Wednesday, May 25, 2011

India's Missing Girl Child

Selective abortion of girls on rise among rich, educated

India the Emerging World Power, one of the strongest contender of UNSC permanent seat unfortunately can't save its own girls. The Indian society and present day social customs has made it very difficult to have a girl child. This is because of traditions in the society where girl is considered as burden and marriage becomes very difficult.

New Delhi: Between 42 lakh and 1.21 crore female foetuses were selectively aborted in the country in the last three decades and wealthy and educated families are increasingly going for abortion of the second girl child if their first-born too was a girl, claims a new study. Selective abortions of girls are estimated to be between 4.2 and 12.1 million over the three decades from 1980 to 2010, as per the research findings that are to be published in the upcoming issue of prestigious 'Lancet' magazine.

Parents are going for abortion of the second girl child to ensure that at least one child in the family be a boy.

Make marriage easy.




video


Women in Islam - Way to Peace and Salvation


a) As a child and an adolescent



Despite the social acceptance of female infanticide among some Arabian tribes, the Qur'an forbade this custom, and considered it a crime like any other murder.
"And when the female (infant) buried alive - is questioned, for what crime she was killed." (Qur'an 81:8-9). Criticizing the attitudes of such parents who reject their female children, the Qur'an states:
When news is brought to one of them, of (the Birth of) a female (child), his face darkens and he is filled with inward grief! With shame does he hide himself from his people because of the bad news he has had! Shall he retain her on (sufferance) and contempt, or bury her in the dust? Ah! What an evil (choice) they decide on? (Qur'an 16: 58-59).
Far from saving the girl's life so that she may later suffer injustice and inequality, Islam requires kind and just treatment for her. Among the sayings of Prophet Muhammad (P.) in this regard are the following:
Whosoever has a daughter and he does not bury her alive, does not insult her, and does not favor his son over her; God will enter him into Paradise. (Ibn Hanbal, No. 1957).
Whosoever supports two daughters till they mature, he and I will come in the day of judgment as this (and he pointed with his two fingers held together).



b) As a wife:


The Qur'an clearly indicates that marriage is sharing between the two halves of the society, and that its objectives, beside perpetuating human life, are emotional well-being and spiritual harmony. Its bases are love and mercy.
Among the most impressive verses in the Qur'an about marriage is the following.
"And among His signs is this: That He created mates for you from yourselves that you may find rest, peace of mind in them, and He ordained between you love and mercy. Lo, herein indeed are signs for people who reflect." (Qur'an 30:2 1).
According to Islamic Law, women cannot be forced to marry anyone without their consent.
Ibn Abbas reported that a girl came to the Messenger of God, Muhammad (P.), and she reported that her father had forced her to marry without her consent. The Messenger of God gave her the choice . . . (between accepting the marriage or invalidating it). (Ibn Hanbal No. 2469). In another version, the girl said: "Actually I accept this marriage but I wanted to let women know that parents have no right (to force a husband on them)" (Ibn Maja, No. 1873).
The Qur'an thus states:

"And they (women) have rights similar to those (of men) over them, and men are a degree above them." (Qur'an 2:228).
Such degree is Quiwama (maintenance and protection). This refers to that natural difference between the sexes which entitles the weaker sex to protection. It implies no superiority or advantage before the law. Yet, man's role of leadership in relation to his family does not mean the husband's dictatorship over his wife. Islam emphasizes the importance of taking counsel and mutual agreement in family decisions. The Qur'an gives us an example:
The Qur'an states:
"...But consort with them in kindness, for if you hate them it may happen that you hate a thing wherein God has placed much good." (Qur'an 4: l9).
Prophet Muhammad. (P) said:
The best of you is the best to his family and I am the best among you to my family.
The most perfect believers are the best in conduct and best of you are those who are best to their wives. (Ibn-Hanbal, No. 7396)



c) As a mother:



