Introduction to Financial Statements 1

Introduction to Financial Statements

Wirecard scandal (from Wikipedia)

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
https://www.ft.com/content/d51a012e-1d6f-11e9-b126-46fc3ad87c65
Date Close
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
 Introduction to Financial Statements 2

Asian Paints Q4 Results: Profit Falls Sequentially But Beats

Estimates, Margin Contracts
BloombergQuint May 12 2021, 4:01 PM
Asian Paints Ltd.’s fourth-quarter profit fell sequentially but beat estimates
as a rebound in demand continued. Net profit of India’s largest paintmaker
fell 31% quarter-on-quarter to Rs 870 crore in the quarter ended March,
according to its exchange filing. That, however, surpassed the Rs 825.6-
crore consensus forecast of analysts tracked by Bloomberg. To be sure,
the preceding third quarter coincided with the festival season, usually a
period of strong demand for paintmakers. Highlights (QoQ) Revenue fell 2%
to Rs 6,651 crore against an estimated Rs 6,008 crore. Operating profit fell
26% to Rs 1,318 crore. Margin contracted to 19.8% from 26.3%.

The company didn't disclose sequential volume growth. Domestic

decorative business volumes jumped 48% over a year earlier, led by a
robust growth in the premium and luxury product range, the company said.
That was also aided by a lower base as several states had started
announcing restrictions in March last year before a complete lockdown.
“We have seen a very strong quarter aided by good demand”
 Introduction to Financial Statements 3

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.

Asian Paints 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 4

Procedural Scheme of a firm

Shareholders

Dividends
Creditors/

Capital
Debt Holders Customer

Equity
Cash
COMPANY
(MANAGER Cash
Government S) 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.
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
 Introduction to Financial Statements 5

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 6

Balance Sheet of Asian Paints (Rs. Cr.)

ASSETS Mar-21 Mar-20 EQUITY AND LIABILITIES Mar-21 Mar-20
Tangible Assets 4525.73 4875.23 Equity Share Capital 95.92 95.92
Intangible Assets 76.88 85.63 Reserves and Surplus 11995.18 9357.37
Capital Work-In-Progress 110.11 108.09 EQUITY 12091.1 9453.29
Non-Current Investments 2161.94 2225.58 NON-CURRENT LIABILITIES
Long Term Loans & advances 57.02 64.11 Long Term Borrowings 14.31 18.5
Other Non-Current Assets 694.45 403.28 Deferred Tax Liabilities 265.19 282.68
NON-CURRENT ASSETS 7626.13 7761.92 Other Long Term Liabilities 473.23 501.32
Current Investments 3178.81 432.35 Long Term Provisions 163.51 136.78
Inventories 3124.61 2827.47 NON-CURRENT LIABILITIES 916.24 939.28
Trade Receivables 1809.75 1109.22 CURRENT LIABILITIES
Cash And Cash Equivalents 134.91 376.06 Trade Payables 2814.3 1760.08
Short Term Loans &
Advances 24.55 21.31 Other Current Liabilities 1703.12 1390.83
OtherCurrentAssets 1683.91 1059.29 Short Term Provisions 57.91 44.14
TOTAL CURRENT ASSETS 9956.54 5825.7 TOTAL CURRENT LIABILITIES 4575.33 3195.05
TOTAL ASSETS 17582.67 13587.62 TOTAL EQUITY AND LIABILITIES 17582.67 13587.62

Stockholders’ Equity
 Equivalently net assets (i.e. = A -L).
 Two sources of OE:
 Amounts provided directly by equity investors (Paid-in-capital).
 Introduction to Financial Statements 7

 Amounts retained from earnings, i.e. profits (Retained Earnings).

