The National Financial Reporting Authority (NFRA) on Tuesday flagged flaws in India’s leading government-owned Iron ore company KIOCL) claiming that its accounting policy for Foreign Exchange (Fx) Forward Contracts and a material element was erroneous.
KIOCL Limited (Formerly known as Kudremukh Iron Ore Company Limited) is a Flagship Company under the Ministry of Steel and has been a pioneer with over four decades of experience in operating Iron Ore Mining in India. This is the first-ever Financial Reporting Quality Review Report (FRQRR) report on KIOCL where NFRA questioned its Foreign Exchange forward and material element policy.
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The NFRA has also asked KOICL to improve its functioning and accounting standards. “In case there are violations of accounting standards and the law that require action to be taken under the law, the matter is reported to the authorities who can take action,” the NFRA stated in its report.
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In its report, NFRA said KIOCL’s accounting policy for Foreign Exchange (Fx) Forward Contracts is erroneous and it is non-compliant with the classification and measurement requirements. Further, the accounting policy for a material element i.e. Revenue (with the corresponding impact on related assets such as Trade Receivables, Inventories etc.) as stated in its statement of significant accounting policies is erroneous.
“This erroneous accounting policy raises questions over the reliability and accuracy of the financial statements of the Company,” NFRA said.
The Centre had created the National Financial Reporting Authority (NFRA) in 2018 on the recommendations of a Parliamentary standing committee after the Satyam scam to oversee the auditing profession and accounting standards in India. The NFRA, as an independent regulator for the auditing profession, has been tasked to improve the transparency and reliability of financial statements and information presented by listed companies and large unlisted companies in India.
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