Islam considered kindness to parents next to the worship of God.
"And we have enjoined upon man (to be good) to his parents: His mother bears him in weakness upon weakness..." (Qur'an 31:14) (See also Qur'an 46:15, 29:8).
Moreover, the Qur'an has a special recommendation for the good treatment of mothers:
"Your Lord has decreed that you worship none save Him, and that you be kind to your parents. . ." (Qur'an 17:23).
A man came to Prophet Muhammad (P) asking:
O Messenger of God, who among the people is the most worthy of my good company? The Prophet (P) said, Your mother. The man said then who else: The Prophet (P) said, Your mother. The man asked, Then who else? Only then did the Prophet (P) say, Your father. (Al-Bukhari and Muslim).
A famous saying of The Prophet is "Paradise is at the feet of mothers." (In Al'Nisa'I, Ibn Majah, Ahmad).
"It is the generous (in character) who is good to women, and it is the wicked who insults them."


Friday, May 20, 2011

At IMF, Men on Prowl and Women on Guard - CNBC

At IMF, Men on Prowl and Women on Guard - CNBC

This is the standard of world bodies. Those who can not governed themseves just can not preach it. Preaching starts with self. There is no place and no need of corrupt leaders.
Why should Europe get this job at all?
The criteria should be the best suited person should take the job. Bankrupt Europe should think more rationally, there is better leaders should be given chance not corrupt leaders.

Thursday, May 19, 2011

Islamic Bank the challenges

Forbidden to you (for food) are: dead meat, blood the flesh of swine, and that on which hath been invoked the name of other than Allah, that which hath been killed by strangling, or by a violent blow, or by a headlong fall, or by being gored to death; that which hath been (partly) eaten by a wild animal; unless ye are able to slaughter it (in due form); that which is sacrificed on stone (altars); (forbidden) also is the division (of meat) by raffling with arrows: that is impiety. This day have those who reject Faith given up all hope of your religion: yet fear them not but fear Me.
This day have I perfected your religion for you, completed my favors upon you, and have chosen for you Islam as your religion.

But if any is forced by hunger, with no inclination to transgression, Allah is indeed Oft-Forgiving Most Merciful. (3) Quran Al Maidah 3

· Islam is completed and there is no transition, shariah is complete and there can’t be any more addition.
· The door of Ijtehaad is open but stopped long time ago.
· Ijma of Scholars of Ummah is open and practiced.
Those who are talking of transition period, there is no transition. There are no differences or dispute on any of the basic principles of Shariah.
· Maqasid al Shariah – everyone is agreed on it.
· Halal and Haram everyone agrees and no issues.
· Ethics, moral values and transparency is agreed upon.
· Basic principles of contract and product is agreed
Transition is only related to work in progress for something innovative within parameters and limits of shariah. (This should go on and more expertise and competence should be develop.)
I am talking of basic principles which have been agreed by AAOIFI and IFSB and IOC Fiqah Academy. How much compliant are our institutions are? I am talking about three examples.
· Even though Shariah Board of the company has very clear opinion and this opinion that the contract is Shariah Compliant and this opinion is held by all Shariah Scholars also, do company has any right to go to the secular court and fight a case in secular court (judge do not understand Shariah, his judgment will be based on who has better lawyer and argument) because company has ill intentions not to pay.
· Is there any logic or compliance when funds invest in haram, whatever may be the case?
· Can there be Sukuk for a company engaged in Haram Activities and its majority income is Haram.
· Sukuk are assets based or assets backed, when they default why there is long litigation, basically the assets should be sold to pay the investors.( there are big litigations and fights because really we do want a product which can be sold as Islamic in market but we do not want to adhere to the principle and spirit of Shariah.)
· Shariah Compliance inside the institution and its practices and its supervision of activities. How many of IFI are following these standards.
· Derivatives and structured products – There is no scope that industry can act in this matter, industry do not any right to come out re packaged product. There is no place of self-regulation (regulating or enacting or making new law) or self-governance (self-regulation). Only Shariah Scholar based on Ijma of Scholars of Ummah can come to some kind of solution for this. There is no place for industry overtones or self-proclaimed product agreed by Industry. (Even if all Ummah agrees on Haram, it cannot be allowed and will always remain Haram.)
· Industry must have enough presentation for those who understands and follows Shariah so that these people can keep watch on complete life cycle (product life cycle) of IFI products and services.
· Just Shariah Board an outsider is not enough to say company is Shariah Compliant and its Product and services is Shariah Compliant.
· There must be enough Muttaqueen (pious, who fear Allah and Follows Shariah in all aspects of life). Unless and until this happens there is little chances the IFI can remain Islamic.

Tuesday, May 17, 2011

Government takes over Dubai Bank target=

Government takes over Dubai Bank target=

How much Islamic are Islamic Bank ?

I have written on the Dubai's debacle before also. Today I am going more the pracyices adopted by Islamic Bank's and financial institutions and they are not Islamic, or does not comply with basic principles of Shariah. This is very important issue.
Islamic Bank and Financial Institutions needs cleaning , from its practices and peoples who themselves does not have enough trust in their own system. I am writting with my experience and due diligence I did while acquisition process or otherwise and public information available on these companies from stock markets.


  1. The myth about Islamic Funds ( offshore / private equity) - Only the contract remains Islamic and Shariah board has responsibility only. I have seen after that they are indulging in all Kinds of activities, investment in hotels which serves alcohol,financing conventional, and conventional leveraging more than value of fund itself. When I asked them these are funds and funds are Islmic and investment has nothing to do with investment they are making. There is not a single person who understands shariah and can look after the interest of the investor. Unfortunately this is the story and it is very sad.

  2. The most important diffrence is moral values and transparency. _ The moral's are equally bad may be more. When I look through the balance sheet and it is equally manupulative. The industry need to understand they need people who belive and has trust in the Islamic Banking and has very high moral standards. ( Taqawa ). Shariah Scholar and Promoter must understand the diffrence, if they are coming just to make money they Dubai is waiting for such people, the debacle. The leadership of such companies should be shariah compliants.

  3. The funds, investments and all value chain must remain clean andshariah compliant, otherwise there is no difference.

  4. The muslims come to the Islamic Finance the most important reason is religion, they want halal income. They do not want to go to the Fire ( Jahannam ) for eating haram in this life. This is sole reason, profit is always secondary, two things investor expect from them is Good Service and Halal Profit. ( If islamic finance can not give halal return then there is no need of it.) I personally know thousands people who leave their interest in banks and give in writting to bank please do not pay us interest.

  5. Juridiction - (فَلَا وَرَبِّكَ لَا يُؤْمِنُونَ حَتَّى يُحَكِّمُوكَ فِيمَا شَجَرَ بَيْنَهُمْ ثُمَّ لَا يَجِدُوا فِي أَنْفُسِهِمْ حَرَجًا مِمَّا قَضَيْتَ وَيُسَلِّمُوا تَسْلِيمًا ﴿4:65﴾

(4:65) But no, by your Lord, they cannot become true be-lievers until they seek your arbitration in all matters on which they disagree among themselves, and then find not the least vexation in their hearts over what you have decided, and accept it in willing submission. *95.The application of the injunction embodied in this verse is not confined to the life-time of the Prophet (peace be on him). It will remain in force until the Day of Judgement. The guidance the Prophet (peace be on him) proclaimed on God's behalf, and the manner in which he followed God's direction and inspiration, will for ever remain the universal touchstone for Muslims. In fact, recognition of that guidance as the final authority is the criterion of true belief. This principle was pronounced by the Prophet (peace be on him) in the following words: 'None of you can become a believer until his desires become subservient to what I have brought (i.e. my teachings).' (Cited by al-Nawawi in al-Arba'in, see the tradition no. 41, transmitted on their authority of Abu al-Qasim Isma'il b. Muhammad al-Isfahani, Kitab al-Hujjah with the opinion that it is a 'good' and 'sound' tradition, with a sound chain of transmission - Ed.)


Those who do not want to follow Islamic Principles they go and fight cases in secular courts even if their own Shariah Baoard is advising them otherwise. Such companies has ill intensions in their heart and they do not want to pay their investors.



  1. The practices of Islamic Banking - Tawwaruk and Murabah must comply Shariah. They are allowed but in practice how much shariah compliant they are. Secondly Wkalah contract is ISlamic, but what happens after that must be Islamic. The practices and procedures must comply Shariah.