 Want more Equity?
 Raise More capital – Increases the Contributed Capital portion of
Equity
 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)
 Introduction to Financial Statements 8

-Income Taxes (T)

 = Net Income
 Beg. RE + NI - Div = End. RE
RE =  net income -  dividends
Statement of Profit and Loss for the year ended (in Rs. Cr.)
Mar-21 Mar-20
Total Operating Revenues 18,516.86 17,194.09
Other Income 366.32 357.54
TOTAL INCOME 18,883.18 17,551.63
EXPENSES
Cost of Materials Consumed 8,524.17 8,432.51
Changes In Inventories -90.7 -210.21
Employee Benefit Expenses 1,128.66 985.43
Finance Costs 71.66 78.38
Depreciation & Am. Expenses 697.47 689.97
Other Expenses 2,812.48 2,845.44
TOTAL EXPENSES 14,792.80 14,105.40
Exceptional Items 0 -33.2
PROFIT BEFORE TAX 4,090.38 3,413.03
Total Tax Expenses 1,037.87 759.08
PROFIT FOR THE PERIOD 3,052.51 2,653.95
EARNINGS PER SHARE
Basic EPS (Rs.) 31.82 27.67
Diluted EPS (Rs.) 31.82 27.67

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
 Introduction to Financial Statements 9

Statement of Cash Flows for the year ended

Mar-21 Mar-20
Net Profit 4,090.38 3,413.03
Net CashFlow from Operating Activities 3,459.50 2,407.47
Net Cash Used In Investing Activities -436.95 -774.65
Net Cash Used from Financing Activities -582.9 -2,095.25
Net Change in Cash & CE 2,439.65 -462.43
Cash and CE at Begin of Year 693.93 1,156.36
Cash and CE at End of Year 3,133.58 693.93
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.
 Introduction to Financial Statements 10

 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.
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:
 Introduction to Financial Statements 11

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.
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.
 Introduction to Financial Statements 12

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.
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

21. 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.

22 . 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
 Introduction to Financial Statements 13

C. Rs.27,000 D. Rs.8,000

23. 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.

24. 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:
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

25. 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

26. 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
27. 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

28. 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

29. 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
 Introduction to Financial Statements 14

30. 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

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 TL and E

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
 Introduction to Financial Statements 15

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

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
 Introduction to Financial Statements 16

7. Commissions

8.

9.

10. Expenses

TOTAL

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
 Introduction to Financial Statements 17

BON VOYAGE TRAVEL

CASH RECEIPTS AND DISBURSEMENTS JUNE 1-30, ----.

Operating CF

Investing CF

Financing CF

Increase in cash
 ASIAN PAINTS LIMITED

Value creation model

We deliver joy
EXTERNAL ENVIRONMENT

INPUTS STAKEHOLDERS Customers | Influencers | Investors | Employees | Community | Government and Regulatory Bodies | Vendors OUTPUTS OUTCOMES
Financial capital Financial capital
Product portfolio
`12,091.1 Crores `27.4 Crores Our purpose `18,516.9 Crores `4,859.5 Crores
Shareholder’s fund Borrowings Revenue EBITDA
Manufactured capital We exist to beautify,
preserve, transform `3,052.5 Crores `31.8 38.1%
`3,810.9 Crores 10
Integrated Report 2020-21

all spaces and objects, PAT EPS ROCE

Property, plant and Own manufacturing Risks and Paints Waterproofing Wall
equipment facilities
bringing happiness to Strategy
the world. opportunities coverings
Customer Innovation-led Human capital
1,730,000 KL 24

