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Inactivity Based Cost Management

Inactivity Based Cost Management

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Inactivity Based Cost Management

255 pages
3 heures
Sep 17, 2010


Inactivity Based Cost Management [IBCM©] enables Study of Cost Consequence: activity has a cost incidence whereas inactivity a cost consequence. This is made feasible by defining Intangible. Intangible is the energy force making things work in this tangible world. When things do not work, as we see today, we tend to blame the financial results and chaos in the economy. That is old capitalism. IBCM© is New Capitalism where strategies are observed and reported on a real-time monitoring basis before the events overtake the results.

That is the study of Cost Consequence. Intangible enables it by differentiating between good intentions and broken promises. Good intentions are strategies, broken promises are strategies abandoned mid-way. IBCM© gives the way to identify those spots where inactivity occurs and corrects the situation.

This book is the primer for the series of books that would be published. In this book the case-study is on UNCAC - United Nations Convention Against Corruption. UNCAC is common for both Government as well as Corporate.

The second book on the series is now available titled Corporate Critical Density, with the sub-title Leveraging Companies to Occupy Wall Street (with a case-study on Unilever Sustainable Living Plan). This differentiates between good companies and the rest. Good companies must occupy Wall Street displacing the valueless companies. Strategies and good intentions are abstract terms. So are the terms value and valueless.

Inactivity Based Cost Management [IBCM©]and Corporate Critical Density bring us back to basics. Both put us into a position to bring out the reality of business. We now shall practice business with reference to an accountable substance and product which ushers in sustainability of values. In our consumer environment substance and product is obscured by the very complexity of our overly abstracted world. What is crucial is to bring the abstractions into reality, acknowledge value where value is due, and deconstruct what is valueless.

Both the books are important to understand abstract terms and measure them on realistic terms.

Sep 17, 2010

À propos de l'auteur

Jayaraman Rajah Iyer is a Chartered Accountant from ICAI, New Delhi (1966) who has aunique insight into major changes in accounting in India’s history culled from experience withmajor firms across the globe. He interned at Hindustan Lever, worked his way up holding keypositions at API and Mafatlals. He introduced the principle of Likely Ultimate Costwhile appointed as Forestry Operations Accountant at Wimco. Leaving India in 1977 wasappointed as General manager of ITI Nigeria, Lagos. Selected by Sir William Castell who isnow the Chairman of the Wellcome trust, joined the Wellcome Foundation, UK to set right theaccounting functions of Wellcome Nigeria. He had also been visiting faculty at SPJIMR, SIESSchool of Management, and Vivekananda School of Management where he taught BalancedScorecard and Strategic Cost Management based on the Proprietary IBCM (Jayaraman ownsthe copyright to Inactivity Based Cost Management, 2006).He is the son of the renowned educationalist late Rajah Iyer, Headmaster, policy makerand Member of the Legislative Council of Tamil Nadu till his death in 1974. Jayaraman’sRajah Iyer Foundation provides a support system for teachers.Major contributions to the world of Accounting:In 1966 Jayaraman learned the ropes under visiting IIM-A faculty member late RSubrahmanyam of Hindusthan Lever, submitting cost data to the Govt of India for thefortnightly increase in the selling price of vegetable oil, Dalda. Sub as he was known, used allpossible cost allocation and apportionment while Forward Commodity Exchange wasprevalent during that time. Not a single cost driver could afford to be missed as the differencein price from one fortnight to the other was so insignificant that it would not be possible toaccommodate in today's currency break-up. In due course, the Govt. of India brought in aCost Audit Dept. including medicine and petrol under Dr. Rajagopalan, the first ManagementAccountant of ICAI and ICWAI and Jayaraman’s mentor in Management Accounting.In 1972 as Forestry Operations Accountant for Wimco, Jayaraman acquired an in-depthknowledge of forest terrains and realized a discrepancy between the accounting year forWIMCO (Jan. to Dec) and the forestry season (Sep. to March). This made it difficult toestimate cost for wood sent to the factories. This prompted him to institute a system calledLikely Ultimate Cost to achieve a balanced figure through the year without overloading a costfigure at the end. It necessitated estimating cost constantly a year ahead.In the course of his duty, as per the case study detailed in the book, Jayaraman was calledupon to play whistle-blower to corrupt practices. He says “An Accountant is the trustee of thepublic wherever he/she is employed. The personal case study reported in this book is not tobe construed as whistle-blowing but performing one's duty. An Accountant undertakes socialresponsibility quietly fighting for justice where 'matsyanyaya' is prevalent. Matsya means fishand nyaya justice, where the big fish swallows the small one.” Jayaraman went throughsubsequent inquiries at great personal cost to be vindicated in his stand against corruption.His joining the Wellcome Foundation later remains possibly the only HR case study where thewhistle-blower was appointed to a company despite a written negative reference from theprevious employer specifically imploring the new employer not to appoint him.It was in 2001, called upon to prepare a normal ROI for an investment in a major ERPpackage that Jayaraman drafted a unique methodology – RoI based on intangible, coveringthe entire spectrum of usage of an ERP package and its capability rather than submitting tothe futility of its usage hovering around 8%, for almost all highly priced ERPs, based on cashflow.Inactivity Based Cost Management was born (and copyrighted) in 2006.

