NBFCs Audit Aspects and Post Companies Act 2013 scenario BCAS JOLLY BHAVAN 26 TH SEPTEMBER, 2014 Zubin F. Billimoria
CONTENTS Audit Aspects Post Companies Act, 2013 scenario
Audit Aspects Classification Key Regulatory Aspects Key Operational Aspects Key Internal Control Aspects Applicability and Relevance of specific Standards of Auditing (SAs)
Classification Asset Finance Companies Loan Companies Investment Companies Infrastructure Finance Companies Micro Finance Institutions Core Investment Companies Mortgage Guarantee Companies Infrastructure Debt Fund Companies Factoring Companies Non Operative Holding Finance Companies Identification relevant from the point of view of SA-315
Key Regulatory Aspects Registration Capital Adequacy Norms Norms for Public Deposits Credit Rating Liquid Assets IRAC and Provisioning norms Lending Restrictions ALM framework Reserve Fund Identification relevant from the point of view of SA-315
Key Operational Aspects Key business cycles - Financing - Borrowing - Investments / Treasury Identification relevant from the point of view of SA-315 and 330
Financing Business Cycle Asset based funding wholesale and retail (vehicles, plant and machinery, consumer durables, mortgage loans) Cash flow based and funding (bills discounting, personal loans, ICDs)
Borrowings Business Cycle Public Deposits Bank Financing ICDs Debentures Money Market Instruments Securitisation
Key Internal Control Aspects Entity Level Controls Risk Mitigation and Management Cash / Collection Management Receivables / NPA Management Investment Management Management Override of Controls Financial Closing and Reporting process Identification relevant from the point of view of SA-315 and 330
Relevance of certain specific SAs to NBFCs SA- 230 : Audit Documentation SA-240 : Auditor s Responsibilities Relating to Fraud in an Audit of Financial Statements SA-250: Consideration of Laws and Regulations in an Audit of Financial Statements SA-260 / 265: Communicating (including Deficiencies in Internal Control) to Those Charged with Governance SA-315 / 330: Identifying and Assessing the Risk of Material Misstatement through Understanding the Entity and its Environment and Auditor s Responses to the Assessed Risks The above is not an exhaustive list of all SAs which are applicable
SA-230: Audit Documentation Updated and relevant permanent file is of paramount importance in view of dynamic legal and regulatory requirements Documentation of control and substantive procedures to comply with the specific regulatory, operational and control aspects discussed earlier. (Discussion on specific aspects discussed in subsequent slides)
SA-240 : Auditor s Responsibilities Relating to Fraud in an Audit of Financial Statements Characteristics of Fraud Nature of business makes them more susceptible to fraud Booking of fictitious loans to earn more incentives Collusion with DSAs Non adherence to KYC / AML guidelines
SA-240 : Auditor s Responsibilities Relating to Fraud in an Audit of Financial Statements Adherence to the RBI Master Circular dated 1 st July, 2014 on Frauds Monitoring: Classification of Frauds Misappropriation and criminal breach of trust Fraudulent encashment through forged instruments, manipulation of books of account or through fictitious accounts and conversion of property Unauthorized credit facilities extended for reward or for illegal gratification. Negligence and cash shortages Cheating and forgery Irregularities in foreign exchange transactions Any other type of fraud not coming under the specific heads as above. Reporting of Frauds coupled with Quarterly and Annual Reporting Direct reporting responsibilities to RBI in case of serious irregularities
SA-240 : Auditor s Responsibilities Relating to Fraud in an Audit of Financial Statements Professional Skepticism Relevant whilst sanctioning and disbursement of big ticket loans Obtaining project reports / valuation reports from independent sources directly Controls over generation of information for determining loan loss provisioning Discussion amongst engagement team Dissemination of information based on review of fraud returns submitted to the RBI by experienced engagement team members Dissemination of information based on inside information, news reports etc. Applying an element of unpredictability whilst verifying assets secured, selecting locations for cash verification etc.