  2. New Products - Islamic Finance do not need to compete with conventional product. Virtual products has no place in Ilamic Finace - Any kind of derivatives or derivatives based product are not needed. The scholras and industry who are trying to develop such thing must restrain themselves and sought guidance from Allah ( Istekhara). What Islamic Finance needed is people who believe and trust and work with Guidance from Allah. Allah will ( Insha Allah) will guide them to right product development and best practices.

  3. The product must satisfy following requirement.

o Maqasid al Shariaho


Conditions of contract


Islamic Economic SystemIslamic economics is based on the Shariah. The basic objectives are to ensure general human well-being and socio-economic justice.


THE DISTINCTION BETWEEN CONVENTIONAL AND ISLAMIC THEORIES


The Role of Moral Values


While conventional economics generally considers the behavior, tastes and preferences of individuals as given, Islamic economics does not do so. It places great emphasis on individual and social reforms through moral uplift.


The Importance of the Hereafter


The Hereafter is a concept which is completely ignored by conventional economics, but it is one which is greatly emphasized by Islam. Because of their innate goodness, human beings do not always try to serve their self-interest.


MAQASID E SHARIAH- the Objectives of Shari'ah


Maqasid al-Shari'ah that is, the objectives of Shari'ah can be defined as below:· Maqasid al-Shari'ah comprises those benefits/welfare/advantages for which Allah has revealed His Shari'ah.· Maqasid al-Shari'ah aims at the attainment of good, welfare, advantage, benefits, etcetera, and warding off evil, injury, loss, etcetera, for the creatures. (All this in Arabic terminology can be stated as Masalih al-'Ibad.)


Islamic Commercial Law -Legality of Cause, Object and Consideration


Let us All of us introspect and ask for guidance and success is for those who chose right path. ( Sirat e Mustkim).


وَقُلْ جَاءَ الْحَقُّ وَزَهَقَ الْبَاطِلُ إِنَّ الْبَاطِلَ كَانَ زَهُوقًا ﴿17:81﴾


17:81) And declare, "The Truth has come and falsehood has vanished: for falsehood is a thing that must by its nature vanish."



At the time of this declaration, the persecution of the Muslims was at its height. A large number of them had emigrated to Habash, and those who had remained behind were suffering from untold hardships at Makkah and its suburbs: so much so that the life of the Holy Prophet himself was always in danger. Therefore, to all appearances, falsehood was prevailing everywhere and there was no sign to show that the truth would ever overpower falsehood. That is why the disbelievers took it for a boastful talk and scoffed at it when this declaration was trade. But this prophecy of victory did come out true in less than a decade when the Holy Prophet entered the same city of Makkah as a conqueror, and entered the Ka'abah where he made the same declaration while he was breaking the three hundred and sixty idols. According to a Tradition of Bukhari, related by Hadrat 'Abdullah bin Mas`ud, "On the day of the conquest of Makkah the Holy Prophet went on striking idols and uttering these words: `The Truth has come and falsehood has vanished; for falsehood is a thing that must by its nature vanish. The Truth has come and falsehood will never reappear nor return' . "




Monday, May 16, 2011

EU-US Economies - Will Another Lehman-Style Crisis Be Prevented? - CNBC

EU-US Economies - Will Another Lehman-Style Crisis Be Prevented? - CNBC

No it is not possible. The crisis can not be prevented. When we look at present situation not much has been changed and the causes of the previous collapse are still existant in the market.


  • Too Big to Fail -- The companies which were affected and needs rresue have become bigger, the systematic risk of collapse of the system has not removed or reduced, over the years it has increased.

  • Off Balance Sheet Transaction - Derivatives and swaps are there and no body really knows how much each of them owe. How much risk or swaps or derivates they have played. Derivatives are sttill off balancesheet and not goverened by the Financial Authorities.

  • Toxic assets are still there on the balance sheet sitting and looking pretty beutiful. No one knows how much toxic each of them has and what is its worth.

  • Credit Rating Agencies are same, methods are same and methodology is the same. They are still beyond control and again started playing the dirty game.

  • Auditors are same - they have not changed their behaviour and practices. They are not controlled and supervised.

  • Housing is going down, mortges are under water and bond for them are in market. Game is still on.

