C K Prusty& Associates

Address: “Netaji Subhash Villa”, 18 Karunamoyee Ghat Road, Flat 3C, 3rd Floor, Kolkata-700082

C K Prusty& Associates Chartered Accountants

Audited Financial Statements for Bhutan Board Products Limited for the year

ended 31st December 2019

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF

BHUTAN BOARD PRODUCTS LIMITED, PHUENTSHOLING, BHUTAN

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF

BHUTAN BOARD PRODUCTS LIMITED, PHUENTSHOLING, BHUTAN

Report on the Audit of the Financial Statements Opinion We have audited the Financial Statements of Bhutan Board Products Limited which

comprises of the statement of Financial position as on December 31, 2019 and the statement of comprehensive income , statement of changes in equity and statement

of cash flows for the year then ended and notes to the financial statements including a summary of significant accounting policies.

In our opinion, the accompanying financial statements presents fairly, in all material respects, the financial position of Bhutan Board Products Limited, as on December 31, 2019 and its financial performance and its cash flows for the year then ended in

accordance with Bhutanese Accounting Standards (BAS).

Basis for Opinion We have conducted our audit in accordance with International Standards on Auditing (ISA‟s). Our responsibilities under those standards are further described in

the “Auditors Responsibilities for the Audit of the Financial Statements” section of our report. We are independent of the company in accordance with the ethical

requirements that are relevant to our audit of the financial statements in Bhutan and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our opinion.

Key Audit Matters Key Audit Matters are those matters that, in our professional judgement, 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.

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Responsibilities of Management and the Board of Directors for the Financial Statements Management is responsible for the preparation and fair presentation of these

financial statements in accordance with Bhutanese Accounting Standards (BAS) and for such internal control as management determines is necessary to enable the

preparation of financial statement that 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 management either intends to liquidate the

company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company‟s financial reporting process.

Auditors Responsibilities for the audit of the Financial Statements The objectives of our audit 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 ISA‟s 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 ISA‟s, we have exercised professional judgment and maintained professional skepticism throughout the planning and

performance of the audit. We have also adhered to the below mentioned points:

• Identified and assessed the risks of material misstatement of the financial statements, whether due to fraud or error, designed and performed audit procedures

responsive to those risks and obtained audit evidence that are sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than one resulting from error, as fraud

may involve collusion, forgery, intentional omissions, misrepresentations or the overriding of internal control.

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• Obtained an understanding of internal controls relevant to the audit in order to

design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity‟s internal control.

• Evaluated the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Evaluated 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 results fair presentation. We are required to communicate with the management 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 have identified during our

audit. We have to provide to the management 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.

Report on Other Legal and Regulatory Requirements As required by Section 266 of The Companies Act of Bhutan 2016 (Minimum Audit Examination and Reporting Requirements), we enclose in the annexure a statement

on the matters specified therein to the extent applicable.

1. Further, to our comments in the annexure as referred above, as per Section 265 of The Companies Act of Bhutan 2016 , we report that:

a. Our examination was made in accordance with the Bhutanese Accounting Standards and accordingly included such tests of accounting records and such

other auditing procedures as we considered appropriate for the purpose of our audit.

b. We have obtained all information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit.

c. In our opinion, proper books of accounts as required by law have been kept by the company, in so far as it appears from our examination of those books.

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d. The Statements of Financial position, Statement of Comprehensive Income,

Statement of Changes in Equity and Cash Flow Statement dealt with in this report are in agreement with the books of accounts and have been compiled on the basis of Bhutanese Accounting Standards, provisions of the Companies Act of Bhutan 2016

and other applicable legal and regulatory requirements.

The engagement partner on the audit resulting in this Independent Auditor's Report

is CA Tiruvengadam Kannan.

For C. K. PRUSTY & ASSOCIATES Chartered Accountants (FRN: 323220E)

(CA. TiruvengadamKannan) PARTNER FCA: 055803

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ANNEXURE TO THE AUDIT REPORT (REFERRED TO IN OUR REPORT OF EVEN DATE)

MINIMUM AUDIT EXAMINATION AND REPORTING REQUIREMENTS ___________________________________________________________________________

Points relevant for Manufacturing Concern:

1) The company has not conducted Physical Verification of Fixed Assets during the year under review.

2) Physical Verification and quantitative reconciliation of inventories including finished goods, raw materials, stores and spares, consumables and work in progress have been conducted by the management at the year end and

differences between physical balance and book balance have been reconciled and accounted for.

3) In our opinion , the valuation of inventories including finished goods, raw

materials, stores and spares, consumables and work in progress is appropriate and in accordance with the BAS 2 . Weighted average method of valuation of inventories was followed during the year under revenue.

4) The company has not taken any loans secured or unsecured from companies,

firms or other parties and / or from companies under the same management except an overdraft facility of Nu 10.00 million from Bank of Bhutan and Nu 35.00 million from DRUK PNB Bank Limited for meeting its working capital

requirements . Prima facie, the interest rate and other terms and conditions of the said overdraft facility are not prejudicial to the interest of the company.

5) The company has not granted any loans secured or unsecured to other

companies , firms or other parties and /or to companies under the same management except interest free advances to the staff which is being recovered within a period of one year.

6) The advances granted to officers are in keeping with the provision of service

rule and no excessive and frequent advances are given by the company.

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7) The company does not have Internal Audit system commensurate with the size of the company and nature of its business. Except for the above, the company has a well established system of internal

controls to ensure completeness, accuracy and reliability of accounting and other records for carrying out the business in an orderly and efficient manner

to safeguard the assets of the company as well as to ensure adherence to the rules/ regulations and systems and procedures.

8) As observed by us , from the verification of purchase records, there is a reasonable system of obtaining competitive quotations and bidding from

vendors in respect of purchase of stores, plant and machinery, equipments and other assets commensurate with the size of the company and nature of its business.

9) a) As explained to us there are no transactions for purchase and sale of goods

and services made in pursuance of contracts and agreements entered into with the directors or any other parties related to directors or with the

company or firms in which directors are directly or indirectly interested.

b) Prima facie, the records of the company do not reveal any transactions

entered into by the company, wherein the directors are directly or indirectly interested.

10) As found during audit unserviceable or damaged stock of inventories are

disposed off as and when ascertained and recorded in books of accounts .During the year under review , Nu. 0.43 million was recovered from auction of scraps.

11) It has been explained to us during the course of audit , the company has a

reasonable system of ascertaining and identifying point of the occurrence of breakage, damages of stores, spares and capital goods , while in transit,

during loading/unloading in storage and during handling , so that responsibility could be fixed and compensation sought from those responsible.

12) The company is maintaining necessary production records and adequate

physical safeguards have been deployed to prevent unauthorized movement of goods.

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13) Scrap generation during production is as per the prevailing norms in the industry .If any sale of scrap arises ,the same is accounted in separate account

head .

14) According to the records, the company is regular in depositing statutory dues

with the appropriate authorities.

15) For the year under review, the company has made no provision as there is a loss on operations reported in the financial statements .Necessary adjustments

have been made by the company for revising the excess provision made during the last financial years.

16) There are no disputed amounts payable in respect of statutory dues and other statutory deductions payable as on 31st December 2019.

17) During our examination of the books of accounts, we have not come across

any instances of personal expenses which have been charged to the

company‟s accounts other than those payable under contractual obligations in accordance with the generally accepted business practices and neither have

we been reported of any such instances by the management.

18) On verification of records, we are of opinion that the company has a reasonable system of recording receipts, issues & consumption of raw materials, stores and allocating materials consumed to the respective jobs

commensurate with its size and nature of its business.

19) No write off on account of material loss, discrepancies in physical or book balances of inventories have taken place during the year under review.

20) The company has a reasonable system of allocating man hours utilized to the

respective jobs commensurate with the size and nature of its business except

that there has been an increase in overtime hours due to o of the plant.As also we observed that some of the key managerial personnel who has presently

looking after multiple responsibilities which may result in conflict of interest and also in our opinion is not appropriate from internal control point of view.

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21) System of authorization and internal control regarding issue of stores and allocation of materials and labour are commensurate with the size of the

company and nature of its business.

22) It was observed during the course of audit that the company has recently

undertaken a study on the costing of products and the resultant price fixation. The company has not taken into cognisance the report of the study though in

our opinion the company has reasonably acceptable system to fix the prices of the products given the internal and external environment.

23) The company has not engaged any commission agents except distributors.

24) The balances of sundry debtors are not fully confirmed by all of them and in our opinion appropriate letters with a time limitation for such confirmations

should be communicated to all the credit customers it is suggested to write appropriate letters for such confirmations .As also appropriate legislations for recovery may be initiated by the company for its export sales.

25) The management of current assets particularly balances of cash/bank are

reasonably adequate, considering the nature and size of the business. Funds generally found are not lying idle in bank accounts.

26) According to information and explanations given to us and on the basis of

examination of books and records on test check basis, the activities carried out

by the company are in our opinion lawful and intra vires to the Article of incorporation of the company.

27) According to information and explanations given to us, the company has a

system to obtain approval from the board of directors for all capital investments.

28) The company has an established budgetary control system to verify the actual expenditure vs. budget.

29) The details of remuneration to the managing director and sitting fees paid to

all other directors & observers have been indicated in notes to accounts.

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30) According to information and explanations given to us, the directives of the

board given to the company from time to time have duly complied with.

31) According to information and explanations given to us , the officials , their

relatives/friends/associates or close persons of the company have not been communicated any price sensitive information which are not publicly

available or not authorized by the management which would directly or indirectly benefit them.

Points relevant for trading concerns

1) As per the reports prepared by the management and produced to us, the

company is holding damaged or slow moving goods which are reasonable to the size of operations.

Information Technology

The company has implemented Tally ERP Accounting Software from the year 2020 for accounting including inventories which is expected to be integrated with the plant.

General Points :

1) Going concern: Based on the company‟s Audited Financial statements, we are of opinion that the company is a Going concern.

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2) Ratio Analysis : Financial and Operational Ratios in respect of the company are given in the statement below :

Sl Ratio Details of Calculation 2019 2018

A Ratios for Assessing Financial Health 1 Capital Turnover Ratio (Sales / Capital Employed ) 0.34 1.11

2 Current Ratio (Current Assets/ Current Liabilities )

3.20 3.92

3 Acid Test Ratio (Current Assets other than inventories/Current Liabilities)

0.61 0.83

4 Inventory Turnover Ratio (Sales/ Average Inventories ) 1.48 1.62

5 Fixed Assets Turnover Ratio (Sales / Fixed Assets ) 6.55 5.82

6 Debtors Turnover Ratio (Gross Debtors/ Sales ) X 365 29 Days 23 Days

B Ratios for Assessing Profitability

1 Return on Investment

(Profit After Tax/ Capital

Employed) X 100 (19.45)%*

(22.60)%

2 Net Profit Ratio ( Net Profit / Sales ) X 100 202.87% (12.64)%

3 Operating Ratios ( All expenses excluding Finance Cost )/ sales X 100

109.68% 112.05%

*Profit After Tax does not include income recognised towards valuation of Biological Assets as per BAS 41.This for one to one comparison with previous year figures.

3) Compliance with the Companies Act of The Kingdom of Bhutan The company has complied with the requirements of the Companies Act of Bhutan

2016 concerning conducting of meetings, filing requirements, maintenance of records and all other matter specified in the said act .

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4) Adherence to Laws , Rules and Regulations Audit of the corporation is governed by the Companies Act of Bhutan 2016, and the scope of audit is limited to examination and review of the financial statement as

produced to us by the management. In the course of audit, we have considered the compliance of provision of the said Companies Act and its Article of Incorporation. As per information and explanations given to us by the management , the Company

has been complying with applicable laws , rules and regulations, systems , procedures and practices except our observations made in the Auditor‟s Report to

the members for the year 2019 and our detailed observations .

For C. K. PRUSTY & ASSOCIATES Chartered Accountants (FRN: 323220E)

(CA. Tiruvengadam Kannan) PARTNER

FCA: 055803 Place : Date :

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Bhutan Board Products Limited

Statement of Financial Position

(Amount in Nu.)

