To The Members of
FUTURE RETAIL LIMITED
Report on the Audit of the Standalone financial statements Opinion
We have audited the accompanying standalone financial statements of Future RetailLimited ("the Company") which comprise the Balance Sheet as at March 31 2020and the Statement of Profit and Loss (including Other Comprehensive Income) the Statementof Cash Flows and the Statement of Changes in Equity for the year then ended and asummary of significant accounting policies and other explanatory information.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Companies Act 2013 ("the Act") in the manner so required and give a trueand fair view in conformity with the [Indian Accounting Standards prescribed under section133 of the Act read with the Companies (Indian Accounting Standards) Rules 2015 asamended ("Ind AS") and other accounting principles generally accepted in Indiaof the state of affairs of the Company as at March 31 2020 and its profit totalcomprehensive income its cash flows and the changes in equity for the year ended on thatdate.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with theStandards on Auditing specified under section 143(10) of the Act (SAs). Ourresponsibilities under those Standards are further described in the Auditor'sResponsibility for the Audit of the Standalone financial statements section of our report.We are independent of the Company in accordance with the Code of Ethics issued by theInstitute of Chartered Accountants of India (ICAI) together with the ethical requirementsthat are relevant to our audit of the standalone financial statements under the provisionsof the Act and the Rules made thereunder and we have fulfilled our other ethicalresponsibilities in accordance with these requirements and the ICAI's Code of Ethics. Webelieve that the audit evidence obtained by us is sufficient and appropriate to provide abasis for our audit opinion on the standalone financial statements.
Emphasis of Matter:
We draw attention to Note no.50 of the statement which describes management'sassessment of the impact of the COVID 19 pandemic on the financial results of the company.
Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the standalone financial statements of the current period.These matters were addressed in the context of our audit of the standalone financialstatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matter described below to be thekey audit matters to be communicated in our report.
We have determined the matters described below to be the key audit matters to becommunicated in our report. We have fulfilled the responsibilities described in theAuditor's responsibilities for the audit of the standalone Ind AS financial statementssection of our report including in relation to these matters. Accordingly our auditincluded the performance of procedures designed to respond to our assessment of the risksof material misstatement of the standalone Ind AS financial statements. The results of ouraudit procedures including the procedures performed to address the matters below providethe basis for our audit opinion on the accompanying standalone Ind AS financial statements
|Key Audit Matter ||Auditor's Response |
|1 Revenue Recognition ||Principal Audit Procedures |
|Accuracy of recognition measurement presentation and disclosures of revenues and other related balances in view of adoption of Ind AS 115 "Revenue from Contracts with Customers" (new revenue accounting standard) ||We assessed the appropriateness of the revenue recognition accounting policies including those relating to rebates and discounts by comparing with new revenue accounting standard. |
| ||Tested the relevant information technology system's access and change management controls which govern revenue recognition interfaces between different systems and key management controls over revenue recognition to assess the completeness of the revenue entries being recorded in the accounting system. |
| ||We performed substantive testing by selecting samples of rebate and discount transactions recorded during the year and comparing the parameters used in the calculation of the rebate and discounts with the relevant source documents (including schemes) to assess whether the methodology adopted in the calculation of the rebates and discounts was in accordance with the terms and conditions defined in the corresponding schemes. Performed analytical procedures for reasonableness of revenues. |
|2 Valuation of Inventory ||Principal Audit Procedures |
|We identified this matter as key in our audit due to the materiality of the value of inventories and the numerous SKUs and high volume of movement in the inventory. ||Assessment of the design implementation and operational effectiveness of the relevant controls in place in the inventory management and measurement process. |
| ||Evaluation of the inventory costing methodology and valuation policy established by management including compliance with the applicable accounting standard. |
| ||Assessment of the inventory costing methodology and valuation policy maintained and applied in the IT system. Obtained an understanding of management's estimate of business impact of COVID 19 pandemic on provision on inventories. |
| ||Assessing the analysis and assessment made by the management with respect to slow moving and obsolete inventory. |
| ||Verification of the determination of net realizable value on a representative sample basis |
|3 Implementation of Ind AS 116 - Leases (as described in Note 4a of the Standalone Ind AS Financial Statements) ||Principal Audit Procedures |
|On March 30 2019 MCA notified Ind AS 116 Leases and it replaced Ind AS 17 Leases including appendices thereto. Ind AS 116 is effective for annual periods beginning on or after April 01 2019. Ind AS 116 sets out the principles for the recognition measurement presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under Ind AS 17. ||Assessed the Company's accounting policy with respect to recognition of leases and for assessing compliance with Ind AS 116. |
|The Company has applied the modified retrospective method to ongoing leases as of April 01 2019. ||Obtained an understanding evaluated the design and tested the operating effectiveness of controls that the Company has in relation to accounting of leases under Ind AS 116. |
|The adoption of Ind AS 116 resulted in transitional impact amounting to Rs. 4664.73 Crore of Right of Use asset lease liability of Rs. 6059.18 Crore. As at March 31 2020 the Company has Rs. 1655.52 Crore of Right of use (RoU) assets and Rs. 2222.77 Crore of Lease liabilities. ||Tested the accuracy and completeness of the underlying lease master by agreeing the underlying data pertaining to lease rentals term escalation and other relevant terms and conditions to lease agreements and recomputed on a sample basis calculation involved. |
|Application of Ind AS 116 requires significant judgement and estimate in identification of lease arrangement determining the RoU assets and lease liabilities based on terms of the underlying lease agreements hence we considered this as a key audit matter. ||Assessed the underlying assumptions and estimates including the applicable discount rates. We also assessed the Company's disclosures made in accordance with the requirements of Ind AS 116. |
Information Other than the Standalone financial statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the other information. The otherinformation comprises the information included in the Management Discussion and AnalysisBoard's Report including Annexures to Board's Report Business Responsibility ReportCorporate Governance and Shareholder's Information but does not include the standalonefinancial statements and our auditor's report thereon.
