scanning the annual report.doc

7/22/2019 Scanning the Annual Report.doc

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SCANNING THE ANNUAL REPORT

Try and find answers to the following questions from the annual report ofHindustan Unilever Ltd.

1. What is HULs business? Who are its major suppliers and customers?How many employees does HUL have? Why is this informationimportant?

2. Read the Contents page. Mark the items that relate to financialstatements as FS and the rest as NFS.

3. Who is responsible for preparing and presenting the financialstatements? Where is this information available?

4. How does HUL define the reporting entity? Where is this informationavailable?

5. List HULs asset, liability and equity items.

6. Verify that the financial statements satisfy the accounting equation.

7. Who audited the financial statements? Is it a part of any Big Fourfirm? If yes, which one?

8. Who appoints the auditors? Where is this information available?

9. To whom is the auditors report addressed? Why?

10. What are the matters on which the auditors report?

11. What is the auditors opinion on the financial statements?

12. Does the auditors report contain any recommendation to presentand potential investors?

13. How much was the auditors remuneration?

14. Did the auditors provided any non-audit service to HUL? If yes, howmuch was the payment for these services? Where is this information

available? Why is this information important?

15. What information does HUL provide in items that you have marked asNFS? Is the information useful? How, who is the intended audience?Will it be able to understand the information?

16. When was the annual general meeting to be held? What were theitems to be discussed?

Narayanaswamy R., (2011), Financial Accounting A Managerial Perspective, FourthEdition, PHI Learning Private Limited, New Delhi, p. 59.


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Try and find answers to the following questions from the annualreport of Hindustan Unilever Ltd.

1. What are the major items of revenues?

2. What are the major items of expenses?

3. Think of information that would be useful but is not disclosed inthe financial statements. Why do you think the information isnot disclosed?

4. This of information not reported in the financial statements butwould be available internally.

5. How would you assure yourself that the accounting system isreliable?

6. Prepare sample journal entries to record HULs revenues andexpenses.

7. HULs trial balance certainly balanced. Think of some errorsthat could have occurred and how these would have beencorrected.

8. Prepare an outline of how XBRL would benefit HUL. Provide anillustrative XBRL taxonomy for expenses.

Narayanaswamy R., (2011), Financial Accounting A Managerial Perspective, FourthEdition, PHI Learning Private Limited, New Delhi, pp. 105-106.


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1. Is the classification of revenue informative? How?

2. Is the classification of expenses informative? How?

3. Identify items of gains and losses.

4. The profit and loss account has more than one profit number.Why?

5. Locate any references to accounting principles in the financial

statements and related information.

6. When does HUL recognize revenue from services?

7. When does HUL recognize dividend income?

8. When does HUL recognize expenses?

9. Identify any items of accruals and deferrals in the financialstatements.

10. Give examples of temporary accounts and permanent accountsin the financial statements.

11. Give an example of an item that would qualify for reversing andillustrate how it would be reversed.



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Try and find answers to the following questions from the annualreport of Hindustan Unilever Ltd. (HUL).

1. Prepare a diagram showing the flow of merchandise from HULto the consumer.

2. Compare HULs presentation of revenue, expenses and profitwith Vijay Electronics Ltd.s Profit and Loss Account in Exhibit4.1. What are the similarities and differences?

3. When does HUL recognize revenue from sales?

4. How does HUL treat trade discounts?

5. What were the beginning and ending inventories?

6. Is it possible to calculate the cost of goods sold? Whatadditional information would you need?

7. How much was the freight on purchases?

8. What was the amount of purchases?

9. What was the total amount spent on employees?

10. Consider the item Operating Expenses in HULs profit andloss account. How does it differ from the way this chapter usesthe term?



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Try and find answers to the following questions from the annualreport of Hindustan Unilever Limited.

1. Locate any references to internal control systems in theauditors report.

2. Study the composition of the audit committee and the businessand financial expertise of its members.

3. What does the item Cheques on hand mean?

4. What is the amount of doubtful debts? Has HUL provided for itsdoubtful debts?

5. Locate and review the age of receivables. What additionalinformation would be useful?

6. How much was the amount of receivables written off?

7. What was the bad debt expense for the period?

8. Calculate HULs average debt collection period? State anyassumptions.

9. Locate any references to receivables in the auditors report.



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1. Consider the items in the Current Assets section of thebalance sheet. Determine which of these are current, applyingthe definition of current assets used in the chapter.

2. Name the various types of inventories.

3. What cost formula(s) does HUL use?

4. Locate any references to inventories in the auditors report.How are these useful?

5. Calculate HULs average inventory holding period. State anyassumptions.

6. Calculate HULs operating cycle. State any assumptions.

7. What do the directors say about HULs inventory managementefforts?



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1. Name HULs property, plant and equipment items.

2. How does HUL measure property, plant and equipment?

3. What depreciation method(s) does HUL use?

4. What is the estimated useful life of computers? Is this higher orlower than the life implied by Schedule XIV rates? Why?

5. Are there any fully depreciated property, plant and equipment

items?

