THE MEMBERS OF
ABB India Limited
Report on the Audit of the Financial Statements
We have audited the financial statements of ABB India Limited ("theCompany"} which comprise the balance sheet as at 31 December 2021 the statement ofprofit and loss (including other comprehensive income} statement of changes in equity andstatement of cash flows for the year then ended and notes to the financial statementsincluding a summary of the significant accounting policies and other explanatoryinformation.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theCompanies Act 2013 ("Act"} in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India of thestate of affairs of the Company as at 31 December 2021 and profit and other comprehensiveincome changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specifiedunder section 143(10} of the Act. Our responsibilities under those SAs are furtherdescribed in the Auditor's Responsibilities for the Audit of the Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the financial statements under theprovisions of the Act and the Rules thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the Code of Ethics. We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion on the financial statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters.
|The key audit matter ||How the matter was addressed in our audit |
|Revenue recognition || |
|See note 2.3.1(a) 2.6 24 and 46 to the financial statements || |
|Revenue from fixed price contracts are recognized in accordance with Ind AS 115 Revenue from Contracts with Customers and as detailed in note 2.6 of the "significant accounting policies" in the financial statements. ||In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence: |
|There are key judgements and estimates involved in recognition of revenue relating to fixed price contracts on a percentage of completion method which includes: ||1. We assessed the appropriateness of the revenue recognition accounting policies by comparing with applicable accounting standards. |
| Estimation of total contract costs and remaining costs to completion which is a critical factor in measuring progress of a contract and amounts of revenue to be recognized; ||2. We understood the process on revenue recognition of fixed price contracts and tested key internal controls (both design and operating |
| Evaluation of risks arising from operational delays contract terms changes in estimations technical legal external environment etc. This requires the Company to estimate costs to capture such risks including liquidated damages and warranties. ||effectiveness) with respect to revenue recognition of such contracts on random sample basis. |
|In view of the above and given the Company and its stakeholders focus on revenue as a key performance indicator we determined this to be a key audit matter. ||3. We carried out analytical procedures on revenue recognised during the year to identify unusual variances and discussed with designated management personnel. |
| ||4. We performed substantive testing on the statistically selected samples of revenue transactions recorded during the year by testing the underlying documents. |
| ||5. We evaluated management's estimates over contract costs by performing analytical procedures on such estimates and discussed with designated management personnel. |
| ||6. We performed a retrospective review for contracts completed during the current year by comparing the final outcome of the contracts with previous estimates made for those contracts to assess the reliability of the management's estimation process. |
| ||7. We tested provision for onerous contracts on a random sampling basis. |
| ||8. We performed tests on whether actual costs have been accrued in the correct period by testing the underlying documents for samples selected using statistical sampling. |
| ||9. We tested the disclosures made in the financial statements. |
|Recoverability of trade receivables ||In view of the significance of the matter we applied the following audit procedures in this area among others to obtain sufficient appropriate audit evidence: |
|See note 2.3.1(e) 2.12(a) 11 and 38(iii)(i) to the financial statements ||1. We obtained an understanding of the processes implemented by management to estimate impairment provision against trade receivables. |
|Trade receivables including retention money with customers forms a significant part of the financial statements. Customer contracts typically involve time consuming and complex conditions around closure of contracts including technical acceptances. This generally leads to longer and significant time for realization of receivables. As a result of the above management's assessment of recoverability of trade receivables involves critical evaluation of all factors impacting recoverability including impact of external environment such as capability of customers to pay. ||2. We tested key controls (both design and operating effectiveness) over management's estimate of impairment loss on random sample basis. |
|Management makes an impairment allowance for trade receivables on the basis of its assessment of recoverability of specific customers and on the basis of expected credit loss model for the remaining customers in accordance with Ind AS 109 Financial Instruments. For the purposes of impairment assessment significant judgements and assumptions are made including assessing credit risk timing and amount of realization etc. In view of above we determined this to be a key audit matter. ||3. We obtained and tested the appropriateness of ageing of trade receivables with the underlying invoices on a sample basis using random sampling. |
| ||4. We evaluated the impairment model adopted by management to estimate the expected credit loss and tested related computations. We corroborated management's estimates on the basis of past trends. |
| ||5. We obtained discussed and tested management assessment of impairment for specific customer balances with designated management personnel. |
| ||6. We have circulated direct confirmations on a sample basis using statistical sampling. In case of non-receipt of such confirmations alternate test procedures such as testing subsequent receipts and underlying documents have been performed |
The Company's Management and Board of Directors are responsible for the otherinformation. The other information comprises the information included in the Company'sannual report but does not include the financial statements and our auditor's reportthereon. The annual report is expected to be made available to us after the date of thisauditor's report.
