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Accounting Policies of International Paper APPM Ltd. Company

Mar 31, 2015

A. Basis of accounting and 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 notified 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. The financial statements have been prepared on accrual basis under the historical cost convention. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year, except for the change in accounting policy for depreciation as more fully described in Note 36.

b. Use of estimates

The preparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities on the date of the financial statements and reported amounts of revenues and expenses for 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 periods in which the results are known/materialize.

c. Inventories

Inventories are valued at the lower of cost and net realizable value after providing for obsolescence and other losses, where considered necessary. Cost includes all charges in bringing the goods to the point of sale, including octroi and other levies, transit insurance and receiving charges.

The methods of determining cost of various categories of inventories are as follows:

Raw materials Weighted average method.

Stores and spares and packing materials Weighted average method.

Work-in-process and finished goods Weighted average method and (manufactured) including an appropriate share of applicable overheads.

Excise duty is included in the value of finished goods.

Raw material and packing material held for use in the production of inventories are not written down below cost if the finished goods in which they will be incorporated are expected to be sold at or above cost.

d. Cash Flow Statement

Cash flows are reported using the indirect method, whereby profit/(loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.

e. Depreciation and amortization Tangible assets

Depreciation on plant and machinery situated at Rajahmundry and Kadiyam Units and buildings located at Kadiyam Unit are provided on straight line method as per useful life prescribed in Schedule II of the Companies Act, 2013.

Leasehold improvements are amortized over the primary period of lease or the estimated useful life of such assets, whichever is shorter.

Freehold land is not depreciated.

Depreciation on other tangible fixed assets has been provided on written down value method as per the useful life prescribed in Schedule II of the Companies Act, 2013.

Depreciation is calculated from the first day of the month based on the capitalization date.

Intangible assets

Goodwill arising on amalgamation is amortized over a period of 10 years.

Software is amortized over a period of three years or estimated useful life, whichever is shorter.

Individual assets costing less than or equal to Rs. 15,000 are depreciated in full in the year of acquisition.

f. Revenue recognition

Revenue from sale of goods is recognized when significant risks and rewards in respect of ownership of products are transferred to customers. Revenue from sale of goods is inclusive of excise duty and exclusive of returns, sales tax and applicable trade discounts and allowances.

Dividend income is recognized when the unconditional right to receive the income is established. Income from interest on deposits, loans and interest bearing securities is recognized on a time proportionate method using underlying interest rates.

Export entitlements are recognized as income when the right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.

Insurance and other claims/refunds are accounted for as and when admitted by appropriate authorities.

Income from sale of Certified Emission Reduction points (CERs) granted by UNFCCC on energy efficient measures are accounted as and when sold to customers.

g. Fixed assets Tangible/intangible assets

Fixed assets are carried at cost less accumulated depreciation and impairment losses, if any. The cost of fixed assets includes the cost of acquisition/construction, non-refundable taxes, duties, freight, borrowing costs attributable to acquisition of the qualifying fixed assets up to the date the asset is ready for its intended use and other incidental expenses related to the acquisition and installation of the respective assets. Exchange differences arising on restatement/settlement of long-term foreign currency borrowings relating to acquisition of depreciable fixed assets are adjusted to the cost of the respective assets and depreciated over the remaining useful life of such assets.

Capital work-in-progress

Projects under which assets are not ready for their intended use and other capital work-in-progress are carried at cost, comprising direct cost, related incidental expenses and attributable borrowing costs.

h. Employee benefits

Defined Contribution Plans

Employee benefits in the form of provident fund, superannuation, employee''s state insurance fund and labour welfare fund are considered as defined contribution plans and the contributions are charged to the statement of profit and loss during the year when the contributions to the respective funds are due as and when services are rendered by employees.

Provident fund

Eligible employees receive benefits from a provident fund. Both the employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employee''s salary. Rajahmundry unit of the Company makes the contributions to ''The Employee''s Provident Fund of The Andhra Pradesh Paper Mills Limited'' trust maintained by the Company. The rate at which the annual interest is payable to the beneficiaries by the trust is administered by the government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate to the Regional Provident Fund Commissioner, a statutory authority. The Company has no further obligations.

Superannuation

Certain employees of the Company are participants in the superannuation plan (''the Plan'') which is a defined contribution plan. The Company contributes all ascertained liabilities to the superannuation fund maintained with Life Insurance Corporation of India.

Defined Benefit Plans

The Company''s liabilities towards gratuity and compensated absences are determined based on actuarial valuation carried out by an independent actuary using the projected unit credit method as on the date of the balance sheet.

Gratuity

In accordance with the Payment of Gratuity Act, 1972, the Company provides for gratuity, a defined benefit retirement plan (''the Gratuity Plan'') covering eligible employees. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee''s salary and the tenure of employment with the Company.

Liabilities with regard to the Gratuity Plan are determined by actuarial valuation at each Balance Sheet date using the projected unit credit method. The Company fully contributes all ascertained liabilities to the gratuity fund maintained with Life Insurance Corporation and Birla Sun Life Insurance. The Company recognizes the net obligation of the Gratuity Plan in the Balance Sheet as an asset or liability, respectively in accordance with Accounting Standard (AS) 15, ''Employee Benefits.'' The Company''s overall expected long-term rate of return on asset has been determined based on consideration of available market information, current provisions of Indian law specifying the instruments in which investments can be made, and historical returns. The discount rate is based on the government securities yield. Actuarial gain or losses arising from experience adjustments and changes in actuarial assumptions are recognized in statement of profit and loss in the period in which they arise.

Compensated absences

The employees of the Company are entitled to compensated absences which are both accumulating and non-accumulating in nature. The Company fully contributes all ascertained liabilities to the superannuation fund maintained with Birla Sun Life Insurance. The expected cost of accumulating compensated absences is determined by actuarial valuation based on the additional amount expected to be paid as a result of the unused entitlement that has accumulated at the balance sheet date. Expense on non-accumulating compensated absences is recognized in the period in which the absences occur.

i. Borrowing costs

Borrowing costs include interest, amortization of ancillary costs incurred and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Costs in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the statement of profit and loss over the tenure of the loan. Borrowing costs, allocated to and utilized for qualifying assets, pertaining to the period from commencement of activities relating to construction/development of the qualifying asset up to the date of capitalization of such asset is added to the cost of the assets.

j. Foreign currency transactions

Transactions in foreign currencies entered into by the Company are accounted at the exchange rates prevailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction.

Foreign currency monetary items (other than derivative contracts) of the Company, outstanding at the balance sheet date are restated at the year-end rates. Non-monetary items of the Company are carried at historical cost.

Exchange differences arising on settlement/restatement of short-term foreign currency monetary assets and liabilities of the Company are recognized as income or expense in the Statement of Profit and Loss.

The exchange differences arising on settlement/restatement of long-term foreign currency monetary items are capitalized as part of the depreciable fixed assets to which the monetary item relates and depreciated over the remaining useful life of such assets. If such monetary items do not relate to acquisition of depreciable fixed assets, the exchange difference is amortized over the maturity period/upto the date of settlement of such monetary items, whichever is earlier. The unamortized exchange difference is carried in the Balance Sheet as ''Foreign currency monetary item translation difference account'' net of the tax effect thereon, where applicable.

In respect of forward contracts entered into to hedge risks associated with foreign currency fluctuation on its existing assets and liabilities, the premium or discount at the inception of the contract is amortized as income or expense over the period of the contract. Any profit or loss arising on the cancellation or renewal of forward contracts is recognized as income or expense in the period in which such cancellation or renewal is made.

k. Leases

Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognized as operating leases. Lease payments under operating lease are recognized as an expense in the Statement of Profit and Loss on a straight line basis over the lease term.

l. Earnings per share

Basic earnings per share is computed by dividing the profit/(loss) after tax (including the post-tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year.

Diluted earnings per share is computed by dividing the profit/(loss) after tax (including the post-tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.

m. Taxes on income

Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rate and the provisions of the Income Tax Act, 1961.

Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognized as an asset in the Balance Sheet when it is probable that future economic benefit associated with it will flow to the Company.

Deferred tax is recognized on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantially enacted as at the reporting date. Deferred tax liabilities are recognized for all timing differences. Deferred tax assets in respect of unabsorbed depreciation and carry forward of losses are recognized only if there is virtual certainty supported by convincing evidence that there will be sufficient future taxable income available to realize such assets. Deferred tax assets are recognized for timing differences of other items only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realized. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each Balance Sheet date for their realizability.

n. Investments

Long-term investments are carried individually at cost less provision for diminution, other than temporary, in the value of such investments.

Current investments are carried individually, at the lower of cost and fair value. Cost of investments includes acquisition charges such as brokerage, fees and duties.

o. Impairment of assets

The Company assesses at each balance sheet date whether there is any indication that an asset/ cash generating unit may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Statement of Profit and Loss. If at the balance sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost and such reversal of impairment is recognized in the statement of profit and loss.

p. Provisions and contingencies

A provision is recognized when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed in the Notes.

q. Service tax input credit

Service tax input credit is accounted for in the books in the period in which the underlying service received and when there is reasonable certainty in availing/utilizing the credits.

r. Operating cycle

Based on the nature of products/activities of the Company and the normal time between acquisition of assets and their realization in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.


Mar 31, 2014

1. Corporate Information

International Paper APPM Limited ("IPAPPM"/"the Company") formerly known as The Andhra Pradesh Paper Mills Limited is an integrated pulp and paper manufacturer. APPM was incorporated on June 29, 1964 in pursuance of an agreement dated May 13, 1964 between Government of Andhra Pradesh (GOAP) and Mr. G.D. Somani. By an agreement dated February 10, 1966, Mr. G. D. Somani transferred all his rights, powers and authorities contained in the agreement dated May 13, 1964 in favour of The West Coast Paper Mills Limited (WCPM). By an agreement dated April 16, 1981, WCPM assigned to Digvijay Investments Limited (DIL) all its rights and obligations under the agreement dated February 10, 1966.

Consequent upon disinvestment of its entire shareholding in favour of DIL in December, 2003, GOAP and DIL agreed by an agreement dated December 12, 2003 that all subsisting rights and obligations of GOAP and DIL arising out of the above agreements dated February 10, 1966 and April 16, 1981 stand terminated with effect from December 18, 2003. In October, 2011, IP Holding Asia Singapore Pte. Limited has acquired controlling stake of 75% of paid up share capital in the Company from the then promoters and public shareholders. Pursuant to such acquisition, IP Holding Asia Singapore Pte Limited became the holding company of International Paper APPM Limited (formerly The Andhra Pradesh Paper Mills Limited) and International Paper Company, USA being the ultimate holding company.

The Company owns and operates two manufacturing units located in the State of Andhra Pradesh, India, one at Rajahmundry and the other at Kadiyam in East Godavari District.

2. Significant accounting policies

a. Basis of accounting and 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 notified under Section 211 (3C) of the Companies Act, 1956 (''the 1956 Act'') (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 (''the 2013 Act'') in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs and the relevant provision of the 1956 Act/2013 Act as applicable and the guidelines issued by Securities and Exchange Board of India. The financial statements have been prepared on accrual basis under the historical cost convention.

The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.

b. Use of estimates

The preparation of the financial statements in conformity with Indian GAAP requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities on the date of the financial statements and reported amounts of revenues and expenses for 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. Any revision to accounting estimates is recognised prospectively in the current and future periods.

c. Inventories

Inventories are valued at the lower of cost and net realisable value after providing for obsolescence and other losses, where considered necessary. Cost includes all charges in bringing the goods to the point of sale, including octroi and other levies, transit insurance and receiving charges.

The methods of determining cost of various categories of inventories are as follows:

Raw materials Weighted average method.

Stores and spares and packing materials Weighted average method.

Work-in-process and finished goods Weighted average method and including an (manufactured) appropriate share of applicable overheads.

Excise duty is included in the value of finished goods.

Raw material and packing material held for use in the production of inventories are not written down below cost if the finished goods in which they will be incorporated are expected to be sold at or above cost.

d. Cash Flow Statement

Cash flows are reported using the indirect method, whereby profit/(loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.

e. Depreciation and amortisation

Depreciation on plant and machinery situated at Rajahmundry and Kadiam Units and buildings located at Kadiam Unit are provided on straight line method applying the rates specified under Schedule XIV of the Companies Act, 1956.

Leasehold improvements are amortised over the primary period of lease or the estimated useful life of such assets, whichever is shorter.

Freehold land is not depreciated.

Depreciation on other fixed assets is charged under written down value method in accordance with Schedule XIV of the Companies Act, 1956.

Depreciation is calculated from the first day of the month based on the capitalisation date.

Intangible assets

Goodwill arising on amalgamation is amortised over a period of 10 years.

Software is amortised over a period of five years or estimated useful life, whichever is shorter.

Individual assets costing less than or equal to Rs.15,000 are depreciated in full in the year of acquisition.

f. Revenue recognition

Revenue from sale of goods is recognised when significant risks and rewards in respect of ownership of products are transferred to customers. Revenue from sale of goods is inclusive of excise duty and exclusive of returns, sales tax and applicable trade discounts and allowances.

Dividend income is recognised when the unconditional right to receive the income is established. Income from interest on deposits, loans and interest bearing securities is recognised on a time proportionate method using underlying interest rates.

Export entitlements are recognised as income when the right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.

Insurance and other claims/refunds are accounted for as and when admitted by appropriate authorities.

Income from sale of Certified Emission Reduction points (CERs) granted by UNFCCC on energy efficient measures are accounted as and when sold to customers.

g. Fixed assets

Fixed assets are carried at cost less accumulated depreciation and impairment losses, if any. The cost of fixed assets includes the cost of acquisition/construction, non-refundable taxes, duties, freight, borrowing costs attributable to acquisition of the qualifying fixed assets up to the date the asset is ready for its intended use and other incidental expenses related to the acquisition and installation of the respective assets. Exchange differences arising on restatement/settlement of long-term foreign currency borrowings relating to acquisition of depreciable fixed assets are adjusted to the cost of the respective assets and depreciated over the remaining useful life of such assets.

CAPITAL WORK-IN-PROGRESS

Projects under which assets are not ready for their intended use and other capital work-in-progress are carried at cost, comprising direct cost, related incidental expenses and attributable borrowing costs.

h. Employee benefits

Defined Contribution Plans

Employee benefits in the form of provident fund, superannuation, employees state insurance fund and labour welfare fund are considered as defined contribution plans and the contributions are charged to the statement of profit and loss during the year when the contributions to the respective funds are due as and when services are rendered by employees.

PROVIDENT FUND

Eligible employees receive benefits from a provident fund. Both the employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employee''s salary. Rajahmundry unit of the Company makes the contributions to ''The Employee''s Provident Fund of The Andhra Pradesh Paper Mills Limited'', a trust maintained by the Company. The rate at which the annual interest is payable to the beneficiaries by the trust is administered by the government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate to the Regional Provident Fund Commissioner, a statutory authority. The Company has no further obligations.

SUPERANNUATION

Certain employees of the Company are participants in the superannuation plan (''the Plan'') which is a defined contribution plan. The Company contributes all ascertained liabilities to the superannuation fund maintained with Life Insurance Corporation of India.

Defined Benefit Plans

The Company''s liabilities towards gratuity and compensated absences are determined based on actuarial valuation carried out by an independent actuary using the projected unit credit method as on the date of the balance sheet.

