Accounting Of Vrs Pares Loss Figure For Whirlpool

Whirlpool of India Ltd, the domestic arm of the US white goods giant, has shown reduced losses of about Rs 40 crore in the 15-month financial year till December 1996, according to the companys balance sheet.

The company achieved this by capitalising on its expenditure on the voluntary retirement scheme (VRS).

The company has treated VRS as a deferred expenditure in its balance sheet.

Had the VRS expense of Rs 40.07 crore been shown on the profit and loss account, Whirlpool's losses would have crossed Rs 100 crore instead of the reported net loss of Rs 64.30 crore at the end of December 31, 1996.

 

The company's treatment of the VRS expense, however, is not in violation of any accounting norm.

A company spokesperson explained that Whirlpool had planned to trim its employees' strength at one go last year to achieve operational efficiency.

During 1996, Whirlpool India had extended its VRS to its 1,305 employees, as part its plans to improve its productivity.

But, we have decided to treat the expenditure incurred on the VRS on a deferred basis, as the company would ideally have the carried the VRS burden annually, he said.

He added that its losses would have increased by around Rs 40 crore had the company placed the VRS expense on the profit and loss account.

Whirlpool has also deferred its expenditure on advertisements of about Rs 5.51 crore during the period. The spokesperson explained this was because the advertisement was not a `tactical one aimed at increasing sales, but at building the Whirlpool brand.