Understanding Corporate Financial Statements and Reports

Tata McGraw-Hill Publishing Company Limited, Management Accounting

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UNDERSTANDING CORPORATE FINANCIAL STATEMENTS AND REPORTS

CORPORATE FINANCIAL STATEMENTS

CORPORATE REPORTS

Tata McGraw-Hill Publishing Company Limited, Management Accounting

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Corporate Financial Statements

Preparation and presentation of corporate financial statements in India should conform to statutory requirements prescribed by the Companies Act.

Books of Accounts
Section 209 of the Companies Act requires every company to keep proper books of accounts with respect to
(a) all receipts and all payments, (b) all expenditures and revenues,

(c) all sales and purchases and

(d) all assets and liabilities. In the case of manufacturing companies, details relating to utilisation of materials, labour other items of manufacturing costs are also required.
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Annual Accounts and Balance Sheet

Section 210 requires the Board of Directors to present balance sheet as at the end of the period and profit and loss account for the period in every annual general meeting. Form and Contents of Balance Sheet and Profit and Loss Account

Section 211 requires the companys balance sheet and its profit and loss account to give a true and fair view of its state of affairs. While the balance sheet should be set out in the prescribed format in accordance with Schedule VI of the Companies Act, the P&L A/c should include the prescribed contents. Both these financial statements should comply with accounting standards also, wherever applicable.

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Authentication of Balance Sheet and Profit and Loss Account Section 215 requires that balance sheet as well as profit and loss account should be signed by the manager or secretary (on behalf of the Board of Directors) and by at least two directors of the company, one of whom should be a managing director, if any. The financial statements so authenticated should be submitted to the auditors for their report. Profit and Loss account and Auditors Report to be Annexe to Balance Sheet

Section 216 requires the P&L account and the auditors report to be annexed to the balance sheet .

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Exhibit 1: Vertical Form of Balance Sheet

Name of the Company .......................... Balance Sheet as at ..........................
Schedule No. Figures as at the end of current financial year Figures as at the end of previous financial year

I. Sources of Funds: (1) Shareholders funds (a) Capital (b) Reserves and Surplus (2) Loan funds (a) Secured loans (b) Unsecured loans TOTAL :
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(Contd.)
Schedule No. Figures as at the end of current financial year Figures as at the end of previous financial year

II. Applications of Funds:

(1) Fixed assets (a) Gross block (b) Less depreciation (c) Net block (d) Capital work-in-progress (2) Investments (3) Current assets, loans, and advances : (a) Inventories (b) Sundry debtors (c) Cash and bank balances (d) Other current assets (e) Loans and advances Less: Current liabilities and provisions : (a) Liabilities (b) Provisions Net current assets (4) (a) Miscellaneous expenditure to the extent not written off or adjusted (b) Profit and Loss account TOTAL : 4-7 Tata McGraw-Hill Publishing Company Limited, Management Accounting

Notes
1) Details under each of the above items shall be given in separate Schedules. The Schedules shall incorporate all the information required to be given under Horizontal Form. 2) The Schedules, referred above, accounting policies and explanatory notes that may be attached shall form an integral

part of the balance-sheet.

3) The figures in the balance-sheet may be rounded off to the nearest 000 or 00 as may be convenient or may be expressed in terms of decimals of thousands. 4) A foot-note to the balance sheet may be added to show separately the contingent liabilities.
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Tata McGraw-Hill Publishing Company Limited, Management Accounting

Schedule VI Exhibit 2: Horizontal Form - Balance sheet of __________________ [Here enter the name of the Company] As at ________________ [Here enter the date as at which the balance-sheet is made out.] Liabilities Figures for the Previ ous year (Rs) 2 Curr ent Year (Rs) 3 Assets Figures for the Prev ious year (Rs) 5 Curr ent Year (Rs) 6

1 SHARE CAPITAL: Authorised: _____shares of Rs ___ each. Issued: (distinguishing between the various classes of capital and stating the particulars specified below, in respect of each class) shares of Rs_____ each. Subscribed: (distinguishing between the various classes of capital and stating the particulars specified below, in respect, of each class). _____ shares of Rs____ each, Rs ______ called up.