Strategic Review
life cycle products 0.7 7.8%
Installed decorative Outsourced
paint capacity per processing management and services Lost Time Injury Attrition rate
annum * centres Frequency Rate
* Only own manufacturing Adhesives Decor Tools (LTIFR) 23.4
facilities
Severity rate
Human capital
7,160 16,354 Intellectual capital
16 Permanent Temporary/ 17
employees contractual employees Bath fittings and Sanitizers and 14 48
sanitary ware Number of New products/
disinfectants
`20.1 Crores Deliver OUR BUSINESS Strategic patents granted
variants developed
Investment in products and PROCESSES supply chain Traded products
learning and development Services management Manufactured/ traded Social and relationship capital
Intellectual capital
Impact of community initiatives:
`82.6 Crores 20 Services
Spent on Research Number of 170,000+ 199,000+
and Development (R&D) patents filed Strategic focus Lives touched Beneficiaries
through health through Colour
200+ `45 Crores • Customer Initiatives Academy Trainings
Number of scientists Investment in
celebrations Experience Colour
at R&D centre information technology
Retail Stores Consultancy
• High-performance Natural capital
Social and relationship capital Brand Sustainable
70,000+ 1.3 Lakhs + team 56%** 184.5%
value and safe
No. of dealers Business influencers Reduction in specific Water replenishment
(contractors/painters/ • Innovative and propagation manufacturing
hazardous waste
architects/interior co-created solutions Projects Sanitization disposal footprint
designers) 34.7% **
• Sustainability Resource services
`63 Crores 15,000+ Governance Reduction in specific
allocation 58.9%** electricity consumption
CSR expenditure Supplier base • Cutting-edge Reduction on Specific
Natural capital technology Non-Process Water 65.4% **
(SNPW) Emission reduction
0.8 KL/KL `12.2 Crores Safe Painting Interior Design
Specific water Expenditure on
consumption
Services Services 75.9%** 57.2%
environmental 
Reduction in Specific
initiatives Renewable energy
`3.8 Crores effluent generation consumption out of
Integrated watershed total consumption
development • Standing for each
Values • Creative zeal • Integrity • Audacity • Scientific rigour • Customer passion ** As compared to baseline year 2013-14
Reporting Boundaries other’s success
Natural Capital Decorative Paint Business in India
Other Capitals Asian Paints Limited (Standalone)
 ASIAN PAINTS LIMITED

Stakeholder engagement and materiality assessment

Stakeholder engagement
Ensuring shared growth At Asian Paints, stakeholders play an integral role in our
journey and we recognise the need to partner with them
and understand their concerns to deliver the ambitious
groups on our business and vice versa3. Based on the
exercise carried out, we prioritised our key stakeholders
to understand their expectations and concerns.

through meaningful
targets which we have set for ourselves as a part of the Through regular interactions4 with our stakeholders
organisational vision.Our multi-stakeholder model aims across various channels, we have been able to
to understand the requirement of our stakeholders strengthen our relationships and enhance our
and we attempt to respond to them through various organisational strategy.

interactions
initiatives and programmes.
We have identified the following key stakeholder group
Our process of stakeholder engagement involved and each stakeholder continues to contribute in their
identifying key internal and external stakeholders own way in creating value for our business.
followed by analysing the impact of each stakeholder

How we create value for our stakeholders5

Integrated Report 2020-21

STAKEHOLDER GROUP KEY CONCERNS AND EXPECTATIONS6 OUR APPROACH OF ENGAGEMENT

y Personalised learning and development programmes y Digital engagement

y Employee well-being

Strategic Review
y Regular performance review and feedback y Exit interviews
y Learning and development
y One on one engagements and town hall meetings y Programmes catered around overall well-being
y Occupational health and safety
y Employee engagement surveys y Engaging with students in leading campuses
Employees

y Delightful experience y Anticipating requirements y Partnering with them in their journey from
through the journey of décor y Creating value products to services y Customer satisfaction survey
y Product safety and y Convenience y One–on–one interactions y Feedback surveys and calls post addressal
20 value for money y Solutions and not just products y Digital channels like mobile applications of complaints 21
Customers y Innovative products y Better servicing (Colour with AP), website and many more y Customer service helpline

y Adherence to compliance in y Emails and letters y Regulatory Filings

y Inputs for ease of doing business
substance and spirit y Conferences y Meetings with officials
y Inputs for regulatory changes
Government and y Collaboration on national agenda y Industry forums y Representations
Regulatory Bodies

