FINANCIAL A CCOUNTING & R EPORTING –

A SSIGNMENT 2
I. Choose a Company whose name matches with your name/surname (must be a listed company from India). Download
the latest annual report (preferably 2019-20). Go through the annual report and briefly mention the following:

a. Who are the board members and who are executive and non-executive? Who is the Chairman of the board? IS
he/she executive or non-executive board member? What are different subcommittees of the Board members?
What do you think the mandate of “Audit Committee” and “Nomination & Remuneration Committee”?

The executive board members are -

• Sanjiv Goenka, Chairman
• Shashwat Goenka, Vice Chairman
• Rabi Chowdhury, Managing Director (Generation)
• Debasish Banerjee, Managing Director (Distribution)

The non-executive board members are-

• Pradip Kumar Khaitan
• Chandra Kumar Dhanuka
• Rekha Sethi
• Kalaikuruchi Jairaj
• Pratip Chaudhuri
• Sunil Mitra

The Chairman of the board is Sanjiv Goenka. He is an executive board member.

Different sub-committees of the board members are –

AUDIT COMMITTEE
1 Mr. Chandra Kumar Dhanuka Chairperson / Independent / Non-Executive
2 Mr. Sanjiv Goenka Non-Executive
3 Mr. Pratip Chaudhuri Independent / Non-Executive
4 Ms. Rekha Sethi Independent / Non-Executive
NOMINATON & REMUNERATION COMMITTEE
1 Mr. Chandra Kumar Dhanuka Chairperson / Independent / Non-Executive
2 Mr. Sanjiv Goenka Non-Executive
3 Mr. Pradip Kumar Khaitan Non-Independent / Non-Executive
4 Mr. Kalaikuruchi Jairaj Independent / Non-Executive
STAKEHOLDERS RELATIONSHIP COMMITTEE
1 Mr. Sanjiv Goenka Chairperson / Non-Executive
2 Mr. Pratip Chaudhuri Independent / Non-Executive
3 Mr. Rabi Chowdhury Executive
CSR COMMITTEE
1 Mr. Sanjiv Goenka Chairperson / Non-Executive
2 Mr. Chandra Kumar Dhanuka Independent / Non-Executive
3 Mr. Rabi Chowdhury Executive
RISK MANAGEMENT COMMITTEE
1 Mr. Pradip Kumar Khaitan Chairperson / Non-Independent / Non-Executive
2 Mr. Pratip Chaudhuri Independent / Non-Executive
3 Mr. Rabi Chowdhury Executive
4 Mr. Rajarshi Banerjee Executive Director & CFO
5 Mr. Gautam Ray Executive Director (HR & Admin.)
 Audit Committee Mandate –
The Audit Committee consisted of Dr. Sanjiv Goenka, Mr. P. Chaudhuri and Mr. C.K. Dhanuka for the FY 2019 -20.
During the year ended 31 March 2020. Ms. R Sethi was inducted as a member w.e.f. 14 November, 2019.

Audit Committee of the Board is empowered to review the financial statements, in particular, investments made
by the unlisted subsidiary companies, in view of the requirements under Regulation 24 of the Listing Regulations.
The books, papers, minute books, forms and returns filed and other records maintained by the Company for the
financial year ended on 31st March, 2020, were examined according to the applicable provisions of:
1. The Companies Act, 2013 (the Act) and the Rules made thereunder
2. The Securities Contracts (Regulation) Act, 1956 (`SCRA’) and the rules made there under
3. The Depositories Act, 1996 and the Regulations and Bye -laws framed thereunder
4. Foreign Exchange Management Act; 1999 and the rules and regulations made thereunder to the extent of Foreign
Direct Investment, Overseas Direct Investment and External Commercial Borrowings to the extent applicable to the
Company

Nomination & Remuneration Committee Mandate –

During the year ended 31 March, 2020, the Nomination & Remuneration Committee comprised of Dr. Sanjiv
Goenka, Mr. P.K. Khaitan, Mr. K. Jairaj and Mr. C.K. Dhanuka, being the Chairman of the Committee.

In accordance with the recommendation of the Committee, the Company has since formulated a Remuneration
Policy for directors, key managerial personnel and other employees of the Company. The Committee is also
responsible for recommending the fixation and periodic revision of remuneration of the Managing Director .

The independent directors met on February 11, 2020 in the absence of non -independent directors and the members
of management. They discussed, inter-alia, the performance of non-independent directors and the Board as a
whole, the performance of the Chairman of the Company after taking into consideration the views of executive and
non-executive directors and to assess the quality, quantity and timeliness of flow of information between the
Company’s management and the Board that is necessary for the Board of Directors to effectively perform their
duties. The performance evaluations of all the independent directors have been done by the entire Board, excluding
the director being evaluated. On the basis of performance evaluation, the Board determine d whether to extend or
continue their term of appointment, whenever the respective term expires. The Directors expressed their
satisfaction with evaluation process.

b. Among all the “board members”, who do you think would be most independent and why? Name the Board
member and the reasons for your choice. Focus on Reasons for your choice.

Among all the board members, I believe that Mr. Sunil Mitra is the most independent director as of now.

I believe that he is the most independent of all board members is because he has been newly appointed to that
position w.e.f. 14 th November 2019 for a term of five years. In addition to that, he has not been part of any
committee since joining.

c. List the Subsidiary, Associate and Joint Venture companies. (SAJV companies) Rank “TOP” 3 SAJV as per your
understanding. You decide the parameters for “TOP”. In Explicitly mention at least 2 -3 parameters in addition
Revenue & Profit Contribution for you have considered to rank these SAJV.

The SAJV companies of CESC Limited are listed below.

1. Surya Vidyut Limited

2. Malegaon Power Supply Limited
3. CESC Projects Limited
4. Bantal Singapore Pte. Limited $
 5. Ranchi Power Distribution Company Limited
6. Pachi Hydropower Projects Limited
7. Papu Hydropower Projects Limited
8. Au Bon Pain Café India Limited
9. Haldia Energy Limited
10. Dhariwal Infrastructure Limited
11. Kota Electricity Distribution Limited
12. Bikaner Electricity Supply Limited
13. Bharatpur Electricity Services Limited
14. Crescent Power Limited
15. CESC Green Power Limited
16. Jharkhand Electric Company Limited
17. Jarong Hydro-Electric Power Company Limited
18. Eminent Electricity Distribution Limited

The top 3 companies that have been ranked as per the parameters mentioned along with the companies -

Reporting Share Profit after

Rank Name of the Subsidiary Turnover
Period Capital Taxation
1 Haldia Energy Limited April-March 1203.44 2258.14 317.72
2 Surya Vidyut Limited April-March 251.91 130.34 14.44
3 Bikaner Electricity Supply Limited April-March 120.05 544.24 5.90

d. From Wikipedia, some information related to “Earning Quality” is given below. You can use any other web
source. How would rate the “Earning Quality’ of your chosen company in a Likert scale of 1-5 (1 being poor and
5 being best quality). List out your views for rating.

In terms of earning quality CESC Limited can be rated as “4”.

As per the audit by Mr Pradip Kumar Muduli from Chaturvedi & Co. Chartered Accountants, the company has
adhered to all the account standards set as per-
1. The Companies Act, 2013 (the Act) and the Rules made thereunder
2. The Securities Contracts (Regulation) Act, 1956 (`SCRA’) and the rules made thereu nder
3. The Depositories Act, 1996 and the Regulations and Bye -laws framed thereunder
4. Foreign Exchange Management Act; 1999 and the rules and regulations made thereunder to the extent of
Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings to the extent
applicable to the Company

Some salient points from the annual report state that –

1. Total income (including other income) increased by 3.2% to Rs.11,217 crore.
2. Overall operating expenses also grew by 3.2% to Rs.5,730 crore. After including depreciation and finance costs,
total expenses increased by 3.5% to Rs.10,280
3. Earnings per share increased from Rs.89.32 in 2018-19 to Rs.98.24 in 2019-20

However, the business and working has been adversely impacted by the COVID-19 pandemic and the Amphan
cyclone hitting major areas of operation in West Bengal under the company, causing some damage and havoc.