4 FIXED ASSETS: Distinguishing as far as possible between expenditure upon (a) Goodwill, (b) Land, (c) Buildings, (d) Leaseholds, (e) Railway Sidings, (f) Plant and Machinery, (g) Furniture and Fittings, (h) Development of Property, (i) Patents, Trade Marks and Designs, (j) Livestock, (k) Vehicles, etc.

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(Contd.)
(Of the above shares, _______ shares are allotted as fully paid up by way of bonus shares. Specify the source from which bonus shares are issued, e.g. capilalisation of reserves, share premium, etc. Less: Calls unpaid (i) by directors (ii) by others Add: Forfeited shares (amount originally paid up). (Any capital profit on reissue of forfeited shares should be transferred to capital reserve) Notes: 1. Terms of redemption of conversion (if any)of any redeemable preference capital is to be stated , together with the earliest date of redemption of conversion. (2) Particulars of any option on unissued share capital is to be specified (3) Particulars of the different classes of preference Share is to be given Under each head, the original cost and the additions thereto, and deductions there from during the year, and the total depreciation written off or provided up to the end of the year is to be stated.

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(Contd.)
RESERVES AND SURPLUS: 1. Capital Reserves. 2. Capital Redemption Reserve. 3. Share Premium. (Specify the details of its utilization in the manner provided in Sec. 78 in the year of utilization). 4. Other Reserves specifying the nature of each Reserve and the Amount in respect thereof. Less: Debit Balance in Profit and Loss A/c. (if any). 5. Surplus, i.e. the balance in the Profit and Loss Account, after providing for the proposed allocation, namely, Dividend, Bonus or reserves. 6. Proposed Additions to Reserves. 7. Sinking Funds.
Additions and deductions since the last balance sheet to be shown under each of the specified heads.

INVESTMENTS: Showing the nature of Investments and the Mode of Valuation, for example, the Cost or the Market Value and distinguishing between 1. Investments in Government or Trust Securities. 2. Investments in Shares, Debentures or Bonds, (showing separately, shares fully paid up and partly paid up and also distinguishing the different classes of shares. 3. Immovable Properties. 4. Investments in the Capital of Partnership Firms.
(Aggregate amount of the Companys quoted investments and also the market value thereof shall be shown. The aggregate amount of the companys unquoted investments shall also be shown.) 4 - 11

The word fund in relation to any Reserve should be used only where such a reserve is specifically represented by earmarked Tata McGraw-Hill Publishing Company Limited, Management Accounting investments.

(Contd.)
SECURED LOANS:

1. Debentures. 2. Loans and advances from banks. 3. Loans and advances from subsidiaries. 4. Other Loans and Advances. Loans from Directors and Managers should be shown separately. Interest Accrued and Due on the Secured Loans should be included under the appropriate subhead under the head Secured Loans. The nature of the Security should be specified in each case. Where Loans have been Guaranteed by Managers and/or Directors, a mention thereof shall also be made as also the Aggregate Amount of such Loans, under each head. Terms of Redemption or Conversion (if any) of the Debentures issued should be stated, together with the earliest date of Redemption or Conversion

CURRENT ASSETS, LOANS AND ADVANCES:

A. Current Assets 1. Interest accrued on Investments. 2. Stores and Spare Parts. 3. Loose Tools. 4. Stock-in-trade 5. Works-in-Progress. (Mode of valuation of stock and work in progress shall be stated and the amount in respect of raw materials shall also be stated separately where practicable.) 6. Sundry Debtors. (a) Debts Outstanding for a period exceeding six months. (b) Other Debts. Less: Provision for Bad and Doubtful Debts
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Tata McGraw-Hill Publishing Company Limited, Management Accounting

(Contd.)
UNSECURED LOANS: 1. Fixed Deposits. 2. Loans and advances from subsidiaries. 3. Short-term Loans and Advances; (a) From Banks. (b) From Others. 4. Others loans and advances: (a) From Banks. (b) From Others. Loans from Directors and Managers should be shown separately. Interest Accrued and Due on Unsecured loans should be included under the appropriate sub-head, under the head Unsecured Loans. In regard to sundry debtors, particulars to be given separately in respect of: (a) Debts considered Good and in respect of which the Company is fully secured. (b) Debts considered Good but for which the Company holds no Security, other than the debtors personal security. (c) Debts considered doubtful or bad). 7.A. Cash Balance on Hand. 7. B. Bank Balances: (a) With Scheduled Banks (b) With Others.
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(Where loans have been guaranteed by the managers and/or directors, a mention thereof shall also be made as also the aggregate amount of such loans under each head).

