• PAGE ONE
• INDEX
• HOME

Sale of US-64 units -- Bombay Dyeing incurs Rs 22.89-crore loss

K.R. Srivats

NEW DELHI, July 2

BOMBAY Dyeing and Manufacturing Company Ltd had incurred a loss of Rs 22.89 crore on sale of 5,92,98,450 units of Rs 10 each of Unit Scheme, 1964 (US-64) to the Unit Trust of India (UTI) during fiscal 2000-01.

While the average carrying cost of these units was Rs 105.91 crore, the company, during fiscal 2000-01, surrendered units of US-64 to repurchase by the UTI for Rs 83.02 crore.

The company has classified its investments in US-64 as long-term investments in its financial statements. The carrying amount of the company's holdings of US-64 units stood at Rs 240.59 crore as on March 31, 2001 (Rs 346.50 crore as on March 31, 2000).

Even as the loss of Rs 22.89 crore arising from the sale of this long-term investment has been charged to the profit and loss account, an equivalent amount has been withdrawn from investment reserve and credited to the profit and loss account for the yea r ended March 31, 2001.

According to the company's annual report for 2000-01, the amount withdrawn from the investment reserve was ``appropriated in earlier years out of past years' profits specifically to meet such eventualities''.

The company has also maintained that it has been ``legally advised'' that such an accounting treatment is in accordance with the applicable provisions of the Companies Act, 1956 and the relevant Accounting Standards of the Institute of Chartered Accounta nts of India (ICAI).

On their part, the auditors -- A.F.Ferguson & Co -- has in their report to the members of Bombay Dyeing on the accounts for the year ended March 31, 2001 highlighted that ``the company has been legally advised that the loss of Rs 22.89 crore on sale of l ong term investments... can be withdrawn from, and, offset against investment reserve''.

Some corporate observers, however, contend that such an accounting treatment may not be in consonance with the spirit of the accounting norms outlined in the ICAI's Accounting Standard (AS-13) -- Accounting for Investments.

The ICAI's AS-13 merely states that in the case of disposal of investments, the difference between the carrying amount and the net disposal proceeds should be charged or credited to the profit and loss account.

For the year ended March 31, 2001, Bombay Dyeing reported a net profit of Rs 18.13 crore on a total income of Rs 1,042.41 crore. The company had reported a net profit of Rs 43.16 crore on a total income of Rs 1,048.71 crore during the year ended March 31 , 2000.