Our opinion on the standalone financial statements does not cover the other informationand we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements our responsibilityis to read the other information and in doing so consider whether the other informationis materially inconsistent with the standalone financial statements or our knowledgeobtained during the course of our audit or otherwise appears to be materially misstated.
If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.
Management's Responsibility for the Standalone financial statements
The Company's Board of Directors is responsible for the matters stated in section134(5) of the Act with respect to the preparation of these standalone financial statementsthat give a true and fair view of the financial position financial performance includingother comprehensive income cash flows and changes in equity of the Company in accordancewith the Ind AS and other accounting principles generally accepted in India. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the financial statement that givea true and fair view and are free from material misstatement whether due to fraud orerror.
In preparing the standalone financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so. Those Board of Directors are also responsible foroverseeing the Company's financial reporting process.
Auditor's Responsibility for the Audit of the Standalone financial statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements as whole are free from material misstatement whether due to fraud orerror and to issue an auditor's report that includes our opinion. Reasonable assurance isa high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these standalone 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 standalone 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 financial 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 system in place and the operating effectiveness ofsuch controls.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the management.
Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the Company'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditor's report to the related disclosures inthe standalone financial statements or if such disclosures are inadequate to modify ouropinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However future events or conditions may cause the Company to cease tocontinue as a going concern.
Evaluate the overall presentation structure and content of the standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.
Materiality is the magnitude of misstatements in the standalone financial statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of the standalone financial statements may be influenced. Weconsider quantitative materiality and qualitative factors in (i) planning the scope of ouraudit work and in evaluating the results of our work; and (ii) to evaluate the effect ofany identified misstatements in the standalone financial statements.
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 matter communicated with those charged with governance we determine thosematters that were of most significance in the audit of the standalone financial statementsof the current period and are therefore the key audit matters. We describe these matter inour auditor's report unless law or regulation precludes public disclosure about the matteror when 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 (Auditor's Report) Order 2016 ("the Order")issued by the Central Government in terms of Section 143(11) of the Act we give in"Annexure A" a statement on the matters specified in paragraphs 3 and 4 of theOrder.
2. 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 Cash Flows and Statement of Changes in Equity dealt with by thisReport are in agreement with the relevant 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 the written representations received from the directors as on March 312020 taken on record by the Board of Directors none of the directors is disqualified ason March 31 2020 from being appointed as a director in terms of Section 164(2) of theAct.
f) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the Company's internal financial controls overfinancial reporting on the Company's internal financial controls over financial reportingfor the reasons stated therein.
g) With respect to the other matters to be included in the Auditor's Report inaccordance with the requirements of section 197(16) of the Act as amended In our opinionand to the best of our information and according to the explanations given to us theremuneration paid by the Company to its directors during the year is in accordance withthe provisions of section 197 of the Act.
h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 as amended inour opinion and to the best of our information and according to the explanations given tous:
i. The Company has disclosed the impact of pending litigations on its financialposition in its standalone financial statements;
ii. The Company did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Company.
Annexure - A to the Auditor's Report
The Annexure referred to in Independent Auditors' Report to the members of the FUTURERETAIL LIMITED on the standalone financial statements for the year ended March 31 2020we report that:
i. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) Some of the fixed assets were physically verified during the year by the Managementin accordance with a regular programme of verification which in our opinion providesfor physical verification of all the fixed assets at reasonable intervals. According tothe information and explanations given to us no material discrepancies were noticed onsuch verification.
