Financial reporting

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Financial reporting

  1. 1. Financial Reporting & Analysis sagar's Group no. 5 INTRODUCTION Accounting policies followed by companies while preparing and presentation of financial statements have a significant impact on the financial position of a company. Disclosure of accounting policies followed is necessary if the view presented by the company is to be properly appreciated by users of financial statements. Proper disclosure of accounting policies facilitates a more meaningful comparison between financial statements of two companies. The appropriate application of Accounting Standards and Accounting Policies with additional disclosure results in virtually all circumstances in financial statements that achieve a fair presentation. The nature, quality and degree of disclosure vary considerably in various companies. Some companies disclose them as the foot note while some companies disclose as the last note of the financial statements. However, it is more appropriate to disclose them as the first note to the financial statements. DISCLOSURE BY WAY OF NOTES The disclosure of some of the accounting policies followed by the companies in preparing and presenting of the financial statements is required by law in some cases. The accounting standards require in many cases the disclosure of the accounting policies such as segment accounting policies. Accounting standard provides that all significant accounting policies adopted in the preparation and presentation of the financial statements should be disclosed. The disclosure of the significant accounting policies should form part of the financial statements and the significant accounting policies should normally by disclosed in the place. For example, schedule VI requires disclosure of mode of valuation of investments. The word, significant, before accounting policies should include any accounting policy that is useful for an understanding in the user of financial statement of the decision of the user on financial aspect of a company is likely to change or influence because of an accounting policy, it will become an obligation on the company to disclose it. T.Y.B.B.I. 1
  2. 2. Financial Reporting & Analysis sagar's Group no. 5 DISCLSOURE BY BANKING COMPANY – UTI BANK LTD. UTI BANK LIMITED Registered Office : ‘Trishul’, 3rd Floor, Opp. Samartheshwar Temple, Law Garden, Ellisbridge, Ahmedabad – 380 006. BALANCE SHEET AS ON 31ST MARCH, 2006 Schedule No. (Rs. In Thousands) As on 31.03.2006 As on 31.03.2005 CAPITAL AND LIABILITIES Capital 1 2,786,907 2,73,964 Reserves and Surplus 2 25,934,957 21,343,882 Employees’ Stock Options Outstanding (Net) 17(4.13) 134,394 134,173 Deposits 3 401,135,313 317,120,001 Borrowings 4 26,809,318 17,814,115 Other Liabilities and Provisions 5 40,510,278 18,286,773 TOTAL 497,311,167 377,436,908 ASSETS Cash & Balances with reserve Bank of India 6 24,293,964 24,487,411 Balance with Banks and money at call and short notice 7 12,124,458 10,541,953 Investments 8 215,273,513 150,480,194 Advances 9 223,152,304 156,029,219 Fixed Assets 10 5,677,131 5,184,358 Other Assets 11 16,799,797 20,713,773 TOTAL 497,311,167 377,436,908 Contingent Liabilities 12 985,653,794 531,857,401 Bills for Collection 43,322,052 36,169,839 Significant Accounting Policies and Notes to Accounts Schedules referred to above form an integral part of the Balance Sheet 17 As per our report of even date For BSR & CO. for UTI BANK LTD., Chartered Accountants, P.J. Nayak Chairman & Managing Director Akeel Master S. Chatterjee Surendra Singh N.C. Singhal R.B.L. Vaish Partner Executive Director Director Director Director P.J. Oza Date : 17 April 2006 Company Secretary Place: Mumbai T.Y.B.B.I. 2
  3. 3. Financial Reporting & Analysis sagar's Group no. 5 UTI BANK LIMITED Registered Office: ‘Trishul’, 3rd Floor, Opp. Samartheshwar Temple, Law Garden, Ellisbridge, Ahmedabad – 380 006. PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2006 Schedule No. (Rs. In Thousands) As on 31.03.2006 As on 31.03.2005 (I) INCOME Interest Earned 13 28,887,904 19,241,582 Other Income 14 7,296,344 4,158,196 TOTAL 36,184,248 23,399,778 (II) EXPENDITURE Interest Expended 15 18,105,560 11,929,808 Operating Expenses 18 8,140,507 5,813,789 Proisions and Contingencies 17(5.1.1) 5,087,344 2,310,404 TOTAL 31,333,411 20,054,001 (III) NET PROFIT FOR THE YEAR (I-II) 4,850,837 3,345,777 Balance in Profit & Loss Account Brought forward from previous yr 1,974,076 1,821,024 Transfer from Investment Fluctuation Reserve 2,928,137 -- (IV) AMOUNT AVAILABLE FOR APPROPRIATION 9,753,050 5,166,801 (V) APPROPRIATIONS : Transfer to Statutory Reserve 1,212,709 836,445 Transfer to Capital Reserve 17(5.2.2) 104,471 478,747 Transfer to Investment Fluctuation Reserve 1,000,000 Proposed Dividend (Includes tax on Div) 1,125,480 877,533 Balance in Profit & Loss Account C/f. 7,310,390 1,974,076 TOTAL 9,753,050 5,166,801 (VI) EARNINGS PER EQUITY SHARE 17(5.2.4) (Face Value Rs.10/- per share) (Rupees) Basic 17.45 14.32 Diluted 17.08 14.00 Significant Accounting Policies and Notes to Accounts Schedules referred to above form an integral Part of the Profit and Loss Account 17 As per our report of even date For BSR & CO. for UTI BANK LTD., Chartered Accountants, P.J. Nayak Chairman & Managing Director Akeel Master S. Chatterjee Surendra Singh N.C. Singhal R.B.L. Vaish Partner Executive Director Director Director T.Y.B.B.I. 3
  4. 4. Financial Reporting & Analysis sagar's Group no. 5 Director P.J. Oza Date : 17 April 2006 Company Secretary Place : Mumbai STATUTORY DISCLOSURES AS PER RBI 1.1 ‘Provisions and contingencies’ recognized in the profit and loss account include. (Rs. In Crores) For the year ended 31st March, 2006 31st March, 2005 Provision for Income Tax - Current Tax for the year 296.11 155.94 - For Earlier years -- (2.22) - Deferred Tax for the year (55.73) 23.98 - For Earlier years -- (8.58) Provision for Fringe Benefit Tax 5.83 -- TOTAL 246.21 169.12 Provision for Wealth Tax 0.14 0.11 Provision for Non Performing Advances and Investments, (including Bad Debts Written Off and Write Backs) 127.06 3.04 Provision towards Standard Assets 44.76 13.12 Amortisation of Premium on Held to Maturity Investments 87.55 48.27 Provision for Depreciation in Value of Investments 3.41 (3.69) Others (0.40) 1.07 Total 508.73 231.04 1.2 The capital adequacy ratio of the Bank, calculated as per RBI guidelines is set out below: (Rs. In Crores) Assets 31st March, 2006 31st March, 2005 Capital Adequacy Tier I 2,802.18 2,110.96 Tier II 1,476.08 902.19 Total Capital 4,278,26 3,013.15 Total Risk Weighted Assets and Contingents 38,598.25 23,799.52 Capital Ratios Tier I 7.26% 8.87% Tier II 3.82% 3.79% Total Capital 11.08% 12.66% 1.3 Subordinated debt outstanding as at 31 March, 2006 is a long term unsecured non-convertible debt aggregating Rs.1,788.60 crores (previous year Rs.788.60 crores). T.Y.B.B.I. 4