Particulars Note 31-Dec-19 31-Dec-18

Assets:

Property, Plants & Equipments 1 385,36,188 426,91,876

Trade & Other Receivables 2 24,49,621 19,67,337

Investment in subsidiary company 3 5,00,000 5,00,000

Other bank balances 4 5,68,429 5,68,429

Deferred Tax Assets 5 - 181,78,942

Biological Asset Recognition as per BAS 41 31 5607,90,000 -

Other non current assets 6 1,50,687 1,50,688

Total Non-Current Assets - 6029,94,924 640,57,272

Inventories 14 1687,54,404 1722,11,289

Trade & Other Receivables 2 129,13,035 79,22,172

Prepayments 7 235,70,274 322,89,569

Cash & Cash Equivalents 8 22,22,056 52,12,853

Current Tax Assets 9 12,64,319 9,54,826

Total Current Assets - 2087,24,088 2185,90,709

TOTAL ASSETS 8117,19,012 2826,47,980

Equity:

Share Capital 15 1400,01,400 1400,01,400

Reserves 691,35,663 691,35,663

Retained Earnings 5276,58,625 156,49,692

Total Equities - 7367,95,688 2247,86,755

Liabilities:

Employee Benefit Liabilities 10 85,31,506 19,68,314

Trade & Other Payables 11 11,56,301 1,50,671

Total Non-Current Liabilities - 96,87,807 21,18,985

Trade & Other Payables 11 258,46,895 165,74,434

Borrowings 12 340,75,754 374,02,160

Other current liabilities 13 53,12,867 17,65,646

Total Current Liabilities - 652,35,517 557,42,240

Total Liabilities - 749,23,324 578,61,225

TOTAL EQUITY AND LIABILITIES 8117,19,012 2826,47,980

In terms of our Report of even date-For C K PRUSTY & ASSOCIATESChartered Accountants Chencho Dorji Sangay WangdiFRN: 323220E Chairman Managing Director

TIRUVENGADAM KANNAN Aita Raj RaiPartner Director Head - FinanceMembership No.: 055803

Place: Kolkata

Date:

Page 13 of 78

Bhutan Board Products LimitedSTATEMENT OF COMPREHENSIVE INCOME

(Amount in Nu.)


Continuing Operations:

Revenue 16 2523,80,791 2486,06,372

Cost of Sales 17 (2486,73,535) (2487,41,919)

Gross Profit/(Loss) - 37,07,256 (1,35,547)

Other Incomes 18 18,97,969 26,63,546

Selling & Distribution Expenses 19 (211,60,438) (203,13,506)

Administrative Expenses 20 (69,24,642) (68,58,763)

Other Expenses 21 (47,563) (26,57,494)

Results from Operating Activities - (225,27,418) (273,01,763)

Finance Cost 22 (47,03,984) (16,74,950)

Net Finance (Costs)/Income - (47,03,984) (16,74,950)

Profit Before Tax - (272,31,402) (289,76,713)

Tax Expenses 23 - (26,59,055)

Profit from Continuing Operations - (272,31,402) (316,35,768)

Profit/(Loss) For the Year - (272,31,402) (316,35,768)

Other Comprehensive Income:

Other Comprehensive Income/(Expense) 24 5392,40,336 2,17,090

Other Comprehensive Income/(Expense) For the Year(Net of Tax)

5392,40,336 2,17,090

Total Comprehensive Income/(Loss) For the Year

5120,08,934 (314,18,678)

Earning per Share:

Basic Earning per Share - 25 36.57 -

Diluted Earning per Share - 25 36.57 -

In terms of our Report of even date-

For C K PRUSTY & ASSOCIATESChartered Accountants Chencho Dorji Sangay WangdiFRN: 323220E Chairman Managing Director

TIRUVENGADAM KANNAN Aita Raj RaiPartner Director GM - FinanceMembership No.: 055803

Place: KolkataDate:

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STATEMENT OF CASH FLOW

(Amount in Nu.)


Cash Flows from Operating Activities:

Profit/(Loss) for the Year 5120,08,934 (287,59,623)

Adjustment for:

- Profit on sale of fixed assets - (4,06,000)

- Depreciation 17 66,85,586 82,16,894

- Impairment Loss on Trade Receivables 30 (1,57,686) 25,85,002

- Net Finance Costs 22 47,03,984 16,74,950

- Provision for Leave Encashment 11 1,21,154 2,266

5233,61,972 (166,86,511)

Changes in:

- Inventories 7 34,56,885 (174,16,509)

- Trade & Other Receivables 2 (53,15,461) 53,63,682

- Other non current assets 6 (5607,90,000) -

- Prepayments 8 87,19,295 1,47,468

- Current Tax Assets 10 (3,09,493) (3,15,367)

- Employee Benefits (Excluding Acturial Gain/Loss) 11 (64,42,038) (35,40,970)

- Trade & Other Payables 12 102,78,091 81,62,976

- Other current liabilities 14 (27,91,920) (22,54,366)

Cash Generated from Operating Activities - (298,32,669) (265,39,597)

Income Tax Paid 24 - (26,59,055)

Net Cash from Operating Activities - (298,32,669) (291,98,652)

Cash Flows from Investing Activities:

Proceeds from Sale of Property, Plant & Equipment - 4,06,000

Development Expenditure 1 (25,29,898) (47,88,331)

Net Cash from/(used) in Investing Activities - (25,29,898) (43,82,331)

Cash Flows from Financing Activities:

Interest Paid 23 (47,03,984) (16,74,950)

Proceeds from Loans & Borrowings 13 340,75,754 374,02,160

Net Cash from/(used) in Financing Activities - 293,71,771 357,27,210

Net Increase/(Decrease) in Cash & Cash Equivalent - (29,90,796) 21,46,227

Opening Balance of Cash & Cash Equivalent 52,12,852 30,66,625

CLOSING BALANCE OF CASH & CASH EQUIVALENT 22,22,056 52,12,852

In terms of our Report of even date-For C K PRUSTY & ASSOCIATESChartered Accountants Chencho Dorji Sangay WangdiFRN: 323220E Chairman Managing Director

TIRUVENGADAM KANNAN Aita Raj RaiPartner Director GM - FinanceMembership No.: 055803

Place: Kolkata

Date:

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A. Equity share capital (Amount in Nu.)

Description Notes AmountAs at 01 January 2018 140,001,400 Changes in equity share capital -

As at 31 December 2018 140,001,400

Changes in equity share capital -

As at 31 December 2019 140,001,400

B. Other equity (Amount in Nu.)

Reserves Reserves Reserves Retained Earnings

General ReserveDividend Equilisation

ReserveReplacement &

Maintenance ReserveRetained earnings

Balance at 01 January 2018 29,149,212 12,000,000 27,986,451 47,068,369 116,204,032 Profit for the year - - - (31,635,768) (31,635,768) Other comprehensive income - - - 217,090 217,090 Fixed Asset Impairment - - - - - Balance at 31 December 2018 29,149,212 12,000,000 27,986,451 15,649,691 84,785,354

Reserves Reserves Reserves Reserve and surplus

General ReserveDividend Equilisation

ReserveReplacement &

Maintenance ReserveRetained earnings

Balance at 01 January 2019 29,149,212 12,000,000 27,986,451 15,649,691 84,785,354 Profit for the year - - - (27,231,402) (27,231,402) Other comprehensive expense - - - 539,240,336 539,240,336 Fixed Asset Impairment - - - - - Balance as at 31 December 2019 29,149,212 12,000,000 27,986,451 527,658,625 596,794,288

Bhutan Board Products LimitedStatement of Changes in Equity

Description Notes Total other equity

Description Notes Total other equity

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NOTES FORMING INTEGRAL PART OF THE FINANCIAL STATEMENTS

1. Property, Plants & Equipments: (Amount in Nu.)

As on 31-12-2018

Additions in the Year

Deletions in the Year

As on 31-12-2019

As on 31-12-2018

Depreciation for the Year

Adjustments in the Year

As on 31-12-2019

As on 31-12-2019

As on 31-12-2018

A B C D = A + B - C E F G H = E + F - G I = D - H J = A - E

Land and Development 4,894,211 - - 4,894,211 - - - - 4,894,211 4,894,211

Roads and Culverts 49,790,085 - - 49,790,085 26,019,456 1,244,752 - 27,264,208 22,525,877 23,770,629

Factory Building 32,902,632 - - 32,902,632 32,902,630 - - 32,902,630 2 2

Housing Colony 7,153,374 - - 7,153,374 6,037,481 178,834 - 6,216,316 937,058 1,115,893

Office Bldg/Warehouse 10,306,187 - - 10,306,187 7,010,035 257,655 - 7,267,690 3,038,497 3,296,151

Plant and Machinery 359,080,771 2,463,278 - 361,544,048 349,995,098 4,408,425 - 354,403,523 7,140,525 9,085,673

Electrical Installation 2,635,473 - - 2,635,473 2,635,471 - - 2,635,471 2 2

Generator 434,640 - - 434,640 434,639 - - 434,639 1 1

Laboratory Equipments 694,783 - - 694,783 694,782 - - 694,782 1 1

Tools and Implements 2,444,536 - - 2,444,536 2,444,534 - - 2,444,534 2 2

Semi Permanent Structure 2,913,216 - - 2,913,216 2,913,214 - - 2,913,214 2 2

Furniture and Fixture 7,457,768 - - 7,457,768 7,457,766 - - 7,457,766 2 2

Office Equipments 15,177,322 66,620 - 15,243,942 15,146,398 97,542 - 15,243,940 2 30,924

Water Works 845,338 - - 845,338 845,336 - - 845,336 2 2 Motor Vehicles 15,326,271 - 15,326,271 14,827,891 498,378 - 15,326,269 2 498,380 Software 511,326 - - 511,326 511,325 - - 511,325 1 1

A. Total Fixed Assets - 512,567,933 2,529,898 - 515,097,830 469,876,056 6,685,586 - 476,561,643 38,536,188 42,691,876

GRAND TOTAL 512,567,933 2,529,898 - 515,097,830 469,876,056 455,400,414 - 476,561,643 38,536,188 42,691,876

PREVIOUS YEAR - 517,885,997 7,699,402 15,883,550 509,701,850 455,400,414 9,050,999 870,000 463,581,413 46,120,437 62,485,584

a. Depreciation has been computed on Straight Line Method on the salvage value of the assets.b. Depreciation rates have been determined based on Useful Life of an asset.

Particulars

Gross Carrying Amount (in Nu.) Depreciation/Amortisation (in Nu.) Net Carrying Amount (in Nu.)

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2. Trade & Other Receivables: (Amount in Nu.)

31-Dec-19 31-Dec-18

Other Deposits 7,664 156,290

Other Receivables 2,441,957 1,811,047

2,449,621 1,967,337

Trade Receivables (Subject to Confirmation)

Due for more than 6 months

- Considered Good 5,200,928 5,699,178

- Considered Doubtful 2,951,797 1,435,490

Others - Considered Good - 2,317,434

8,152,725 9,452,102

Less: Allowance of Impairment Loss 2,325,231 2,937,996

a. Total Debts Considered Good - 5,827,494 6,514,106

Trade Receivables (Subject to Confirmation) on A/c of BBEL

Due for more than 6 months

- Considered Good 10,411,655 312,886 - Considered Doubtful 1 359 256 4 723 592

A. Total Non-Current Assets -

Particulars

Considered Doubtful 1,359,256 4,723,592

Others - Considered Good - 1,095,180

11,770,911 6,131,658

Less: Allowance of Impairment Loss 4,685,370 4,723,592

b. Total Debts Considered Good for BBEL - 7,085,541 1,408,066 Total Trade Receivables (a+b) - 12,913,035 7,922,172

12,913,035 7,922,172

31-Dec-19 31-Dec-18

500,000 500,000

- (5000 Eq. Shares @ 100/- each)

500,000 500,000

3. Investment in subsidiary company:

TOTAL -

Particulars

In Equity Shares of Bhutan Board Exports Limited, the wholly ownedsubsidiary company.