Also, the company is yet to make a mark in Environmental Social Governance (ESG). The company is taking efforts
to be known for quality of the Board, commitment to ethics, anti-corruption, transparency and a
code of conduct; disclosures and respect for shareholders’ rights. As a start, plans are being made to carry out an
independent third-party audit of the ESG and, based on the results, prepare a dynamic ESG roadmap for the years
ahead.
 e. Has the company discussed or mentioned about the impact of recent pandemic on company’s performance as
well as any potential risk due to the Pandemic? If so, elaborate Among other se ctions, one must refer
Management’s Discussion and Analysis section for the purpose.

The Covid-19 global pandemic gathered momentum in India in March 2020. Early protective measures by the Indian
government to contain the health emergency in January were ramped-up, culminating into a strict nationwide
lockdown starting 25 March 2020.

This crisis facing the world is unique in terms of the quantum of output loss as countries restricted mobility and
economic activity to contain spread of the virus. Besides, there is severe uncertainty around the duration and
intensity of the crisis, which will have a huge impact on the global economy, including the power sector in which
CESC operates. As per Power System Operation Corporation (POSOCO) reports, India experien ced a 25% dip in
energy consumption between 25 March 2020 and 9 April 2020, which was the first phase of the lockdown. Although
economic activity has gradually resumed since mid-May, it is still operating below preCovid levels, with considerable
uncertainty on the time to normalcy.

As far as CESC’s system demand is concerned, the dip was around 12% in March 2020, bringing down annual growth
to 3%, which was otherwise projected at around 3.7%. As a result, while the Company’s performance in 2019-20
was not affected much due to the timeline of events, future performance will depend on when normalcy returns
and demand revives fully. Our approach during the lockdown and initiatives to mitigate associated risks are
discussed in greater detail in the sections on ‘Risks and Concerns’.

II. In June 20XX, Prasanna set up a debt rating service as a sole proprietorship. At the end of the month, the business had
the following balances: Cash, `3,000; Trade Receivables, `2,000; Office Supplies, `1,000; Office Equipment, `5,0 00;
Trade Payables, `1,000; Prasanna’s Capital, `10,000. The following transactions took place in July:
(a) Paid June salaries, `400.
(b) Billed clients for services, `2,000.
(c) Bought office equipment for cash, `1,000.
(d) Bought office supplies on credit, `100.
(e) Withdrew cash for personal use, `1,000.
(f) Provided services for cash, `18,000.
(g) Prasanna invested in the business, `15,000.
(h) Collected payments for past invoices, `1,500.
(i) Paid electricity expense, `300.
(j) Paid for past purchases of office supplies, `500.
(k) Paid July salaries, `400.

Required:
1. Enter the beginning balances.
2. Analyze the effect of the transactions on the related asset, liability and equity items.
3. Calculate the profit for June 20XX.

Answer:

1. Following are the beginning balances –

Assets Liabilities Equity

Balances Trade = Trade + Prasanna's
Cash Supplies Equipment
Receivables Payables Capital
Balance 3000 2000 1000 5000 1000 10000

2. The effects of the transactions on the related asset, liability and equity terms can be observed as under –
 Assets Liabilities Equity
Balances Trade = Trade + Prasanna's
Cash Supplies Equipment
Receivables Payables Capital
Balance 3000 2000 1000 5000 1000 10000
(a) -400 -400
Balance 2600 2000 1000 5000 600 10000
(b) 2000 2000
Balance 2600 4000 1000 5000 600 12000
(c) -1000 1000
Balance 1600 4000 1000 6000 600 12000
(d) 100 100
Balance 1600 4000 1100 6000 700 12000
(e) -1000 -1000
Balance 600 4000 1100 6000 700 11000
(f) 18000 18000
Balance 18600 4000 1100 6000 700 29000
(g) 15000 15000
Balance 33600 4000 1100 6000 700 44000
(h) 1500 -1500
Balance 35100 2500 1100 6000 700 44000
(i) -300 -300
Balance 34800 2500 1100 6000 700 43700
(j) -500 -500
Balance 34300 2500 1100 6000 200 43700
(k) -400 -400
Balance 33900 2500 1100 6000 200 43300

