Section B:
Consolidated Financial Statements: Accounting Policy adopted by respective foreign jurisdictions followed and not aligned to accounting policy followed in standalone financial statements
Tata Global Beverages Ltd. (Year ended 31-03-2013)
From Significant Accounting Policies on CFS
Employee Benefits
iii) With regard to overseas subsidiaries and associates, liabilities for retirement benefits are determined as per the regulations and principles followed in the respective countries. Defined benefit obligation of overseas subsidiaries accounted for in the reserves in its financial statements, in compliance with the local generally accepted accounting principles, are recognised in Group’s Reserve and Surplus (Refer Note 41(d)).
From Notes to Accounts on CFS
Post Retirement Employee Benefits
d) The Group has substantial international operations with approximately 65% of its revenues coming from overseas operations. For the purposes of consolidated financial statements, actuarial gains and losses relating to defined benefit pension scheme of overseas subsidiaries has been accounted for in the Reserves instead of the statements of profit and loss, applying the accounting principles of consolidation under Accounting Standard 21 and the policy followed by the overseas subsidiaries and as recognised by the relevant overseas accounting framework. Adoption of the above policy is required to reflect a consistent framework amenable for better inter-firm comparison and to reflect the underlying performance. Overseas actuarial gains/losses principally relate to a defined benefit retirement scheme of an overseas subsidiary which is closed for future accruals. These gains/losses represent increase in the value of future long-term payment obligations due to changes in interest rates and other actuarial assumptions based on the market position as at the year end. The actuarial assumptions are subject to significant fluctuations especially under volatile market conditions. Had the company followed the policy of accounting overseas actuarial gain/ (loss) in the statement of profit and loss, the profit before tax, profit after tax before shares of results of Associate & Minority interest and profit after tax would have been lower by Rs. 4215.20 lakh (Rs. 10215.00 lakh), Rs. 3245.70 lakh (Rs. 8516.00 lakh) and Rs. 2695.23 lakh (Rs. 7071.71 lakh) respectively.
From Auditor’s Report
Emphasis of Matter
As mentioned in Note 41(d) to the financial statements, the overseas subsidiaries of the group have defined benefit schemes relating to which the actuarial losses or gains are allowed to be recognised in the Reserves as per the local generally accepted accounting practices followed in those respective jurisdictions. For the purpose of consolidated financial statements, the holding company management has adopted the accounting policy in respect of actuarial gains or losses for its overseas defined benefit schemes to reflect the applicable accounting framework of the respective jurisdictions and consequently accounted it in the Reserves instead of in the Statement of Profit and Loss. Had the company followed the practice of recognition of actuarial losses on the aforesaid defined benefit plans in the Statement of Profit and Loss as per Accounting Standard (AS 15) on Employee Benefits, the charge to employee benefits expenses would have been higher by Rs. 4215 lakh, the deferred tax credit would have been higher by Rs. 969 lakh, the consolidated profit before taxes and minority interest would have been lower by Rs. 4215 lakh and the profit after taxes after minority interest would have been lower by Rs. 2695 lakh.
Profit recorded on sale/exchange of shares in entities under common control Mawana Sugars Ltd. (18 months ended 30-09-2012)
From Notes to Accounts
A Memorandum of Understanding (MOU) was signed between the Company and Government of Punjab in 1933 for setting up an Industrial Estate in Punjab. Siel Industrial Estate Limited (Siel – IE) was incorporated in an earlier year as a wholly owned subsidiary of the Company for setting up the Industrial Estate. The clear and unencumbered title and possession of the land for the aforesaid Industrial Estate came to Siel – IE in October, 2011 and now Siel – IE holds approximately 455 acres of land at Rajpura, Punjab.
The Company, Siel – IE and Siel Infrastructure and Estate Developers Private Limited (Siel – IED), which was acquired from Usha International Limited, the holding company, and consequently, became a wholly owned subsidiary for the Company during the period, have entered into a Joint Development Agreement for the development of the Industrial Estate.
During the period, the Company has sold 13,475,000 equity shares of Rs.10/- each of Siel – IE to Siel – IED for a consideration aggregating to Rs. 1350.20 million, as determined though an independent valuation of Siel – IE based on the Net Asset Value method wherein the market value of the aforesaid land of 455 acres has been considered for the valuation. The consideration has been received by the Company in the form of 13,501,950 equity shares of Rs. 100/- each fully paid up of Siel – IED. Accordingly, the Company has recognised a profit of Rs. 1215.45 million in the Statement of Profit and Loss as an exceptional item.
From Auditor’s Report
4(b) Note 49 of the financial statements explains the transactions underlying the recognition of profit on transfer of shares of Siel – IE, a wholly owned subsidiary of the Company, to Siel – IED, another wholly owned subsidiary of the Company.
In our opinion, as the amount recorded as profit on sale of shares of Siel – IE to Siel – IED represents surplus arising out of recognition of the fair value of Siel – IE shares exchanged for the additional shares acquired in Siel – IED and since this exchange of shares in Siel – IE for shares in Siel – IED is an exchange of shares in entities under common control without dilution in the Company’s control over Siel – IE even after the non-monetary transfer of shares to Siel – IED, the Loss after tax for the period is understated by Rs. 1215.45 million.
6. Subject to our comments and the effects of the matters discussed in paragraph 4 above, and further to our comments in paragraph 3 and the Annexure referred to in paragraph 5 above, we report that:
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