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Accounting Policies of Alicon Castalloy Ltd. Company

Mar 31, 2015

Corporate information

Alicon Castalloy Limited (the Company) is listed on the Bombay Stock Exchange and National Stock Exchange. It is engaged in the manufacturing of aluminum die castings primarily used in automotive segment of the industry in India.

1. Basis of preparation of financial statements

a) These financial statements of the Company are prepared under the historical cost convention and are on an accrual basis of accounting. These financial statements comply in all materials respects with generally accepted accounting principles in India, the accounting standards notified under the Companies Act, 1956 (the 'Act'), vide Companies (Accounting Standards) Rules, 2006 as amended, read with the General Circular 15/2013 dated 13.09.2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013, to the extent applicable unless otherwise stated below.

b) All assets and liabilities have been classified as current or non-current as per the Company's operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current - noncurrent classification of assets and liabilities.

c) The accounting policies adopted in the preparation of financial statements are consistent with those of previous years.

2. Use of Estimates

The preparation of the financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognized in the period in which the results are known / materialized.

3. Revenue Recognition

a) Revenue is recognized only when it can be reliably measured and it is reasonable to expect ultimate collection based upon negotiations with the customers for price escalations and price settlements.

b) Domestic sales are recognized on dispatch of goods by the Company from its factory premises and Export sales are accounted on the basis of dates of Bill of Lading and are reflected in the accounts net of taxes, returns and trade discounts.

c) The Company besides manufacturing the products from its raw materials, also converts raw materials supplied by the customers and accounts for the gross receipts as 'conversion income' once the job is competed and goods are dispatched to the customers.

d) Other operating revenue represents income earned from the Company's principal activities and is recognized when the right to receive the income is established as per the terms of the contract.

4. Other Income

i Dividend income is accounted once it is received or right to receive the dividend is established.

ii Interest income is recognized on time proportion basis taking into account the amount of deposits held and applicable rate.

iii Other temporary income for e.g. rent is recognized when the right to receive the income is established as per the terms of the contract.

5. Tangible Fixed Assets & Capital Work-in-Progress

i. Fixed Assets except land are stated at cost less accumulated depreciation and impairment losses, if any. The cost represents purchase price (net of recoverable taxes) and all other direct expenses including financing cost in respect of acquisition or construction of fixed assets incurred for the period up to the date the asset is ready for its intended use or for the period till commencement of commercial production respectively.

ii. Machinery spares which can be used only in connection with an item of fixed asset and whose use is expected to be irregular are capitalized and depreciated over the useful life of the principal item of the relevant assets.

iii. Subsequent expenditure relating to fixed assets is capitalized only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance.

iv. In case of new production facilities, the project costs incurred are capitalized from the date the facilities are commenced and trial production is obtained successfully. The project cost including attributable borrowing cost incurred in respect of facilities not commenced/expanded has been accounted as 'Capital Work-in-Progress', unless the project takes substantial period to commence and where assets are separately identifiable.

6. Intangible Assets

i Intangible Assets are recognized only if it is probable that the future economic benefits that are attributable to the assets will flow to the enterprises and the cost of the assets can be measured reliably.

ii Intangible assets are carried at cost less accumulated amortization and impairment losses, if any. The cost of an intangible asset comprises its purchase price (net of recoverable of taxes) and expenses directly attributable for making the asset ready for its intended use.

7. Depreciation and Amortization

i. During the year, the Company has computed the depreciation in accordance with the schedule II to the Companies Act, 2013, which provides useful lives of assets to compute the depreciation.

