Pratik kedia KediaPratik kedia Kedia asked 1 year ago
1 Answers
RaviRavi Staff answered 1 year ago

SA 570 doesnt give any list.
below is example from one of the audit reports of listed company who are in solar energy.
First Basis of Disclaimer Because of Multiple Uncertainties & Second Notes to Accounts Where Material Uncertainties are Further Explained. 
FIRST
Basis for disclaimer of opinion

  1. Attention is invited to note 1 (i), which explains in detail the full erosion of net worth as at 31 March 2014, reference made to BIFR in case of erosion of more than 50% of peak net worth in the year ended 31 March 2013 and also explains the multiple uncertainties being faced by the Company. The Company has been unable to utilise its capacity as the cost of production of solar cells continues to be higher than the prevailing market prices and the plant has remained shut for a substantial part during the year ended 31 March 2014 and in the previous year ended 31 March 2013. The impact of key policy decision relating to local content requirement and incentivizing projects through Viability Gap Funding shall be known in the coming quarters. Also, some key policy decisions relating to imposition of Anti Dumping Duty and Company’s eligibility for certain incentives remain unresolved.

    The actual net cash inflows during the year ended 31 March 2014 are significantly lower than the projections for the same period incorporated in the first CDR package. Accordingly, the cash flow projections approved as part of that CDR package are unreliable and future cash flows in the light of prevailing conditions are not determinable. Due to continued liquidity issues the Company has approached the bankers for a second Corporate Debt Restructuring package. The response of the banks is awaited.

    On an overall basis the short term liabilities exceed the short term assets by Rs. 34,956.01 lakhs. In addition as per the terms of the first Corporate Debt Restructuring package, an amount of Rs. 8,469.75 lakhs has become repayable as at 31 March 2014 and an amount of Rs 17,741.85 lakhs is repayable by 31 March 2015. Further, there are outstanding foreign currency liabilities for purchase of material and capital goods aggregating to Rs. 2,993.48 lakhs which are outstanding for a period of more than 3 years as at 31 March 2014.

    The above factors create multiple uncertainties, and we are unable to determine their possible effects on the financial statements. We are also unable to conclude on the ability of the Company to carry on as a going concern. This was also the subject matter of a modification in the previous year end.

 
Second
Notes to Accounts
Note 1(i):

  1. Basis of preparation

These financial statements have been prepared and presented on the accrual basis of accounting and comply with the Accounting Standards prescribed in the Companies (Accounting Standards) Rules, 2006 issued by the Central Government, the relevant provisions of the Companies Act, 1956 and other accounting principles generally accepted in India, to the extent applicable. The financial statements are presented in Indian rupees rounded off to the nearest lakhs.
The Company has continued to incur significant losses in the year ended 31 March 2014 resulting in full erosion of its net worth as at 31 March 2014. During the previous year, on erosion of more than 50% of peak net worth, the Company made reference to BIFR (Board of Industrial and Financial Reconstruction) on 22 November 2013 in accordance with the requirements of Sick Industrial Companies Act, 1985.
The Solar industry witnessed turmoil owing to significant downturn in the global market due to structural over supply situation resulting in a significant reduction in prices of PV cells. The Company has been unable to utilise its capacity as the prices of solar cells in demand did not yield margins owing to higher cost of production of solar cells and consequently, the plant has remained shut for a significant part of the current year ended 31 March 2014 and previous year ended 31 March 2013. Due to the prevailing conditions, the actual net cash inflows in the year ended 31 March 2014 and year ended 31 March 2013 have been significantly lower than the projections for the same period incorporated in the first CDR package. Accordingly, the cash flow projections approved as part of the first CDR package continues to be unreliable and future cash flows in the light of prevailing conditions are not determinable. Due to continued liquidity issues the Company has approached the bankers for a second Corporate Debt Restructuring package. The response of the banks is awaited.
As at 31 March 2014, the networth is fully eroded. On an overall basis the short term liabilities exceed the short term assets by Rs. 34,956.01 lakhs. In addition as per the terms of the first Corporate Debt Restructuring package, an amount of Rs. 8,469.75 lakhs has become repayable as at 31 March 2014 and an amount of Rs 17,741.85 lakhs is repayable by 31 March 2015. Also, there are outstanding foreign currency liabilities for purchase of material and capital goods aggregating to Rs. 2,993.48 lakhs which are outstanding for a period of more than 3 years as at 31 March 2014. Further as explained in Note 35, the Company has not met its NFE obligations 5 years after commencement of business nor has it been able to set up Line C within the stipulated time permitted under Custom regulations in respect of duty free import of capital goods.
During the current year, there have been some key policy announcements in the guidelines issued under the ‘Jawaharlal Nehru National Solar Mission (JNNSM), Phase-II, Batch-I’ that provided for bidding with domestic content requirement (both PV/ thin film based cells and modules must be manufactured in India). Also, the guidelines provide that such projects shall be incentivised by way of ‘Viability Gap Funding’ and the extent of funding shall be determined basis the project cost of setting up of such projects. The impact of these policy decisions in terms of pricing and orders placed on the Company shall be known only in the next few quarters. Further, certain key decisions that are much awaited for providing a sustained impetus remains unknown at present. Some of these relate to: a) the imposition of Anti Dumping Duty per the application filed by Solar Manufacturers Association of India dated 18th January 2012, wherein subsequent to the year end, on 22 May 2014, notification for final findings has been issued by Ministry of Commerce & Industry recommending anti dumping duty to be imposed. The recommendation is pending with the Central Government for their consideration ; and b) eligibility of the Company for certain capital incentives.
The above factors create multiple uncertainties and the effect thereof on the financial statements, if any, is not ascertainable. The management however believes that it is appropriate to prepare the financial statements on the going concern assumption and accordingly these financial statements do not include any adjustments that might result from the outcome of uncertainties explained above.
 

  1. Attention is invited to note 42, which explains in detail, the status of the contract for setting up Solar Photovoltaic Power Plants that was awarded in the quarter ended 31 December 2012 aggregating to 1.6 MW to be executed till 30 June 2013, against which the Company has executed 0.1 MW until 31 March 2014. During the quarter ended 30 June 2013, the Company had filed an application seeking extension for completing the unexecuted work citing the prevailing industry condition and logistical issues. During the current year, on account of breach of terms and conditions of the agreement, MP Urja Vikas Nigam Limited (MP Urja) has served a final notice on the Company, rejecting the extension plea and deciding to cancel the work order (other than the 3 sites considered completed by MP Urja) given to the Company, for forfeiture of earnest money deposit (EMD) amounting to Rs. 60.10 lakhs, adjustment of dues amounting to Rs. 177.23 lakhs payable by MP Urja to the Company against any loss or damage arising due to non completion of the contract and imposition of penalty due to non compliance with the terms of the agreement by the Company. Management is contesting the aforesaid claims citing logistical issues, delay in handing over the sites and delays to issue site completion reports on part of MP Urja and has requested to recall the notice for cancellation of work orders and has further requested to allow the Company to complete the pending work allocated. The response of MP Urja is still waited. As a consequence of the claims and counterclaims as evinced through the letters exchanged between the customer and the Company, we are unable to ascertain the impact, if any, on the financial statements.

Note 42:
The Company had been awarded a turnkey contract by MP Urja Vikas Nigam Limited (MP Urja) for setting up of 3MW (in aggregate) SPV Power Plants with a capacity ranging between 10-50 KW per plant, vide letter of intent dated 12 September 2012, through a tender process during the quarter ended 31 December 2012. The contract included design, engineering, supply, installation and commissioning and interfacing of Solar Photovoltaic Power Plants (SPVPP) with 5 years Warranty Cum Comprehensive Maintenance Contract (CMC). In accordance with the stipulated terms of the contract, the Company has deposited earnest money deposit (EMD) amounting to Rs. 60.10 lakhs. Out of the total contract, work orders aggregating to 1.6 MW amounting to Rs. 2,914.13 lakhs was raised on the Company that was required to be executed till 30 June 2013. The Company has raised the bills for having completed 0.1 MW (5 sites) until 31 March 2014 and the dues outstanding in relation to the executed portion amounts to Rs. 177.23 lakhs. The Company had also filed an application seeking extension with MP Urja for completion of the unexecuted work till 30 June 2014.
During the year, the Company had received a final notice from MP Urja rejecting the extension plea and deciding to cancel the work order (other than the 3 sites considered completed by MP Urja) given to the Company alongwith the forfeiture of EMD and imposition of penalty due to the non compliance by the Company. MP Urja has also provided in the notice that it shall take action against the Company on account of breach of terms and conditions of the agreement. The contract stipulates a penalty if there is a delay in completing the work order that can extend to a maximum of 10 % of the order value and MP Urja will be free to purchase the balance goods from elsewhere without notice to the Company and carry out the unexecuted work, at Company’s cost and risk. Also, any loss or damage that MP Urja may sustain due to such failure MP Urja shall have a right to recover any loss or damage, if any, from any sum payable to the Company. Further, if recovery is not possible from the Company on account of the Company’s failure to pay the losses or damages within one month from the claim, the recovery shall be made under Madhya Pradesh Public Demand Recovery Act or any other law applicable under these circumstances.
Management is contesting the aforesaid claims citing logistical issues, delay in handing over the sites and delays to issue site completion reports on part of MP Urja and has requested to recall the notice for cancellation of work orders and has further requested to allow the Company to complete the pending work allocated. The response of MP Urja is still waited. As a consequence, the impact of the loss or damage due to the action that MP Urja may take and the outcome of the final notice issued, that may include forfeiture of EMD, adjusting the dues against any loss or damage and levy of penalty, in the light of the Company expressing its inability to complete the order within the stipulated time period, is uncertain and the same shall crystallise only on the conclusion of discussion and the actions that the authorities may take against the Company.

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