Quick-Recall Notes: 10 Integrated Case Studies

Case Study 1 – Rahul & Raj Films Ltd.

• Pioneer in Indian film production; diversified into OTT (2023).
• Board: 3 promoters + 2 IDs (max 2 consecutive 5-yr terms).
• Key strategies – expand non-fiction, focus on quality, tech-driven UX.
• Music-rights contract: recognise revenue when rights made available; FY 24 = 2,000  lakhs2{,}000\;\text{lakhs}.
• Abandoned film: production cost deductible as revenue exp. (CBDT Circular 16/2015).
• Audit issues: new EL only if significant change (SA 210 ¶A29); positive confirmations planned (SA 505). Days-sales > industry.
• R&D vs development (Ind AS 38): project ‘Simran’ = research → expense.
• Value-chain highlights: inbound logistic care, tech adoption, OTT threat, subsidiary theatre ops.

Case Study 2 – Dev Products Ltd.

• Diversified mfg; acquired BDM Ltd.
• Correct WACC calc: market weights E:D = 3:1; WACC=10.5%\text{WACC}=10.5\%. Firm value ≈36.36  cr\approx 36.36\;\text{cr}.
• Design A (patented) & Design B (separable IP): recognise as separate intangibles at FV (Ind AS 38 ¶11-12).
• Software cap-cost: list less 5 % TD + NRPT + customisation = 18  lakhs18\;\text{lakhs}; maintenance = prepaid exp.
• Amalgamation ‘appointed date’ governs effectiveness (Sec 232): 05-05-23.
• Independent director term rules: any term ≤5 yrs counts; max 2 consecutive.
• Goodwill = permanent cons. adj.; intra-group & policy align = current-period adj.

Case Study 3 – Doormato (Food-delivery)

• Revenue streams: restaurant commission 15-25 %, delivery fee, ads, vouchers, loyalty, Gold/Silver subs.
• Voucher GST: time = redemption; taxable value = credit (₹1,200).
• Dynamic QR: invoice shows gross ₹900, discount ₹200, net payable ₹700; QR ₹700.
• Subscription (Silver): 2 distinct POs – print mag & online access (Ind AS 115).
• Risk-based audit: sig. attn. areas picked on RoMM (SA 701); override & rev.recog may still be risks.
• Acquiring African Eats: nominal r = 8%+6%8\%+6\%; NPV (3 yrs + TV) ≈ positive ₹1.63 cr (worked). Must assess PESTLE (fx volatility, 10 % inflation, legal, tech, ethics).

Case Study 4 – EcoTech Innovations Pvt Ltd.

• Borrowing-cost capitalisation rate (4 m) = 7.8375300.625=2.607%\frac{7.8375}{300.625}=2.607\%; apply over WIP.
• Lease liability (SOFR 2 %, i.r.i. 5 %) 10-yr annuity PV ≈ ₹8.81 lakh (Ind AS 116).
• Re-import for repair: BCD on (materials+repairs+I/F)=₹20 lakh;\text{(materials+repairs+I/F)}=₹20\,\text{lakh}; duty = ₹3 l + SWC 10 % + IGST 12 %.
• Section 43B: interest converted to debentures not “actually paid” ⇒ disallowed.
• Whole-time CS mandatory: paid-up ≥₹10 cr; same CS can serve holding & subsidiary.
• Goodwill on 55 % buy: FV method ₹1 cr; proportionate ₹3.4 cr.

Case Study 5 – A Ltd. (Hospitality)

• Cashier fraud → auditor guilty under Sch-II Cl 7 (negligence) & SA 240.
• Secretarial audit: outstanding loans ≥₹100 cr ⇒ mandatory (Rule 9).
• Audit Cttee chair must be independent director (SEBI Reg 18).
• GST: Building sale outside GST (Sch III); furniture taxable.
• ROI divisional bonus flaws: Div F 28.4 % → max bonus; Div G 11.9 % none; promotes sub-optimal invest. Consider residual income.

