To the Members of
Procter & Gamble Hygiene and Health Care Limited
Report on the Audit of the Ind AS Financial Statements
We have audited the Ind AS Financial Statements of PROCTER & GAMBLE HYGIENE AND HEALTH CARE LIMITED (the Company) which comprise the Balance Sheet as at June 30 2019 and the Statement of Profit and Loss (including other comprehensive income) the Statement of Cash Flows and the Statement of Changes in Equity for the year then ended and a summary of significant accounting policies and other explanatory information (hereinafter referred to as `Financial Statements').
In our opinion and to the best of our information and according to the explanations given to us the aforesaid Financial Statements give the information required by the Companies Act 2013 (the Act) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (India Accounting Standard) Rules 2015 as amended (Ind AS) and other accounting principles generally accepted in India of the state of affairs of the Company as at June 30 2019 the profit and total comprehensive income its cash flows and the changes in equity for the year ended on that date.
Basis for Opinion
We conducted our audit of the Financial Statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the `Auditor's Responsibilities for the Audit of the Financial Statements' section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of the Financial Statements under the provisions of the Act and the Rules thereunder and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the Financial Statements.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of most significance in our audit of the Financial Statements of the current period. These matters were addressed in the context of our audit of the Financial Statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.
|Key Audit Matter||Auditor's Response|
|1. Revenue Recognition (note no. 2.3(a) and 19 to the Financial Statements)||Our audit procedures included:|
|Revenue is measured net of trade discounts rebates and various types of Marketing and Distribution Activities such as incentives and promotions.||(a) Assessing the appropriateness of the revenue recognition accounting policies including those relating to discounts and incentives by comparing with applicable accounting standards.|
|The estimation of the various types of discounts incentives and rebate schemes to be recognised based on sales made during the year is material and considered to be judgmental owing to the varying terms of the agreements with customers which are based on annual contracts or shorter term arrangements. In addition the value and timing of promotions for products varies from period to period and the activity can span over a year end.||(b) Testing the design implementation and operating effectiveness of the Company's general IT controls and key IT/manual application controls over the Company's systems which govern recording of revenue and rebates/ schemes in the general ledger accounting system.|
|Accumulated experience is used to estimate the provision for discounts and rebates considering the terms of the underlying schemes and arrangements with customers.||(c) We tested the design implementation and operating effectiveness of controls over the calculation of discounts and rebates including review of the independent service auditor's SOC 1 (Type 2) report with regards to the third party service organization's system and the suitability of the design and operating effectiveness of IT / manual controls relating to processing of claims.|
|There is also a risk that revenue may be overstated due to fraud including through manipulation of the discounts and incentives recognised resulting from the pressure local management may feel to achieve performance targets.||(d) Performing substantive testing (including year-end cut- off testing) by selecting samples of revenue transactions recorded during the year (and before and after the financial year end) by verifying the underlying documents which included sales invoices/contracts and shipping documents.|
|(e) We compared the historical discounts rebates/schemes and allowances to current payment trends. We also considered the historical accuracy of the Company's estimates in previous years.|
|(f) Performing substantive testing by checking samples of rebate/schemes transactions to supporting documentation.|
|(g) We assessed manual journals posted to revenue to identify unusual items.|
|(h) Considering the adequacy of the Company's disclosures in respect of revenue.|
|2. Uncertain Tax Positions (note no. 26 and 35 to the Financial Statements)||Our audit procedures included:|
|The Company is subject to a range of tax risks. There is inherent judgement involved in determining provisions for uncertain tax positions.||(a) We evaluated the design and tested the operating effectiveness of controls over the assessment of uncertain tax positions and completeness of disclosures.|
|The Company is subject to periodic challenges by local tax authorities on a range of tax matters during the normal course of business including direct taxes transfer pricing and indirect taxes.||(b) We discussed the status and potential exposures in respect of significant tax litigations with the Company's tax team including their views on the likely outcome of each assessment / litigation and magnitude of potential exposure.|
|Applicable tax laws and regulations are subject to differing interpretations and the resolution of a final tax position can take several years to complete. Where the amount of tax payable is uncertain the Company establishes provisions based on Management's judgement of the likelihood of settlement being required. Given the number of judgements involved in estimating the provisions relating to uncertain tax positions and the complexities of dealing with tax rules this was considered as a key audit matter.||(c) We focused on the judgements made by Management in assessing the likelihood of potentially material exposures and the estimates used to determine such provisions where required. In particular we focused on the impact of changes in local tax regulations and ongoing inspections by local tax authorities which could materially impact the amounts recorded in the Financial Statements.|
