The National Financial Reporting Authority (NFRA) in its report on KIOCL said that the company's accounting policy for Foreign Exchange (Fx) Forward Contracts was erroneous and non-compliant with the classification and measurement requirements of the Indian accounting standards.
NFRA, a body under the ministry of corporate affairs, looks at financial reporting of companies and, in the case of KIOCL, noted that the accounting policy for the revenue as stated in its statement of significant accounting policies is erroneous.
"This erroneous accounting policy raises questions over the reliability and accuracy of the financial statements of the Company," the MCA noted.
KIOCL had submitted to the NFRA that it had intended to restart BFU Operation during the year 2019-20, however, due to the un-economic price of Pig Iron, Blast Furnace Unit (BFU) could not be operated during the year. The recoverable amount in each class of assets in BFU and other Units is more than the carrying amount and hence, there is no impairment loss to be recognised during the year, it was stated.
In response to that, the NFRA noted in its report, "Adequate evidence, such as valuation reports, if any, have not been provided by KIOCL in respect of application of Indian Accounting Standard (Ind AS) 36, Impairment of Assets (Ind AS 36) in the case of the Blast Furnace Unit that was non-operational. Also, there is no evidence that impairment loss computations were considered/reviewed/ presented to Audit Committee and the Board of Directors (BoD) of the Company."
DH has reviewed the report.
NFRA has said that KIOCL had investments in liquid mutual funds which were disposed of in the financial year 2019- 2020. The company had disclosed these as investments classified and measured at Amortised Cost as per Ind AS 109. "However, these financial instruments shall have to be classified and measured as FVTPL," the NFRA noted.
It further noted that KIOCL’s classification and measurements of investments in liquid mutual funds as of March 31, 2019 are incorrect and against the prescriptions of Ind AS 109.