Case Study on SAIL (Window Dressing)
The annual report for 1997-98 reveals, the Rs 16,403-crore Steel Authority of India Ltd’s (SAIL) bottomline is not worth its weight in steel. By resorting to complex accounting changes, and despite 11 qualifications from 5 statutory auditors–as well as the venerable Comptroller & Auditor-General of India (CAG) SAIL, transfigured net losses of Rs 354.08 crore into net profits of Rs 132.99 crore in 1997-98.
The performance of SAIL the countryâ€™s largest steel producer was not good in the previous year. Despite the recession, and even as it was buffeted by cheap imports, SAIL’s sales went up marginally: from Rs 14,114.01 crore in 1996-97 to Rs 14,624.07 crore in 1997-98. But its net profits plummeted from Rs 515.17 crore to Rs 132.99 crore on account of a Rs 374- crore increase in interest costs and a Rs 104-crore increase in depreciation.
Even these meagre profits–which account for only 0.81 per cent of its sales–came from window-dressing the accounts through write-backs and non-provisions. But a SAIL spokesperson defended by saying that “Changes in accounts are for valid and justifiable reasons.” We now look at the five contentious accounting changes made by SAIL: