From published accounts

II. Adjustment of loss on exiting of business adjusted to Business Restructuring Reserve in Consolidated Financial Statements (CFS)

Hindalco Industries Ltd (31-3-2012)

From Notes to CFS
47. Effective from financial year 2011-12, the Company has changed its accounting policy for preparation of consolidated financial statements relating to actuarial gains or losses arising out of actuarial valuation of long term employee benefits and post employment benefits with respect to one of its overseas subsidiaries (Novelis Inc.). Till the previous year, the amount of actuarial gains or losses was accounted, though the along with related deferred tax have been adjusted against Reserves and Surplus. The adjustment is cash neutral. Had the Company not changed the accounting policy as above, Employee Benefits Expenses would have been higher by Rs. 1,014.91 crore, Tax Expenses would have been lower by Rs. 299.88 crore, Net Profit for the year would have been lower by Rs. 715.03 crore and Foreign Currency Translation Reserve in Reserves and Surplus would have been lower by Rs. 44.39 crore. Consequently, the Basic and Diluted Earnings per Share for the period is higher by Rs. 3.73.

46. Pursuant to a court approved scheme of financial restructuring under sections 391 to 394 of the Companies Act, 1956, Business Reconstruction Reserve (BRR) was established during 2008-09 for adjustment of certain specified expenses. Accordingly, costs in connection with exiting certain business during the year have been adjusted against the BRR in consolidated financial statements. Had this adjustment not been done, Other Expenses would have been higher by Rs. 536.33 crore, Tax Expenses would have been lower by Rs. 35.86 crore and Net Profit for the year would have been lower by Rs. 500.47 crore. A summary of adjustments made so far against BRR is given in the following table Had the Scheme not prescribed aforesaid treatment of certain specified expenses, the Profit for the period and the Earnings per Share (EPS) thereof would have been higher/(lower) by:

4) Without qualifying our opinion, attention is drawn to the following:

a) Note no.47 of Notes to Consolidated Financial Statement regarding change in accounting policy with respect to recognition of actuarial losses of Rs. 759.42 crore (net of Deferred Tax) relating to pension and other post-retirement benefit plans in the Actuarial Gain/(Loss) Reserve under Reserves and Surplus of Novelis Inc. (the Company) and its subsidiaries and associates (Novelis Group) for reasons as stated therein. Had the Novelis group followed the earlier practice of recognition of actuarial losses on the aforesaid defined benefit plans in the Statement of Profit and Loss as per the Accounting Standard (AS 15) on Employee Benefits, Employee Benefits expenses would have been higher by Rs. 1,014.91 crore, tax expenses would have been lower by Rs. 299.88 crore, the consolidated profit before taxes and minority interest would have been lower by Rs. 1,041.91 crore, Actuarial Gain/(Loss) Reserve would have been Rs. Nil and Foreign Currency Translation Reserve would have been lower by Rs. 44.39 crore.

b) Note no.46 of notes to Consolidated Financial Statement relating to loss on exiting foil and packing business in one of the foreign subsidiaries amounting to Rs. 500.47 crore (Net of deferred tax of Rs. 35.86 crore) has been adjusted with Business Reconstruction Reserve as per the scheme of arrangement u/s.391 of 394 of the Companies Act 1956 as approved by the High Court at Mumbai. Had the aforesaid treatment been not done, the reported group profit before tax would have been lower by Rs. 536.33 crore and Business Reconstruction Reserve would have been higher by Rs. 500.47 crore and deferred tax assets would have been higher by Rs. 35.86 crore.

c) Note no.4 of notes to consolidated financial statements regarding consolidation of accounts of an associate including for the year ended 31st March, 2011, resulting in profit for the year being higher by Rs. 62.02 crore.

From Directors’ Report on CFS

4. Changes in Accounting Policy

Effective from the Financial Year 2011-12, the Company has changed its accounting policy for preparation of the consolidated financial statements relating to actuarial gains or losses arising out of actuarial valuation of long term employee benefits and post employment benefits with respect to one of its overseas subsidiaries (Novelis Inc.). Until the previous year, the amount of actuarial gains or losses was accounted through the Statement of Profit and Loss. Consequent to the change in accounting policy, actuarial gains or loss along with related deferred tax have been adjusted against Reserves and Surplus. This is a noncash item. Had the Company not changed the accounting policy as above, the Employee Benefits Expenses would have been higher by Rs. 1,014.91 crore, Tax Expenses would have been lower by Rs. 299.88 crore, Net Profit for the year would have been lower by Rs. 715.03 crore and Foreign Currency Translation Reserve in Reserves and Surplus would have been lower by Rs. 44.39 crore.

5. Business Reconstruction Reserve

Pursuant to a court approved scheme of financial restructuring u/s. 391 to 394 of the Companies Act, 1956, Business Reconstruction Reserve (BRR) was established during 2008-09 for adjustment of certain specified expenses. Accordingly, costs in connection with exiting certain business during the year have been adjusted against the BRR in the consolidated financial statements. Had this adjustment not been done, Other Expenses would have been higher by Rs. 536.33 crore, Tax Expenses would have been lower by Rs. 35.86 crore and Net Profit for the year would have been lower by Rs. 500.47 crore. A summary of adjustments made so far against BRR is given in the following table: