Q1. Shepherd Ltd is in the activity of manufacturing vaccines for rabies and its flagship product rabshep is a Rs 50 crore brand. In the early part of April 2017 and 2020, there were complaints of adverse reactions from 25 patients each year who had been administered the vaccine in the northern region of the country. Each patient claimed damages of Rs 1 crore. The company expected to receive more such complaints as the batch of the vaccine was a large one. However, it chose to challenge the claims in the court of law. Meanwhile the company has made a provision of Rs 40 crores spread over a period of four years from the year 2018. The extract from the financial statements are as under Rs in Crores Particulars 2017 2018 2019 2020 2021 Sales 100 120 150 100 120 Profit before Tax 30 22 33 21 21 10 10 10 10 Amortisation of 10 intangible asset Cash from 43 Operating activities 50 (1) (20) 30 You are required to answer the following a) Calculate the reported profit after tax, assuming the tax rate at 30% b) Calculate the PAT and cash from operating activities, in case the claims were to be paid away to the aggrieved in the year it was reported. Comment on the trends. c) Why also do you think the company chose to provide rather than pay the damage to the aggrieved in the year it was reported. d) Do you think that the company should take any other steps in financial reporting. (C01, C04)