GRATUITY

In accordance with the Payment of Gratuity Act, 1972, the Company provides for gratuity, a defined benefit retirement plan (''the Gratuity Plan'') covering eligible employees. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee''s salary and the tenure of employment with the Company.

Liabilities with regard to the Gratuity Plan are determined by actuarial valuation at each balance sheet date using the projected unit credit method. The Company fully contributes all ascertained liabilities to the gratuity fund maintained with ICICI Prudential Life Insurance, Life Insurance Corporation and Birla Sun Life Insurance. The Company recognises the net obligation of the Gratuity Plan in the balance sheet as an asset or liability, respectively in accordance with Accounting Standard (AS) 15, ''Employee Benefits.'' The Company''s overall expected long-term rate of return on asset has been determined based on consideration of available market information, current provisions of Indian law specifying the instruments in which investments can be made, and historical returns. The discount rate is based on the government securities yield. Actuarial gain or losses arising from experience adjustments and changes in actuarial assumptions are recognised in statement of profit and loss in the period in which they arise.

COMPENSATED ABSENCES

The employees of the Company are entitled to compensated absences which are both accumulating and non-accumulating in nature. The Company fully contributes all ascertained liabilities to the superannuation fund maintained with Birla Sun Life Insurance. The expected cost of accumulating compensated absences is determined by actuarial valuation based on the additional amount expected to be paid as a result of the unused entitlement that has accumulated at the balance sheet date. Expense on non-accumulating compensated absences is recognised in the period in which the absences occur.

i. Borrowing costs

Borrowing costs include interest, amortisation of ancillary costs incurred and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Costs in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the statement of profit and loss over the tenure of the loan. Borrowing costs, allocated to and utilised for qualifying assets, pertaining to the period from commencement of activities relating to construction/development of the qualifying asset up to the date of capitalisation of such asset is added to the cost of the assets.

j. Foreign currency transactions

Transactions in foreign currencies entered into by the Company are accounted at the exchange rates prevailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction.

Foreign currency monetary items (other than derivative contracts) of the Company, outstanding at the balance sheet date are restated at the year-end rates. Non-monetary items of the Company are carried at historical cost.

Exchange differences arising on settlement/restatement of short-term foreign currency monetary assets and liabilities of the Company are recognised as income or expense in the statement of profit and loss.

The exchange differences arising on settlement/restatement of long-term foreign currency monetary items are capitalised as part of the depreciable fixed assets to which the monetary item relates and depreciated over the remaining useful life of such assets. If such monetary items do not relate to acquisition of depreciable fixed assets, the exchange difference is amortised over the maturity period/up to the date of settlement of such monetary items, whichever is earlier. The unamortised exchange difference is carried in the balance sheet as ''Foreign currency monetary item translation difference account'' net of the tax effect thereon, where applicable.

In respect of forward contracts entered into to hedge risks associated with foreign currency fluctuation on its existing assets and liabilities, the premium or discount at the inception of the contract is amortised as income or expense over the period of the contract. Any profit or loss arising on the cancellation or renewal of forward contracts is recognised as income or expense for the period.

k. Leases

Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating leases. Lease payments under operating lease are recognised as an expense in the statement of profit and loss on a straight line basis over the lease term.

l. Earnings per share

Basic earnings per share is computed by dividing the profit/(loss) after tax (including the post-tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year.

Diluted earnings per share is computed by dividing the profit/(loss) after tax (including the post-tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.

m. Taxes on income

Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of the Income Tax Act, 1961.

Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognised as an asset in the balance sheet when it is probable that future economic benefit associated with it will flow to the Company.

Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantially enacted as at the reporting date. Deferred tax liabilities are recognised for all timing differences. Deferred tax assets in respect of unabsorbed depreciation and carry forward of losses are recognised only if there is virtual certainty that there will be sufficient future taxable income available to realise such assets. Deferred tax assets are recognised for timing differences of other items only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each balance sheet date for their realisability.

n. Investments

Long-term investments are carried individually at cost less provision for diminution, other than temporary, in the value of such investments.

Current investments are carried individually, at the lower of cost and fair value. Cost of investments includes acquisition charges such as brokerage, fees and duties.

o. Impairment of assets

The Company assesses at each balance sheet date whether there is any indication that an asset/cash generating unit may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the statement of profit and loss. If at the balance sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost and such reversal of impairment is recognised in the statement of profit and loss.

p. Provisions and contingencies

A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed in the Notes.

q. Service tax input credit

Service tax input credit is accounted for in the books in the period in which the underlying service received and when there is reasonable certainty in availing/utilizing the credit.


Mar 31, 2013

A. Basis of accounting and 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'') on accrual basis under the historical cost convention to comply with the Accounting Standards as notified by the Companies (Accounting Standards) Rules, 2006 (as amended), the relevant provisions of the Companies Act, 1956 and the guidelines issued by Securities and Exchange Board of India.

The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.

b. Use of estimates

The preparation of the financial statements in conformity with Indian GAAP requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities on the date of the financial statements and reported amounts of revenues and expenses for 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. Any revision to accounting estimates is recognised prospectively in the current and future periods.

c. Fixed assets

Fixed assets are carried at cost less accumulated depreciation and impairment losses, if any. The cost of fixed assets includes the cost of acquisition/construction, non-refundable taxes, duties, freight, borrowing costs attributable to acquisition of the qualifying fixed assets up to the date the asset is ready for its intended use and other incidental expenses related to the acquisition and installation of the respective assets. Exchange differences arising on restatement/settlement of long-term foreign currency borrowings relating to acquisition of depreciable fixed assets are adjusted to the cost of the respective assets and depreciated over the remaining useful life of such assets.

