2. You have been provided the Profit & Loss Account for the year ended 31 March 2014 and Balance sheets as on 31 March 2013 and 31 March 2014 for Bharat Electronics Ltd, 11. BEL is primarily engaged in manufacture of high value equipments such as Sonar, Radar, Missile approach warning systems as well as lower value items such as Electronic Voting Machines. For FY2014, defence sector contributed 83% of the company's revenues, with the balance 17% coming from the civilian sector i Assuming Rs.35 crores of the non-current liabilities represent convertible bonds of Rs.1000 face value carrying interest at the rate of 8% p.a. These bonds can be converted into 10 equity shares each. Assume an average effective income tax rate of 25% for BEL. With this information, compute the following a. basic EPS for the year FY2014 diluted EPS for the year FY2014 C. earnings per incremental share for the convertible bonds (01+02+01) BEL acquired a machinery for Rs. 25 lacs on 31 December 2009 which has a useful life of 10 years with salvage value of Rs. llacs. Depreciated using the Written Down Value method. On 31 Mar 2014, test of impairment indicates below: PV of future cash flows expected Rs. 2lacs p.a. for next 3 years and Rs. 0.5lacs p.a. for 2 years thereafter. Rate of discounting 10%. b. Fair value of asset is Rs. 6lacs, termination benefits are Rs.0.3lacs, legal cost on disposal is Rs.0.Slacs. C. Revised salvage value Rs.0.5lacs. Balance useful life remains same. Compute (02+02+01+02) WDV of Machinery as at Mar 2014 Recoverable amount as per IAS 36 Impairment loss, if any, be provided for during M 2014 Depreciation expense for the year Mar 2015 and 2016 In April 20, 2013 BEL offered ESOP to 1000 of its employees with vesting period of 5 years, provided employee continue till end of year 5. Option expires in 10 years. 100 shares offered per employee, par value per share is 10Rs. Exercise price per share is 13 Rs and fair value on grant date is 14 Rs. Addl info available: end of year 1, 2,3: expected employees to continue at the end of vesting period 75% a 111 . 75% Impairment loss, if any, to be provided for during Mar 2014 Depreciation expense for the year Mar 2015 and 2016 In April 20, 2013 BEL offered ESOP to 1000 of its employees with vesting period of 5 years, provided employee continue till end of year 5. Option expires in 10 years. 100 shares offered per employee, par value per share is 10Rs. Exercise price per share is 13 Rs and fair value on grant date is 14 Rs. Addl info available: end of year 1, 2,3: expected employees to continue at the end of vesting period: 75% b. end of year 4: expected employees to continue at the end of vesting period 68% end of year 5: actual attrition rate 20% a. C. This case has been written solely for the purpose of class discussion and student evaluation. Instructors have taken the liberty to simplify the financial statements and make assumptions for this purpose. With all available information: (1) Compute the amount of expense to be recognised during next 5 years applying Fair value and intrinsic value method (03+03) (2) Suggest which method is best suited for BEL and why? Under what circumstances can BEL adopt intrinsic value method? (01) 31.Mar.13 31. Mar 14 80 80 6224 6304 6937 7017 376 372 6676 7393 2234 2423 1576 1497 737 847 12 12 Balance sheet as on All amounts in Rs. Crores Equity & Liabilities Share capital Reserves & Surplus Total Non-current liabilities Total Liabilities Assets 1. Fixed assets: At cost Less: Accumulated depreciation Net assets Profit & Loss account for year ended 2. Non-current Investments All amounts in Rs. Crores 31-Mar-14 3. Long-term loans and advances 1. Turnover 6275 4. Other non-current assets 5. Current Assets 11. Other income 429 a. Inventories Total revenues 6704 b. Receivables III. Expenses C. Cash & Bank balances a. Cost of inventory consumed 3631 d. Short term loans & advances b. Employee benefit expense 1030 e. Other current assets c. Finance costs 3 Total current assets d. Depreciation & Amortization 142 6. Less: Current liabilities e. Other operating expenses 723 a. Trade payables Total Expenses 5529 b. Other current liabilities & Provis IV. Profit before tax 1175 Total Current Liabilities V. Tax expense 243 Net Current Assets VI. Profit after tax for the year 932 Total Assets 130 352 63 393 3191 3299 4129 3335 5302 1308 4564 1154 80 66 13212 13216 1127 6644 1197 5937 7134 7771 5445 6078 7393 6676 *Issued and paid-up share capital consists of 8 crore equity shares of Rs. 10 face value each. Other current liabilities are associated with other operating expenses