Batson International

Part (A)Batson InternationalGroup 3Ankur Agarwal E001 Shivam Garg E018Rajeev Jain E025 Saumil Kakkad E026Rahul Khosla E030Priyank Vora E059Publicly traded multinational based outside USProvides high-technology products and servicesUses IFRS for reporting purposesHistorically a Growth Stock and company is looking to maintain that positionPrior years first quarter EPS reported at 52 cents per shareAnalysts projection for EPS of current year first quarter 58 cents per share while Managements Estimated EPS comes at 51 cents per shareIf EPS comes out to be less than analyst's projection the price earnings ratio will fall which can lead to the collapse of their acquisition plans

IntroductionIFRS Vs. US GAAPIFRSUS GAAPEntities are recorded via Discrete-period-methodEntities are recorded via Integral-period-methodInventory write-down can be reversed in future periodsAny reversal in inventory write-off is prohibitedDeferred taxes are shown as separate line items on the balance sheetDeferred taxes are included with assets and liabilitiesIntangible assets Intangible assets are recognized if the asset has a future economic benefitIntangible assets are considered at fair valueUneven cost incurred in interim periods should be deferred only if deferral is also done at the end of financial periodUneven Cost should be charged at an appropriate amount in all the interim periods in which it is expensed.Advertising cost must be taken into the provisional period.Advertising cost can be deferred to multiple periods. Current Status Maintenance costAll data in cents per shareEIC Tax SavingsAll data in cents per shareCost of RelocationAll data in cents per shareAdvertising CostAll data in cents per shareDividend from BrazilAll data in cents per shareCorporate RestructuringAll data in cents per shareItemsPresent statusSavings by IFRS(Cents Per share)Savings by US GAAP(Cents per share)Maintenance cost6 cents per share3 cents per share3 cents per shareEIC Tax Savings2 cents per share1 cent per share1 cent per shareCost of relocation3 cents per shareNo savings2.25 cents per share

Advertising cost2 cents per shareNo savings2 cents per shareAdvertising cost (Summer)2 cents per share2 cents per share2 cents per shareDividend from Brazil

4 cents per shareNo savingsNo savingsCorporate restructuring(Reserves)

None0.5 cents per share0.5 cents per shareTotal EPS51 cents per share57.50 cents per share61.75 cents per shareBatson International, S.A. (B)

Part B Accounting irregularities13Part B Accounting irregularities14Part B Accounting irregularities15Part B Accounting irregularities16Part B Accounting irregularities17Batson International, S.A. (C)

Accounting scandals of Enron, WorldCom, & Tyco in 2000s disturbed the corporate worldInvestors demanded for stringent rules for accounting standards & financial disclosuresSOX Act was passed by US congress in 2002Two key provisions of the Act are:

Section 302: Requires senior management to certify the accuracy of the reported financial statement Section 404: Requires that management establish internal controls and approve its adequacySarbanes-Oxley Act (SOX)Under Section 302 -Corporate Responsibility for Financial Reports, the signing officers should:

Maintain internal controlsEnsure that material information related to the issuer is available in internal controlEvaluate effectiveness of the issuer's internal controls within 90 days prior to the report; andComment on the effectiveness of the internal controls

SOX Act continuedA process, effected by the senior management which is designed to provide "reasonable assurance" regarding the achievement of objectives in the following categories:Effectiveness and efficiency of operationsReliability of financial reportingCompliance with applicable laws and regulations.Safeguarding of AssetsPlays a vital role in detecting fraud and protecting organisations resources both tangible and intangible.Mandatory for all Listed Companies under local companies ActSelf inspection by the company management

Internal controlCOSO has established a common internal control model against which companies and organizations may assess their control systems.The five components of COSO framework are:Control EnvironmentRisk AssessmentControl ActivitiesInformation and communicationMonitoringLimitationsLot of human action leading to errors in processing and judgementComplex Model

Committee of Sponsoring Organisations of the Treadway Commission (COSO)Batson International, S.A. management is responsible for establishing and maintaining adequate internal control over financial reporting under Rule 14-15(f) of the Securities Exchange Act,2004.This certification is required under local Companies Act and required for all listed companies.Batson International used COSO framework criteria to evaluate the effectiveness of its internal control over financial reporting.

Case DescriptionManagement concluded that reporting was effective based on the criteria issued by COSOIf company repots any deficiency in their report they will not be delistedIf company finds deficiency and corrects it in the same fiscal year, it does not have to report itThe Companies Act also requires independent auditor to express an opinion

ContinuedIt is the duty of CFO to sign the management report on internal control over financial reporting certification.If company fails to report a material defect or there is false representation CFO will be held responsible.In such cases CFO will be liable to five years or less imprisonment and fine of $5 million.Conclusion