3. As per the Profit & Loss Statement for July 20XX,

Statement of Profit and Loss

For the month ended January 31, 20XX
Amount
Revenue
Revenue from clients billed 2000
Revenue from services 18000
Total Revenue 20000
Expenses
Electricity expenses 300
Salaries 400
Total Expenses 700
Profit 19300

III. On August 1, 20XX, Ajay and Jeevan quit as senior executives in a mutual fund to set up MoneyCare Company, an
investment advisory service. Each of them deposited `50,000 in MoneyCare’s bank account in exchange for 5,000
shares. Also, they raised an interest-free loan of `20,000 for the company from their friend. They rented an office for
the company in the city, costing `5,000 per month payable on the last day of the month. At the landlord’s insistence,
they paid a deposit of `70,000, refundable on MoneyCare vacating the place. They leased two computers for one year
on a monthly rental of `6,000 per computer and subscribed to a financial database for a fee of `11,000 per month.
Computer rental and database fee were payable at the beginning of the month. They appointed a secretary on a
monthly salary of `9,000 and an assistant on a monthly salary of `5,000.
Depending on their credit rating, MoneyCare’s customers paid in one of the following ways:
1. Before receiving service.
2. Immediately on receiving service.
3. Within one month after receiving service.

During August, MoneyCare provided services for `70,800 and raised invoices with the following payment terms:
Fifteen customers with invoices totalling `62,100 could pay until end of September. Two customers with invoices
totalling `8,700 had to pay immediately.

MoneyCare’s other transactions in August were as follows:

Paid computer rental, database fee, office rent and salaries as agreed.
Received from customers amounts totalling `24,100 including `15,400 from customers who chose to pay early.
Paid for office supplies costing `1,800 but did not use them.
Received `9,000 from a customer for service to be provided in September.
Earned interest income of `460 on the bank account.

Required
1. Prepare MoneyCare’s financial statements for August.
2. What do you think of the company’s financial performance?

Balance Sheet
As calculated on August 31, 20XX
Liabilities and Equity Assets
Loan payable 20,000 Cash 1,18,460
Unearned revenue 9,000 Trade receivables 46,700
Equity 1,29,260 Office supplies 1,800
Total 1,58,260 Total 1,58,260

Statement of Profit and Loss

For the month ended August 31, 20XX
Amount
Revenue
Revenue from invoices raised 46,700
Revenue from sevices to
24,100
customers
Interest income 460
Total Revenue 71,260
Expenses
Office rent 5,000
Computer rent 12,000
Financial database fee 11,000
Salaries 14,000
Total Expenses 42,000
Net Profit 29,260
 Statement of Changes in Equity
For the month ended August 31, 20XX
Capital Retained Earnings Total
Balance, August 1, 20XX 0
Capital introduced 1,00,000 1,00,000
Net Profit 29,260 29,260
Balance, August 31, 20XX 1,00,000 29,260 1,29,260

Statement of Cash Flows

For the month ended August 31, 20XX
Cash flows from operating activities
Cash received from customers 33,100
Cash paid to suppliers and employees -43,800
Net cash flow from operating activities -10,700
Cash flow from investing activities
Net cash used in investing activities 0
Cash flows from financing activities
Capital invested 1,00,000
Loan from friend 20,000
Interest income 460
Net cash provided by financing activities 1,20,460
Net increase in cash 1,09,760
Beginning balance 0
Ending balance 1,09,760

Profit earned in the month of August 20XX is 41.06% of the revenue earned in this duration. Considering that the company
is new and investments have been done in the beginning of the month, it is a good start for the company.