ITI Ltd, India’s first Public Sector Unit (PSU), manufactures and supplies telephone and communications equipment and parts. It is listed on the Bombay Stock Exchange. We present excerpts from the annual report of ITI Ltd for the financial year ended March 31, 2010.

(a) What does the above schedule of ITI Limited for FY2010 convey about its current position? Discuss.

(b) What is the important reason for the company making provision for obsolescence?

(c) What does it mean by having provisions in the inventory schedule? Discuss all the possible reasons in the case of ITI Limited.

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Annual Report 2009-2010 Schedules to the Balance Sheet Schedule 5.1 INVENTORIES (Valued as per Accounting Policy No. 3.00) Stock and Stores as taken and certified by Management Raw material and Production Stores Less: Provision for Obsolescence Material issued against Fabrication Contracts Less: Provision Material issued on Loan Basis Non-Production Stores Less: Provision for Obsolescence Work-in-Process Production Less: Provision Work-in-Process Installation AS at 31st March 2010 98.73 17.91 1.01 0.95 9.72 2.71 51.44 7.58 0.00 80.82 0.06 0.00 7.01 43.86 As at 31st March 2009 156.36 20.34 1.00 0.95 12.53 4.69 ( in crores) 63.07 7.58 0.00 136.02 0.05 0.00 7.84 55.49