Tata McGraw-Hill Publishing Company Limited, Management Accounting

(Contd.)
CURRENT LIABILITIES AND PROVISIONS:
A. Current Liabilities: 1. Acceptances, i.e., Bills Payable. 2. Sundry Creditors. 3. Subsidiary Companies. 4. Advance Payments. 5. Unclaimed Dividends. 6. Other Liabilities (if any). 7. Interest accrued but not due on Loans B. Provisions: 8. Provision for Taxation. 9. Proposed Dividends. 10. For Contingencies. 11. For Provident Fund Scheme. 12.For Insurance, Pension and similar Staff Benefit Schemes. 13. Other Provisions.

B. Loans and Advances:

8. (a) Advances and Loans to Subsidiaries. (b) Advances and Loans to Partnership Firms in which the Company or any of its Subsidiaries is a Partner. 9. Bills of Exchange. 10. Advances Recoverable in Cash or in Kind or for the Value to be received, e.g. Rates, Taxes, Insurance, etc. (The above instructions regarding sundry debtors apply to loans and advances also).

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(Contd.)
A footnote to the balance sheet may be added to show separately: Claims against the Company not acknowledged as debts. Uncalled Liability of shares partly paid. Arrears of Fixed Cumulative Dividends. Estimated Amount of Contracts remaining to be executed on Capital Account and not provided for.
Other money for which the Company is Contingently Liable.

1. 2. 3. 4.

1. 2.

3. 4. 5.

Miscellaneous Expenditure: (To the extent not written off or adjusted.) Preliminary Expenses. Expenses including Commission or Brokerage on the underwriting of Subscription of Shares or Debentures Discount allowed on issue of Share/Debentures. Interest paid out of Capital during Construction. Other Items.
Profit and Loss Account: (Show here the debit balance of the profit and loss account, carried forward after deduction of the uncommitted reserves, if any.)

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Notes and General Instructions

1) If the required information cannot be conveniently included in any item sub-item of the balance sheet itself, the same should be furnished in a separate schedule(s) annexed to the balance sheet. 2) Capital Reserves These include all the reserves of capital nature, except the capital redemption reserve and share premium. 3) Capital Redemption Reserve This reserve is created out of revenue reserves by transfer when the preference share capital of the company is redeemed out of profits under Section 80 of the Companies Act. 4) Interest Accrued and Due would be included under the appropriate subhead (of secured or unsecured loans, as the case may be) while interest accrued but not due would appear under current liabilities. 5) Depreciation Written off or Provided should be allocated under different asset heads and deducted in arriving at the value of the fixed assets. 6) According to Section 78, share premium can be utilised only for the following purposes: (i) issue of fully paid bonus shares to members, (ii) writing off the preliminary expenses, (iii) writing off the expenses incurred, or the commission paid, or discount allowed on any issue of shares or debentures and (iv) providing premium payable on redemption of redeemable preference shares or debentures.
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Profit and Loss Account

The main requirements of Part II of Schedule VI of the Companies Act are the following:

1) The profit and loss account should a) be made in such a manner that it discloses clearly
the result of the working of the company during the period covered by the account and b) disclose every material feature. It should set out the various items relating to the income and expenditure of the company arranged under the most convenient heads.
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2)

