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Accounting Policies of Atul Ltd. Company

Mar 31, 2013

1 Basis of Preparation:

These financial statements have been prepared on accrual basis and under historical cost convention and in compliance, in all material aspects, with the generally accepted accounting principles in India, the applicable Accounting Standards notified under Section 211 (3C) and the relevant provisions of the Companies Act, 1956.

The significant Accounting Policies adopted by the Company are detailed below.

All the assets and liabilities have been classified as current or non-current as per the normal operating cycle of the Company and other criteria set out in Schedule VI to the Companies Act, 1956. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current and non-current classification of assets and liabilities.

2 Use of Estimates:

The preparation of financial statements in conformity with generally accepted accounting principles requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period. These estimates are based on the Management evaluation of the relevant facts and circumstances as of the date of the financial statements, which may differ from future revisions and actual results in subsequent period. Differences are adjusted in subsequent periods as they occur.

3 Fixed Assets:

a) Tangible Assets:

i) Fixed assets other than (ii) and (iii) below are carried at cost of acquisition | construction including incidental expenses directly attributable to the acquisition | construction activity, as the case may be, less accumulated depreciation, amortisation and impairment as necessary.

ii) Assets received free of cost on premature cancellation of a lease agreement are valued at fair value.

iii) Freehold land, lease hold land at Panoli and certain business premises have been revalued as per the report of approved valuer.

iv) Spares specific to a machinery are carried at cost and allocated over the useful life of the asset.

b) Intangible Assets:

Computer software includes Enterprise Resource Planning Project and other cost relating to software which provides significant future economic benefit. Costs comprise license fees and cost of system integration services.

4 Depreciation and Amortisation:

Depreciation:

Depreciation on building and plant and equipment is being provided on ''Straight Line Method'' and on all other assets on ''Written Down Value'' basis in accordance with the provisions of Section 205(2)(b) and 205(2) (a) of the Companies Act, 1956 respectively, in the manner and at the rates specified in Schedule XIV to the said Act. An amount in respect of assets revalued in the past, the depreciation charge over the enhancement to cost is withdrawn from the revaluation reserves and adjusted against the depreciation charge each year.

Depreciation on additions to the assets during the year is being provided on pro-rata basis at their respective rate with reference to the month of acquisition | installation.

Depreciation on assets sold, scrapped or discarded during the year is being provided at their respective rates up to the month in which such assets are sold, scrapped or discarded.

Depreciation is adjusted in subsequent periods to allocate the revised carrying amount of assets after the recognition of an impairment loss on a systematic basis over its remaining useful life of assets.

Amortisation:

a) Premium on lease hold land is amortised over the period of lease.

b) Computer software is amortised over a period of three years.

5 Impairment of Assets:

The carrying amounts of assets are reviewed at each Balance Sheet date to assess if there is any indication of impairment based on internal | external factors. An impairment loss on such assessment will be recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount of the assets is net selling price or value in use whichever is higher. While assessing value in use, the estimated future cash flows are discounted to the present value by using weighted average cost of capital. A previously recognised impairment loss is further provided or reversed depending on changes in the circumstances.

6 Borrowing Costs:

Borrowing costs in relation to acquisition and construction of qualifying assets are capitalised as part of cost of such assets up to the date when such assets are ready for intended use. Other borrowing costs are charged as expense in the year in which these are incurred.

7 Investments:

Investments that are intended to be held for more than a year, from the date of acquisition, are classified as long- term investments and are carried at cost. However, provision for diminution in value of investments is made to recognise a decline, other than temporary, in the value of the investments.

8 Inventories:

a) Raw materials, packing materials, purchased finished goods, work-in-progress, finished goods, fuel, stores and spares other than specific spares for machinery are valued at cost or net realisable value whichever is lower. Cost is arrived at on moving weighted average basis.

b) Goods-in-transit and in bonded warehouse are stated at the cost to the date of Balance Sheet.

c) ''Cost'' comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventory to the present location and condition.

d) Due allowances are made for obsolete inventory based on technical estimates made by the Company.

9 Foreign Currency Transactions:

a) Initial recognition:

Transactions denominated in foreign currencies are recorded at the rate prevailing on the date of the transaction.

b) Conversion:

At the year end, monetary items denominated in foreign currencies remaining unsettled are converted into rupee equivalents at the year end exchange rates. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction.

c) Exchange differences:

All exchange differences arising on settlement and conversion of foreign currency transactions are included in the Statement of Profit and Loss. The Company has opted to avail the choice provided under paragraph 46A of Accounting Standard-11 ''The effects of changes in foreign exchange rates'' inserted vide Notification dated December 29, 2011 issued by the Ministry of Corporate Affairs. Consequently, foreign exchange difference on account of long-term foreign currency borrowings utilised to acquire a depreciable asset, is adjusted in the cost of the depreciable asset, which will be depreciated over the balance life of the asset.