  5. 5. Financial Reporting & Analysis sagar's Group no. 5 This debt is subordinate to present and future indebtedness of the Bank and qualifies as Tier II risk based capital under RBI’s gudelines for assessing capital adequacy. During the year ended 31st March, 2006, the Bank raised subordinated debt of Rs.1,000 crores, the details of which are set out below : Date of Allotment Period Coupon Amount 25 July 2005 84 Months Simple average of Mid of Bid and Offer yield of the 1 year COI benchmark (i.e. INBMK) + a margin of 65 basis points to be reset at semi annual intervals. Rs. 500 Crores 22 March 2006 87 Months 8.5% Rs. 125 Crores 87 Months 8.32% Rs. 5 Crores 120 Months 8.75% Rs. 360 Crores 120 Months 8.56% Rs. 10 Crores 1.4 The key business ratios and other information is set out below : As at 31st March 2006 % 31st March 2005 % Invest income as a percentage to working funds (working funds represent average total assets) 7.05 6.94 Non-interest income as a percentage to working funds 1.78 1.50 Operating profit as a percentage to working funds 2.43 2.04 Return on assets 1.18 1.21 Business (deposits less inter bank deposits plus advances) per employee** Rs. 10.20 Crores Rs.10.21 Cores Profit per employee** Rs. 8.69 Lacs Rs. 8.02 Lacs Net non performing assets as a percentage of net customer assets* 0.75 1.07 Net non performing assets as a percentage of net advances 0.98 1.39 * Net Customer assets include advances and credit substitutes. ** Productivity ratios are based on average employee numbers. T.Y.B.B.I. 5
  6. 6. Financial Reporting & Analysis sagar's Group no. 5 1.5 Movement in non performing advances is set out below: (Rs. In Crores) 31 March, 2006 31st March, 2005 Gross Net Gross Net Opening Balance at the beginning of the year 311.10 216.85 274.72 112.21 Additions during the year (net of recoveries in respect of retail advances) 173.16 89.47 129.09 126.05 Reductions (including write offs) during the year (109.98) (88.72) (92.71) (21.41) Closing balance at the end of the year 374.28 217.60 311.10 216.85 1.6 Movement in provisions for non performing assets is set out below : (Rs. In Crores) 31 March, 2006 31st March, 2005 Advance Investments Advances Investments Opening balance at the beginning of the year 94.25 4.44 162.51 3.04 Additions during the year 83.69 5.84 3.04 1.40 Recoveries/write-offs/ write backs during the year (21.26) 8.84) 71.30) (-) Closing balance at the end of the year 156.68 1.44 94.25 4.44 1.7 Movement in provisions for non performing assets is set out below : (Rs. In Crores) For the year ended 31st March 2006 31st March 2005 Opening balance at the beginning of the year 15.28 18.97 Provisions made during the year 3.41 -- Write-offs/write back of excess provisions during the year - (3.69) Closing balance at the end of the year 18.69 15.28 1.8 Movement in non-performing non SLR investments is set out below : (Rs. In Crores) For the year ended 31st March 2006 31st March 2005 Opening balance at the beginning of the year 13.67 13.57 T.Y.B.B.I. 6
  7. 7. Financial Reporting & Analysis sagar's Group no. 5 Additions during the year 6.70 -- Write-offs/recoveries during the year (16.70) -- Closing balance at the end of the year 3.67 13.67 Total provisions held 1.44 4.44 1.9 A summary of lending to sensitive sectors is set out below : (Rs. In Crores) As at 31st March 2006 31st March 2005 A) Exposure to Real Estate Sector 1) Direct Exposure i) Residential mortgages 2,608.60 1,127.81 - of which housing loans upto Rs. 15 lakhs 1,409.08 788.66 ii) Commercial real estate 1,660.76 455.70 iii) Investments in mortgage backed Securities (MBS) and other Securitised exposures - a) Residential 0.06 0.01 b) Commercial real estate -- -- 2) Indirect Exposure Fund based and non-fund passed Exposures on National Housing Bank (NHB) and Housing finance companies (HFCs) -- -- Total Exposure to real estate sector 4,269.42 1,583.71 As at 31st March 2006 31st March 2005 B) Exposure to Capital Market 1) Investments made in equity shares (includes sanctioned application money Of Rs.50.18 crores, previous year Rs.0.18 Crores) 241.98 113.01 2) Investments in bonds/convertible Debentures -- -- 3) Investments in units of equity-oriented Mutual funds (includes application money Of Rs.3.00 crores, previous year Rs.4.50 crores) 3.00 22.93 4) Advances against shares to individuals In equity shares (including IPOs/ESOPs), Bonds and debentures, units of equity T.Y.B.B.I. 7
  8. 8. Financial Reporting & Analysis sagar's Group no. 5 Oriented mutual funds 0.02 0.61 5) Secured and unsecured advances to Stockbrokers and guarantees issued on Behalf of stockbrokers and market Makers (including underwriting Commitments) 232.69 273.29 Total Exposure to the Capital Market (Total of 1 to 5) 477.69 410.10 6) Of (5) above, the total finance extended To stock brokers for margin trading -- -- 1.10 Details of loan assets subjected to restructuring are given below : (Rs. In Crores) 31st March 2006 31st March 2005 (i) Total amount of loan assets subjected to Restructuring, rescheduling, renegotiation - of which under CDR 330.11 101.90 (ii) The amount of Standard assets subjected To restructuring, rescheduling, Renegotiation 315.12 101.90 - Of which under CDR 37.70 18.52 (iii) The amount of Sub-Standard assets Subjected to restructure rescheduling, Renegotiation 3.93 -- - of which under CDR -- -- (iv)The amount of Doubtful assets subjected To restructuring rescheduling, Renegotiation 11.06 -- - of which under CDR -- -- 1.11 Details of restructuring undertaken by the Bank during the year for SME accounts are given below: (Rs. In Crores) 31st March 2006 (i) Total amount of assets of SMEs subjected to restructuring 109.00 (ii) The amount of standard assets of SMEs subjected to Restructuring 104.41 (iii) The amount of sub-standard assets of SMES subjected to Restructuring 3.93 (iv)The amount of doubtful assets of SMEs subjected to Restructuring. 0.63 T.Y.B.B.I. 8
  9. 9. Financial Reporting & Analysis sagar's Group no. 5 1.12 Details of issuer composition as at 31st March 2006 of non-SLR investments is set out below : (Rs. In Crores) Issuer Total Amount Extent of Private Placement Extent of “below investment grade” securities Extent of “unrated” securities Extent of “unlisted” securities Public sector unit 1,195.45 755.90 -- -- -- Financial Institutions 1,273.80 1,001.80 -- -- 11.00 Banks 304.68 108.50 5.00 -- 1.01 Private corporate 5,861.38 4,520.51 630.58 40.51 560.22 Others 1,122.36 -- -- -- -- Provision held towards depreciation/ non-per- forming investments (20.12) -- -- -- -- Total 9,737.55 6,386.60 635.58 40.51 572.23 1.13 Details of securities sold/purchased during the year under repos/reverse repos (excluding LAF transactions): (Rs. In Crores) Minimum outstanding Maximum outstanding Daily average outstanding As at 31st March, 2006 Securities sold under repos 7.34 606.99 164.32 -- Securities purchased under reverse repos 2.00 799.86 50.57 -- 1.14 Details of securitisation transaction is undertaken by the Bank in the year are as follows: (Rs. In Crores) As at 31st March 2006 31st March 2005 Number of loan assets securitised -- 20,501 Book value of loan assets securitised -- Rs.626.61 crores Sale consideration for securitised assets -- Rs.653.95 crores Gain/loss on account of securitisation -- Rs.29.54 crores Cash collateral/Investment in PTCs -- Rs.69.37 crores T.Y.B.B.I. 9