Accordingly, the carrying value of each of the Tangible Fixed Assets other than Dies and Moulds as appearing in the books on 01.04.2014 is being depreciated equally over a period of remaining useful life of the respective asset(s).

ii. Useful life is the period over which an asset is expected to be available for use by the Company or the number of production or similar units expected to be obtained from the asset by the Company. In the context and also permitted vide notification issued in this regard under the Companies Act, 2013, the useful lives followed by the Company for some of its fixed assets / class of assets are different than the ones specified under schedule III to the Companies Act, 2013, which have been supported by justifications & certifications from its technical personnel in this regard.

iii. Dies and Moulds which were being earlier depreciated at Written down Value method are now being depreciated from 01.04.2014 on the basis of their useful lives as required under schedule II to the Companies Act, 2013. The useful lives (including remaining useful lives for old dies & mould) and which is in terms of casting a Die can give / make over a period and casting made during the year 2014-15 are supported by justifications & certifications from its technical personnel in this regard.

iv. The useful lives of tangible assets adapted by the Company which are different from the lives specified under Part C of schedule III to the Companies Act, 2013 are give below with justifications for the differences.

v. The Company's Plant runs into three shifts. The useful lives of the assets estimated by the management of the Company is after considering their estimated usage / utilization for 24 hours a day and 365 days a year. Though, there are no separate useful lives are prescribed for extra shift working under schedule III to the Companies Act, 2013, the useful lives estimated and depreciation computed by the Company, in the opinion of the Company's management, covers depreciation for its triple shift working.

vi. Depreciation on all additions during the year is provided on pro rata basis from the quarter in which assets have been purchased.

vii. Had there been no change in the manner of computing depreciation as required under the statue, the depreciation reported for the year 2014-15 would have been Rs, 236.01 million and therefore depreciation reported would have been higher and profit before tax reported would have been lower to the extent of Rs, 7.76 million.

viii Intangible assets in the nature of computer & functional software are amortized over a period of five years.

8. Impairment of Assets

i. An asset is treated as impaired when identified and when the carrying amount of the asset exceeds it recoverable amount. An impairment loss is charged to the statement of profit and loss in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

ii. At times, impairment loss is charged to the revenue, in the year in which the loss is crystallized and quantified with ease.

9. Investments

Long-term investments, which are unquoted, are stated at cost. Cost includes costs incidental to acquisition such as legal costs etc, Provision for diminution in the value of long- term investments is made only if such a decline is other than temporary.

Current investments are stated at lower of the cost and fair market value.

10. Inventories

i. Raw Materials

Inventory of raw materials is valued at cost. Cost represents purchase price, net of recoverable taxes and is determined on weighted average basis of last purchases.

ii. Semi-Finished goods

Inventory of semi-finished goods is valued at lower of cost of net realizable value. Cost comprises of material cost and conversion cost.

Conversion cost includes cost of consumables, direct labour, and variable overheads in proportion to direct labour and fixed cost in respect of production facilities.

iii. Consumables, Stores and Spares

Consumables, stores and spares are valued at cost. Cost represents purchase price, net of recoverable taxes, and is determined on First in First out basis.

iv. Dies and Moulds

i. The expenditure on development of dies and moulds commissioned for and on behalf of the customers is carried in the books at the appropriate cost of development, under "Current Assets", subject to such cost not exceeding the maximum value contracted to be paid by the customer. Income from development and development cost of such dies is accounted for in the year in which they are completed and invoiced.

ii. The unfunded cost of such dies, if any, is written off to revenue in the event of their commercial obsolescence and in the year in which the loss is crystallized and quantified with ease.

11. Cash and cash equivalents

Cash and cash equivalents comprise of balance with the banks and cash in hand. The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase, to be cash equivalents.

12. Transactions in Foreign Currencies

(i) Transactions denominated in foreign currencies are recorded at the exchange rate prevailing on the date of transaction except sales which are recorded at a rate notified for a month, by the customs, for invoice purposes.

(ii) Old liabilities denominated in foreign currencies but agreed to be settled in Indian rupee are not restated and continue to be carried at their original values.

(iii) Monetary items denominated in foreign currencies at the year-end are restated at the year-end exchange rates.

(iv) Non monetary foreign currency items are carried at cost.

(v) All exchange differences arising on settlement and restatement of year-end foreign currency monetary assets and liabilities are recognized as income or expense in the statement of profit and loss.

13. Taxes on income

(i) Tax expense comprises of current tax and deferred tax.

