SCANNING THE ANNUAL REPORT

Try and find answers to the following questions from the annual report of Hindustan Unilever Ltd. 1. What is HULs business? Who are its major suppliers and customers? How many employees does HUL have? Why is this information important? Read the Contents page. Mark the items that relate to financial statements as FS and the rest as NFS. Who is responsible for preparing and presenting the financial statements? Where is this information available? How does HUL define the reporting entity? Where is this information available? List HULs asset, liability and equity items. Verify that the financial statements satisfy the accounting equation. Who audited the financial statements? Is it a part of any Big Four firm? If yes, which one? Who appoints the auditors? Where is this information available? To whom is the auditors report addressed? Why? What are the matters on which the auditors report? What is the auditors opinion on the financial statements? Does the auditors report contain any recommendation to present and potential investors? How much was the auditors remuneration? Did the auditors provided any non-audit service to HUL? If yes, how much was the payment for these services? Where is this information available? Why is this information important? What information does HUL provide in items that you have marked as NFS? Is the information useful? How, who is the intended audience? Will it be able to understand the information? When was the annual general meeting to be held? What were the items to be discussed?

2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

15.

16.

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

SCANNING THE ANNUAL REPORT

Try and find answers to the following questions from the annual report of Hindustan Unilever Ltd. 1. 2. 3. What are the major items of revenues? What are the major items of expenses? Think of information that would be useful but is not disclosed in the financial statements. Why do you think the information is not disclosed? This of information not reported in the financial statements but would be available internally.

4.

5. How would you assure yourself that the accounting system is reliable? 6. Prepare sample journal entries to record HULs revenues and expenses. 7. HULs trial balance certainly balanced. Think of some errors that could have occurred and how these would have been corrected. Prepare an outline of how XBRL would benefit HUL. Provide an illustrative XBRL taxonomy for expenses.

8.

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

SCANNING THE ANNUAL REPORT

Try and find answers to the following questions from the annual report of Hindustan Unilever Ltd. 1. 2. 3. Is the classification of revenue informative? How? Is the classification of expenses informative? How? Identify items of gains and losses.

4. The profit and loss account has more than one profit number. Why? 5. 6. 7. 8. Locate any references to accounting principles in the financial statements and related information. When does HUL recognize revenue from services? When does HUL recognize dividend income? When does HUL recognize expenses?

9. Identify any items of accruals and deferrals in the financial statements. 10. 11. Give examples of temporary accounts and permanent accounts in the financial statements. Give an example of an item that would qualify for reversing and illustrate how it would be reversed.

Narayanaswamy R., (2011), Financial Accounting A Managerial Perspective, Fourth Edition, PHI Learning Private Limited, New Delhi, p. 169.

SCANNING THE ANNUAL REPORT

Try and find answers to the following questions from the annual report of Hindustan Unilever Ltd. (HUL). 1. 2. Prepare a diagram showing the flow of merchandise from HUL to the consumer. Compare HULs presentation of revenue, expenses and profit with Vijay Electronics Ltd.s Profit and Loss Account in Exhibit 4.1. What are the similarities and differences? When does HUL recognize revenue from sales? How does HUL treat trade discounts? What were the beginning and ending inventories? Is it possible to calculate the cost of goods sold? What additional information would you need? How much was the freight on purchases? What was the amount of purchases? What was the total amount spent on employees? Consider the item Operating Expenses in HULs profit and loss account. How does it differ from the way this chapter uses the term?

3. 4. 5. 6. 7. 8. 9. 10.

Narayanaswamy R., (2011), Financial Accounting A Managerial Perspective, Fourth Edition, PHI Learning Private Limited, New Delhi, p. 204.

SCANNING THE ANNUAL REPORT

Try and find answers to the following questions from the annual report of Hindustan Unilever Limited. 1. 2. 3. 4. 5. 6. 7. Locate any references to internal control systems in the auditors report. Study the composition of the audit committee and the business and financial expertise of its members. What does the item Cheques on hand mean? What is the amount of doubtful debts? Has HUL provided for its doubtful debts? Locate and review the age of receivables. What additional information would be useful? How much was the amount of receivables written off? What was the bad debt expense for the period?

8. Calculate HULs average debt collection period? State any assumptions. 9. Locate any references to receivables in the auditors report.

Narayanaswamy R., (2011), Financial Accounting A Managerial Perspective, Fourth Edition, PHI Learning Private Limited, New Delhi, p. 259.

SCANNING THE ANNUAL REPORT

Try and find answers to the following questions from the annual report of Hindustan Unilever Limited. 1. Consider the items in the Current Assets section of the balance sheet. Determine which of these are current, applying the definition of current assets used in the chapter. Name the various types of inventories. What cost formula(s) does HUL use? Locate any references to inventories in the auditors report. How are these useful?

2. 3. 4.

5. Calculate HULs average inventory holding period. State any assumptions. 6. Calculate HULs operating cycle. State any assumptions.

7. What do the directors say about HULs inventory management efforts?

Narayanaswamy R., (2011), Financial Accounting A Managerial Perspective, Fourth Edition, PHI Learning Private Limited, New Delhi, p. 301.

SCANNING THE ANNUAL REPORT

Try and find answers to the following questions from the annual report of Hindustan Unilever Limited. 1. 2. 3. 4. Name HULs property, plant and equipment items. How does HUL measure property, plant and equipment? What depreciation method(s) does HUL use? What is the estimated useful life of computers? Is this higher or lower 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 and equipment items? 7. 8. 9. 10. 11. Locate any observations on property, plant and equipment in the auditors report. How are these useful? Name HULs intangible assets. How does HUL measure intangible assets? How does HUL measure impairment loss? What was the expenditure on research and development?

