Glitches In Sbi Associates Accounts To The Fore

There are at least a dozen instances where the associates of the State Bank of India (SBI), either did not stick to the accounting standards (AS) issued by the Institute of Chartered Accountants of India (ICAI) or preferred the traditional accounting standard against the ones issued by ICAI, the 2000-01 annual report reveals.

However, the bank managements have countered these observations in the reports.

The banks involved are State Bank of Bikaner and Jaipur, State Bank of Indore, State Bank of Mysore, State Bank of Patiala, State Bank of Saurashtra, and State Bank of Travancore.

While most of the subsidiary banks preferred to account leave encashment, certain items of income and expenditure and treatment of revaluation of effect of foreign currency monetary assets and liabilities on cash basis, this treatment was in contravention to accounting standards 15, 5 and 11 (revised), the auditors have noted in the report. In addition, State Bank of Saurashtra did not follow AS 9 related to this.

 

The management however argued that since bank employees can encash unavailed leave during the period of service or at the time of cessation of service tenure, AS 15 does not apply to that extent and the expenses on employees likely to avail encashment of accumulated leave, if any, at the time of retirement are accounted for on payment basis.

For AS 5, it was argued that since the entire amount of leave encashment was written off, it had no impact on the balance-sheet of the company.

The banks have adhered to FEDAI or RBI guidelines, which is the legal alternative to AS 11. State Bank of Saurashtra however has chosen to remain silent on the reason for non conformity to AS 9, the bank managements have explained.

The auditor's report stated that information on leave encashment paid during the period at State Bank of Bikaner and Jaipur has not been separately disclosed in the accounts as required by accounting standard 5.

Auditors of State Bank of Hyderabad said accounting policy on translation or conversion of foreign exchange transactions was not in accordance with AS 11. Further, accounting policy with regard to expenses were for its voluntary retirement scheme accounted on cash basis against standards issued by ICAI.

The bank did not disclose as required by AS 5 the nature and amount of the encashment of leave salary related to prior periods separately in its profit and loss statement in a manner that its impact in the current profit/loss can be ascertained.

Auditors of State Bank of Mysore observed that foreign exchange transactions and their year-end translation, has been consistently following FEDAI/RBI guidelines, which are mandatory in preference to the revised accounting standard 11 issued by ICAI.

With regards to foreign exchange transaction and its year end valuation, State Bank of Mysore has consistently followed FEDAI/RBI guidelines which are mandatory in preference to AS 11, said its auditors.

The bank did not adhere to AS 15 for accounting leave encashment, which was done on cash basis.

State Bank of Patiala was no different. The auditing CA firm reported on non-compliance of AS 11 and 15. Things were no different at State Bank of Travancore which did not conform to Accounting Standards 15 and 11, said auditors.