(ii) Current tax is the amount of tax due & payable on the taxable income as determined in accordance with the provisions of the Income Tax Act,1961.

(iii) Deferred tax is recognized subject to the consideration of prudence, on timing difference between accounting income and taxable income that originate in one period and are capable of reversal in one or more subsequent periods. However, these have remained to be extensively reviewed & provided for on a cumulative basis.

(iv) Deferred tax assets, if any, are recognized, only when there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

14. Employee Benefits

Employee benefits include provident fund, pension fund, gratuity fund, compensated absences and medical benefits.

Defined contribution plans

Contributions to defined contribution approved Provident Fund and Pension Fund, defined contribution schemes, are made at pre- determined rates and charged to the statement of profit and loss, as and when incurred.

Post-employment benefit plans

Contributions to defined contribution retirement benefit schemes are recognized as an expense when employees have rendered services entitling them to contributions using Projected Unit Credit Method, with actuarial valuations being carried out by an independent value. Actuarial gains and losses have been recognized in full in the statement of profit and loss for the year. Past service cost has also been recognized to the extent that the benefits are already vested. The retirement benefit obligation recognized in the balance sheet represents the present value of the defined benefit obligation as adjusted for as reduced by the fair value of scheme assets.

Short-term employee benefits

The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognized during the period when the employee renders the service. These benefits include compensated absences such as paid leave, performance incentives, bonus, ex-gratia etc.

Long-term employee benefits

Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognized as an actuarial liability determined by an independent value being the present value of the defined benefit obligation at the balance sheet date.

The liability towards Workmen Compensation is also funded with New India Insurance and contribution made towards this is charged to the statement of profit and loss of the year.

15. Borrowing Costs

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as a part of the cost of such assets. All other borrowing costs incurred and which are not identified to the particular qualifying assets is charged to revenue.

16. Leases

Operating Leases: In respect of assets acquired on leases, rentals are charged to the statement of profit and loss on accrual basis and with reference to lease terms and other considerations. Assets leased out under operating leases are capitalized. Rental income is recognized on accrual basis over the lease term.

Finance Leases: In respect of the assets acquired under leases, the lower of the fair value of the assets and present value of the minimum lease rentals is capitalized as fixed assets with corresponding amount shown as a lease liability. The principal component in the lease rental is adjusted against the lease liability and the interest component is charged to the statement of profit and loss.

17. Research and Development Costs

a) Research costs are expensed as and when incurred.

b) Development costs are as and when incurred, unless the technical and commercial feasibility of the project is demonstrated, future economic benefits are probable and the costs can be measured reliably.

c) Research and development expenditure of a capital nature in include in the cost of relevant fixed assets.

18. Provisions, Contingencies and Commitments

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognized but are disclosed in the notes to accounts. Contingent Assets are neither recognized nor disclosed in the financial statements.


Mar 31, 2013

1. Basis of preparation of financial statements

a) The financial statements are prepared under the historical cost convention, on accrual basis and are in accordance with the generally accepted accounting principles (GAAP) in India (Indian GAAP), the provisions of the Companies Act, 1956 and the Accounting Standards ("AS") notified under Companies (Accounting Standard), Rules, 2006 as amended from time to time unless otherwise stated below.

b) The accounting policies adopted in the preparation of financial statements are consistent with those of previous year/s) unless otherwise stated.

2. Use of Estimates

Estimates and assumptions used in the preparation of the financial statements and reporting of amounts of assets and liabilities (including contingent liabilities) and the income and expenses during the year are based upon management''s evaluation of the relevant facts and circumstances as of the date of the financial statements, which may differ from the actual results at a subsequent date.

3. Revenue Recognition

a) Revenue is recognised only when it can be reliably measured and it is reasonable to expect ultimate collection based upon negotiations with the customers for price escalations and settlements.

b) Sales are recognised on despatch of goods by the Company from its factory premises and are reflected in the accounts net of excise duty, sales tax, and other levies.

c) The Company, besides manufacturing its products from raw materials purchased directly by it, also converts raw material/ (s) supplied by the customer/(s) and thus accounts for gross receipts as ''Conversion Income''.

d) Sales return is accounted for only upon physical receipt of the rejected goods at the Company''s factory premises.

