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Accounting Policies of Alok Industries Ltd. Company

Mar 31, 2015

A) Basis of Preparation of Financial Statements

The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013 ("the 2013 Act") / Companies Act, 1956 ("the 1956 Act"), as applicable.

b) Use of Estimates

The preparation of financial statements in conformity with the generally accepted accounting principles require estimates and assumptions to be made that affect the reported amounts of assets and liabilities and disclosure relating to contingent liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Differences between the actual results and estimates are recognised in the period in which the results are known / materialise.

c) Revenue Recognition

Revenue from sale of goods is recognised on delivery of the product, when all significant contractual obligations have been satisfied, significant risks and rewards of ownership are transferred to the customers and no effective ownership is retained by the Company. Revenue from sale of goods is recognised gross of excise duty, and net of rebates and discounts. Excise duty recovered is presented as reduction from gross turnover. Export turnover includes related export benefits.

d) Fixed Assets

i. Tangible Assets:

Fixed Assets are stated at cost of acquisition or construction less accumulated depreciation and impairment losses. Costs of acquisition comprise all costs incurred to bring the assets to their location and working condition up to the date the assets are put to use. Costs of construction are composed of those costs that relate directly to specific assets and those that are attributable to the construction activity in general and can be allocated to specific assets up to the date the assets are put to use.

ii. Intangible Assets:

Intangible assets are recognised only if it is probable that the future economic benefits that are attributable to the assets will flow to the enterprise and the cost of the assets can be measured reliably. Intangible assets are stated at cost less accumulated amortisation and impairment losses.

e) Impairment of Fixed Assets

The carrying values of assets/cash generating units are reviewed for impairment at each balance sheet date in accordance with Accounting Standard (AS-28) Impairment of Assets. An impairment loss is recognized in the statement of profit and loss in the period in which, an asset is identified as impaired, i.e. when the carrying value of the asset exceeds its recoverable value. An impairment loss recognised in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

f) Investments

Investments classified as Long Term Investments are stated at cost. Provision is made to recognise a decline, other than temporary, in the value of investments. Current investments are carried at cost or fair value, whichever is lower.

g) Depreciation / Amortisation

i. Depreciation on Fixed Assets is provided by the Straight Line Method at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956. Continuous process plant is classified based on technical assessment and depreciation is provided accordingly. Depreciation on additions to assets or on sale / disposal of assets is calculated from the beginning of the month of such addition or up to the month of such sale / disposal, as the case may be. Assets costing less than Rs. 5,000/- are fully depreciated in the year of purchase.

ii. Cost of leasehold land is amortised over the period of lease.

iii. Trademarks / Brands are amortised over a period of ten years from the date of capitalization

iv. Computer software is amortised for a period of five years from the date of capitalization.

h) Foreign Currency Transactions

Foreign currency transactions are recorded at the exchange rates prevailing on the date of the transaction.

Monetary items denominated in foreign currency are reported at the exchange rate prevailing on the balance sheet date. Exchange differences relating to long term monetary items are dealt with in the following manner:

* Exchange differences relating to long-term monetary items, arising during the period, in so far as those relate to the acquisition of a depreciable capital asset are added to / deducted from the cost of the asset and depreciated over the balance life of the asset.

* In other cases, such differences are accumulated in the "Foreign Currency Monetary Item Translation Difference Account" and amortised to the statement of profit and loss over the balance life of the long- term monetary item.

All other exchange differences are dealt with in the

statement of profit and loss.

i) Inventories

Items of Inventories are valued on the basis given below:

i. Raw Materials, Packing Materials, Stores and Spares: at cost determined on First - In - First - Out (FIFO) basis or net realisable value, whichever is lower.

ii. Process stock and Finished goods: At cost or net realisable values whichever is lower. Cost comprises of cost of purchase, cost of conversion and other costs incurred in bringing the inventory to their present location and condition.