|(d) We involved our in-house tax experts to evaluate and challenge the appropriateness of Management's assessment and judgements to estimate the provisions held in respect of uncertain tax positions. To do this we assessed the provisions recognized in the Financial Statements using the outcome of prior and ongoing tax assessments conducted on the Company correspondences between the Company and relevant tax authorities judgemental positions taken in tax returns and current year estimates our own experience in these areas and assessing whether the approach applied by the Company is supported by the practice in the industry.|
|(e) We have also assessed the adequacy of the Company's disclosures in respect of tax and uncertain tax positions.|
Information Other than the Financial Statements and Auditor's Report Thereon
The Company's Board of Directors is responsible for the other information. The other information comprises the information in the Management Discussion and Analysis Report of the Directors Report on Corporate Governance and Shareholder's Information but does not include the Financial Statements and our auditor's report thereon. Our opinion on the Financial Statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the Financial Statements our responsibility is to read the other information and in doing so consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained 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 material misstatement of this other information we are required to report that fact. We have nothing to report in this regard.
Management's Responsibility for the Standalone Financial Statements
The Company's Board of Directors is responsible for the matters in Section 134(5) of the Act with respect to the preparation of these Financial Statements that give a true and fair view of the financial position financial performance total comprehensive income changes in equity and cash flows of the Company in accordance with the Ind AS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provision of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records relevant to the preparation and presentation of the Financial Statements that give a true and fair view and are free from material misstatement whether due to fraud or error.
In preparing the Financial Statements Management is responsible for assessing the Company's ability to continue as a going concern disclosing as applicable matters related to going concern and using the going concern basis of accounting unless the Management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so. The Board of Directors are also responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement whether due to fraud or error and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if individually or in the aggregate they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.
As part of an audit in accordance with SAs we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the Financial Statements whether due to fraud or error design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion forgery intentional omissions misrepresentations or the override of internal control.
Obtain an understanding of internal financial control relevant to the audit in order to design 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 has adequate internal financial controls system in place and the operating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management.
Conclude on the appropriateness of Management's use of the going concern basis of accounting and based on the audit evidence obtained whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists we are required to draw attention in our auditor's report to the related disclosures in the Financial Statements or if such disclosures are inadequate to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the Financial Statements including the disclosures and whether the Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding among other matters the planned scope and timing of the audit and significant audit findings including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable related safeguards. From the matters communicated with those charged with governance we determine those matters that were of most significance in the audit of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when in extremely rare circumstances we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be 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 of India in terms of sub-section (11) of Section 143 of the Act we give in the Annexure A a statement on the matters specified in paragraphs 3 and 4 of the Order to the extent applicable.
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 best of 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 the Company so far as it appears from our examination of those books.
c) The Balance Sheet the Statement of Profit and Loss (including other comprehensive income) the Statement of Cash Flows and the Statement of Changes in Equity dealt with by this Report are in agreement with the books of account.
d) In our opinion the aforesaid Financial Statements comply with the Ind AS prescribed under section 133 of the Act read with relevant rules issued thereunder.
e) On the basis of the written representations received from the directors as on June 30 2019 taken on record by the Board of Directors none of the directors is disqualified as on June 30 2019 from being appointed as a director in terms of Section 164 (2) of the Act.
f) With respect to the adequacy of the internal financial controls with reference to financial statements of the Company and the operating effectiveness of such controls refer to our separate report in Annexure B.
g) With respect to the other matters to be included in the Auditor's Report in accordance with the requirements of section 197(16) of the Act as amended: In our opinion and to the best of our information and according to the explanations given to us the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.
h) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financial position in its Financial Statements - Refer Note. 35 to the Financial Statements.
ii. The Company did not have any material foreseeable losses on long term contracts including derivative contracts requiring provision under the applicable law or accounting standards.
iii. There has been no delay in transferring amounts required to be transferred to the Investor Education and Protection Fund by the Company.
