Variable Policy

‘Is it not self defeating if a policy is changed frequently?’ asked my commerce studying son. I tore my eyes from the news of a large Bank’s profit plummeting 99% in a year suggesting some sinister story of the previous year but no-one openly discussing it. Pausing to reflect on his words, I began as usual how a policy ensures that all members of the corporate are aware what is expected from them. ‘But here, the accounting policy is a different animal from other policy matters’ I began. Naturally I had to follow it up with what made this a different animal. ‘While other policy matters are very much under the licensed imagination of the management, the accounting policy is set not only by the accounts department of the corporate but within a framework of the premier Institute which is further influenced today by the international bodies as India as opened its borders. Accounting policies, Accounting standards, Indian and International, International Financial Reporting Standards…’ I lost my breath there, ‘are all which the poor accountant has to follow and convince the auditor he has done the right thing.’ With a raised eyebrow, my son looked at me and observed, ‘If just naming the bodies pulling you and your professional colleagues in different directions takes away your breath, I wonder what pressure it must be exerting to actually sit and debate over some point interpreted differently by such agencies.’

‘But which policy can wipe out a profit of a Bank?’ he asked in wide eyed innocence. ‘In a Bank, provision for doubtful debts is a powerful determinant of profits and what is a sick account is clearly mentioned by the Apex Bank’ my son answered his own question. ‘If we take the analogy of a Bank Loan to be that of a body of a human body and seek to determine whether the body or in case of a Bank, the loan account is sick or not, it should be as simple as using a thermometer. Do we ever change the definition of fever to be lower than 98.5°F or change it to define a man to be sick only at 101°F?’ he had cornered the entire population of policy changers.

‘If the previous year’s reporting was wrong, whose head rolls?’ he had to ask the ultimate question of casualty for which I had no answer. ‘Does anyone know the actual position of this or any other year’s profit with the mess of all policies? I think the vegetable vendor is more clear in his head on his profit of the day than the high salaried accountants in air conditioned offices’ he fired his logical salvo. ‘When you follow my footsteps in the profession of Accountancy, perhaps you can develop more stable and logical policies.’ I nearly challenged his intelligence. He looked at me as if I had said something stupid. ‘Dad, you are forgetting that no-one in our family has followed his father’s footsteps. If I have to live with such fickle policies and be held responsible for their implementation, I would rather steer clear from this profession. My friends can still call me ‘CA hoga tera Baap.’

As a logical conclusion on the issue, my son remarked, ‘Now as a policy shall we change the inflation index of my allowance to the petrol price of 1992 BASE year?’