Our opinion on the financial statements does not cover the other information and wewill not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated. When we read the annual report if we conclude that there is a materialmisstatement therein we are required to communicate the matter to those charged withgovernance and take necessary actions as applicable under the applicable laws andregulations.
Management's and Board of Directors' Responsibility for the Financial Statements
The Company's Management and Board of Directors are responsible for the matters statedin section 134(5) of the Act with respect to the preparation of these financial statementsthat give a true and fair view of the state of affairs profit/ loss and othercomprehensive income changes in equity and cash flows of the Company in accordance withthe accounting principles generally accepted in India including the Indian AccountingStandards (Ind AS) specified under section 133 of the Act. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Company and for preventing and detectingfrauds and other irregularities; selection and application of appropriate accountingpolicies; making judgments and estimates that are reasonable and prudent; and designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring accuracy and completeness of the accounting records relevant tothe preparation and presentation of the financial statements that give a true and fairview and are free from material misstatement whether due to fraud or error.
In preparing the financial statements the Management and Board of Directors areresponsible for assessing the Company's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless the Board of Directors either intends to liquidate the Companyor to cease operations or has no realistic alternative but to do so.
The Board of Directors is also responsible for overseeing the Company's financialreporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order todesign audit procedures that are appropriate in the circumstances. Under section 143(3)(i)of the Act we are also responsible for expressing our opinion on whether the Company hasadequate internal financial controls with reference to financial statements in place andthe operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures in the financial statements made by theManagement and Board of Directors.
Conclude on the appropriateness of the Management and Board of Directors use ofthe going concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditor's report tothe related disclosures in the financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditors' report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditors' Report) Order 2016 ("the Order")issued by the Central Government in terms of section 143 (11) of the Act we give in the"Annexure A" a statement on the matters specified in paragraphs 3 and 4 of theOrder to the extent applicable.
2 (A) As required by Section 143(3) of the Act we report that:
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit.
b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books.
c) The balance sheet the statement of profit and loss (including other comprehensiveincome) the statement of changes in equity and the statement of cash flows dealt with bythis Report are in agreement with the books of account.
d) In our opinion the aforesaid financial statements comply with the Ind AS specifiedunder section 133 of the Act.
e) On the basis of the written representations received from the directors as on 31December 2021 taken on record by the Board of Directors none of the directors isdisqualified as on 31 December 2021 from being appointed as a director in terms of Section164(2) of the Act.
f) With respect to the adequacy of the internal financial controls with reference tofinancial statements of the Company and the operating effectiveness of such controlsrefer to our separate Report in "Annexure B".
(B) With respect to the other matters to be included in the Auditors' Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations as at 31 December 2021on its financial position in its financial statements - Refer note 9 22 23 and note 41to the financial statements;
ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long-term contracts includingderivative contracts- Refer note 19 and note 22 to the financial statements;
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company;
iv. The disclosures in the financial statements regarding holdings as well as dealingsin specified bank notes during the period from 8 November 2016 to 30 December 2016 havenot been made in these financial statements since they do not pertain to the financialyear ended 31 December 2021.