D Employee Benefits

i. Defined Contribution Plans

The Company''s contributions to provident fund, being defined contribution plans, are charged to the statement of profit and loss as an expense based on the amount of contribution required to be made and when services are rendered by the employees.

ii. Defined Benefit Plan

The Company participates in a group gratuity cum life insurance scheme administered by the Life Insurance Company, a defined benefit plan. The cost of providing benefit is determined actuarially by the projected unit credit method at each balance sheet date. Actuarial gains/losses are recognised in the statement of profit and loss in the period in which they occur. The retirement benefit obligation recognised in the Balance Sheet represents the present value of defined benefit obligations as adjusted for unrecognised past service cost and as reduced by the fair value of scheme assets.

iii. Short Term Employee Benefits

Short term employee benefits are recognised as an expense at undiscounted amounts in the statement of profit and loss in the period in which the related service is rendered.

k) Share based compensation

The compensation cost of stock options granted to employees is measured by the intrinsic value method, i.e. the difference between the market price of the Company''s shares on the date of grant of options and the exercise price to be paid by the option holders. The compensation cost is amortised over the vesting period of the options.

l) Leases

Operating lease receipts and payments are recognized as income or expense in the statement of profit and loss on a straight-line basis over the lease term.

m) Government Grants

Grants, in the nature of interest subsidy under the Technology Upgradation Fund Scheme (TUFs), are accounted for when it is reasonably certain that ultimate collection will be made. The interest subsidy is reduced from interest cost.

n) Borrowing Costs

Borrowing costs attributable to the acquisition or construction of qualifying assets, as defined in Accounting Standard (AS-16) "Borrowing Costs" are capitalized as part of the cost of such asset up to the date when the asset is ready for its intended use. Other borrowing costs are expensed as incurred.

o) Income taxes

Tax expense comprises current and deferred taxes. Current tax is measured at the amount expected to be paid to revenue authorities using, applicable rates and tax laws.

Minimum Alternative Tax (MAT) credit entitlement available under the provisions of the section 115JJA of the Income Tax Act, 1961 is recognized in accordance with the principles laid down in the Guidance Note on Accounting for credit available in respect of MAT under the Income Tax Act, 1961 issued by the ICAI, to the extent that the credit will be available for discharge of future normal tax liability.

Deferred tax is recognised on timing differences between the accounting and the taxable income for the period and quantified using the tax rates and laws enacted or substantively enacted as on the reporting date.

Deferred tax assets are recognised only when there is a reasonable or virtual certainty, as relevant, in accordance with the principles laid down in Accounting Standard (AS-22) "Accounting for Taxes on Income", that sufficient future taxable income will be available against which they will be realized.

p) Accounting for Derivatives

The company enters in to derivative contracts to hedge its exposure to movements in interest rates and foreign exchange rates. These are not intended for trading or speculative purposes.

i. Derivative Instruments (other than ii and iii below) are accounted for based on the principles of prudence enunciated in Accounting Standard (AS- 1) "Disclosure of Accounting Policies". The category wise net mark to market loss or gain position is determined on balance sheet date and the loss recognised in the statement of Profit and Loss, gains are ignored.

ii. Foreign currency forward contracts entered into to hedge foreign currency exposure on recognized monetary items is accounted for, in accordance with Accounting Standard (AS-11) "The effects of changes in Foreign Exchange Rates". The premium or discount on such contracts is amortized over the life of the contract. The exchange difference measured by the change in exchange rate between the inception dates of the contract / last reporting date as the case may be and the balance sheet date is recognized in the statement of profit and loss. Any gain / loss on cancellation of such forward contracts are recognised as income / expense of the period.

iii. Forward exchange contracts entered in to after 1 April 2011 to hedge highly probable forecast transactions and firm commitments are accounted for by applying the recognition and measurement principles set out in the Accounting Standard (AS-30) "Financial Instruments: Recognition and Measurement". Accordingly, changes in the fair value of instruments designated as cash flow hedges are deferred in the Cash Flow Hedging Reserve account until the underlying transaction materializes at which stage the amount in the reserve is recycled to the statement of profit and loss in the same line as the hedged item. Gain or loss on ineffective cash flow hedges (if any) is recognized in the statement of profit and loss.

q) 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 disclosed by way of Notes to the financial statements. Disclosure is not made if the possibility of an outflow of future economic benefits is remote. Contingent Assets are neither recognised nor disclosed in the financial statements.