  10. 10. Financial Reporting & Analysis sagar's Group no. 5 1.15 During the year, the Bank’s credit exposures to single borrowers and group borrowers were within the prudential exposure limits prescribed by RBI except in 11 case where single borrower limit was exceeded upto an additional exposure of 5% with the approval of the Board of Directors. These 11 cases represent credit and investment exposures to financial institutions, multinationals and local corporates. The total exposures outstanding in respect of these 11 cases as at 31st March, 2006 was Rs. 3,911.99 crores. Further the total amount of exposure in excess of the prudential limit as at 31st March, 2006 was Rs. 323.80 crores. 1.16 A maturity profile of assets and liabilities at 31st March, 2006 is set out below: 1 to 14 days 15 to 28 days 29 days & upto 3 mths Over 3 months & upto 6 mths Over 6 months & upto 1 yr Over 1yr & upto 3 yrs Over 3 yrs& upto 5 yrs Over 5 yrs Lliabilities Deposits Borrowings Assets Investment Advances 4964.76 330.00 4168.81 1035.85 1539.41 100.00 1178.05 83.62 5376.98 144.62 3847.60 852.63 3312.69 762.74 1313.07 1129.80 8407.45 201.26 2117.87 1696.36 15,347.34 1102.21 5480.61 8268.10 836.27 0.24 1500.19 4230.72 328.63 39.86 1921.15 5017.15 Classification of assets and liabilities under the different maturity buckets are complied by the management based on the guidelines issued by RBI and are based on the same estimates and assumptions as used by the Bank for compiling the return submitted to the RBI. 1.17 A maturity profile of foreign currency assets and liabilities at 31st March 2006 is set out below: 1 to 14 days 15 to 28 days 29 days &upto 3mths Over 3 months & upto 6 mths Over 6 months & upto 1 yr Over 1yr & upto 3 yrs Over 3 yrs& upto 5 yrs Over 5 yrs Total Assets Liabilities 67.96 104.9 2 21.3 7 8.92 60.56 91.50 322.56 508.35 66.03 450.86 105.1 4 195.7 2 49.09 100.3 3 3.67 - 696.38 1,460.60 T.Y.B.B.I. 10
  11. 11. Financial Reporting & Analysis sagar's Group no. 5 Disclosure in respect of Interest Rate Swap (IRS) forward rate agreement (FRA) and cross currency swap (CCS) outstanding at 31 march 2006 is set as below ; Sr no Items As at 31 march 2006 As at 31 march 2006 1 National principal of swap agreement 53,168.58 32,736.95 2 Losses which would be incurred if counterparties fail to fulfil their obligations under the agreements 573.40 294.94 3 collateral required by the bank upon entering into swaps 4 concentration of credit risk arising from the swaps maximum single industry exposure with banks ( previuos year with banks ) - interest rate swaps /fra - cross currency swaps 76.31 % 60.57 % 76.57 % 39.21 % 5 Fair value of the cross book - interest rate swap/FRAs (hedging and trading) - currency swaps 0.80 26.78 ( 1.51 ) 6.65 The nature and the terms of the IRS are set out below; Nature Nos Notional principal ( Rs . in crores ) Benchmark Terms Hedging swaps 9 345.80 INBMK Fixed receivable v/s floating payable Hedging swaps 10 325.00 MIBOR Fixed payable v/s floating receivable Hedging swaps 8 290.00 MIBOR Fixed receivable v/s floating payable Hedging swaps 1 150.00 LIBOR Fixed payable v/s fixed receivable Hedging swaps 1 45.68 LIBOR Fixed payable v/s floating receivable Trading swaps 37 1,830.00 INBMK Fixed payable v/s floating receivable Trading swaps 40 1680.00 INBMK Fixed receivable v/s floating payable Trading swaps 538 15,195.00 MIBOR Fixed payable v/s floating receivable Trading swaps 547 14,845.70 MIBOR Fixed receivable v/s floating payable Trading swaps 1 50.00 LIBOR/ MIBOR floating payable v/s floating receivable Trading swaps 273 6,925.00 MIFOR Fixed payable v/s T.Y.B.B.I. 11
  12. 12. Financial Reporting & Analysis sagar's Group no. 5 floating receivable Trading swaps 273 6,925.00 MIFOR Fixed receivable v/s floating payable Trading swaps 38 394.04 LIBOR Fixed payable v/s floating receivable Trading swaps 200 361.48 LIBOR Fixed receivable v/s floating payable Trading swaps 2 87.44 LIBOR floating payable v/s floating receivable 1,978 49,450.84 The nature and terms of the FRA’s are set out below Nature Nos Notional principal ( Rs . in crores ) Benchmark Terms Trading swaps 1 10.00 MIBOR Fixed payable v/s floating receivable Trading swaps 2 50.00 INBMK Fixed payable v/s floating receivable Trading swaps 1 25.00 INBMK Fixed receivable v/s floating payable 4 85.00 The nature and terms of the CCS are set out below Nature Nos Notional principal ( Rs . in crores ) Benchmark Terms Trading swaps 20 1,484.46 LIBOR Fixed receivable v/s floating payable Trading swaps 26 1,557.29 LIBOR Fixed payable v/s floating receivable Trading swaps 2 13.00 LIBOR floating receivable v/s floating payable Trading swaps 15 255.31 PRINCIPAL ONLY Fixed receivable Trading swaps 20 321.78 PRINCIPAL ONLY Fixed payable 83 3,632.74 T.Y.B.B.I. 12
  13. 13. Financial Reporting & Analysis sagar's Group no. 5 Disclosures on risk exposure in Derivatives Sr. No. Particulars Currency Derivativ e Interst rate in derivatives CCS Option 1 2. 3. 4 5. Derivatives a) for hedging b) for trading market to market position# a) assets(+) b) liability(-) credit exposure likely impact of one % change in interest rate a) on hedging derivatives b) on trading derivatives maximum and minimum of 100* PV01 observed during the year a) on hedging • minimum • maximum b) on trading • minimum • maximum # only on trading derivatives - 3,632.74 92.26 (65.48) 257.21 - 0.63 - - 0.63 15.06 - 4,685.86 26.97 (26.67) 179.41 - - - - - - 1,156.48 48,379.36 481.14 (463.53) 664.87 16.58 8.69 7.25 22.07 0.06 18.77 Earning per Share (EPS) The details of EPS computation is set out below: As at 31 March,2006 31 March,2005 Earning for the year(in crores) Basic weighted average no. of shares(in crores) Basic EPS (Rs.) Diluted weighted average no. of shares (in crores) Diluted EPS (Rs.) 485.08 27.80 17.45 28.40 17.08 334.58 23.37 14.32 23.80 14.06 T.Y.B.B.I. 13
  14. 14. Financial Reporting & Analysis sagar's Group no. 5 Nominal value of shares-basic (in crores) Nominal value of shares- diluted (in crores) 278.69 284.68 273.80 278.07 Employee Stock options Scheme (‘the scheme’) In February 2001, pursuant to the approval of the shareholders at the Extraordinary General Meeting, the bank approved an employee stock option scheme. Under the scheme, the bank is authorized to issue about 13,000,000 equity shares to liable employees. Eligible employees are granted an option to purchase shares subjecting to vesting conditions. The option vest in a graded manner over three years. The option can be exercised within 3 years from the date of vesting. Further, in june 2004, pursuant to the approval of the shareholders at Annual General meeting, the bank approved an ESOP scheme for scheme for additional 10,000,000 options. 94, 82,905 options have been granted under the scheme till the previous year ended 31 March 2005. On 10 June 2005, the bank granted 57, 08,240 stock options to its employees, the Chairman and Managing Director and the Executive Director. These options can be exercised at a price of Rs.232.10 per option. The bank has not recorded any compensation cost on options granted during the year ended 31 March 2001 and the current year 31 March 2006 as the exercise price was more than or equal to the quoted market price of underlying equity shares on the grant date. The bank recorded a compensation cost of Rs.1.39 crores on options granted during the year ended 31 March 2002, Rs. 1.99 crores on options granted during the year T.Y.B.B.I. 14