SA-250: Consideration of Laws and Regulations in an Audit of Financial Statements Non compliance with laws and regulations which materially affect the financial statements Disclosures in the financial statements laid down by the RBI (CRAR, Direct and Indirect Exposure to Real Estate Sector, Maturity Pattern of Assets and Liabilities) Conducting the business including licencing and registration requirements Going Concern implications Operating aspects of the business (Provisioning, Valuation, Capital adequacy, Deposit acceptance etc.) Financial consequences like fines, penalties etc.
SA-250: Consideration of Laws and Regulations in an Audit of Financial Statements Non compliance is primarily the responsibility of the Management Laying down appropriate operating procedures and systems including internal controls especially to capture information for monitoring, reporting and recording compliances with the key operational and control aspects discussed earlier Framing a code of conduct / fair practices code Compliance with specific Corporate Governance guidelines like constitution of Audit, Nomination and Risk Management Committee
SA-250: Consideration of Laws and Regulations in an Audit of Financial Statements Auditor s Considerations and Responsibilities Review of the minutes and various regulatory returns and their timely submission Review of the RBI inspection reports and other similar correspondence Non compliance with licencing / registration conditions Going Concern issues Reporting to Management and Those Charged with Governance Specific reporting aspects under the NBFC (Auditor s Report Directions) Direct reporting to the RBI in case of serious irregularities
SA-260 / 265: Communicating (including Deficiencies in Internal Control) to Those Charged with Governance (TCWG) Specific responsibility to report to the Board on matters specified in the NBFC (Auditor s Report Directions) (see next slide) In case of any non compliance direct responsibility to also report to the RBI prior to which / simultaneously need to keep TCWG also informed
SA-260 / 265: Communicating (including Deficiencies in Internal Control) to Those Charged with Governance (TCWG) Matters to be included in the Auditor s report The auditor s report on the accounts of a non-banking financial company shall include a statement on the following matters, namely: (A) In the case of all Non-Banking Financial Companies I. Whether the company is engaged in the business of non-banking financial institution and whether it has obtained a Certificate of Registration (CoR) from the Bank II. In the case of a company holding CoR issued by the Bank, whether that company is entitled to continue to hold such CoR in terms of its asset/income pattern as on March 31 of the applicable year. III. Based on the criteria set forth by the Bank in Company Circular No. DNBS.PD. CC No. 85 / 03.02.089 /2006-07 dated December 6, 2006 for classification of NBFCs as Asset Finance Company (AFC), whether the non-banking financial company has been correctly classified as AFC as defined in Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 with reference to the business carried on by it during the applicable financial year. IV. Based on the criteria set forth by the Bank in the Notification viz. Non-Banking Financial Company- Micro Finance Institutions (Reserve Bank) Directions, 2011 dated December 02, 2011 for classification of NBFCs as NBFC-MFIs, whether the non-banking financial company has been correctly classified as NBFC-MFI as defined in the said Directions with reference to the business carried on by it during the applicable financial year.]
