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Window dressing


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Window dressing

  1. 1.  Value of closing stock at higher value Treating some expenditure as capital expenditure. Revaluation of fixed assets on higher side. Providing no provisions No disclosure of extraordinary income. Manipulation of accounts to show better picture of the firm in the form of ratio.
  2. 2.  Satyam books have been overstated by Rs 5,000 to Rs 6,000 crore. Inflated (non-existent) cash and bank balances of Rs 5,040 crore (as against Rs 5,361 crore reflected in the books); An accrued interest of Rs 376 crore, which is non- existent An understated liability of Rs 1,230 crore on account of funds arranged by Mr.Raju
  3. 3.  An overstated debtors position of Rs 490 crore (as against Rs 2,651 reflected in the books) For the September quarter(Q2) reported a margin of Rs 649 crore(24 per cent of revenue) as against the actual operating margin of Rs 61 crore The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones
  4. 4. Company To obtain funding (to Increase profits and Borrowers borrow money) liquidity ratios (banks, other financial institutions) To reduce tax Decrease profits by Government payments increasing expenses To smooth financial Record sales or Owners data (sales, expenses, purchases in an accounts receivable, inappropriate etc.) period; give large discounts to debtors for payments received before period end To hide some Increase cash Owners problems (liquidity, account balance at profitability, poor the period end; management increase useful life decisions) of fixed assets
  5. 5. PROFIT & LOSS ASIANP BERGERGross Sales 6,322.24 2,100.82Net Sales 6,322.24 2,100.82Total Operating Income 6,322.24 1,975.32Raw Materials Consumed 3,681.53 1,275.73Other Direct Expenses 105.56 120.52Payments to Employees 300.45 64.86Other Administrative Expenses 1,090.20 75.50Operating Profit BDIT 1,144.50 217.40Depreciation 94.48 29.98Operating profit 1,050.02 187.42Income from Non-Operating Activities 88.16 35.87PBIT 1,138.18 223.29Interest 15.35 12.18PBT 1,122.83 211.11Provision for Taxes 325.49 1,096.86Deferred Taxes 26.41 0.00
  6. 6. Book value: it is the value at which an items appears in the books of account or financial statement.Entity value: it is calculated by considering market value.