Corporate 

Financial Reporting
Session 6 and 7: PGP 2018‐20
Multi‐Step Income Statement: Hindalco

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 Name of the Company……………………. Revision: As per MCA Notification (6th April 2016)
As per Schedule III, Division II of Companies Act 2013 
Profit and loss statement for the year ended ………………………
Particulars Note No. Figures for  (Rupees in…………)
Current Year  Previous Year 
I. Revenue from operations
II. Other income
III. Total Income (I + II) 
IV. Expenses:
Cost of materials consumed
Purchases of Stock‐in‐Trade
Changes in inventories of finished goods, work‐in‐progress, and Stock‐in‐Trade
Employee benefits expense
Finance costs
Depreciation and amortization expense
Other expenses
Total expenses  (IV)
V. Profit before exceptional items and tax (III‐IV)
VI. Exceptional items
VII. Profit before tax (V‐ VI)
VIII Tax expense:
(1) Current tax
(2) Deferred tax
IX Profit/ (Loss) for the period from continuing operations (VII‐VIII)
X Profit/(loss) from discontinuing operations
XI Tax expense of discontinuing operations
XII Profit/(loss) from Discontinuing operations (after tax) (X‐XI)
XIII Profit (Loss) for the period (IX + XII)
XIV Other Comprehensive Income (OCI)
A (i) Items that will not be reclassified to profit or loss
(ii) Income tax relating to items that will not be reclassified to profit or loss
B (i) Items that will be reclassified to profit or loss
(ii) Income tax relating to items that will be reclassified to profit or loss
XV Total Comprehensive Income for the period (XIII+XIV)
[ Profit/(loss) + OCI for the period ]
XVI Earnings per equity share (for continuing ops, for discontinued ops & for both)
(1) Basic
(2) Diluted 2
Hindalco: Statement of Profit and Loss for the year ended March 31st

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25. Revenue from Operations Hindalco
Year ended
31/03/2016
Sale of products (a)
Domestic sales 23,024.03 23,635.74
Export sales 15,921.62 12,681.69
Net Sales 38,945.65 36,317.43
Other operating revenues 437.47 395.62
Gross revenue from operations 39,383.12 36,713.05

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Hindalco

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Hindalco

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Hindalco

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 Income Statement 20XX
Multiple Step Income Statement
• Sales Revenue
Continuation…                                                     20XX
Gross Sales  (Price per unit * Units sold)
Less: Taxes, Sales Returns
OPERATING PROFIT 
or Profit from Operations
Net Sales ***
Add:   Other Income (Non‐Operating‐ **
Less: Cost of Goods Sold (COGS) : like Gain on sale of equipment)
• Raw Material Consumed (includes Interest Income)
(Opening + Purchases(Net of returns + Freight In)  Less:  **
– Closing) Other Expenses (Non‐Operating)
• Direct Labour Cost EBIT
(Earnings Before Interest and Taxes )
• Manufacturing Expenses (related to Factory) Less:  Interest Expense
• Adjustment for WIP  EBT (Earnings Before Tax)
(Add: Opening WIP Less: closing WIP)
Less: Income Tax
• Adjustment for FG
(Add: Opening FG, Less: closing FG) PAT
(Earnings  or Profits After Tax)
COGS ***
or (Net Income or Net Profits)
GROSS PROFIT
Add: Other Operating Income (if any) **
Less: Operating Expenses (SG&A) **
OPERATING PROFIT  8
 Hindalco: Statement of Profit and Loss for the year ended March 31st

Task: Prepare Multi‐step Income Statement for Hindalco (including calculation of Gross Profit)
and check whether you got the net profit correct. Can you explain the performance?

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Some costs can be clearly identified whether they relate to manufacturing like Power and Fuel, Repairs to 
Machinery

For others,  some assumptions can be made like  
• Rent, Rates and Taxes – fully relate to Factory
• 80% of Employee benefit expenses relates to factory workers
• Insurance: 30% relates to factory
• Miscellaneous Expenses: 10% relates to factory

For Depreciation: Check the respective Schedule (Schedule 2)

2. Property, Plant and Equipment HIndalco

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 HINDALCO :

Change 
 Income Statement ( Multi step, classified as per function) for the year ended 31st March  2017 2016_R 2017‐2016 Growth %
25. Revenue from Operations CS 2016 CS 2017
Net Sales              38,945.65              36,317.43      2,628.2              7.2            100.0           100.0
Less: COGS  (Note 1)            ‐33,419.88            ‐32,399.16      1,020.7              3.2             ‐85.8            ‐89.2
Gross Profit                5,525.77                 3,918.27      1,607.5            41.0              14.2 2017
             10.8 2016
   Other Operating Revenues Sale of products (a)
                   437.47                    395.62            
41.9            10.6                 1.1                1.1
  Operating Expenses (Note 2) Domestic sales
             ‐2,577.69               ‐2,249.84         327.8            14.6               ‐6.6 23,024.03
              ‐6.223,635.74
Operating Profit                 3,385.55                 2,064.05      Export sales
1,321.5            64.0                 8.7 15,921.62
               5.712,681.69
  Non‐Operating items:  Other Income                  1,005.17                   978.92            26.3              2.7 Net Sales
                2.6 38,945.65
               2.736,317.43
EBIT Other operating revenues
               4,390.72                 3,042.97       437.478.4 395.62
1,347.7            44.3              11.3                
 Less: Finance Costs                ‐2,322.87               ‐2,390.14            67.3              2.8               ‐6.0 39,383.12
Gross revenue from operations               ‐6.636,713.05
Profit Before Exceptional Items and Tax                2,067.85                    652.83      1,415.0          216.8                 5.3                1.8
Exceptional Items(Net)                     84.89                          ‐            84.9                 0.2                ‐
 EBT or PBT ( Profit before Tax )                2,152.74                    652.83      1,499.9          229.8                 5.5                1.8
 Tax Expenses (Current Tax + Deferred Tax)                  ‐596.35                    ‐98.92         497.4          502.9               ‐1.5               ‐0.3
PAT                1,556.39                    553.91      1,002.5          181.0                 4.0                1.5
EBITDA (EBIT + Depreciation) (p14 of AR) 5,818.69 4,324.99
Operating Profit + Depreciation 4,813.52 3,346.07
Notes 
Note 1 : COGS 2017 2016_R
1401.70 Cost of Raw Material consumed 21,018.22 19,208.79 IS ‐ Sch 27
Excise Duty on Sales   2,446.51 2,442.24 IS 
= Employee 
Labour Cost  (assuming 80% of Employee benefit expenses relates to factory workers) 1,401.70 1,350.34 IS ‐SCh 30
Benefit Expense 
Other Manufacturing Expense 
(IS)1,752.12 *80%
Power and Fuel 5,898.67 6,508.06 IS ‐ Sch 31
Depreci ati on (rel ated to Pl ant & machi nery) 1,083.15 999.08 IS ‐Sch 33
Consumpti on of Stores and Spares 808.22 677.34 sch 35
Repai rs to Machi nery (assumi ng ful l y rel ated to factory) 478.90 471.68 sch 35
30.65 Rates and Taxes (assumi ng ful l y  rel ated to factory) 40.66 23.13 sch 35
= Insurance Expense  Rent (assumi ng ful l y rel ated to factory) 74.35 64.42 sch 35
(Schedule 35) 102.17 *30% Insurance (assumi ng  30% rel ated to factory) 30.65 36.55 sch 35
Mi scel l aneous Expenses (assumi ng 10% rel ates to factory) 109.39 84.70 sch 35
Cost of own Manufactured Products Capi tal i zed/Used ‐20.84 ‐22.60 sch 35
 Equi pment and materi al  handl i ng expenses  400.15 350.28
109.39  Premi um on coal  extracti on  661.47 20.63
= Misc Expense  Transfer to Capi tal  Work‐i n‐Progress ‐0.26 ‐8.66 sch 35
(Schedule 35)  Manufacturing Costs 34,430.93 32,205.98
1093.85* 10% Purchases of Stock‐i n‐Trade 89.11 1.48 IS ‐ Sch 28
Changes i n Inventory of Fi ni shed Goods, WIP and Stock i n Trade ‐1,100.16 191.70 IS ‐ Sch 29
COST OF GOOD SOLD 33,419.88 32,399.16 11
Note 2. Operating Expenses  2017 2016_R
Other Expenses  344.82
Employee Benefit Expenses (Assumption: 20%) 350.42 337.58 Sch 30 = Deprecation Expense (IS) 1,427.97
Insurance (Assumption: 70%) 71.52 85.29 sch 35
‐ Depreciation on P&M 1,083.15
Miscellaneous Expenses (Assumption: 90%) 984.47 762.29 sch 35
Repairs to Buildings  64.31 58.42 sch 35 71.52
Payments to Auditors 5.34 5.06 sch 35 = Insurance Expense (Schedule 35) 102.17 *70%
Depreciation (other than Plant & machinery) 344.82 282.94 sch 35
Freight and Forwarding Expenses 720.09 607.24 sch 35
Provision for Doubtful Loans, Advances and Receivables (Net) 31.02 ‐7.70 sch 35 984.47
Bad Loans, Advances and Receivables written off/(written back) (Net) 0.43 23.77 sch 35 = Misc Expense (Schedule 35) 1093.85* 90%
Prior Period Items (Net) 0.00 0.00 sch 35
Donation  22.48 6.16 sch 35
Directors' Fees and Commission 6.37 2.25 sch 35
Loss on assets held for sale ‐2.04 ‐2.25 sch 35
 Provision for expected credit loss  1.31 0.63 sch 35
 (Gain) / loss on exchange fluctuation  ‐12.32 55.46 sch 35
(Gain)/Loss on Change in Fair Value of Derivatives (Net) ‐29.91 13.26 sch 35
Research and Development 19.38 19.44 sch 35
Operating Expenses  2,577.69 2,249.84

HINDALCO :

 Income Statement ( Multi step, classified as per function) for the year ended 31st March  2017 2016_R

Net Sales              38,945.65              36,317.43
Less: COGS  (Note 1)            ‐33,419.88            ‐32,399.16
Gross Profit                5,525.77                 3,918.27
   Other Operati ng Revenues                    437.47                    395.62
  Operating Expenses (Note 2)              ‐2,577.69               ‐2,249.84
Operating Profit                 3,385.55                 2,064.05
  Non‐Operating items:  Other Income                  1,005.17                   978.92
EBIT                4,390.72                 3,042.97
 Less: Finance Costs                ‐2,322.87               ‐2,390.14
Profit Before Exceptional Items and Tax                2,067.85                    652.83
Exceptional Items(Net)                     84.89                          ‐
 EBT or PBT ( Profit before Tax )                2,152.74                    652.83
 Tax Expenses (Current Tax + Deferred Tax)                  ‐596.35                    ‐98.92
PAT                1,556.39                    553.91
EBITDA (EBIT + Depreci ati on) (p14 of AR) 5,818.69 4,324.99
Operating Profit + Depreciation 4,813.52 3,346.07 12
Thank You 

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 Assignment Questions for Chemalite Case:

1. Prepare T accounts to record the transactions of Chemalite during its pre‐operation

period as well as for the full year 2003. Compute the closing balances of each account
and prepare the Adjusted Trial Balance.

2. Recording of the some of these transactions would have involved you making one or
more assumptions. Identify such transactions and explain the assumptions.

3. Prepare Multi‐Step Income Statement, Classified Balance sheet, and Statement of

Retained Earnings for the year ended 31st Dec 2003.

4. Explain the change in cash. How much of the total change in cash is related to
operations? How much is related to financing? How much is related to investing?

5. Use 3) and 4) above to help perplexed Alexander explain to the stockholders why
Chemalite’s bank account did not support Alexander’s feeling that “things were going
well”.

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