r) Cash Flow Statement

The Cash Flow Statement is prepared using the "indirect method" set out in Accounting Standard (AS- 3) "Cash Flow Statements" and presents the cash flows by operating, investing and financing activities of the Company. Cash and Cash equivalents presented in the Cash Flow Statement consist of cash on hand and unencumbered, highly liquid bank balances.

s) Earnings per share

The Company reports basic and diluted Earnings per share (EPS) in accordance with Accounting Standard (AS-20) "Earnings per Share". Basic EPS is computed by dividing the net profit or loss for the period by the weighted average number of equity shares outstanding during the period. Diluted EPS is computed by dividing the net profit or loss for the period by the weighted average number of equity shares outstanding during the period as adjusted for the effects of all dilutive potential equity shares, except where the results are anti-dilutive.


Sep 30, 2013

A) Basis of Preparation of Financial Statements

These financial statements have been prepared under the historical cost convention in accordance with generally accepted accounting principles in India, the applicable Accounting Standards and the provisions of the Companies Act, 1956.

b) Use of Estimates

The preparation of financial statements in conformity with the generally accepted accounting principles require estimates and assumptions to be made that affect the reported amounts of assets and liabilities and disclosure relating to contingent liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Differences between, the actual results and estimates are recognised in the period in which the results are known / materialise.

c) Revenue Recognition

i. Revenue on sale of products is recognised when the products are dispatched to customers, all significant contractual obligations have been satisfied and the collection of the resulting receivable is reasonably expected. Sales are stated net of trade discount, returns and sales tax collected.

ii. Revenue in respect of insurance/other claims, interest etc. is recognised only when it is reasonably certain that the ultimate collection will be made.

d) Fixed Assets

i. Own Assets:

Fixed Assets are stated at cost of acquisition or construction including directly attributable cost. They are stated at historical cost less accumulated depreciation and impairment loss, if any.

ii. Assets taken on operating lease:

Assets taken on lease under which, all the risk and rewards of ownership are effectively retained by the lessor are classified as operating lease. Lease payments under operating leases are recognised as expenses on accrual basis in accordance with the respective lease agreements.

iii. Assets given on operating lease

Lease rental are recognised as income over the lease term.

e) Investments

Investments classified as Long Term Investments are stated at cost. Provision is made to recognise a decline, other than temporary, in the value of investments. Current investments are carried at cost or fair value whichever is lower.

f) Depreciation / Amortisation

i. Depreciation on Fixed Assets is provided on Straight Line Method at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956. Continuous process plant is classified based on technical assessment and depreciation is provided accordingly Depreciation on additions to assets or on sale / disposal of assets is calculated from the beginning of the month of such addition or up to the month of such sale / scrapped, as the case may be. Assets costing less than Rs. 5,000/- are fully depreciated in the year of purchase.

ii. Cost of leasehold land is amortised over the period of lease.

iii. Trademarks / Brands are amortised over a period of ten years from the date of capitalization

iv. Computer software is amortised for a period of five years from the date of capitalization.

g) Foreign Currency Transactions & Translations

i. Foreign currency transactions are recorded at the exchange rates prevailing on the date of the transaction. Exchange differences arising on settlement of foreign currency transactions are recognised in the statement of profit and loss.

ii. Monetary items denominated in foreign currency are restated using the exchange rate prevailing at the balance sheet date and the resultant exchange differences are recognized in the statement of profit and loss . Non-monetary items denominated in foreign currency are carried at historical cost.

However, pursuant to the amended Accounting Standard (AS) 11 on "The Effects of Changes in Foreign Exchange Rates", exchange differences arising on restatement of long term monetary items are dealt with in the following manner:

- Exchange differences relating to long-term monetary items, arising during the year, in so far as those relate to the acquisition of a depreciable capital asset are added to / deducted from the cost of the asset and depreciated over the balance life of the asset.

