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Read more31 December 2019
Reported financials have to follow accounting guidelines when they are presented to investors. However, while analyzing, it is important for an investor to make necessary adjustments to the reported numbers in order to make them relevant and understand the underlying economics of the business.
Below is case study of SBI Cards wherein we discuss how the accounting policies and changes therein impact the reported profits vis-a-vis economic profits of the business.
Credit card companies incur customer acquisition cost which comprise of:
a. Costs for acquiring customers through various channels and
b. Marketing cost – costs for advertisements and discounts or cashbacks offered. For SBI Cards, these cost mainly form part of “Advertisement and Sales promotions”. This has shown an increasing trend as % of total income over years.
Till 2014 – Amortized over a period of 12 months
Change in 2015 – Recognizing upfront – as and when incurred
Change in 2019 – Adopted Ind AS norms – Amortizing over the behavioral life of the customer
Given the nature of cost, this may be a recurring expense while the expected benefits may not be certain for the company. The company itself had been recognizing costs upfront before adopting Ind AS, probably an indication that this may be more practical way of looking at the profits of this business.
Thus, while the reported profits are in line with the prevalent accounting standards, an investor may want to use adjusted numbers to get closer to economic reality, before taking an investment decision.
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Sr. No. | Received from | Pending at the end of last month | Received | Resolved* | Total Pending # | Pending complaints > 3 months | Average Resolution time^ (in days) |
---|---|---|---|---|---|---|---|
1 | Directly from Investors | 0 | 0 | 0 | 0 | 0 | 0 |
2 | SEBI (SCORES) | 0 | 0 | 0 | 0 | 0 | 0 |
3 | Other Sources (if any) |
0 | 0 | 0 | 0 | 0 | 0 |
Grand Total | 0 | 0 | 0 | 0 | 0 | 0 |
Trend of Monthly Disposal of Complaints
Sr. No. | Month | Carried forward from previous month | Received | Resolved* | Pending# |
---|---|---|---|---|---|
1 | April 2022 | 0 | 0 | 0 | 0 |
2 | May 2022 | 0 | 0 | 0 | 0 |
3 | June 2022 | 0 | 0 | 0 | 0 |
4 | July 2022 | 0 | 0 | 0 | 0 |
5 | August 2022 | 0 | 0 | 0 | 0 |
6 | September 2022 | 0 | 0 | 0 | 0 |
7 | October 2022 | 0 | 0 | 0 | 0 |
8 | November 2022 | 0 | 0 | 0 | 0 |
9 | December 2022 | 0 | 0 | 0 | 0 |
8 | January 2023 | 0 | 0 | 0 | 0 |
8 | February 2023 | 0 | 0 | 0 | 0 |
Grand Total |
0 |
0 |
0 |
0 |
Trend of Annual Disposal of Complaints
Sr. No. | Year | Carried forward from previous year | Received | Resolved* | Pending# |
---|---|---|---|---|---|
1 | 2019-20 | 0 | 0 | 0 | 0 |
2 | 2020-21 | 0 | 0 | 0 | 0 |
3 | 2021-22 | 0 | 0 | 0 | 0 |
Grand Total | 0 | 0 | 0 | 0 |