Financial Statement Analysis Solved Papers May' 2017, Dibrugarh University B.Com 6th Sem

Financial Statements Analysis Solved Question Paper May' 2017
COMMERCE (Speciality)
Course: 602 (Financial Statement Analysis)
Full Marks: 80
Pass Marks: 24
Time: 3 hours

1. (a) State whether the following statements are True or False:                                      1x5=5

a)      Financial statements disclose only monetary facts.                   True
b)      The figures shown in financial statements are on historical cost basis.             True
c)       Current Ratio is calculated to compare current assets and fixed assets.  False, Current Assets/Current Liabilities
d)      A decrease in Stock Turnover Ratio indicates that business is becoming more efficient.   False
e)      Corporate social responsibility reporting is not mandatory for any business in India.   Ans: False, The following companies are necessary to constitute a CSR committee: Companies with a net worth of Rs. 500 crores or greater, or Companies with a turnover of Rs. 1000 crores or greater, or Companies with a net profit of Rs. 5 crores or greater.
(b) Fill in the blanks with appropriate word(s):                                                    1x5=5
a)      Profit or Loss of Life Insurance business is determined by preparing _____. (Revenue Account/Valuation Balance Sheet).
b)      A Banking Company incorporate in India shall have to transfer a sum equal to _____. (25%/30%) of profit to a Statutory Reserve.
c)       According to RBI Guidelines a Provision of _____(20%/30%) is required for any advance remains doubtful up to one year.
d)      Common Size Statement Analysis is known as _____ (Vertical Analysis/Horizontal Analysis).
e)      Compliance of Corporate Governance was made mandatory by SEBI as listing requirement vide _____(Clause 49/Clause 32).
2. Write short notes on the following (any four):                             4x4=16
a) Economic Value Added Statement: Economic Value-Added is the surplus generated by an entity after meeting an equitable charge towards providers of capital. It is the post-tax return on capital employed (adjusted for the tax shield on debt) less the cost of capital employed. Companies which earn higher returns than cost of capital create value, and companies which earn lower returns than cost of capital are deemed harmful for shareholder value.
EVA Calculation: EVA = (r-c) x Capital
where: r = rate of return, and
c = cost of capital, or the weighted average cost of capital.
Economic Value Added Statements: Value Added Statement is a financial statement that depicts wealth created by an organization and how is that wealth distributed among various stakeholders. The various stakeholders comprise of the employees, shareholders, government, creditors and the wealth that is retained in the business. As per the concept of Enterprise Theory, profit is calculated for various stakeholders by an organization. Value Added is this profit generated by the collective efforts of management, employees, capital and the utilization of its capacity that is distributed amongst its various stakeholders. Consider a manufacturing firm. A typical firm would buy raw materials from the market. Process the raw materials and assemble them to produce the finished goods. The finished goods are then sold in the market. The additional work that the firm does to the raw materials in order for it to be sold in the market is the value added by that firm. Value added can also be defined as the difference between the value that the customers are willing to pay for the finished goods and the cost of materials.
Advantages of a Value Added Statement
a)      It is easy to calculate.
b)      Helps a company to apportion the value to various stakeholders. The company can use this to analyze what proportion of value added is allocated to which stakeholder.
c)       Useful for doing a direct comparison with your competitors.
d)      Useful for internal comparison purposes and to devise employee incentive schemes.
b) Profitability Ratio: Profitability Ratio: These ratios show relationship between profits and sales and profit & investments. It reflects overall efficiency of the organizations, its ability to earn reasonable return on capital employed and effectiveness of investment policies. Example : i) Profits and Sales : Operating Ratio, Gross Profit Ratio, Operating Net Profit Ratio, Expenses Ratio etc. ii) Profits and Investments : Return on Investments, Return on Equity Capital etc.
c) Corporate Governance Reporting: Corporate governance is the system of rules, practices and processes by which a company is directed and controlled. Corporate governance essentially involves balancing the interests of a company's many stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community. Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The corporate governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources.
There shall be a separate section on Corporate Governance in the Annual Reports of company, with a detailed compliance report on Corporate Governance. Non-compliance of any mandatory requirement of this clause with reasons thereof and the extent to which the non-mandatory requirements have been adopted should be specifically highlighted.
The companies shall submit a quarterly compliance report to the stock exchanges within 15 days from the close of quarter as per the format given latter. The report shall be signed either by the Compliance Officer or the Chief Executive Officer of the company.
d) Valuation of Investment of NBFCs: A Non-Banking Financial Company (NBFC) is a company engaged in the business of loans and advances, acquisition of quoted and unquoted shares/stocks/bonds/debentures/securities issue by Government or local authority or other marketable securities of a like nature, leasing, hire purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. Investments in securities of NBFCs are divided into two categories: Current investment and non-current investments. Quoted current investments shall be valued at cost or market value whichever is lower and quoted non-current investments are valued at cost or as per the accounting standard issued by ICAI. Unquoted equity and preference shares in the nature of current investment shall be valued at cost or breakup value, whichever is lower. Investments in unquoted Government securities or Government guaranteed bonds shall be valued at carrying cost. Unquoted investment in the units of mutual funds in the nature of current investments shall be valued at the net asset value declared by the mutual fund in respect of each particular scheme.
e) Activity Ratio: This ratio is also known as turnover ratio or productivity ratio or efficiency and performance ratio. These ratios show relationship between the sales and the assets. These are designed to indicate the effectiveness of the firm in using funds, degree of efficiency, and its standard of performance of the organization. Example : Stock Turnover Ratio, Debtors' Turnover Ratio, Turnover Assets Ratio, Stock working capital Ratio, working capital Turnover Ratio, Fixed Assets Turnover Ratio.
f) Trend Analysis: It is a technique of studying the operational results and financial position over a series of years. Using the previous years’ data of a business enterprise, trend analysis can be done to observe the percentage changes over time in the selected data. The trend percentage is the percentage relationship, in which each item of different years bear to the same item in the base year. Trend analysis is important because, with its long run view, it may point to basic changes in the nature of the business. By looking at a trend in a particular ratio, one may find whether the ratio is falling, rising or remaining relatively constant. From this observation, a problem is detected or the sign of good or poor management is detected.
