Qualincai restated three years after accounting corrections

Qualincai International Limited restated FY2023-24 through FY2025-26 financial statements after correcting cash-basis gratuity, depreciation on land, foreign-currency translation and interest-accrual treatments. The restatement raised FY2025-26 profit after tax to Rs 11.87 crore from Rs 10.67 crore, while reducing the corresponding profits reported for FY2024-25 and FY2023-24.

Why did Qualincai restate three years of accounts?

Qualincai restated the three financial years because earlier accounting treatments did not apply required accrual, valuation and period-recognition methods in several areas. In FY2023-24 and FY2024-25, gratuity had been accounted for on a cash or payment basis rather than on an actuarial basis under Accounting Standard 15, or AS 15, on employee benefits. The restated statements recognise employee-benefit expense and a corresponding gratuity liability for the relevant periods; Qualincai's gratuity plan is unfunded.

Qualincai also revised when it recognised imported materials purchased on an ex-works, or EXW, basis. Under EXW terms, risks and rewards pass at the overseas supplier's premises, so the restated accounts recognise the inventory and corresponding purchase when dispatch occurs rather than when goods arrive at an Indian port. Materials dispatched but not received at the reporting date are classified as raw materials in transit and measured at cost.

The revised statements also applied year-end foreign-currency translation and interest accruals. Under Accounting Standard 11, or AS 11, foreign-currency monetary balances with overseas suppliers and customers must be restated at the closing exchange rate, with exchange differences recognised in profit or loss. Qualincai additionally recognised interest accrued between the last instalment or payment date and year-end on certain borrowings, and accrued interest income on fixed deposits that had not yet become due.

How did Qualincai's restated profits change?

Qualincai's restated profit after tax increased in FY2025-26 but fell in the preceding two financial years. The net movement in each period combines adjustments for gratuity, deferred and current tax, foreign exchange, prepaid expenses, interest, goods and services tax demand paid, depreciation, asset-sale loss and prior-period items. The disclosed reconciliation therefore does not attribute each year's overall change to one accounting correction.

FY2025-26 included a Rs 1.14 crore gratuity provision under AS 15, a Rs 23.32 lakh deferred-tax adjustment and a Rs 34.55 lakh adjustment for goods and services tax demand paid. The same year's reconciliation included a Rs 5.17 lakh foreign-exchange gain and Rs 4.30 lakh of interest accrued but not due on borrowings. These entries, along with the other stated adjustments, produced the Rs 1.20 crore net increase in FY2025-26 profit after tax.

In FY2024-25, the reconciliation recorded a Rs 16.12 lakh gratuity adjustment, a Rs 84.82 lakh deferred-tax adjustment and a Rs 3.43 lakh foreign-exchange loss. FY2023-24 profit after tax was restated down by Rs 87.18 lakh, to Rs 2.84 crore from Rs 3.71 crore. The comparison shows that applying the revised recognition methods changed reported earnings in different directions across the three annual periods.

What else did Qualincai's restated accounts change?

Qualincai's restatement changed accumulated profit, revaluation reserves, tax balances and carrying values of property, plant and equipment. At 31 March 2024, surplus in the profit and loss account changed from an audited deficit of Rs 1.71 crore to a restated deficit of Rs 97.60 lakh, a net improvement of Rs 73.22 lakh. At 31 March 2025, the same surplus changed from Rs 4.17 crore to Rs 3.92 crore, a net reduction of Rs 24.50 lakh.

Revaluation reserves also differed between the audited and restated records. At 31 March 2024, the revaluation reserve increased to Rs 11.39 crore from Rs 8.00 crore, reflecting a Rs 3.39 crore net restatement adjustment. At 31 March 2025, the reserve was Rs 10.61 crore rather than Rs 7.28 crore before restatement, a Rs 3.34 crore difference.

Qualincai said earlier audited financial statements had inadvertently charged depreciation on land and had not calculated depreciation on certain assets disposed of during the year up to their disposal date. It recomputed depreciation under Accounting Standard 10, or AS 10, on property, plant and equipment. The adjustments changed depreciation expense, the carrying value of property, plant and equipment, and loss on the sale of assets for the relevant periods.

How are tax and foreign-exchange adjustments connected?

Qualincai recalculated deferred tax and current income tax because the underlying restatement entries affected accounting income, taxable income and timing differences. Deferred tax under Accounting Standard 22, or AS 22, was recomputed for the actuarially valued gratuity liability, depreciation differences and carried-forward losses. The FY2025-26 deferred-tax adjustment was Rs 23.32 lakh, compared with Rs 84.82 lakh in FY2024-25 and Rs 55.71 lakh in FY2023-24.

Current-tax provision was also recalculated after revisions to interest accrued on term loans and fixed deposits, prepaid expenses, interest subvention, loss on sale of plant and machinery, mercantile recognition of expenses and prior-period items. Mercantile accounting recognises income and expenses in the period to which they relate rather than only when cash is received or paid. Qualincai reported an Rs 8.08 lakh current-income-tax adjustment in both FY2025-26 and FY2024-25, in opposite directions.

Foreign-exchange restatement linked year-end balance-sheet values to annual profit or loss. Qualincai said certain overseas customer and supplier balances had not been restated using the closing exchange rate in earlier accounts. The restated FY2025-26 statements recorded a Rs 5.17 lakh exchange gain, while FY2024-25 and FY2023-24 recorded exchange losses of Rs 3.43 lakh and Rs 7.29 lakh, respectively.

What do the disclosures say about the restatement process?

Qualincai's disclosures show that the restatement covered more than profit recognition. The company moved wages, professional fees, processing fees, free samples, audit fees and bank interest subvention into the financial years to which those items related. It also recomputed certain prepaid insurance expenses and interest paid on post-shipment credit facilities, with resulting changes to expenses and prepaid balances under short-term loans and advances.

The company stated that, except for the reconciliation explaining differences in equity and profit or loss, there were no other changes in restated equity and profit or loss. The table covering qualifications, emphasis of matter and other matters requiring adjustment reported nil audit qualifications for FY2023-24, FY2024-25 and FY2025-26. Separately, the Companies (Auditor's Report) Order, or CARO, disclosure stated that Qualincai had no internal-audit system in FY2023-24 and FY2024-25 because Section 138 of the Companies Act, 2013 did not impose a mandatory requirement for a documented internal-audit system.

Conclusion

Qualincai's restatement changed the measurement of employee benefits, inventory in transit, depreciation, foreign-currency balances, borrowing costs, fixed-deposit income and tax. The combined effect was uneven: FY2025-26 profit after tax rose by Rs 1.20 crore, while FY2024-25 and FY2023-24 profit after tax fell by Rs 97.72 lakh and Rs 87.18 lakh, respectively.

The next disclosed matter to watch is management's assessment at approval of the restated accounts on 14 August 2026 that asset carrying amounts would be recovered and liquidity would fund operations for at least 12 months. Qualincai also stated that unforeseen circumstances could cause the eventual impact on assets to differ from that assessment, making the later application of the revised accounting treatments relevant to subsequent financial statements.