SA-260 / 265: Communicating (including Deficiencies in Internal Control) to Those Charged with Governance (TCWG) In case of a non-banking financial company accepting/holding public deposits Apart from the matters enumerated in (A) above, the auditor shall include a statement on the following matters, namely:- (i) Whether the public deposits accepted by the company together with other borrowings indicated below viz. (a) from public by issue of unsecured non-convertible debentures/bonds; (b) from its shareholders (if it is a public limited company); and (c) which are not excluded from the definition of public deposit in the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998,are within the limits admissible to the company as per the provisions of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998; (ii) Whether the public deposits held by the company in excess of the quantum of such deposits permissible to it under the provisions of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 are regularised in the manner provided in the said Directions; (iii) Whether an Asset Finance Company having Capital to Risk Assets Ratio (CRAR) less than 15% or an Investment Company or a Loan Company as defined in paragraph 2(1)(ia), (vi) and (viii) respectively of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 is accepting "public deposit without minimum investment grade credit rating from an approved credit rating agency;
SA-260 / 265: Communicating (including Deficiencies in Internal Control) to Those Charged with Governance (TCWG) (iv) In respect of NBFCs referred to in clause (iii) above, whether the credit rating, for each of the fixed deposits schemes that has been assigned by one of the Credit Rating Agencies listed in Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 is in force; and whether the aggregate amount of deposits outstanding as at any point during the year has exceeded the limit specified by the such Credit Rating Agency; (v) In case of NBFCs having Net Owned Funds of Rs 25 lakh and above but less than Rs 200 lakhs, whether the public deposit held by the companies is in excess of the quantum of such deposit permissible to it in terms of Notification No. DNBS. 199/CGM (PK) - 2008 dated June 17, 2008 and whether such company : (a) has frozen its level of deposits as on the date of that Notification; or (b) has brought down its level of deposits to the level of revised ceiling of deposits in terms of that Notification. (vi) Whether the company has defaulted in paying to its depositors the interest and /or principal amount of the deposits after such interest and/or principal became due;
SA-260 / 265: Communicating (including Deficiencies in Internal Control) to Those Charged with Governance (TCWG) (vii) Whether the company has complied with the prudential norms on income recognition, accounting standards, asset classification, provisioning for bad and doubtful debts, and concentration of credit/investments as specified in the Directions issued by the Reserve Bank of India in terms of the Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007. (viii) Whether the capital adequacy ratio as disclosed in the return submitted to the Bank in terms of the Non- Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 has been correctly determined and whether such ratio is in compliance with the minimum CRAR prescribed therein; (ix) Whether the company has complied with the liquid assets requirement as prescribed by the Bank in exercise of powers under section 45-IB of the RBI Act and whether the details of the designated bank in which the approved securities are held is communicated to the office concerned of the Bank in terms of Notification No.DNBS.172/CGM(OPA)-2003 dated July 31, 2003; (x) Whether the company has furnished to the Bank within the stipulated period the return on deposits as specified in the NBS 1 to the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998; (xi) Whether the company has furnished to the Bank within the stipulated period the half-yearly return on prudential norms as specified in the Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007; (xii) Whether, in the case of opening of new branches or offices to collect deposits or in the case of closure of existing branches/offices or in the case of appointment of agent, the company has complied with the requirements contained in the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998.
SA-260 / 265: Communicating (including Deficiencies in Internal Control) to Those Charged with Governance (TCWG) (C) In the case of a non-banking financial company not accepting public deposits Apart from the aspects enumerated in (A) above, the auditor shall include a statement on the following matters, namely: - (i) Whether the Board of Directors has passed a resolution for non- acceptance of any public deposits; (ii) Whether the company has accepted any public deposits during the relevant period/year; (iii) Whether the company has complied with the prudential norms relating to income recognition, accounting standards, asset classification and provisioning for bad and doubtful debts as applicable to it in terms of Non-Banking Financial (Non- Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007; (iv) In respect of Systemically Important Non-deposit taking NBFCs as defined in paragraph 2(1)(xix) of the Non-Banking Financial (Non- Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007: (a) Whether the capital adequacy ratio as disclosed in the return submitted to the Bank in form NBS- 7, has been correctly arrived at and whether such ratio is in compliance with the minimum CRAR prescribed by the Bank; (b) Whether the company has furnished to the Bank the annual statement of capital funds, risk assets/exposures and risk asset ratio (NBS-7) within the stipulated period.
SA-260 / 265: Communicating (including Deficiencies in Internal Control) to Those Charged with Governance (TCWG) Deficiency in Internal Control - A control is designed, implemented or operated in such a way that it is unable to prevent, detect and correct misstatements on a timely basis - A control necessary to prevent or detect and correct misstatements on a timely basis is missing (Communication to an appropriate level of Management on a timely basis would be sufficient- Letter of Weakness, Management Letter etc.) Significant deficiency in Internal Control - Deficiency or combination of deficiencies in internal control that based on professional judgment are of sufficient importance to merit attention to TCWG Identification relevant from the point of view of SA-315 and SA -330
SA-260 / 265: Communicating (including Deficiencies in Internal Control) to Those Charged with Governance (TCWG) Adequacy of Entity Level Controls Constitution of an Audit Committee (asset size of > Rs. 50 crores or Deposits >Rs. 20 crores) Constitution of a Nomination Committee to evaluate fit and proper criteria (Deposits > Rs. 20 crores and SI NBFCs) Constitution of an Asset Liability Management Committee together with a Risk Management Committee to ensure an Integrated Risk Management framework (asset size of > Rs. 100 crores or Deposits >Rs. 20 crores) Framing of and adherence to the Fair Practices code in terms of the RBI guidelines (deals with Loan applications and processing, recoveries, Grievance Redressal Officer, recoveries etc.)
