TO ALL THE MEMBERS OF
TREE HOUSE EDUCATION & ACCESSORIES LIMITED
Report on the Standalone Indian AS Financial Statements
We have audited the accompanying standalone Ind AS financial statements of TREEHOUSE EDUCATION & ACCESSORIES LIMITED ("the Company") which comprisethe Balance Sheet as at March 31 2018 the Statement of Profit and Loss (includingOther Comprehensive Income) the Cash Flow Statement and the Statement of Changes inEquity for the year then ended and a summary of significant accounting policies and otherexplanatory information.
Management's Responsibility for the Standalone AS Financial Statements
The Company's Board of Directors are responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to preparation ofthese standalone Ind AS financial statements to give a true and fair view of the financialposition financial performance (including other comprehensive income) cash flows andchanges in equity of the Company in accordance with the accounting principles generallyaccepted in India including the Indian Accounting standards specified in the Companies(Indian Accounting Standards) Rules 2015 (as amended) under Section 133 of the Act. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of 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 standalone Ind As financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
Our responsibility is to express an opinion on these standalone Ind AS financialstatements based on our audit. We have taken into account the provisions of the Act andthe Rules made thereunder including the accounting and auditing standards and matterswhich are required to be included in the audit report under the provisions of the Act andthe Rules made thereunder.
We conducted our audit of the standalone Ind AS financial statements in accordance withthe Standards on Auditing specified under Section 143(10) of the Act and other applicableauthoritative pronouncements issued by the Institute of Chartered Accountants of India.Those standards and pronouncements require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether the standalone IndAS financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the standalone Ind AS financial statements. The procedures selected dependon the auditor's judgment including the assessment of the risks of material misstatementof the standalone Ind AS financial statements whether due to fraud or error. In makingthose risk assessments the auditor considers internal financial control relevant to theCompany's preparation of the standalone Ind AS financial statements that give a true andfair view in order to design audit procedures that are appropriate in the circumstances.An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of the accounting estimates made by the Company's Directors as well asevaluating the overall presentation of the standalone Ind AS financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the standalone Ind AS financial statements.
Basis of Forming an Opinion
1.We draw your attention to the Standalone Ind AS Financial Statements with regard toFixed Assets. The Company has discontinued most of the centres operated by the Companyduring F.Y. 2016-17 and have converted some of them into franchisee during F.Y. 2016-17& 2017-18. The Company has informed us that it has identified Furniture & Fixturesand Leasehold Improvements into those lying at closed centres franchise centres and owncentres in a phased manner.
The management has informed us that furniture & fixtures lying at the some of theclosed centres were taken over and were stored at various places. The other furniture& fixtures and leasehold improvements at the closed centres that could not be takenover by the Company or not in control of the Company has been written off. In case offranchise converted centres the Company has entered into a service agreement wherein ithas been provided that the franchise centre shall use the furniture & fixtures andleasehold improvement lying at the centres. The management is in the process of verifyingthe assets lying at the franchise centres.
2.We draw attention to Standalone Ind AS Financial Statements with regards toIntangible Assetsin respect of Goodwill and "Business Commercial Rights".Management is of the view that no revenue is generated from Mira KG Baroda and UtsahEducation and therefore Goodwill of Mira KG Baroda and Utsah Education has been impairedfully with in the meaning of lndian Accounting Standards (lND AS)-36. Similarly managementis of the view that no revenue is generated from Dixit Education Society and therefore"Business Commercial Rights" in respect of Dixit Education Society has beenfully impaired within the meaning of lndian Accounting Standards (lND AS)-36.
3.We draw attention to Standalone Ind AS Financial Statements with regards to Depositsgiven to Educational Trusts amounting to Rs. 18889 lakhs as on March 31 2017 themanagement has carried out an exercise to book the impairment loss of Financial Assetswithin the meaning of Indian AS-109. Accordingly the management has booked impairment lossof Rs. 2425 lakhs based on DCF method and the balance carrying value of the deposits atRs. 16533 lakhs is carried in books of accounts at carrying value for the year ended 31stMarch 2018.