B. Total Current Assets -

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31-Dec-19 31-Dec-18

Balances with Banks in

- Earmarked Dividend Account 568,429 568,429

568,429 568,429

31-Dec-19 31-Dec-18

Deferred Tax Assets/(Liabilities) [Note-29]

- On Allowance of Impairment Loss - 18,002,956

- On Employee Benefit Expenses - 175,986

- 18,178,942

6. Other non current assets:31-Dec-19 31-Dec-18

Sales Tax Deposits 150,687 150,687

150,687 150,688 Total Other non current assets -

Particulars

TOTAL -

Particulars

5. Deferred Tax Assets:

CLOSING BALANCE -

Particulars

4. Other Bank balances:

31-Dec-19 31-Dec-18

Advance to Party 12,196,303 23,338,832

Advance for Customs Duty 8,412,161 5,888,778

Advance to Staffs 824,385 545,065

Advance for Company Expenses 407,998 289,556

Tour Advance 62,359 108,323

Margin Money Balances 600,787 1,183,786

Prepaid Expenses 1,066,282 935,229

23,570,274 32,289,569 TOTAL -

Particulars7. Prepayments:

Page 19 of 78

31-Dec-19 31-Dec-18

Balances with Banks in Current Accounts 1,502,375 4,038,426

Cash in Hand 719,681 1,174,427

2,222,056 5,212,853

31-Dec-19 31-Dec-18

Advance Tax - Opening Balance

- TDS Credit 850,304 534,937

- Advance Corporate Tax 1,655,497 1,655,497

2,505,801 2,190,434

Add: TDS Credit during the Year 309,494 315,367

2,815,294 2,505,801

2,815,294 2,505,801

Provision for Corporate Tax - Opening Balance 1,550,975 1,550,975

1,550,975 1,550,975

1,550,975 1,550,975

1,550,975 1,550,975

1,264,319 954,826

B. Closing Balance of Provision -

CASH & CASH EQUIVALENTS AS PER CASH FLOW (A+B) -

Particulars

9. Current Tax Assets:

8. Cash & Cash Equivalents:

Particulars

A. Closing Balance of Advance Tax -

Net Curent tax assets

31-Dec-19 31-Dec-18

Defined Benefit Obligation - Gratuity Liability (Note-28) 42,840,087 42,644,518

Less: Fair Value of Plan Assets - Gratuity Fund (Note-28) 35,018,621 41,265,090

Net Defined Benefit (Assets)/Liabilities - 7,821,466 1,379,428

Provision for Leave Encashment 710,040 588,886

8,531,506 1,968,314

Particulars

NET EMPLOYEE BENEFIT (ASSETS)/LIABILITIES -

10. Employee Benefits liabilities:

Page 20 of 78

31-Dec-19 31-Dec-18

Deposits

- Security Deposits 964,022 33,918

- Performance Bonds 192,279 116,753

1,156,301 150,671

Sundry Creditors 22,965,086 13,692,556

Liabilities for Purchase 59,827 59,841

Liabilities for Expenses 1,986,368 1,960,013

Deposits

- Earnest Money 353,789 292,449

- Others 280,576 280,576

Unclaimed Dividend 153,988 153,988

Unpaid Salary 17,560 14,880

BBEL Current A/c 29,702 120,131

25,846,895 16,574,434

31-Dec-19 31-Dec-18

12. Borrowings :

Particulars

Particulars11. Trade & Other Payables:

A. Total Non-Current Liabilities -

B. Total Current Liabilities -

Bank Overdraft with DPNBL - Hypothecation of Stocks & Land) 28,881,519 32,780,502

Bank Overdraft with BOBL - Hypothecation of Stocks & Book Debts) 5,194,236 4,621,658

34,075,754 37,402,160

31-Dec-19 31-Dec-18

Advance from Customers 9,778 15,071

Other Advances Received 486,039 373,689

PF Settlement 2,549,698 416,220

GIS Contribution 738,342 224,160

TDS Payable - 4,115

Health Contribution - 5,507

BBPL/BBEL Employees Welfare Scheme 11,295 20,714

Gratuity Fund Payable 1,517,715 706,170

5,312,867 1,765,646

Total Borrowings

Particulars

B. Total Current Liabilities -

13. Other current liabilities:

Page 21 of 78



14. Inventory

As on 31-12-2018

Purchases in the Year

Issuea/

Adjustmentsb

Consumption/Change

As on 31-12-2019

As on 31-12-2017

Purchases in the Year

Issuea/

Adjustmentsb

Consumption/Change

As on 31-12-2018

Wood 21,730,896 40,879,754 - 50,928,632 11,682,018 26,117,140 47,822,861 - 52,209,105 21,730,896

Chemicals 6,437,985 50,038,513 - 47,830,561 8,645,937 5,708,012 51,823,815 - 51,093,842 6,437,985

Decorative Paper 13,223,929 22,526,142 - 25,961,281 9,788,790 16,404,220 35,321,751 - 38,502,041 13,223,929

Board 4,861,119 - - 764,163 4,096,956 4,075,649 - - (785,470) 4,861,119

Fittings 9,715,496 4,928,839 - 5,276,701 9,367,634 10,142,093 5,912,274 - 6,338,871 9,715,496

A. Raw Materials - 55,969,426 118,373,248 - 130,761,339 43,581,334 62,447,114 140,880,702 - 147,358,390 55,969,426

Imported 23,993,243 14,732,933 10,941,484 1,005,449 26,779,243 23,117,140 6,965,768 5,949,029 140,636 23,993,243

Indigenious 16,206,789 5,295,739 6,827,623 1,499,010 13,175,895 15,540,462 14,902,609 11,392,661 2,843,621 16,206,789

POL 692,128 4,308,642 3,817,703 371,014 812,053 1,195,847 5,376,302 5,452,953 427,068 692,128

B. Stores & Spares - 40,892,160 24,337,315 21,586,810 2,875,474 40,767,191 39,853,449 27,244,679 22,794,643 3,411,325 40,892,160

C. Packing Materials 502,281 2,591,106 - 1,914,340 1,179,047 950,784 2,854,346 - 3,302,849 502,281

Raw Materials and Consumables(A+B+C)- 97,363,866 145,301,668 21,586,810 135,551,152 85,527,572 103,251,347 170,979,727 22,794,643 154,072,564 97,363,866

Work-in-Progress 10,388,654 - - (2,683,317) 13,071,971 4,592,815 - - (5,795,839) 10,388,654

Finished Goods 64,458,769 - - (5,696,092) 70,154,861 46,950,618 - - (17,508,151) 64,458,769

GRAND TOTAL - 172,211,289 145,301,668 21,586,810 127,171,743 168,754,404 154,794,780 170,979,727 22,794,643 130,768,574 172,211,289

a). Issue of Stores & Spares was for Repairs of Machineries.b). Adjustment of Finished Goods is for Opening stock.

Particulars

For the Year 2019 (in Nu.) For the Year 2018(in Nu.)

Page 22 of 78



Authorised Share Capital

No. of Shares Amount in Nu. No. of Shares Amount in Nu. No. of Shares Amount in Nu.

Equity Shares 15,000,000 150,000,000 15,000,000 150,000,000 15,000,000 150,000,000

Issued, Subscribed and Paid-up Share Capital

No. of Shares Amount in Nu. No. of Shares Amount in Nu. No. of Shares Amount in Nu.

Fully paid up Equity Shares 14,000,140 140,001,400 14,000,140 140,001,400 14,000,140 140,001,400

14,000,140 140,001,400 14,000,140 140,001,400 14,000,140 140,001,400

a. The reconciliation of the number of shares outstanding and the amount of share capital as on 31-12-2018 is set out as below,

No. of Shares Amount in Nu. No. of Shares Amount in Nu. No. of Shares Amount in Nu.14,000,140 140,001,400 14,000,140 140,001,400 14,000,140 140,001,400

- - - - - -

14,000,140 140,001,400 14,000,140 140,001,400 14,000,140 140,001,400

b.

c.

As on 31-Dec-19 As on 31-Dec-18 As on 31-Dec-17

1 Druk Holding & Investment Ltd. 668,334 668,334 668,334

2 Bank of Bhutan Ltd. 172,400 172,400 172,400

3 Royal Insurance Corporation of Bhutan ltd. 11,830 11,830 11,830

4 Bhutan National Bank Ltd. 1,400 1,400 1,400

853,964 853,964 853,964

d. The company has not reserved any of it's shares for issue under Options and Contracts for the Sale of Shares including Terms & Amounts.

15. Share Capital:

ParticularsAs on 31-Dec-19 As on 31-Dec-18

Opening Balance

TOTAL -

Particulars

TOTAL -

Name of the ShareholdersSl. No.No. of Shares

List of shares in the company held by it's associates are as follows,

The Co. has not distributed dividends during the reporting year year 2019.

As on 31-Dec-17

As on 31-Dec-17

Clsoing

ParticularsAs on 31-Dec-19 As on 31-Dec-18 As on 31-Dec-17

Add: Issued during the year

As on 31-12-2019 As on 31-Dec-18

Page 23 of 78



(Amount in Nu.)

31-Dec-19 31-Dec-18

Sale of Boards 230,377,187 223,516,477

Less: Discounts Allowed 15,766,985 12,265,052

214,610,202 211,251,425

Sale of RTAFs 51,959,604 47,891,445

Less: Discounts Allowed 15,048,801 11,229,557

36,910,803 36,661,888

Total Net Sales of Finished Goods (A+B) - 251,521,005 247,913,313

Sale - Others 859,786 693,059

252,380,791 248,606,372

31-Dec-19 31-Dec-18Changes in Inventories

- (Increase)/Decrease in Work-in-Progress (2,683,317) (5,795,839)

- (Increase)/Decrease in Finished Goods (5,696,092) (17,508,151)

Particulars

TOTAL -

16. Revenue:

Particulars

17. Cost of Sales:

A. Net Sales of Boards -

B. Net Sales of RTAFs -

Raw Materials and Consumables Used - Raw Materials Consumed 130,761,339 147,358,390

- Stores & Spares Consumed 2,875,474 3,411,325

- Packing Material Consumed 1,914,340 3,302,849

Employee Benefit Expenses (Note - 27) 60,995,776 55,250,125

Depreciation & Amortisation Expenses 6,685,586 8,216,894

Other Direct Expenses (Note - 28) 53,820,430 54,506,326 248,673,535 248,741,919

31-Dec-19 31-Dec-18BSBMiscellaneous Receipt 1,894,463 2,663,546

Liability no longer required Written Back 3,506 -

1,897,969 2,663,546

31-Dec-19 31-Dec-18Advertisement and Publicity 334,008 1,049,710

Business Promotion 67,556 199,796

Marketing Expenses (BBEL) 20,758,874 19,064,000

21,160,438 20,313,506 TOTAL -

TOTAL -

TOTAL -

18. Other Incomes:

Particulars

19. Selling & Distribution Expenses:

Particulars

Page 24 of 78

31-Dec-19 31-Dec-18Rent, Rates and Taxes 719,877 814,843

Office Rent 626,800 572,000

Repairs & Maintenance - Others 540,032 761,464

Audit Fees and Expenses 214,537 264,716

Board Meeting Expenses 22,130 83,460

Communication Expenses 528,592 579,111

Consultancy Charges 756,342 -

General Expenses 541,206 739,726

Insurance 656,198 1,228,982

Bank Charges 118,439 185,067

Membership Fees 200,000 200,000

Printing and Stationery 492,387 487,254

Recruitment and Training Expenses 13,623 -

Travelling Expenses 1,494,480 942,140

6,924,642 6,858,763

31-Dec-19 31-Dec-18

Particulars

20. Administrative Expenses:

Particulars

21. Other Expenses:

TOTAL -

Miscellaneous Expenses 205,249 72,492

Impairment Loss on Trade Receivables (157,686) 2,585,002

47,563 2,657,494

31-Dec-19 31-Dec-18Interest on Bank OD A/c 4,703,984 1,674,950

4,703,984 1,674,950 TOTAL -

Particulars

22. Finance Costs:

TOTAL -

Page 25 of 78

31-Dec-19 31-Dec-18Earlier Year's Tax Adjustments - (2,659,055)

- (2,659,055)

- (2,659,055)

31-Dec-19 31-Dec-18Actuarial Gain/(Loss) on Net Defined Plan (Note-28) (3,370,722) (188,910)