Tata McGraw-Hill Publishing Company Limited, Management Accounting

(Contd.)
3) The profit and loss account should also contain or give by way of a note detailed information. 3-A) The profit and loss account should contain or give by way of a note a statement showing the computation of net profits in accordance with Section 349 of the Companies Act. 3-B) The profit and loss account should further contain or give by way of a note detailed information in regard to amounts paid to the auditor, whether as fees, expenses or otherwise for services rendered i. as auditor; ii. as adviser, or in any other capacity, in respect of (i) taxation matters, (ii) company law matters, (iii) management services; and iii. in any other manner. 3-C) In the case of manufacturing companies, the profit and loss account should also contain, by way of a note in respect of each class of goods manufactured, detailed quantitative information in regard to the following, namely: (a) the licensed capacity (where licence is in force); (b) the installed capacity; and (c) the actual production.
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(Contd.)
3-D. The profit and loss account should also contain by way of a note the following information, namely: a) value of imports calculated on C.I.F. basis by the company during the financial year in respect of (i) raw materials, (ii) components and spare parts, (iii) capital goods; b) expenditure in foreign currency during the financial year on account of royalty, know-how, professional, consultation fees, interest, and other matters; c) value of all imported raw materials, spare parts and components consumed during the financial year and the value of all indigenous raw materials, spare parts and components similarly consumed and the percentage of each to the total consumption; d) the amount remitted during the year in foreign currencies on account of dividends, with a specific mention of the number of non-resident shareholders, the number of shares held by them on which the dividends related; e) earnings in foreign exchange classified under the following heads, namely, (i) export of goods calculated on F.O.B. basis, (ii) royalty, know-how, professional and consultation fees, (iii) interest and dividend, (iv) other incomes, indicating the nature thereof. 4. Except in the case of the first profit and loss account, the corresponding amounts for the immediately preceding financial year for all items shown in the profit and loss account should also be given in the profit and loss account.
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Balance Sheet Abstract and Company's General Business Profile The format of the balance sheet abstract and companys general profile in Part IV of Schedule VI is given below
I. Registration Details Registration No. ________ State Code _____ (Refer Code List) Balance-sheet ___ _____ _____ Date Month Year II. Capital Raised during the year (Amount in Rs. Thousands). Public Issue ____________________ Rights Issue _________________ Bonus Issue ____________________ Private Placement _______________ III. Position of Mobilisation and Deployment of Funds (Amount is Rs. Thousands). Total Liabilities____________________ Total Assets ____________________ Sources of Funds Paid-up Capital ________________ Reserves & Surplus ____________________ Secured Loans __________________ Unsecured Loans ____________________ Application of Funds Net Fixed Assets __________________ Investments ______________________ Net Current Assets______________ Misc. Expenditure ____________________ Accumulated Losses _________________________ IV. Performance of company (Amount in Rs. Thousands) Turnover _______________ Total Expenditure _________________ + - _____ Profit/Loss Before Tax ___________________ + - ______ Profit/Loss After Tax ___________________ (Please tick Appropriate box + for Profit, - for Loss) Earning per share in Rs.____________ Dividend @%_______________ V. Generic Names of Three Principal Products/Services of Company (as per monetary terms) Item Code No (ITC Code) ________________________________ 4 - 20 Product Tata McGraw-Hill Publishing Company Limited, Management Accounting Description ______________________________________

Example 1 From the following trial balance of Prakash Machineries Limited and additional information, prepare final accounts of the company as per Schedule VI of the Companies Act. Particulars Amount Particulars Amount

Opening stock
Raw materials Work-in-process Finished goods Purchases Salaries and wages Plant & machinery (at cost) Investment at cost (short-term) Sundry debtors Cash at bank

Sales
Rs 1,50,000 General reserve 28,000 Provision for 1,90,000 depreciation on 15,50,000 plant and machinery 2,30,000 Sundry creditors Provision for 12,20,000 depreciation on furniture 3,29,000 Purchases returns 1,58,000 Equity share capital 2,50,900 (Rs 100 each)

Rs 47,50,000
25,000

1,40,000 1,35,000

30,000 25,000 30,00,000

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Tata McGraw-Hill Publishing Company Limited, Management Accounting

(Contd.)
Particulars Directors remuneration Interim dividend Office furniture (at cost) Rates and taxes Insurance Audit fee Sales return Excise duty on finished goods Rent Rent prepaid Bad debts Interest on debentures Freehold premises Other expenses Bills receivable Preliminary expenses Amount Particulars 10% Preference shares capital (Rs 100 each) 9% Debentures Debenture redemption reserve Bills payable Securities premium Income from 3,20,000 investments 90,000 Excise duty payable 20,000 Profit and loss 18,000 27,000 47,30,000 37,100 30,000 50,000 99,40,000 80,000 1,20,000 1,80,000 17,000 15,000 30,000 70,000 Amount 5,00,000 6,00,000 3,00,000 90,000 2,80,000 30,000 15,000 20,000

________ 99,40,000
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Tata McGraw-Hill Publishing Company Limited, Management Accounting

