Trade debt of Trading Corporation of Pakistan (TCP) almost doubled, from Rs 16.21 billion in 2008-09 to Rs 31.3 billion in 2009-10. According to Audit Report 2010-11 of Audit General of Pakistan (AGP), all possible efforts were required for early recovery of the Corporation's dues to avoid the chance of their conversion into bad debts.
The Audit Report said that during 2009-10, sales decreased from Rs 64.16 billion in 2008-09 to Rs 45.16 billion; cost of sales declined from Rs 62 billion to Rs 43.87 billion in 2009-10. Resultantly, the gross profit also decreased from Rs 2.255 billion in 2008-09 to Rs 1.29 billion during the year under review. The Report said that efforts are required to be made to increase sales in future.
The report said that according to external Auditors an amount of Rs 3.638 billion is included in inventory which represents financial charges on overdraft facilities and income tax on turnover and purchases. The amount should be included as dues from government. There would be no effect on total assets of the company if the said adjustments are recorded.
The report said that the mark-up on overdraft, amounting to Rs 10.719 billion, is included in the cost of sales, instead of financial cost, and the gross profit is reduced by Rs 10.719 billion. However, the net profit before tax remains the same, if the said provision is recorded.
The Audit Report shows that income tax expense amounting to Rs 1.04 billion is included in the cost of sales, instead of income as a tax expense. This results in decrease in gross profit by Rs 1.04 billion and decrease in income tax expense of Rs 1.04 billion. However, the net profit after tax will remain the same. The audit report further states that provision for gratuity is not based on actuarial valuation as required by International Financial Reporting Standards.
A sum of Rs 541.284 billion has been shown as contingent liability which is a specific liability and should have been provided in books of account as Liverpool Cotton Association (LCA) has been given foreign award against CEC (Defunt) merged in TCP, the audit report adds. The TCP has also filed appeal against the decision of Liverpool Cotton Association in Sindh High Court.