Introduction to Financial Statements  1 

Introduction to Financial Statements

 Introduction to Financial Statements  2 
 

Wirecard scandal
From Wikipedia, the free encyclopedia
https://en.wikipedia.org/wiki/Wirecard_scandal

The Wirecard scandal is a series of accounting scandals that resulted in the insolvency of
Wirecard, a German payment processor and financial services provider that was part of the
DAX index. Wirecard AG is a payment processor headquartered in Munich, Germany. The
company offers its customers electronic payment transaction services and risk management,
as well as the issuing and processing of physical cards. The subsidiary Wirecard Bank AG
holds a banking licence and holds contracts with multiple international financial services
companies.
Allegations of accounting malpractices have trailed the company since the early days of its
incorporation, reaching a peak in 2019 after the Financial Times published a series of
investigations along with whistleblower complaints and internal documents. On 25 June
2020, Wirecard filed for insolvency after revelations that €1.9 billion was "missing", the
termination and arrest of its CEO Markus Braun. Questions are raised with regards to the
regulatory failure on the part of BaFin, Germany's top financial watchdog, and possible
malpractice of its long time auditor EY.

Wirecard: inside an accounting scandal 
A preliminary report by a top law firm has unveiled a pattern of suspected book-padding
across the group’s Asian operations
Dan McCrum in London and Stefania Palma in Singapore
FEBRUARY 7 2019 
https://www.ft.com/content/d51a012e‐1d6f‐11e9‐b126‐46fc3ad87c65 
  Close 
 Introduction to Financial Statements  3 
 

Date 
04‐01‐2018  97.14
02‐01‐2019  134.95
02‐01‐2020  112.4
17‐06‐2020  104.5
18‐06‐2020  39.9
19‐06‐2020  25.82
22‐06‐2020  14.44
14‐08‐2020  1.3592

HUL Q1 results: Net profit rises 7% to ₹1,881

crore, FMCG major announces dividend of ₹9.5
Updated: 21 Jul 2020, 05:12 PM ISTWritten By Anulekha Ray
Hindustan Unilever Ltd (HUL) today reported a 7% year-on-year increase in standalone net
profit at ₹1,881 crore for the quarter ended on June 30. The company reported a net profit
of ₹1,775 in the same quarter last year.
Revenue of the company increased 4% YoY to ₹10,406 crore during the quarter under
review. Earnings before interest, tax, depreciation and amortization (EBITDA) fell 0.1%
year-on-year to ₹2,644 crore and margin declined 120 bps to 25% in June quarter 2020.
"In a challenging context of COVID-19 disrupting markets and operations, HUL delivered a
resilient performance with reported turnover growth of 4 percent and profit after tax and
before exceptional items growing by 7 percent. Domestic consumer growth (excluding
impact of merger with GSK Consumer Healthcare India) stood at -7 percent," the FMCG
company said.
The company declared an interim (special) dividend of ₹9.50 per share for the financial year
ending March 31, 2021.
"Our performance in the quarter has been resilient and reflective of the intrinsic strength of
our portfolio, agility in operations, excellence in execution, purpose-driven leadership and
our strong balance sheet," Sanjiv Mehta, chairman and managing director said.
 Introduction to Financial Statements  4 
 

"While constraints continue due to restrictions in several parts of the country and the near-
term demand outlook remains uncertain, we remain well positioned to drive competitive,
profitable, and responsible growth. The long-term structural opportunity of FMCG in India
also remains intact," he added.
In April, the board of directors of Hindustan Unilever Limited (HUL) approved the merger
with GlaxoSmithKline Consumer Healthcare Limited (GSK CH India).
Stake sales help ICICI Bank Q1 net profit rise
36% to ₹2,599 cr
2 min read . Updated: 25 Jul 2020, 03:50 PM ISTEdited By J. Jagannath
New Delhi: Private lender ICICI Bank on Saturday reported 36% increase in standalone net
profit at ₹2,599 crore for the quarter ending 30 June, 2020. Total income during the quarter
rose to ₹26,066 crore from ₹21,405.50 crore a year earlier... ICICI Bank had in June sold
3.96 per cent stake in arm ICICI Lombard for ₹2,250 crore while it sold 1.5 per cent stake in
ICICI Prudential Life for ₹840 crore. " The sale resulted in net gain (after sale related
expenses) of ₹3,036.29 crore in standalone financial results and ₹2,715.87 crore in
consolidated financial results for Q1FY21," the bank said.
"The lockdown measures have significantly impacted economic activities in the quarter.
Current estimates of growth in India's gross domestic product by various agencies and
analysts indicate a contraction in the economy in fiscal 2021. During Q1FY21, the loan
growth was impacted due to lower credit demand and fee income declined due to lower
borrowing and investment activity by customers and lower consumer spends. The slowdown
in the economy is expected to result in higher additions to non-performing loans, increase in
provisions, lower loan growth and fee income," the bank said in a regulatory filing.
On a consolidated basis, its net profit for the April-June period improved by 24 per cent
at ₹3,117.68 crore as against ₹2,513.69 crore in the corresponding quarter of the previous
fiscal.
The bank's income on a consolidated basis rose to ₹37,939.32 crore in the said quarter
from ₹33,868.89 crore in April-June 2019. During Q1FY21, the bank has made an additional
Covid-19-related provision amounting to ₹5,550 crore.
The lender witnessed an improvement in asset quality as gross non-performing assets (NPAs)
fell to 5.46%t of the gross advances by the end of June 2020, from 6.49% a year ago.
The bank's net interest income (NII) rose nearly 20% on year-on-year basis to ₹9,278 crore.
On Friday, the bank's scrip on BSE closed 2.66% lower at ₹ ₹381.80.
 Introduction to Financial Statements  5 
 

