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TO ALL THE MEMBERS OF
TREE HOUSE EDUCATION & ACCESSORIES LIMITED
Report on the Standalone Indian AS Financial Statements
We have audited the accompanying standalone Ind AS financial statements of TREE HOUSE EDUCATION & ACCESSORIES LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 2018, the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and a summary of significant accounting policies and other explanatory information.
Managements Responsibility for the Standalone AS Financial Statements
The Companys Board of Directors are responsible for the matters stated in Section 134(5) of the Companies Act 2013 ("the Act") with respect to preparation of these standalone Ind AS financial statements to give a true and fair view of the financial position, financial performance (including other comprehensive income), cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting standards specified in the Companies (Indian Accounting Standards) Rules, 2015 (as amended) under Section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind As financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these standalone Ind AS financial statements based on our audit. We have taken into account the provisions of the Act and the Rules made thereunder including the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.
We conducted our audit of the standalone Ind AS financial statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act and other applicable authoritative pronouncements issued by the Institute of Chartered Accountants of India. Those standards and pronouncements require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the standalone Ind AS financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the standalone Ind AS financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Companys preparation of the standalone Ind AS financial statements that give a true and fair view, in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Companys Directors, as well as evaluating the overall presentation of the standalone Ind AS financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.
Basis of Forming an Opinion
1.We draw your attention to the Standalone Ind AS Financial Statements, with regard to Fixed Assets. The Company has discontinued most of the centres operated by the Company during F.Y. 2016-17 and have converted some of them into franchisee during F.Y. 2016-17 & 2017-18. The Company has informed us that it has identified Furniture & Fixtures and Leasehold Improvements into those lying at closed centres, franchise centres and own centres in a phased manner.
The management has informed us that furniture & fixtures lying at the some of the closed centres were taken over and were stored at various places. The other furniture & fixtures and leasehold improvements at the closed centres that could not be taken over by the Company or not in control of the Company, has been written off. In case of franchise converted centres the Company has entered into a service agreement wherein it has been provided that the franchise centre shall use the furniture & fixtures and leasehold improvement lying at the centres. The management is in the process of verifying the assets lying at the franchise centres.
2.We draw attention to Standalone Ind AS Financial Statements with regards to Intangible Assetsin respect of Goodwill and "Business Commercial Rights". Management is of the view that no revenue is generated from Mira KG, Baroda and Utsah Education and therefore Goodwill of Mira KG, Baroda and Utsah Education has been impaired fully with in the meaning of lndian Accounting Standards (lND AS)-36. Similarly management is of the view that no revenue is generated from Dixit Education Society and therefore "Business Commercial Rights" in respect of Dixit Education Society has been fully impaired within the meaning of lndian Accounting Standards (lND AS)-36.
3.We draw attention to Standalone Ind AS Financial Statements with regards to Deposits given to Educational Trusts amounting to Rs. 18889 lakhs as on March 31, 2017, the management has carried out an exercise to book the impairment loss of Financial Assets within the meaning of Indian AS-109. Accordingly the management has booked impairment loss of Rs. 2425 lakhs based on DCF method and the balance carrying value of the deposits at Rs. 16533 lakhs is carried in books of accounts at carrying value for the year ended 31st March, 2018.
In respect of deposit given to Janodhar Shikshan Prasarak Mandal, the Company has filed complaint before Economic Offence Wing-I, Navi Mumbai for recovery of the said deposit. In view of pending proceedings the deposit verable from Janodhar Shikshan Prasarak Mandal is neither written off nor impaired in books of accounts.
4.We draw attention to the StandaloneInd AS Financial Statements with regards to loan advanced to Tree House Employees Welfare Trust to enable the Trust to buy ESOPs for its employees. The management has revalued the carrying amount of the said loan at face value and it represents the fair value of the loan receivable from Tree House Employees Welfare Trustas required and stated in compliance to lndian Accounting Standards issued under Companies (lndian Accounting standards) Rules 2015.
5.We draw attention to the Standalone Ind AS Financial Statements with regards to Trade Receivables amounting to Rs. 2540 lakhs due from Educational trust. In view of the management no provision is required as such balances are good and recoverable.
In our opinion the deliverables and receipts are outstanding for a longer period of time.
6.We draw attention to the Standalone Ind AS Financial Statements with regards to the carrying value of Lease Deposits with landlords amounting to Rs807.98lakhs related to closed/discontinued centres. The lease deposits with landlords for centres already converted into franchise centres of completely closed centres has either been received back or adjusted against lease rentals payable or outstanding expenses or reimbursement of expenses that were found payable at the time of closure of the centres or conversion of the centres into franchise centres.
7.The Company has defaulted in repayment of loans availed from financial institutions due to which these borrowings have been classified as short term borrowings. The management has informed us that the Company has received notices from financial institutions under "SARFAESI Act". The amount classified as short term borrowings is at Rs. 7549 lakhs.
8.The policies, procedures and overall internal controls needs to be strengthen in order to provide proper evidences regarding recover ability of receivables, valuations of financial assets including deposits, write off of fixed assets including impairments and accounting for direct & indirect taxes including other statutory compliances.
9.The management has conducted physical verification of inventory at reasonable intervals during the year and no material discrepancies were noticed on physical verification of stocks as compared to book records. However during the year under audit the company has bifurcated the inventory into non-moving, obsolete, redundant.
10. Confirmation letters have been sent by the Company to sundry creditors and parties to whom loans & advances, deposits have been granted for confirming the balances lying in their ledger accounts in books of the Company. In view of confirmations having been received from only few of the parties, the balance under these heads have been shown as per books of accounts and are subject to reconciliation and adjustment, if any.
11. Some landlords and creditors have initiated legal proceedings against the Company, which may result in compensation, interest and other penalties.
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India of the standalone state of affairs of the Company as at March 31, 2018 and its loss (including other comprehensive income), its cash flows and the changes in Equity for the year ended on that date.
Report on Other Legal and Regulatory Requirements
1.As required by the Companies (Auditors Report) Order, 2016, issued by the Central Government of India, in terms of section 143(11) of the Act ("The Order"), and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure B statement on the matters specified in paragraphs 3 and 4 of the Order.
2.As required by section 143(3) of the Act, we report that:
a) We have sought and obtained all the information and explanations, which to the best of our knowledge and belief, were necessary for the purpose of our audit.
b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.
c) The Balance Sheet, the Statement of Profit and Loss(including other comprehensive income) and the Cash Flow Statement and the Statement of Changes in Equity dealt with by this Report are in agreement with the books of account.
d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act.
e) On the basis of written representations received from the directors of the Company as on March 31, 2018, and taken on record by the Board of Directors of the Company, none of the directors of the Company are disqualified as on 31stMarch, 2018 from being appointed as a director in terms of section 164(2) of the Act.
f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure A". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the companys financial controls over financial reporting.
g) With respect to other matters to be included in the Auditors Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014, in our opinion and to the best of our information and according to the explanations given to us:
i. The Company has numerous pending litigations and suits filed against the company and its directors which may impact its financial position. The Company has not disclosed the impact of such pending litigations.
ii. The Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses.
iii. There are no amounts required to be transferred to the Investor Education and Protection Fund by the Company during the year ended March 31, 2018.
For S. Dedhia & Co,
CA Sandeep Dedhia
M. No. 102606
Date : 30/05/2018
Place : Mumbai