(C) With respect to the matter to be included in the Auditors' Report under section197(16):
In our opinion and according to the information and explanations given to us theremuneration paid by the Companyto its directors during the current year is in accordancewith the provisions of Section 197 of the Act. The remuneration paid to any director isnot in excess of the limit laid down under Section 197 of the Act. The Ministry ofCorporate Affairs has not prescribed other details under Section 197(16) which arerequired to be commented upon by us.
Annexure - A to the Independent Auditors' Report
The Annexure referred to in independent Auditors' Report to the members of the Companyon the financial statements for the year ended 31 December 2021 we report that:
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a regular programme of physical verification of its fixed assets bywhich all fixed assets are verified in a phased manner over a period of three years. inour opinion this periodicity of physical verification is reasonable having regard to thesize of the Company and the nature of its assets. Pursuant to the programme certain fixedassets were physically verified during the year. No material discrepancies were noticed onsuch verification.
(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company the title deeds of immovable properties areheld in the name of the Company except for freehold land aggregating to 1 acre and 32guntas of gross carrying value and net carrying value amounting to Rs2.90 crores as at 31December 2021 acquired by the Company on a slump sale basis in 2011. As explained to usregistration of the title deeds for this land is in process.
(ii) The inventory except goods-in-transit and stocks lying with third parties hasbeen physically verified by the Management during the year. in our opinion the frequencyof such verification is reasonable. The discrepancies noticed on such verification betweenthe physical stock and book records were not material. For stocks lying with third partiesat the year-end written confirmations have been obtained by the Management.
(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms limited liabilitypartnerships or other parties covered in the register maintained under section 189 of theCompanies Act 2013 ("the Act"). Accordingly the provisions of clause 3(iii)(a) (b) and (c) of the Order are not applicable to the Company.
(iv) According to the information and explanations given to us there are no loansinvestments guarantees and security given in respect of which provisions of section 185and 186 of the Act are applicable. Accordingly the provisions of clause 3(iv) of theOrder are not applicable to the Company.
(v) According to the information and explanations given to us the Company has notaccepted any deposits from the public. Accordingly paragraph 3(v) of the Order is notapplicable.
(vi) We have broadly reviewed the books of account maintained by the Company pursuantto the rules prescribed by the Central Government of india for maintenance of cost recordsunder Section 148(1) of the Act and are of the opinion that prima facie the prescribedaccounts and records have been made and maintained. However we have not made a detailedexamination of the records.
(vii) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/ accrued in the books ofaccount in respect of undisputed statutory dues including provident fund employees' stateinsurance income-tax duty of customs goods and services tax cess and other materialstatutory dues have been generally regularly deposited during the year by the Company withthe appropriate authorities. As explained to us the Company did not have any dues onaccount of sales tax value added tax service tax and excise duty.
According to the information and explanations given to us no undisputed amountspayable in respect of provident fund employees' state insurance income-tax duty ofcustoms goods and services tax cess and other material statutory dues were in arrears asat 31 December 2021 for a period of more than six months from the date they becamepayable.
(b) According to information and explanations given to us the following dues of goodsand services tax income tax sales tax duty of excise duty of customs service tax andvalue added tax have not been deposited by the Company on account of disputes:
|Name of the Statute ||Nature of dues ||Amount (Rs.in Crores)* ||Period to which it relates ||Forum where dispute is pending |
|Customs Act 1962 ||Customs duty interest and penalty demanded ||15.80 ||2008-2018 ||Commissioner of Customs/ Custom Excise and Service Tax Appellate Tribunal |
|Income Tax Act 1961 ||Income tax interest and penalty demanded ||71.60 ||2011-2018 ||Commissioner of Income Tax (Appeals) |
| ||Goods and service tax interest and penalty demanded ||7.43 ||2018-2020 ||GST Tribunal / Joint Commissioner of Commercial Taxes (Appeals)/High court |
|Goods and service Tax Act 2017 ||Service tax interest and penalty demanded ||70.11 ||1996-2015 ||Commissioner (Appeals)/Commissioner (LTU) / Ministry of Finance (Department of Revenue)/ Custom Excise and Service Tax Appellate Tribunal |
|Finance Act 1994 ||Service tax interest and penalty demanded ||28.38 ||2006-2015 ||Commissioner (Appeals)/ Custom Excise & Service Tax Appellate Tribunal/High Court/ Supreme Court |
|Sales Tax Act ||Sales tax Value added tax interest and penalty demanded ||266.70 ||1994-2019 ||Additional Commissioner (Appeals) / Assistant Commissioner of Commercial Taxes / Commissioner of Commercial Taxes / Deputy Commissioner of Commercial Taxes (Appeals) / Deputy Commissioner (Appeals) / Joint Commissioner of Commercial Taxes (Appeals) / Taxation Board/ High Court/ Sales Tax Appellate Tribunal/ Supreme Court |
* Net of amounts paid under protest.