Accounting: The Language of Business

 But like any language:
 Many words have similar, but not same, meaning.
 Some rules are definite others are not and rules continue to evolve.
What Accounting Does?
 Accounting is an information and measurement system that identifies, records
and communicates relevant, reliable, and comparable information about an
organizations business activities.

 Accounting provides information on:

 Amounts of resources.
 How resources were financed.
 Results achieved by using resources.

Users of Accounting Information

1.External Information Users—those not directly involved with running the
company. Examples: shareholders (investors), lenders, directors, external auditors,
non-executive employees, labor unions, regulators, voters, legislators, government
officials, customers, suppliers, lawyers, brokers, etc.
a. Financial Accounting—area of accounting aimed at serving external users
by providing them with general-purpose financial statements.
b. General-Purpose Financial Statements—statements that have broad range
of purposes which external users rely on.

2.Internal Information Users—those directly involved in managing and operating

an organization. Examples: research and development managers, purchasing
managers, production managers and marketing managers.
a. Managerial Accounting—area of accounting that serves the decision-
making needs of internal users.
b. Internal Reports—not subject to same rules as external reports. They are
designed with special needs of external users in mind.

Hindustan Unilever Limited

 The Process of ….
 Getting Cash from investors
 Investments in real assets
 Using Cash to purchase inputs
 Changing those inputs into products, and
 Providing the product / service to customers and getting cash back
 Introduction to Financial Statements  6 
 

Procedural Scheme of a firm

Shareholders

Dividends
Creditors/

Capital
Debt Holders Customer

Equity
Cash
COMPANY
(MANAGER Cash
Government Suppliers

Community Employee

Financial Statements
 Financial Statements, along with the notes, report a company’s past
performance and its financial condition. Financial accounting in governed by a
set of rules we call generally accepted accounting principles, or GAAP for
short. GAAP identify three major characteristics of information.
 First, the information must be relevant. Relevant information impacts
the decision of the informed user for financial information.
 Second, the information must be reliable.
 Finally, the information must be comparable. Comparability helps us
compare financial information from one period with that of the next
period.
 International Financial Reporting Standards (IFRS) and International
Accounting Standards Board (IASB)
 Two key features: (i) Substance over form (ii) Fair Value of Accounting
 Indian Accounting Standards
 The Ind AS are named and numbered in the same way as the
corresponding International Financial Reporting Standards (IFRS).
 U.S. GAAP—more focused on strictly following the accounting rules.
 IFRS—more focused on a review of the situation and how accounting can
best reflect it.
 Introduction to Financial Statements  7 
 

Ethics – A Key Concept

 The goal of accounting is to provide useful information for decisions. For
information to be useful, it must be trusted. This demands ethics in
accounting. Ethics are beliefs that distinguish right from wrong. They are
accepted standards of good and bad behavior.
The Financial Statements: Stock vs. Flow
 Stock/ resources and obligations at a point in time:
 Balance sheet : Assets=liabilities +owners’ equity

 Flow/ activity over a period of time:

 Income Statement- performance over a given period
 Revenue - Expenses = Net Income
 Revenues -a measure of economic benefits generated by the
sale of products or providing of services over a period of time
 Expenses -a measure of economic sacrifices incurred to “earn”
the revenues of a given period.
 Statement of cash flows : Operating, Investing and Financing activities
 Notes, Auditors’ Report, Directors’ Report and Management Discussion and
Analysis
Balance Sheet
 Assets = Liabilities + Shareholders’ Equity
 Resources and Claims View & Sources and Uses of Funds
View
 Asset is: ‘a resource controlled by the enterprise as a result of past events
and from which future economic benefits are expected to flow to the
enterprise.’
 Liability: Present obligation as a result of past events and settlement is
expected to result in an outflow of resources (payment)
Dual-Aspect
 Balance Sheet Equation
 Asset = Liabilities + Owner’s Equity
 Assets = economic resources.
 Liabilities =claims of creditors (everyone other than owners).
 Equities = residual claims against assets.
 Transactions = events that affect accounting records.
Every transaction has a dual impact on accounting records.
 Introduction to Financial Statements  8 
 

BALANCE SHEET OF HINDUSTAN UNILEVER (in Rs. Cr.) as at

31 st Mar 31 st Mar 219
20
Equity and Liabilities
Equity Share Capital 216 216
Other Equity 7815 7443
Total Laibailities 11571 10206
Total Equity and Liabilities 19602 17865
NON Current Assets 7069 7665
Total Current Assets 12533 10200
TOTAL ASSETS 19602 17865