y Collaboration with Non-Governmental

y Social concerns such as health
y Sustainable way of carrying Organisations (NGOs) y Skill development
and hygiene, skilling and water
on the business y Field visits y One-on-one interactions
management
y CSR and sustainability initiatives
Communities
y Supplier meets
y Long-term commitments with y Fairness in business dealings
y One-on-one interactions y Forums and seminars
business partners y Necessary knowledge and
y Digital channels like supplier y Collaboration with vendors
y Value creation infrastructure support
grievance/ feedback portal
Vendors
y Consistent return y Digital engagement
y Wealth creation y Annual general meetings
on investments y Media updates
y Timely disclosures y Quarterly investor conferences
y Long-term viability and y Annual report and sustainability report
and compliance y One-on-one engagements
sustainable growth y Meetings
Investors

y Meetings
y Business collaborations
y Conferences
y Policy advocacy
y Digital platforms
Influencers
3 GRI 102-42 Identifying and selecting stakeholders 5 GRI 102-40 List of stakeholder groups Our frequency of engagement
4 GRI 102-43 Approach to stakeholder engagement 6 GRI 102-44 Key topics and concerns raised
On regular basis Periodically
 AsiAn PAints Limited

Balance
as at 31 March, 2021
st
Sheet Statement of Profit and Loss
for the year ended 31 March, 2021
st

(` in Crores) (` in Crores)

As at As at Year Year
Notes Particulars Notes
31.03.2021 31.03.2020 2020-21 2019-20
ASSETS REVENUE FROM OPERATIONS
Non-Current assets Revenue from Sale of Products 22A 18,252.46 17,025.26
Property, Plant and Equipment 2A 3,810.94 4,148.60
Right of Use Asset 2B 714.79 726.63 Revenue from Sale of Services 22A 27.60 0.35
Capital work-in-progress 110.11 108.09 Other Operating Revenue 22A 236.80 168.48
Goodwill 3A 35.36 35.36 Other Income 23 366.32 357.54
Other Intangible Assets 3B 41.52 50.27
Total Income (I) 18,883.18 17,551.63
Investments in Subsidiaries and Associates 4 1,176.99 1,176.99
Financial Assets EXPENSES
Investments 4 984.95 1,048.59 Cost of Materials Consumed 24A 8,524.17 8,432.51
Loans 5 57.02 64.11 Purchases of Stock-in-Trade 24B 1,649.06 1,283.88
Other Financial Assets 6 522.17 232.47
Current Tax Assets (Net) 7 132.84 137.94 Changes in inventories of finished goods, Stock-in-trade and work-in-progress 24C (90.70) (210.21)
Other Non-current assets 8 39.44 32.87 Employee Benefits Expense 25 1,128.66 985.43
7,626.13 7,761.92 2,812.48
Integrated Report 2020-21