4. Other Income

i Dividend income is accounted once it is received or right to receive the dividend is established.

ii Interest income is recognised on time proportion basis taking into account the amount of deposits held and applicable rate.

5. Tangible Fixed Assets & Capital Work-In-Progress

i. Fixed Assets except land are stated at cost less accumulated depreciation and impairment losses, if any. The cost represents purchase price (net of recoverable taxes) and all other direct expenses including financing cost in respect of acquisition or construction of fixed assets incurred for the period up to the date the asset is ready for its intended use or for the period till commencement of commercial production respectively.

ii. Machinery spares which can be used only in connection with an item of fixed asset and whose use is expected to be irregular are capitalised and depreciated over the useful life of the principal item of the relevant assets.

iii. Subsequent expenditure relating to fixed assets is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance.

iv. In case of new production facilities, the project costs incurred are capitalised from the date, the facilities are commenced and trial production is obtained successfully. The project cost including attributable borrowing cost incurred in respect of facilities not commenced/expanded has been accounted as ''Capital Work-In-Progress'', unless the project takes substantial period to commence and where assets are separately identifiable

6. Intangible Assets

i Intangible Assets are recognized only if it is probable that the future economic benefits that are attributable to the assets will flow to the enterprises and the cost of the assets can be measured reliably.

ii The intangible assets are recorded at cost and are carried at cost less accumulated amortisation and impairment losses if any. The cost of an intangible asset comprises its purchase price (net of recoverable of taxes) and any directly attributable expenditure on making the asset ready for its intended use.

7. Depreciation and Amortisation

i Tangible Fixed Assets other than Dies and Moulds are depreciated on Straight Line Method at the rates prescribed in schedule XIV to the Companies Act, 1956.

ii Dies and Moulds are depreciated at Written Down Value at the rates prescribed in schedule XIV to the Companies Act, 1956.

iii Depreciation on additions during the year is provided on pro-rata basis from the middle of the quarter in which capitalisation takes place.

iv Where CENVAT is claimed on capital goods, the relevant excise duty under CENVAT has been deducted from the value of the asset for claiming depreciation.

v In case where specific arrangement exists with a customer for amortisation of capital equipment, depreciation provided equals such agreed amortisation. In such cases, cumulative depreciation at least equals the minimum prescribed under Schedule XIV of the Companies Act,1956.

vi Intangible assets in the nature of computer & functional software are amortised over a period of six years.

vii The estimated useful life of the intangible assets and the amortisation period are reviewed at the end of each financial year and if there is a significant change in the expected pattern of economic benefits from the asset, the amortisation method is revised to reflect the changed/ actual pattern.

8. Impairment of Assets

An asset is treated as impaired when identified and when the carrying amount of the asset exceeds it recoverable amount. An impairment loss is charged to the statement of profit and loss in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

9. Investments

Long-term investments, which are unquoted, are stated at cost. Cost includes costs incidental to acquisition such as legal costs etc, Provision for diminution in the value of long-term investments is made only if such a decline is other than temporary.

Current investments are stated at lower of the cost and fair market value.

10. Inventories

i. Raw Materials

Inventory of raw materials is valued at cost. Cost represents purchase price, net of recoverable taxes and is determined on weighted average basis of last purchases.

ii. Semi-Finished goods

Inventory of semi-finished goods is valued at lower of cost or net realisable value. Cost comprises of material cost and conversion cost.

Conversion cost includes cost of consumables, direct labour, and variable overheads in proportion to direct labour and fixed cost in respect of production facilities.

iii. Consumables, Stores and Spares

Consumables, stores and spares are valued at cost. Cost represents purchase price, net of recoverable taxes, and is determined on First in First out basis.

iv. Dies and Moulds

i. The expenditure on development of dies and moulds commissioned for and on behalf of the customers is carried in the books at the appropriate cost of development, under ''''Current Assets'''', subject to such cost not exceeding the maximum value contracted to be paid by the customer. Income from development and development cost of such dies is accounted for in the year in which they are completed and invoiced.

ii. The unfunded cost of such dies, if any, is written off to revenue in the event of their commercial obsolescence.