- In other cases such differences are accumulated in a "Foreign Currency Monetary Item Translation Difference Account" and amortized to the statement of profit and loss over the balance life of the long-term monetary item, however such that the period of amortization does not extend beyond 31 March, 2020.

h) Inventories

Items of Inventories are valued on the basis given below:

i. Raw Materials, Packing Materials, Stores and Spares: at cost determined on First - In - First - Out (FIFO) basis or net realisable value, whichever is lower.

ii. Process stock and Finished Goods: At cost or net realisable values whichever is lower. Cost comprises of cost of purchase (as above), cost of conversion (absorption cost) and other costs incurred in bringing the inventory to their present location and condition.

i) Employee Benefits (Refer Note No. 31)

i. Defined Contribution Plan

Company''s contribution paid/ payable for the period/year to defined contribution retirement benefit scheme is charged to statement of Profit and Loss.

ii. Defined Benefit Plan and other long term benefit plan

Company''s liabilities towards defined benefit scheme and other long term benefit plans are determined using the projected unit credit method. Actuarial valuation under projected unit credit method is carried out at Balance Sheet date, Actuarial gains/losses are recognised in statement of Profit and Loss in the period of occurrence of such gains and losses. Past service cost is recognised immediately to the extent benefits are vested, otherwise, it is amortized on straight line basis over running average periods until the benefits become vested. The retirement benefit obligation recognised in Balance Sheet represents present value of the defined benefit obligations as adjusted for unrecognised past service cost and as reduced by fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost; the present value is available refunds and reduction in future contribution to the scheme.

iii. Short Term Employee Benefits

Short term employee benefits are recognised as an expense at undiscounted amount in statement of profit & loss of the year in which the related service is rendered. This benefit include incentives, bonus.

j) Share Based Compensation

The compensation cost of stock options granted to employees is measured by intrinsic value method, i.e. difference between the market price of the company''s shares on the date of grant of options and the excercise price to be paid by the option holders. The compensation cost, if any, is amortised over the vesting period of the options.

k) Accounting of CENVAT credit

Cenvat credit available is accounted by recording material purchases net of excise duty. Cenvat credit availed is accounted on adjustment against excise duty payable on dispatch of finished goods.

I) Government Grants

Grants, in the nature of interest subsidy under the Technology Upgradation Fund Scheme (TUFS), are accounted for when it is reasonably certain that ultimate collection will be made. Government grants not specifically related to fixed assets are recognised in the statement of Profit and Loss in the year of accrual / receipt.

m) Borrowing Costs

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale. All other borrowing costs are charged to revenue.

n) Income Taxes

Tax expense comprises of current tax and deferred tax. Current tax and deferred tax are accounted for in accordance with Accounting Standard 22 (AS-22) on "Accounting for taxes on Income". Current tax is measured at the amount expected to be paid / recovered from the tax authority using the applicable tax rates. Deferred tax liabilities are recognised for future tax consequence attributable to timing difference between taxable income and accounting income that are capable of reversing in one or more subsequent periods and are measured at relevant enacted/ substantively enacted tax rates and in the case of deferred tax asset on consideration of prudence, are recognised and carried forward to the extent of reasonable / virtual certainty as case may be. At each balance sheet date, the Company reassesses unrealised deferred tax assets to the extent they become reasonably certain or virtually certain of realisation, as the case may be. Minimum Alternate Tax (MAT) credit entitlement is recognised in accordance with the Guidance Note on "Accounting for credit available in respect of Minimum Alternate Tax under the Income-tax Act, 1961" issued by The Institute of Chartered Accountants of India.

o) Intangible Assets

Intangible assets are recognised only if it is probable that the future economic benefits that are attributable to the assets will flow to the enterprise and the cost of the assets can be measured reliably. The intangible assets are recorded at cost and are carried at cost less accumulated amortisation and accumulated impairment losses, if any.

p) Impairment of Fixed Assets

At the end of each year, the company determines whether a provision should be made for impairment loss on fixed assets by considering the indications that an impairment loss may have occurred in accordance with Accounting Standard 28 (AS-28) "Impairment of Assets". An impairment loss is charged to the statement of Profit and Loss in the year in which, an asset is identified as impaired, when the carrying value of the asset exceeds its recoverable value. The impairment loss recognised in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

q) 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. Contingent Assets are neither recognised nor disclosed in the financial statements.