Stockholders’ Equity
 Equivalently net assets (i.e. = A -L).
 Two sources of OE:
 Amounts provided directly by equity investors (Paid-in-capital).
 Amounts retained from earnings, i.e. profits (Retained Earnings).
 Want more Equity?
 Raise More capital – Increases the Contributed Capital portion of
Equity
 Introduction to Financial Statements  9 
 

 Earn More – Running a successful business increases the Retained

Earnings portion of Equity
But the BS doesn’t tell the whole story….
 The Income Statement tells how the company’s performance changed
the net assets….
 Revenues are transactions which resulted in an inflow of net assets
 The Amount Earned from Sales or Services
 Expenses are transactions which resulted in an outflow of net assets
 The Costs incurred to generate Revenues

The Articulation of the Financial Statements

Cash Flow Statement

Cash from operations

Cash from investing
Beg Balance Sheet Cash from financing End Balance Sheet

Cash Net change in cash Cash

+ Other Assets Profit and Loss Statement + Other Assets

Total Assets Revenues Total Assets

- Liabilities Expenses - Liabilities

Owners’ equity Net Profit Owners’ equity

RE + Net Profit- Dividends=
End RE

Income Statement
 Net Revenue
-Operating Expenses other than Depreciation
 = EBITDA (Margin)
-Depreciation
 = Operating Income before Taxes (EBIT)
-Interest Expense (I)
 = Income Before Taxes (EAIBT or PBT)
-Income Taxes (T)
 = Net Income
 Beg. RE + NI - Div = End. RE
RE =  net income -  dividends
 Introduction to Financial Statements  10 
 

 
Statement of Profit and Loss for the year ended
   Mar-20 Mar-19
INCOME
Revenue from Operations 38,785.00 38,224.00
Other Income 733 664
TOTAL REVENUE 39,518.00 38,888.00
EXPENSES
Cost Of Materials Consumed 11,572.00 13,240.00
Purchase of Stock-in-trade 6,342.00 4,708.00
Changes In Inventories Of FG,WIP -121 12
Employee Benefit Expenses 1,691.00 1,747.00
Finance Costs 106 28
Depreciation And Amortisation 938 524
Other Expenses 9,701.00 9,880.00
TOTAL EXPENSES 30,229.00 30,139.00
Exceptional Items -197 -227
Profit Before Taxes 9,092.00 8,522.00
Total Tax Expenses 2,354.00 2,486.00

Cash Flow Statement

 Categorizes Cash Inflows and Outflows during a specific period of time into
three categories:
 Operating: Cash Receipts and Cash Disbursements as a result of day-
to-day operation of the business
 Investing : Cash used to buy long-term assets and investments and
Cash obtained by selling long-term assets and investments
 Financing
 Cash Receipts and Cash Disbursements From the company’s
funding sources – its long-term creditors and stockholders
 Cash dividends paid, or payments to retire long-term debt

Statement of Cash Flows  for the year ended  
31st Mar, 31st Mar,
2020 2019
Net Profit 9,092 8,522
Net CashFlow From Operating Activities 7,305 5,728
Net Cash Used In Investing Activities 1,926 -264
Net Cash Used From Financing Activities -6,676 -5,462
NET INC/DEC IN CASH & CE 2,555 2
Cash And Cash Equivalents Begin of Year 575 573
Cash And Cash Equivalents End Of Year 3,130 575
 Introduction to Financial Statements  11 
 

Exercise 1
Indicate on which financial statement each of the following accounts would appear.

Income Balance
Statement Sheet Cash Flow

1 Consulting Revenue
2 Land
3 Interest Expense
4 Accrued Salaries Payable
5 Common Stock
6 Salaries Expense
7 Net Cash generated by Operating Activities
8 Retained Earnings
9 Property Plant & Equipment
10 Interest Income
11 Dividend Payable
12 Accounts Payable
13 Total Stockholder's Equity
14 Net Change in Cash
15 Notes Payable

Approaches to Study Accounting

 Viewpoint of accountant (preparer).
 Collecting, summarizing and reporting accounting information.
 Viewpoint of user.
 Understanding, analyzing, and interpreting accounting reports to make
decisions.
 We emphasize perspective of current and potential future users, recognizing
need for some knowledge of how accounting reports are prepared.

Exercise 2
1. Which of the following is the primary purpose of accounting?
A. To establish a business.
B. To identify, record, and communicate business transactions.
C. To earn a large profit.
D. To reduce taxes owed for the business.
 Introduction to Financial Statements  12 
 

E. To establish credit for a company.

2. Identifying business activities requires selecting transactions and events relevant to an

organization. Which of the following events would be recorded in the accounting records of
Acme Car Wash?
A. Acme washes 500 cars @ Rs.50 per car.
B. J.B. Smith, a customer, buys lunch at the restaurant next door to Acme while waiting
for her car to be washed.
C. Clean Company, a supplier, sells 50 pounds of soap to ABC Company.
D. Sudsey Company, a supplier, goes out of business.
E. Acme hires Andrea as a receptionist.

3. Internal users of accounting information include:

A. Shareholders B. Customers
C. Creditors D. Government regulators
E. Production managers

4. The area of accounting aimed at serving the decision-making needs of internal users is:
A. Financial accounting B. Managerial accounting
C. External auditing D. SEC reporting
E. Governmental accounting

5. Which of the following elements are found on the income statement?

A. Cash B. Accounts receivable
C. Common stock D. Retained earnings
E. Salaries expense

6. Which of the following elements are found on the balance sheet?

A. Service revenue B. Net income
C. Operating activities D. Utilities expense
E. Retained earnings

7. A corporation:
A. Is a legal entity separate and distinct from its owners.
B. Must have many owners.
C. Has shareholders who have unlimited liability for the acts of the corporation.
D. Is the same as a limited liability partnership.
E. Does not have to pay taxes.

8. Which of the following statements best describes the relationship of Ind AS and IFRS?
A. They are identical.
B. They are entirely different conceptual frameworks.
C. They are similar but not identical.
 Introduction to Financial Statements  13 
 

D. Neither has anything to do with accounting.

E. They both relate only to publicly traded companies.

9. Which of the following financial statements provides information at a specific point in time?
A. Balance Sheet B. Statement of Cash Flows
C. Income Statement D. Statement of Changes in Equity

10. Equity is
A. a person who owes a debt
B. a business that is owned by two or more people
C. calculated by taking revenue minus expenses
D. the residual interest in the assets after liabilities are deducted

11. Which financial statement reports the net change in a company’s cash resources for a period
of time classifying each transaction as an operating, investing or financing activity?
A. Balance Sheet B. Income Statement
C. Cash Flow Statement D. Statement of Changes in Equity

12. The owners of a partnership:

A. Have created an entity that can also be called a sole proprietorship.
B. Have unlimited liability.
C. Have to have a written agreement in order to be legal.
D. Have created a legal organization separate from its owners.
E. Are called shareholders.

13. Which of the following elements contains cumulative information rather than current period
information?
A. Retained Earnings B. Revenues
C. Expenses D. Dividends

14. How does the balance sheet differ from the income statement?
A. The income statement covers a period of time and the balance sheet is for a specific
moment in time.
B. The income statement is for a specific moment in time and the balance sheet covers a
period of time.
C. The income statement reads as of a date and the balance sheet reads for a period
ending.
D. The income statement and the balance sheet do not differ.

15. A company would report a net loss when

A. liabilities increase during an accounting period
B. assets decrease during an accounting period
C. dividends are paid to the stockholders
D. expenses exceed revenues during an accounting period

16. An example of a financing activity is:

A. Buying office supplies. B. Obtaining a long-term loan.
 Introduction to Financial Statements  14 
 

C. Buying office equipment. D. Selling inventory.

E. Buying land.

17. An example of an operating activity is:

A. Paying wages. B. Purchasing office equipment.
C. Borrowing money from a bank. D. Selling stock.
E. Paying off a loan.

18. An example of an investing activity is:

A. Paying wages of employees. B. Paying dividends.
C. Purchasing land. D. Selling inventory.
E. Contribution from owner.

19. The description of the relation between a company's assets, liabilities, and equity, which is
expressed as Assets = Liabilities + Equity, is known as the:
A. Income statement equation. B. Accounting equation.
C. Business equation. D. Return on equity ratio.
E. Net income.

20. The distribution of assets to stockholders is called a(n):

A. Liability B. Dividend
C. Expense D. Contribution
E. Investment

23. The assets of a company total Rs.700,000; the liabilities, Rs.200,000. What are the total claims
of the owners?
A. Rs.900,000 B. Rs.700,000
C. Rs.500,000 D. Rs.200,000
E. It is impossible to determine unless the amount of owners' investment is known.

24 . Holister Corp reported the following for 2006: total assets, Rs.72,000; total liabilities,
Rs.27,000; total common stock, Rs.37,000. Based on this information, retained earnings were
A. Rs.82,000 B. Rs.62,000
C. Rs.27,000 D. Rs.8,000

25. Our company has three times as many assets as it does liabilities. If total liabilities are
Rs.55,000, what is the amount of owners' equity?
A. Rs.55,000 B. Rs.110,000
C. Rs.165,000 D. Rs.220,000
E. Owners’ equity cannot be determined from the given information.

26. If the liabilities of a business increased Rs.75,000 during a period of time and the equity in
the business decreased Rs.30,000 during the same period, the assets of the business must have:
 Introduction to Financial Statements  15 
 

A. Decreased Rs.105,000 B. Decreased Rs.45,000

C. Increased Rs.30,000 D. Increased Rs.45,000
E. Increased Rs.105,000

27. FastForward had cash inflows from operations of Rs.62,500; cash outflows from investing
activities of Rs.47,000; and cash inflows from financing of Rs.25,000. The net change in cash
was:
A. Rs.40,500 increase B. Rs.40,500 decrease
C. Rs.134,500 decrease D. Rs.134,000 increase
E. Rs.9,500 increase

28. If beginning retained earnings was Rs.184,300, the company distributed Rs.46,000 in
dividends, and ending retained earnings was Rs.345,000, what was the net income for the period?
A. Rs.154,700 B. Rs.206,700
C. Rs.114,700 D. Rs.575,300 E. Rs.160,700
29. Beginning assets were Rs.437,600, beginning liabilities were Rs.262,560, common stock
issued during the year totaled Rs.45,000, revenue for the year was Rs.414,250, expenses for the
year were Rs.280,000, dividends declared were Rs.22,700, and ending liabilities were Rs.350,000.
What was the ending equity for the year?
A. Rs.700,160 B. Rs.331,590 C. Rs.134,250 D. Rs.612,560 E. Rs.175,040

30. Beginning assets were Rs.437,600, beginning liabilities were Rs.262,560, common stock
issued during the year totaled Rs.45,000, revenue for the year was Rs.414,250, expenses for the
year were Rs.280,000, dividends declared were Rs.22,700, and ending liabilities were Rs.350,000.
What was net income for the year?
A. Rs.700,160 B. Rs.331,590
C. Rs.134,250 D. Rs.612,560 E. Rs.175,040

31. Beginning assets were Rs.700,000, beginning equity was Rs.225,000, revenue for the year was
Rs.523,000, common stock issued during the year totaled Rs.320,000, expenses for the year were
Rs.392,000, ending equity was Rs.751,000, and ending assets were Rs.963,000.
What were the beginning liabilities for the year?
A. Rs.738,000 B. Rs.998,000
C. Rs.131,000 D. Rs.203,000 E. Rs.475,000

32. Ending liabilities were Rs.67,000, beginning equity was Rs.87,000, common stock issued
during year totaled Rs.31,000, expenses for the year were Rs.22,000, dividends declared totaled
Rs.13,000, ending equity for the year was Rs.181,000, and beginning assets for the year were
Rs.222,000.
What are the ending assets for the year?
A. Rs.154,000 B. Rs.134,000
C. Rs.212,000 D. Rs.248,000 E. Rs.155,000
 
 
 Introduction to Financial Statements  16 
 

Problem 1 
As of December 31, Charles Company had Rs.12,000 in cash, held Rs.95,000 of
inventory, and owned other items that originally cost Rs.13,000. Charles Company
had also borrowed Rs.40,000 from First City Bank. Prepare a balance sheet for Charles
Company as of December 31. Be sure to label each item and each column with
appropriate terms
CHARLES COMPANY
BALANCE SHEET AS OF DECEMBER 31, ----.
Assets Liabilities and Owners’ Equity

Cash  Bank loan 

Inventory  Owners’ Equity 

Other assets  Owners’ equity 

Total assets  Total liabilities and 
owners’ equity 

Problem 2 
Selected balance sheet items are shown for the Microtech Company. Compute the
missing amounts for each of the four years. What basic accounting equation did you
apply in making your calculations?
Year 1 Year 2 Year 3 Year 4
Current assets ......................... Rs. 113,624 Rs. ? Rs. 85,124 Rs. ?
Noncurrent assets................... ? 198,014 162,011 151,021
Total assets ............................. Rs. 524,600 Rs. ? Rs. ? Rs.220,111
Current liabilities ................... Rs. 56,142 Rs.40,220 Rs. ? Rs. ?
Noncurrent liabilities............. ? ? 60,100 30,222
Paid-in capital ........................ 214,155 173,295 170,000 170,000
Retained earnings .................. 13,785 (3,644) 1,452 2,350
Total liabilities and
owners’ equity .................... Rs. 524,600 Rs. 288,456 Rs. ? Rs.220,111
Year 1Noncurrent assets        Noncurrent liabilities   
Year 2
Current assets Noncurrent liabilities
Total assets
Year 3
Total assets Current liabilities
Total liabilities and owners’ equity
Year 4 Current assets Current liabilities
 
 Introduction to Financial Statements  17 
 

Problem 3 
During the month of June, Bon Voyage Travel recorded the following transactions:
1. Owners invested Rs.25,000 in cash to start the business. They received common stock.
2. The month’s rent of Rs.500 was paid in cash.
3. Equipment costing Rs.8,000 was bought on credit.
4. Rs.500 was paid for office supplies.
5. Advertising expenses of Rs.750 was paid for with cash.
6. Paid Rs.3,000 employee salaries in cash.
7. Earned travel commissions of Rs.10,000 of which Rs.2,000 was received in cash.
8. Paid Rs.5,000 of the Rs.8,000 owed to the equipment supplier.
9. Used Rs.100 of the office supplies.
10. Charged Rs.1,000 of miscellaneous expenses on the corporate credit card.
Required:
a. Prepare an analysis of the month’s transactions using the s tabular format given below
b. Prepare a balance sheet as of the end of the month.
c. Prepare an income statement for the month.
d. Explain the changes in the Cash account.
e. Explain why the change in the Cash account and the month’s income are
not the same.

Accounts Supplies Accounts Owners’

+ Receivable + Inventory + = Payable + Equity
Cash Equipment

1. Investment

2. Rent

3.

4.

5. Advertising

6. Salaries

7. Commissions

8.

9.

10. Expenses

TOTAL
 Introduction to Financial Statements  18 
 

BON VOYAGE TRAVEL

BALANCE SHEET AS OF JUNE 30, ----.

Assets Liabilities and Owners’ Equity

Cash Accounts payable

Accounts receivable Current liabilities

Supplies inventory Owners’ equity

Current assets

Equipment

Total Assets Total liabilities

and owners’ equity

BON VOYAGE TRAVEL

INCOME STATEMENT JUNE 1-30, ----.

Commissions
Expenses
Rent
Advertising
Salaries
Supplies
Misc. Expenses
Net Income
BON VOYAGE TRAVEL
CASH RECEIPTS AND DISBURSEMENTS JUNE 1-30, ----.

Operating CF

Investing CF

Financing CF

Increase in cash
 Overview Reports Financial Statements

Our Performance Financial Performance

The benefits that our vision and strategy deliver, translate into growth-oriented
performance for shareholders and the society at large.

Segmental performance in 2019-20 Standalone (` crores)

SEGMENTAL REVENUE (%) SEGMENTAL RESULTS (%)

Statement of Profit & Loss Account 2017-18 2018-19 2019-20
Gross Sales 34,619 37,660 38,273
Other Income (includes other operating income) 1,168 1,228 1,245
Finance Cost (20) (28) (106)
Profit Before Taxation@ 7,347 8,749 9,289
Profit After Taxation@ 5,135 6,080 6,743

Home Care 35 Home Care 30 Earnings Per Share of ` 1 24.20 27.89 31.13
Beauty & Personal Care 45 Beauty & Personal Care 56 Dividend Per Share of ` 1 20.00 22.00 25.00
Foods and Refreshment 19 Foods and Refreshment 14 @ Before Exceptional items
Others 1 Others 0

Balance Sheet 2017-18 2018-19 2019-20

Financial performance in 2019-20 Property, Plant and Equipment and Intangible Assets 4,572 4,716 5,569
Investments 3,111 2,949 1,500
NET REVENUE EBITDA EPS (BASIC) CASH FROM OPERATIONS Cash and Other Bank Balances 3,373 3,688 5,017

K 38,785 K 9,600 K 31.13 K 9,500+ Net Assets (Current and Non – Current) (3,981) (3,694) (4,055)

crores crores crores 7,075 7,659 8,031

Share Capital 216 216 216
Comparable Comparable Earning Last year’s basic EPS: Cash from operations
Domestic consumer Before Interest Tax D 27.89 per share was up D 1,357 crores Other Equity 6,859 7,443 7,815
business grew by 2%, Depreciation and over the previous year 7,075 7,659 8,031
underlying volume Amortisation (EBITDA)
growth 2% improved by 100 bps

Key Ratios and EVA 2017-18 2018-19 2019-20

Non - Financial performance* EBITDA (% of Gross Sales) 21.0 22.9 25.1

MANUFACTURING Fixed Asset Turnover (No. of times) 7.6 8.0 6.9

PAT@ / Gross Sales (%) 14.8 16.1 17.6
2019: 85% 2019: 58% 2019: 63% Return on Capital Employed (%) 118.9 131.2 128.5
2018: 59% 2018: 55% 2018: 58% Return on Net Worth (%) 84.5 90.5 92.0
Reduction in CO2 emissions Reduction in water Reduction in total waste Economic Value Added (EVA) (` crores) 4,258 5,291 6,085
(kg/tonne of production) consumption (m3/tonne (kg/tonne of production) @ Before Exceptional items
in our manufacturing of production) in our generated from factories
operations compared to manufacturing operations compared to 2008 baseline
2008 baseline compared to 2008 baseline Others 2017-18 2018-19 2019-20
HUL Share Price on BSE (Per share of ` 1)* 1,336 1,708 2,298
BETTER LIVELIHOODS SUSTAINABLE SOURCING HEALTH AND WELL-BEING Market Capitalisation (` crores)* 2,89,159 3,69,688 4,97,514

2019-20 : ~1,20,000 2019: 78% 2019: >152 million *Based on year-end closing prices quoted on BSE Limited

2018-19: 1,09,100 2018: 65% 2018: >150 million Information on 10 years record of Financial Performance is available at www.hul.co.in/investor-relations/annual-reports/hul-annual-report-
related-documents.html.
Shakti entrepreneurs Tea sourced from People reached through
empowered sustainable sources for our Water, Sanitation and
Unilever brands Hygiene (WASH) initiatives
*Our non-financial performance given above is up to December 2019 (except when mentioned otherwise)

8 | Hindustan Unilever Limited Integrated Annual Report 2019-20 | 9

 Overview Reports Financial Statements

Balance Sheet Balance Sheet (continued)

as at 31st March, 2020 as at 31st March, 2020
(All amounts in ` crores, unless otherwise stated) (All amounts in ` crores, unless otherwise stated)

As at As at As at As at
Particulars Note 31st March, 2020 31st March, 2019 Particulars Note 31st March, 2020 31st March, 2019

ASSETS EQUITY AND LIABILITIES

Non-current assets Equity
Property, plant and equipment 3 4,625 3,907 Equity share capital 17 216 216
Capital work-in-progress 3 513 373 Other equity 18A 7,815 7,443
Goodwill 4 36 36 Liabilities
Other intangible assets 4 395 400 Non-current liabilities
Financial assets Financial liabilities
Investments in subsidiaries, associates and joint venture 5 250 254 Other financial liabilities 19 853 360
Investments 6 2 2 Provisions 20 1,198 1,049
Loans 7 453 396 Non-current tax liabilities (net) 9D 416 444
Other financial assets 8 3 11 Current liabilities
Non-current tax assets (net) 9D 1,016 619 Financial liabilities
Deferred tax assets (net) 9C 261 339 Trade payables
Other non-current assets 10 140 154 total outstanding dues of micro enterprises and small enterprises 21 - -
Current assets total outstanding dues of creditors other than micro enterprises and small 21 7,399 7,070
Inventories 11 2,636 2,422 enterprises

Financial assets Other financial liabilities 19 869 456

Investments 6 1,248 2,693 Other current liabilities 22 418 326

Trade receivables 12 1,046 1,673 Provisions 20 418 501

Cash and cash equivalents 13 3,130 575 Total Equity and Liabilities 19,602 17,865

Bank balances other than cash and cash equivalents mentioned above 14 1,887 3,113 Basis of preparation, measurement and significant accounting policies 2
Other financial assets 8 1,410 543 Contingent liabilities and commitments 23
Other current assets 15 533 351
The accompanying notes are an integral part of these financial statements
Assets held for sale 16 18 4
Total Assets 19,602 17,865 As per our report of even date attached For and on behalf of Board of Directors

For B S R & Co. LLP Sanjiv Mehta Srinivas Phatak

Chartered Accountants Chairman and Managing Director Executive Director Finance & IT and CFO
Firm’s Registration No. 101248W/W – 100022 [DIN: 06699923] [DIN: 02743340]

Akeel Master Aditya Narayan Dev Bajpai

Partner Chairman – Audit Committee Executive Director
Membership No. 046768 [DIN: 00012084] Legal and Company Secretary
Membership No. FCS 3354
[DIN : 00050516]
Suman Hegde
Group Controller

Mumbai: 30th April, 2020 Mumbai: 30th April, 2020

108 | Hindustan Unilever Limited Integrated Annual Report 2019-20 | 109

 Overview Reports Financial Statements

Statement of Changes in Equity Statement of Changes in Equity (continued)

for the year ended 31st March, 2020 for the year ended 31st March, 2020
(All amounts in ` crores, unless otherwise stated) (All amounts in ` crores, unless otherwise stated)

A. EQUITY SHARE CAPITAL a) Refer note 18B for nature and purpose of reserves

Note Balance b) The Shareholders of the Company, had, at the Court Convened Meeting held on 30th June, 2016, approved the Scheme of
As at 31st March, 2018 17 216 Arrangement for transfer of the balance of ` 2,187 crores standing to the credit of the General Reserves to the Profit and Loss Account.
The Company had accordingly filed a petition for sanction of the Scheme of Arrangement with the Hon’ble High Court of Mumbai
Changes in equity share capital during the year 0
[jurisdiction later changed to National Company Law Tribunal (NCLT)]. The Hon’ble NCLT, Mumbai Bench, vide it’s order dated 30th
As at 31st March, 2019 17 216
August, 2018, has sanctioned the aforesaid Scheme of Arrangement. The Company has received the said Order on 27th September,
Changes in equity share capital during the year 0
2018 and filed the Order and the Scheme with Registrar of Companies (ROC) on 5th October, 2018 and has subsequently reclassified
As at 31st March, 2020 17 216
the amount standing to the credit of the General Reserves to the Retained Earnings.

The accompanying notes are an integral part of these financial statements

B. OTHER EQUITY
As per our report of even date attached For and on behalf of Board of Directors
Items of Other Comprehensive Income
Reserves and Surplus (OCI)
Employee Cash
Stock flow Total For B S R & Co. LLP Sanjiv Mehta Srinivas Phatak
Capital Options Remeasurements Debt Hedges Chartered Accountants Chairman and Managing Director Executive Director Finance & IT and CFO
Capital Redemption Securities Outstanding General Retained Other of net defined instruments though
Reserve Reserve Premium Account Reserve Earnings Reserves benefit plans through OCI OCI Firm’s Registration No. 101248W/W – 100022 [DIN: 06699923] [DIN: 02743340]
As at 31st March, 2018 4 6 127 30 2,187 4,539 9 (43) (0) - 6,859
Profit for the year - - - - - 6,036 - - - - 6,036 Akeel Master Aditya Narayan Dev Bajpai
Other comprehensive - - - - - - (4) 1 - (3) Partner Chairman – Audit Committee Executive Director
income for the year Membership No. 046768 [DIN: 00012084] Legal and Company Secretary
Total comprehensive - - - - - 6,036 - (4) 1 - 6,033 Membership No. FCS 3354
income for the year [DIN : 00050516]
Dividend on equity shares - - - - - (4,546) - - - - (4,546) Suman Hegde
for the year (Note: 35) Group Controller
Dividend distribution tax - - - - - (913) - - - - (913)
(Note: 35) Mumbai: 30th April, 2020 Mumbai: 30th April, 2020
Transfer to retained - - - - (2,187) 2,187 - - - - -
earnings
(refer note b below)
Issue of equity shares - - 15 (15) - - - - - - -
on exercise of employee
stock options
Equity settled share - - 10 - - - - - - 10
based payment credit
As at 31st March, 2019 4 6 142 25 - 7,303 9 (47) 1 - 7,443
As at 1st April, 2019 4 6 142 25 - 7,303 9 (47) 1 - 7,443
Transition impact of Ind - - - - - (35) - - - - (35)
AS 116, net of tax
[Note: 3 (B)]
Restated Balance as at 4 6 142 25 - 7,268 9 (47) 1 - 7,408
1st April, 2019
Profit for the year - - - - - 6,738 - - - 6,738
Transfer to retained - - - - - (47) - 47 - - -
earnings
Other comprehensive - - - - - (51) - - (1) (37) (89)
income for the year
Total comprehensive - - - - - 6,640 - 47 (1) (37) 6,649
income for the year
Dividend on equity shares - - - - - (5,196) - - - - (5,196)
for the year (Note: 35)
Dividend distribution tax - - - - - (1,048) - - - - (1,048)
(Note: 35)
Issue of equity shares - - 11 (11) - - - - - - -
on exercise of employee
stock options
Equity settled share - - - 2 - - - - - - 2
based payment credit
As at 31st March, 2020 4 6 153 16 - 7,664 9 - - (37) 7,815

