In 1988, Wim Plast Limited was incorporated. The company is engaged in manufacturing plastic moulded furniture. The main products of the company are injection-moulded plastic furniture like chairs, tables, and stools. The products are marketed under the brand name ‘Cello’. Auditor’s report of the company’s annual report for FY2010 containing the following lines:

a. According to information and explanation given to us on the basis of our examination of the records of the company accounts deducted/accrued in the books of account in respect of undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Income Tax, Sales Tax, Wealth Tax, Excise Duty, Service Tax, Custom Duty and other material statutory dues have generally been regularly deposited during the year by the company with the appropriate authorities.

b. The details of disputed statutory dues are as follows:

The company’s FY2010 “Notes to Accounts” schedule also mentioned the following items (in ₹lakh):

(a) Outstanding letters of credit 56.31

(b) Guarantees issued by Company’s Bankers 162.75

Case Questions

(a) As per Ind-AS, how will each of the above items be treated by the company?

(b) Given the limited information – compute the amount of contingent liabilities and related provisioning that you would expect from the company?

(c) What additional information do you expect the company to provide regarding the above items to ensure good ‘financial reporting practice’? Discuss.

Transcribed Image Text:

Name of the Statute Service Tax Act- 1994 Central Excise Act- 1944 Nature of the Amount (3) dues Service Tax Excise Duty 3,40,340 92,356 Period to which Forum where Dispute is the amount relates pending 2006-07 2006-07 Appellate Tribunal (Custom Excise and Service Tax) Custom Excise and Service Tax- Appeal