  15. 15. Financial Reporting & Analysis sagar's Group no. 5 ended 31 March 2004, Rs.24.21 crores on option granted during the year ended 31 March 2005, based on the excess quoted market price of the underlying equity shares as of the date of the grant over the exercise price. The compensation is amortized over the vesting period. Compensation expense for all the grants under the scheme for the year ended 31 March 2006 is Rs. 6.32 crores. Stock option activity under the scheme is set out below: Dividend paid on shares issued on exercise of stock options The bank may allot shares between the balance sheet date and record date for the declaration of dividend pursuant to the exercise of any employee stock options. These will be eligible for full dividend for the year ended 31 March 2006, if approved at the ensuing Annual General Meeting. Dividend relating to these shares has not been recorded in the current year. Appropriation to proposed dividend during the year ended 31 March 2006, includes dividend paid pursuant to exercise of the Green Shoe option in the form of 3,000,700 GDRs and 1,152,522 employee stock options after the previous year end and record date declaration of divided for the year ended 31 March 2005. Segmental Reporting T.Y.B.B.I. 15 As at 31 March, 2006 31 March, 2005 Stock Options outstanding at the beginning of the year. Granted during the year Forfeited during the year Exercised during the year 5,694,445. 5,708,240 670.857 1,893,583 3,992,679 3,809,830 382,490 1,725,574 Stock options outstanding at the end of the year 8,838,245 5,694,574
  16. 16. Financial Reporting & Analysis sagar's Group no. 5 The business of the bank is divided into two segments: Treasury and Other Banking Operations. These segments have been identified and reported based on the RBI guidelines on compliance with accounting standards by banks by vice circular no. DBOD.BP. BC.89/21.04.018/2002/03 dated 29 March 2003. The Treasury service segment undertakes trading operations on proprietary account, foreign exchange operations and derivatives trading. Revenues of treasury service segment primarily consist of fees and gains or losses from trading operations and interest income on the investment portfolio. Other banking operations principally comprise the lending activities like corporate and retail of the bank. The corporate lending activities includes providing loans and transaction services to corporate and institutional customers. The retail lending activities includes raising of deposits form customers and providing loans and advisory services to such customers though branch network and other delivery channels. Revenue from corporate lending activity includes interest and fees earned and loans given to corporate customers and interest earned on cash float and fees arising from transaction services and fees from merchant banking activities as such syndication and debenture trusteeship. Revenues from the retail lending activity are derived from interest earned on retail loans and fees for banking and advisory services. ATM interchange fees and interest earned from other segments for surplus funds placed with those segments. Expenses of the lending activity primarily comprise interest expenses on deposits, infrastructure and premises expenses for operating the branch network and other delivery channels, personnel costs, other direct overheads and allocated expenses. Segment revenue includes earnings from external customers plus earnings from funds transferred to the other segments. Segments result includes revenues as reduced by interest expenses and operating expenses and provisions if any, for the segment. Segmental results are as below: 31st March,2006 T.Y.B.B.I. 16
  17. 17. Financial Reporting & Analysis sagar's Group no. 5 (Rs. In crores) Treasur y Other Banking Operation s Unallocate d Total Segment revenue Gross interest income Other income 1,360.08 206.46 1,528.71 521.98 - 1.19 2,888.79 729.63 Total income as per P & L a/c Add/(less) inter segment interest income 1,566.54 4,061.65 2,050.69 1,071.48 1.19 - 3,618.42 5,133.13 Total Segment income Less: interest expenses Less: inter segment interest exp. Less: Operating Expenses 5,628.19 1317.20 3740.20 53.29 3,122.17 493.36 1,392.93 760.76 1.19 - - - 8,751.55 1,810.56 5,133.13 814.05 Operating profit Less: provision for non performing assets/other 517.50 101.96 475.12 160.42 1.19 0.14 993.81 262.52 Segment Result 415.54 314.70 1.05 731.29 Less: Provision for Tax Net Profit - - - - - - 246.21 485.08 Segment Assets Segment Liabilities 25,731.4 0 23,465.2 0 22,752.44 22,002.60 1,247.28 1,337.69 49.731.1 2 46,845.4 9 Net Assest 2,266.20 749.84 (130.41) 2,885.63 Fixed assets addition Depreciation for fixed assets - - - - 148.66 92.19 148.66 92.19 Segmental results are as below: 31st March, 2005 (Rs. In crores) T.Y.B.B.I. 17
  18. 18. Financial Reporting & Analysis sagar's Group no. 5 Treasury Other Banking Operations Unallocated Total Segment Revenue Gross interest income Other income 945.12 38.76 979.04 378.24 - (1.18) 1,924.16 415.82 Total income as per P&L a/c Add/(less) inter segment interest income 983.88 2,336.08 1,357,28 763.05 (1.18) - 2,339.98 3,099.13 Total Segment income Less: interest expenses Less: inter segment interest exp. Less: Operating Expenses 3,319.96 759.18 2,295.16 29.34 2,120.33 433.80 803.97 552.04 (1.18) - - - 5,439.11 1,192.98 3099.13 581.38 Operating profit Less: provision for non performing assets/other 236.28 44.58 330.52 17.23 (1.18) 0.11 565.62 61.92 Segment Result 191.70 313.29 (1.29) 503.70 Less: Provision for Tax Net Profit - - - - - - 169.12 334.58 Segment Assets Segment Liabilities 20,839.6 1 17,367.6 1 15,907.09 17,277.20 996.99 677.28 37,743.69 35,322.09 Net Assets 3,472.00 (1,370.11) 319.71 2,421.60 Fixed assets addition Depreciation for fixed assets - - - - 180.75 81.58 180.75 81.58 Related party disclosure: The related parties of the bank are classified as: 1 Promoter Administrator of the Specified Undertaking of the Unit Trust of India (UTI-I). Based on the RBI guidelines, details of transactions with promoter are not disclosed since there is only one entity/ party in this category. T.Y.B.B.I. 18
  19. 19. Financial Reporting & Analysis sagar's Group no. 5 2 Key Management Personnel Dr. P.J. Nayak (chairman and managing director and Shri. S. Chatterjee (Executive Director). Details of transactions with Key management Personnel are given below: (Rs. in crores) (Rs. in crores) Items/Related Party Key Management Personnel Related Party to Key Management Personnel Outstanding as at 31 March 2006 Maximum Outstanding during the year 2005-2006 Outstanding as at 31 March 2006 Maximum Outstanding during the year 2005-2006 Placement of deposits Loans 1.14 0.23 1.17 0.62 0.52 _ 0.7 _ Leases Disclosure in respect of assets given on operating lease. Operation lease consists leasing of power generating equipments. There is no power in it relating to contingent rent. The terms of renewal/purchase options and escalation clauses are T.Y.B.B.I. 19 Items/Related party Key Management Personnel Related Party to Key Management Personnel Total Managerial Remuneration Interest on deposits Interest on loans 1.83 0.04 0.02 - - - 1.83 0.04 0.02