Merits of Trend analysis:
a)      Trend percentages can be presented in the form of Index Numbers showing relative change in the financial statements during a certain period.
b)      Trend analysis will exhibit the direction to which the concern is proceeding.
c)       The trend ratio may be compared with the industry, in order to know the strong or weak points of a concern.
Demerits of Common Size Statements:
a)      These are calculated only for major items instead of calculating for all items in the financial statements.
b)      Trend values will also be misleading if there is frequent changes in accounting policies.
3. (a) What do you mean by Financial Statement? Explain the nature and objectives of Financial Statement.  4+10=14
Ans: Meaning of Financial Statements
Financial statements are the summarized statements of accounting data produced at the end of accounting process by an enterprise through which accounting information are communicated to the internal and external users.
The American Institute of Certified Public Accountants states the nature of financial statements as “Financial Statements are prepared for the purpose of presenting a periodical review of report on progress by the management and deal with the status of investment in the business and the results achieved during the period under review. They reflect a combination of recorded facts, accounting principles and personal judgments.”
In the words of Myer,” The financial statements provide a summary of accounts of a business enterprise, the balance sheet reflecting the assets, liabilities and capital as on a certain date and income statement showing the result of operations during a certain period”.
Nature of Financial Statements:
The nature of financial statements is the combination of the following forms:
a)      Recording facts of a business transactions;
b)      Accounting Conventions;
c)       Accounting Concepts;
d)      Legal implications
e)      Personal judgments used in the application of conventions and postulates.
a)      Recorded Facts: The Financial statements are statements prepared on the basis of recorded facts; they do not depict the unrecorded facts. Recorded facts means recording of transactions based on evidence in the accounting books.
b)      Accounting Conventions: Certain accounting conventions are followed while preparing financial statements such as convention of ‘Conservatism’, convention of ‘Materiality’, convention of ‘Full disclosure’, convention of ‘Consistency’. According to convention of ‘Conservatism’, provisions are made of expected losses but expected profits are ignored. This means that the real financial position of the business may be better than what has been shown by the financial statements. The use of accounting conventions makes financial statements simple, comparable, and realistic.
c)       Accounting Concepts: While preparing financial statements the accountants make a number of assumptions known as accounting concepts such as going concern concept, money measurement concept, realisation concept, etc. According to the going concern concept, it is assumed that the business of the concern shall be continued indefinitely. The assets are shown in the balance sheet at their book value rather than their market value.
d)      Legal implications: Financial statements are prepared following the legal obligations of the country. For example, while preparing the financial statement of an Indian company, the requirements as per the companies Act, 2013 and its amendments from time to time must be followed.
e)      Personal Judgement: Personal judgement also has an important bearing on financial statements. For example, selection of one method out of various methods of charging depreciation, inventory valuation etc., depends on the personal judgement of the accountant.
Financial statements are very useful as they serve varied affected group having an economic interest in the activities in the business entity. Let us analyse the purpose served by financial statement:
a)      The basic purpose of financial statement is communicated to their interested users, quantitative and objective information are useful in making economic decisions.
b)      Secondly, financial statements are intended to meet the specialized needs of conscious creditors and investors.
c)       Thirdly, financial statements are prepared to provide reliable information about the earning of a business enterprise and it ability to operate of profit in future. The users who are interested in this information are generally the investors, creditors, suppliers and employees.
d)      Fourthly, financial statements are intended to provide the base for tax assessments.
e)      Fifthly, financial statement are prepare in a way a provide information that is useful in predicting the future earning power of the enterprise.
f)       Sixthly, financial statements are prepares to provide reliable information about the changes in economic resources.
g)      Seventhly, financial statements are prepares to provide information about the changes in net resources of the organization that result from profit directed activities.
h)      Thus, financial statement satisfy the information requirements of a wide cross-section of the society representing corporate managers, executives, bankers, creditors, shareholders investors, labourers, consumers, and government institution.
(b) What is Financial Statement Analysis? Explain the various techniques of analysis of Financial Statement.  4+10=14
Ans: Financial Statement Analysis
We know business is mainly concerned with the financial activities. In order to ascertain the financial status of the business every enterprise prepares certain statements, known as financial statements. Financial statements are mainly prepared for decision making purposes. But the information as is provided in the financial statements is not adequately helpful in drawing a meaningful conclusion. Thus, an effective analysis and interpretation of financial statements is required.
Financial Statement Analysis is the process of identifying the financial strength and weakness of a firm from the available accounting and financial statements. The analysis is done by properly establishing the relationship between the items of balance sheet and profit and loss account.
In the words of Myer “Financial Statement analysis is largely a study of relationship among the various financial factors in a business, as disclosed by a single set of statements, and a study of trends of these factors, as shown in a series of statements.”
In simple words, analysis of financial statement is a process of division, establishing relationship between various items of financial statements and interpreting the result thereof to understand the working and financial position of a business.
Tools of Analysis of Financial Statements
The most commonly used techniques of financial analysis are as follows:
1. Comparative Statements: These are the statements showing the profitability and financial position of a firm for different periods of time in a comparative form to give an idea about the position of two or more periods. It usually applies to the two important financial statements, namely, balance sheet and statement of profit and loss prepared in a comparative form. The financial data will be comparative only when same accounting principles are used in preparing these statements. If this is not the case, the deviation in the use of accounting principles should be mentioned as a footnote. Comparative figures indicate the trend and direction of financial position and operating results. This analysis is also known as ‘horizontal analysis’.
Merits of Comparative Financial Statements:
a)      Comparison of financial statements helps to identify the size and direction of changes in financial position of an enterprise.
b)      These statements help to ascertain the weakness and soundness about liquidity, profitability and solvency of an enterprise.
c)       These statements help the management in making forecasts for the future.
Demerits of Comparative Financial Statements:
a)      Inter-firm comparison may be misleading if the firms are not of the same age and size, follow different accounting policies.
b)      Inter-period comparison will also be misleading if there is frequent changes in accounting policies.
2. Common Size Statements: These are the statements which indicate the relationship of different items of a financial statement with a common item by expressing each item as a percentage of that common item. The percentage thus calculated can be easily compared with the results of corresponding percentages of the previous year or of some other firms, as the numbers are brought to common base. Such statements also allow an analyst to compare the operating and financing characteristics of two companies of different sizes in the same industry. Thus, common size statements are useful, both, in intra-firm comparisons over different years and also in making inter-firm comparisons for the same year or for several years. This analysis is also known as ‘Vertical analysis’.
