The Hindu Business Line : Percentage to pique at

WHEN in school, percentages used to mean marks scored. In college, we laboriously computed GP ratio and such other percentages to cut our teeth on financial analysis. However, as we grew, we learnt that percentage has a different connotation in commercial deals.

You may remember the old story, where a palace guard allows Tenaliraman entry into the king's court after extracting a promise that he would get half of what the king gave as reward. That, as a percentage, worked out to fifty. High-risk arms and drug deals work on higher percentages, they say, and in book trade, similarly high numbers are not uncommon.

Percentages have always had the lure of ensuring performance by adding a dose of self-interest. That is why sales and marketing departments have long adopted percentages as the ideal carrot to dangle before their staff; message is simple: more sales, more commission. A win-win.

The profession of accountancy has the tradition of being remunerated in the form of a fixed fee. What is disturbing, therefore, is the news from the Institute of Chartered Accountants of India that a review is being made to enable members in practice "to charge fee based on percentage basis." An amendment that the ICAI has suggested to the government aims to empower the council of the Institute to permit cases where CAs may be allowed to charge "in respect of any professional employment fees which are based on a percentage of profits or which are contingent upon the findings, or results of such employment".

After having cut out the part-time practitioners, the ICAI is eager to let its practising members hike their fee "in the context of the global changes that are taking place and the multi-pronged services being rendered." And the Institute seems to be in great hurry, because if the amendment to CA Act and Regulations were to take time, it requests that the DCA give the approval fast "in the larger interest of the profession."

It is visible that their interests are extra large, but one wonders if the larger interest would be served through the percentage route.

mail to: AccountSpeak@thehindu.co.in

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