Other Expenses 26 2,845.44

Current assets Total (II) 14,023.67 13,337.05

Financial Statements
Inventories 9 3,124.61 2,827.47
Financial Assets EARNING BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (EBITDA) (I-II) 4,859.51 4,214.58
Investments 4 3,178.81 432.35 Finance Costs 27 71.66 78.38
Trade Receivables 10 1,809.75 1,109.22 Depreciation and Amortisation Expense 28 697.47 689.97
Cash and Cash Equivalents 11A 113.27 336.96 PROFIT BEFORE EXCEPTIONAL ITEMS AND TAX 4,090.38 3,446.23
Other Balances with Banks 11B 21.64 39.10
Loans 5 24.55 21.31 Exceptional Items 43 - 33.20
Other Financial Assets 6 1,237.50 846.96 PROFIT BEFORE TAX 4,090.38 3,413.03
Other Current Assets 8 446.41 212.33 Tax Expense 18
9,956.54 5,825.70
(1) Current Tax 1,052.72 871.15
Total Assets 17,582.67 13,587.62
EQUITY AND LIABILITIES (2) Short tax provision for earlier years 6.46 5.66
194 Equity (3) Deferred Tax (21.31) (117.73) 195
Equity Share Capital 12 95.92 95.92 Total tax expense 1,037.87 759.08
Other Equity 13 11,995.18 9,357.37
12,091.10 9,453.29 PROFIT AFTER TAX 3,052.51 2,653.95
Liabilities OTHER COMPREHENSIVE INCOME (OCI)
Non-Current Liabilities A Items that will not be reclassified to Profit or Loss
Financial Liabilities (a) (i) Remeasurement of the defined benefit plans (5.32) (10.83)
Borrowings 14 14.31 18.50
Lease Liabilities 15 468.73 496.22 (ii) Income tax benefit on remeasurement benefit of defined benefit plans 1.34 1.01
Other Financial Liabilities 16 1.09 0.46 (b) (i) Net fair value gain on investments in equity instruments through OCI 57.26 66.44
Provisions 17 163.51 136.78 (ii) Income tax expense on net fair value gain on investments in equity instruments (4.88) (8.71)
Deferred Tax Liabilities (Net) 18C 265.19 282.68 through OCI
Other Non-current Liabilities 19 3.41 4.64
916.24 939.28 B Items that will be reclassified to Profit or Loss
Current Liabilities (i) Net fair value gain on investments in debt instruments through OCI 2.41 2.81
Financial Liabilities (ii) Income tax expense on net fair value gain on investments in debt instruments (0.28) (0.32)
Lease Liabilities 15 157.22 142.43 through OCI
Trade Payables
Total Outstanding dues of Micro Enterprises and Small Enterprises 20 53.55 45.86 Total Other Comprehensive Income (A+B) 50.53 50.40
Total Outstanding dues of creditors other than Micro Enterprises and Small Enterprises 20 2,760.75 1,714.22 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 3,103.04 2,704.35
Other Financial Liabilities 16 1,284.48 1,118.89 Earnings per equity share (Face value of ` 1 each) 40
Other Current liabilities 19 173.73 80.92
Provisions 17 57.91 44.14 (1) Basic (in `) 31.82 27.67
Current Tax Liabilities (Net) 21 87.69 48.59 (2) Diluted (in `) 31.82 27.67
4,575.33 3,195.05 Significant accounting policies and key accounting estimates and judgements 1
Total Equity and Liabilities 17,582.67 13,587.62 See accompanying notes to the Financial Statements 2-46
Significant accounting policies and Key accounting estimates and judgements 1
See accompanying notes to the Financial Statements 2-46
As per our report of even date attached For and on behalf of the Board of Directors of Asian Paints Limited As per our report of even date attached For and on behalf of the Board of Directors of Asian Paints Limited
CIN:L24220MH1945PLC004598 CIN:L24220MH1945PLC004598
For Deloitte Haskins & Sells LLP Ashwin Dani Amit Syngle For Deloitte Haskins & Sells LLP Ashwin Dani Amit Syngle
Chartered Accountants Chairman Managing Director & CEO Chartered Accountants Chairman Managing Director & CEO
F.R.N: 117366W/W-100018 DIN: 00009126 DIN:07232566 F.R.N: 117366W/W-100018 DIN: 00009126 DIN:07232566
Abhijit A. Damle M.K. Sharma R.J. Jeyamurugan Abhijit A. Damle M.K. Sharma R.J. Jeyamurugan
Partner Chairman of Audit Committee CFO & Company Secretary Partner Chairman of Audit Committee CFO & Company Secretary
Membership No: 102912 DIN:00327684 Membership No: 102912 DIN:00327684
Mumbai Mumbai Mumbai Mumbai
12th May, 2021 12th May, 2021 12th May, 2021 12th May, 2021
 AsiAn PAints Limited

Statement of Changes in Equity

for the year ended 31 March, 2021
st
Cash Flow Statement
for the year ended 31 March, 2021
st

A) EQUITY SHARE CAPITAL (` in Crores)