11. Cash and cash equivalents

Cash and cash equivalents comprise of balance with the banks and cash in hand. The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase, to be cash equivalents.

12. Transactions in Foreign Currencies

(i) Transactions denominated in foreign currencies are recorded at the exchange rate prevailing on the date of transaction except sales which are recorded at a rate notified for a month, by the customs, for invoice purposes.

(ii) Monetary items denominated in foreign currencies at the year-end are re-instated at the year-end rates.

(iii) Non monetary foreign currency items are carried at cost.

(iv) All exchange differences arising on settlement and re- instatement of year-end foreign currency monetary assets and liabilities are recognised as income or expense in the statement of profit and loss.

13. Derivative Instruments

In respect of derivative contracts, premium paid gain/loss on settlement and provision for losses on re-instatement are recognized along with the underlying transactions and charged to the statement of profit and loss.

14. Taxes on income

(i) Income tax expense comprises current tax and deferred tax charge / (credit).

(ii) Current tax is the amount of tax due on the taxable income for the year determined in accordance with the relevant provisions of the Income Tax act, 1961.

(iii) Deferred tax is recognised subject to the consideration of prudence, on timing difference between accounting income and taxable income that originate in one period and are capable of reversal in one or more subsequent periods.

(iv) Deferred tax assets, if any, are recognised, only when there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

(v) Deferred tax assets/liabilities are not extensively reviewed on a cumulative basis.

15. Employee Benefits

Employee benefits include provident fund, pension fund, gratuity fund, compensated absences and medical benefits.

Defined contribution plans

Contributions to defined contribution approved Provident Fund and Pension Fund, defined contribution schemes, are made at pre- determined rates and charged to the statement of profit and loss, as and when incurred.

Post-employment benefit plans

Contributions to defined contribution retirement benefit schemes are recognised as an expense when employees have rendered services entitling them to contributions using Projected Unit Credit Method, with actuarial valuations being carried out by an independent valuer. Actuarial gains and losses have been recognised in full in the statement of profit and loss for the year. Past service cost has also been recognised to the extent that the benefits are already vested. The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for as reduced by the fair value of scheme assets.

Short-term employee benefits

The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employee renders the service. These benefits include compensated absences such as paid leave, performance incentives, bonus, ex-gratia etc.

Long-term employee benefits

Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognised as an actuarial liability determined by an independent valuer being the present value of the defined benefit obligation at the balance sheet date.

The liability towards Workmen Compensation is also funded with

New India Insurance and contribution made towards this is charged to the statement of profit and loss of the year.

16. Borrowing Costs

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as a part of the cost of such assets. All other borrowing costs incurred and which are not identified to the particular qualifying assets is charged to revenue.

17. Leases

Operating Leases: In respect of assets acquired on leases, rentals are charged to the statement of profit and loss on accrual basis and with reference to lease terms and other considerations. Assets leased out under operating leases are capitalised. Rental income is recognized on accrual basis over the lease term.

Financial Leases: In respect of the assets acquired under leases, the lower of the fair value of the assets and present value of the minimum lease rentals is capitalised as fixed assets with corresponding amount shown as a lease liability. The principal component in the lease rental is adjusted against the lease liability and the interest component is charged to the statement of profit and loss.

18. Research and Development Costs

a) Research costs are expensed as and when incurred.

b) Development costs are as and when incurred, unless the technical and commercial feasibility of the project is demonstrated, future economic benefits are probable and the costs can be measured reliably.

c) Research and development expenditure of a capital nature is included in the cost of relevant fixed assets.

19. Provisions, Contingencies and Commitments

Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognised but are disclosed in the notes to accounts. Contingent Assets are neither recognised nor disclosed in the financial statements.


