By Himanshu V. Kishnadwala | Chartered Accountant
From Published Accounts
Section B : Miscellaneous
9 Non disclosure of items in companies wherein Joint Control
is exercised (as required by AS 27)
Electrosteel Castings Ltd. — (31-3-2009)
From Notes to Accounts
26(a)The Company has invested in equity shares of Domco
Private Limited (DPL), a Company incorporated in India and has joint control
(proportion of ownership interest of the Company being 50%) over DPL along with
other venturers (the Venturers). The Venturers had filed a petition before the
Company Law Board, Principal Bench, New Delhi (CLB) against the Company on
various matters, including for forfeiture of the Company’s investment in equity
shares of DPL. The Company had inter alia filed a petition before the Hon’ble
High Court of Jharkhand at Ranchi. The Hon’ble High Court of Jharkhand at Ranchi
upheld the Company’s appeal and decided that the matter would have to be
referred for Arbitration. The Venturer has challenged the aforesaid judgment in
the Divisional Bench of the Hon’ble High Court of Jharkhand at Ranchi. Pending
final outcome of the matter and since, the other Venturers are not providing the
financial statements of DPL, disclosures as regards contingent liability and
capital commitments, if any, aggregate amounts of each of the assets,
liabilities, income and expenses related to the Company’s interest in DPL have
not been made in these accounts.
10 Change in accounting policy on account of change of
management estimates for warranty provision and depreciation
MRF Ltd — (30-9-2009)
From Notes to Accounts
Changes in Accounting Policies
i) The warranty provision has been recognised based on
management estimates regarding possible further outflow on servicing the
customers during the warranty period, on the sales affected during the year.
These estimates are computed on a scientific basis, as per past trends of such
claims, which hitherto were accrued and recognised based on claims preferred.
Due to this change, the profit for the year is lower by Rs.21.25 Crore.
ii) The Company has hitherto been charging depreciation on
windmills on the Straight Line Method, as Continuous Process Plant at the rates
and on the basis specified in Schedule XIV to the Companies Act, 1956. The
management has thought it prudent to switchover from the Straight Line Method to
the Reducing Balance Method to follow a uniform practice and has re-calculated
the depreciation from the date of such assets coming into use. As a result, the
charge for depreciation is more by Rs. 15.75 Crore (including Rs. 8.11 Crore net
for Deferred Tax of Rs. 4.17 Crore for the earlier years) and the profit for the
year is lower by the said amount.
From the Auditors’ Report
In our opinion and to the best of our information, and
according to the explanations given to us, the said accounts, read with Note No.
I (Q) in the notes forming part of the accounts, in respect of changes in
accounting policies relating to provision for warranty and change in the basis
of providing depreciation, resulting in the profit for the year and the reserves
being stated lower by Rs. 37 Crore and read together with other notes thereon,
give the information required by the Companies Act, 1956, in the manner so
required and also give a true and fair view, in conformity with the accounting
principles generally accepted in India;
|
Nature of Provisions
|
Warranties
|
Sales Tax / VAT
|
Excise Duty
|
|
|
2008-09
|
2007-08
|
2008-09
|
2007-08
|
2008-09
|
2007-08
|
|
Carrying amount at thebeginning of the year
|
26.09
|
15.06
|
18.14
|
7.00
|
1.82
|
|
|
Nature
of Provisions
|
Liquidated damages
|
Other Litigation Claims
|
|
Total
|
|
Carrying
amount at the
|
2008-09
|
2007-08
|
2008-09
|
2007-08
|
2008-09
|
2007-08
|
|
|
|
|
|
|
|
|
beginning
of the year
|
11.88
|
9.09
|
–
|
–
|
57.93
|
31.58
|
|
Additional provision
|
|
|
|
|
|
|
|
made
during the year
|
–
|
2.79
|
1.98
|
–
|
27.98
|
32.27
|
|
Amounts used
|
|
|
|
|
|
|
|
during
the year
|
–
|
–
|
–
|
–
|
2.49
|
1.77
|
|
Unused amount reversed
|
|
|
|
|
|
|
|
during
the year
|
–
|
–
|
–
|
–
|
9.18
|
4.15
|
|
|
|
|
|
|
|
|
|
Carrying amount at the
|
|
|
|
|
|
|
|
end of
the year
|
11.88
|
11.88
|
1.98
|
–
|
74.24
|
57.93
|
11. Disclosures for nature of and movement in provisions as per AS 29Crompton Greaves Ltd — (31-3-2009)
From Notes to Accounts
(a)Movement in provisions:
(b)Nature of Provisions:
- Product Warranties: The Company gives warran-ties on certain products and services in the nature of repairs / replacement, which fail to perform satisfactorily during the warranty period. Provi-sion made represents the amount of the expected cost of meeting such obligation on account of rec-tification / replacement. The timing of outflows is expected to be within a period of two years.
- Provision for sales tax represents sales tax liability on account of non-collection of declaration forms and other legal matters which are in appeal under the Act / Rules.
- Provision for excise duty represents the differen-tial duty liability that is expected to materialise in respect of matters in appeal.
- Provision for liquidated damages has been made on contracts, for which delivery dates are exceeded and computed in a reasonable and prudent manner.
- Provision for litigation related obligations represents liabilities that are expected to materialise in respect of matters in appeal.
(c)Disclosure in respect of contingent liabilities:
Refer Schedule 19.
12. Forfeiture of advance received against sale of immovable property not recognised in the Profit and Loss account
Crompton Greaves Ltd— (31-3-2009)
From Notes to Accounts
Other liabilities include Rs. 8.30 Crore received as ad-vance against sale of immovable property of the Com-pany. As per agreements with buyers, the Company is entitled to forfeit the said amounts, if the buyers do not comply with the conditions of sale within the stipulated time. Since, the buyers have failed to comply with the conditions and hence, the Company has forfeited these amounts received in accordance with the terms of the agreements. The buyers have filed suits in the Courts for recovery of the advances paid by them. The Com-pany contends that as per the force majeure clause of the agreements is not required to be refunded. Pending disposal of the cases by the Courts, the Company, as a measure of prudence, has not recognised the said
amount in the profit and loss account.