d) Forward exchange contracts not intended for trading or speculation purposes:

The premium or discount arising at the inception of forward exchange contracts intended to hedge existing exposures is amortised as expenses or income over the life of the contract. Exchange differences on such contract are being recognised in the Statement of Profit and Loss for the year. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or expense for the year.

e) Derivatives:

Where the Company has entered into derivative contracts such as Interest Rate Swaps, Currency Swaps, and Currency Options, to hedge risk associated with interest and foreign currency fluctuations relating to firm commitments where these exposures exist at the Balance Sheet date the hedging instruments are initially measured at fair value, and are remeasured at subsequent reporting dates. The revalorisation gain or loss on Mark-to-Market (MTM) is generally recognised in the Statement of Profit and Loss each year. However on account of choice exercised as per (c) above MTM gains and losses on instruments intended to hedge long-term foreign currency borrowings utilised to acquire depreciable assets are recognised to offset foreign exchange fluctuation differences on such long-term foreign currency borrowings.

f) Changes in fair value of derivative instruments intended to hedge future exposures resulting out of ''highly probable forecast transactions'' such as exports, is determined as effective hedges of future cash flows, which are recognised directly under ''Hedging Reserve'' in shareholders'' funds, and the ineffective portion, if any, is recognised immediately in the Statement of Profit and Loss. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the Statement of Profit and Loss.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At that time, for forecasted transactions, any cumulative gain or loss on the hedging instrument recognised in shareholders'' funds is retained there until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in shareholders'' funds is transferred to the Statement of Profit and Loss for the period.

10 Revenue Recognition:

Revenue from sales are recognised when all significant risks and rewards of ownership have been transferred to the buyer and no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of goods.

a) Sale of goods and services:

i) Domestic sales are accounted for on dispatch from the point of sale.

ii) Export sales are accounted on the basis of dates of on board Bill of Lading and | or Air Way Bill.

iii) Service income is recognised, net of service tax, when the related services are rendered.

b) Other revenues:

i) Eligible export incentives are recognised in the year in which the conditions precedent is met and there is no significant uncertainty about the collectability.

ii) Lease rental income is recognised on accrual basis.

iii) Dividend income is accounted for in the year in which the right to receive the same is established.

iv) Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

11 Provisions, Contingent Liabilities and Contingent Assets :

Provisions involving a 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. Provision is not discounted to its present value and is determined based on the best estimate required to settle an obligation at the year end. These are reviewed every year end and adjusted to reflect the best current estimate. Contingent liabilities are not recognised but are disclosed in the financial statements. Contingent assets are neither recognised nor disclosed in the financial statements.

12 Research and Development Expenditure:

Research and Development expenditure is charged to revenue under the natural heads of account in the year in which it is incurred. Research and Development expenditure on fixed assets is treated in the same way as expenditure on other fixed assets.

13 Employee Benefits:

a) Defined contribution plan:

Contribution paid | payable by the Company during the period to Provident Fund, Super Annuation Fund, Employees'' State Insurance Corporation, and Labour Welfare Fund are recognised in the Statement of Profit and Loss.

b) Defined benefit plan:

Gratuity:

Gratuity liability is a Defined Benefit Obligation (DBO) and is computed on the basis of an actuarial valuation by an actuary appointed for the purpose as per projected unit credit method, at the end of each financial year. The liability so provided is paid to a trust administered by the Company, which in turn invest in eligible securities to meet the liability as and when it accrues for payment in future. Actuarial gains | losses are immediately taken to Statement of Profit and Loss. Any shortfall in the value of assets over the Defined Benefit Obligation is recognised as a liability with a corresponding charge to Statement of Profit and Loss.

Long-term leave encashment:

Long-term leave encashment is provided for on the basis of an actuarial valuation carried out at the end of the year on the projected unit credit method. Actuarial gains | losses are immediately taken to Statement of Profit and Loss.

Provident fund:

Provident fund for certain eligible employees is managed by the Company through the ''Atul Products Ltd - Ankleshwar Division Employees Provident Fund Trust'' in line with Provident Fund and Miscellaneous Provisions Act, 1952. The plan guarantees interest at the rate notified by the Provident Fund Authorities. The contribution by the employer and employee together with the interest accumulated thereon are payable to employees at the time of their separation from the Company or retirement, whichever is earlier. The benefits vest immediately on rendering of the services by the employee. Any shortfall in the value of assets over the Defined Benefit Obligation is recognised as a liability, with a corresponding charge to Statement of Profit and Loss.

c) Short-term leave encashment:

Short-term leave encashment is provided at undiscounted amount during the accounting period based on service rendered by employees.

d) Voluntary retirement scheme:

Compensation payable under the voluntary retirement scheme is being charged to Statement of Profit and Loss in the year of settlement.