Merits of Common Size Statements:
a)      A common size statement facilitates both types of analysis, horizontal as well as vertical. It allows both comparisons across the years and also each individual item as shown in financial statements.
b)      Comparison of the performance and financial condition in respect of different units of the same industry can also be done.
c)       These statements help the management in making forecasts for the future.
Demerits of Common Size Statements:
a)      If there is no identical head of accounts, then inter-firm comparison will be difficult.
b)      Inter-firm comparison may be misleading if the firms are not of the same age and size, follow different accounting policies.
c)       Inter-period comparison will also be misleading if there is frequent changes in accounting policies.
3. Trend Analysis: It is a technique of studying the operational results and financial position over a series of years. Using the previous years’ data of a business enterprise, trend analysis can be done to observe the percentage changes over time in the selected data. The trend percentage is the percentage relationship, in which each item of different years bear to the same item in the base year. Trend analysis is important because, with its long run view, it may point to basic changes in the nature of the business. By looking at a trend in a particular ratio, one may find whether the ratio is falling, rising or remaining relatively constant. From this observation, a problem is detected or the sign of good or poor management is detected.
Merits of Trend analysis:
d)      Trend percentages can be presented in the form of Index Numbers showing relative change in the financial statements during a certain period.
e)      Trend analysis will exhibit the direction to which the concern is proceeding.
f)       The trend ratio may be compared with the industry, in order to know the strong or weak points of a concern.
Demerits of Common Size Statements:
c)       These are calculated only for major items instead of calculating for all items in the financial statements.
d)      Trend values will also be misleading if there is frequent changes in accounting policies.
4. Ratio Analysis: It describes the significant relationship which exists between various items of a balance sheet and a statement of profit and loss of a firm. As a technique of financial analysis, accounting ratios measure the comparative significance of the individual items of the income and position statements. It is possible to assess the profitability, solvency and efficiency of an enterprise through the technique of ratio analysis.
5. Funds flow statement: The financial statement of the business indicates assets, liabilities and capital on a particular date and also the profit or loss during a period. But it is possible that there is enough profit in the business and the financial position is also good and still there may be deficiency of cash or of working capital in business. Financial statements are not helpful in analysing such situation. Therefore, a statement of the sources and applications of funds is prepared which indicates the utilisation of working capital during an accounting period. This statement is called Funds Flow statement.
6. Cash Flow Analysis: A Cash Flow Statement is similar to the Funds Flow Statement, but while preparing funds flow statement all the current assets and current liabilities are taken into consideration. But in a cash flow statement only sources and applications of cash are taken into consideration, even liquid asset like Debtors and Bills Receivables are ignored. A Cash Flow Statement is a statement, which summarises the resources of cash available to finance the activities of a business enterprise and the uses for which such resources have been used during a particular period of time. Any transaction, which increases the amount of cash, is a source of cash and any transaction, which decreases the amount of cash, is an application of cash. Simply, Cash Flow is a statement which analyses the reasons for changes in balance of cash in hand and at bank between two accounting period. It shows the inflows and outflows of cash.
4. (a) “Ration analysis is considered better than mere comparison of figures in carrying out overall appraisal of business.” Explain how ratio analysis is better tool for appraisal.   13
Ans: Meaning of Ratio Analysis
A ratio is one figure expressed in terms of another figure. It is mathematical yardstick of measuring relationship of two figures or items or group of items, which are related, is each other and mutually inter-dependent. It is simply the quotient of two numbers. It can be expressed in fraction or in decimal point or in pure number. Accounting ratio is an expression relating to two figures or two accounts or two set accounting heads or group of items stated in financial statement.
Ratio analysis is the method or process of expressing relationship between items or group of items in the financial statement are computed, determined and presented. It is an attempt to draw quantitative measures or guides concerning the financial health and profitability of an enterprise. It can be used in trend and static analysis. It is the process of comparison of one figure or item or group of items with another, which make a ratio, and the appraisal of the ratios to make proper analysis of the strengths and weakness of the operations of an enterprise.
According to Myers, “Ratio analysis of financial statements is a study of relationship among various financial factors in a business as disclosed by a single set of statements and a study of trend of these factors as shown in a series of statements."
Objectives of Ratio analysis
a)      To know the area of the business which need more attention.
b)      To know about the potential areas which can be improved with the effort in the desired direction.
c)       To provide a deeper analysis of the profitability, liquidity, solvency and efficiency levels in the business.
d)      To provide information for decision making.
e)      To Judge Operational efficiency
f)       Structural analysis of the company
g)      Proper Utilization of resources and
h)      Leverage or external financing
Ratio analysis is a better tool as compared to others because of its various advantages
There are various groups of people who are interested in analysis of financial position of a company used the ratio analysis to workout a particular financial characteristic of the company in which they are interested. Ratio analysis helps the various groups in the following manner:
a)      To workout the profitability: Accounting ratio help to measure the profitability of the business by calculating the various profitability ratios. It helps the management to know about the earning capacity of the business concern.
b)      Helpful in analysis of financial statement: Ratio analysis help the outsiders just like creditors, shareholders, debenture-holders, bankers to know about the profitability and ability of the company to pay them interest and dividend etc.
c)       Helpful in comparative analysis of the performance: With the help of ratio analysis a company may have comparative study of its performance to the previous years. In this way company comes to know about its weak point and be able to improve them.
d)      To simplify the accounting information: Accounting ratios are very useful as they briefly summaries the result of detailed and complicated computations.
e)      To workout the operating efficiency: Ratio analysis helps to workout the operating efficiency of the company with the help of various turnover ratios. All turnover ratios are worked out to evaluate the performance of the business in utilising the resources.
f)       To workout short-term financial position: Ratio analysis helps to workout the short-term financial position of the company with the help of liquidity ratios. In case short-term financial position is not healthy efforts are made to improve it.
g)      Helpful for forecasting purposes: Accounting ratios indicate the trend of the business. The trend is useful for estimating future. With the help of previous years’ ratios, estimates for future can be made.
(b) Debtors’ Velocity – 3 months
Creditors’ Velocity – 2 months
Stock Velocity – 8 times
Fixed Assets Turnover Ratio – 8 times
Gross Profit Ratio – 25%
Gross Profit in the year amounted to Rs. 80,000. There is no long-term Loan and Bank Overdraft. Reserve and Surplus amounted to Rs. 28,000. Liquid Assets are Rs. 97,333. Closing Stock is Rs. 2,000 more than Opening Stock. Bills Receivable and Payable are Rs. 5,000 and Rs. 2,000 respectively.
Find out (i) Sales; (ii) Sundry Debtors; (iii) Closing Stock; (iv) Sundry Creditors; (v) Fixed Assets; and (vi) Proprietor’s Fund.
Also prepare Balance Sheet with as many details as possible.           9+4=13
5. (a) What do you mean by financial reporting? State the various steps adopted by business to enhance transparency in financing reporting process.   6+7=13
Ans: Basically, financial reporting is the process of preparing, presenting and circulating the financial information in various forms to the users which helps in making vigilant planning and decision making by users. The core objective of financial reporting is to present financial information of the business entity which will help in decision making about the resources provided to the reporting entity and in assessing whether the management and the governing board of that entity have made efficient and effective use of the resources provided. Financial reporting is of two types – Internal reporting and external reporting. The financial report made to the management is generally known as internal reporting and the financial report made to the shareholders and creditors is generally known as external reporting. The internal reporting is a part of management information system and they uses MIS reporting for the purpose of analysis and as an aid in decision making process.
 The components of financial reporting are:
a)      The financial statements – Balance Sheet, Profit & loss account, Cash flow statement & Statement of changes in stock holder’s equity
b)      The notes to financial statements
c)       Quarterly & Annual reports (in case of listed companies)
d)      Prospectus (In case of companies going for IPOs)
e)      Management Discussion & Analysis (In case of public companies)
Objectives of Financial Reporting
The following points sum up the objectives & purposes of financial reporting:
a)      Providing information to management of an organization which is used for the purpose of planning, analysis, benchmarking and decision making.
b)      Providing information to investors, promoters, debt provider and creditors which is used to enable them to male rational and prudent decisions regarding investment, credit etc.
c)       Providing information to shareholders & public at large in case of listed companies about various aspects of an organization.
d)      Providing information about the economic resources of an organization, claims to those resources (liabilities & owner’s equity) and how these resources and claims have undergone change over a period of time.
e)      Providing information as to how an organization is procuring & using various resources.
f)       Providing information to various stakeholders regarding performance of management of an organization as to how diligently & ethically they are discharging their fiduciary duties & responsibilities.
g)      Providing information to the statutory auditors which in turn facilitates audit.
h)      Enhancing social welfare by looking into the interest of employees, trade union & Government.
Qualitative Characteristics of Financial Reports
The objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. The Qualitative characteristics of useful financial reporting identify the types of information which are likely to be most useful to users in making decision about the reporting authority on the basis of information in its financial report. Financial information is useful when it is relevant and presented faithfully. Some of the qualitative characteristics which makes the financial reports useful to its users are given below:
a)      Relevance: Information is relevant if it would potentially affect or make a difference in users’ decisions. A related concept is that of materiality i.e. information is considered to be material if omission or misstatement of the information could influence users’ decisions.
b)      Faithful Representation: This means that the information is ideally complete, neutral, and free from error. The financial information presented reflects the underlying economic reality.
c)       Comparability: This means that the information is presented in a consistent manner over time and across entities which enables users to make comparisons easily.
d)      Materiality: Materiality is an entity-specific aspect of relevance based on the nature or magnitude (or both) of the items to which the information relates in the context of an individual entity's financial report.
e)      Verifiability: This means that different knowledgeable and independent observers would agree that the information presented faithfully represents the economic phenomena it claims to represent.
f)       Timeliness: Timely information is available to decision makers prior to their making a decision.
g)      Understandability: This refers to clear and concise presentation of information. The information should be understandable by users who have a reasonable knowledge of business and economic activities and who are willing to study the information with diligence.
h)      Transparency: This means that users should be able to see the underlying economics of a business reflected clearly in the company’s financial statements.
i)        Comprehensiveness: A framework should encompass the full spectrum of transactions that have financial consequences.
j)        Consistency: Similar transactions should be measured and presented in a similar manner across companies and time periods regardless of industry, company size, geography or other characteristics.
Transparency in Financial Reporting
When it comes to investing in a business most of the decision making process is based on the company’s financial reporting. This means that maintaining complete transparency in their reports is very important to both the corporation and its potential investors. They require as much information as possible about the corporate financial before they can decide on whether or not this would be a good investment.
In financial reporting, transparency is considered to be reports that have high quality and clear information which makes them easy to understand. The company’s budgeting and forecasting should be readily available for possible as well as existing investors to access and comprehend.
When preparing reports there are companies that go to great lengths to mislead potential investors in order to be more appealing. It goes without saying that these companies should be avoided at all costs. Some companies ignore their knowledge of why it is necessary to be transparent in their financial reporting. Consequently, this makes them a significantly higher risk investment with the possibility of lower returns.
In order to maintain transparency, a business must consider the following points:
GAAP, or Generally Accepted Accounting Principles, is a commonly recognized set of rules and procedures designed to govern corporate accounting and financial reporting. GAAP is a comprehensive set of accounting practices that were developed jointly by the Indian Accounting Standards Board (IASB) and ICAI. The purpose of GAAP is to create a uniform standard for financial reporting. When financial information is made available to the public, it should serve the purpose of helping investors make informed decisions as to where to put their money. Similarly, it should enable lenders to properly assess the financial condition of companies looking to borrow money.
When applied to non-profits and government organizations, the goal of GAAP is to ensure complete transparency on the part of the reporting entities. Information provided under GAAP needs to be not only clear, comprehensive, and easily understood, but verifiable by auditors and other outside parties.
The Generally Accepted Accounting Principles further set out specific rules and principles governing such things as standardized currency units, cost and revenue recognition, financial statement format and presentation, and required disclosures.
(B) Convergence with IFRS
IFRS is a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements. IFRS are generally principles-based standards and seek to avoid a rule-book mentality. Application of IFRS requires exercise of judgment by the preparer and the auditor in applying principles of accounting on the basis of the economic substance of transactions. IFRS are issued by the International Accounting Standards Board (IASB).
