Section A:
Revision to Financial Statements
Compiler’s Note
The Companies Act, 2013 vide sections 130/131 permits revision of financial statements under the circumstances mentioned in the said sections. The Companies Act, 1956 does not contain similar provisions. However, some companies have resorted to revision of financial statements adopted by the Board of Directors, but before the same were adopted by the shareholders in the Annual General Meeting. Given below is one such instance where the financial statements have been revised for reversing the decision of the Board of Directors for recommendation of dividend. (Readers interested in similar instances can also refer BCAJ February 2013)
Nagarjuna Fertilizers and Chemicals Ltd 31st March 2013
From Notes to Accounts
Revision of Financial Statements
The Board of Directors at their meeting held on 3rd May, 2013 had considered and approved the Audited Financial Statements of the Company comprising of the Balance sheet as on 31st March, 2013, the statement of Profit and Loss and Cash Flow Statement for the year then ended together with significant accounting policies and other explanatory information.
The Directors had recommended a Dividend at a rate of 100% 1.e. Rs. 1/- per share on the fully paid up capital of the Company to be paid in accordance with the Articles of Association of the Company out of the profits of the Company, absorbing a sum of Rs. 5,980.65 lakh, apart from dividend tax of Rs. 1,016.41 lakh.
The recommendation of the Board for payment of Divided was based on Profits available and the expectation of realisation of government subsidy, and market outstanding which ensure the ability of the Company to meet its commitment in respect of Dividend payment and repayment obligations to the Lenders.
Consequent to the approval of the Board of Directors on a review of the financial position of the Company, the Board noted that in view of the non-receipt of subsidy from the Government of India which has accumulated to substantial amounts and the unlikelihood of receipt in the near term having regard to the increasing uncertainty in the economic situation, market realisations not being to the expectations, higher commitments and outlays on account of appreciated value of dollar, there could be a stress on the cash flows as the same would be required for the operations. The Company accordingly may not be able to meet its commitments of payment of dividend which is required to be paid out immediately on approval by the shareholders at the ensuing Annual General Meeting.
In view of the changed circumstances as stated above, the Board has reconsidered the decision to recommend the dividend payment as stated above and resolved to withdraw the recommendation made earlier and accordingly, the Board has resolved to cause revision of the financial statements of the year 2012-2013.
In view of the above decision, financial statements which were considered and approved at the meeting held on 3rd May, 2013 have been revised for reversal of the provisions made for proposed dividend and dividend tax aggregating to Rs. 6,997.06 lakh and consequent reversal of transfer to General Reserve Rs. 850.00 lakh.
From Auditors’ Report
As stated in Note 3, the financial statements for the year ended on March 31, 2013 approved by the Board of Directors and reported by us on May 3, 2013 have been revised to give effect of reversal of provision made for proposed dividend and dividend tax of Rs. 5,980.65 lakh and Rs. 1,016.41 lakhs respectively consequent to the Board’s decision
Your Directors consequent to a review of the financial position of the company, in view of the company facing severe financial stress owing to the non-receipt of subsidy from the Government on India which has accumulated to substantial amounts, market realisations not being to the expectations, higher commitments and outlays on account of appreciated value of dollar, the unlikelihood of the cash flow improving in view of the increasing uncertainty in the economic situation, have re-considered the Audited Annual accounts and Audited Financial Results of the company for the year ended 31st March, 2013.
The Board of Directors after careful re-consideration of the Audited Accounts and having explored all available options have approved the Audited Accounts and decided to withdraw the recommendation for payment of dividend to conserve the funds for the future in view of the present outlook of the Industry.