Mar 31, 2012

1. Basis of preparation of financial statements

The financial statements are prepared under the historical cost convention, on accrual basis and are in accordance with the Indian Generally Accepted Accounting Principals ('GAAP'), the provisions of the Companies Act, 1956 and the Accounting Standards notified under Companies (Accounting Standard), Rules, 2006 as amended from time to time except as otherwise stated below.

The accounting policies adopted in the preparation of financial statements are consistent with those of previous year/s)

2. Use of Estimates

Estimates and assumptions used in the preparation of the financial statements and reporting of amounts of assets and liabilities (including contingent liabilities) and the income and expenses during the year are based upon management's evaluation of the relevant facts and circumstances as of the date of the financial statements, which may differ from the actual results at a subsequent date.

3. Revenue Recognition

i. Revenue is recognised only when it can be reliably measured and it is reasonable to expect ultimate collection based upon negotiations with the customers for price escalations and settlements.

ii. Domestic sales are recognised on despatch of goods by the Company from its factory premises and Export sales are accounted on the basis of dates of Bill of Lading and are reflected in the accounts net of excise duty, sales tax, and other levies and net of returns and discounts

iii. The Company, besides manufacturing its products from raw materials purchased directly by it, also converts raw materials supplied by the customers and thus accounts gross receipts as 'Conversion Income'.

iv. Sales returns are accounted for only upon physical receipts of the rejected goods at the factory premises.

4. Other Income

i. Benefit on account of entitlement to import goods free of duty under the Duty Entitlement Pass Book (DEPB) scheme, is accounted in the year of export and shown under 'Other Income'.

ii. Interest income is recognised on time proportion basis taking into account the amount of deposits held and applicable rate.

5. Tangible Fixed Assets & Capital Work-In-Progress

Fixed Assets except land are stated at cost less accumulated depreciation and impairment losses, if any. The cost represents purchase price (net of recoverable taxes) and all other direct expenses including financing cost in respect of acquisition or construction of fixed assets incurred for the period up to the date the asset is ready for its intended use or for the period till commencement of commerical production respectively. Machinery spares which can be used only in connection with an item of fixed asset and whose use is expected to be irregular are capitalised and depreciated over the useful life of the principal item of the relevant assets. Subsequent expenditure relating to fixed assets is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance.

In case of new production facilities, the project costs incurred are capitalised from the date the facilities are commenced and trial production is obtained successfully. The project cost including attributable borrowing cost incurred in respect of facilities not commenced/expanded has been accounted as 'Capital Work-In-Progress', unless the project takes substantial period to commence and where assets are separately identifiable.

6. Intangible Assets

i. Intangible Assets are recognized only if it is probable that the future economic benefits that are attributable to the assets will flow to the enterprises and the cost of the assets can be measured reliably.

ii. The intangible assets are recorded at cost and are carried at cost less accumulated amortisation and impairment losses if any. The cost of an intangible asset comprises its purchase price (net of recoverable of taxes) and any directly attributable expenditure on making the asset ready for its intended use.

7. Depreciation and Amortisation

i. Tangible Fixed Assets other than Dies and Moulds are depreciated on Straight Line

Method at the rates prescribed in schedule XIV to the Companies Act, 1956.

ii. Dies and Moulds are depreciated at Written Down Value at the rates prescribed in schedule XIV to the Companies Act, 1956.

iii. Depreciation on additions during the year is provided on pro-rata basis from the middle of the quarter in which capitalisation takes place.

iv. Where CENVAT is claimed on capital goods, the relevant excise duty under CENVAT has been deducted from the value of the asset for claiming depreciation.

v. In case where specific arrangement exists with a customer for amortisation of capital equipment, depreciation provided equals such agreed amortisation. In such cases, cumulative depreciation at least equals the minimum prescribed under Schedule XIV of the Companies Act,1956.

vi. Intangible assets in the nature of computer & functional software are amortised over a period of 6 years.

vii.The estimated useful life of the intangible assets and the amortisation period are reviewed at the end of each financial year and if there is a significant change in the expected pattern of economic benefits from the asset, the amortisation method is revised to reflect the changed/ actual pattern.