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Aperçu du livre

Inactivity Based Cost Management - Jayaraman Iyer


Measurement of Intangible: Governance, Ethical & Fiscal Responsibility and Accountability

Jayaraman Rajah Iyer


Published by Jayaraman Iyer at Smashwords

Inactivity Based Cost Management - Copyright © REGN. NO. L-27490/2006 DATED December 1, 2006 Govt. of India, Copyrights Office, by the Author, Jayaraman Rajah Iyer

ISBN 978-81-920004-0-4

First eBook edition October 2010

Smashwords Edition, License Notes

This ebook is licensed for your personal enjoyment only. This ebook may not be re-sold or given away to other people. If you would like to share this book with another person, please purchase an additional copy for each recipient. If you’re reading this book and did not purchase it, or it was not purchased for your use only, then please return to Smashwords.com and purchase your own copy. Thank you for respecting the hard work of this author.


Dedicated to

The Sage of Kanchi

Shri Chandrashekarendra Saraswati Swamigal

and my father & Headmaster Shri M Rajah Iyer

Rivers themselves do not drink of the water they carry,

Trees do not eat of the fruits they bear,

Clouds too do not eat of the rains they produce,

For the riches of the good are utilized for the welfare of others.


Table of Contents

Inactivity Based Cost Management



The Root

Chapter 1 Introduction

Chapter 2 Intangible

Chapter 3 Intangible Assets

Chapter 4 Fighting corruption

Chapter 5 Intangible defined

Chapter 6 Measuring the Intangible

The Stem

Chapter 7 Governance of Responsibility

Chapter 8 Governance of Accountability

Chapter 9 Inactivity Based Cost Management [IBCM]

Chapter 10 IBCM - UNCAC: Article 13 - Participation of Society

Chapter 11 IBCM - UNCAC: Article 5 - Preventive Anti-Corruption Policies and Practices

Chapter 12 IBCM - UNCAC: Article 10 - Public Reporting

Chapter 13 IBCM - UNCAC: Article 6 - Preventive anti-corruption body or bodies

Chapter 14 IBCM - UNCAC: Article 8 - Codes of Conduct for Public Officials

Chapter 15 IBCM - UNCAC: Article 9 - Public Procurement and Management of Public Finances

Chapter 16 IBCM - UNCAC: - Chapter II Preventive Measures: Statement of Accountability

The Knowledge Tree

Chapter 17 Ethical Responsibility

Chapter 18 Business Ethics




My father, a Gandhian using only Khadi a coarse homespun cotton cloth initiated by the Mahatma, a teacher par excellence with a mission to serve, influenced my mind. It was the Reader's Digest 50th Anniversary Book reading the life history of George Washington Carver that I cut out the epitaph portion and attached to the photo frame of my father A life that stood out as a gospel of self forgetting service. Could have added fortune to fame, but caring for neither, he found happiness and honor in being helpful to the world. It is truly amazing how an individual could dedicate one's entire life for uplifting the weaker section of the society.

Never in the history of mankind so many such dedicated people, as on to-day, serve and struggle to establish a humane society around the world. To these men and women, including many within the government, who have relentlessly pursued for transparency, Human Rights, Anti-corruption, environmental protection, whistleblowers protection and Right to Information, whose grace on this planet enable the dumb eloquent and the cripple cross mountains, that this book is addressed, to further enforce the governance standards as enunciated. Managing the managers has become crucial for a humane society to be formed. You will find the usefulness of the theory and practice of Governance in this book.