Mar 31, 2012

A) Basis of Preparation of Financial Statements

These financial statements have been prepared under the historical cost convention in accordance with generally accepted accounting principles in India, the applicable Accounting Standards and the provisions of the Companies Act, 1956.

b) Use of Estimates

The preparation of financial statements in conformity with the generally accepted accounting principles require estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Differences between, the actual results and estimates are recognised in the period in which the results are known / materialise.

c) Revenue Recognition

i) Revenue on sale of products is recognised when the products are dispatched to customers, all significant contractual obligations have been satisfied and the collection of the resulting receivable is reasonably expected. Sales are stated net of trade discount, returns and sales tax collected.

ii) Revenue in respect of insurance/other claims, interest etc. is recognised only when it is reasonably certain that the ultimate collection will be made.

d) Fixed Assets

i) Own Assets:

Fixed Assets are stated at cost of acquisition or construction including directly attributable cost. They are stated at historical cost less accumulated depreciation and impairment loss, if any.

ii) Assets taken on lease:

Operating Lease:

Assets taken on lease under which, all the risk and rewards of ownership are effectively retained by the lessor are classified as operating lease. Lease payments under operating leases are recognised as expenses on accrual basis in accordance with the respective lease agreements.

iii) Assets given on lease

Lease rental are recognised as income over the lease term.

e) Investments

Investments classified as Long Term Investments are stated at cost. Provision is made to recognise a decline, other than temporary, in the value of investments. Current investments are carried at cost or fair value whichever is lower.

f) Depreciation / Amortisation

i) Depreciation on Fixed Assets is provided on Straight Line Method at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956. Continuous process plant is classified based on technical assessment and depreciation is provided accordingly Depreciation on additions to assets or on sale / disposal of assets is calculated from the beginning of the month of such addition or up to the month of such sale / scrapped, as the case may be. Assets costing less than Rs 5,000/ - are fully depreciated in the year of purchase.

ii) Cost of leasehold land is amortised over the period of lease.

iii) Trademarks / Brands are amortised over a period of ten years from the date of capitalization

iv) Computer software is amortised for a period of five years from the date of capitalization.

g) Foreign Currency Transactions & Translations

i) Foreign currency transactions are recorded at the exchange rates prevailing on the date of the

transaction. Exchange differences arising on settlement of foreign currency transactions are recognised in the profit and loss account

ii) Monetary items denominated in foreign currency are restated using the exchange rate prevailing at the balance sheet date and the resultant exchange differences are recognized in the profit and loss account. Non-monetary items denominated in foreign currency are carried at historical cost.

However, pursuant to the amended Accounting Standard 11 on The Effects of Changes in Foreign Exchange Rates, exchange differences arising on restatement of long term monetary items are dealt with in the following manner:

- Exchange differences relating to long-term monetary items, arising during the year, in so far as those relate to the acquisition of a depreciable capital asset are added to / deducted from the cost of the asset and depreciated over the balance life of the asset.

- In other cases such differences are accumulated in a "Foreign Currency Monetary Item Translation Difference Account" and amortized to the profit and loss account over the balance life of the long-term monetary item, however that the period of amortization does not extend beyond 31 March, 2020.

h) Inventories

Items of Inventories are valued on the basis given below:

i) Raw Materials, Packing Materials, Stores and Spares and Trading goods: at cost determined on First

- In - First - Out (FIFO) basis or net realisable value, whichever is lower.

ii) Process stock and Finished Goods: At cost or net realisable values whichever is lower. Cost comprises of cost of purchase (as above), cost of conversion (absorption cost) and other costs incurred in bringing the inventory to their present location and condition.

i) Employee Benefits (Refer Note No. 31)

i) Defined Contribution Plan

Companys contribution paid/ payable for the year to defined contribution retirement benefit scheme is charged to Profit and Loss account.

ii) Defined Benefit Plan and other long term benefit plan

Companys liabilities towards defined benefit scheme and other long term benefit plans are determined using the projected unit credit method. Actuarial valuation under projected unit credit method are carried out at Balance Sheet date, Actuarial gains/losses are recognised in Profit and Loss Account in the period of occurrence of such gains and losses. Past service cost is recognised immediately to the extent benefits are vested otherwise it is amortized on straight line basis over running average periods until the benefits become vested. The retirement benefit obligation recognised in Balance Sheet represents present value of the defined benefit obligations as adjusted for unrecognised past service cost and as reduced by fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost; the present value is available refunds and reduction in future contribution to the scheme.