Unless and untill the reasons behind the crisis are corrected, another crisis can not be avoided.


The only difference is that, Mr. Ben Bernanke has new printing press and this one is priting Dollars and Printting as much he want. No one in world is sure what is worth of this Dollar.


Sunday, May 15, 2011

IMF chief held for alleged sexual attack - Americas - Al Jazeera English

IMF chief held for alleged sexual attack - Americas - Al Jazeera English

These are the ethics and moral standards of heads of global institutions. These institutions preach the ethics and morals to everybody, " Nations and Individuals." The peoples who are corrupt in their personal life, how can they serve the humanity. The most important criteria for the leadership is its Moral Standards.

The best has the first right to lead and defination of the best is, "Quran :- (49:13) Human beings, We( Allah) created you all from a male and a female, and made you into nations and tribes so that you may know one another. Verily the noblest of you in the sight of Allah is the most God-fearing of you. Surely Allah is All-Knowing, All-Aware"

The qualities of leadership is as below,


Islamic perspective of Holistic Leadership
• Leadership in Islam
§ Definition - Process of moving and guiding people in a planned direction in which is truly in their long term best interest. Leadership is about making a change for the better
§ Objective - Provide for happiness (al falah) in this world and hereafter (dual worldview)
§ Mechanism - Obedience to the Shariah. Act in accordance with the injunctions of Allah and His Prophet

• Guiding Principles
§ Trust (Amanah)
§ Responsibility (Taklif)
§ Accountability (Mas’uliyyah)

• The Prophet Muhammad, (PBUH) is the greatest leader of all time

• Prophet’s Leadership Qualities:
§ Guiding others through modeling
§ Talent and technical specific skills
§ Initiative and drive
§ Charismatic inspiration
§ Preoccupation with role
§ Clear sense of purpose
§ Results oriented
§ Cooperation work with others
§ Encourage and nurture others below
§ Optimistic

Islamic perspective of holistic leadership

10 Essential Personal Qualities of Muslim Leaders

• Fasahah - Eloquence. Communication skills are necessary for any leadership role
"I have been given the authority over you, and I am not the best of you. If I do well, help me; and if I do wrong, set me right. Sincere regard for truth is loyalty and disregard for truth is treachery. The weak amongst you shall be strong with me until I have secured his rights, if God will; and the strong amongst you shall be weak with me until I have wrested from him the rights of others, if God will. Obey me so long as I obey God and His Messenger (Muhammad, pbuh). But if I disobey God and His Messenger, ye owe me no obedience. Arise for your prayer, God have mercy upon you.“
Abu Bakar when he was appointed as khalif

• Adl – Justice

O you who believe! Stand out firmly for Allah, as witness to fair dealings and let not hatred of others to you make you swerve to wrong and depart from justice. Be just that is next to piety (Quran 5:8)

• Shura - Mutual consultation or decision making. What kind of counselors do we need?

Extract of Letter written by Khalifah Ali bin Abi Talib addressed to Malik Bin Al Haris on his appointment as Governor of Egypt (655 C.E.)

“The worst of counselor is he who has served as counselor to unjust rulers and shared their crimes. So never let men who have been companions of tyrants or shared their crimes be your counselors. You can get better men than these, men gifted with intelligence and foresight, but unpolluted by sin, men who have never aided a tyrant in his tyranny or criminal in his crime. Such men will never be a burden to you. On the other hand, they will be source of help and strength to you at all times”.

• Taqwa - Fear of Allah

It is only the evil one that suggests to you the fear of his allies; be you no afraid of them, but fear Me, if you have faith! (Quran 3:175)

• Yaqin - conviction.

The leadership of Abu Bakar in handling the Romans, those who refused to pay zakat and the false prophet musailamah. Umar thought that it would not be a good idea to fight those people just because they fail to pay zakat. Abu Bakar replied “Revelation finished and religion was completed. Would it decrease while I am alive? When Umar say the strong conviction and firmness of Abu Bakar he immediately changed his position.