14 Taxation:

a) Income tax expense comprises current tax and deferred tax charge or credit. Provision for current tax is made on the basis of the assessable income at the tax rate applicable to the relevant assessment year.

b) MAT credit is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax within the specified period.

c) Deferred tax asset and deferred tax liability are calculated by applying tax rate and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets on account of timing differences are recognised, only to the extent there is a reasonable certainty of its realisation. Deferred tax assets are reviewed at each Balance Sheet date to reassure realisation.

d) Deferred tax assets, representing unabsorbed depreciation or carried forward losses, are recognised, if and only if there is virtual certainty that there would be adequate future taxable income against which such deferred tax assets can be realised.

15 Government Grants:

a) Government grants are recognised when there is reasonable assurance that the same will be received.

b) Revenue grants for expenses incurred are reduced from the respective expenses.

c) Capital grants relating to specific fixed assets are reduced from the cost of the respective fixed assets.

d) Government grants in the nature of promoters'' contribution are credited to capital reserve and treated as a part of shareholders'' funds.


Mar 31, 2010

These financial statements have been prepared on an accrual basis and under historical cost convention and in compliance, in all material aspects, with the applicable accounting principles in India, the applicable accounting standards notified under Section 211 (3C) and the relevant provisions of the Companies Act, 1956. The significant accounting policies adopted by the Company are detailed below.

1 Use of Estimates:

The preparation of financial statements in conformity with generally accepted accounting principles requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period. Although these estimates are based upon Managements best knowledge of current events and actions, actual results could differ from these estimates. Differences between actual results and estimates are recognised in the period in which the results are known | materialised.

2 Fixed Assets: (Tangible and Intangible)

1 Tangible Assets:

i) Fixed assets are carried at cost of acquisition including incidental expenses, less accumulated depreciation, amortisation and impairment except freehold land, lease hold land Panoli and certain business premises at fair market value, assets received Free of Cost on premature cancellation of lease agreement with one leasee which are at Fair Value.

ii) Spares for specific machinery are carried at cost less amortisation.

2 Intangible Assets:

Computer Software includes Enterprise Resource Planning (ERP) Project and other cost relating to software which provides significant future economic benefit. Costs comprise license fees and cost of system integration services.

3 Depreciation and Amortisation:

Amortisation:

1 Premium on lease hold land is amortised over the period of lease.

2 Cost of spares for specific machinery is amortised over balance period of life of related machinery.

3 Computer Software is being amortised over a period of three years.

4 Other fixed assets:

Depreciation on Buildings and Plant and Machinery is being provided on "Straight Line Method" basis in accordance with provisions of Section 205(2)(b) of the Companies Act, 1956 in the manner and at the rates specified in Schedule XIV to the said Act and on all other assets is being provided on "Written Down Value" basis in accordance with the provisions of Section 205(2)(a) of the Companies Act, 1956 in the manner and at the rates specified in Schedule XIV to the said Act.

Depreciation on additions to the assets during the year is being provided on pro-rata basis at their respective rate with reference to the month of acquisition | installation as required by Schedule XIV to the Companies Act, 1956.

Depreciation on assets sold, scrapped or discarded during the year is being provided at their respective rates up to the month in which such assets are sold, scrapped or discarded, as required by Schedule XIV to the Companies Act, 1956.

Depreciation is adjusted in subsequent periods to allocate the assets revised carrying amount after the recognition of an impairment loss on a systematic basis over its remaining useful life.

4 Impairment of Assets:

The carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal external factors. An impairment loss will be recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to the present value by using weighted average cost of capital. A previously recognised impairment loss is further provided or reversed depending on changes in circumstances.

5 Borrowing Costs:

Borrowing costs in relation to acquisition and construction of qualifying assets are capitalised as part of cost of such assets up to the date when such assets are ready for intended use. Other borrowing costs are charged as expense in the year in which these are incurred.

6 Investments:

Investments that are intended to be held for more than a year, from-the date of acquisition, are classified as long term investments and are carried at cost. However, provision for diminution in value of investments is made to recognise a decline, other than temporary, in the value of the investments.

7 Inventories:

1 Raw Materials, Packing materials and fuel are valued at cost or net realisable value whichever is lower. Cost is arrived at on Moving Weighted Average basis.

2 Stores and spares other than specific spares for machinery are valued at cost or net realisable value whichever is lower. Cost is arrived at on Moving Weighted Average basis.

3 Materials - in - Process and Finished Goods are valued at cost or net realisable value whichever is lower. Finished goods stocks are valued at full absorption cost (Including Excise Duty).

4 Purchased Finished Goods are valued at cost or net realisable value whichever is lower. Cost is arrived at on Moving Weighted Average basis.