iii) Short Term Employee Benefits

Short term employee benefits are recognised as an expense at undiscounted amount in profit & loss account of the year in which the related service is rendered. These benefits include incentive, bonus.

j) Accounting of CENVAT credit

Cenvat credit available is accounted by recording material purchases net of excise duty. Cenvat credit availed is accounted on adjustment against excise duty payable on dispatch of finished goods.

k) Government Grants

Grants, in the nature of interest subsidy under the Technology Upgradation Fund Scheme (TUFS), are accounted for when it is reasonably certain that ultimate collection will be made. Government grants not specifically related to fixed assets are recognised in the Profit and Loss Account in the year of accrual / receipt.

l) Borrowing Costs

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale. All other borrowing costs are charged to revenue.

m) Income taxes

Tax expense comprises of current tax and deferred tax. Current tax and deferred tax are accounted for in accordance with Accounting Standard 22 (AS-22) on "Accounting for taxes on Income". Current tax is measured at the amount expected to be paid / recovered from the tax authority using the applicable tax rates. Deferred tax liabilities are recognised for future tax consequence attributable to timing difference between taxable income and accounting income that are capable of reversing in one or more subsequent periods and are measured at relevant enacted/ substantively enacted tax rates and in the case of deferred tax asset on consideration of prudence, are recognised and carried forward to the extent of reasonable / virtual certainty as case may be. At each balance sheet date, the Company reassesses unrealised deferred tax assets to the extent they become reasonably certain or virtually certain of realisation, as the case may be. Minimum Alternate Tax (MAT) credit entitlement is recognised in accordance with the Guidance Note on "Accounting for credit available in respect of Minimum Alternate Tax under the Income-tax Act, 1961" issued by ICAI

n) Intangible Assets

Intangible assets are recognised only if it is probable that the future economic benefits that are attributable to the assets will flow to the enterprise and the cost of the assets can be measured reliably. The intangible assets are recorded at cost and are carried at cost less accumulated amortisation and accumulated impairment losses, if any.

o) Impairment of Fixed Assets

At the end of each year, the company determines whether a provision should be made for impairment loss on fixed assets by considering the indications that an impairment loss may have occurred in accordance with Accounting Standard 28 (AS-28) "Impairment of Assets". An impairment loss is charged to the Profit and Loss Account in the year in which, an asset is identified as impaired, when the carrying value of the asset exceeds its recoverable value. The impairment loss recognised in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

p) 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. Contingent Assets are neither recognised nor disclosed in the financial statements.

q) Accounting for Derivatives

i) The company uses derivative instruments like foreign currency forward contracts, foreign currency options and Interest rate swaps to hedge its exposure to movements in foreign exchange rates, interest rates and currency risks. The objective of these derivative instruments is to reduce the risk or cost to the company and is not intended for trading or speculation purposes.

ii) Interest Rate Swaps, Foreign Currency Options and Currency Swaps, entered into by the Company for hedging the risks of foreign currency exposure (including interest rate risk) are accounted based on the principles of prudence as enunciated in Accounting Standard 1 (AS-1) "Disclosure of Accounting Policies". Thus, mark to market loses (net) are accounted for by the company, net gains are ignored.

iii) In respect of foreign currency forward contracts entered into to hedge foreign currency exposure in respect of recognized monetary items, the premium or discount on such contracts is amortized over the life of the contract. The exchange difference measured by the change in exchange rate between the inception dates of the contract / last reporting date as the case may be and the balance sheet date is recognized in the profit and loss account. Any gain / loss on cancellation of such forward contracts are recognised as income / expense of the period.

iv) The Company designates foreign currency forward contracts taken with respect to highly probable forecast transactions and firm commitments as hedges and accounts for the same by applying the recognition and measurement principles set out in the Accounting Standard (AS) 30 "Financial Instruments: Recognition and Measurement". Accordingly, the Company records the gain or loss on effective cash flow hedges in the Cash Flow Hedging Reserve account until the forecasted transaction materializes. Gain or loss on ineffective cash flow hedges (if any) is recognized in the profit and loss account. (Refer Note No. 33(ii)).

 
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