IFRS Standards aims at providing a high quality, internationally recognised set of accounting standards that bring transparency, accountability and efficiency to financial markets around the world.
IFRS Standards bring transparency by enhancing the international comparability and quality of financial information, enabling investors and other market participants to make informed economic decisions.
IFRS Standards strengthen accountability by reducing the information gap between the providers of capital and the people to whom they have entrusted their money. Our Standards provide information that is needed to hold management to account. As a source of globally comparable information, IFRS Standards are also of vital importance to regulators around the world.
And IFRS Standards contribute to economic efficiency by helping investors to identify opportunities and risks across the world, thus improving capital allocation. For businesses, the use of a single, trusted accounting language lowers the cost of capital and reduces international reporting costs.
(C) Follow up of Accounting Standards
Accounting Standards are formulated with a view to harmonize different accounting policies and practices in use in a country. The objective of Accounting Standards is, therefore, to reduce the accounting alternatives in the preparation of financial statements within the bounds of rationality, thereby ensuring comparability of financial statements of different enterprises with a view to provide meaningful information to various users of financial statements to enable them to make informed economic decisions. The Companies Act, 2013, as well as many other statutes in India requires that the financial statements of an enterprise should give a true and fair view of its financial position and working results. This requirement is implicit even in the absence of a specific statutory provision to this effect. The Accounting Standards are issued with a view to describe the accounting principles and the methods of applying these principles in the preparation and presentation of financial statements so that they give a true and fair view. The Accounting Standards not only prescribe appropriate accounting treatment of complex business transactions but also foster greater transparency and market discipline. Accounting Standards also helps the regulatory agencies in benchmarking the accounting accuracy.
(D) Segment Reporting
Segment reporting is the reporting of the operating segments of a company in the disclosures accompanying its financial statements. Segment reporting is required for publicly-held entities, and is not required for privately held ones
The key advantage of segment reporting is transparency. For businesses that operate in different categories or geographic areas, segment reporting can reveal which areas are profitable and which are drains on the bottom line. If the segment reporting shows a business its overseas operations are more profitable than domestic operations, it could prompt a change in strategic direction. Done properly, it keeps managers from hiding unprofitable ventures.
Segment reporting also allows stakeholders to get a better sense of the fluctuations that might affect overall numbers. If a business reports much higher earnings than expected, for example, segment reporting shows where those earnings are coming from. A stakeholder can look at the same report to determine if the numbers are sustainable. It's designed to help investors better understand the business and its potential cash flow.
(b) What is corporate social responsibility reporting? Explain the present legal provisions of corporate social responsibility and its reporting practices in India.            4+9=13
Ans: Corporate social responsibility (CSR) is a business approach that contributes to sustainable development by delivering economic, social and environmental benefits for all stakeholders. CSR is a concept with many definitions and practices. Corporate social responsibility (CSR) promotes a vision of business accountability to a wide range of stakeholders, besides shareholders and investors. Key areas of concern are environmental protection and the wellbeing of employees, the community and civil society in general, both now and in the future.
The concept of CSR is underpinned by the idea that corporations can no longer act as isolated economic entities operating in detachment from broader society. Traditional views about competitiveness, survival and profitability are being swept away.
A corporation practicing CSR strives to comply with the laws and regulations, make a profit, be ethical and provide social accountability. It is responsible for the wider impact on society and not just the return of investments to stakeholders alone. Changing business practices and internal operations is considered vital for those organizations practicing CSR. In 1998 John Eklington coined the term “Triple Bottom Line” which is a coincident approach to that of CSR and an integrated concept under the umbrella of Social Responsibility. The “Triple Bottom Line (TBL)” approach is a means for corporations to achieve the adequate level of Corporate Social Responsibility which is necessary in the age of sustainable development for future generations.
There is no single, universally accepted definition of TBL reporting. In its broadest sense, TBL reporting is defined as corporate communication with stakeholders that describes the company’s approach to managing one or more of the economic, environmental and / or social dimensions of its activities and through providing information on these dimensions. Consideration of these three dimensions of company management and performance is sometimes referred to as sustainability or sustainable development. In its purest sense, the concept of TBL reporting refers to the publication of economic, environmental and social information in an integrated manner that reflects activities and outcomes across these three dimensions of a company’s performance.
Also termed as the 3P approach- People, Planet, Profit, the TBL considers CSR as an investment rather than a method of achieving sustainability. It focuses on the three aspects of-
People: A triple bottom line organization takes steps to ensure that its operations benefit the company's employees as well as the community in which it conducts business. Human resources managers of TBL entities are concerned, not just with providing adequate compensation to its workers, but also with creating a safe and pleasant working environment and helping employees find value in their work.
Planet: A TBL company avoids any activities that harm the environment and looks for ways to reduce any negative impact its operations may have on the ecosystem. It controls its energy consumption and takes steps to reduce its carbon emissions. Many TBL companies go beyond these basic measures by taking advantage of other means of sustainable development, such as using wind power. Many of these practices actually increase a company's profitability while contributing to the health of our planet.
Profit: The profit or economic bottom line deals with the economic value created by the organization after deducting the cost of all inputs, including the cost of the capital tied up. It therefore differs from traditional accounting definitions of profit. In the original concept, within a sustainability framework, the "profit" aspect needs to be seen as the real economic benefit enjoyed by the society. It is the real economic impact the organization has on its economic environment.
Corporate Social Responsibility (CSR) is a continuous commitment by the business houses and the corporate to contribute towards inclusive growth in the society. CSR is the process by which an organization thinks about and evolves its relationships with stakeholders for the common good, and demonstrates its commitment in this regard by adoption of appropriate business processes and strategies. Thus CSR is not charity or mere donations. CSR is a way of conducting business, by which corporate entities visibly contribute to the social good. Socially responsible companies do not limit themselves to using resources to engage in activities that increase only their profits. They use CSR to integrate economic, environmental and social objectives with the company’s operations and growth. CSR is often called the triple bottom-line approach – Sustainability in Environment, Social Community & Business.