• Ma’refah - Knowledge

[and] God will exalt by [many] degrees those of you who have attained to faith and, [above all,] such as have been vouchsafed [true] knowledge: for God is fully aware of all that you do.(al-mujadalah: 11)

• Sabr - Patience

Be sure We shall test you with something of fear and hunger, some loss in goods or lives or the fruits (of your toil), but give glad tidings to those who patiently preserve. Who say when afflicted with calamity “To Allah we belong and to him is our return” (Quran 2: 155-156)
Or do you think that you shall enter the Garden (of Bliss) without such (trials) as came to those who passed away before you? They encountered sufferings and adversity, and were so shaken in spirit that even the Messenger and those of faith who were with him cried: “When (will come) the help of Allah” Ah the help of Allah is (always) near!

• Leen - Leniency

It was by the mercy of Allah that you were lenient with them (O Muhammad), for if you had been stern and fierce of heart they would have dispersed from round you. So pardon them and upon the conduct of affairs. And when you are resolved, then put your trust in Allah. Lo! Allah loves those who put their trust (in Him). Quran 3: 159

• Tadhhiyah - Self-Sacrifice

God has purchased of the believers their persons and their goods: for their (in return) is the garden (of paradise): They fight in His cause and slay and are slain, a promise binding on Him in Truth, through the Law, the Gospel and the Quran: and who is more faithful to his covenant than God? They rejoice in the bargain which we have concluded: That is the achievement supreme. Quran 9:111
Attitude and sacrifice of the prophet and him companions: Invocation of the prophet just before the battle of Badr “O God, here is Quraysh with all her tribe seeking to belie your Prophet. O God, give us the assistance which you promised. O God, if this little army perishes, when will you be worshipped again?”
The above invocation of the prophet indicates that even at the perilous moment before battle, the prophet’s mind is centered upon completion of his mission so that Islam prevails on this earth.
The prophet is never concerned for himself and had indeed sacrificed everything for the sake of Allah and His religion - Islam.


Statement by an Italian scholar, Leone P Di Teonao Caetani, writing in the late 17th century about the companions of the Prophet:

• These men were the true moral heirs of the prophet, the future apostles of Islam, the faithful trustee of all that Muhammad had revealed unto the men of God
• Into these men, through their constant contact with the Prophet and their devotion to him, there had already entered a new mode of thought and feeling, loftier and more civilized than any they had known before: they had really changed for the better from every point of view, and later on as statesmen and generals, in the most difficult moments of war of conquest they gave magnificent and undeniable proof that the ideas and the doctrines
• Muhammad had been seed cast on fruitful soil, and had produced a body of men of the very highest worth


It is the right of people to chose best leadership for them, the one who is not corrupt and moraly bad. It is human right of the people to have a leader who is ameen ( trustworthy) and who can preserve wealth and rights of people. We do not need morally corrupt leaders to head global bodies and nations.






Wednesday, May 4, 2011

Art of Managing Balance Sheet

Art of Managing Balance Sheet


Art of Managing Balance Sheet
IFRS is considered as one of the greatest innovation in modern accounting, developed by the accountant themselves and also promoted and ranked as best themselves. I am just giving few insights into how companies are using IFRS to show how good they are. How healthy and beautiful they are.



  • Associate Company

This is very important class of assets, it is 20% and above companies are called associate companies, but if company can prove through board presentation or with any other evidence to their auditors even lower stake can be considered as associate companies.
o These associate companies are carried out on balance sheet on book value or acquisition cost/ it is at management’s discretion to decide which method to follow.
§ (Companies are using this gimmick to keep the companies at acquisition cost even though their present value/ market value is lower than acquisition cost.) – This is the area where much due diligence is required while analyzing the balance sheet of the company.



  • · Mark to Market – AFS – Risk discloser


This is second important grey area for playing. When there is nothing to mark against then and even if there is something companies need to convince their auditors there nothing and no risk involved and it can be kept at acquired value/ book value. How nice it is, the bond, the treasury and junk all in one basket nothing to mark.
o The value of non traded securities of all kind is kept at acquisition cost conveniently even if they are junk. Equity, bond’s treasuries and everything are valued at convenience of holder and not at price market is willing to pay.
o What about derivatives swaps and covers companies has bought. They are not mentioned or even if they are mentioned in risk it is non quantified in small letters.
o Few Examples who lost millions in such transactions.
§ Harvard University
§ Gulf Bank
§ Wokhardt Pharmaceutical India
§ Italian Municipality
§ Australian Rail Road
§ (Still today these transactions are not quantified and not mentioned, no one in this world really knows how much each sovereign state has on its books which can take them to bankruptcy, and Greece is only tip of iceberg.)