5 Materials in transit and in Bonded Warehouse are stated at the cost to the date of Balance Sheet.

8 Foreign Currency Transaction:

1 Initial Recognition:

Transactions denominated in foreign currencies are recorded at the rate prevailing on the date of the transaction.

2 Conversion:

At the year-end, monetary items denominated in foreign currencies remaining unsettled ^re converted into rupee equivalents at the year-end exchange rates. Non monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction.

3 Exchange Differences:

All exchange differences arising on settlement and conversion of foreign currency transactions are included in the Profit and Loss Account, except in cases where they relate to the acquision of fixed assets, acquired out of India in which case they are adjusted in the cost of the corresponding asset.

4 Forward Exchange Contracts not intended for trading or speculation purposes:

The premium or discount arising at the inception of forward exchange contract is amortised as expenses or

income over the life of the contract. Exchange differences on such contract is being recognised in the statement of profit and loss for the year. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or expense for the year.

5 Derivatives:

Where Company has entered into the derivative contracts such as Interest Rate Swaps, Currency Swaps, Forward Contracts and Currency Options, to hedge against risks of adverse movements in interest rates, foreign currencies of values of the hedged items associated with interest and foreign currency fluctuations relating to firm commitments and forecasted transactions.

Hedging instruments are initially measured at fair value, and are remeasured at subsequent reporting dates. Changes in the fail value of these derivatives that are designated and effective as hedges of future cash flows are recognised directly in shareholders funds, under "Hedging Reserve" and the ineffective portion is recognised immediately in the Profit and Loss Account.

Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the Profit and Loss Account as they arise. "

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At that time for forecasted transactions, any cumulative gain or loss on the hedging instrument recognised in shareholders1 funds is retained there until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in shareholders funds is transferred to the Profit and Loss Account for the period.

9 Revenue Recognition:

1 Sale of Goods:

Revenue is recognised when the significant risks and rewards of ownership of goods have passed to the buyer, which generally coincides with delivery. It includes excise duty but excludes value added tax and sales tax.

2 export sales are accounted on the basis of dates of Bill of Lading and or Air Way Bill.

3 Benefit on account or entitlement to import goods free of duty under the "Duty Entitlement Pass Book under Duty Exemption Scheme" is accounted in the year of export.

4 Lease rental income is recognised on accrual basis.

5 Dividend Income is accounted for in the year in which the right to receive the same is established.

6 Interest Income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable

10 Provisions:

A provision is recognised when an enterprise has a present obligation as a result of past event and it is probable tha an outflow of resources will he required to settle the obligation, in respect of which a reliable estimate can be made Provisions are not discounted to its present value and are determined based on Management estimate required t< settle the obligation at the balance sheet date and adjusted to reflect the current. Management estimates

11 Research & Development Expenditure:

Research & Development Expenditure is charged to revenue under the natural heads of account in the year in which it i incurred. However, Research & Development Expenditure on fixed assets is treated in the same way as expenditure o other fixed assets.

12 Employee Benefits:

1 Defined Contribution Plan:

Companys contribution paid | payable during the period to Provident Fund, Employees Deposit Link Insurance Scheme, Officer Super Annuation Fund, Employees State Insurance Corporation, and Labour Welfare Fund are recognised in the Profit & Loss Account.

2 Defined Benefit Plan:

Gratuity:

Gratuity liability is defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year. The liability so provided is represented by creation of separate funds and is used to meet the liability as and when it accrues for payment in future. Actuarial gains losses are immediately taken to Profit and Loss Account.

Long Term Leave Encashment:

Long term leave encashment are provided for based on actuarial valuation on project unit credit method carried by an actuary as at the end of the year. Actuarial gains losses are immediately taken to Profit and Loss Account.

3 Short-Term Employee Benefits:

Short term leave encashment are provided at undiscounted amount during the accounting period based on service rendered by employee.

4 Voluntary Retirements:

Compensation payable under the Voluntary Retirement Scheme is being charged to Profit and Loss Account.

13 Taxation:

1 Income-tax expense comprises current tax and deferred tax charge or credit. Provision for current tax is made on the basis of the assessable income at the tax rate applicable to the relevant assessment year.

2 MAT credit is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal Income Tax within the specified period.

3 Deferred tax asset and deferred tax liability are calculated by applying tax rate and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets on account of timing differences are recognised, only to the extent there is a reasonable certainty of its realisation. Deferred tax assets are reviewed at each Balance Sheet date to reassure realisation.

14 Government Grants:

1 Government grants are recognised when there is reasonable assurance that the same will be received.

2 Revenue grants for expenses incurred are reduced from the respective expenses.

3 Capital grants relating to specific fixed assets are reduced from the cost of the respective fixed assets.

4 Capital grants for project capital subsidy are credited to capital reserve.

 
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