Capital work-in-progress

Projects under which assets are not ready for their intended use and other capital work-in-progress are carried at cost, comprising direct cost, related incidental expenses and attributable borrowing costs.

d. Depreciation and amortisation

Depreciation on plant and machinery situated at Rajahmundry and Kadiyam Units and buildings located at Kadiyam Unit are provided on straight line method applying the rates specified under Schedule XIV of the Companies Act, 1956.

Leasehold improvements are amortised over the primary period of lease or the estimated useful life of such assets, whichever is shorter.

Freehold land is not depreciated.

Goodwill arising on amalgamation is amortised over a period of 10 years.

Software is amortised over a period of five years or estimated useful life, whichever is shorter.

Individual assets costing less than Rs.5,000 are depreciated in full in the year of acquisition.

Depreciation on other fixed assets is charged under written down value method in accordance with Schedule XIV of the Companies Act, 1956.

Depreciation is calculated on a pro-rata basis from the date of installation till the date the assets are sold or disposed.

e. Impairment of assets

The Company assesses at each balance sheet date whether there is any indication that an asset/ cash generating unit may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Statement of Profit and Loss. If at the balance sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost and such reversal of impairment is recognised in the statement of profit and loss.

f. Investments

Long-term investments are carried individually at cost less provision for diminution, other than temporary, in the value of such investments.

Current investments are carried individually, at the lower of cost and fair value. Cost of investments includes acquisition charges such as brokerage, fees and duties.

g. Inventories

Inventories are valued at the lower of cost and net realisable value after providing for obsolescence and other losses, where considered necessary. Cost includes all charges in bringing the goods to the point of sale, including octroi and other levies, transit insurance and receiving charges.

The methods of determining cost of various categories of inventories are as follows:

Raw materials Weighted average method.

Stores and spares and packing materials Weighted average method.

Work-in-process and finished goods (manufactured)

Weighted average method and including an appropriate share of applicable overheads.

Excise duty is included in the value of finished goods.

Raw material and packing material held for use in the production of inventories are not written down below cost if the finished goods in which they will be incorporated are expected to be sold at or above cost.

h. Employee benefits

Defined Contribution Plans

Employee benefits in the form of provident fund, superannuation, employees state insurance fund and labour welfare fund are considered as defined contribution plans and the contributions are charged to the Statement of Profit and Loss during the year when the contributions to the respective funds are due.

PROVIDENT FUND

Eligible employees receive benefits from a provident fund. Both the employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employee''s salary. Rajahmundry unit of the Company makes the contributions to ''The Employee''s Provident Fund of The Andhra Pradesh Paper Mills Limited'' trust maintained by the Company. The rate at which the annual interest is payable to the beneficiaries by the trust is administered by the government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate to the Regional Provident Fund Commissioner, a statutory authority. The Company has no further obligations.

SUPERANNUATION

Certain employees of the Company are participants in the superannuation plan (''the Plan'') which is a defined contribution plan. The Company contributes all ascertained liabilities to the superannuation fund maintained with Life Insurance Corporation of India.

Defined Benefit Plans

The Company''s liabilities towards gratuity and compensated absences are determined based on actuarial valuation carried out by an independent actuary using the projected unit credit method as on the date of the Balance Sheet.

GRATUITY

In accordance with the Payment of Gratuity Act, 1972, the Company provides for gratuity, a defined benefit retirement plan (''the Gratuity Plan'') covering eligible employees. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee''s salary and the tenure of employment with the Company.

Liabilities with regard to the Gratuity Plan are determined by actuarial valuation at each Balance Sheet date using the projected unit credit method. The Company fully contributes all ascertained liabilities to the gratuity fund maintained with ICICI Prudential Life Insurance, Life Insurance Corporation and Birla Sun Life Insurance. The Company recognises the net obligation of the Gratuity Plan in the Balance Sheet as an asset or liability, respectively in accordance with Accounting Standard (AS) 15, ''Employee Benefits.'' The Company''s overall expected long-term rate of return on asset has been determined based on consideration of available market information, current provisions of Indian law specifying the instruments in which investments can be made, and historical returns. The discount rate is based on the Government securities yield. Actuarial gain or losses arising from experience adjustments and changes in actuarial assumptions are recognised in statement of profit and loss in the period in which they arise.

COMPENSATED ABSENCES

The employees of the Company are entitled to compensated absences which are both accumulating and non-accumulating in nature. The Company fully contributes all ascertained liabilities to the superannuation fund maintained with Birla Sun Life Insurance. The expected cost of accumulating compensated absences is determined by actuarial valuation based on the additional amount expected to be paid as a result of the unused entitlement that has accumulated at the balance sheet date. Expense on non-accumulating compensated absences is recognised in the period in which the absences occur.

i. Foreign currency transactions

Transactions in foreign currencies entered into by the Company are accounted at the exchange rates prevailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction.