8. Impairment of Assets

An asset is treated as impaired when identified and when the carrying amount of the asset exceeds it recoverable amount. An impairment loss is charged to the Profit and Loss Account in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

9. Investments

All Long-term investments, which are unquoted, are stated at cost. Current investments are stated at lower of cost and fair value.

10. Inventories

Raw Materials

Inventory of Raw materials is valued at cost. Cost represents purchase price, net of recoverable taxes and is determined on weighted average basis of last purchases.

Semi-Finished goods

Inventory of Semi-finished goods is valued at lower of cost of net realisable value. Cost comprises of material cost and conversion cost.

Conversion cost includes cost of consumables, direct labour, and variable overheads in proportion to direct labour and fixed cost in respect of production facilities.

Consumables, Stores and Spares Consumables Stores and Spares are valued at cost. Cost represents purchase price, net of recoverable taxes, and is determined on FIFO basis.

Dies and Moulds

The expenditure on development of Dies and Moulds commissioned on behalf of the customers is carried in the books at the appropriate cost of development, as Current Assets, subject to such cost not exceeding the maximum value contracted to be paid by the customer. Income from development and development cost of such dies is accounted for in the year in which they are completed and invoiced.

The unfunded cost of such dies, if any, is written off to the revenue in the event of their commercial obsolescence.

11. Inter-division Transfers

Interdivisional transfers are valued, either at ex-factory cost of the transfer or unit/division, net of recoverable taxes and are recorded on physical receipt

12. Transactions in Foreign Currencies Foreign currency transactions are recorded at the exchange rate prevailing as at the date of transaction except sales which are recorded at a rate notified for a month, by the customs, for invoice purposes. The exchange differences arising on settlement and restatement of year-end foreign currency monetary assets and liabilities are recorded in the profit and loss account.

13. Derivative Instruments

Derivative contracts are entered into by the company only based on underlying transaction. Forward and Options contract are fair valued at each reporting date and the resulting gain or loss from these transaction are recognized in the Profit and Loss of such reporting period.

14. Taxes on income

i. Income tax expense comprises current tax and deferred tax charge /(credit).

ii. Current tax is the amount of tax due on the taxable income for the year determined in accordance with the relevant provisions of the Income Tax act, 1961.

iii. Deferred tax is recognised subject to the consideration of prudence, on timing differences between accounting income and taxable income that originate in one period and are capable of reversal in one or more subsequent periods.

iv. Deferred tax assets, if any, are recognised, only when there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

v. Deferred tax assets/liabilities are not extensively reviewed on a cumulative basis.

15. Employee Benefits

Employee benefits include provident fund, pension fund, gratuity fund, compensated absences and medical benefits.

DEFINED CONTRIBUTION PLANS Contributions to defined contribution approved Provident Fund and Pension Fund, defined contribution schemes, are made at pre-determined rates and charged to the Profit and Loss Account, as and when incurred.

POST-EMPLOYMENT BENEFIT PLANS Contributions to defined contribution retirement benefit schemes are recognised as an expense when employees have rendered services entitling them to contributions using Projected Unit Credit Method, with actuarial valuations being carried out by an independent valuer. Actuarial gains and losses have been recognised in full in the profit and loss account for the year. Past service cost has also been recognised to the extent that the benefits are already vested. The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for as reduced by the fair value of scheme assets.

SHORT-TERM EMPLOYEE BENEFITS

The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employee renders the service. These benefits include compensated absences such as paid leave, performance incentives, bonus, ex-gratia etc.

LONG-TERM EMPLOYEE BENEFITS

Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognised as an actuarial liability determined by an independent valuer being the present value of the defined benefit obligation at the balance sheet date.

The liability towards Workmen Compensation is also funded with New India Insurance and contribution made towards this is charged to the Profit and Loss Account.

16. Borrowing Costs

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as a part of the cost of such assets. All other borrowing costs incurred and which are not identified to the particular qualifying assets is charged to revenue.

17. Leases

The Company's rental/hire arrangements are in respect of operating leases for guest-houses and a few machineries.

The arrangements normally range between eleven months to twenty-two months renewable by mutual consent on agreed terms and thus are short term nature and no significant obligations are attached thereto.

18. Provisions, Contingent Liabilities and Contingent Assets Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognised but are disclosed in the notes to accounts. Contingent Assets are neither recognised nor disclosed in the financial statements.


Mar 31, 2010

1. Basis of preparation of financial statements

The financial statements are prepared under the historical cost convention, on accrual basis and are in accordance with the Indian Generally Accepted Accounting Principals (GAAP), the provisions of the Companies Act, 1956 and the Accounting Standards notified under Companies (Accounting Standard), Rules, 2006 as amended from time to time except as otherwise stated.

However, during the year, post-demerger, ECL has revalued its lane forming part of its fixed assets not intended for sale during the ordinary course of its business activities. The excess of fair market value over cost of the assets has been recognised in Revaluation Reserve for its subsequent transfer to Business Construction Reserve.

2. Use of Estimates

Estimates and Assumptions used in the preparation of the financial statements are based upon managements evaluation of the relevant facts and circumstances as of the date of the financial statements, which may differ from the actual results at a subsequent date.

3. Revenue Recognition

i. All material items of revenue and expenditure are recognised on accrual basis except as otherwise stated.

ii. Domestic sales are recognised on despatch of goods by the Company from its factory premises and Export sales are accounted on the basis of dates of Bill of Lading and are reflected in the accounts net of excise duty, sales tax, and other levies.

iii. The Company, besides manufacturing its products from raw materials purchased directly by it, also converts raw materials supplied by the customers and thus accounts gross receipts as Conversion Income.

iv. Sales returns are accounted for only upon physical receipts of the rejected goods at the factory premises.

v. Benefit on account of entitlement to import goods free of duty under the Duty Entitlement Pass Book (DEPB) scheme, is accounted in the year of export and shown under Other Income.

4. Price Escalation Claims/Negotiations

The effect of price amendments is accounted for on the basis of agreement with the customers from time to time. However, escalation and other claims, which are not ascertainable/ acknowledged by customers, are not taken into account.

5. Purchases

All purchases of raw materials, stores and spares are accounted in the system once Goods Received Note (GRN) is prepared. GRN is prepared only after goods are inspected and tested for qualities after the receipt at the factory gate.

6. Fixed Assets & Depreciation

i. Fixed Assets are stated at cost less accumulated depreciation and impairment loss ascertained, if any. The cost represents purchase price (net of recoverable taxes) and all other direct expenses including financing cost in respect of acquisition or construction of fixed assets incurred for the period till commencement of commercial production.

ii. Fixed Assets other than Dies and Moulds are depreciated on

Straight Line Method at the rates prescribed in schedule XIV to the Companies Act, 1956.

iii. Dies and Moulds are depreciated at Written Down Value at the rates prescribed in schedule XIV to the Companies Act, 1956.

iv. Depreciation on additions during the year is provided on pro-rata basis from the middle of the quarter in which capitalisation takes place.

v. Where CENVAT is claimed on capital goods, the relevant excise duty under CENVAT has been deducted from the value of the asset for claiming depreciation.

vi. In case where specific arrangement exists with a customer for amortisation of capital equipment, depreciation provided equals such agreed amortisation. In such cases, cumulative depreciation at least equals the minimum prescribed under Schedule XIV of the Companies Act, 1956.

vii. In case of new production facilities, the project costs incurred are capitalised from the date the facilities are commenced and trial production is obtained successfully. The project costs incurred till year-end and relatable/identified to/for particular project/production facilities are debited to individual fixed assets such as land, building, plant & machinery. The project cost incurred in respect of facilities not commenced/expanded and/or which has not been identified/allocated to individual fixed assets have been accounted under Capital Work-in- Process.

 
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