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Analysis Of Annual Report Nestle


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Analysis Of Annual Report Nestle

  1. 1. Corporate Balance Sheet <ul><li>Prepared on a particular date </li></ul><ul><li>Comparative position </li></ul><ul><li>Grouping and sub grouping of assets and liabilities </li></ul><ul><li>May be drawn vertically or horizontally </li></ul><ul><li>Details of Schedules and Notes to accounts </li></ul><ul><li>Matching of assets and liabilities </li></ul><ul><li>Signed by preparers and auditors </li></ul>
  2. 2. Balance Sheet of Nestle India Ltd. <ul><li>Has been prepared on 31 December 2001 </li></ul><ul><li>Has been drawn vertically </li></ul><ul><li>Comparative position of each account of the balance sheet as on 31 December 2000 has also been disclosed </li></ul><ul><li>Reference to Schedules A to I has been provided against various accounts of the balance sheet </li></ul><ul><li>Gap between I and R indicates that the rest of the schedules from J to Q pertain to Profit and loss account </li></ul><ul><li>Sources of funds = Application of funds , based on Dual aspect concept </li></ul><ul><li>The balance sheet has been signed by the preparers and the auditors respectively </li></ul>
  3. 3. Balance Sheet of Nestle India Ltd. <ul><li>FIXED ASSETS </li></ul><ul><li>These enable the company to produce goods and provide marketing and administrative support to the business operations </li></ul><ul><li>Lead to generation of operational revenue </li></ul><ul><li>Note 24 of Schedule R ‘Notes to the accounts’ states the fixed assets accounting policy of the company as under: </li></ul><ul><li>“ Fixed assets are stated at cost (net of CENVAT) less accumulated depreciation. Cost is inclusive of freight, duties, levies and any directly attributable cost of bringing the assets to their working condition for intended use.” </li></ul><ul><li>Valuation has been done in compliance with the requirements of AS 10 – Accounting for Fixed assets </li></ul>
  4. 4. Balance Sheet of Nestle India Ltd. <ul><li>INVESTMENTS </li></ul><ul><li>Represent deployment of surplus funds to earn income, known as non-operating income </li></ul><ul><li>Companies may diversify into other lines of businesses through investments in associate companies, joint ventures and subsidiary companies </li></ul><ul><li>Nestle India Ltd. By itself is a subsidiary of Nestle S.A. Switzerland </li></ul><ul><li>Notes 24 of Schedule R, ‘Notes to the accounts’ of Nestle India ltd. states the investment accounting policy of the company: </li></ul><ul><li>“ Investments are classified into current and long term investments. Current investments are stated at the lower of cost and fair value. Long term investments are stated at cost.” </li></ul><ul><li>Nestle has made all the disclosures as per AS 13 - Accounting for Investments </li></ul>
  5. 5. Balance Sheet of Nestle India Ltd. <ul><li>CURRENT ASSETS, LOANS AND ADVANCES </li></ul><ul><li>Current assets are held for consumption or for sale and are expected to be realized in cash during the normal operating cycle </li></ul><ul><li>In the day to day activities companies are required to make advance payments of expenses, pay to suppliers in advance, provide for advances to associates, extend loan to employees, pay advance income tax etc. </li></ul><ul><li>Loans and advances should be grouped with current assets only when they are expected to expire over the normal operating cycle or a period of 12 months </li></ul><ul><li>Current assets of Nestle include inventories, debtors and cash and bank balances </li></ul><ul><li>Note 24 of Schedule R states the inventories accounting policy of the company: </li></ul><ul><li>“ Stores and spare parts are stated at cost. Stock in trade is valued at cost or net realizable value whichever is lower.” </li></ul>
  6. 6. Balance Sheet of Nestle India Ltd. <ul><li>MISCELLANEOUS EXPENDITURE AND PROFIT AND LOSS ACCOUNT </li></ul><ul><li>Miscellaneous expenditure represent revenue expenditure to the extent not charged to P&L account i.e they are deferred over more than one accounting years </li></ul><ul><li>Debit balance of P&L A/c after adjustments against reserves is the last item of the assets </li></ul>
  7. 7. Balance Sheet of Nestle India Ltd. <ul><li>CURRENT LIABILITIES AND PROVISIONS </li></ul><ul><li>Current liabilities of Nestle include sundry creditors, unclaimed dividends, interest accrued but not due on loans and unclaimed amounts against debenture series I and II </li></ul><ul><li>Provisions of Nestle include provision for pension and gratuity, proposed final dividend, provision for corporate dividend tax and provision for contingencies </li></ul><ul><li>Net Current assets of Nestle is a negative figure. i.e it has net current liabilities as a source of finance for fixed assets and investments. </li></ul>