For KALYANIWALLA & MISTRY LLP
Firm Regn. No.: 104607W / W100166
Roshni Marfatia PARTNER
M. No. 106548 UDIN: 19106548AAAACB2516
MUMBAI August 21 2019
Annexure A to the Independent Auditor's Report
(Referred to in paragraph 1 under `Report on Other Legal and Regulatory Requirements' in our Independent Auditor's Report to the Members of the Company on the Financial Statements for the year ended June 30 2019).
(i) a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.
b) As explained to us the Company has a program for physical verification of fixed assets at periodic intervals. In our opinion the period of verification is reasonable having regard to the size of the Company and the nature of its assets. The discrepancies reported on such verification are not material and have been properly dealt with in the books of account.
c) According to the information and explanations given to us the title deeds comprising all the immovable properties of buildings other than self-constructed buildings are held in the name of the Company. In respect of immovable properties of land that have been taken on lease and disclosed as non-current / current assets in the Financial Statements the lease agreements are in the name of the Company where the Company is the lessee in the agreement.
(ii) The inventory has been physically verified by the Management at reasonable intervals during the year. In our opinion the frequency of such verification is reasonable. In respect of inventory lying with third parties these have substantially been confirmed by them. The discrepancies noticed on verification between the physical stocks and the book records were not material.
(iii) In our opinion and according to the information and explanations given to us the Company has not granted any loans secured or unsecured to companies firms limited liability partnerships or other parties covered in the register maintained under Section 189 of the Act. Accordingly paragraph 3(iii) of the Order is not applicable to the Company.
(iv) In our opinion and according to the information and explanations given to us the Company has complied with the provisions of section 185 and 186 of the Act with respect to investments made guarantees given and securities provided.
(v) According to the information and explanations given to us the Company has not accepted deposits from the public to which the directives issued by the Reserve Bank of India and the provisions of Sections 73 to 76 of the Act and the rules framed thereunder apply. Accordingly paragraph (v) of the Order is not applicable to the Company.
(vi) The maintenance of cost records has been prescribed by the Central Government under section 148(1) of the Companies Act 2013 in respect of specified products of the Company. For such products we have broadly reviewed the cost records maintained by the Company pursuant to the Companies (Cost Records and Audit) Rules 2014 as amended and are of the opinion that prima facie the prescribed cost records have been made and maintained. We have however not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.
(vii) According to the information and explanations given to us and records of the Company examined by us in our opinion:
a) the Company is generally regular in depositing the undisputed statutory dues including Provident Fund Employees' State Insurance Income Tax Duty of Customs Goods and Services Tax Cess Professional Tax and other statutory dues as applicable with the appropriate authorities and there are no undisputed amounts which have remained outstanding as at the last day of the financial year for a period of more than six months from the date they became payable.
b) there are no dues of Income Tax Sales Tax Service Tax Duty of Customs Duty of Excise Value Added Tax and Goods and Services Tax which have not been deposited with the appropriate authorities on account of any dispute other than the following:
|Name of Statute||Nature of Dues||Forum where Dispute is Pending||Period to which the Amount Relates*||Amount Involved ( Rs. in lakhs) **|
|The Central Excise Act 1944||Excise duty||Appellate Authority - up to Commissioners/ Revisional authorities Level||2000-01 to 2002-03||2|
|Customs Excise and Service Tax Appellate Tribunal||2007-08||73|
|Sales Tax and Laws as per statutes applicable in various states||Sales Tax and VAT||Appellate Authority - up to Commissioners/ Revisional authorities level||1997-98 to 2001-02 2003-04 to 2015-16||1339|
|Appellate Authority - Tribunal||1996-97 2001-02 to 2002-03 2008-09 to 2012-13||1659|
|High Court||1995-96 2002-03 2006-07 2008-09 to 2009-10||123|
|Finance Act 1994||Service tax||Appellate Authority - up to Commissioners/ Revisional authorities level||2006-07 to 2012-13||1225|
|Income Tax Act 1961||Income Tax||Income Tax Appellate Tribunal||2009-10 2010-11 2012-13 to 2014-15||9573|
|Commissioner of Income Tax (Appeals)||2015-16||43|
* Period denotes the financial year April to March
** includes penalty and interest on taxes wherever applicable
(viii) The Company has not taken any loans or borrowings from financial institutions banks and government or has not issued any debentures. Accordingly paragraph 3(viii) of the Order is not applicable to the Company.