Profit/(Loss) on disposal of Property, Plants & Equipments - 406,000

Adjustment on account of deferred Tax Asset (18,178,942) -

Income on Biological Asset Recognition as per BAS 41 560,790,000 -

539,240,336 217,090

31-Dec-19 31-Dec-18A. Absolute No. of Shares 14,000,140 14,000,140

B. Diluted No. of Shares 14,000,140 14,000,140

C. Comprehensive Income for the Year 512,008,934 -

D. Income from Continuing Operation for the Year (27,231,402) -

Basic Earning per Share (C/A) - 36.57 0.00

Tax Expenses on Continuing Operations -

Particulars

TOTAL -

Particulars

23. Tax Expenses:

25. Earning Per Share:

Particulars

24. Other Comprehensive Incomes:

TOTAL -

Basic Earning per Share (C/A) 36.57 0.00

Diluted Earning per Share (C/B) - 36.57 0.00

Basic Continuing Earning per Share (D/A) - (1.95) 0.00

Diluted Continuing Earning per Share (D/B) - (1.95) 0.00

31-Dec-19 31-Dec-18Salary and Wages 41,271,720 35,579,824

Extra Time Allowance 4,013,973 4,017,769

Medical Expenses 7,022 128,541

Gratuity 3,071,316 2,540,130

Leave Encashment 2,219,639 1,947,421

Leave Travel Concession 2,652,730 2,727,758

Contribution to Providend Fund 4,159,037 4,279,622

Directors' Remuneration, Perks and Sitting Fees 2,286,304 2,321,860

Staff Welfare 1,314,035 1,707,200

60,995,776 55,250,125 TOTAL -

Particulars

26. Employee Benefit Expenses:

Page 26 of 78

31-Dec-19 31-Dec-18Power and Fuel (Electricity) 16,949,256 17,690,858

Repairs & Maintenance:

- Building 1,472,128 6,880

- Machinery 17,905,490 16,178,998

- Vehicle 1,282,448 1,760,356

Road - 37,500

Loading and Unloading Charges 750,984 719,371

Packing and Forwarding 156,739 138,999

POL Expenses for Vehicles 3,983,827 4,331,486

Purchase (Others) 916,324 1,763,576

Transportation Charges 770,525 878,479

Afforestation Expenses 897,233 1,767,892

Forestry Expenses 8,735,474 9,231,931

53,820,430 54,506,326 TOTAL -

Particulars

27. Other Direct Expenses:

Page 27 of 78

a.

As per BAS As per IT Act Temporary Timing Diff.

Deferred Tax Liabilities

As on 31.12.2018:-1 WDV of Fixed Assets 46,120,437 46,120,437 - - 2 (586,620) - 586,620 175,986

3 (60,009,855) - 60,009,855 18,002,956

A. Deferred Tax Assets/(Liabilities) - 18,178,942 As on 31.12.2019:-

1 WDV of Fixed Assets 38,536,188 38,536,188 - - B. Deferred Tax Assets/(Liabilities) - - Increase/(Decrease) in DTA [B-A] - (18,178,942)

a.

Year 2019 Year 2018Balance at the beginning of the Year 7,661,588 60,009,855 Add: Charge for the Year (157,686) 2,585,002

7,503,902 62,594,857 Less: Amount written off during the Year - 54,933,269 Balance at the end of the Year - 7,503,902 7,661,588

BHUTAN BOARD PRODUCTS LIMITED

Impairment Loss on Debtors

28. Calculation of Deferred Tax:Detail calculation for Deferred Tax are as follows:

Particulars

Provision for Leave Encashment

29. Impairment Loss on Trade Receivables:Movements in the Allowance for Impairment Loss were as follows:

ParticularsAmount in Nu.

Page 28 of 78

a.Year 2019 Year 2018

Actuarial Gain/(Loss) due to Liability Experience 750,292 (2,495,810) Actuarial Gain/(Loss) due to Liability assumption charges - 1,321,690 Return on Plan Assets greater/(lesser) than Discount Rate 2,620,430 1,363,030 Actuarial Gain/(Loss) recognised as OCI - 3,370,722 188,910

Less: Employee Benefit Cost charged to Profit & Loss Statement

- Service Cost (2,704,396) (2,287,390) Net interest on net defined benefit liability/asset (366,920) (252,740) -acturial gain /loss cecognized in ociet Interest on (Liability)/Assets (3,370,722) (188,910)

Net Gain/(Expenses) for the Year - (6,442,038) (2,729,040)

b.As on 31-12-2019 As on 31-12-2018

Opening Balance 41,265,090 35,748,330 Interest Income on Fund Assets 2,788,078 3,038,610 Employer Contributions - 6,270,010 Return on Plan Assets greater/(lesser) than Discount Rate (2,620,430) (1,363,030) Paid into Gratuity Fund by Company - - Benefits paid during the year (6,414,117) (2,428,830) A. Gratuity Fund Assets at the Year end - 35,018,621 41,265,090 Opening Balance 42,644,518 40,668,728 Service Cost 2,704,396 2,287,390 Interest Cost on Obligation 3,154,998 3,291,350

Net Actuarial Gain during the year in Nu.,Particulars

Balance Position at year end in Nu.,Particulars

30. Employee Benefits:

Actuarial Gain due to Liabity Experience 750,292 (2,495,810) Actuarial gain/(loss) - Financial Assumption - 1,321,690 Benefits paid from Plan Assets (6,414,117) (2,428,830) B. Defined Benefit Obligation at the Year end - 42,840,087 42,644,518 Net Employee Benefit Assets/(Liabilities)[A-B] (7,821,466) (1,379,428)

c. Other Informations:i. Discount Rate as at 31st December, 2019 8.00% 8.00%ii. Effect of 1% increase in Discount Rate on Obligation in Nu. (1,377,334) (2,566,380) iii. Effect of 1% decrease in Discount Rate on Obligation in Nu. 1,468,774 2,900,860 iv. Salary Escalation Rate 6.00% 6.00%v.Effect of 1% increase in Salary Escalaration Rate on Obligation in Nu 1,609,452 2,656,830 vi.Effect of 1% decrease in Salary Escalaration Rate on Obligation in Nu (1,521,591) (2,455,130) vii. Type of Investments for Fund Assets Fixed Deposit RICB Bond

As on 31-12-2019 As on 31-12-2018Biological Asset Recognised as per BAS 41 560,790,000 -

Particulars31. Income on Biological Asset Recognition as per BAS 41:

Page 29 of 78

a. Identification of Reportable Segments:-

b. Type of Products:-i.

ii.iii.

c. Accounting Policies:-

d. Primary Segment Informations(Business Segment):-

Board RTAF Unallocated TOTAL Board RTAF Unallocated TOTAL

Total Revenue 225,552,470.11 36,910,803.00 - 262,463,273.11 222,470,736.04 36,661,888.00 - 259,132,624.04 Inter-Segment Transfer (10,942,268.11) - - (10,942,268.11) (11,219,311.04) - - (11,219,311.04) External Revenue 214,610,202.00 36,910,803.00 - 251,521,005.00 211,251,425.00 36,661,888.00 - 247,913,313.00

External Sales 214,610,202.00 36,910,803.00 - 251,521,005.00 211,251,425.00 36,661,888.00 - 247,913,313.00 Add: Other Incomes 859,786.00 562.80 - 860,348.80 3,762,605.00 3,762,605.00 Less: Operating Expenses (241,402,991.63) (23,906,564.17) - (265,309,555.80) (230,496,554.74) (41,203,689.25) - (271,700,243.99) EBITDA (25 933 003 63) 13 004 801 63 (12 928 202 00) (19 245 129 74) (4 541 801 25) 3 762 605 00 (20 024 325 99)

B. Segment Result:-

Unallocated - Represents other corporate support services which can not be allocated to any particular products.

The accounting policies used by the company in reporting segments are the same as those contained in Pt.-IV of Note-33 of the Financial Statements. The Chief Executive assesses the performance of the operating segments on a measure ofEBITDA. Segment EBITDA represents profit earned by each segment exclusive of any allocation of Depreciation & Amortisation, Impairment Loss on Trade Receivables, Finance Costs and Income Tax Expense.

Particulars Amount for the year ended 2019 in Nu. Amount for the year ended 2018 in Nu.

A. Segment Revenue:-

BHUTAN BOARD PRODUCTS LIMITEDNOTES FORMING INTEGRAL PART OF THE FINANCIAL STATEMENTS

32. Operating Segments:

The operational segments are identified by the Management based on the nature of activities. Financial information about each of the operating activities segments is sent to the board on quarterly basis.

Particle Board - The particle board segment encompasses activity associated with the production and sale.Ready to Assamble Furniture (RTAF) - The furniture segment encompasses activity associated with the production, sale and trading of related items and services.

EBITDA - (25,933,003.63) 13,004,801.63 - (12,928,202.00) (19,245,129.74) (4,541,801.25) 3,762,605.00 (20,024,325.99) Less: Depreciation (5,214,859.52) (1,412,718.48) - (6,627,578.00) (5,162,784.19) (1,521,482.81) - (6,684,267.00)

Impairment Loss - - - - - - - Finance Costs (4,013,672.56) (690,311.44) - (4,703,984.00) (1,674,950.00) - - (1,674,950.00) Tax Expenses - - - - - - -

Profit after Tax (35,161,535.71) 10,901,771.71 - (24,259,764.00) (26,082,863.93) (6,063,284.06) 3,762,605.00 (28,383,542.99)

Non-Current Assets 595884922.6 7110001.39 - 602,994,924.00 58,463,684.61 8,310,001.39 - 66,773,686.00 Current Assets 141660910.4 67063177.62 - 208,724,088.00 150,409,473.38 68,499,954.62 - 218,909,428.00 Total Assets 737,545,832.99 74,173,179.01 - 811,719,012.00 208,873,157.99 76,809,956.01 - 285,683,114.00

Non-Current Liabilities 9687807 - - 9687807 2,311,280.00 - - 2,311,280.00 Current Liabilities 64246828 988689 - 65235517 54,761,145.61 981,094.39 - 55,742,240.00 Total Liabilities 73,934,635.00 988,689.00 - 74,923,324.00 57,072,425.61 981,094.39 - 58,053,520.00

d. Secondary Segment Informations(Geographical Segment):-The Geographical Segments considered for disclosure are, a). Sales within Bhutan and b). Sales within India.

For the Year 2019 For the Year 2018 As on 31-12-2019 As on 31-12-2018Sales within India 215,772,009 206,389,156 206,389,156 195,848,522 Sales within Bhutan 36,608,782 42,217,216 42,217,216 90,563,371

252,380,791 248,606,372 248,606,372 286,411,893 Total

C. Segment Assets:-

D. Segment Liabilities:-

Particulars Segment Revenue in Nu. Segment Assets in Nu.

Page 30 of 78


a. List of Related Parties of the company are as follows:-

1. Druk Holding & Investments Limited 11.Bank of Bhutan securities Ltd.2. CDCL 12. Thimphu Tech park Ltd.3. Dagachu Hydro Power Corporation 13.Tangsibji hydro energy Ltd.4. Bank of Bhutan Limited 14.State Mining Corporation Ltd.5. Bhutan Power Corporation Limited 15.Wood Craft centre Ltd.6. Bhutan Telecom Limited 16. Druk Air Corporation Limited7. Bhutan Board Exports Ltd. 17. Druk Green Power Corporation

18. Natural Resources Development Corporation Ltd.9.Bhutan hydropower service Corporation ltd. 19. State Trading Corporation of Bhutan Limited

20. Dungsam Polymers Limited

d. Transactions with the Related Parties are as follows:-

Associate Subsidiary KMP TOTAL Associate Subsidiary KMP TOTAL1. Sale of Finished Products 3,582,700.12 162,819,182.00 - 166,401,882.12 5,192,064.10 165,108,659.00 - 170,300,723.10 2. Purchase of Wood - - - - - - - - 3. Running and Maintenance Vehicles 244,939.65 - - 244,939.65 - - - - 3. Expenses

- Electricity Charges 16,949,256.29 - - 16,949,256.29 17,690,858.00 - - 17,690,858.00 - Telephone Charges 468,051.90 - - 468,051.90 511,918.24 - - 511,918.24

10. Dungsam Cement Corporation Limited Group Associate Co. Group Associate Co.

Particulars Amount for the year ended 2019 in Nu. Amount for the year ended 2018 in Nu.