  20. 20. Financial Reporting & Analysis sagar's Group no. 5 those normally prevalent in similar agreements. Operating lease of office premises/ATMs, staff quarters and electronic data capturing machines. Provisions and contingencies 1. Movement in provisions for frauds included in liabilities are set as under: (Rs. In crores) 31 March,2006 31 March 2005 Opening balance at the beginning of the year Additions during the year Reductions on account of payments during the year Reductions on account of reversals during the year 2.41 0.55 (1.01) (0.95) 5.73 0.08 (3.30) (0.10) Closing balance at the end of the year 1.00 2.41 2. Movement in provision for credit enhancement on securitized assets is set out below: (Rs. in crores) 31 March 2006 31 March 2005 Opening balance at the beginning of the year Additions during the year Reductions during the year 1.07 - (0.40) - 1.07 - Closing balance at the end of the year 0.67 1.07 Description of contingent liabilities: (a) Claims against the Bank not acknowledged as debts. These represent claims filed against the Bank in the normal course of business relating to various legal cases currently in progress. T.Y.B.B.I. 20
  21. 21. Financial Reporting & Analysis sagar's Group no. 5 These also include demand raised by income tax and other statutory authorities disputed by the Bank. (b) Liability on account of forward exchange and derivative contracts. The Bank enters into foreign exchange contracts, currency options/swaps and forward rate agreements on its own account and for customers. Foreign exchange contracts are commitments to buy or all foreign currency at a future date at the contracted rate. Currency swaps are commitments to exchange cash flows by way of interest in two currencies, based on ruling spot rates. Interest rates swaps are commitments to exchange, fixed and floating interest rate cash flows. All such option in the Bank’s book are on a back to back basis. (c) Guarantees given on behalf of constituents. As a part of its banking activities, the bank issues guarantees on behalf of its customers to enhance their credit standing (d) Acceptances, endorsements and other obligations. These include documentary credit issued by the bank on behalf of its customers and bills drawn by the banks customer that rate accepted by the bank. (e) Other items. Other items represent bills rediscounted by the bank and the value of put option provided by the bank to certain pass through certificate (PTC) holder under an agreement wherein the banks act as an arranger. T.Y.B.B.I. 21
  22. 22. Financial Reporting & Analysis sagar's Group no. 5 ANALYSIS AND INTERPRETATION OF ANNUAL REPORT OF COMPANIES. Analysis and interpretation of financial statements refers to such a treatment of the information contained in the Income statement and the Balance Sheet so as to give full identification of the profitability and financial soundness of the company’s business. Thus, financial statements are indicators of two significant factors such as profitability and financial soundness. The term analysis means methodical classification of the data given in the financial statements may not help the user unless they are put in a simplified form. The term interpretation means explaining the meaning and significance of the data so simplified in the analysis. The company’s act 1956, section 210 provides that the management of every company should submit an annual report regarding the company’s operations and financial position. The Annual Report information, which is required by the company’s act. It includes profit and loss account, balance sheet and notes to accounts. It also includes Auditors report. Director’s report and some more information. The Analysis and interpretation of some important content of Annual Report is given below: Chairman’s Statements: Annual Report of the company is required to be sent to every shareholder. It contains financial statements, Directors report, auditor report etc. Chairman’s T.Y.B.B.I. 22
  23. 23. Financial Reporting & Analysis sagar's Group no. 5 statement is a letter addressed by the Chairman of the Company to its shareholders. It is given at the beginning of the annual report. The Chairman’s statement becomes impressive to the shareholders. They get the idea about the progress of the business, future prospects etc. The shareholder can take a decision about the further investment or disinvestment in the company. The chairman also expresses his about value, vision, strategy and execution of policies in the statement. Finally the chairman thanks the shareholder for their confidence in the company management in the process of transformation. Chairman Speech: The chairman speech is the speech delivered by the chairman in the Annual General Meeting. It gives complete account of affairs of the company during the year for the information of its members. Chairman speech is different from chairman’s statement. The chairman statement is printed in the Annual Report whereas chairman speech is delivered by the chairman in the Annual General Meeting. A Printed copy of the chairman speech may be distributed to the shareholders in the annual general meeting. The chairman speech is also published in the newspaper after the meeting for the information of the stockholders. The chairman’s speech contains the future plans, development Opportunities Company's role in implementation of national development plans and its international operations. Thus, the chairman’s speech throws light on the following matters: • Hearty welcome to the members. • Current business conditions,(profits, dividends). • Implementation of national plans. • Future development plans of the company. • Efforts made towards satisfaction of customers. • Research & development plans. • Future development opportunities. • Labour and industrial relations. • Acknowledgements. • Thanks. T.Y.B.B.I. 23
  24. 24. Financial Reporting & Analysis sagar's Group no. 5 Director’s Report: Section 217 of the company’s act 1956 provides that the balance sheet and profit & loss account should be presented before the Annual General Meeting. It also provides that the Directors report must be accompanied as a statutory requirement. Section 217 has been amended with a view to widen the scope of Board’s report. The additions relate to the accounts and are a welcome step. Board’s report besides other matter shall includes a director’s responsibilities statement including thereon: • That the preparation of the annual accounts, the applicable accounting standards has been followed along with proper explanation relating to material departures. • That the directors have selected such accounting policies and applied them consistency and made judgements and estimates that are responsible and prudent so as to give a true and fair view of the state of affairs of the company at the and of the financial year and of the profit or loss of the company for that period. • That the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provision of the Act for safeguarding the assets of the company and for preventing fraud and other irregularities. • That the directors have prepared the annual accounts on going concern basis. While drafting this report following requirements shall be kept in mind: • The report shall be titled as ‘director’s Report’. • There shall be a solution like gentlemen or Dear shareholders. • The matters “the directors of your company are presenting with pleasure the…… Annual general report for the year ending…. • There shall be heading titled. “Financial Results”. • there shall also be the heading titled ‘financial statements’ under head and sub-heads, stating gross profits, depreciation, profit before tax provision for tax, provision for dividend, net profit, transfer to general reserve account etc. T.Y.B.B.I. 24
