By Himanshu V. Kishnadwala
Chartered Accountant
(A) APPLYING PRACTICAL EXPEDIENT AS PER IND AS 116 FOR LEASE CONCESSIONS
BATA INDIA LTD.
From Consolidated Published Results for quarter and period ended 30th September, 2020
From Notes to Results
The Group has elected to apply the practical expedient of not assessing the rent concessions as a lease modification, as per MCA Notification dated 24th July, 2020 on IND AS 116 for rent concessions which are granted due to the Covid-19 pandemic. According to the Notification, total rent concessions confirmed in the quarter ended 30th September, 2020 of Rs. 274.38 million (including Rs. 95.26 million unconditional rent concessions pertaining to subsequent quarters) has been netted of from rent expenses.
Further, out of total rent concessions confirmed for the six months ended 30th September, 2020 of Rs. 775.76 million (including Rs. 95.26 million unconditional rent concessions pertaining to subsequent quarters), Rs. 475.34 million has been accounted under rent expenses and balance of Rs. 300.42 million is reported under Other Income.
(B) INEFFECTIVENESS OF DERIVATIVE CONTRACTS DESIGNATED AS CASH FLOW HEDGES CONSIDERED AS ‘EXCEPTIONAL ITEM’
STERLITE POWER TRANSMISSION LTD. (YEAR ENDED 31ST MARCH, 2020)
NOTE 32: EXCEPTIONAL ITEMS (Rs. in million)
Ineffectiveness of derivative contracts designated as cash flow hedges Rs. 2,565.95.
During the year, the wholly-owned subsidiary of the Company, Sterlite Power Grid Ventures Limited, has sold some of its investments in Brazilian transmission project entities. The contract for supply of conductors to these project entities has subsequently been cancelled, and this cancellation has been considered as a non-recurring event. The loss on cancellation of corresponding cash flow hedges entered for mitigation of risk of fluctuation in prices of aluminium and foreign currency has been disclosed as Exceptional Item.
(C) AMALGAMATION INCLUDED AS KEY AUDIT MATTER
BANDHAN BANK LTD. (YEAR ENDED 31ST MARCH, 2020)
From Auditors’ Report
Accounting for Scheme of Amalgamation of GRUH Finance Limited with the Bank
(Refer Note 38 to Schedule 18 to the Financial Statements)
On 7th January, 2019 the Board of Directors of the Bandhan Bank approved the Scheme of Amalgamation of GRUH Finance Limited with the Bank (the ‘Scheme’). The Scheme has received all the necessary regulatory approvals and the certified copies of the orders passed by NCLTs were filed with ROCs on the 17th October, 2019 – becoming the Effective Date on which GRUH Finance Limited has ultimately been merged with Bandhan Bank Limited. The Scheme has received the RBI approval on 14th March, 2019. The Bank accounted for the merger under pooling of interest method. We have determined this to be a key audit matter in view of the magnitude of the transaction and the significant management judgment involved with respect to alignment of accounting policies between the Bank and Non-Banking Finance Company (NBFC).
Our audit procedures included the following:
• We obtained and read the Scheme, NCLT orders and ROC fillings in relation to the amalgamation of Gruh Finance Limited with the Bank.
• We evaluated the appropriateness of the ‘Pooling of interest’ method of accounting adopted by the management to account for the merger in compliance with the requirement of the scheme of merger duly approved by the NCLTs.
• We evaluated management’s alignment of accounting policies and estimates by comparing the significant accounting policies and estimates of erstwhile GRUH Finance Limited with the Banks’s accounting policies and estimates and performed procedures to verify the accounting for the Scheme done by the Bank.
From Notes to Financial Statements
Business transfer
As per the ‘Scheme of Amalgamation’ of erstwhile GRUH Finance Limited (‘GRUH’) with Bandhan Bank Limited (‘BANK’) had been approved by the Reserve Bank of India, the Competition Commission of India, Stock Exchanges, the respective Shareholders and Creditors of each (of the) entities as applicable and the National Company Law Tribunals (NCLT) Bench at Kolkata and Ahmedabad, with appointed date as 1st January, 2019 and effective date as 17th October, 2019, all assets and liabilities pertaining to the GRUH Finance Limited (‘GRUH’) were transferred to the Bank on amalgamation for a consideration of Rs. 416.19 crores. The consideration has been determined as per the scheme of amalgamation. The acquired assets and liabilities were recorded at their existing carrying amount in the BANK in accordance with ‘Pooling of Interest Method’ guidance provided in AS 14, Accounting for Amalgamations; Rs. 1,101.03 crores being short of consideration settled by the Bank over net assets acquired have been transferred to Capital Reserve in the books of the Bank.
The summary of assets and liabilities acquired is as follows:
|
Amount (Rs. in crores)
|
|
Description
|
Amount
|
|
Investments
|
2,501.64
|
|
Advances
|
16,858.88
|
|
Fixed Assets
|
15.02
|
|
Cash and Bank Balances
|
808.28
|
|
Other Assets
|
48.01
|
|
Total Assets
|
20,231.83
|
|
Deposits
|
1,620.93
|
|
Borrowings
|
16,567.67
|
|
Other Liabilities & Provisions
|
526.01
|
|
Total Liabilities
|
18,714.61
|
|
Net Assets (A)
|
1,517.22
|
|
Consideration (B)
|
416.19
|
|
|
|
|
Capital Reserve (B-A)
|
(1,101.03)
|
For every 1,000 shares of GRUH Finance Limited, 568 shares of Bandhan Bank Ltd. were issued as consideration paid in relation to Net Assets acquired in relation to amalgamation and transferred to capital reserve accordingly.
Each work has to pass through these stages – ridicule, opposition and then acceptance. Those who think ahead of their time are sure to be misunderstood
— Swami Vivekananda