Foreign currency monetary items (other than derivative contracts) of the Company, outstanding at the balance sheet date are restated at the year-end rates. Non-monetary items of the Company are carried at historical cost.

Exchange differences arising on settlement/restatement of short-term foreign currency monetary assets and liabilities of the Company are recognised as income or expense in the Statement of Profit and Loss.

The exchange differences arising on settlement/restatement of long-term foreign currency monetary items are capitalised as part of the depreciable fixed assets to which the monetary item relates and depreciated over the remaining useful life of such assets. If such monetary items do not relate to acquisition of depreciable fixed assets, the exchange difference is amortised over the maturity period/upto the date of settlement of such monetary items, whichever is earlier. The unamortised exchange difference is carried in the Balance Sheet as "Foreign currency monetary item translation difference account" net of the tax effect thereon, where applicable.

In respect of forward contracts entered into to hedge risks associated with foreign currency fluctuation on its existing assets and liabilities, the premium or discount at the inception of the contract is amortised as income or expense over the period of the contract. Any profit or loss arising on the cancellation or renewal of forward contracts is recognised as income or expense for the period.

j. Revenue recognition

Revenue from sale of goods is recognised when significant risks and rewards in respect of ownership of products are transferred to customers. Revenue from sale of goods is inclusive of excise duty and exclusive of returns, sales tax and applicable trade discounts and allowances.

Dividend income is recognised when the unconditional right to receive the income is established. Income from interest on deposits, loans and interest bearing securities is recognised on a time proportionate method using underlying interest rates.

Export entitlements are recognised as income when the right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.

Insurance and other claims/refunds are accounted for as and when admitted by appropriate authorities.

Income from sale of Certified Emission Reduction points (CERs) granted by UNFCCC on energy efficient measures are accounted as and when sold to customers.

k. Borrowing costs

Borrowing costs include interest, amortisation of ancillary costs incurred and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Costs in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the statement of profit and loss over the tenure of the loan. Borrowing costs, allocated to and utilised for qualifying assets, pertaining to the period from commencement of activities relating to construction/development of the qualifying asset upto the date of capitalisation of such asset is added to the cost of the assets.

l. Leases

Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating leases. Lease payments under operating lease are recognised as an expense in the Statement of Profit and Loss on a straight line basis over the lease term.

m. Taxes on income

Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of the Income Tax Act, 1961.

Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognised as an asset in the Balance Sheet when it is probable that future economic benefit associated with it will flow to the Company.

Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantially enacted as at the reporting date. Deferred tax liabilities are recognised for all timing differences. Deferred tax assets in respect of unabsorbed depreciation and carry forward of losses are recognised only if there is virtual certainty that there will be sufficient future taxable income available to realise such assets. Deferred tax assets are recognised for timing differences of other items only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each Balance Sheet date for their realisability.

n. Earnings per share

Basic earnings per share is computed by dividing the profit/(loss) after tax (including the post-tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year.

Diluted earnings per share is computed by dividing the profit/(loss) after tax (including the post-tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.

o. Provisions and contingencies

A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed in the Notes.

p. Cash Flow Statement

Cash flows are reported using the indirect method, whereby profit/(loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.


Mar 31, 2011

A. Basis of preparation

The financial statements of The Andhra Pradesh Paper Mills Limited ('APPM' or 'the Company') have been prepared and presented in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on the accrual basis. GAAP comprises accounting standards notified by the Central Government of India under Section 211 (3C) of the Companies Act, 1956, other pronouncements of Institute of Chartered Accountants of India, the provisions of Companies Act, 1956 and guidelines issued by Securities and Exchange Board of India. The financial statements are rounded off to the nearest Rupees Lakhs.

b. Use of estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities on the date of the financial statements and reported amounts of revenues and expenses for the year. Actual results could differ from these estimates. Any revision to accounting estimates is recognised prospectively in the current and future periods.

c. Fixed assets and depreciation

Fixed assets are carried at the cost of acquisition or construction less accumulated depreciation. The cost of fixed assets includes non-refundable taxes, duties, freight and other incidental expenses related to the acquisition and installation of the respective assets. Borrowing costs directly attributable to acquisition or construction of those fixed assets which necessarily take a substantial period of time to get ready for their intended use are capitalised.

Intangible assets are recorded at the consideration paid for acquisition.

Advances paid towards the acquisition of fixed assets outstanding at each balance sheet date and the cost of fixed assets not ready for their intended use before such date are disclosed under capital work-in-progress.

Depreciation on Plant and Machinery of Units APPM and CP and Buildings of Unit:CP are charged under straight line method applying the rates worked out in accordance with Schedule XIV of the Companies Act, 1956. Depreciation on other fixed assets is charged under written down value method in accordance with Schedule XIV of the Companies Act, 1956.

Leasehold improvements are amortised over the primary period of lease or the estimated useful life of such assets, whichever is shorter.

Goodwill arising on amalgamation is amortised over a period of 10 years.

Depreciation is calculated on a pro-rata basis from the date of installation till the date the assets are sold or disposed. Individual assets costing less than Rs.5,000 are depreciated in full in the year of acquisition.

d. Investments

Long-term investments are carried at cost less any other-than-temporary diminution in value, determined separately for each individual investment. The reduction in the carrying amount is reversed when there is a rise in the value of the investment or if the reasons for the reduction no longer exist.