Wholly Owned Subsidiary Co. Group Associate Co.8. Mr. Sangay Wangdi (Managing Director) Key Management Personel(KMP) Group Associate Co.

Group Associate Co. Group Associate Co.

Group Associate Co. Group Associate Co.Group Associate Co. Group Associate Co.Group Associate Co. Group Associate Co.

Associate Co. Group Associate Co.Group Associate Co. Group Associate Co.Group Associate Co. Group Associate Co.

Name of the Related Parties Nature of Relation Name of the Related Parties Nature of Relation

- Travelling Exp. - - - - - - - - Interest on OD A/c 988,818.18 - 988,818.18 182,116.20 - - 182,116.20 - Exp. Reimbursed - 20,758,873.95 - 20,758,873.95 - 19,064,000.00 - 19,064,000.00

4. Payment to Directors 114,639.18 - - - Salary to MD 1,847,604.00 - - 1,847,604.00 - - 1,010,664.00 1,010,664.00 - Other benefits to MD 158,700.00 - - 158,700.00 - - 836,940.00 836,940.00 - Sitting Fees 280,000.00 - - 280,000.00 - - 118,256.00 118,256.00

5. Balance at Year end - Amount Receivable 59,484.00 - - 59,484.00 292,392.00 - - 292,392.00 - Amount Payable 1,421,176.00 - - 1,421,176.00 1,137,283.90 - - 1,137,283.90

Page 31 of 78

Quantity Value in Nu. Quantity Value in Nu.Raw Material Consumed:Urea M.T. 545.64 9,330,290.00 630.29 8,495,423.30 Formaline M.T. 1,137.64 21,849,926.30 1,279.84 25,650,157.55 Melamine "A" M.T. 102.57 10,050,298.50 104.90 9,897,419.50 Parafin Wax M.T. 27.90 2,945,416.00 39.10 3,322,426.00 Amonium Hydro-Oxide M.T. 10.44 313,051.20 13.12 393,690.00 Amonium Chloride M.T. 22.20 666,000.00 26.70 801,000.00 Stearic Acid M.T. 3.35 318,060.00 4.72 448,020.00 Rhodomine "B" M.T. 1.10 776,750.00 0.93 585,125.10 Di-Ethyle Glycol (DEG) M.T. 5.35 632,362.00 5.26 621,152.00 Normal Butanol M.T. 3.48 435,875.00 3.27 408,250.00 Sodium Hydroxide M.T. 0.35 17,150.00 0.45 22,050.00 Sodium Carbonate M.T. 0.90 33,300.00 1.15 42,550.00 Formic Acid M.T. 0.66 42,900.00 0.67 43,550.00 Ammonium Accetate M.T. 0.20 22,000.00 0.15 16,500.00 Triethanolamine M.T. 0.93 137,640.00 0.88 130,240.00 Releasing Agent (India) M.T. 0.60 259,542.00 0.50 216,289.00

47,830,561.00 51,093,842.45 Wood M.T. 24,556.25 50,928,632.00 23,823.62 52,209,104.78 Decorative Paper M.T. 104.57 25,961,281.00 119.55 26,864,028.83 Fittings 6,040,864.00 Assorted 6,338,871.47 TOTAL - 130,761,338.00 136,505,847.53

Opening Stock:Plain Particle Board Sq. Mtr. 74,863.200 18,518,415.66 16,154.020 5,639,816.90 Laminated Particle Board Sq. Mtr. 79,081.930 24,901,555.14 19,955.460 8,918,158.75 Ready-to-Assemble Furniture Pcs. 7,275 21,038,796.00 6,087 32,596,699.70 A. Finished Goods - 64,458,766.80 47,154,675.35 Raw Board (Unsanded) Sq. Mtr. 26,591.75 6,177,320.00 98.28 49,947.52 Furniture Pcs. 1,323 4,211,333.75 2,495 4,542,868.44 B. Work in Progress - 10,388,653.75 4,592,815.96 GRAND TOTAL (A+B) - 74,847,420.55 51,747,491.31

Closing Stock:Plain Particle Board Sq. Mtr. 64,619.45 16,391,652.56 74,863.20 18,518,415.66 Laminated Particle Board Sq. Mtr. 90,048.22 30,543,925.05 79,081.93 24,901,555.14 Ready-to-Assemble Furniture Pcs. 6,524.00 23,764,119.60 7,275.00 21,038,796.00 A. Finished Goods - 70,699,697.21 64,458,766.80 Raw Board (Unsanded) Sq. Mtr. 32,829.80 8,466,102.48 26,591.75 6,177,320.00 Furniture Pcs. 965 4,605,868.50 1,323 4,211,333.75 B. Work in Progress - 13,071,970.98 10,388,653.75 GRAND TOTAL (A+B) - 83,771,668.19 65,133,022.38

Sales:Plain Particle Board Sq. Mtr. 24,738.710 10,219,887.30 21,298.730 9,409,691.07 Laminated Particle Board Sq. Mtr. 583,621.72 205,250,100.70 573,437.90 201,841,753.93 Ready-to-Assemble Furniture Pcs. 9,220 36,910,803.00 10,396 36,661,868.00 TOTAL - 252,380,791.00 247,913,313.00

Total Chemicals -

BHUTAN BOARD PRODUCTS LIMITEDANNEXURE - A : QUANTITATIVE INFORMATIONS

Particulars Units For the Year 2019 For the Year 2018

Page 32 of 78


NOTES TO ACCOUNTS AND ACCOUNTING POLICIES

Page 33 of 78


33. SIGNIFICANT ACCOUNTING POLICIES

I. Reporting Entity

The principal activities of Bhutan Board Products Limited (the “Company” or “BBPL.”) cover all significant operations that have taken place in Bhutan and the

Zonal Offices in India . The ultimate parent is the Royal Government of Bhutan. The Company is a limited liability company incorporated and domiciled in Bhutan.

The address of its principal place of business is Phuentsholing , Bhutan. These financial statements relate to the year ended 31 December 2019.

II. Basis of preparation

The financial statements of the Company have been prepared in accordance with

Bhutanese Accounting Standards. The statements have been prepared under the accrual, historical cost and going concern conventions. The preparation of financial statements in conformity with BAS requires the use of

certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group‟s accounting policies. The areas

involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are:

1 Fixed assets: critical judgments are expected period of use, condition of the asset, technological advances, regulation, and residual values.

2 Actuarial valuation of employee benefits: expected uptake of the gratuities

and the discount rate used in the valuation. The functional currency of preparation is the Bhutanese Ngultrum.

III. Application of Bhutanese Accounting Standards

The Financial Statements have been prepared in line with Bhutanese Accounting

Standards. The summarised impact of the introduction of BAS are :

a) The company has presented Statements of Comprehensive Income and Changes in Equity as required by BAS 1. These statements show information that was previously disclosed in the schedules to the financial statements.

Generally the disclosure norms adopted by the company is as per function which is in confirmation with group accounting policies.

b) Depreciation has been calculated using an assumed useful life of Fixed Assets

including additions during the year using the rates applicable as per DHI Group Accounting Policy and which are in line with BAS 16.

Page 34 of 78


c) Employee retirement benefits are valued on an actuarial basis which reflects

the estimated liability at balance sheet date.

d) The company has recognised Biological Assets this year as a first time recognition in accordance with BAS 41.

IV. Segment reporting

Operating segments are reported in a manner consistent with the internal reporting

provided to the chief operating decision-maker. The chief operating decision-maker, who are responsible for allocating resources and assessing performance of the

operating segments has been identified as the Board of Directors.

V. Consolidation The Company has control over and owns all the shares in subsidiary company Bhutan Board Exports Ltd. Consolidated financial statements have not been

prepared as the Company itself is a subsidiary of Druk Holdings and Investments Ltd.(DHIL). DHIL is understood to prepare consolidated financial accounts which will include the results of BBPL and BBEL .

VI. Foreign currency translation

a) Foreign currency transactions that are completed within the accounting period are translated into Bhutan Ngultrum using the exchange rates prevailing at the date of settlement. Monetary assets and liabilities in foreign currencies at

balance sheet date are translated at the rates of exchange ruling at balance sheet date.

b) Foreign exchange gains and losses resulting from the settlement of such

transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Income.

Page 35 of 78


VII. Property, plant and equipment

All property, plant and equipment is stated at historical cost less depreciation and

impairment, if any. Costs includes purchase price, taxes and duties, labour cost, direct financing costs, direct overheads for self-constructed assets, borrowing costs, other direct costs incurred up to the date the asset is ready for its intended use

including initial estimate of dismantling and site restoration cost. Subsequent costs are included in the assets carrying amount of assets or recognised

as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All

other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

a) Land is not depreciated. Depreciation on other Assets has been calculated

using an assumed useful life of Fixed Assets including additions during the year using the rates applicable as per DHI Group Accounting Policy which in line with BAS 16. Gains and losses on disposals are determined by comparing

the proceeds with the carrying amount and are recognised within „Other Income‟ or „Other expenses‟ as the case may be, in the income statement.

VIII. Intangible assets

a) Costs associated with maintaining computer software programmes are

recognised as an expense incurred. b) The Company does not recognize the internally generated technical knowhow

and hence recognition criteria and amortisation policy is not defined by the entity.

IX. Research and Development costs

Research costs are recognised as an expense in the year in which they are incurred.

Development costs are only capitalised if a potentially profitable product has been found and management has given approval to further develop the product. If the company decides to proceed and market the product, development costs will

be amortised over the expected profitable period of marketing the product, not exceeding 5 years. Other development costs are expensed immediately if the

decision is made not to proceed to market the product.

Page 36 of 78


X. Receivables and advances .

Loans and receivables are non-derivative financial assets with fixed or determinable

payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting

period. These are classified as non-current assets. The group‟s loans and receivables comprise „loans to customers‟, „trade and other receivables‟ and „cash & cash equivalents‟ in the Statement of Financial Position (notes 5, 3 ).

XI. Inventories

Inventories are stated at costor net realisable value whichever is lower. Cost are

determined using the weighted average method. The cost of finished goods and work in progress comprises design costs, raw materials, direct labour, other direct

costs and related production overheads (based on normal operating capacity).

XII. Trade and other receivables Trade and other receivables are initially recognised at the fair value of the amounts to be received. If collection is expected in one year or less (or in the normal

operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Receivables are reviewed regularly for impairment.

The company has been consistently been adopting policy for impairment of trade

receivables as follows:

1) Outstanding more than one year but less than two years : 20% 2) Outstanding more than two years but less than three years : 40% 3) Outstanding more than three years : 100%

XIII. Cash and cash equivalents

In the Statement of Cash Flows, cash and cash equivalents includes cash in hand,

deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts.

Page 37 of 78


XIV. Trade and other payables

Trade and other payables are initially recognised at the fair value of the amounts to

be paid. Accounts payable are classified as current liabilities if payment are due within one year or less (or in the normal operating cycle of the business if longer). If

not, they are presented as non-current liabilities.

XV. Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in Other Comprehensive Income and in this case, the tax is also

recognised in other comprehensive income. The current income tax charge is calculated on the basis of the tax laws enacted at the balance sheet date in Bhutan.

Management periodically evaluates computation made in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It

establishes provisions wherever appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognised using the liability method on temporary differences arising between the tax bases of assets and

liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted at the balance

sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that

future taxable profit will be available against which the temporary differences can be utilised.

XVI. Employee benefits

a. Retirement Benefits

Defined Contribution Scheme Employees belong to a defined contribution benefit plan managed by a separate entity. The company has no legal or constructive obligations to pay further

contributions if the fund does not hold sufficient assets to pay all employees, the benefits relating to employee service in the current and prior periods.

Page 38 of 78


Defined Benefit Scheme The company makes retirement payments based on the final salary and years of

service. The gratuity is accrued on the basis of actuarial valuation. Changes in service and

interest are charged to the Profit and Loss Account. Changes to actuarial valuation are charged to the Statement of Comprehensive Income.

b. Other benefits Other benefits such as leave encashment and bonus are accrued and are provided for.