  8. 8. Balance Sheet of Nestle India Ltd. <ul><li>LOAN FUNDS </li></ul><ul><li>Secured loans are obtained against security of one or more assets of the company. The nature of security is to be specified in each case in the Balance sheet </li></ul><ul><li>Term loans from financial institutions for new projects, expansion projects and diversification projects </li></ul><ul><li>Debentures are issued by the company to the lenders in form of certificates under the common seal of the company, acknowledging the debt taken. Terms of redemption or conversion together with the date in the balance sheet </li></ul><ul><li>Unsecured loans are not backed by any security </li></ul>
  9. 9. Balance Sheet of Nestle India Ltd. <ul><li>SHAREHOLDERS’ FUNDS </li></ul><ul><li>These are the funds contributed by owners and include accumulated retained earnings and other reserves of the company </li></ul><ul><li>Net worth, shareholders’ equity or owners’ equity are some popular terms used to denote shareholders’ funds </li></ul><ul><li>Nestle has issued only one kind of shares i.e Equity shares </li></ul><ul><li>Reserves represent that portion of earnings which are set apart by the management for a general or a specific purpose </li></ul><ul><li>Surplus represents credit balance in profit and loss account retained in the business after providing for proposed appropriations towards dividends and / or reserves </li></ul>
  10. 10. Corporate P&L A/c <ul><li>Prepared for a given period </li></ul><ul><li>Comparative position </li></ul><ul><li>Grouping of income and expenditure </li></ul><ul><li>Details in schedules and notes to the accounts </li></ul><ul><li>Appropriation of profit and transfer of balance to the balance sheet </li></ul><ul><li>Signed by preparers and auditors </li></ul>
  11. 11. P&L A/c of Nestle India Ltd. <ul><li>Note 24 of Schedule R, ‘Notes to the accounts’ states the sales accounting policy of the company as under </li></ul><ul><li>“ Sale of goods is recognised at the point of despatch to the customer. Sales include excise duty but excludes sales tax.” </li></ul><ul><li>It means that Nestle transfers all the risks and rewards of ownership to the customers at the time of despatch of goods </li></ul><ul><li>Note 24 of Schedule R, ‘Notes to the accounts’ states the depreciation accounting policy of the company as under </li></ul><ul><li>“ Depreciation is provided as per the straight line method at rates given in Schedule XIV to the Companies Act 1956 except for information technology equipments and vehicles which are depreciated over three to five years respectively and leasehold improvements are depreciated over the lease period.” </li></ul>
  12. 12. <ul><li>SCHEDULE R : NESTLE INDIA LTD. </li></ul><ul><li>Impairment loss </li></ul><ul><li>Contingency provision </li></ul><ul><li>Deferred tax </li></ul><ul><li>Change in policy of depreciation on vehicles </li></ul><ul><li>Contribution to gratuity fund </li></ul><ul><li>Debenture redemption reserve </li></ul><ul><li>Capital commitments </li></ul><ul><li>Auditor’s remuneration </li></ul><ul><li>Managerial remuneration </li></ul><ul><li>etc… </li></ul>Notes to the accounts
  13. 13. Cash Flow Statement <ul><li>Prepared for a given period </li></ul><ul><li>Comparative position </li></ul><ul><li>Cash flows from Operating, Financing and Investing activities </li></ul><ul><li>Reconciliation with the opening and closing balances of cash and cash equivalents </li></ul><ul><li>Signed by preparers and auditors </li></ul><ul><li>A derived statement </li></ul>
  14. 14. Other Financial Reports <ul><li>Auditor’s report </li></ul><ul><li>Director’s report </li></ul><ul><li>Corporate governance report </li></ul>
  15. 15. Auditor’s Report <ul><li>Requirements of The Companies Act - Section 227 of the Companies Act deals with the auditor’s report </li></ul><ul><li>MAOCARO (Manufacturing and Other Companies (Auditor’s Report) Order 1988 </li></ul><ul><li>Reasons for qualified answers - Where, in the auditor’s report, the answers to any of the questions is unfavourable or qualified, the report shall also state the reasons for the same. Where the auditor is not able to provide an answer to a particular question, his report shall indicate such fact together with the reasons </li></ul><ul><li>CARO (Companies Audit Report Order 2003) </li></ul><ul><li>Corporate financial practices </li></ul>
  16. 16. Director’s Report <ul><li>Requirement of Companies Act – Section 217, as regards the contents </li></ul><ul><li>Corporate financial practices </li></ul><ul><li>Indicative of director’s responsibility towards ensuring that financial statements are drawn in accordance with the requirements of accounting standards and other statutory norms </li></ul><ul><li>Also respond to audit qualifications and make a declaration about fulfillment of their responsibility towards quality of financial statements </li></ul>
  17. 17. Corporate Governance Report <ul><li>Mandated by SEBI through stock exchanges via the listing agreement for the listed companies (Clause 49 of Listing agreement) </li></ul><ul><li>Seeks to report the effectiveness with which the management is discharging its responsibilities of running the corporate affairs transparently </li></ul><ul><li>In 1996 CII took a special initiative on Corporate Governance – the first institutional initiative in the Indian industry </li></ul><ul><li>Kumar Mangalam Birla Committee on Corporate Governance </li></ul>