(viii) According to the information and explanations given to us the Company did nothave any outstanding loans or borrowings from any financial institution or bank orGovernment or dues to debenture holders during the year.
(ix) The Company did not raise any money by way of initial public offer or furtherpublic offer (including debt instruments) and term loans during the year. Accordinglyparagraph 3 (ix) of the Order is not applicable.
(x) According to the information and explanations given to us no material fraud on theCompany by its officers or employees or fraud by the Company has been noticed or reportedduring the course of our audit.
(xi) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has paid/provided for managerialremuneration in accordance with the requisite approvals mandated by the provisions ofsection 197 read with Schedule V to the Act.
(xii) In our opinion and according to the information and explanations given to us theCompany is not a Nidhi company. Accordingly paragraph 3(xii) of the Order is notapplicable.
(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company all transactions with the related parties arein compliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the financial statements as required by the applicableaccounting standards.
(xiv) According to the information and explanations give to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.
(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly paragraph 3(xv) ofthe Order is not applicable.
(xvi) The Company is not required to be registered under section 45-IA of the ReserveBank of India Act 1934.
Annexure B to the Independent Auditors' report on the financial statements of ABB IndiaLimited for the year ended 31 December 2021.
Report on the internal financial controls with reference to the aforesaid financialstatements under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013
(Referred to in paragraph 2(A)(f) under Report on Other Legal and RegulatoryRequirements' section of our report of even date)
We have audited the internal financial controls with reference to financial statementsof ABB India Limited ("the Company"} as of 31 December 2021 in conjunction withour audit of the financial statements of the Company as at and for the year ended on thatdate.
In our opinion the Company has in all material respects adequate internal financialcontrols with reference to financial statements and such internal financial controls wereoperating effectively as at 31 December 2021 based on the internal financial controlswith reference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India (the "Guidance Note"}.
Management's Responsibility for Internal Financial Controls
The Company's management and the Board of Directors are responsible for establishingand maintaining internal financial controls based on the internal financial controls withreference to financial statements criteria established by the Company considering theessential components of internal control stated in the Guidance Note. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013 (hereinafter referred to as"the Act"}.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note and the Standards on Auditing prescribed undersection 143(10} of the Act to the extent applicable to an audit of internal financialcontrols with reference to financial statements. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls with reference tofinancial statements were established and maintained and whether such controls operatedeffectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to financialstatements included obtaining an understanding of such internal financial controlsassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgement including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls withreference to financial statements.
Meaning of Internal Financial controls with Reference to Financial Statements
A company's internal financial controls with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company's internal financial controlswith reference to financial statements include those policies and procedures that
(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the company are being made only inaccordance with authorisations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the financial statements.
Inherent Limitations of Internal Financial controls with Reference to FinancialStatements
Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial controls with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
|for B S R & Co. LLP |
|Chartered Accountants |
|Firm's registration number: 101248W/W-100022 |
|Amit Somani |
|Membership number: 060154 |
|UDIN: 22060154ABDFGC3011 |
|Place: Bengaluru |
|Date: February 10 2022 |