Current investments are carried at the lower of cost and market value. The comparison of cost and market value is done separately in respect of each category of investment.

e. Inventories

Inventories are valued at the lower of cost and net realisable value. Cost of inventories comprises all cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition.

The methods of determining cost of various categories of inventories are as follows:

Raw materials

Weighted average method

Stores and spares and packing materials

Weighted average method

Work-in-process and finished goods (manufactured)

Weighted average method and including an appropriate share of production overheads

f. Employee benefits

Employee benefits in the form of superannuation fund, employees state insurance fund and labour welfare fund are considered as defined contribution plans and the contributions are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due.

Eligible employees receive benefits from a provident fund, which is a defined benefit plan. Both the employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employee's salary. The Company contributes the contributions to the Employees Provident Fund of The Andhra Pradesh Paper Mills Limited, Unit:APPM, Rajahmundry. The rate at which the annual interest is payable to the beneficiaries by the Trust is being administered by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate.

Company's liabilities towards gratuity, compensated absences are determined based on actuarial valuation carried out by an independent actuary using the projected unit credit method as on the date of the Balance Sheet.

Actuarial gains/losses are immediately recognised in the Profit and Loss Account and are not deferred.

g. Foreign currency transactions and balances

Foreign currency transactions are recorded at the rates of exchange prevailing on the date of the respective transactions. Exchange differences arising on foreign exchange transactions settled during the year are recognised in the Profit and Loss Account of the year.

Monetary assets and liabilities denominated in foreign currencies as at the Balance Sheet date are translated at the exchange rate on the balance sheet date and resultant exchange differences are recognised in the Profit and Loss Account.

Non-monetary items which are carried in terms of historical cost denominated in foreign currency are reported using the exchange rate at the date of the transaction.

As per the notification issued by the Ministry of Corporate Affairs vide notification dated 31st March 2009, the Company has adjusted foreign exchange differences arising on long term foreign currency loans to the cost of the asset, where the long term foreign currency monetary items related to acquisition of a depreciable capital asset (whether purchased within or outside India), and has depreciated such foreign exchange gain/losses over the asset's balance useful life.

Forward contracts are entered into to hedge the foreign currency risk of the underlying outstanding at the Balance Sheet date. The premium or discount on all such contracts is amortised as income or expense over the life of the contract. Any profit or loss arising on the cancellation or renewal of forward contracts is recognised as income or expense for the period.

In relation to the forward contracts entered into to hedge the foreign currency risk of the underlying outstanding at the Balance Sheet date, the exchange difference is calculated and recorded in accordance with AS-11 (revised). The exchange difference on such a forward exchange contract is calculated as the difference of the foreign currency amount of the contract translated at the exchange rate at the reporting date, or the settlement date where the transaction is settled during the reporting period and the corresponding foreign currency amount translated at the later of the date of inception of the forward exchange contract and the last reporting date. Such exchange differences are recognised in the Profit and Loss Account in the reporting period in which the exchange rates change.

h. Revenue recognition

Revenue from sale of goods is recognised when significant risks and rewards in respect of ownership of products are transferred to customers. Revenue from domestic sales is recognised on delivery of products to customers, from the factories of the Company. Revenue from export sales is recognised when the significant risks and rewards of ownership of products are transferred to the customers, which is based upon the terms of the applicable contract. Revenue from sale of goods has been presented both gross and net of excise duty.

Revenue from product sales is stated exclusive of returns, sales tax and applicable trade discounts and allowances.

Dividend income is recognised when the unconditional right to receive the income is established. Income from interest on deposits, loans and interest bearing securities is recognised on the time proportionate method based on underlying interest rates.

Export entitlements are recognised as income when the right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.

Insurance and other claims/refunds are accounted for as and when admitted by appropriate authorities.

Income from sale of Certified Emission Reduction points (CERs) granted by UNFCCC on energy efficient measures are accounted as and when sold to customers.

i. Income tax expense

Income tax expense comprises current tax and deferred tax charge or credit.

Current tax

The current charge for income taxes is calculated in accordance with the relevant tax regulations applicable to the Company.

Deferred tax

Deferred tax charge or credit reflects the tax effects of timing differences between accounting income and taxable income for the period. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using currently applicable enacted Minimum Alternate Tax rate. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carry forward of losses, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each balance sheet date and are written-down or written-up to reflect the amount that is reasonably/virtually certain (as the case may be) to be realised. The break-up of the major components of the deferred tax assets and liabilities as at Balance Sheet date has been arrived at after setting off deferred tax assets and liabilities where the Company has a legally enforceable right to set-off assets against liabilities and where such assets and liabilities relate to taxes on income levied by the same governing taxation laws.