Changing nearly six decades (57 Years) old regulations for corporate reporting, the new Companies Act 2013 makes it mandatory for certain class of profitable enterprises to spend profits on social welfare activities. Under Section 135 (5) of the new Companies Act, 2013, passed by Parliament in August 2013, profitable companies must spend every year at least 2 per cent of their average net profit over the preceding three years on CSR works and shall not include profits arising from branches outside India. This mandatory CSR-spend rule will apply from fiscal 2014-15 onwards. The Ministry of Corporate Affairs, vide its Notification dated 11 October 2018, has reconstituted the High Level Committee on Corporate Social Responsibility. The Scope of the said committee is to review existing framework under the Companies Act, 2013, regarding CSR, recommend guidelines for enforcement of CSR provisions, suggest measures for adequate monitoring and evaluation of CSR by companies and examine and recommend audit (financial, performance, social) for CSR, as well as analyse outcomes of CSR activities/programmes/projects.
Present Corporate Social Responsibility Norms in India
Applicability: As per Section 135 of the Act and rules issued there under, CSR norms are applicable on companies which have (a) net worth of Rs 500 Crore or more; (b) turnover of Rs 1000 Crore or more; or (c) net profit of Rs 5 Crore or more.
Compliance: The companies, crossing the prescribed threshold, are required to spend at least 2% of their average net profit for the immediately preceding 3 financial years on CSR activities. Such expenditure incurred on the CSR activities cannot be taken as an expenditure incurred by the company being an assessee for the purposes of the business or profession. Further, no specific tax exemptions have been extended to CSR expenditure per se.
Other key requirements includes constitution of a committee of the Board of Directors consisting of 3 or more directors, formulation of the Corporate Social Responsibility Policy by the Board of Directors on the recommendation of the CSR Committee, undertaking the CSR activities and spending the prescribed amount of expenditure on CSR activities as per CSR Policy and recommendations of CSR Committee and monitoring effective implementation of CSR Policy.
Board's Responsibility: The Board of Directors are required to disclose in their report the composition of the CSR Committee and other compliance undertaken by the company and place it on company's website. If the company fails to spend the prescribed amount on CSR activities, the Board is also required to specify the reasons for not spending the amount in their report.
Penal provisions: At present, there is no penal provision for non-compliance under CSR norms. However, penalties can be levied of the Act for not making the required disclosures in Board's report on an annual basis besides prosecution of the officers of the company in default.
Activities which may be included by companies in their Corporate Social Responsibility Policies relating to:
a)      Eradicating extreme hunger and poverty;
b)      Promotion of education;
c)       Promoting gender equality and empowering women;
d)      Reducing child morality and improving maternal health;
e)      Combating human immunodeficiency virus (HIV), acquired immune deficiency syndrome, (AIDS), malaria and other diseases;
f)       Ensuring environmental sustainability;
g)      Employment enhancing vocational skills;
h)      Social business projects;
i)        Contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; and
j)        Such other matters as may be prescribed.

6. (a) Discuss the important provisions need to be taken into consideration for financial reporting of Insurance Companies in India and also state disclosures requirement of their financial statements as per IRDA regulations. 7+7=14
Ans: Financial Reporting Requirements of Insurance Companies in India
To protect the interests of policyholders and to increase transparency and credibility of insurance companies there is a need to have an effective regulatory system for financial reporting of insurance companies. Reporting requirements of insurance companies are different from that of other companies, because of the concept of policyholders and shareholders’ fund, segment reporting in respect of all the funds maintained by the company, complexity of insurance contracts and insurance itself is an intangible product.
Earlier the accounts of insurance companies were governed by Insurance Act 1938, but passing of Insurance Regulatory Development Authority Act (IRDA Act) in 1999 opened a new chapter for disclosure norms of insurance companies. In the year 2002, the IRDA came up with regulations for the preparation of the financial statements of insurance companies. According to the Insurance (Amendment) Act, 2002, the first, second and third schedules prescribed for balance sheet, profit and loss account and revenue account respectively as given in Insurance Act, 1938 have been omitted. Now revenue account, profit and loss account and balance sheet are to be prepared as per the formats prescribed by IRDA. However, the statutes governing financial reporting practices of insurance companies in India are: Insurance Act 1938, IRDA Act, 1999 (including IRDA Regulations), Companies Act and Institute of Chartered Accountants of India (ICAI).
IRDA Act 1999 (Including IRDA Regulations)
Insurance Regulatory Development Authority (IRDA) has prescribed various regulations from time to time. Preparation of Financial Statements and Auditor’s Report of Insurance Companies Regulations, 2002 are one of them. These regulations are related to the financial reporting practices of insurance companies. These regulations are important constituents of the Indian regulatory regime. According to the regulations made by the authority in consultation with the Insurance Advisory Committee, accounts of insurance companies are prepared according to the prescribed formats given by the authority. Details are given as under:
a) Preparation of Financial Statements: After the commencement of Insurance Regulatory Development Authority, Regulations, 2002, all the life insurance companies shall comply with the requirements of Schedule A and general insurance companies with Schedule B of these regulations while preparing their financial statements. The auditor’s report on the financial statements of all insurance companies shall be in conformity with the requirements of Schedule C. IRDA given the list of items to be disclosed in the financial statements of insurance companies under Part II of Schedule A (for life insurance companies) and Schedule B (for general insurance companies) of the (Preparation of Financial Statements and auditor’s report of Insurance Companies) Regulations, 2002. According to these regulations, following disclosure will form part of financial statements of insurance companies:
1.       Every insurance company will disclose all significant accounting policies and accounting standards followed by them in the manner required under Accounting Standard I issued by the Institute of Chartered Accountants of India. (ICAI).
2.       All companies will separately disclose if there is any departure from the accounting policies with reasons for such departure.
3.       Disclosure of investments made in accordance with statutory requirements separately together with its amount, nature, security and any special rights in and outside India.
4.       Disclosure of performing and non-performing investments separately.
5.       Disclosure of assets to the extent required to be deposited under local laws for otherwise encumbered in or outside India.
6.       All the companies are required to show sector-wise percentage of their business.
7.       To include a summary of financial statements for the last five years in their annual report to be prepared as prescribed by the IRDA.
8.       Disclose the basis of allocation of investments and income thereon between policyholders’ account and shareholders’ account.
9.       To disclose accounting ratios as prescribed by the Insurance Regulatory and Development Authority.
Disclosure of following items is made by way of notes to balance sheet:
1.       Contingent Liabilities.
2.       Actuarial assumptions for valuation of liabilities for life policies in force.
3.       Encumbrance’s to assets of the company in and outside India.
4.       Commitments made and outstanding for loans, investments and fixed assets.
5.       Basis of amortization of debt securities.
6.       Claims settled and remaining unpaid for a period of more than six months as on the balance sheet date.
7.       Value of contracts in relation to investments, for purchases where deliveries are pending and sales where payments are overdue.