(` in Crores) Year Year
As at As at 2020-21 2019-20
31.03.2021 31.03.2020 (A) CASH FLOW FROM OPERATING ACTIVITIES
Balance at the beginning of the reporting year 95.92 95.92 Profit before tax 4,090.38 3,413.03
Changes in Equity Share capital during the year - - Adjustments for:
Balance at the end of the reporting year 95.92 95.92 Depreciation and amortisation expense 697.47 689.97
B) OTHER EQUITY Interest income (41.20) (41.67)
(` in Crores) Dividend income (16.45) (34.73)
Reserves and Surplus Finance costs 71.66 78.38
Debt Equity
Capital Capital General Retained Allowance for doubtful debts and advances 27.90 15.27
instruments instruments Total
Reserve Redemption Reserve earnings through OCI through OCI Bad debts written off 0.56 6.18
Reserve
Deferred income arising from government grant (2.28) (1.64)
Balance as at 1st April, 2019 (A) 44.38 0.50 4,166.74 4,424.53 (0.01) 110.90 8,747.04
Net unrealised foreign exchange (gain)/ loss (16.73) 36.74
Integrated Report 2020-21

Additions during the year :

(Gain) on sale of property, plant and equipment (net) (18.37) (10.50)

Financial Statements
Profit for the year - - - 2,653.95 - - 2,653.95
Net gain on modification/ termination of leases (1.72) (0.96)
Items of OCI for the year, net of tax
Net gain arising on financial assets measured at fair value through profit or
Remeasurement of the defined benefit plans - - - (9.82) - - (9.82)
loss (FVTPL) (92.28) (75.26)
Net fair value gain on investments in equity - - - - - 57.73 57.73
Impairment loss on non-current investments - subsidiaries - 33.20
instruments through OCI
Net fair value gain on investments in debt - - - - 2.49 - 2.49 Other non cash adjustment - 8.01
instruments through OCI Operating Profit before working capital changes 4,698.94 4,116.02
Total Comprehensive Income for the year 2019-20 (B) - - - 2,644.13 2.49 57.73 2,704.35 Adjustments for :
Reductions during the year : (Increase)/Decrease in trade receivables (724.39) 116.12
196 Dividends (Refer note 30) - - - (1,740.95) - - (1,740.95) (Increase)/Decrease in financial assets (242.73) 18.85 197
Income tax on dividend (Refer note 30) - - - (353.07) - - (353.07) (Increase) in inventories (297.14) (242.37)
Total (C) - - - (2,094.02) - - (2,094.02) (Increase)/Decrease in other assets (234.99) 95.82
Balance as at 31st March, 2020 (D) = (A+B+C) 44.38 0.50 4,166.74 4,974.64 2.48 168.63 9,357.37 Increase/(Decrease) in trade and other payables 1,234.30 (368.18)
Additions during the year : Increase in provisions 40.50 10.16
Profit for the year - - - 3,052.51 - - 3,052.51 Cash generated from Operating activities 4,474.49 3,746.42
Items of OCI for the year, net of tax - Income Tax paid (net of refund) (1,014.99) (933.35)
Remeasurement of the defined benefit plans - - - (3.98) - - (3.98) Net Cash generated from Operating activities 3,459.50 2,813.07
Net fair value gain on investments in equity - - - - - 52.38 52.38
instruments through OCI
(B) CASH FLOW FROM INVESTING ACTIVITIES
Net fair value gain on investments in debt - - - - 2.13 - 2.13
Purchase of Property, plant and equipment (210.56) (306.43)
instruments through OCI
Total Comprehensive Income for the year 2020-21 (E) - - - 3,048.53 2.13 52.38 3,103.04 Sale of Property, plant and equipment (including advances) 25.56 26.35
Reductions during the year : Payment for acquiring right of use assets (7.14) (9.79)
Dividends (Refer note 30) - - - (465.23) - - (465.23) Loan given to subsidiary (1.85) (6.25)
Total (F) - - - (465.23) - - (465.23) Purchase of non-current investments - Subsidiaries - (379.84)
Balance as at 31st March, 2021 (D+E+F) 44.38 0.50 4,166.74 7,557.94 4.61 221.01 11,995.18 Purchase of non-current investments - others (0.50) (24.95)
Significant accounting policies and key accounting estimates and judgements (Refer note 1) Sale of non-current investments 272.32 85.50
See accompanying notes to the Financial Statements (Refer note 2-46) Purchase of term deposits (897.11) (489.02)
Proceeds from maturity of term deposits 458.01 222.53
As per our report of even date attached For and on behalf of the Board of Directors of Asian Paints Limited
Sale of current investments (net) (139.34) 31.26
CIN:L24220MH1945PLC004598
Interest received 47.21 41.26
For Deloitte Haskins & Sells LLP Ashwin Dani Amit Syngle
Dividend received from subsidiaries 8.64 8.13
Chartered Accountants Chairman Managing Director & CEO
Dividend received from others 7.81 26.60
F.R.N: 117366W/W-100018 DIN: 00009126 DIN:07232566
Net Cash (used in) Investing activities (436.95) (774.65)
Abhijit A. Damle M.K. Sharma R.J. Jeyamurugan
Partner Chairman of Audit Committee CFO & Company Secretary
Membership No: 102912 DIN:00327684
Mumbai Mumbai
12th May, 2021 12th May, 2021
 AsiAn PAints Limited