In respect of deposit given to Janodhar Shikshan Prasarak Mandal the Company has filedcomplaint before Economic Offence Wing-I Navi Mumbai for recovery of the said deposit. Inview of pending proceedings the deposit verable from Janodhar Shikshan Prasarak Mandal isneither written off nor impaired in books of accounts.
4.We draw attention to the StandaloneInd AS Financial Statements with regards to loanadvanced to Tree House Employees Welfare Trust to enable the Trust to buy ESOP's for itsemployees. The management has revalued the carrying amount of the said loan at face valueand it represents the fair value of the loan receivable from Tree House Employees WelfareTrustas required and stated in compliance to lndian Accounting Standards issued underCompanies (lndian Accounting standards) Rules 2015.
5.We draw attention to the Standalone Ind AS Financial Statements with regards to TradeReceivables amounting to Rs. 2540 lakhs due from Educational trust. In view of themanagement no provision is required as such balances are good and recoverable.
In our opinion the deliverables and receipts are outstanding for a longer period oftime.
6.We draw attention to the Standalone Ind AS Financial Statements with regards to thecarrying value of Lease Deposits with landlords amounting to Rs807.98lakhs related toclosed/discontinued centres. The lease deposits with landlords for centres alreadyconverted into franchise centres of completely closed centres has either been receivedback or adjusted against lease rentals payable or outstanding expenses or reimbursement ofexpenses that were found payable at the time of closure of the centres or conversion ofthe centres into franchise centres.
7.The Company has defaulted in repayment of loans availed from financial institutionsdue to which these borrowings have been classified as short term borrowings. Themanagement has informed us that the Company has received notices from financialinstitutions under "SARFAESI Act". The amount classified as short termborrowings is at Rs. 7549 lakhs.
8.The policies procedures and overall internal controls needs to be strengthen inorder to provide proper evidences regarding recover ability of receivables valuations offinancial assets including deposits write off of fixed assets including impairments andaccounting for direct & indirect taxes including other statutory compliances.
9.The management has conducted physical verification of inventory at reasonableintervals during the year and no material discrepancies were noticed on physicalverification of stocks as compared to book records. However during the year under auditthe company has bifurcated the inventory into non-moving obsolete redundant.
10. Confirmation letters have been sent by the Company to sundry creditors and partiesto whom loans & advances deposits have been granted for confirming the balances lyingin their ledger accounts in books of the Company. In view of confirmations having beenreceived from only few of the parties the balance under these heads have been shown asper books of accounts and are subject to reconciliation and adjustment if any.
11. Some landlords and creditors have initiated legal proceedings against the Companywhich may result in compensation interest and other penalties.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone Ind AS financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India of the standalone state ofaffairs of the Company as at March 31 2018 and its loss (including other comprehensiveincome) its cash flows and the changes in Equity for the year ended on that date.
Report on Other Legal and Regulatory Requirements
1.As required by the Companies (Auditor's Report) Order 2016 issued by the CentralGovernment of India in terms of section 143(11) of the Act ("The Order") andon the basis of such checks of the books and records of the Company as we consideredappropriate and according to the information and explanations given to us we give in theAnnexure B statement on the matters specified in paragraphs 3 and 4 of the Order.
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 purpose 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) and the Cash Flow Statement and the Statement of Changes in Equity dealt with bythis Report are in agreement with the books of account.
d) In our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act.
e) On the basis of written representations received from the directors of the Companyas on March 31 2018 and taken on record by the Board of Directors of the Company noneof the directors of the Company are disqualified as on 31stMarch 2018 from beingappointed as a director in terms of section 164(2) of the Act.
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 A". Our report expresses an unmodified opinion onthe adequacy and operating effectiveness of the company's financial controls overfinancial reporting.
g) With respect to other matters to be included in the Auditor's Report in accordancewith Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinion and to thebest of our information and according to the explanations given to us:
i. The Company has numerous pending litigations and suits filed against the company andits directors which may impact its financial position. The Company has not disclosed theimpact of such pending litigations.
ii. The Company did not have any long term contracts including derivative contracts forwhich there were any material foreseeable losses.
iii. There are no amounts required to be transferred to the Investor Education andProtection Fund by the Company during the year ended March 31 2018.
For S. Dedhia & Co
CA Sandeep Dedhia
M. No. 102606
Date : 30/05/2018
Place : Mumbai