8.       Operating expenses relating to insurance business and basis of allocation of expenditure to various segments of business.
9.       Computation of managerial remuneration.
10.   Historical costs of those investments valued on fair value basis.
11.   Basis of revaluation of investment property.
b) Management Report: According to the IRDA Regulations 2002, all the insurance companies are required to attach a management report to their financial statements. The contents of the management report are given under PART IV (Schedule A and Schedule B) of these regulations and reproduced below:
1.       Confirmation regarding the continued validity of the registration granted by the IRDA.
2.       Certification that all the dues payable to the statutory authorities has been duly paid.
3.       Confirmation to the effect that the shareholding patterns and the transfer of shares during the year are in accordance with the statutory or regulatory requirements.
4.       Declaration that the management has not directly or indirectly invested outside India the funds of the policyholders.
5.       Confirmation regarding required solvency margins.
6.       Certification to the effect that no part of the life insurance fund has been directly or indirectly applied in contravention of the provisions of the Insurance Act, 1938 (4 of 1938) relating to the application and investment of the life insurance funds.
7.       Disclosure with regard to the overall risk exposure and strategy adopted to mitigate the same.
8.       Operations in other countries, if any, with a separate statement giving the management’s estimate of country risk and exposure risk and the hedging strategy adopted.
9.       Ageing of claims indicating the trends in average claim settlement time during the preceding five years.
10.   Certification to the effect as to how the values, as shown in the balance sheet, of the investments and stocks and shares have been arrived at, and how the market value thereof has been ascertained for the purpose of comparison with the values so shown.
11.   Review of assets quality and performance of investment in terms of portfolio, i.e. separately in terms of real estate, loans, investments. Etc.
12.   A schedule payments, which have been made to individuals, firms, companies and organizations in which directors of the insurance company are interested.
13) A responsibility statement indicating therein that:
Ø  In the preparation of financial statements, the applicable amounting standards, principles and policies have been followed along with proper explanations relating to material departures, if any;
Ø  The management has adopted accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the operating profit or loss and of the profit or loss of the company for the year;
Ø  The management has taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the applicable provisions of the Insurance Act, 1938 and Companies Act 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
Ø  The management has prepared the financial statements on a going concern basis;
Ø  The management has ensured that an internal audit system commensurate with the size and nature of the business exists and is operating effectively.
(b) Discuss the suggestions made by RBI’s Advisory Group on Accounting and Auditing in Financial Reporting of Banks and Financial Institutions.    14
There are various types of users of the financial statements of banks who need information about the financial position and performance of the banks. The financial statements are required to provide the information about the financial position and performance of the bank in making economic decisions by the users. The important information sought by these users are, about bank’s Liquidity and solvency and the risks related to the assets and liabilities recognized on its balance sheet and to its off balance sheet items. This useful information can be provided by way of ‘Notes’ to the financial statements, hence notes become an integral part of the financial statements of banks. The users can make use of these notes and supplementary information to arrive at a meaningful decision. Some of the specific disclosure requirements in Bank’s financial statement are given below:
a) Presentation: Summary of Significant Accounting Policies’ and ‘Notes to Accounts’ may be shown under Schedule 17 and Schedule 18 respectively, to maintain uniformity.
b) Minimum Disclosures: While complying with the requirements of Minimum disclosures, banks should ensure to furnish all the required information in ‘Notes to Accounts’. In addition to the minimum disclosures, banks are also encouraged to make more comprehensive disclosures to assist in understanding of the financial position and performance of the bank.
c) Summary of Significant Accounting Policies: Banks should disclose the accounting policies regarding key areas of operations at one place (under Schedule 17) along with Notes to Accounts in their financial statements. The list includes – Basis of Accounting, Transactions involving Foreign Exchange, Investments – Classification, Valuation etc, Advances and Provisions thereon, Fixed Assets and Depreciation, Revenue Recognition, Employee Benefits, Provision for Taxation, Net Profit, etc.
d) Disclosure Requirements: In order to encourage market discipline, Reserve Bank has over the years developed a set of disclosure requirements which allow the market participants to assess key pieces of information on capital adequacy, risk exposures, risk assessment processes and key business parameters which provide a consistent and understandable disclosure framework that enhances comparability. Banks are also required to comply with the Accounting Standard 1 (AS 1) on Disclosure of Accounting Policies issued by the Institute of Chartered Accountants of India (ICAI). The enhanced disclosures have been achieved through revision of Balance Sheet and Profit & Loss Account of banks and enlarging the scope of disclosures to be made in “Notes to Accounts”.
e) Additional/Supplementary Information: In addition to the 16 detailed prescribed schedules to the balance sheet, banks are required to furnish the following information in the “Notes to Accounts”. Such furnished (information should cover the current year and the previous year). “Notes to Accounts” may contain the supplementary information such as:
1.       Capital (Current & Previous Year) with breakup including CRAR – Tier I/II capital (%), % of shareholding of GOI, amount of subordinated debt raised as Tier II capital. Also it should show the total amount of subordinated debt through borrowings from Head Office for inclusion in Tier II capital etc.
2.       Investments: Total amount should be mentioned in crores, with the total amount of investments, showing the gross value and net value of investments in India and Abroad. The details should also cover the movement of provisions held towards depreciation on investments.
3.       Derivatives: Forward Rate Agreement/Interest Rates Swap: Important aspects of the disclosures would include the details relating to:
a.       The notional principal of swap agreements;
b.      Losses which would be incurred if counterparties failed to fulfill their obligations under the agreements;
c.       Collateral required by the bank upon entering into swaps;
d.      Nature and terms of the swaps including information on credit and market risk and the accounting policies adopted for recording the swaps etc.