  25. 25. Financial Reporting & Analysis sagar's Group no. 5 • the particulars of information stating the name, age, post, salary drawn, educational qualifications and experience, date of appointment etc. of every employees of the company whose remuneration does not fall below Rs.72000 during the financial year under report, be stated in the statutory report. • The director’s responsibility statement giving requisite information. • On the approval of the Board, the report must be signed by the chairman and the director’s who had signed on the balance sheet, profit & loss account. • The names of such employees may also be included in the report who were appointed for a short period, under report and were drawing a monthly salary of not less than Rs. 6000/-. • the names of the following person shall also be given in the director’s report as required under companies ( amendment) Act, 1988: A. the name of such persons who have been drawing an honorarium not less than that drawn by managing director of full- time director or the manager. B. The names of those who are holding at least two percent of the company’s equity shares in the name of wife/husband/legitimate children. Management Discussion and Analysis: Management discussion and analysis report forms the part of annual report. It includes discussion on the matter as prescribed. The prescribed matters are industry structure & developments, opportunities, and threat segment or product based performance, outlook, risks, and concerns, internal control system and their adequacy, financial performance vis-à-vis operational performance and material developments in human resource and industrial relations. The auditor should ascertain whether management discussion and analysis report forms part of the annual report. The auditor should also ascertain prescribed disclosures by the management to the board. The disclosure relates to all financial and commercial transactions in which management have personal interest and which may have a potential conflict with interest of the company at large. For example, dealing in T.Y.B.B.I. 25
  26. 26. Financial Reporting & Analysis sagar's Group no. 5 company shares, commercial dealings with bodies that have shareholders of management and their relatives. The auditor should have ascertained whether at the time of appointment of a new director or reappointment of an existing director the shareholders have received the following information: • Brief resume of each director. • Nature of his expertise in specific functional areas, and • Names of companies in which he holds directorship and membership of Board committees. The auditor should ascertain whether this information finds place on the company’s website. Alternatively, whether the company has sent this information to the stock exchange such that the exchange may put its on its own website. The same would be the case with other information requiring mandatory disclosure. The auditor should ascertain whether the board has constituted this committee headed by a non executive director and that the committee is indeed functioning to redress complaints in respect of transfer of shares, non-receipt of balance sheet, declared dividend etc. he should also verify from the committee records and certificates from SEBI and stock exchange, the number of pending grievances. The auditor should ascertain whether the entity has delegated the power of share transfer to an officer, committee, registrar or transfer agents. He should also verify whether the share transfer is quick and delegated authority attends to share transfer formalities at least once or a fortnight. The auditor should ascertain whether the board of director has in the annual report of the company, a detailed compliance report on corporate governance. The report should highlight non-compliance of any mandatory requirement, with reasons for the same. Corporate governance Disclosure: Corporate governance is a system of management under which direction and control of the company is in the best interest of the stockholders and others ensuring greater transparency and better and timely financial reporting. To implement Corporate Governance SEBI has directed stock exchanges to insert a new clause 49 in their T.Y.B.B.I. 26
  27. 27. Financial Reporting & Analysis sagar's Group no. 5 listing agreement, under which the management of companies already listed and having specified paid up capital/net worth will implement conditions of corporate governance. The auditor should see whether at least 50% of the directors are non-executive directors that are not involved in day management of the company. Further, if the company has a non-executive chairman, a least one third of the directors are independent directors and in case of an executive chairman, at least half of the directors are independent directors. An independent director is one who, expect for receiving directors remuneration does not have any other material pecuniary relationship or transactions with the company, its promoters, its management or its subsidiaries which in the judgement of the Board, may affect independence of judgement of the director. The auditor should ascertain whether the company has disclosed in the compliance report on corporate governance all pecuniary relationship or transactions of the non- executive directors vis-à-vis the company. The auditor should ascertain form minutes of the Board whether the company has set up an audit committee in compliance with condition of corporate governance as laid down in clause 49 of the listing agreement and Section 292 A of the companies act. This section provides that every company with paid up capital of Rs. 5 crores or above should have an Audit Committee. The committee should have minimum three non-executive directors, majority of them being independent directors. The chairman himself should be an independent director. At least one member of committee should have financial and accounting knowledge. The auditor should verify whether the chairman of the Audit committee was present at the last annual general meeting to answer shareholder’s queries on corporate governance. The auditor should ascertain whether: • the finance director and head of internal audit attended the committee meeting by invitation. • The company secretary if any had authority to act as secretary to Audit Committee. • A representative of the statutory auditor of the company attended the committee meeting when required. T.Y.B.B.I. 27