Cash Flow Statement (Contd.)

for the year ended 31st March, 2021
Notes to the Financial Statements
for the year ended 31 March, 2021
st

(` in Crores) COMPANY BACKGROUND All other assets and liabilities are classified
Year Year Asian Paints Limited (the ‘Company’) is a public limited as non-current.
2020-21 2019-20
Company domiciled and incorporated in India under the Indian
(C) CASH FLOW FROM FINANCING ACTIVITIES For the purpose of current/non-current classification of
Companies Act, 1913. The registered office of the Company
(Repayment) of non-current borrowings (5.90) - assets and liabilities, the Company has ascertained its
is located at 6A, Shantinagar, Santacruz East, Mumbai, India.
Proceeds from non-current borrowings 1.96 17.86 normal operating cycle as twelve months. This is based
Acceptances (net) 115.17 (202.80) The Company is engaged in the business of manufacturing, on the nature of services and the time between the
Repayment of lease liabilities (158.71) (148.72) selling and distribution of paints, coatings, products related acquisition of assets or inventories for processing and
to home décor, bath fittings and providing related services. their realization in cash and cash equivalents.
Finance costs paid (69.36) (76.78)
Dividend and Dividend tax paid (466.06) (2,090.41) 1. SIGNIFICANT ACCOUNTING POLICIES AND KEY 1.3. Summary of Significant accounting policies
Net Cash (used in) Financing activities (582.90) (2,500.85) ACCOUNTING ESTIMATES AND JUDGEMENTS
a) Business combinations
Significant Accounting Policies: Business combinations are accounted for using
(D) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 2,439.65 (462.43)
[A+B+C] 1.1. Basis of preparation of Financial Statements the acquisition method. At the acquisition date,
Integrated Report 2020-21

Add: Cash and cash equivalents as at 1st April 693.93 1,156.36 These Financial Statements are the separate Financial identifiable assets acquired and liabilities assumed