4.       Exchange Traded Interest Rate Derivatives: As regards Exchange Traded Interest Rate Derivatives, details would include the notional principal amount undertaken:
a.       During the year (instrument-wise),
b.      Outstanding as on 31st March (instrument-wise),
c.       Outstanding and not “highly effective” (instrument-wise),
d.      Mark-to-market value of exchange traded interest rate derivatives outstanding and not “highly effective” (instrument-wise).
f) Qualitative Disclosure: Banks should discuss their risk management policies pertaining to derivatives with a specific reference to the extent to which derivatives are used, the associated risks and business purposes served. This also includes:
a.       The structure and organization for management of risk in derivatives trading,
b.      The scope and nature of risk measurement, risk reporting and risk monitoring systems,
c.       Policies for hedging and/or mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges/mitigants, and accounting policy for recording hedge and non-hedge transactions; recognition of income, premiums and discounts; valuation of outstanding contracts; provisioning, collateral and credit risk mitigation.
g) Quantitative Disclosures: Apart from qualitative disclosures, banks should also included the quantitative disclosures. The details are both Currency Derivatives and Interest rate derivatives.
h) Asset Quality: Banks’ performances are considered good based on the quality of assets held by banks. With the changing scenario and due to number of risks associated with banks like Credit, Market and Operational risks, banks are concentrating to ensure better quality assets are held by them. Hence, the disclosure needs to cover various aspects of asset quality consisting of:
a.       Non-Performing Assets, covering various details like Net NPAs, movement of NPAs (Gross)/(Net) and relevant details provisioning to different types of NPAs including Write off/write-back of excess provisions, etc., Details of Non-Performing financial assets purchased, sold, are also required to be furnished.
b.      Particulars of Accounts Restructured: The details under different types of assets such as (i) Standard advances (ii) Sub-standard advances restructured (iii) Doubtful advances restructured (iv) TOTAL with details number of borrowers, amount outstanding, sacrifice.
c.       Banks disclose the total amount outstanding in all the accounts/facilities of borrowers whose accounts have been restructured along with the restructured part or facility. This means even if only one of the facilities/accounts of a borrower has been restructured, the bank should also disclose the entire outstanding amount pertaining to all the facilities/accounts of that particular borrower.
d.      Details of financial assets sold to Securitization/Reconstruction Company for Assets Reconstruction.
e.      Provisions on Standard Assets: Provisions towards Standard Assets need not be netted from gross advances but shown separately as ‘Provisions against Standard Assets’, under ‘Other Liabilities and Provisions – Others’ in Schedule No. 5 of the balance sheet.
f.        Other Details: Business Ratios: (i) Interest Income as a percentage to Working Funds (ii) Non-interest income as a percentage to Working Funds (iii) Operating Profit as a percentage to Working Funds (iv) Return on Assets (v) Business (Deposits plus advances) per employee (vi) Profit per employee.
i) Assets Liability Management: As part of Assets Liability Management, the maturity pattern of certain items of assets and liabilities such as deposits, advances, investments, borrowings, foreign current assets, and foreign currency liabilities. Banks are required to disclose the information based on the maturity patterns covering daily, monthly and yearly basis.
j) Break up Exposures: Banks should also furnish details of exposures to certain sectors like Real Estate Sector.
Exposure to Capital Market: Capital Market exposure details should be disclosed for the current and previous year in crores. The details would include direct investment in equity shares, convertible bonds, convertible debentures and units of equity-oriented mutual funds the corpus of which is not exclusively invested in corporate debt and also loan raised against such securities. A bank must also disclose the risk associated with such investments. The risks are to be categorized as Insignificant, Low, Moderate, High, Very high, Restricted and Off-credit.
Apart from the above category of exposures, banks are required to disclose details relating to Single Borrower Limit (SGL)/Group Borrower Limit (GBL) exceeded by the bank, and Unsecured Advances are to be furnished. Miscellaneous items would include Amount of Provisions made for Income Tax during the year, and Disclosure of Penalties imposed by RBI, etc.
Full Marks: 80
Pass Marks: 32
1. (a) Fill in the blanks with appropriate word(s):                                               1x5=5
a)      Reporting of Corporate Governance reflects _____ (Company/Management Process/Earning Status/Assets and Liabilities).
b)      Long-term solvency of the business is reflected by _____ (Acid Test/Ratio/Debt-equity Ratio/Stock Turnover Ratio).
c)       Accounting Standards Board (ASB) was set up in India in the year _____ (1973/1975/1977)
d)      The basic objective of financial statements is to ____ (provide information/meet legal requirement/show performance of management).
e)      Disclosure in financial statements of banks and similar financial institutions is associated with (IAS-30/IAS-31/IAS-32)
(b) State whether the following statements are True or False:                                    1x3=3
a)      Financial statements reflect the recorded facts.                        True
b)      The new name of Accounting Standards issued by IASB is International Financial Reporting Standards (IFRS).  True
c)       Current Ratio indicates short-term debt paying ability of a firm.         True
2. Write short notes on any four of the following:                                             4x4=16
a)      Comparative Statement Analysis.
b)      Indian Accounting Standards.
c)       Solvency Ratios.
d)      Corporate Social Responsibility Reporting.
e)      RBI Guidelines on Financial Reporting of NBFCs.
3. (a) What do you mean by Financial Statement? Explain the objectives and limitations of Financial Statement.                 11
(b) “Analysis of Financial Statement is best way to judge the overall financial health of a business.” Explain the statement with your justification.                                                   11
4. (a) What do you mean by Ratio Analysis? Explain the different types of Ratio used for the purpose of Financial Statement Analysis.                                              12
(b) From the following information, prepare the Balance Sheet:                                                12
Net Working Capital
Reserve and Surplus
Bank Overdraft
Current Ratio
Liquid Ratio
Fixed Assets to Proprietor’s Fund
Long-term Liabilities
5. (a) What is the objectives of financial reporting? Explain the qualitative characteristics of a good financial reporting. 4+7=11
(b) What do you mean by Corporate Governance? Discuss how good Corporate Governance Reporting is useful to users of financial report.                                11
6. (a) What do you mean by Accounting Standards? Explain the role of Accounting Standards for Global Harmonization of financial reporting.                          4+7=11
(b) What is International Financial Reporting Standards (IFRS)? Describe the role played by Indian accounting regulatory bodies for convergence of Indian Accounting Standards with IFRS.                                           11
7. (a) Explain the important provisions relating disclosure requirement of Banks and Financial Institutions issued by Reserve Bank of India.                    11
(b) Discuss the IRDA guidelines regarding the financial reporting of Insurance Companies on Insurance Contract.                11

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