Minimum alternate tax credit

Minimum Alternate Tax ('MAT') paid in accordance with the Indian tax laws, which gives rise to future economic benefits in the form of tax credit against future income tax liability, is recognized as an asset in the Balance Sheet if there is convincing evidence that the Company will pay normal tax after the tax holiday period and the resultant asset can be measured reliably.

j. Earnings per share

The basic Earnings per Share ('EPS') is computed by dividing the net profit after tax for the year by the weighted average number of Equity Shares outstanding during the year. For the purpose of calculating diluted earnings per share, net profit after tax for the year and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential

Equity Shares. The dilutive potential Equity Shares are deemed converted as of the beginning of the period, unless they have been issued at a later date. The diluted potential Equity Shares have been adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. the average market value of the outstanding shares).

k. Provisions and contingent liabilities

The Company creates a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

Provisions for onerous contracts, i.e. contracts where the expected unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it, are recognised when it is probable that an outflow of resources embodying economic benefits will be required to settle a present obligation as a result of an obligating event based on a reliable estimate of such obligation.

l. Impairment of assets

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Profit and Loss Account. If at the Balance Sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.

m. Leases

Lease payments under operating lease are recognised as an expense in the Profit and Loss Account on a straight line basis over the lease term.










Mar 31, 2010

1. Accounting Concepts

Financial Statements are prepared on accrual basis under the historical cost convention and in accordance with the accounting standards specified in sub-section 3(C)of Section 211 of the Companies Act, 1956.

2. Fixed Assets

a. Fixed Assets are stated at cost less accumulated depreciation. Cost of acquisition of fixed assets is net of CENVAT/VAT and inclusive of freight, duties, taxes, incidental expenses including interest on specific borrowings and pre-operative expenses as allocated.

b. Expenditure during construction/erection period is included under Capital Works-in- Progress and allocated to the respective fixed assets on completion of construction/erection.

c. Goodwill is amoritsed over a period of 10 years.

3. Investments

Investments are stated at cost, inclusive of all expenses relating to acquisition. Provision for diminution in the market value of long-term investments is made, if in the opinion of the management such diminution is permanent in nature.

4. Inventories

Inventories are valued at the lower of the cost (net of CENVAT/VAT Credit) or net realizable value (except scrap/waste which are valued at net realizable value). Cost is computed on average basis. Finished Goods and Work-in-Process include cost of conversion and other costs incurred in bringing the inventories to their present location and condition.

5. Borrowing Costs

Borrowing cost is charged to Profit and Loss Account except cost of specific borrowing for acquisition of qualifying assets which is capitalised till the date of commercial use of the asset.

6. Impairment of Assets

The Company applies the test of impairment of its assets as provided in Accounting Standard (AS) - 28

7. Intangible Assets

Assets those are identifiable, non-monetary in nature and with no physical substance have been

classified as Intangible Assets. Only those assets have been recognized as Intangible Assets, on which future economic benefit/s is/are probable and whose cost can be measured reliably. Assessment of probable future economic benefits has been made by the management on reasonable and supportive assumptions.

8. Revenue Recognition

a. Sales are inclusive of excise duty, export incentives and net of trade and quantity discounts and rebates.

b. Interest and dividend income from investments are accounted on accrual basis.

c. Insurance and other claims/refunds are accounted for as and when admitted by appropriate authorities.

d. Income relating to Certified Emission Reduction points (CERs) granted by United Nations Framework Convention on Climate Change (UNFCCC) on energy efficient measures are accounted as and when sold to outside third parties.

e. Inter Division transfers are eliminated in financial statements.

9. Employee Benefits

i. Defined Contribution Plans:

Employee benefits in the form of Superannuation Fund, ESIC and Labour Welfare Fund are considered as defined contribution plans and the contributions are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due.

ii. Defined Benefit Plans:

Companys liabilities towards provident fund, gratuity, leave encashment are determined based on actuarial valuation using the projected unit credit method as on the date of the Balance Sheet.

iii. Actuarial gains/losses are immediately taken to Profit and Loss Account and are not deferred.

iv. Payments made under the Voluntary Retirement Scheme are amortised to the Profit and Loss Account over its pay-back period.

10. Depreciation on Fixed Assets

a. Depreciation on Plant & Machinery of Units:APPM & CP and Buildings of Unit:CP are charged under straight line method applying the rates worked out in accordance with the provisions of Section 205 (2) (b) of the Companies Act, 1956 prevalent in respective years of acquisition in respect of items acquired prior to 1st July, 1986 and in accordance with Schedule XIV of the Companies Act, 1956 in respect of items acquired after 1st July, 1986.

b. Depreciation on other fixed assets is charged under written-down value method in accordance with Schedule XIV of the Companies Act, 1956.

11. Deferred Revenue Expenditure

Expenditure other than expenditure on VRS (including expenditure on Research & Development) incurred upto 31st March, 2003 in respect of which benefit is expected to flow into future periods, is amortised over the expected period of benefit.

txports/Imports are accounted at forward contract rates/exchange rates prevailing on the date of transaction.

Exchange fluctuations relating to fixed assets is adjusted in the cost of the asset upto the time of commissioning or putting to use. Thereafter all such exchange fluctuations are recognised in the Profit and Loss Account.

However, exchange fluctuations arising from long term currency monetory items relating to acquisition of depreciable capital assets from 1st April, 2007 are added to/deducted from the cost of the said assets as the case may be.

However, gain/loss on monetary items which are repayable/receivable within 12 months from the reporting period was charged to Profit and Loss Account.

13. Financial Instruments

The Company uses derivative financial instruments such as forward contracts, currency swap to hedge certain currency exposures relating to the business operations of the Company present and anticipated. Generally such contracts are taken for exposures materializing in the next 12 months.

 
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