112 | Hindustan Unilever Limited Integrated Annual Report 2019-20 | 113

 Overview Reports Financial Statements

Statement of Cash Flows Statement of Cash Flows (continued)

for the year ended 31st March, 2020 for the year ended 31st March, 2020
(All amounts in ` crores, unless otherwise stated) (All amounts in ` crores, unless otherwise stated)

Year ended Year ended Year ended Year ended

31st March, 2020 31st March, 2019 31st March, 2020 31st March, 2019

A CASH FLOW FROM OPERATING ACTIVITIES: C CASH FLOW FROM FINANCING ACTIVITIES:
Profit before tax 9,092 8,522 Dividends paid (5,196) (4,546)

Adjustments for: Dividend distribution tax paid (1,048) (913)

Depreciation and amortisation expenses 938 524 Principal Payment of lease liabilities (352) -

(Profit) / loss on sale of property, plant and equipment 50 38 Interest paid on lease liabilities (74) -

Government grant accrued (net) (104) (66) Interest paid other than on lease liabilities (6) (3)

Contingent Consideration true up for business combination (26) 57 Proceeds from share allotment under employee stock options/performance share schemes 0 0

Finance income (500) (323) Net cash (used in)/generated financing activities – (C) (6,676) (5,462)

Dividend income (96) (103) Net increase/(decrease) in cash and cash equivalents – (A+B+C) 2,555 2
Fair value (gain)/loss on investments (137) (164) Add: Cash and cash equivalents at the beginning of the year 575 573
Interest expense 106 28 Cash and cash equivalents at the end of the year 3,130 575
Provision for expenses on employee stock options 2 10
Note: The above Statement of Cash Flows has been prepared under the ‘Indirect Method’ as set out in Ind AS 7, ‘Statement of Cash Flows’.
Impairment of non-current investments 4 -
The accompanying notes are an integral part of these financial statements
Inventory written off net of Provision/(write back) for Inventory 155 132
Bad debts/assets written off net of Provision/(write back) 12 5 As per our report of even date attached For and on behalf of Board of Directors
Mark-to-market (gain)/loss on derivative financial instruments (23) 14

Cash Generated from operations before working capital changes 9,473 8,674 For B S R & Co. LLP Sanjiv Mehta Srinivas Phatak
Chartered Accountants Chairman and Managing Director Executive Director Finance & IT and CFO
Adjustments for:
Firm’s Registration No. 101248W/W – 100022 [DIN: 06699923] [DIN: 02743340]
(Increase)/decrease in Non-Current Assets (16) (64)
(Increase)/decrease in Current Assets 351 31
Akeel Master Aditya Narayan Dev Bajpai
(Increase)/decrease in Inventories (369) (195) Partner Chairman – Audit Committee Executive Director
Increase/(decrease) in Non-Current Liabilities 59 274 Membership No. 046768 [DIN: 00012084] Legal and Company Secretary
Membership No. FCS 3354
Increase/(decrease) in Current Liabilities 272 (307) [DIN : 00050516]
Cash generated from operations 9,770 8,413 Suman Hegde
Group Controller
Taxes paid (net of refunds) (2,465) (2,685)
Net cash (used in) / generated from operating activities - (A) 7,305 5,728 Mumbai: 30th April, 2020 Mumbai: 30th April, 2020

B CASH FLOW FROM INVESTING ACTIVITIES:

Purchase of property, plant and equipment (754) (662)
Sale proceeds of property, plant and equipment 52 4
Purchase of Intangibles (11) (66)
Contingent Consideration paid on business combination (30) (13)
Purchase of current investments (34,074) (70,434)
Sale of current investments 35,656 70,761
Loans given to subsidiaries (292) (248)
Loans repaid by subsidiaries 257 283
Redemption/maturity of term deposits (having original maturity of more than 3 months) 5,646 3,997
Investment in term deposits (having original maturity of more than 3 months) (4,979) (4,297)
Interest received 359 308
Dividend received from subsidiaries 95 102
Dividend received from others 1 1
Net cash (used in) / generated from investing activities – (B) 1,926 (264)

114 | Hindustan Unilever Limited Integrated Annual Report 2019-20 | 115