FRA Final Term

Q2 -A) Intercorporate Investments: Intercorporate investment is a type of investment by a

company in another company. These types of investments can be accounted for in a variety of ways,
depending on the investment. The percentage of ownership share is the most complete and wide-
ranging method of accounting for various types of assets.

A financial investment is a type of financial asset into which we put money in the hopes of it
increasing in value over time. The notion is that we will be able to sell it at a higher price later or
profit from it while we hold it.

Tata Motors invests in other companies in the given exhibit, which is indicated by Investment in
Equity Accounted Investees. This is a long-term investment that the corporation has made in other
firms. This is an example of a cross-organizational investment. Similarly, the firm has Other financial
assets, which are investments made by the firm to earn future profits. This is a type of financial
investment that is also a non-current asset.

 Cost Method for Reporting Intercorporate Investments- The cost approach is widely
applicable because it includes a wide range of assets with less than a 20% ownership stake.
Intercorporate debt investments are typically accounted for using the cost method because
debt does not always come with ownership rights or voting power.
 The equity method of accounting is used to report the initial investment in the target firm on
the balance sheet. The value of the investment is adjusted based on the profit or loss
proportion of the owner. Dividends are not taken into account while calculating revenue. On
the other hand, dividends increase cash flow while decreasing an investment's value for the
holder.
 Consolidation- Using the consolidation approach is usually required when you own a 50% or
more stake in another company. When employing the consolidation approach, companies
must integrate their financials into consolidated financial statements. The consolidation
procedure is typically utilized after a merger or purchase.

It Benefits Investors in the Following Ways:

 Within the cost approach, there may be some further investment delineation. For investing
purposes, these investments will be handled similarly to the company's other securities.
Bonds, for example, can be designated as held till maturity, traded, sold, or strictly retained
on the balance sheet at the designated fair value.
 Goodwill can be connected to investments when employing the equity method. If the
investor pays more than the investment's carrying value, the target firm may recognize
goodwill for the difference.
Q2-B) A minority interest, in terms of voting rights, is defined as a stake in a company less than 50%
of the total shares. Minority investors have little say in how a company is run; hence they have little
say in the decision-making process. Minority interests are shown on a company's balance sheet with
controlling interests as a non-current liability, and they represent the minority interests' portion of a
subsidiary.

Minority interest financial reporting occurs only after the significant firm has prepared separate
financial statements and consolidated financial documents. The minority interest is adjusted when a
huge corporation owns less than a 100 per cent stake in a small business. The percentage of
consolidated profit and loss under normal operations after taxation in the profit and loss statement
is a minority interest. Under IFRS requirements, minority ownership is classified as equity.

Q3) The financial reporting requirements have been updated from time to time to
incorporate the features of changing business practices and that in a way has made the
organization follow or maintain discipline in their organizational practices.
Integrated reporting practices incorporate the company's financial features and provide
more authentic, complete, meaningful, and wholesome information about all areas of an
organization's performance and value creation. The future of corporate reporting forces
companies to be more responsible and focus on the triple bottom line.
The recent SEBI regulation regarding Business Responsibility and Sustainability Report also
fits the narrative; it includes environmental, and government perspectives of the company's
performance and will apply to the top 1000 listed entities in terms of market capitalization.
According to the new regulations in this report, the listed entities are supposed to disclose
the company's ESG risks and opportunities; here, ESG stands for Environmental, social and
governance; this action is aimed at bringing more transparency and assist the market
players or participants to identify and assess the sustainability-based risks and opportunities
of an entity. The environmental aspect of the report includes aspects such as resource
usage, pollution emission, waste generation and management practices etc. The social
aspects cover the information about the workforce such as gender and social diversity,
median wages, welfare benefits, etc. the companies will also have to disclose details of
Social impact assessment, CSR measures, etc. In the case of consumers, according to the
new regulation, the entities are required to disclose the details of consumer complaints,
product labelling, product recall etc.
About Business Responsibility and Sustainability Report (BRSR):
BRSR, which is from a Social and Governance perspective, Environmental, is intended to
enable businesses to engage meaningfully with their stakeholders. It will encourage
businesses to go beyond financial regulatory compliance and report their social and
environmental impacts. The BRSR will apply to the 1000 listed entities for reporting
voluntarily for (2021 – 22) and on a mandatory basis from FY (2022 – 23).
BRSR emphasizes that businesses should focus on safety and resource-efficiency in the
design and manufacture of their products and use their products in a manner that creates
value while minimizing and mitigating its adverse impacts on the environment and society
through all stages of its life cycle, from design to final disposal. Over time, businesses should
embrace the idea of circularity in all their operations. In order to do so, the businesses have
to understand all material sustainability issues across their product life cycle and value
chain.
Sustainability Reporting:

 It is the communication and disclosure of environmental, governance and social

goals and their progress towards them.
 The benefits of sustainability reporting include improved corporate reputation,
improvement of risk management.
Building consumer confidence, increased innovation, and even Environmental, Social, and
Governance Goals:

 Environmental, social, and governance goals are standards for a company's

operations that force companies to follow social responsibility, better governance,
ethical practices, environment-friendly measures.
 Environmental criteria evaluate how a company performs as a steward of nature.
 Social criteria consider how it manages relationships with suppliers, employees,
customers, and the communities where it operates.
 Governance deals with a company's leadership, audits, internal controls, and
shareholder rights.
Responsible Business
The responsible business depends on the principle of business being accountable to all its
internal and external stakeholders towards global developments, seeking sustainability and
accountability to their environment and society.
With Ever-increasing global challenges relating to climate change, growing inequality, and
environmental risks, business leaders have found that it is important to reimagine the role
of businesses in society and not view them as economic units for increasing wealth.
The company's performance must be measured on economic and financial performance and
its environmental, social, and good governance objectives.