Additional information: (1) Stock as at March 31, 2008 Raw materials and stores, Rs 1,45,000; Work-in-process, Rs 22,000; Finished goods, Rs 1,98,000. (2) Provide depreciation on written down value basis on plant and machinery @ 20 per cent per annum and on furniture @ 15 per cent per annum and on freehold premises @ 5 per cent per annum. (3) In the middle of the year machine costing Rs 3,00,000 was purchased and duly recorded. (4) Sundry debtors include Rs 18,000 due for more than six months. Provide for bad and doubtful debts @ 5 per cent on debtors. (5) Market value of investments is Rs 3,19,000. (6) Make a provision for income-tax @ 35 per cent. (7) Corporate dividend tax is 14.025 per cent including surcharge of 10 per cent and education cess of 2 per cent. (8) The Board of Directors has recommended a final dividend @ 15 per cent on equity shares. (9) Transfer Rs 1,00,000 to debenture redemption reserve. (10) Transfer minimum amount to statutory reserve as required by Company law. (11) Provision for depreciation on freehold premises as on 31/3/2007 was Rs 12,70,000. (12) Write of 1/5th of preliminary expenses. (13) Interest on debentures becomes due on October 31 and March 31.
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Solution Profit and Loss Account for the Year Ended March 31, 2008 Particulars To Opening stock Work-in-process Finished goods To Raw material consumed Opening stock Add purchases Less purchases returns Less closing stock To Salaries and wages To Directors remuneration To Rates and taxes To Insurance To Audit fees Amount Particulars By Sales Less excise duty Less sales return By Income from investments By Closing stock Finished Goods Work-inprocess Rs 47,50,000 Amount

Rs 28,000 1,90,000

Rs 2,18,000

3,20,000

1,50,000 15,50,000 25,000 1,45,000 15,30,000 2,30,000

70,000

Rs 43,60,000

30,000

1,98,000 22,000 2,20,000

80,000
17,000 15,000 30,000

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(Contd.)
Particulars To Rent To Bad debts To Provision for bad debt To Interest on Debentures Add interest due To Depreciation on Plant and Machinery Office furniture Freehold premises To Other expenses To Loss on investment To Preliminary expenses written off To Provision for income-tax To Net profit Amount 90,000 18,000 7,900 27,000 27,000 Particulars Amount

54,000

2,14,000 22,500 2,36,500

4,73,000 37,100 10,000

10,000 6,26,500 11,63,500 46,10,000

_________ 46,10,000
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Tata McGraw-Hill Publishing Company Limited, Management Accounting

Profit and Loss Appropriation Account Particulars To Interim dividend To Proposed dividend Equity Preference To Corporate dividend tax payable (Rs 50,000 14.025%) To Provision for CDT (14.025% of Rs 5,00,000) To Debenture redemption reserve To General reserve (5% of Rs 11,63,500) To Balance c/d Amount Particulars Amount Rs 20,000 11,63,500 Rs 1,20,000 By Balance b/d By Net profit transfer from profit and loss 5,00,000

Rs 4,50,000 50,000

16,830

70,125
1,00,000 58,175 3,18,370 11,83,500

________ 11,83,500
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Tata McGraw-Hill Publishing Company Limited, Management Accounting

Balance Sheet of Prakash Machineries as at March 31, 2008

Particulars
SHARE CAPITAL Authorised capital Issued and Subscribed Capital: 30,000 Equity shares of Rs 100 each fully paid up 5,000 10% Preference shares of Rs 100 each fully paid up Reserves and Surplus: Securities premium Debentures redemption reserve Add transfer from profit and loss General reserve Add statutory transfer Profit and loss

Amount

Particulars
Fixed Assets: Freehold premises Less provision for depreciation at cost Plant and machinery at cost Add purchased Less provision for depreciation (Rs 1,40,000 + 2,14,000) Furniture at cost Less provision for depreciation (Rs30,000 + 22,500)

Amount

Rs 60,00,000

Rs 30,00,000

15,06,500

Rs 44,93,500

5,00,000

9,20,000 3,00,000

2,80,000 Rs 3,00,000 1,00,000 25,000 58,175 4,00,000

3,54,000 8,66,000

1,80,000

Tata McGraw-Hill Publishing Company Limited, Management Accounting

83,175 3,18,370

52,500

1,27,500 4 - 27

(Contd.)
Particulars Amount 6,00,000 27,000 Particulars Amount 3,19,000

Secured Loans: 9% Debentures Interest due on debentures Unsecured Loans: Current Liabilities and Provisions Current liabilities Bills payable Sundry creditors Excise duty payable Corporate dividend tax payable Provisions: Provision for corporate dividend tax Provision for tax Proposed dividend on Equity capital Preference capital