(ix) The Company has not raised any money by way of initial public offer further public offer (including debt instruments) and term loans during the year. Accordingly the provisions of paragraph 3(ix) of the Order are not applicable to the Company. (x) To the best of our knowledge and according to the information and explanations given to us no fraud by the Company or on the Company by its officers or employees has been noticed or reported during the course of our audit.
(xi) In our opinion and according to the information and explanations given to us and based on our examination of the records the Company has paid/provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.
(xii) In our opinion and according to the information and explanations given to us the Company is not a Nidhi company. Accordingly paragraph 3(xii) of the Order is not applicable to the Company.
(xiii) In our opinion and according to the information and explanations given to us and based on our examination of the records of the Company transactions with the related parties are in compliance with Section 177 and 188 of the Act where applicable. The details of such related party transactions have been disclosed in the Financial Statements as required by the applicable accounting standards.
(xiv) According to the information and explanations give to us and based on our examination of the records the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. Accordingly paragraph 3(xiv) of the Order is not applicable to the Company.
(xv) According to the information and explanations given to us and based on our examination of the records the Company has not entered into any non-cash transactions with directors or persons connected with him. Accordingly paragraph 3(xv) of the Order is not applicable to the Company.
(xvi) The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act 1934. Accordingly paragraph 3(xvi) of the Order is not applicable to the Company.
For KALYANIWALLA & MISTRY LLP
Firm Regn. No.: 104607W / W100166
PARTNER M. No.: 106548 UDIN: 19106548AAAACB2516
MUMBAI August 21 2019
Annexure B to the Independent Auditor's Report
(Referred to in Para 2 (f) `Report on Other Legal and Regulatory Requirements' in our Independent Auditor's Report to the members of the Company on the Financial Statements for the year ended June 30 2019)
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act 2013 (the Act)
We have audited the internal financial controls with reference to Financial Statements of PROCTER & GAMBLE HYGIENE AND HEALTH CARE LIMITED (the Company) as of June 30 2019 in conjunction with our audit of the Financial 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 internal financial controls based on the internal control with reference to financial statements criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (the Guidance Note). These responsibilities include the design implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business including adherence to company's policies the safeguarding of its assets the prevention and detection of frauds and errors the accuracy and completeness of the accounting records and the timely preparation of reliable financial information as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financial controls with reference to financial statements based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act 2013 to the extent applicable to an audit of Internal Financial Controls both applicable to an audit of Internal Financial Controls and both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls with reference to financial statements was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls with reference to financial statements and their operating effectiveness. Our audit of internal financial controls with reference to financial statements included obtaining an understanding of such internal financial controls assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor's judgment including the assessment of the risks of material misstatement of the financial statements whether due to fraud or error. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company's internal financial controls with reference to financial statements.
Meaning of Internal Financial Controls with reference to Financial Statements
A Company's internal financial control with reference to financial statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Company's internal financial control with reference to financial statements includes those policies and procedures that:
(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of Management and directors of the Company; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the Company's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls with reference to Financial Statements
Because of the inherent limitations of internal financial controls with reference to financial statements including the possibility of collusion or improper management override of controls material misstatements due to error or fraud may occur and not be detected. Also projections of any evaluation of the internal financial controls with reference to financial statements to future periods are subject to the risk that the internal financial control with reference to financial statements may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion the Company has in all material respects an adequate internal financial controls with reference to financial statements and such internal financial controls with reference to financial statements were operating effectively as at June 30 2019 based on the internal control with reference to financial statements criteria established by the Company considering the essential components of internal control stated in the Guidance Note.
For KALYANIWALLA & MISTRY LLP
Firm Regn. No.: 104607W / W100166
M. No.: 106548
MUMBAI August 21 2019