Comment on valuation of Fixed Assets, Depreciation and Inventories of Asian Paints and Berger Paints:
To comment on these we require the internal and external audit reports and the system and procedures adopted by the company to maintain its records. As per the Annual report given, both the companies are reasonably following all the accounting practices, physical verification and no qualifying remarks by the Auditors on these three items.
Asian Paints: The Company is increasing Fixed Assets base on year on year basis. Net FA is increased from 707 crores to 2012 crores in five year term. The company wants to increase the capacity further in their Haryana Plant. So ...view middle of the document...
The company has done the valuation of Fixed assets as per the regular practice and as per the accounting standards.
Both the companies are following straight Line method of depreciation which is allowed as per companies act. Where as for income tax purpose only written down value according to the income tax depreciation rates will be calculated and the difference between the company depreciation and income tax depreciation will be transferred to deferred tax asset or revenue accordingly.
Asian paints has debited revenue for the assets below Rs.5000 value where as no such mention is there is Berger Paints annual report.
Both the companies are taking some aggressive method of depreciation in case of certain assets based on their estimates on the life of the assets which is much higher than the company law depreciation rates and this will understate the profitability of the company to that extent.
As per AS2 cost or net realizable value should be taken to value the inventories and both the companies are adopting the AS 2 guide lines.