  28. 28. Financial Reporting & Analysis sagar's Group no. 5 • The committee met at least thrice in a year and that the quorum was present at each meeting. The auditor should see whether the terms of reference of Audit Committee authorize it to exercise the power granted to it under clause 49 of the listing agreement and section 292A of the Companies Act. In addition whether the committee has exercised those powers to carry out the role assigned to it. the auditor should examine the Board report on corporate governance for inclusion in the annual report of the company and ascertain whether it makes the required disclosure about remuneration to directors whether executive or non-executive. He should also verify whether the remuneration complies with section 309 of the Companies Act. The auditor should ascertain whether Board meetings have taken place a required that is at least four times a year, with a gap maximum four months between any two meetings. He should also see whether minimum information as prescribed in clause 49 of the Listing Agreement was available to the Board. The auditor should also ascertain form the information given by every director to the company about the committee positions occupied by him in other companies. The Act provides that no director can be member of more than 10 committees constituted by the Board or act as a chairman of the more than five committees of the Board across all companies of which he is a director. This limit is applied only to membership of audit committee and not for other committees. Compliance certificate in Corporate Governance Audit Report: The auditor on his part will certify compliance of the conditions of corporate governance applying the Auditing and Assurance Standard AAS and code of conduct. The guidance Note on certificate of corporate governance issued by the ICAI, seeks to guide in discharge of their responsibility to certify whether the management has complied with the conditions of the corporate governance under clause 49 of the Listing Agreement between the stock exchange and the company under audit. In case the auditor finds the compliance with conditions of corporate governance he would issue a certificate to the effect. If there is non-compliance with any mandatory requirements, the auditor may give a qualified or adverse report. T.Y.B.B.I. 28
  29. 29. Financial Reporting & Analysis sagar's Group no. 5 Annexure to Auditor’s Report including CAR Balance Sheet: the Auditor is required to make a report to the members of the company under section 227 (2) of the companies act, 1956: • On the accounts examined by him. • On every balance sheet and profit and loss account which are laid before the company in general meeting during his tenure of office, and • On document declared to be a part of or annexed to the balance sheet or profit and loss account. The auditor report must state whether his opinion and to the best of his information and according to the explanation given to him, the said accounts give the information’s required by the act in the manner so required and give a true and fair view: • In the case of the balance sheet of the state of the company’s affairs as at the end of the financial year, and • In the case of profit and loss account of the profit or loss for the financial year. • The auditor’s report should identify the persons to him it is addressed and the financial statements to which it relates. The auditor should refer expressly in his report to the following: • Whether the financial statements have been audited in accordance with generally accepted auditing standards and practices • Whether in his opinion the financial statements give a true and fair view of the state of affairs, profit and loss and where applicable, source and application of funds. • Any matter to be included in his report according to the relevant law or other requirements. The auditing standard as regard audit applies to all reports in which the auditor is required to express his opinion on financial statements intended to give a true and fair view of the state of affairs, profit and loss account etc. but it does not override the T.Y.B.B.I. 29
  30. 30. Financial Reporting & Analysis sagar's Group no. 5 statutory provisions regarding any other matters to be included in the report in the case of any specified class of companies. In addition to the requirements of section 227 (2) and (3), the auditor may also be required to report his opinion in regard to certain other special matters. This can be in respect of certain specified transactions of the company or special matters in case of building, insurance electric supply, manufacturing and other companies. A. Matters required to be included in audit report in certain cases: Under section 227(1-A), the auditor is required to enquire and report on the following matters: • Loans and advances made by the company on the basis of security in case these are not properly secured or if their terms are prejudicial to the interests of the company. • Transaction of the company represented merely by book entries in case they are prejudicial to the interests of the company. • Sale of shares, debentures and other securities by a non-investment company, in case the sale price is less than the purchase price. • Loans and advances made by the company though shown as deposits. • Charging of personal expenses to revenue accounts. • The amount of cash received against shares allotted for cash and the amount of outstanding. However, the auditor is not obliged to express his opinion on these matters, unless he has any special comments to make about them. B. Matters to be included in audit report in case of banking, insurance and electric supply companies: T.Y.B.B.I. 30
  31. 31. Financial Reporting & Analysis sagar's Group no. 5 In case of audit of banking, insurance and an electric company, the auditor must also state in his report the following matters: In case of a banking company: • Whether the auditor has obtained all the information and explanation which to the best of his knowledge and belief were necessary for the purpose of his audit and has found them to be satisfactory. • Whether the transaction of the bank which have come to his notice, have been within the powers of the bank. • whether in his opinion proper books of accounts as required by the law have been kept by the bank, so far as appears to him from his examination of these books and proper returns adequate for the purpose of his audit have been received from the branches of the bank. • Whether the bank’s balance sheet and Profit and Loss Account dealt with by his report are in agreement with the books of account and returns. • Whether the report on the accounts of branches audited by the branch auditor has been forwarded to him and the same have been considered by him in preparing his own report. • Whether in his opinion, and to the best of his information and according to the explanations given to him, the said accounts give the information required in respect of the banking companies, and on such basis the Balance sheet gives a true and fair view of the state of affairs of the bank as on the last day of financial year and the profit and loss accounts shows a true and fair view of the profit and loss for the year ended on that date. In case of insurance and electric companies: In case of insurance and electric supply companies also, there are provisions in the Insurance Act and the Electricity (supply) Act, specifying the matters in respect of which auditor is required to report. T.Y.B.B.I. 31
