REC- 1-51.p65 - Rural Electrification Corporation Ltd.

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AUDITORS’ REPORT TO THE BOARD OF DIRECTORS ON THE CONSOLIDATED
FINANCIAL STATEMENTS OF RURAL ELECTRIFICATION LIMITED AND ITS
SUBSIDIARIES
1. We have audited the attached Consolidated Balance Sheet
of M/s RURAL ELECTRIFICATION CORPORATION
LIMITED (THE COMPANY) AND ITS SUBSIDIARIES as at
31st March 2010 and also the Consolidated Profit & Loss
Account and the Consolidated Cash Flow Statement for the
year ended on that date annexed thereto. These financial
statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on
these financial statements based on our audit.
2. We conducted our audit in accordance with the auditing
standards generally accepted in India. Those standards
require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by the management, as well as
evaluating the overall financial statements presentation. We
believe that our audit provides a reasonable basis for our
opinion.
3. We report that the Consolidated financial statements have
been prepared by the Company’s management in accordance
with the requirements of Accounting Standard (AS) 21
Consolidated Financial Statements’, issued by the Institute
of Chartered Accountants of India.
4. We did not audit the financial statements of subsidiaries of
the Company. These companies are audited by other auditors
whose reports were furnished to us. The audited financial
statements of these companies reflects total assets of Rs. 54.10
Crore (Previous year Rs. 5.96 Crore) as at March 31st 2010,
total revenue of Rs. 40.02 Crore (Previous year Rs. 5.27 Crore)
for the year ended on that date. Our opinion, in so far as it
relates to the amounts included in respects of these
subsidiaries, is based solely on the audit reports of the
auditors of the subsidiaries companies.
5. Subject to our comments, and based on our audit and on
consolidation of report of other auditors on separate financial
statements of the subsidiaries and to the best of our
information and according to explanations given to us, we
are of the opinion that the attached consolidated financial
statements of Rural Electrification Corporation Limited and
its Subsidiary Companies read with note 22(B) in Schedule
17 of Notes on Accounts regarding Deferred Tax Liability
that after considering the opinion given by various concerned
authorities, and also the practice followed by other similarly
placed Institutions of not creating Deferred Tax Liability
(DTL) on account of special reserve created and maintained
under Section 36(1)(viii) of the Income Tax Act 1961, the
Company is of the opinion that there is no requirement for
DTL as per AS 22 of ICAI. Accordingly, the Company has
not created Deferred Tax Liability (DTL) of Rs. 155.65 Crore
on account of special reserve created and maintained under
Section 36(1)(viii) of the Income Tax Act, 1961, for the year
ended on 31st March, 2010 and has also reversed the DTL of
Rs. 964.57 Crore created in earlier years on this account as
per Notes on Accounts, note no. 22(B). The reversal of DTL
is done by crediting General Reserve by Rs. 638.80 Crore for
the financial years upto 2005-06 and through Profit and Loss
Appropriation by Rs. 325.77 Crore for the financial year
2006-07 to financial year 2008-09. Had the Company
followed the same accounting treatment regarding creation
of DTL as in earlier years, the Profit After Tax for the year
ended 31.03.2010 would have been Rs. 1866.60 Crore against
reported Profit of Rs. 2022.25 Crore and Reserve & Surplus
would have been Rs. 8996.58 Crore against reported Reserve
& Surplus of Rs. 10116.80 Crore as on 31.03.2010, together
with other notes and accounting policies thereon, give the
information required by the Companies Act 1956, in the
manner so required and give a true and fair view in
conformity with the accounting principles generally
accepted in India:
a) In the case of the Consolidated Balance Sheet of the
State of Affairs of the Rural Electrification Corporation
Limited and its Subsidiary Companies as at 31st March
2010.
b) In the case of Consolidated Profit & Loss Account, of
the Profit of the Rural Electrification Corporation
Limited and its Subsidiary Companies for the year
ended on that date; and
c) In the case of the Consolidated Cash Flow Statement,
of the Cash flows of Rural Electrification Corporation
Limited and its Subsidiary Companies for the year
ended on that date.
For Bansal & Co. For K.G. Somani & Co.
Chartered Accountants Chartered Accountants
Firm Regn. No. 001113N Firm Regn No. 006591N
(D.S Rawat) (Bhuvnesh Maheshwari)
Partner Partner
M. No.83030 M. No. 88155
Place: New Delhi
Date : 19.05.2010