SA-260 / 265: Communicating (including Deficiencies in Internal Control) to Those Charged with Governance (TCWG) Adequacy of Entity Level Controls (contd.) Review of budgets and incentive plans to check whether they are realistic or put undue pressure Adequate training provided to employees and DSAs on selling skills, regulatory requirements and IT SYSTEMS on induction and periodically Adequacy and appropriateness of the Approval Matrix Adequacy of the Internal Audit charter / scope Identification relevant from the point of view of SA-315 and SA -320
SA-260 / 265: Communicating (including Deficiencies in Internal Control) to Those Charged with Governance (TCWG) Risk Mitigation and Management Deficiencies in the credit appraisal and evaluation process at the micro and macro level (specific aspects relating to Loans against Gold Jewellery, adherence to KYC guidelines etc.) Non adherence to the interest rate guidelines at the individual level and deficiencies in the interest rate policy vis a vis the maturity profile etc. Non adherence to the credit concentration and exposure norms at the individual and group level Irregular monitoring of securities held against advances exposing the NBFC to price risks Non adherence to the KYC guidelines Adequacy and appropriateness of the hedging policy to mitigate exchange fluctuation / currency risks Methodology for determining the base rate Identification relevant from the point of view of SA-315 and SA -320
SA-260 / 265: Communicating (including Deficiencies in Internal Control) to Those Charged with Governance (TCWG) Controls over Cash / Collections Management Timely banking and recording of PDCs Monitoring the reversal of bounced cheques Timely preparation and adequate review / follow up of bank reconciliations Adequate IT / SYSTEM controls to enable seamless transfer of funds electronically Controls over cash collections in rural areas Adequacy of insurance for cash in transit Identification relevant from the point of view of SA-315 and SA -320
SA-260 / 265: Communicating (including Deficiencies in Internal Control) to Those Charged with Governance (TCWG) Receivables / NPA Management Accurate and timely generation of overdue reports Procedures for follow up of overdues Adequacy of IT / SYSTEM controls Timely initiation of legal proceedings Adherence to the guidelines for restructuring of advances including those under the CDR mechinism Ensure that it is not a tool for avoiding provisions Whether to take cognisance of subsequent receipts? Identify cases of evergreening Identification relevant from the point of view of SA-315 and SA -320
SA-260 / 265: Communicating (including Deficiencies in Internal Control) to Those Charged with Governance (TCWG) Investment Management Investment policy needs to be in line with RBI guidelines (Classification, valuation, transfer, transactions in government securities through CSGL account etc.) Specific requirements for Core Investment Companies Controls over timely recording of deals, accrual and receipt of interest etc. Policy for determining provisioning for diminution other than temporary Identification relevant from the point of view of SA-315 and SA -320
SA-260 / 265: Communicating (including Deficiencies in Internal Control) to Those Charged with Governance (TCWG) Financial Closing and Reporting Process(including Management Override of Controls) Controls over uploading from sub-systems to the main system Controls over closing entries especially those involving estimation (provisioning, valuation, revaluation, impairment etc.) Controls over identification of changes in regulatory requirements / processes having an impact on accounting / reporting and disclosures Identification relevant from the point of view of SA-315 and SA -320