  32. 32. Financial Reporting & Analysis sagar's Group no. 5 CARO Balance Sheet: Central Government had issued the companies (Auditors Report) Order (CARO) 2003 under section 227 (4A) of the Companies Act. Earlier, the order under section 227 (4A) was manufacturing and other Companies Auditor’s report came into effect from 1st July 2003. It was issued in consultation with the ICAI. The CARO is applicable to the following companies: • Chit Fund Company, Nidhi Company. • Mutual Benefit Company. • Finance Company. • Investment Company • Manufacturing Company. • Processing Company. • Service Company. • Trading Company. However, the CARO will not apply to the following companies: T.Y.B.B.I. 32
  33. 33. Financial Reporting & Analysis sagar's Group no. 5 • Banking Company • Insurance Company. • Private company, having a paid up capital and reserves upto Rs. 50 lakhs, which has not accepted any Public deposit and does not have loan outstanding upto Rs. 10 lakhs or more from any bank or financial institution and does not have a turnover exceeding Rs. 5 crore. An Auditor’s report under CARO- 2003: Under CARO 2003, the Auditor Report includes the following matters: • Proper records showing full particulars regarding fixed assets, physical verification, disposal, etc. • Physical verification of inventory at reasonable intervals. • Loans taken, security, registration of charges, etc. • Adequate internal control procedure. • The entry of transactions in the register for loans, reasonable price for transactions exceeding Rs. 5 lakhs. • Details about deposits accepted from the public under section 58A and 58AA. • Internal audit system. • Maintenance of cost records. • Regularity in depositing undisputed statutory dues such as Provident Fund, ESI Fund, Income Tax, Sales Tax, Wealth Tax, Custom Duties, etc. • Whether the losses of the company for a period of at least five years, accumulated losses more than 50% of its net worth and incurred cash losses in the financial years. • Whether the company has defaulted in repayment of dues to a financial institution or a bank or debenture holders. • Whether the company has maintained adequate documents and records for loans granted and advances based on security by way of pledge of shares, debentures etc. • Whether the company has complied with the provisions of any special statute applicable to unit fund. T.Y.B.B.I. 33
  34. 34. Financial Reporting & Analysis sagar's Group no. 5 • In case a company dealing in shares debentures and other instruments, whether it has maintained proper records of the transactions and contracts. • Whether the company has given any guarantee for the loans taken by others from bank or financial institutions and the terms and conditions of which are prejudicial to the interest of the company. • Whether the company has applied the sums for the purposes for which it has obtained them. • The report should indicate the nature and amount of funds used, funds raised on short-term basis for long-term investment and vice-versa. • Whether the company has made any preferential allotment of shares to parties and companies covered in the register maintained. • Where there is creation of securities in respect of debentures issued. • Whether the management has disclosed on the end-use of money raised by the public issues. • Whether there is any notice of fraud reported by the company during the year, indicating the nature and amount of fraud. Profit and Loss Account of a company: Schedule VI part II of the Companies Act, 1956 provides that the following information must be disclosed in the Profit and Loss accounts of the company: • The amount provided for depreciation, renewals or diminution in value of fixed assets. If no provision has been made, the fact shall be stated and the quantum of arrears of depreciation computed in accordance with section 205 (2) of the Act, shall be disclosed by way of a note. • Debenture interest and interest on other fixed loans, stating separately the amount of interest, if any paid or payable to managing director and the manager. • Any amount provided for repayment of share capital or loan. • The amount of charges of income tax. • The amount of income from investments, distinguishing between trade investment and other investments, profits or losses on investment should be shown separately. • Dividend from subsidiary companies and provisions for losses of subsidiary companies. T.Y.B.B.I. 34
  35. 35. Financial Reporting & Analysis sagar's Group no. 5 • The amounts paid to the Auditor for audit fees, for taxation matters, company law matters or management services as auditor or any other capacity. • Details of managerial remuneration under section 198 of the Companies Act, 1956. • Previous year’s figures relating to all items. • Prior period adjustment should be shown separately from the current year’s figures. However, the following details should be shown by way of notes: 1. Calculation of managerial remuneration. 2. Particulars in respect of licensed and installed capacity and actual production. 3. Details of finished goods, sales, and materials consumed nature of raw materials spare parts and components used. 4. Earning in foreign exchange. 5. Value of imports (CIF basis). 6. Expenditure in foreign currency. 7. Remittances in foreign currency on account of dividend. Balance Sheet of a Holding Company (s. 212): Section 212 of the Companies Act, 1956 provides that there shall be attached to the Balance Sheet of a holding company having a subsidiary or subsidiaries at the end of the financial year as at which the holding company’s Balance sheet is made out, the following documents in respect of such subsidiary or each of such subsidiaries as the case may be: • A copy of the balance sheet of subsidiary. • A copy of its profit and loss account. • A copy of the report of its Board of Directors. • A copy of the report of its Auditors. • A statement of the holding company’s interest in the subsidiary as specified above. The balance sheet and profit and loss account shall be made out in accordance with the requirement of the act. Where the financial year of the subsidiary does not coincide with that of the holding company, the financial year aforesaid of the T.Y.B.B.I. 35
  36. 36. Financial Reporting & Analysis sagar's Group no. 5 subsidiary shall not end on a day which proceeds the day on which the holding company’s financial year ends by more than six months. The statement under section 212 shall specify the extent of the holding company’s interest in the subsidiary at the end of the financial year or at the last financial years of the subsidiary. The net aggregate amount so far as it concerns members of the holding company and with in the company’s accounts of subsidiary’s profits after deducting its losses. The statement should also include the details on any material changes which have occurred between the end of financial year and last of the financial years of the subsidiary and the end of the holding company’s financial year in respect of : 1. The subsidiary’s fixed assets 2. Its investments. 3. The money lent by it 4. The amount of money borrowed by it for any purpose other than that of meeting current liabilities. T.Y.B.B.I. 36

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