90,000 1,35,000 15,000 16,830

70,125 6,26,500 4,50,000 50,000

5,00,000 _______ 66,62,000

Investments at market value Current Assets Loans And Advances: Current Assets Stock Raw material Work-in-process Finished goods Debtors Less provision for bad debts Debts due for more than six months Other debts Cash at bank Loans and advances Bills receivable Prepaid rent Miscellaneous expenditure Preliminary expenses Less written off

1,45,000 22,000 1,98,000 1,58,000 7,900 18,000 1,40,000

3,65,000

1,50,100

2,50,900

30,000 20,000
50,000 10,000

50,000

Tata McGraw-Hill Publishing Company Limited, Management Accounting

40,000 66,62,000 4 - 28

Corporate Reports
Corporates have to annex to their financial statements the corporate reports specified by the Companies Act. Corporate report primarily consists of (i) Report of the Board of Directors, (ii) Management Discussion and Analysis, (iii) Corporate Governance Report (iv) Compliance report on Corporate Governance and (v) Select accounting information as required under various Accounting Standards Relating to Segment Reporting (AS-17), Related Party Disclosures (AS-18), Discontinuing Operations (AS-24), Interim Financial Reporting (AS-25), and Financial Reporting of Interests in Joint Venture (AS-27).
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1. Board of Directors Report

The Board of Directors report provides information, among others, pertaining to the financial state of the company affairs, the dividend amount proposed, appropriations made for various reserves, major events and future plans, foreign exchange earnings and outflows, employee relations, and so on. It also includes a Directors Responsibility statement stating the (a) Adherence to the accounting standards, (b) Selection of prudent accounting policies which are consistently followed and (c) Response to every reservations, qualification or adverse remark contained in the auditors report.
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2. Management Discussion and Analysis Management discussion and analysis contains forwardlooking statements relating to the operating results and companys financial performance, landmark events, likely opportunities and threats faced by the companys business, say, in the wake of change in Government policy. 3. Corporate Governance Report Corporate governance refers to the distribution of rights and responsibilities among different participants in the company, such as, the Board of Directors, management, shareholders and other stakeholders such as lenders/creditors and spells out rules and procedures for making decisions on corporate affairs.
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Exhibit 3: Suggested List of Items to be Mandatory Included in the Report on Corporate Governance in the Annual Report of Companies
1. A brief statement on companys philosophy on code of governance. 2. Board of Directors i. Composition and category of directors, for example, promoter, executive, non-executive, independent non-executive, nominee director, which institution represented as lender or a equity investor. Attendance of each director at the Board of Directors (BOD) meetings and the last AGM. Number of other BODs or Board committees in which he/she is a member or chairperson. Number of BOD meetings held, dates on which held.

ii. iii. iv.

3. Audit Committee

i. ii. iii.

Brief description of terms of reference Composition, name of members and chairperson Meetings and attendance during the year.
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(Contd.)
4. Remuneration Committee i. Brief description of terms of reference ii. Composition, name of members and chairperson iii. Attendance during the year iv. Remuneration policy v. Details of remuneration to all the directors, as per format in main report. 5. Shareholders Committee i. Name of non-executive director heading the committee ii. Name and designation of compliance officer iii. Number of shareholders complaints received so far iv. Number not solved to the satisfaction of shareholders v. Number of pending complaints 6. General Body Meetings i. Location and time, where last three AGMs were held ii. Whether any special resolutions passed in the previous three AGMs iii. Whether any special resolution passed last year through postal ballotdetails of voting pattern iv. Person who conducted the postal ballot exercise v. Whether any special resolution is proposed to be conducted through postal ballot vi. Procedure for postal ballot.
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(Contd.)
7. Disclosures i. Disclosures on materially significant related party transactions that may have potential conflict with the interests of the company at large ii. Disclosure of accounting treatment, if different, from that prescribed in Accounting Standards with explanation iii. Details of non-compliance by the company, penalties, strictures imposed on the company by stock exchange(s) or SEBI or any statutory authority, on any matter related to capital markets, during the last three years iv. Whistle blower policy and affirmation that no personnel has been denied access to the Audit Committee 8. Means of Communication i. Half-yearly report sent to each household of shareholders ii. Quarterly results iii. Newspapers wherein results normally published iv. Any web site, where displayed v. Whether it also displays official news releases vi. The presentations made to institutional investors or to the analysts vii. Whether management decision and analysis (MDA) is a part of annual report or not
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(Contd.)
9. General Shareholder Information i. AGM: Date, time and venue ii. Financial calendar iii. Date of book closure iv. Dividends payment date v. Listing on stock exchange(s) vi. Stock code vii. Market price data: high, low during each month in last financial year viii. Performance in comparison to broad-based indices such as BSE sensex, CRISIL index and so on. ix. Registrar and transfer agents x. Share transfer system xi. Distribution of shareholding xii. Dematerialisation of shares and liquidity xiii. Outstanding GDRs/ADRs/warrants or any convertible instruments, conversion date and likely impact on equity xiv. Plant locations xv. Address for correspondence
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Exhibit 4: Non-Mandatory Requirements To be Included in Corporate Governance Report

(1) The Board: A non-executive Chairman may be entitled to maintain a Chairmans office at the companys expense and also allowed reimbursement of expenses incurred in performance of his duties. Independent Directors may have a tenure not exceeding, in the aggregate, a period of nine years, on the Board of a company. (2) Remuneration Committee (i) The Board may set up a remuneration committee to determine on their behalf and on behalf of the shareholders with agreed terms of reference, the companys policy on specific remuneration packages for executive directors including pension rights and any compensation payment. (ii) To avoid conflicts of interest, remuneration committee, which would determine the remuneration packages of the executive directors may comprise of at least three directors, all of whom should be non-executive directors, the Chairman of committee being an independent director. (iii) All the members of the remuneration committee could be present at the meeting. (iv) The Chairman of the remuneration committee could be present at the Annual General Meeting, to answer the shareholder queries. However, it would be up to the Chairman to decide who should answer the queries.
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(Contd.)
(3) Shareholder Rights: A half-yearly declaration of financial performance including summary of the significant events in last six-months, may be sent to each household of shareholders. (4) Audit Qualifications: The company may move towards a regime of unqualified financial statements. (5) Training of Board Members: A company may train its Board members in the business model of the company as well as the risk profile of the business parameters of the company, their responsibilities as directors, and the best ways to discharge them. (6) Merchanism for Evaluating Non-executive Board Members: The performance evaluation of non-executive directors could be done by a peer group comprising the entire Board of Directors, excluding the director being evaluated; and Peer Group evaluation could be the mechanism to determine whether to extend/continue the terms of appointment of non-executive directors. (7) Whistle Blower Policy: The company may establish a mechanism for employees to report to the management concerns about unethical behaviour, actual or suspected fraud or violation of the companys code of conduct or ethics policy. This mechanism could also provide for adequate safeguards against victimisation of employees who avail of the mechanism and also provide for direct access to the Chairman and the Audit Committee in exceptional cases. Once established, the existence of the mechanism may be appropriately communicated within the organisation.

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4. Compliance Report on Corporate Governance

A certificate relating to the compliance report on corporate governance should be obtained form either the auditor or practising company secretary.

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Exhibit 5: Quarterly Compliance Report on Corporate Governance Name of the Company: Quarter ending on: Particulars Clause of Listing Agreement 49 I 49 (IA) 49 (IB) 49 (IC) 49 (ID) Compliance Status Yes/No Remarks

I. Board of Directors (A) Composition of Board (B) Non-executive Directors compensation and disclosures (C) Other provisions as to Board and Committees (D) Code of Conduct II. Audit Committee (A) Qualified and Independent Audit Committee (B) Meeting of the Audit Committee Powers of Audit Committee (D) Role of Audit Committee (E) Review of Information by Audit Committee

(C)

49 (II) 49 (IIA) 49 (IIB) 49 (IIC) 49 (IID)

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(Contd.)
Particulars Clause of Listing Agreement
49 (IIE) 49 (IV) 49 (IVA) 49 (IVB)

Compliance Status Yes/No

Remarks

III. Subsidiary Companies IV. Disclosures (A) Basis of Related Party Transactions (B) Board Disclosures (C) Proceeds From Public Issues, Rights Issues, Preferential Issues etc. (D) Remuneration of Directors (E) Management (F) Shareholders V. CEO/CFO Certification VI. Report on Corporate Governance VII. Compliance

49 (IVC) 49 (IVD) 49 (IVE) 49 (IVF) 49 (V) 49 (VI) 49 (VII)

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NOTES
1) The details under each head shall be provided to incorporate all the information required as per the provisions of the Clause 49 of the Listing Agreement.

