It further recommended the company to, "...examine if it is necessary to prepare and publish restated financial statements as per Ind AS 8 and Section 131 of the Companies Act, 2013"
National Financial Reporting Authority (NFRA) said it found errors in KIOCL Ltd's financial statements pertaining to the fiscal year 2019-20. Further, it flagged the company's foreign exchange forward contracts as 'erroneous'. It further recommended the company to, "...examine if it is necessary to prepare and publish restated financial statements as per Ind AS 8 and Section 131 of the Companies Act, 2013".
Ind AS refers to Indian Accounting Standards.
The watchdog recorded the findings in its Financial Reporting Quality Review Report (FQRR) of KIOCL for FY2019-20. This is also the first Quality Review Report issued to KIOCL by the watchdog.
The Errors
Formerly known as Kudremukh Iron Ore Company Limited, the company under the ambit of the Ministry of Steel of the Government of India is primarily into mining and beneficiation of low-grade iron ore at Kudremukh, Karnataka, India
"The accounting policy for a material element i.e. Revenue (with the corresponding impact on related assets such as Trade Receivables, Inventories etc) as stated in its statement of significant accounting policies is erroneous," the report stated. It added that the erroneous accounting policy raises questions over the reliability and accuracy of the company's financial statements.
The watchdog added that the company did not provide adequate evidence such as valuation reports, if any, catering to Ind AS 36 dealing with Impairment of Assets 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," the report states.
NFRA stated that it found many other errors with respect to disclosures in the notes of the company's financial statements. It stated, "These disclosures were either not relevant or useful to the users of financial statements, and have the potential to obscure the material information in the financial statements,".
What is FQRR?
The FQRR along with the Audit Quality Review Report (AQRR) are two components of NFRA's inspection routine. FQRR evaluates the role of those preparing the financial statements and reports of the company in accordance with applicable accounting standards as required in the Companies Act.