Where does Governance exist? The interesting quote of Robert Doniger, [from Timeline by Michael Crichton], I'm not interested in the future; I'm interested in the future of the future, possibly has a clue. To-day was the future of yesterday and tomorrow is the future of to-day as well the future of the future of yesterday. Effectively what Doniger says is that he dwells in the past all the time the fascinating historical events and ever interested in tomorrow, a dreamer and a maverick he is, that he ignores 'to-day' completely. Working like a beaver, he takes his scientists and cultural experts to the past making them stuck in the ruins of history and the genius that he is, promises a great future of the future making the people of to-day to sit in awe and wonder till they realize the future ever remains a distant dream. A solar view of the planet displays the monumental towers everywhere, promises that are not kept. These towers represent a cost already incurred that cannot be recovered. Donigers do not think that it is necessary for them to be concerned about to-day and not at all obliged to inform or discuss the cost consequence of their action, where to-day represents the effect of decisions of yesterday for all to see with utter helplessness.

There are three sections in the book a. The Root, b. The Stem and c. The Knowledge Tree. The Root expounds the basic structural difference of the past and buttonholes on the core that brings into focus 'to-day'. The meaning and purport of the theme of the book - Activity is a cost incidence whereas inactivity a cost consequence, is elucidated. You will notice that cost consequence is relevant for only one day, i.e. to-day and as a corollary Governance is feasible for only one day, i.e. to-day, neither by the dateless past nor of the infinite future. Therefore, it is imperative to measure Cost Consequence today. You will find interesting the definition of intangible, defined for the first time and its application to the tangible substance with quality and action process clearly figured, like treating zero when found as a number on its own right, exploring into the Governance of all that matters, enabling the measurement of Governance. Balance Sheet measures the Cost Incidence whereas Cost Consequence is left in a limbo. Cost Consequence is the very essence of Governance and IBCM provides the platform to box the Accountability so that Cost Consequence could be evaluated. It derives the measuring device, simple but robust that could be understood by a farmer, to look at the substance as a whole.

The measuring device is derived from the definition of Intangible that is central to every substance in the universe. Locating and buttonholing is an interesting exercise that you would surely be with. The statement from the book, In the domain of intangible there is no duality, no paradox, no plurality, and no opposite values that are the characteristics of the tangible domain. should alleviate you any fresh bout of jargon. When antimatter collides with matter the mass is converted into pure energy and so does the intangible when it collides with the substance. That's Governance, a dynamic force of pure energy. Substance creation and task accomplishment provide a basis of measurement, keeping its independence even while performing the tasks yoked with another, enabling accomplishment of infinite succession of finite purposes by controlling each goal.

Analysis of Government Auditing Standards issued by US Government Accountability Office, Accounting Standards from IASB - IAS 9 Capitalization of Development Costs and IAS 38 Intangible Assets leading to Financial Crisis of 2009, Foreign Corrupt Practices Act [FCPA], OECD Anti-bribery Convention and its Consultation Paper Review backed up by the definition of Intangible prepare you to collide with the case study of UN Convention Against Corruption [UNCAC] Preventive Measures, resulting in Governance of paradox - by IBCM.

Is it not a paradox, but true, Madoffs and Mahatma Gandhis exist in the same plane? IBCM resolves the paradox.

The second section The Stem applies the concept of Inactivity Based Cost Management [IBCM] to measure Chapter II Preventive Measures of United Nations Convention Against Corruption [UNCAC]. The Root not only derives a measuring device but brings out the attempts since 1977 to stem the rot in the society that the second section entirely focuses on Corruption. UNCAC is a wonderfully prepared document but the surprising aspect is that more than 100 countries are signatories to the UNCAC. The grouping of resource owners by Ethical and Fiscal Responsibility and deriving the Accountability could give the signatories a real meaning of RTI. Persons who run the Governments will know from the book where they stand. IBCM applies its principle of measurement on Chapter II Preventive Measures of UNCAC as you would find the study of Cost Consequence as the only tool to gauge Preventive Measures. Ranking for each Article covered, deriving the Index of Inactivity by each resource area as well by Performance Criteria nails the Accountability factor individually and collectively. Index of Inactivity is the outcome of Governance report that forms the basis of Accountability, where Cost Consequence as on today can be evaluated. You will also note how a single ranking that can be yoked with the performance of any other substance for comparison, facilitates the application of IBCM for measurement of Governance. You will conclude - 'Budgeting for and Govern - Cost Consequence' is feasible. You have a tool to control your future.

The third section is the Knowledge Tree providing a basis for the concept to measure Ethical and Fiscal responsibility and its use on Business Ethics. You will observe the statement quoted in the book, 'If H.G. Wells could comment: Amidst the tens of thousands of names of monarchs that crowd the columns of history ... the name of Asoka shines, and shines almost alone, a star., then what could be the Ethical Responsibility that was followed to get the encomium from the distinguished historian of repute that extols Asoka's regime, around 300 B.C., as the pioneer of a Humane Society? What did Asoka stand for?' You will find quite invigorating when you comprehend the judgement derived in the book "that Knowledge is the Goal of Ethics' What otherwise is a wisdom quote left to contemplate, you will conclude, can be practiced following the dictum set by Galileo Galilei: Measure what is measurable, and make measurable what is not so.