2) In Column 3, compliance or non-compliance may be indicated by Yes/No/N.A. For example, if the Board has been composed in accordance with the Clause 49 (I) of the Listing Agreement, Yes may be indicated. Similarly, in case the company has no related party transactions, the words N.A. may be indicated against 49 (IV-A).
3) In the remarks column, reasons for non-compliance may be indicated, for example, in case of requirement related to circulation of information to the shareholders, which would be done only in the AGM/EGM, it might be indicated in the Remarks column as will be complied with at the AGM. Similarly, in respect of matters which can be complied with only where the situation arises, for example, Report on Corporate Governance is to be a part of Annual Report only, the words will be complied in the next Annual Report may be indicated.
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Reporting Under Select Accounting Standards

AS-17: Segment Reporting AS-18: Related Party Disclosure

AS-24: Discontinuing Operations

AS-25: Interim Financial Reporting

AS-27: Financial Reporting of Interest in Joint Ventures

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AS-17: Segment Reporting

Segment reporting is reporting financial information about different types of products and services of an enterprise and the different geographical areas in which it operates. Segment information helps the users of financial statements to: Have a better understanding of the performance of the enterprise; Assess the risks and returns of the enterprise; and Make more informed judgements about the enterprise as a whole.

The segment information should be prepared in compliance with

the accounting policies adopted for preparing and presenting the financial statements of the enterprise as a whole.
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AS-18: Related to Party Disclosures

Related party is a party which has the capacity to control the other party of exercise significant influence over the other party.
The required disclosure by the reporting enterprise are: (a) the name of transacting related party, (b)the description of the nature of transactions, (c) volume of transactions, (d)debt dues written off from or to related parties and, (e) amount due from related parties at the balance sheet date, along with provisions, if any.
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AS-24: Discontinuing Operations

Discontinuing operations aims at establishing principles for reporting information about the magnitude of discontinuing operations with a view to help the stakeholders to make projections of an enterprises cash flows, earnings capacity and financial position by segregating information about discontinuing operations from information about continuing operations. The disclosures pertain to a) description of the discontinuing operation(s), b) gain or loss on the disposal of assets or settlement of liabilities attributable to the discontinuing operations, c) the amount of pre-tax profit or loss from ordinary activities attributable to the discontinuing operations during the current financial reporting period and d) comparative information for prior periods that is presented in financial statements prepared after the initial disclosure event to segregate assets, liabilities, revenue, expenses and cash flows of continuing and discontinuing operations.
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AS-25: Interim Financial Reporting

Interim Financial Report
Interim Financial Reporting is a financial report containing a complete set or condensed financial statements for a period shorter than one year.

Interim Period
Interim period is a financial reporting period shorter than a full financial year.

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Timely and reliable interim financial reporting improves the ability of

investors, creditors, and others to understand an enterprises

capacity to generate earnings and cash flows, its financial condition and liquidity. In recognition of the importance of interim financial reporting, the interim financial report should include a minimum. (a) condensed balance sheet,

(b) condensed statement of profit or loss,

(c) condensed cash flow statement and (d) select explanatory notes about the seasonality of interim

operations.
While preparing an interim financial report, an enterprise should apply the same accounting policies as are applied in its annual financial statements.
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AS-27: Financial Reporting of Interest in Joint Venture

Joint Venture is a contractual agreement between parties to undertake an economic activity based on contractually agreed sharing of control.

Joint control is the contractually agreed sharing of control over an economic activity. In respect of its interests in jointly controlled operations, a venturer should recognise in its separate financial statements and consequently in its consolidated financial statements: (a) the assets that it controls and the liabilities that it incurs and (b) the expenses that it incurs and its share of the income that it earns from the joint venture (jointly controlled assets).
A venturer should, among others, disclose (a) the aggregate amount of the contingent liabilities related to the joint venture and its share in contingent liabilities, (b) the aggregate amount of capital commitments related to joint venture and its share of the capital commitments, (c) a list of all joint ventures and description of interests in significant joint ventures and (d) the aggregate amounts of each of the assets, liabilities, income and expenses related to its interests in the jointly controlled entities.

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