SA-315 / 330: Identifying and Assessing the Risk of Material Misstatement through Understanding the Entity and its Environment and Auditor s Responses to the Assessed Risks Understanding the entity and its Environment Classification Key regulatory aspects Key Operational aspects / business cycles Understanding the Internal Controls (Process designed, implemented and maintained by TCWG, management and others to provide reasonable assurance about the achievement of an entity s objectives with regard to reliability of financial reporting, effectiveness and efficiency of operations, safeguarding of assets and compliance with applicable laws and regulations) Understanding the IT Controls General and Business process (covers controls over the source data, report parameters / change management process and report logic)
SA-315 / 330: Identifying and Assessing the Risk of Material Misstatement through Understanding the Entity and its Environment and Auditor s Responses to the Assessed Risks Identification and assessment of ROMMs and responses thereto Needs to be done for ELCs, FCRP and all key business cycles identified earlier Identification of ROMM ( what could go wrong ) Identify the control ( review type or direct and specific ) identify RAWC RAWC is higher if it addresses a significant risk
SA-315 / 330: Identifying and Assessing the Risk of Material Misstatement through Understanding the Entity and its Environment and Auditor s Responses to the Assessed Risks Significant risk: Control activity is non routine Whether identified as a fraud risk Control is a review type control or requires judgement Significant changes in the nature and volume of transactions which might adversely affect the design and operating effectiveness of the control Whether the account has a history of errors (i.e. OE not effective or significant misstatement observed in the past) Effectiveness of ELCs that monitor control are not effective Whether the control operates less frequently Whether the control is performed by incompetent persons or there is a change in the key personnel performing the controls Whether the control is manual or complex in nature A yes answer to one or more of the above questions would generally imply that there is a significant risk
SA-315 / 330: Identifying and Assessing the Risk of Material Misstatement through Understanding the Entity and its Environment and Auditor s Responses to the Assessed Risks Based on the above assessment the following are generally the common significant ROMMs for NBFCs Revenue recognition (presumed fraud risk) Provisioning for NPAs Assessing provisions for diminution in value of investments especially for unquoted investments Valuation of derivatives and other financial instruments
SA-315 / 330: Identifying and Assessing the Risk of Material Misstatement through Understanding the Entity and its Environment and Auditor s Responses to the Assessed Risks Responses to the Assessed Risks Maintaining professional skepticism Assigning experienced staff Providing more supervision Incorporating unpredictability Control Testing Design and Implementation and Operating Effectiveness - Inquiry, Observation, Inspection and Reperformance Substantive procedures Analytical Procedures and Test of Details
Post Companies Act, 2013 Scenario Raising of Funds[sections 2(30), 42, 62 and 71] Related party transactions [section 2(76), 2(77) and 188] Internal Financial Reporting Controls [Section 134(5)(e) and Section 143(3)(i)] Depreciation CSR Obligations (Section 135)
Raising of Funds[sections 2(30), 42, and 71] Definition of Debenture Private Placements Regulated Creation of charge on specific assets for issue of debentures
Definition of Debenture [Section 2(30)] Section 2(30) Debenture includes debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not 1956 act did not refer to any other instrument Not clear whether commercial paper would be covered since it is not a security under the Securities (Contracts Regulation) Act but a money market instrument under the Negotiable Instruments Act?
Private Placements Regulated (section 42) Private placements not covered under the 1956 act Private placement means any offer of securities or invitation to subscribe securities by a company which satisfies the following conditions: i. It is made to a select group of persons ii. iii. It is other than by way of public offer It is through the issue of a private placement letter accompanied by a serially numbered application form addressed to specified persons and through normal banking channels with allotment being made within 60 days or else refund within 15 days failure of which will result in interest to be payable iv. Moneys received to be kept in a separate bank account v. Record to be maintained and details to be filed with the ROC including a return of allotment vi. The offer / invitation in a financial year is not made to more than 200 persons (excluding QIBs and ESOPs to employees) which is to be reckoned individually for each kind (not applicable to NBFCs which comply with the RBI guidelines - mainly relevant for subordinated / perpetual debt for CRR purposes) vii. The value of such offer per person shall not be less than Rs. 20,000 FV (not applicable to NBFCs which comply with the RBI guidelines - mainly relevant for subordinated / perpetual debt for CRR purposes) viii. Prior special resolution needs to be passed for each offer or invitation except for NCDs where the same can be passed once in a year ix. No fresh offer / invitation unless allotments with respect to the earlier offer / invitation are completed or withdrawn / abandoned Guidelines made more stringent Fall out of the judgement of the Honourable Supreme Court in the Sahara case the primary ruling being that the limit of 49 earlier laid down cannot be circumvented by approaching groups of 49 at a time
Creation of charge on specific assets for issue of debentures Secured debentures to be issued subject to certain conditions as under(absent under the 1956 Act): i. Redemption period of 10 years (30 years for infra project companies not clear whether applies to companies engaged in financing infra projects) ii. Creation of charge shall be on specific movable and immovable properties or assets of sufficient valuefixed charge on present and future assets and floating charge is not permissible This would lead to challenges for NBFCs whereby it would be difficult to identify specific loans in the security document
Related party transactions [section 2(76), 2(77) and 188] As per Section 2(76) Related party with reference to a company, means: A director or his relative; A key managerial personnel ( KMP ) or his relative; A firm, in which a director, manager or his relative is a partner; A private company in which a director or manager [or his relative] is a member or director; A public company in which a director or manager is a director and holds along with his relatives, more than two per cent of its paid up share capital; Any body corporate whose board of directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager (other than those provided in a professional capacity); Any person on whose advice, directions or instructions a director or manager is accustomed to act (other than those provided in a professional capacity); Any company which is: a holding, subsidiary or an associate company of such company; or a subsidiary of a holding company to which it is also a subsidiary; A director or KMP of the holding company of such company or his relative.
Related party transactions [section 2(76), 2(77) and 188] As per Section 2(77) read with Rule 4 of Companies (Specification of Definitions Details) Rules, 2014,Relative with reference to a person means: Members of a Hindu Undivided Family; Husband and wife; Father (including step father); Mother (including step mother); Son (including step son); Son s wife; Daughter; Daughter s husband; Brother (including step brother); Sister (including step sister).
Related party transactions [section 2(76), 2(77) and 188] Challenges for NBFCs Tracking details especially for entities involved in retail lending and accepting public deposits IT systems need to be updated Approval by audit committee especially for listed companies in terms of Clause 49 Disclosure in the Board Report even if transactions are in the ordinary course of business but are material (materiality not defined- guidance from AS-18 or Clause 49) Documentation to justify arm s length
Internal Financial Reporting Controls [Section 134(5)(e) and Section 143(3)(i)] Internal Financial Controls means policies and procedures adopted by the company for ensuring orderly and efficient conduct of the business, including adherence to the company s policies, safeguarding of assets, the prevention and detection of frauds and errors, the accuracy and completeness of accounting records and timely preparation of reliable financial information [Explanation to section 134(5)(e)]
Internal Financial Reporting Controls [Section 134(5)(e) and Section 143(3)(i)] Disconnect between the Act and the Rules regarding companies covered Onerous responsibilities placed on the Management and Auditors (both internal and external) Rigours seem to be more onerous than the SOX reporting requirements since operating controls are also covered SOPs need to be realigned / prepared to document specific controls and align them with the risks distinction between a process and a control needs to be understood
Depreciation Significant increase in rate of depreciation of commonly used assets by NBFCs as compared to Schedule XIV rates under the 1956 Act The Companies Act, Nature of asset - illustrative 2013 The % change Deemed Companies Increase Useful Life rate Act, 1956 General Plant and Machinery other than continuous process plant 15 6.33% 4.75% 1.58% 33.33% General furniture and fittings 10 9.50% 6.33% 3.17% 50.08% Office equipment 5 19.00% 4.75% 14.25% 300.00% Desktops, laptops, etc. 3 31.67% 16.21% 15.46% 95.35% Electrical Installations and Equipment 10 9.50% 4.75% 4.75% 100.00% Impact on profitability and distributable surplus IT systems would need to be realigned 47
CSR Obligations (Section 135) More formalised monitoring Specific procedural compliances May need to shift focus from existing avenues to ensure compliance with specific requirements Impact on profitability, taxation and distributable surplus
Questions????