You have taken up the assignment for Due Diligence Review of the financial statement as of 31 Asadh 2069 of Das Dhunga Bank Ltd for facilitating the merger process with Lucky Finance Co. Ltd. Write down any seven points you have to pay due consideration on carrying out the review on assets side (covering each asset category) of the financial statement.
b) Upon taking up the assignment for due diligence review of the Das Dhunga Bank Ltd; i have to pay due following due consideration on review assets side of the financial statement:
i. Loan & Advances: The due consideration to be paid on loan and advances is whether the adequate loan loss provision has been made in line with Nepal Rastra Banks Directive applicable to the bank.
ii. Investment: The due consideration to be paid on investment is that whether the investment has been made in line with Nepal Rastra Banks Directive in eligible portfolio. If investment is doubtful of recovery to see whether necessary provision has been set aside or otherwise. Further in applicable cases have to see whether required reserves/funds against the investment been set aside.
iii. Fixed Assets: The due consideration to be paid on fixed assets is that whether all the fixed assets appearing in financial statement legally owned the entity, physically available and are in working condition. The major fixed assets should be revalued with the help of expert for the purposes of DDA.
iv. Advance Tax: The due consideration to be paid on Advance Tax is to see whether the amount shown as advance tax are really an existed asset representing the cash deposits made and advance tax made parties and are not time barred for claiming for assessment of tax purposes.
v. Non-Banking Assets (NBA): To see whether the NBA are on the possession and ownership of the bank. See whether disposal (sales) process of NBA has not been suffered any hindrances like NBA is insufficient for covering dues recoverable, NBA is subject to lien of others, NBA is under legal cases. Further should be ensured that NBA is adequately provisioned as per NRB Directives.
vi. Advances: To see the recoverability of advances. If advances are doubtful of recoverability, ensure that whether adequate provision against possible loss has been made.
vii. Deposits: To see the existence of various deposits. If deposits are doubtful of refund and are not backed up with sufficient documents, ensure that whether adequate provision against possible loss has been made.