Narayanaswamy R., (2011), Financial Accounting A Managerial Perspective, Fourth Edition, PHI Learning Private Limited, New Delhi, pp. 367-368.

SCANNING THE ANNUAL REPORT

Try and find answers to the following questions from the annual report of Hindustan Unilever Limited (HUL): 1. Identify HULs investments in equity and debt securities. How does their classification compare with the one used in this chapter? Identify HULs subsidiaries. What is the percentage HULs shareholding in each of them? How much is the minority interest (non-controlling interest) in HULs consolidated balance sheet?

2. 3.

4. How can you confirm that HUL is or is not a subsidiary of Unilever? 5. 6. 7. 8. Does HUL have any associates? If yes, name them. Does HUL have any joint ventures? If yes, name them. Study HULs accounting for investments. How does it compare with the principles discussed in this chapter? What is the amount of goodwill on consolidation? How does HUL account for it?

Narayanaswamy R., (2011), Financial Accounting A Managerial Perspective, Fourth Edition, PHI Learning Private Limited, New Delhi, pp. 411-412.

SCANNING THE ANNUAL REPORT

Try and find answers to the following questions from the annual report of Hindustan Unilever Limited (HUL). 1. Consider the items in the Current Assets section of the balance sheet. Determine which of these are current, applying the definition of current liabilities used in the chapter? Does HUL have any bills payable? What is the amount of dividends payable? Name HULs estimated liabilities. How does HUL estimate the amount of estimated liabilities? How does HUL define deferred tax? Is it different from the definition used in the chapter? How? What employee benefits does HUL recognize as liabilities. What was the estimated liability for retirement benefits? How does HUL estimate and account for the liability? What are HULs long-term liabilities? What is the security provided for HULs loan funds? Does providing the security affect HULs day-to-day working?

2. 3. 4. 5. 6. 7. 8. 9. 10.

11. What are HULs contingent liabilities? Where is this information available?

Narayanaswamy R., (2011), Financial Accounting A Managerial Perspective, Fourth Edition, PHI Learning Private Limited, New Delhi, pp. 477-478.

SCANNING THE ANNUAL REPORT

Try and find answers to the following questions from the annual report of Hindustan Unilever Ltd. 1. 2. 3. What is the amount of HULs authorized capital, Issued capital, Subscribed capital, and Paid-up capital. What are the types of share capital issued by HUL? Has HUL issued any shares for services or non-cash assets?

4. Group the reserves according to the categories discussed in the chapter. 5. 6. Are there any accumulated other comprehensive income items? If yes, which ones? Was there a share buy-back? If yes, how much was the amount, and how did it affect the various items in the shareholders equity? Are there any bonus shares? If yes, how many? Was there a final or interim dividend? How much was the total dividend for the period? Was all of it paid?

7. 8.

9. How much was the dividend distribution tax? What is the tax rate? 10. 11. 12. Does HUL have a stock-based compensation plan? How much was the basic EPS? What is the weighted average number of equity shares for calculating EPS? Is it different from the year-end number? Why or shy not? Did HUL have any potentiality dilutive securities? If yes, what were these? How would they be dilutive?

13.

14. What are the items on the agenda for the annual general meeting? 15. What is the length of the notice for the annual general meeting? Is it sufficient?

Narayanaswamy R., (2011), Financial Accounting A Managerial Perspective, Fourth Edition, PHI Learning Private Limited, New Delhi, p. 521.

SCANNING THE ANNUAL REPORT

Try and find answers to the following questions from the annual report of Hindustan Unilever Ltd. 1. 2. What could be the probable reasons for HUL changing its fiscal year end from December to Match in 2009? In this chapter, the 2009 profit and loss account amounts have been taken on a proportionate basis. State the assumptions that would justify this procedure. Who would you regard as HULs competitor for the purpose of financial statement analysis? Explain. How is HULs segment disclosure useful? Relate the chairmans statement and the directors report to the financial statement numbers. Explain how the text is or is not useful in understanding the information available in the financial statements. Comment on HULs earnings quality. What do you think of HULs management of inventories and debtors? What do you think of the size of HULs cash and bank balances and investments? Comment on HULs dividend policy.

3. 4. 5.

6. 7. 8. 9.

10. Why is the difference between HULs basic and diluted EPS not significant? 11. 12. 13. 14. 15. Does HUL provide information that would enable investors and analysts to understand the companys long-term direction? Explain. How would a possible requirement for capitalization of operating leases affect HUL? Do you have any concerns on earnings management in HUL? Are these concerns justified? How is the corporate governance report useful? How would you improve the report? What additional disclosures would you recommend to HULs management? What are the pros and cons of providing these disclosures?

 Narayanaswamy R., (2011), Financial Accounting A Managerial Perspective, Fourth Edition, PHI Learning Private Limited, New Delhi, pp. 581-582.

SCANNING THE ANNUAL REPORT

Try and find answers to the following questions from the annual report of Hindustan Unilever Limited (HUL). 1. 2. How much cash did HUL generate from or use in operating, investing and financing activities? Verify that the sum of net cash from or used in operating, investing and financing activities equals the change in cash and cash 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? Why or why not? 7. 8. 9. 10. 11. Try to reconcile the change in working capital items with the information on these items in the balance sheet. How will you find out if HUL is a growing, maturing or declining business? State your finding and explain its basis. What can we learn from HULs dividend payment? What do you think of HULs debt policy? This is a tough question. As you know, the profit and loss account, balance sheet and cash flow statement are interrelated. Prepare a statement explaining changes in balance sheet items using the information in the profit and loss account and the cash flow statement.

Narayanaswamy R., (2011), Financial Accounting A Managerial Perspective, Fourth Edition, PHI Learning Private Limited, New Delhi, pp. 633-634.