Batson International

Part (A)
Group 3
Ankur Agarwal
E001 Shivam Garg
E018
Rajeev Jain
E025
Saumil Kakkad

Introduction
Publicly traded multinational based outside US
Provides high-technology products and services
Uses IFRS for reporting purposes
Historically a Growth Stock and company is looking to

maintain that position

Prior years first quarter EPS reported at 52 cents per share
Analysts projection for EPS of current year first quarter
58 cents per share while Managements Estimated EPS
comes at 51 cents per share
If EPS comes out to be less than analyst's projection the
price earnings ratio will fall which can lead to the collapse
of their acquisition plans

IFRS Vs. US GAAP

Areas

IFRS

US GAAP

Period record
method

Entities are recorded via

Discrete-period-method

Entities are recorded

via Integral-periodmethod

Inventory Write
down

Inventory write-down can

be reversed

Any reversal in
inventory write-off is
prohibited

Deffered Tax

Deferred taxes are shown

as separate line items on
the balance sheet

Deferred taxes are

included with assets
and liabilities

Intangiable Assets Intangible assets are

recognized if the asset has
a future economic benefit

Intangible assets are

considered at fair
value

Uncommon
Expenses

Uneven Cost should

be charged at an
appropriate amount
in all the interim

Uneven cost incurred in

interim periods should be
deferred only if deferral is
also done at the end of

Current Status

Maintenance cost

All data in cents per

share

EIC Tax Savings

All data in cents per

share

Cost of Relocation

All data in cents per

share

Advertising Cost

All data in cents per

share

Dividend from Brazil

All data in cents per

share

All data in cents per

share

Corporate Restructuring

Items

Present status

Savings by
IFRS(Cents Per
share)

Savings by US
GAAP(Cents per
share)

Maintenance cost

6 cents per share

3 cents per share

3 cents per share

EIC Tax Savings

2 cents per share

1 cent per share

1 cent per share

Cost of relocation

3 cents per share

No savings

2.25 cents per

share

Advertising cost

2 cents per share

No savings

2 cents per share

Advertising cost
(Summer)

2 cents per share

2 cents per share

2 cents per share

Dividend from
Brazil

4 cents per share

No savings

No savings

Corporate
restructuring
(Reserves)

None

0.5 cents per

share

0.5 cents per

share

Total EPS

51 cents per
share

57.50 cents per

share

61.75 cents per

share

Batson
International,
S.A. (B)

Part B Accounting
irregularities

Part B Accounting
irregularities

Part B Accounting
irregularities

Part B Accounting
irregularities

Part B Accounting
irregularities

Batson
International,
S.A. (C)

Sarbanes-Oxley Act (SOX)

Accounting scandals of Enron, WorldCom, & Tyco in

2000s disturbed the corporate world

Investors demanded for stringent rules for
accounting standards & financial disclosures
SOX Act was passed by US congress in 2002
Two key provisions of the Act are:
Section 302: Requires senior management to

certify the accuracy of the reported financial

statement
Section 404: Requires that management establish
internal controls and approve its adequacy

SOX Act continued

Under Section 302 -Corporate Responsibility

for Financial Reports, the signing officers

should:
Maintain internal controls
Ensure that material information related to

the issuer is available in internal control

Evaluate effectiveness of the issuer's
internal controls within 90 days prior to
the report; and
Comment on the effectiveness of the
internal controls

Internal control
A process, effected by the senior management which is

designed to provide "reasonable assurance" regarding

the achievement of objectives in the following
categories:
Effectiveness and efficiency of operations
Reliability of financial reporting
Compliance with applicable laws and regulations.
Safeguarding of Assets

Plays a vital role in detecting fraud and protecting

organisations resources both tangible and intangible.

Mandatory for all Listed Companies under local
companies Act
Self inspection by the company management

Committee of Sponsoring
Organisations of the Treadway
Commission (COSO)
COSO has established a common internal control model

against which companies and organizations may assess their

control systems.
The five components of COSO framework are:
Control Environment
Risk Assessment
Control Activities
Information and communication
Monitoring
Limitations
Lot of human action leading to errors in processing and
judgement
Complex Model

Case Description
Batson International, S.A. management is

responsible
for
establishing
and
maintaining adequate internal control over
financial reporting under Rule 14-15(f) of
the Securities Exchange Act,2004.
This

certification is required under local

Companies Act and required for all listed
companies.
Batson International used COSO framework
criteria to evaluate the effectiveness of its
internal control over financial reporting.

Continued
Management concluded that reporting was

effective based on the criteria issued by COSO

If company repots any deficiency in their
report they will not be delisted
If company finds deficiency and corrects it in
the same fiscal year, it does not have to
report it
The Companies Act also requires independent
auditor to express an opinion

Conclusion
It is the duty of CFO to sign the

management report on internal control

over financial reporting certification.
If company fails to report a material defect
or there is false representation CFO will be
held responsible.
In such cases CFO will be liable to five
years or less imprisonment and fine of $5
million.