(c) The Company have immovable properties of freehold or leasehold land and building asat March 31 2020. Therefore paragraph 3(i) (c) of the Order is applicable.
ii. (a) As explained to us management has conducted physical verification of inventoryat regular intervals during the year.
(b) In our opinion and according to the information and explanations given to us theprocedures of physical verification of inventory followed by the Management werereasonable and adequate in relation to the size of the Company and nature of its business.
(c) In our opinion and according to the information and explanations given to us theCompany has maintained proper records of its inventories and no material discrepancieswere noticed on physical verification.
iii. The Company has not granted any loan secured or unsecured to companies firms orother parties covered in the register maintained under section 189 of the Companies Act2013 ("the Act"). Therefore paragraph 3 (iii) of the Order is not applicable.
iv. In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of section 185 and 186 of the Act with respectto the loans and investments made.
v. The Company has not accepted any deposits as during the year from the public asmentioned in the provision of Section 73 to 76 and any other relevant provisions of theAct and rules framed there under apply. Therefore Paragraph 3(v) of the Order is notapplicable to the Company.
vi. To the best of our knowledge and as explained the Central Government has notprescribed the maintenance of cost records under section 148(1) of the Act for any of theproducts of the Company.
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'State Insurance Income-tax Sales-tax Duty of Customs Goods and Service Tax ValueAdded Tax cess and other material statutory dues as applicable have been regularlydeposited during the year by the company with the appropriate authorities.
(b) According to the information and explanations given to us no undisputed amountspayable in respect of Provident Fund Employees' State Insurance Income-tax Sales-taxDuty of Customs Goods and Service Tax Value Added Tax cess and other material statutorydues were in arrears as at March 312020 for a period of more than six months from thedate they became payable.
However according to information and explanations given to us value added tax andService Tax have not been deposited by the Company on account of disputes:
|Name of the Statute ||Nature of the dues ||Amount (Rs. In crore) ||Period to which the amount relates ||Forum where dispute is pending |
|The Indian Stamp Act 1899 ||Stamp Duty ||14.01 ||FY: 2008-09; FY: 2015-16 ||District Collector of Stamp Gau- tambudhnagar U.P.; Collector of Lucknow; ADM (F & R); The Collector of Stamps Preet Vihar Delhi |
|Central Sales Tax Act and Lo- cal Sales Tax Act ||Central Sales Tax and Local Sales Tax (including Value Added Tax) ||23.06 ||FY: 2011-12; FY: 2013-14; FY: 2014-15; FY: 2015-16; FY: 2016-17; FY: 2017-18. ||Dy. Commissioner of Sales Tax; Joint Commissioner of commercial Taxs Appeal-3; Comm. Tax Circle-P Jammu; Tribunal |
|Service Tax Act1994 ||Service Tax ||39.72 ||FY:2007- 2011 ||Department of Service Tax |
viii. Based on our audit procedures and on the basis information and explanations givenby the management we are of the opinion that the company has not defaulted in repaymentof loans or borrowings from banks and debenture holders. The company has not taken anyloans from Government or any Financial Institution.
ix. Based on our audit procedure and on the basis information and explanation given bythe management we are of the opinion that money raised by company by way of term loanhave been applied for the purpose for which they were raised. The company did not raiseany money by way of Initial Public offer or further public offer.
x. To the best of our knowledge and belief and according to the information andexplanations given to us no fraud by the Company was noticed or reported during the yearalthough there were some instances of fraud on the Company noticed by the Management theamounts whereof were not material in the context of the size of the Company and the natureof its business and the amounts were adequately provided for.
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. Therefore paragraph 3(xii) of the Order is notapplicable.
xiii. According to the information and explanations give to us and based on ourexamination of the records of the Company transactions with the related parties are incompliance with sections 177 and 188 of the Act where applicable and details of suchtransactions have been disclosed in the standalone financial statements as required by theapplicable accounting standards.
xiv. According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment of shares during the year in compliance with the requirement of section 42 ofthe Act and amount raised has been used for the purpose for which the funds were raised.
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. Therefore 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 Auditor's Report
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act") We have audited the internalfinancial controls over financial reporting of FUTURE RETAIL LIMITED ("theCompany") as of March 31 2020 in conjunction with our audit of the standalonefinancial statements of the Company for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (ICAI'). 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.
Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing 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 judgment including the assessment of the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror.
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 systemover financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of standalone financial statements for external purposes in accordance withgenerally accepted accounting principles.
A company's internal financial control over financial reporting includes those policiesand procedures that (1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary topermit preparation of standalone financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; 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 standalone financial statements.
Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2020 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.