Financial Statements
Cash and cash equivalents as at 31st March 3,133.58 693.93 Statements of the Company (also called Standalone are measured at fair value. For this purpose, the
Financial Statements) prepared in accordance with liabilities assumed include contingent liabilities
Notes: Indian Accounting Standards (‘Ind AS’) notified under representing present obligation and they are
(a) The above Cash Flow Statement has been prepared under the “Indirect Method” as set out in the Indian Accounting Standard section 133 of the Companies Act, 2013, read together measured at their acquisition date fair values
(Ind AS 7) - Statement of Cash Flow. irrespective of the fact that outflow of resources
with the Companies (Indian Accounting Standards)
(b) In the presentation of the Cash Flow Statement for the year ended 31st March, 2020, in cash flows from financing activities, net cash embodying economic benefits is not probable. The
Rules, 2015 (as amended).
outflows relating to acceptances of ` 202.80 crores were incorrectly reported as net cash inflows with a consequential impact on
consideration transferred is measured at fair value
decrease in trade and other payables in the cash flows from operating activities. The Cash Flow Statement for the corresponding period These Financial Statements have been prepared and
(i.e. year ended 31st March, 2020) has been corrected in the Financial Statements for the current year to reflect this. There is no impact
at acquisition date and includes the fair value of
presented under the historical cost convention, on the
198 on any other line item in the Financial Statements. any contingent consideration. However, deferred 199
accrual basis of accounting except for certain financial
(` in Crores) tax asset or liability and any liability or asset
assets and financial liabilities that are measured at fair
As at As at relating to employee benefit arrangements arising
values at the end of each reporting period, as stated in
31.03.2021 31.03.2020 from a business combination are measured and
the accounting policies set out below. The accounting
(c) Cash and Cash Equivalents comprises of recognized in accordance with the requirements of
policies have been applied consistently over all the
Cash on hand 0.02 0.04 Ind AS 12, Income Taxes and Ind AS 19, Employee
periods presented in these Financial Statements.
Balances with Banks: Benefits, respectively.
- Current Accounts 81.62 131.32
1.2. Current / Non-Current Classification Where the consideration transferred exceeds the
- Cash Credit Account 12.27 205.60
Any asset or liability is classified as current if it satisfies fair value of the net identifiable assets acquired
Cheques, draft on hand 19.36 -
any of the following conditions: and liabilities assumed, the excess is recorded as
Cash and cash equivalents (Refer note 11A) 113.27 336.96
goodwill. Alternatively, in case of a bargain purchase
Add: Investment in liquid mutual funds [Refer note 4II (B)(ii)] 3,020.31 356.97 i. the asset/liability is expected to be realized/settled
wherein the consideration transferred is lower
Cash and cash equivalents in Cash Flow Statement 3,133.58 693.93 in the Company’s normal operating cycle;
than the fair value of the net identifiable assets
Significant accounting policies and key accounting estimates and judgements (Refer note 1) ii. the asset is intended for sale or consumption; acquired and liabilities assumed, the Company
See accompanying notes to the Financial Statements (Refer note 2-46) after assessing fair value of all identified assets and
iii. the asset/liability is held primarily for the
purpose of trading; liabilities, record the difference as a gain in other
comprehensive income and accumulate the gain in
As per our report of even date attached For and on behalf of the Board of Directors of Asian Paints Limited iv. the asset/liability is expected to be realized/settled equity as capital reserve. The costs of acquisition
CIN:L24220MH1945PLC004598 within twelve months after the reporting period; excluding those relating to issue of equity or debt
For Deloitte Haskins & Sells LLP Ashwin Dani Amit Syngle securities are charged to the Statement of Profit
v. the asset is cash or cash equivalent unless it is
Chartered Accountants Chairman Managing Director & CEO and Loss in the period in which they are incurred.
restricted from being exchanged or used to settle
F.R.N: 117366W/W-100018 DIN: 00009126 DIN:07232566
a liability for at least twelve months after the In case of business combinations involving entities
Abhijit A. Damle M.K. Sharma R.J. Jeyamurugan
reporting date; under common control, the above policy does not
Partner Chairman of Audit Committee CFO & Company Secretary
Membership No: 102912 DIN:00327684 vi. in the case of a liability, the Company does not apply. Business combinations involving entities
have an unconditional right to defer settlement under common control are accounted for using
Mumbai Mumbai
of the liability for at least twelve months after the the pooling of interests method. The net assets
12th May, 2021 12th May, 2021
reporting date. of the transferor entity or business are accounted