REPORTS

Investment Strategy: Under pressure- Part II

Auditors of many mid caps note non-provision for derivatives losses, pressure on cash flows and diminution in value of investments

Aptech: Payment of excess remuneration to the managing director, aggregating to Rs 46.81 lakh, for which application for approval made to the Central government.

* Though there is improvement compared with prior years, internal control in sale of services needs to be strengthened further.

Kanani Industries: Taking steps to introduce internal audit system.

Bombay Burmah Trading Corporation: No provision for foreseeable losses on outstanding derivatives contracts entered into for hedging borrowings and interest costs in foreign currencies. The company is accounting for gains and losses on such contracts along with settlement of underlying transactions. Due to the complex nature of long-term derivatives contracts and market volatility, the management is not in a position to realistically ascertain the ultimate loss or gain on settlement.

Gati: Claims and counter-claims made on pending dispute with National Aviation Company of India (Nacil). Further, Rs 26.59 crore due from Nacil included in loans and advances, pending realisation. As per legal opinion, no liability is contemplated to arise and no provision necessary.

* Remuneration of Rs 1.27 crore paid to managing director and wholetime director subject to approval of the Central government and shareholders.

Garware Polyester: In compliance with provisions of AS and based on general prudence not recognised the deferred tax asset or liability of Rs 11.93 crore in FY 2009 while preparing the accounts, as per legal advice obtained.

Dunlop India: No provision made for interest on loans from Catholic Syrian Bank and Karnataka State Industrial & Development Corporation (KSIIDC) as the company is in the process of making one-time settlement with these banks.

* Recognised deferred tax asset on account of carried forward business losses and unabsorbed depreciation under the IT Act end March 2007. This was adjusted against general reserve (GR). Filed a petition with the Calcutta HC in March 2010, seeking extension of carry-forward losses beyond eight years because the company was under BIFR. Pending decision, Rs 33.58 crore, which was adjusted against GR in FY 2008 and 2009, has been brought back to GR.

* Capitalisation of expenses for refurbishment.

* Internal audit system should be strengthened.

Andhra Pradesh Paper Mills: Recognising deferred tax liability at effective rate instead of the standard rate. A writ petition is pending before the Calcutta HC and the matter will be reviewed on disposal of the case.