Envoy Textiles Limited, a listed company on the stock exchanges, has overstated its earning and assets by deviating from different accounting standards, said a Dhaka Stock Exchange report.
The DSE management prepared the report on the basis of audited financial statement of Envoy Textiles for the year ended on September 2012.The bourse, referring to its observations on the audit report, has asked the company to explain their position in this regard by October 30.
The DSE report said that the company had shown Tk 2.76 crore of deferred expenses as non-current asset, which overstated the company’s earning.
The report said that deferred expenses of the company must be recognised as expenses to comply with the paragraph 69 of Bangladesh Accounting Standard 38.
‘We are carrying the expenses from the beginning, it’s not current expense. That’s why the amount was shown as non-current asset,’ Envoy Textiles chief financial officer Saidul Islam told New Age.
The company also did not show depreciation on the newly added fixed assets of the company, which is another violation of paragraph 55 of BAS 16, added the report.
Due to non-recognition of depreciation of addition of fixed asset, the profit, earning per shares and carrying amount of the fixed assets of the company have been overstated, which would not let the investors get the actual financial picture of the company, the report said.
The company also violated another accounting standard by not recognising deferred tax assets or liabilities in accordance with the audited financial statements for the year ended on September 2012.
For taxable temporary differences associated with investments in subsidiaries, branches and associates and interests in joint ventures, a deferred tax liability shall be recognised in accordance with paragraph 39 on BAS 12.
Due to the violation of the accounting standards the financial statement of the company did not portray the actual picture of the company, the bourse report said.
‘The bourse earlier asked us why the company had not deducted the deferred taxes and depreciation. We replied that it would be deducted from the next year,’ Saidul Islam said.
‘The earlier statement of the company was pre-IPO accounts of the company, that’s why the expenses were not deducted,’ he added.
Envoy Textiles showed profits of Tk 42.42 crore with an EPS of Tk 4.24 as per the audited financial statement of the company for the last year.
The BSEC in June last year approved initial public offering of Tk 90 crore of the Envoy Textiles with an offer price of Tk 30, including a premium of Tk 20.
The company floated 3 crore ordinary shares among the public while the earning per share of the company showed Tk 4.42 according to the audited financial statement of 2010-11.
The company used the IPO proceedings for buying machineries, using as working capital and to bear the IPO cost.
-With New Age input