XVII.Revenue recognition Revenue is measured at the amount entity expects to be entitled in exchange for transferring promised goods or services to a customer, and represents amounts receivable for goods supplied, stated net of discounts, returns and taxes and royalty

collected on behalf of government.The Company recognises revenue when the entity satisfies a performance obligation identified in the contract by transferring a

promised goods (i.e., an asset) to a customer and the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the group. An asset is assumed to be transferred to a customer when (or as) the

customer obtains control of that asset. Incremental cost incurred by the company for obtaining as contract with customer is recognised as assets if the recovery of such

cost is expected. Such assets are amortised on a systematic basis that is consistent with the transfer to the customer of the goods to which the asset relates.

XVIII. Interest income Interest income is recognised using the effective interest method. When a loan and

receivable is impaired, the company reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument. Interest income on impaired loan and receivables is

recognised using the original effective interest rate.

XIX. Comparative information Where necessary certain comparative information has been reclassified in order to

provide a more appropriate basis for comparison , comparative information has been updated to comply with the introduction of Bhutanese Accounting Standards.

Page 39 of 78


34. Notes on Accounts:

a. Consumption of raw materials is ascertained by adding purchases during the year to the opening stock and by deducting closing stock there from (Note-5) .

b. Quantitative Information in respect of Opening Stock, Purchases, Closing Stock, Sales

and Consumption of Raw Materials (As Certified by Management) is given in Annexure-A.

c. As per MOU, all expenses of Bhutan Board Exports Ltd, wholly owned subsidiary Company, have been reimbursed on actual basis.

d. Sundry Debtors A/c BBEL represents balance on Current Account with the

subsidiary company, net of expenses reimbursed to them and other adjustments.

e. Confirmation of balances although obtained from some of the Trade Debtors as on

31.12.2019 remains to be obtained from majority of the customers.

f. Lease rents amounting to Nu.1.08 million have been provided in the accounts under the head Raw Material Consumed (Wood) as per ( Note– 5).

g. As per para 12 of BAS-41 (BAS 2015 page 1199) a Biological Asset shall be measured

on initial recognition and at the end of each reporting period at its fair value less costs

to sell, except in those cases where the fair value cannot be measured reliably. Accordingly, the management has estimated the biological asset at Nu 560.79 million.

The company has recognized the same in profit and loss account as this is the first time measurement. It was opined by the consultant that the income recognised in

financial statement under BAS-41 will not be subject to income tax under the local laws.

Page 40 of 78


Fair value/Cost to Sell is calculated as under

a) Total hectares where living trees are presently standing= 2100.66 Hectares b) Volume per hectare= 91.714 Cubic Meter c) Therefore total volume of plantation= 91.714 Cubic MeterX2100.66 Hectare= 1,92,659.93 Cubic Meters c) Present market value per cubic meter excluding felling, cross cutting, craning manual rolling, toll fees and loading & transportation cost= Nu 4238.40per cubic meter e) Fair value of the plantation= 1,92,659.93 cubic meter X Nu 4238.40 per cubic meter= Nu 816.57 million f. Cost to sell = 1,92,659.93 cubic meter X Nu 1332.82 per cubic meter= Nu 256.78 million g. Therefore amount recognized is Nu.816.57 million - Nu.256.78 million = Nu 560.79 million.

h. Deferred Tax assets over provided in last year now reversed .

i. It was decided by the Board of Directors of the company to merge of Bhutan Board Exports Limited a wholly owned subsidiary of this company.

j. The performance of the company has been adversely affected in the last few years

due to changes in policy like GST, Demonetisation etc in India to which the company

majorly exports. Despite the above hostile environment, the company could sustain its performance at the current level due to proper utilisation of available resources.

k. During the previous year the Net Worth of company was Nu. 282 Million which

increased during the currently year to Nu. 811 million due to recognition of Biological Asset of Nu. 560.79 million as per BAS 41.

Page 41 of 78


g. Payments to Auditors:

Particulars Year 2019

(Nu.)

Year 2018

(Nu.)

Statutory Audit Fees 1,54,350.00 1,54,350.00

Out of Pocket Audit Expenses 79,444.00 1,10,366.00

TOTAL -

For C. K. PRUSTY & ASSOCIATES Chairman Managing Director Chartered Accountants (FRN: 323220E)

(CA.Tiruvengadam Kannan) PARTNER FCA: 055803

Place : Kolkata Date :

Page 42 of 78


COMPLIANCE CALENDAR AND

COMPLIANCE CHECKLIST

Page 43 of 78



COMPLIANCE CALENDAR

Sl. No. ACTIVITY SECTION TIMING REMARKS

1

a)

b)

Submission of Annual Return

Companies listed with Royal Securities Exchange of Bhutan

Limited All unlisted companies includes:

i) Duly filled form as per Schedule XII

ii) Balance Sheet iii)Profit & Account iv)Cash Flow Statement

v)Auditors Report vi)Director‟s Report

267

NA

On 27/04/201

9

a) As per Annual Return Form for a period relating

to financial year ended on 31st December.

b) Should be duly authenticated by at least

one director and the Chief Executive Officer.

2

a) b)

c)

Annual General Meeting

Listed Companies Unlisted Companies

Government Companies

177

NA NA

On 28-03-

2019

To be conducted once a year besides other meetings Board Cum

AGM

3 Notice Calling General Meetings 185 On 06-03-

2019

NA to PVT. Ltd.

4 Payment of Dividend 204 - Company has not declared during the year.

Page 44 of 78



5 Presentation of B/S,P&L A/c and Cash Flow Statement at every

AGM

244 On 28-03-2019

BY BoD

6 Filing of Documents with Registrar 267 On 05-07-2019

As per Section 267

7 Appointment of Auditor

GCC & GC Reappointment Removal

Resignation

251

260-262

Every AGM

Notify the Registrar

within 15 Days from

passing the resolution.

Convene

the EGM within 14

Days to discuss resignatio

n.

Every year at AGM from panel of Auditors

– RAA AG of Bhutan .Not more than 3 years.

8 Consent to act as Director 140 Within 30 Days of

appointment or reappoint

ment with the

registrar.

Complied

Page 45 of 78



9 Board Meetings 138th BM

139th BM 140th BM

146 & 149 On 28th

March,2019

On 22nd July,2019 On 30th

September,2019

Quorum :2/3 of total strength or 2 directors

whichever is higher.

10 Appointment of CEO 210 Every 5

Years

At AGM

11 Power of Regulatory Authority to

accord approval

412 Approval

of Regulator

y Authority

Prescribing

Forms,Payments of fees ,generally for the purpose

of this Act.

12 Appointment of Company Secretary

213 As prescribed

by MTI

Listed companies and Companies with more

than Nu.100,000,000/- as paid up capital.

13 Statutory Record and Inspection 228 All Times

Page 46 of 78

No. Ss. INCORPORATION OF A COMPANY & SECURITIES YES NO NA REMARKS

1 28 Changes to Articles/Approval

2 47 Change of name/Approval

3 123 Increase or consolidation of share capital

4 124 Reduction of share capital

5 82 License Copy and Share Certificate filing

The company's shares are not in dematerialised

form despite being offered to public.

6 107 Public offer of shares & Debentures-ROC Approval No public offer was made during the period

MANAGEMENT & ADMINISTRATION

7 217 Registered Office of Company

(Postal Address & Contact Number)

8 221 Publication of name by Company

(Letter Head, Seals and Sign Board)

9 241 Financial Year of Companies as of 31st Dec.

242 Extension upto 15 months - ROC approval

243 Extension upto 18 months - Authority's approval

10 245 Financial Statements to follow BAS BAS for Public Cos/BAS for SMEs for Pvt

Should Consult AASBB & AS Regulations,''12

11 267 Annual Return Submission

On/before 31st May for listed; others 31st July

12 177 Annual General Meeting (Minutes)

13 180 Extraordinary General Meeting (Minutes)

DATE:15.02.2020

NAME OF COMPANY : BHUTAN BOARD PRODUCTS LIMITED

REGISTERED NO:

COMPLIANCE CHECKLIST

Page 47 of 78

14 185 Notice for calling general meeting

Notice for calling 07th March,2019 AGM held on

28/03/2019 was published in Kuensel on

07/03/2019 which is in violation to section 185

which calls for not less than 21 days notice in

writing.

15 187 listed Co. - written as well as in media

Public Co/Private Co. - Written Notice

16 190 Chairman of meeting

(CEO cannot chair)

17 192 Representation of corporations at meetings

(appointed by Board Directors)

18 193 Ordinary and special resolutions (Minutes)

There is no practice of passing ordinary and

special resolutions.

19 195 Minutes of Annual General Meeting and AGM was held on ......., was signed.

Board Meetings (maintained ss.195-198)

20 199 Declaration and payment of dividend(199-209)

No Dividend declared during this year, 2019

21 232 Books of account to be kept by company Intimation with ROC within 7 days

(location & time period )

22 Board's report (signed by Chairman) to contain CG&CSR practices report

23 252 Appointment and removal of Auditors Non-appoint within7 days of AGM have to

Need to re-appoint annually(251-259) intimate with Registrar of Companies

24 260 Resignation of Auditors from office

(Annual Resignation)

25 266 Auditing standards

(Audit using Auditing Standards issued by AASBB)

26 133 Number of directors

27 134 One third of all Public Companies shall be independent Includes FIs, listed, U-Public Co & SOEs

28 138 (Minimum No. & retirement on rotation)

2 in Pvt. & 3 in Public Co./rotation for Public Co

only

29 139 Additional directors

30 140 Consent to act as directors

Page 48 of 78

31 141 Certain persons not to be appointed as Directors

32 142 Resignation by a director

33 143 Removal of directors

Either in EGM or AGM

34 146 Board meetings

(3 Meetings for Public Cos & 2 Meetings for Pvt )

35 152 General powers of the board

36 156 Restriction on powers of Board

37 210 Appointment of Chief Executive Officer

(Max 5 years terms& 2 consecutive terms only)

38 213 Company Secretary required in all Public Companies Comply with sections 10(c), 213 & 214

39 414 Appointment of selling or buying agents

(govt. Approval obtained or not)

40 157 No loans to directors (only for Public Co.) only exempt if provided by other law

41 53 Inter-corporate investments

(investments to be disclosed) apply old rule

42 158 Conflict of Interest Transactions by Board

Need to disclose & approved by board directors

43 161 Standard of care rquired by directors Section 162 duty is complied with

(Reckless decision) whilst making decisions by the Board

No. Ss. INCORPORATION OF A COMPANY & SECURITIES YES NO NA REMARKS

44 228 Statutory record and inspection Maintaining properly

(a) Register of buy-back of shares No instance of buyback of shares.

(b) Register of transfers

(c) Register of charges

STATUTORY RECORD AND INSPECTION

Page 49 of 78

(d) Register of inter-corporate loans

(e) Register of inter-corporate investments

(f) Register of contracts in which directors are

interested

(g) Register of directors Updated till 2019

(h) Register of directors' shareholding

OTHERS

SIGNATURE/SEAL SIGN NAME

NAME OF INSPECTOR/AUDITOR COMPANY REPRESENTATIVE

NOTE: THIS COMPLIANCE CHECKLIST IS TO BE USED BY ALL CONCERNED UNTIL NEW ONE IS ADOPTED BY REGISTRAR OF COMPANIES

Page 50 of 78


MANAGEMENT REPORT AND

COMPLIANCE ON PREVIOUS

AUDIT REPORT

Page 51 of 78


BHUTAN BOARD PRODUCTS LTD.

MANAGEMENT REPORT FOR THE YEAR 2019 Auditor’s observation : Non follow-up of debtors & advances (AIMS Category No. 5.7.4) : We observed that there is a credit policy in vogue for the company and sometimes the same results in default. This results in accumulation of debtors during the past

years particularly in export sales. We have also suggested in our previous reports that the system followed by the company regarding the credit policy needs

modification. The customers who are entitled for a credit transaction needs to have an agreement with the company, which will ensure recovery from the customers

appropriately. For the old debtors who have availed the credit facilities of the company and have not made payments , our suggestion was, to send legal letters to the customers informing the consequences for breach of credit facility.

Management’s Response

Accumulation of debtors in export market was due to extension of credit facilities to the loyal customers. Efforts are being made to collect all the past debts.

Auditor’s further comments

We suggest to adopt the newly implemented Insolvency and Bankruptcy Code 2016

for recovery of old debtors in India as the same is effective , takes lesser time and

does not entail unreasonable legal expense.

Accountability

DIRECT ACCOUNTABILITY NAME - Mr.Nagendra Sharma NAME - Mr.L.B.Subba DESIGNATION- Dy.General Manager(Debtor) DESIGNATION- Dy.General Manager (Board))

CITIZEN ID NO – 11201002801 CITIZEN ID NO – 11804000363

SUPERVISORY ACCOUNTABILITY NAME – Mr. Sonam Wangchuk DESIGNATION – General Manager (Mktg) CITIZEN ID NO.11410001377

Page 52 of 78


Auditor’s observation : Non Follow-up of debtors & advances (AIMS Category No. 5.7.4):

It was observed that the company could not obtain confirmations from most of the trade debtors .It is suggested that such confirmations should be obtained in all cases for prudent policy norms.


Confirmations can be obtained. F&A Dept.will initiate the confirmation process with immediate effect..


It is suggested to appropriately frame the debtors confirmation letter with a disclaimer that if the same is not confirmed within a reasonable time the same will

taken as confirmed by company. The format is available in Tally Accounting Package which is under implementation.

Accountability DIRECT ACCOUNTABILITY NAME - Mr.Jambay Dorji

DESIGNATION – Dy.Manager (Finance)

CITIZEN ID NO- 11407001132

SUPERVISORY ACCOUNTABILITY NAME – Mr.Aita Raj Rai

DESIGNATION- Head (Finance & Accounts)

CITIZEN ID NO - 10201000464

Page 53 of 78


Auditor’s observation: Other inadequate internal controls(AIMS Category No. 5.15.5):

The company does not have proper Internal Audit System commensurate with the volume, size and nature of its business. Since there are multiple responsibilities for

internal audit head, it was suggested to have an independent Internal audit department.

Management’s Response The company will outsource internal audit for proper internal audit system so that the

present head of Internal Audit can fully look after the administrative functions.


The management decision is acceptable and this decision will not lead to conflict of interest.

Accountability

DIRECT ACCOUNTABILITY NAME – Mr.Vinod Moktan DESIGNATION- Internal Auditor


SUPERVISORY ACCOUNTABILITY NAME – Mr.Sangay Wangdi

DESIGNATION- Managing Director


Page 54 of 78


Auditor’s observation: Non-determination of obsolete, slow moving, surplus stores (AIMS Category No. 5.9.14):

It was observed that some decorative papers are lying unutilised in Tala Factory. No action was taken on these non-moving stocks of decorative papers.

Management’s Response These decorative papers are procured long time back. It was not used since these

shades are outdated not in tune with current market requirement .The papers will be put to use as a balancing paper as in the past.

Auditor’s further comments There are no further comments to offer.

Accountability

DIRECT ACCOUNTABILITY NAME – Mr.L.B.Subba DESIGNATION- Dy.General Manager (Board)


SUPERVISORY ACCOUNTABILITY

NAME – Mr. Sonam Wangchuk

DESIGNATION – General Manager (Mktg)

CITIZEN ID NO.11410001377

Page 55 of 78


Auditor’s observation : Non-conducting of Physical Verification (AIMS Category No. 5.9.8):

Fixed asset register has been updated but no further verification was done since

2017.We also observed that appropriate tag numbers are not affixed on the fixed assets. We also observed that the Internal Auditor does not conduct physical

verification of assets. Management’s Response It is decided to include Fixed Asset Verification as a part of scope of Internal Audit to be

carried out from 2020.


Accountability DIRECT ACCOUNTABILITY NAME – Mr.Vinod Moktan

DESIGNATION- Internal Auditor


SUPERVISORY ACCOUNTABILITY NAME – Mr.Sangay Wangdi

DESIGNATION- Managing Director


Page 56 of 78


Auditor’s Observation : Non-determination of obsolete ,slow moving, surplus stores

(AIMS Category No. 5.9.14 ): There are non-moving items and unusable spare parts lying but the company is

neither taking proper steps for sale/disposal of the same, neither adequate provisions are being made.


The existing non-moving & unusable spares were procured long time back. Over the

period of years, the spares were replaced with latest brands/make which has resulted in redundancy of these items. For instances, all electrical contractors of TB series were replaced by TH series. These items will be segregated into usable & non-

usable separately and the non-usable would be disposed off through auction.


There are no further comments to offer. Accountability

DIRECT ACCOUNTABILITY NAME – Mr.Letho Dorji

DESIGNATION- Store Keeper


SUPERVISORY ACCOUNTABILITY NAME – Mr.D.B.Gurung

DESIGNATION – Offtg.General Manager(Forestry) CITIZEN ID NO- 31306000057

Page 57 of 78


BHUTAN BOARD PRODUCTS LTD. MANAGEMENT REPORT RECOMMENDATORY IN NATURE WITHOUT

ACCOUNTABILITY FOR THE YEAR 2019

Auditor’s observation : Use of Outdated Technologies (AIMS Category No. 5.12.6)

The plant & machineries at TALA Factory are old and outdated. In our opinion, the management needs phase wise capital investments and modernisation of the plant.

This needs to be implemented by the management immediately, else , the company may lose heavily in the near future. Despite these conditions , the company perform

at the capacity utilisation of 50% due to optimum utilisation of resources and proactive breakdown maintenance.

Management’s Response The company has been able to maintain the capacity utilization of 50 % even in this

condition because of frequent repair and maintenance carried out by its dedicated

maintenance team.

The Company has already initiated the revamping process by awarding a Consultant for

study.

(a)Revamping of particle board factory at Tala.

(b) Way forward regarding RTAF Pasakha.

Depending upon the report submitted by the Consultant to the shareholders, the factories

would be revamped which would enhance production capacity and the plant capacity

utilization.


Agreed. It is felt that capital expenditure and modernisation will any way needs to

be carried out to sustain in this competitive market.

Page 58 of 78


Auditor’s observation: Non-conducting of Physical Verification (AIMS Category No. 5.9.8)

We observed that CCTV are not installed in any of the premises of the company.

Proper surveillance is not only important part of security but also helps in optimum utilisation of the resources of the company.

Management’s Response It is suggested to CCTV cameras at least inside the premise in order to have internal control.

Auditor’s further comments Agreed. It should be under proper supervision and monitoring.

Page 59 of 78


Auditor’s Recommendation : Non-Management of Property (AIMS Category No. 5.9.1)

During our visit to Pasakha factory, we found that the condition of RTAF godown is not in a good condition. We were informed by the supervisor that since the interior

and exterior of the factory is not maintained properly, during rainy season the workers are facing problems in working. The materials are susceptible due to such

seepage of water. It is suggested that the company should have a capital budget to be implemented in a phased manner .


Maintenance is being carried out in phases due to huge financial implications to the company.

Auditor’s further comments Water damage may entail losses to the company and hence it is advisable to

prioritise the maintenance exercise.

Page 60 of 78


Auditor’s Recommendation : Other Mismanagement of Revenue & Taxes (AIMS Category No. 3.4.27)

It was suggested that liaison offices in India needs to maintain all records pertaining to GST regulations which will be helpful in recovery of debtors at the time of

defaults because ,once the customer accepts that they have purchased goods through imports from Bhutan in their GST Returns , the sale becomes legally binding under

court of law. Management’s Response The company has only liaison offices and not commercial branch offices. And hence it is not

required to comply as per GST Regulations.


Page 61 of 78


Auditor’s Recommendation: Non Maintenance of Other Records (AIMS Category No. 5.2.19)

We observed that the system for filing customer complaints are not at desired level and needs up gradation. For addressing the customer complaints properly, the concerned department should record the complaints appropriately.

Management’s Response Very few complaints were received during the year and the same was addressed. It will be

complied in future.

Auditor’s further comments It is felt that improvements are needed with proper computerisation of redressing customer

complaints.

Page 62 of 78


Auditor’s Recommendation: Advance from Customers (AIMS Category No. 5.6.8) It was observed that the company is not opting for advances from the customers and

in future after completion of the orders, in many cases the customers tends to reject the material which results for huge loss for the company. It is suggested that before

the any order is accepted sufficient advances may be taken. Management’s Response

There were no issues as of now. However, it is unpredictable and can occur. As such, we will comply and implement the valuable suggestions of the auditors on an

immediate basis for the customized items.


Page 63 of 78



FOLLOW-UP REPORT FOR THE YEAR -2018 A. Follow-up Report on the Previous Year’s Audit Qualification on the

Financial Statements:-

Accounting Year

Total No. of Audit Qualifications

No. of Qualifications Implemented

No. of Qualifications Partly Implemented

Balance Qualifications to be Implemented

2016 2 1 1 0

2017 2 0 1 0

2018 5 5 0 0

B. DETAILED FOLLOW-UP REPORT ON THE AUDIT QUALIFICATION

FOR THE YEAR ENDED 31-12-2018:-

Para No.

Audit Qualification on the Financial Statement in brief

Management’s Response – Current Status

Status of Compliances

1 Deferred Tax Asset: The Company is carrying Deferred

Tax Asset in the statement of financial position at Nu. 1,81,78,942/-. The Company has

not charged the same to statement

of Comprehensive Income, which constitutes a departure from Bhutanese Accounting

Standard 12. The Company‟s records indicate that, had the

Company charged the same, Deferred Tax Expense would

have been increased by Nu 1,81,78,942/-and net income and shareholders‟ equity would have

been reduced by Nu 1,81,78,942/-.

We will comply at the year ending.

Necessary adjustment has been done as on 31.12.2019

Implemented

Page 64 of 78


Para

No.

Audit Qualification on the

Financial Statement in brief

Management’s

Response – Current Status

Status of

Compliances

2 Inventories: The Company‟s inventories are carried in the

financial statements at Nu 17,22,11,289/-, We have not been

able to obtain sufficient appropriate audit evidence in

terms of basis of valuation of the following inventories, to ascertain the appropriateness

and the basis in accordance with BAS

2 – “Inventories”, as the Management has not stated the

inventories at the “lower of cost and net realizable value”, but has valued the same as follows:

a) Stock of Ready to Assemble furniture has been valued at

Selling prices, instead of actual cost incurred during the year, which constitutes a departure

from “Bhutanese Accounting Standard 2-

Inventories”. b) Board Stock has been valued

based on the cost determined in the year 2013, and not the actual cost incurred during the

year. Since the costs of all components used for arriving

at the cost in 2013 has increased, valuing and carrying the stock at

2013 prices may impact the profitability, which constitutes a departure from

Bhutanese Accounting

Valuation of inventories as per

BFRS 2: This Standard

prescribes the basis of accounting treatment

of inventories which states that inventories need to be measured

at lower of cost and net realizable value

and the cost and to be determined using first

in first out or weighted average method. However,

DHI group accounting policy

prescribes to follow the weighted average method and it is

complied with effect from 2019 onwards.

Costing has been done

by J.P & Company cost accountants in 2019 and the

valuation of inventories has been

done in weighted average method

which is as per BAS-2 and as per group accounting policy of

DHI.

Implemented

Page 65 of 78


Para

No.



Management’s


Status of

Compliances

Standard 2- Inventories. c) Other Inventories has been

valued based on the cost incurred for the last purchase for

the year. Had the company valued the inventory based on

“weighted average Cost” the carrying value of inventory may have an impact on the

profitability, which constitutes a departure from Bhutanese

Accounting Standard 2- Inventories.

Therefore, we are unable to comment on possible adjustments of these, if any, on

the carrying value of inventories as

at 31st December 2018.

3 The Company carries out

activities of Planting and afforestation, of components covered

under “Biological Assets” and “Agricultural Produce”, as per

“BAS 41- Agriculture”. The Company has not valued such

“Biological assets” and hence have not recognised the same as asset, in the accompanying

financial statements as at 31st December 2018, which

constitutes a departure from Bhutanese Accounting Standard 41- Agriculture.