6. What was the gain or loss on disposal of property, plant andequipment items?

7. Locate any observations on property, plant and equipment inthe auditors report. How are these useful?

8. Name HULs intangible assets.

9. How does HUL measure intangible assets?

10. How does HUL measure impairment loss?

11. What was the expenditure on research and development?



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Try and find answers to the following questions from the annualreport of Hindustan Unilever Limited (HUL):

1. Identify HULs investments in equity and debt securities. Howdoes their classification compare with the one used in thischapter?

2. Identify HULs subsidiaries. What is the percentage HULsshareholding in each of them?

3. How much is the minority interest (non-controlling interest) inHULs consolidated balance sheet?

4. How can you confirm that HUL is or is not a subsidiary ofUnilever?

5. Does HUL have any associates? If yes, name them.

6. Does HUL have any joint ventures? If yes, name them.

7. Study HULs accounting for investments. How does it comparewith the principles discussed in this chapter?

8. What is the amount of goodwill on consolidation? How does

HUL account for it?



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Try and find answers to the following questions from the annualreport of Hindustan Unilever Limited (HUL).

1. Consider the items in the Current Assets section of thebalance sheet. Determine which of these are current, applyingthe definition of current liabilities used in the chapter?

2. Does HUL have any bills payable?

3. What is the amount of dividends payable?

4. Name HULs estimated liabilities.

5. How does HUL estimate the amount of estimated liabilities?

6. How does HUL define deferred tax? Is it different from thedefinition used in the chapter? How?

7. What employee benefits does HUL recognize as liabilities.

8. What was the estimated liability for retirement benefits? Howdoes HUL estimate and account for the liability?

9. What are HULs long-term liabilities?

10. What is the security provided for HULs loan funds? Doesproviding the security affect HULs day-to-day working?

11. What are HULs contingent liabilities? Where is this informationavailable?



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1. What is the amount of HULs authorized capital, Issued capital,Subscribed capital, and Paid-up capital.

2. What are the types of share capital issued by HUL?

3. Has HUL issued any shares for services or non-cash assets?

4. Group the reserves according to the categories discussed in thechapter.

5. Are there any accumulated other comprehensive incomeitems? If yes, which ones?

6. Was there a share buy-back? If yes, how much was the amount,and how did it affect the various items in the shareholdersequity?

7. Are there any bonus shares? If yes, how many?

8. Was there a final or interim dividend? How much was the totaldividend for the period? Was all of it paid?

9. How much was the dividend distribution tax? What is the taxrate?

10. Does HUL have a stock-based compensation plan?

11. How much was the basic EPS?

12. What is the weighted average number of equity shares forcalculating EPS? Is it different from the year-end number? Whyor shy not?

13. Did HUL have any potentiality dilutive securities? If yes, whatwere these? How would they be dilutive?

14. What are the items on the agenda for the annual generalmeeting?

15. What is the length of the notice for the annual generalmeeting? Is it sufficient?



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Try and find answers to the following questions from the annual report of

Hindustan Unilever Ltd.

1. What could be the probable reasons for HUL changing its fiscal yearend from December to Match in 2009?

2. In this chapter, the 2009 profit and loss account amounts have beentaken on a proportionate basis. State the assumptions that would

justify this procedure.

3. Who would you regard as HULs competitor for the purpose offinancial statement analysis? Explain.

4. How is HULs segment disclosure useful?

5. Relate the chairmans statement and the directors report to thefinancial statement numbers. Explain how the text is or is not usefulin understanding the information available in the financialstatements.

6. Comment on HULs earnings quality.

7. What do you think of HULs management of inventories and debtors?

8. What do you think of the size of HULs cash and bank balances andinvestments?

9. Comment on HULs dividend policy.

10. Why is the difference between HULs basic and diluted EPS notsignificant?

11. Does HUL provide information that would enable investors andanalysts to understand the companys long-term direction? Explain.

12. How would a possible requirement for capitalization of operating

leases affect HUL?

13. Do you have any concerns on earnings management in HUL? Arethese concerns justified?

14. How is the corporate governance report useful? How would youimprove the report?

15. What additional disclosures would you recommend to HULsmanagement? What are the pros and cons of providing thesedisclosures?


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Try and find answers to the following questions from the annualreport of Hindustan Unilever Limited (HUL).

1. How much cash did HUL generate from or use in operating,investing and financing activities?

2. Verify that the sum of net cash from or used in operating,investing and financing activities equals the change in cash andcash equivalents over the reporting period.

3. Depreciation is not a source of cash but it is added to net profit.Why?

4. Does the amount of interest income equal interest received?Why or why not?

5. Does the amount of dividend income equal dividend received?Why or why not?

6. Does the amount of interest expense equal interest paid? Whyor why not?

7. Try to reconcile the change in working capital items with theinformation on these items in the balance sheet.

8. How will you find out if HUL is a growing, maturing or decliningbusiness? State your finding and explain its basis.

9. What can we learn from HULs dividend payment?

10. What do you think of HULs debt policy?

11. This is a tough question. As you know, the profit and lossaccount, balance sheet and cash flow statement areinterrelated. Prepare a statement explaining changes inbalance sheet items using the information in the profit and lossaccount and the cash flow statement.


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