Window dressing
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The document summarizes various accounting manipulations and financial irregularities at Satyam Computers including overstating assets and revenues, understating liabilities, and misreporting profits. Specifically, it finds that Satyam overstated assets by Rs. 5,000-6,000 crore through non-existent cash balances, accrued interest, and underreported liabilities. It also details how Satyam misreported a net profit of Rs. 649 crore for Q2 when the actual operating profit was only Rs. 61 crore.
Window dressing
- 3. Value of closing stock at higher value Treating some expenditure as capital expenditure. Revaluation of fixed assets on higher side. Providing no provisions No disclosure of extraordinary income. Manipulation of accounts to show better picture of the firm in the form of ratio.
- 4. Satyam books have been overstated by Rs 5,000 to Rs 6,000 crore. Inflated (non-existent) cash and bank balances of Rs 5,040 crore (as against Rs 5,361 crore reflected in the books); An accrued interest of Rs 376 crore, which is non- existent An understated liability of Rs 1,230 crore on account of funds arranged by Mr.Raju
- 5. An overstated debtors' position of Rs 490 crore (as against Rs 2,651 reflected in the books) For the September quarter(Q2) reported a margin of Rs 649 crore(24 per cent of revenue) as against the actual operating margin of Rs 61 crore The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones
- 6. Company To obtain funding (to Increase profits and Borrowers borrow money) liquidity ratios (banks, other financial institutions) To reduce tax Decrease profits by Government payments increasing expenses To smooth financial Record sales or Owners data (sales, expenses, purchases in an accounts receivable, inappropriate etc.) period; give large discounts to debtors for payments received before period end To hide some Increase cash Owners problems (liquidity, account balance at profitability, poor the period end; management increase useful life decisions) of fixed assets
- 7. PROFIT & LOSS ASIANP BERGER Gross Sales 6,322.24 2,100.82 Net Sales 6,322.24 2,100.82 Total Operating Income 6,322.24 1,975.32 Raw Materials Consumed 3,681.53 1,275.73 Other Direct Expenses 105.56 120.52 Payments to Employees 300.45 64.86 Other Administrative Expenses 1,090.20 75.50 Operating Profit BDIT 1,144.50 217.40 Depreciation 94.48 29.98 Operating profit 1,050.02 187.42 Income from Non-Operating Activities 88.16 35.87 PBIT 1,138.18 223.29 Interest 15.35 12.18 PBT 1,122.83 211.11 Provision for Taxes 325.49 1,096.86 Deferred Taxes 26.41 0.00
- 8. Book value: it is the value at which an items appears in the books of account or financial statement. Entity value: it is calculated by considering market value.
Editor's Notes
- #5: In June 2001, Raju had nearly 23 per cent shares. By December that year, his share was down to 22.4 per cent.In September 2002, it fell to 21.6 per cent which fell a year later to just over 19 per cent.In 2004, Raju's holding was 16 per cent which fell to 14 per cent in 2005, 11 per cent in 2006. In 2007 it was in single digit. By September 2008 Raju's share was just 8.27 per cent.BSE figure also show Vadlamani sold 92,538 shares while the then CEO Ram Mynampati sold 700,000 shares plus 2,50,000 ADRs.Apart from these, other senior officials also reportedly sold large number of shares. Sources say they include one KiranCavale who reportedly sold 400,000 shares and 10,000 ADRs and one RajanNagarajan who reportedly sold 430,000 shares and 70,000 ADRs.