Complied as per BFRS 41, we have hired the consultant from

Kolkata and done the valuation.

Implemented.

Page 66 of 78


Para

No.



Management’s


Status of

Compliances

Therefore, we are unable to comment on possible

adjustments of the “Biological Assets”, if

any, on the carrying value of assets as at 31st December 2018

4 Investment in subsidiaries are carried at cost in the

accompanying individual financial statements as at 31st

December 2018. The Company has not carried out the Impairments testing for its

Investment in Subsidiary, as to the recoverability of the

investment, to ascertain the carrying amount of the investment, which constitutes a

departure from Bhutanese Accounting Standard -36-

Impairment of Assets. Therefore, we are unable to

comment on possible adjustments, if any, on the carrying value of investments as

at 31st December 2018.

We are going to

merge the BBEL with BBPL; Hence the

qualification may be dropped.

Court verdict and

board resolution has been passed and the company act

formalities in under process which will be

done with in 30.3.2020.

Partially

Implemented.

5

Consolidated Financial Statements: As stated in note 2.17

to the financial statements, the Company has not prepared consolidated financial statements

as required by the Bhutanese Financial Reporting Standard 10

We are going to merge the BBEL with

BBPL Hence, the qualification may be dropped.

Partially Implemented.

Page 67 of 78


Para

No.



Management’s


Status of

Compliances

“Consolidated Financial Statements”.

In our opinion, the presentation of consolidated information is

necessary for a proper understanding of the financial

position, the financial performance and the cash flows of the

Company and its subsidiary.

Page 68 of 78


C. FOLLOW-REPORT ON THE Previous Year’s Management Reports:-

Accounting Year

Total No. of Audit Qualifications

No. of Qualifications Implemented

No. of Qualifications Partly

Implement

Balance Qualifications to be

Implemented

2016 44 38 1 5

2017 19 11 2 6

2018 18 18 0 0


D. Detailed Follow-up Report on the Management Report for the year - 2018.

Sl.No.

Observation Auditee’s Comments Auditor’s

Comments

Current Status

1 On verification of the

balances of BBEL in the books of BBPL, it was noticed that there was difference in

the balances, as compared to the balance as per BBEL,

books.

It has been rectified

and reconciled in the current year.

Reconciliation

has been carried out by management

during the year..

Reconciliation has

been carried out by management during the year.

The balance in BBEL is Nu

29701.78(Dr.) and balance in BBPL

Nu.29701.78(Cr.) after reconciliation.

Page 69 of 78


2 On review of fixed assets register of the company, it

was observed that the FA register was not updated with the assets purchased

and sold in the period. It was also noted that the FA

register is an independent excel spreadsheet that is maintained by the company

and not integrated to the accounting system. it was

noticed the following were information was not

available in the FA Register:· Invoice details of assets · Year of

Purchase · Expected useful life· Others

As suggested by auditors, Physical

verification of assets will be carried out annually hereafter.

Fixed Asset Register has been

updated. However ,Physical

Verification of Fixed Assets was

not conducted since 2017.

Fixed Assets register has been

updated. Book Value Nu.515097830.00

FAR value nu.515097830.00

Partially Complied with.

3

It was observed that the

company has not carried out physical verification of assets in last 2 Financial year

i.e.2017 and 2018

Physical verification

of assets pertaining to 2017 & 2018 was done in 2019

Being complied

with.

Being Complied

with.

4 On review of balance with the debtors outstanding at the end of the period, it was

noticed that confirmations from the debtors have not

been received by the Company, for the balance

carried in the books.

Follow up with the Regional Heads in India being carried

out to get the outstanding balances

confirmation from the major parties. The

balance confirmation received from the parties has been

submitted to the auditors for

verification.


Trade Debtors confirmations for the recent

customers has been received.

Page 70 of 78


5 Sales Tax Deposits of Nu.150, 688.07 has been carried in the

books for more than 3 accounting periods. In the absence of Specific

information/documents supporting such deposits as

refundable in nature, the auditors were unable to comment on the

recoverability of such amount and carrying the

same as an asset in the books.

Since it was an old case, we could not

trace out the details. However, we shall seek an approver of

the Board for write-off.

Not complied with.

Not complied with.

6 It was observed that “Board” stocks were valued on the

“cost” arrived in 2013.Valuation of such stock

is not based on the cost incurred by the company in

procurement/manufacturing the said component in2018

A cost Accountant from Kolkata has

been hired for the standard costing of

particle board. From 2019 onwards, we are

doing valuation of all inventories in Weighted Average

Method as per DHI Group Accounting

Policies.

Cost Analysis of particle board

during the financial year

2019 by the company.

Cost Analysis of particle board

during the financial year 2019

by the company.

7 It was noticed that the

inventories are insured by the company for protection

against losses. However, we noticed that the total value of

FG and WIP was Nu.7.44 crore but insured only 3.1 crore and the total value of

wood was Nu.2.17 lakhs, resulting in shortage of

insurance cover.

We are working on

the same and comply accordingly.

On assessment of

the ground level situation we are

opinion that the Inventories are

adequate insured.

Agreed with no

further comments.

Page 71 of 78


8 During the review it was observed that there were no

approved minimum stock levels for each product. If such ROL is fixed, unwanted

purchases can be prevented resulting in savings in

interest on working Capital.

No further reply after the issue of the

report.

Being complied with.

Being complied with.

9 Slow moving RTA furniture

stock of RTAF identified totaling to Nu.2;

486,517.00.The said furniture is included in the stock

valuation at the same values of 2018.

No further reply after

the issue of the report.

Being complied

with.

Slow moving RTA

furniture of 2018 has been sold

during the discount sale in

2019.

10 Issues Relating to Financial Management System:

The automated links

between the branches of operating units is not possible in the

existing ERP.However; we

will study the system and implement the same.

ERP Financial

Package (Tally Accounting )implemented

from 2020 financial year.

ERP Financial

Package (Tally Accounting )implemented

from 2020 financial year.

a. INVENTORY: The company does not have an automated inventory system

integrated with all the Branches in Relation to the

size of the company, and the nature of its business Movement of stock between

the factories and branches should be tracked and

reconciled through this system. Even the manual

records are not maintained for the dispatch and receipt of goods at the other

location. In the absence of the inventory status, purchases

could not be made based on information provided by the

department and not by independent evaluation.

Page 72 of 78


b. Accounting software is not integrated with branches,

inventories and sales.

The current ERP programme has

become quite old., the application and database running has

become outdated which needs to be

replaced with latest features. Redesigning and modification are

not possible in the existing ERP.

Therefore, initial feasibility studies on

SRS (system Requirement Specification) from

respective user departments are

under process. Once the total system

documentation and studies for the new integrated software

are all complete, this software will take

care of all computer related issues and we

are in the phase of implementing the same as soon as

possible.

ERP Financial Package (Tally

Accounting )implemented from 2020

financial year.



financial year.

Page 73 of 78


c. In the accounting software maintained by the company,

it‟s not able to extract the required reports like:

The list of sale, purchase and

advance are taken care of once the new integrated software is

implemented.



financial year.



financial year. i) list of Sales with Customer

name and Invoice No.

ii) List of purchase with vendor name and invoice

No.

iii) List of advances paid to parties

11

As per the policy of the company, cash holding limit

is Nu. 3 Lakh.

As noted by the

auditors, we shall comply with the

maximum cash holding limit of Nu. 300,000/-

Complied. Complied .

12 However, during the period it was noticed the average

holding was Nu. 9 Lakh, with maximum of Nu.45

Lakh and minimum of Nu. 4 Lakh in the period.

13 It was observed that the sales

of BBEL was accounted in BBPL books on a quarterly basis, as a cumulative entry,

based on the Sales accounted in BBEL books. The sale is

not accounted for all individual transaction of

inventory movement for sale to BBEL.

The management

will seek approval of the Board for the merger of BBPL and

BBEL .The above problem will not

occur once the merger is complete.

Merger of BBPL

and BBEL is under process which is

expected to be completed within

current year.

Partly done.

Page 74 of 78


14 It was observed that outward register or DC register along

with Invoice details was not maintained by the company, that were used to track and

monitor movement of goods outside the Head office.

As pointed out by the auditors, the

incoming and Outgoing vehicle movement register at

the security gate with invoice details for

tracking and record purpose shall be maintained. It will be

strictly monitored by Administrative

Department.

Being monitored by

Administrative department strictly.

Complied.

15

During the review of purchases, it was noticed that all purchases are received at Head Office, Goods Receipt Notice and Vehicle Inward register is not maintained at Head Office gate authorizing vehicle inward and tracking of material received. The GRN is

prepared at the factory for receipt of goods from the

Head Office. In the absence of vehicle details and inward dates, we are unable to

comment of actual receipt of material to the Head office,

further when the material is dispatched from Head Office to the Factory, Transit

challan prepared and materials are dispatched to

the factory. However, it was noticed that issuance in the

system recorded based on the GRN recorded at the Factory.

As pointed out by the auditors we shall

maintain Incoming and Outgoing vehicle

movement at the Security Gate along

with Invoice details for tracking and record purpose. It

would be strictly monitored by

Administrative Department.

Being monitored by

administrative department

strictly.

Complied

Page 75 of 78


16 As per service rule advance paid to staff are to be

recovered from them within the financial year. A few cases where advances are not

recovered within the FY and outstanding for more than 1

year are detailed as follows:

The same will be submitted to the

Board for directors.


Adjusted with the settlement except

Mr.SonamNorbu of Nu.38200.00 as he did not turn up

for the settlement.

i) A K Roy-

Nu. 264,515.00 2016

ii) PemaChopel- Nu. 6,581.00 old O/S

iii) KenchoTshering –

Nu.3,368.00 “

iv) GyempoDorji- Nu.1,500.00 “

v) KinzangDorji - Nu. 2,345.00 “

vi) SonamNorbu- Nu. 38,200.00 “

17 The company has not

received the letter authorizing the shareholder‟s

representatives, where the shareholder is a body corporate to attend the

annual general meeting held on 13th March 2018, which is

violation of section 192 of the Companies Act of

Bhutan, 2016.

Henceforth, the

management will request the holding

company/other institutional shareholders to

authorize its representatives for

attending company‟s AGM in writing in

compliance to section 195 of Companies Act 2016.

Complied. Complied.

Page 76 of 78


18 Company has availed the Overdraft facility from Druk

PNB Ltd. To the extent of Nu. 35 million on 26th June 2018. As per section 154 of

the Company Act of Bhutan 2016. Company should

obtain the prior approval from the Board. In the Board meeting held on 25th June.

Board has directed the management to obtain the

competitive rates from other banks and seek approval of

has received the loan from the Bank on 26th June 2018. The said loan was approval

by the Board in the Board meeting held on 27th

September 2018.

The management has verbally sought the

approval of the board before OD was sanctioned/released

by the bank.

Complied. Complied

Page 77 of 78


Ratio Analysis Financial and Operational Ratios in respect of the company are given in the statement below:

Sl Ratio Details of Calculation 2019 2018

A Ratios for Assessing Financial Health

1 Capital Turnover Ratio (Sales / Capital Employed ) 0.34 1.11

2 Current Ratio (Current Assets/ Current Liabilities )

3.20 3.92

3 Acid Test Ratio (Current Assets other than inventories/Current Liabilities)

0.61 0.83

4 Inventory Turnover Ratio (Sales/ Average Inventories ) 1.48 1.62

5 Fixed Assets Turnover Ratio (Sales / Fixed Assets )

6.55 5.82

6 Debtors Turnover Ratio (Gross Debtors/ Sales ) X 365 29 Days

23 Days

B Ratios for Assessing Profitability

1 Return on Investment

(Profit After Tax/ Capital

Employed) X 100 (19.45)%*

(21.60)%

2 Net Profit Ratio ( Net Profit / Sales ) X 100 202.87% (12.64)%

3 Operating Ratios ( All expenses excluding Finance Cost )/ sales X 100

109.68% 112.05%

*Profit After Tax does not include income recognised towards valuation of Biological Assets as per BAS 41.This for one to one comparison with previous year figures.

Page 78 of 78