Knowledge is of five categories: 1. Good Knowledge; 2. Wrong Knowledge; 3. Knowledge of Verbal Delusion; 4. Knowledge of Ignorance and 5. Intuitive Knowledge. Corporate work on the fifth all the time and that is entrepreneurship. IBCM study implores 'Free enterprise is an expression of freedom, whereas Ethical Responsibility is an expression of liberty, that threshold values emanate to bridge Ethical and Fiscal Responsibility.' and concludes 'Government for the People' belongs to the third category of Knowledge, for you will find out from the book why 1st Amendment of the US Constitution falls very much short of UNCAC document that has the extra Article to make a democracy truly for the people.

Your journey shall find answer from this book, to the three criteria set for a functional Governance - 1. Real-time Monitoring, 2. Cost Consequence and 3. People Participation. You have a purpose in your life now.

Jayaraman Rajah Iyer


15th October 2010



I acknowledge with thanks the permission given by The Buddhist Publication Society to use the quotation from Edicts of King Asoka, by Ven. S. Dhammika. Ethical responsibility would have been difficult to comprehend but for the practices followed by Asoka.

It was in year 1995 that India entered the www when the then Government owned VSNL phoned me up to say that I had been allotted the first number of internet BOMAAA001 that the journey in quest of knowledge had truly begun as well the responsibility of its usage. But for the Internet it would have been impossible to collect so much of information for this project and I thank profusely the organizations and individuals who have created the websites to quench my thirst. Knowledge is the goal of ethics the primary aspect of this book that responsibility to use the available facility from the internet is up to the individual: Let a man raise himself by his own self; let him not debase himself. For he is himself his friend, himself his foe.

Technology is the only avenue open to narrow the gap between the Government and the governed by understanding the status of ethical and fiscal responsibility as elucidated in the book that technological direction alone can achieve real-time monitoring. I thank ISACA, who have contributed immensely to this end by developing COBIT – Control Objectives and Maturity Models, permitting me to use Figure 12 – Graphic Representation of Maturity Models as an illustration towards the measurement standards created in this book as a comparative analysis.

In order to expatiate the development into a measuring methodology used in the book Nyaya or Tarka Sashtra or science of reasoning authored by Gautama has been used. Defining intangible and connecting to the matter is made feasible by my normal wont of opening my Internet Homepage http://www.esatsang.net/ contemplating in particular the Quote for the moment. But for the timely infusion of confidence this book would not have been made feasible that the dedication page is the ultimate acknowledgment of the existence of divine guidance that shall certainly lead the disheartened towards prosperity.

Jayaraman Rajah Iyer


The Root


Chapter 1: Introduction

Intangible is antimatter and good similarities exist between matter & antimatter in one hand, and tangible & intangible at the other. Intangible in the mundane world of business management has been used in only one instance, otherwise, not surprisingly, not touched at all. A physics textbook describes matter as that takes up space and has mass. Every physical object we have ever seen consists of matter. Scientists however have been continuously exploring the existence of antimatter in the known universe. The latest experiment is with a Large Hadron Collider (LHC) a 27-km long tunnel where beams of particles are fired to prove the theory that a particle when it meets its antiparticle, they annihilate each other and their entire mass is converted into pure energy. One of the LHC detectors, code named LHCb, is trying to investigate that equal amounts of matter and antimatter were created in the Big Bang and what happened to the missing antimatter.

In the field of management too, a similar experiment is being conducted and the purpose is the same. Similar to the LHC a very long tunnel was built for the experiment inside a Balance Sheet. Two beams were sent one a matter called asset and another antimatter called intangible. They were to collide and annihilate each other and the entire mass of intangible asset was to be converted into pure energy. The experiments are on, with a hiccup similar to the LHC.

Experiments are fundamental to scientific discoveries despite knowing fully well that experiments could go wrong to prove a theory. But experiments are essential and without these we wouldn't be enjoying the day-to-day use of cell phones and Internet. LHC's Big Bang experiment is expected to find Higgs Boson particle, also called God Particle, giving a theoretical explanation for the origin of mass in the universe and a proof that without its presence there would be no gravity. LHC has taken a considerable time and cost of the scientific community and despite of the current delay in experimentation process, on account of multiple problems, the scientific community is keen on continuing the experiments. Prof Hawking, who has motor neurone disease, bedridden in a hospital, is keen to get an update on work at the Large Hadron Collider and the interest of the scientific community has not diminished on account of the

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