  • · Work in Progress


Work in another interesting area, when assets are constructed or developed or physically acquired they are work in progress till completed. The stalled projects, completed but yet not sold out and also those which has no hopes of completion are all work in progress carried at a value which best suits the company. Companies are using this term to hide their losses and also putting expenditure as capital expenditure so there is no trace of what really going on in the company.
o Few examples of managing work in progress
§ A project which is stalled for last three years, not completed and there is little or no hope of completion in near future is valued every year upside. The hardware and software which are three years old by this time outdated are still at acquired cost as part of capital work in progress. And also equipment which arrived but cannot be used is all at their acquired price.
§ There are many more such examples, commercial complex ready for possession two years ago not yet occupied is work in progress and the company is not even able to pay interest taken to the project, is capitalizing the interest and work in progress is increasing. Even though the fair value of the project is substantial down.
· Intangible assets, goodwill ,brand value and IP’s ( Intellectual Property )
When companies has problems defining and valuing what can be seen and felt, what do you think they will do with intangible which cannot be seen and felt. There is transaction for the same and cannot be explained, can only be believed. These all class of the assets are always for the benefit of the company; in real life it will never create losses on balance sheet of company. They may have been gone long time ago but legacy of it will not go from the balance sheet.
o Few examples from few balance sheets
§ A company which acquired and agency along with product line, but most of these product are no more sold and legacy cannot be sold any more, the overall sale is in decline still the good will paid is there in the balance sheet.
§ When company is acquired along with customer and product, the acquirer has paid separately for the customer and I never been able to understand, what it is really mean and even though company is no more making profit the paid cost for customer is there as intangible assets.



  • Receivables


Here I am not talking of receivables of banks or the investment companies, here my only discussion is operating companies who sales services and products. The companies in the year end to achieve results dump the product in the market and show the sales and create receivables against it. This is one common practice, but the real problem is when these receivables become old and non collectible and still remains in the balance sheet. There must be provisioning for the old receivables and write off for non collectibles. These policies must be clearly mentioned in the documents and policies.
o Few examples of receivables management
§ When I look at performance of one of big travel company which is ranked among first few, sales is increasing every year at least 20% and so is profit. Management and everyone are very happy to see it. General Manager has got bonuses for this fantastic performance. When I started digging little bit, the loan has increased at least 40% every year. Liquidity is real problem, when I asked for ageing report for the company, I am surprised to see there are receivables which are more than 3 years old, nothing has been collected and there are many clients who never paid for their bills. This all was big enough to wipe out all equity and still company owes banks more than enough. When I wrote this report, no one was happy and I have been divested of the portfolio of the company.
§ In one instance one company is showing substantial receivables from one shop which has been closed long time ago and this receivable no more collectible. This company has many such clients, in real term they are in mess but management do not want to accept they created a mess.



  • Inventory


Inventory should be carried out at lower of acquisition cost, or realizable price at which it can be sold. This is basic principle of inventory. But this is one of the area where lot of input is required, last month a product is selling at 220 KD, the company ordered 1000 pieces and got it. In the mean time the prices are gone down to 185 KD a piece. The company must book a price which it can realized while selling the product. This is wired world. Commodities and products are traded day and night and prices are moving under this circumstances valuation of inventory become very critical. It become more critical when it comes to Food and Pharmaceutical products or any such product which has expiry.
o Few examples of inventory management
§ A pharmaceutical distributor is showing substantial inventory in its books, when we went for due diligence 30% of that is expired and almost 30% is due to expire in next 3 month, and another 20% within six months. This means he has inventory 20% only what he is showing. When we ask him due you have contract for replacement of these expired goods but there is nothing like that. Company says they gets replacement for this, but there is no proof which can show this will be replaced by manufacturer. This shows whole inventory is wrong.