Case Study 6 – SarTaj Hotels

• Revenue fraud presumption exists (SA 240 ¶26) despite clean prior yrs.
• Employee loans below mkt rate: recognise FA at FV; difference → prepaid staff cost; post-init EIR 10 %.
• APR (FEMA 2022): audited FS needed where Indian parent has control even if host laws silent.
• Brand portfolio enables multi-segment targeting; BMC key segments.
• Supply-chain gaps: manual forecasting, chef reliance; recommend data/tech, CoE, dual sourcing.

Case Study 7 – Fastest Finger Ltd. (Gaming IPO)

• Ind AS transition date 01-04-22; PPE deemed-cost option is Indian carve-out (Ind AS 101 ¶D7AA).
• Past B/C not restated → consolidate new sub at sub’s Ind AS FVs (¶C4(j)).
• Board via VC ok if physical quorum present; approval of FS allowed (Sec 173 + Rule 4(3)).
• Export betting GST: value = deposited-refund-unused; 28 %; calc ₹9.8 cr.
• Related-party purchases >10 % T/O w-out SH approval ⇒ audit mod.

Case Study 8 – Aadhya Ltd.

• Deselection of EQCR: reviewer must have sector knowledge & cannot make team decisions (SQC-1 ¶68-70).
• Audit file assembly ≤60 days → should finish by 15 May+60=14 Jul15\,\text{May}+60=14\,\text{Jul}.
• Self-review threat: firm prepped client FS (book-keeping) violates Code; create negative-list.
• Investment impairment potentially pervasive (60 % NW) ⇒ disclaimer, not qualification.
• VfM: best answer integrates effectiveness, efficiency, economy (AI records + outcome tracking + vendor compare).
• Dividend intrinsic value (two-stage) ≈ ₹106.98 per share.

Case Study 9 – L & V LLP (Audit QC)

• EQCR must be independent, experienced in sector; provides objective review, cannot take decisions.
• Engagement file assembly ≤60 days post-report (SA 230 A21).
• Book-keeping for audit client = prohibited; self-review threat.
• Related-party goods >10 % T/O needs SH approval unless at ALP + ordinary course.
• Revenue with LC pending: Ind AS 115 criteria not met → defer.
• Suggested independence policy: negative list, annual affirmation, EQCR eligibility, breach escalation.
• Strategy: create Book-keeping CoE, tiered pricing, tech platform, niche sectors.

Case Study 10 – Sprinter Pvt Ltd. (Textiles)

• New mfg co set up 2023 → may opt Sec 115BAB concessional tax 15%15\% (+10 % SC +4 % HEC); must forego specified deductions.
• Oct-23 export IGST liability ₹0.25 cr; utilise ITC inputs ₹0.15 cr + CG ₹0.03 cr + IS ₹0.02 cr; pay ₹0.05 cr cash; refund via customs (Opinion II correct).
• Alternate export under LUT: no IGST, refund of unutilised ITC via Rule 89; compare cash-flow, compliance.
• ITC/TDS table: correct combo needs TDS ₹3.07 lakh & ITC ₹51 k (imports + RCM).
• Product life-cycle: Sprinter made-ups in growth stage.
• Supply-chain ethics: moral duty, wider stakeholders, reputational risk; adopt code, audits, publish suppliers, board oversight.

Key Equations / Values:
• WACC=W<em>eK</em>e+W<em>dK</em>d\text{WACC}=W<em>e K</em>e + W<em>d K</em>d example 0.75×12%+0.25×6%=10.5%0.75\times12\%+0.25\times6\%=10.5\%.
• NPV [African Eats] positive 1.62×1051.62\times10^5 ₹’000.
• Lease PV: ∑<em>t=110P(1+2%)t−1(1+5%)t=₹8.81 lakh\sum<em>{t=1}^{10}\frac{P(1+2\%)^{t-1}}{(1+5\%)^{t}}=₹8.81\text{ lakh}. • Dividend DDM value P=∑</em>t=12D<em>t(1+k)t+D</em>3k−g×1(1+k)2P=\sum</em>{t=1}^{2}\frac{D<em>t}{(1+k)^t}+\frac{D</em>3}{k-g}\times\frac{1}{(1+k)^2}.

These bullets capture the essential exam-worthy points across all ten case studies.