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Accounting Policies of Kemrock Industries & Exports Ltd. Company

Sep 30, 2013

1. Use of Estimates:

The presentation of the Financial Statements, in conformity with the Generally Accepted Accounting policies, required the management to make estimation and assumption that affect the reported amount of Assets and Liabilities, Revenues and Expenses and disclosed of contingent liabilities. Such estimation and assumption are based on management''s evaluation of relevant facts and circumstances as on date of financial statements. Difference between the actual results and estimates are recognized in the period in which the results are knows/materialized.

2. Revenue recognition

Sales are stated net of rebate and trade discount and excludes Central Sales Tax and State Value Added Tax. With regard to sale of products, income is reported when practically all risks and rights connected with the ownership have been transferred to the buyers. This usually occurs upon dispatch, after the price has been determined.

Dividend on Financial Instruments are recognised as and when realised. Interest on deposits is recognised on accrual basis.

3. Fixed Assets

Tangible Fixed Assets acquired by the Company are reported at acquisition value, with deductions for accumulated depreciation and impairment losses, if any. The acquisition value includes the purchase price (excluding refundable taxes), and expenses directly attributable to assets to bring it to the factory and in the working condition for its intended use. Where the construction or development of any such asset requiring a substantial period of time to set up for its intended use, is funded by borrowings if any, the corresponding borrowing cost are capitalised up to the date when the asset is ready for its intended use. Assets related to R&D are capitalized as such.

Intangible Assets are reported at acquisition value with deductions for accumulated amortisation and any impairment losses.

Capital Work in Progress

Capital work in Progress includes advances for pre-production expenses and expenditure on project under implementation including interest and other expenses to be capitalized.

Raw material and consumables (Rs.220 Lakhs) were capitalized during the period (Based on the Chartered Engineer''s Certificate) being utilized towards research and development, trail runs, prototypes and certifications.

4. Depreciation

Depreciation has been provided on Fixed Assets on Straight Line Method as per the rates specified in Schedule XIV of the Companies Act, 1956 as amended from time to time on pro rata basis with reference to the actual date of Purchase/Installation, on basis of efflux of time.

Amortisation of intangible assets takes place on a Straight Line basis over the assets anticipated useful life. The useful life is determined based on the period of the underline contract and the period of time over which the intangible assets is expected to be used.

5. Impairment

The carrying value of assets of the Company''s cash generating units are reviewed for impairment annually or more often if there is an indication of decline in value. If any indication of such impairment exists, the recoverable amounts of those assets are estimated and impairment loss is recognised, if the carrying amount of those assets exceeds their recoverable amount. The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the estimated future cash flows to their present value based on appropriate discount factor. Net Selling price is the estimated selling price in the ordinary course of business, less estimated cost of completion and to make the sales.

Roadblocks to Going Concern:

The Company has made project exports for Fiber Reinforced Polymer (FRP) in various countries. The Company has made total exports for the same to the extent of Rs 11,041.36 Lacs. However the Company has not made reference to appropriate authorities for non-receipt of earnings from exports of Rs. 9,781.75 lacs since last six months from the date of Financial statement. Company is of the view that these earning are recoverable and good and hence no reference to appropriate authorities or provision in books of accounts is made.

The Company''s operations are partially hit due to freezing of accounts by Financial Institutions and major liquidity crunch. However, the going concern is not hindered as the Company is not under lock out situation and utilization of all assets is ongoing on date. The percentage utilization though miniscule, the ultimate outcome shall be dependent broadly on the results of restructuring with the Financial Institutions and / or fresh infusion of funds from new avenues.

6. Excise Duty

The Excise Duty payable on finished goods is accounted for on the clearance of the goods from factory.

7. Employee Benefits

(a) Short Term

Short Term employee benefits are recognised as an expense at the undiscounted amount expected to be paid over the period of services rendered by the employees to the company.

(b) Long Term

The Company has both defined contribution and defined benefit plans, of which some have assets in approved funds. These plans are financed by the Company in the case of defined contribution plans.

(c) Defined Contribution Plans

These are plans in which the Company pays pre-defined amounts to separate funds and does not have any legal or informal obligation to pay additional sums. These comprise of contributions to Employees Provident Fund. The Company''s payments to the defined contribution plans are reported as expenses during the period in which the employee perform the services that the payment covers.

(d) Defined Benefit Plans

Expenses for defined benefit gratuity payment plans are calculated as at the balance sheet date by independent actuaries in the manner that distributes expenses over the employees working life. These commitments are valued at the present value of the expected future payments, with consideration for calculated future salary increases, using a discounted rate corresponding to the interest rate estimated by the actuary having regard to the interest rate on Government Bonds with a remaining term i.e. almost equivalent to the average balance working period of employees.

(e) Other Employee Benefit

Compensated absences which accrue to employees which can be carried to future periods but are expected to be encased or availed in twelve months immediately following the year end are reported as expenses during the year in which the employees perform the services that the benefit covers and the liabilities are reported at the undiscounted amount of the benefits after deducting amounts already paid.

8. Investments

Investments are classified as Long Term & Current Investments. Long Term Investments are valued at cost less provision for diminution other than temporary, in value, if any. Current Investments are valued at cost or fair value whichever is lower.

9. Foreign Currency Transactions

Transactions in foreign currencies are translated to the reporting currency based on the exchange rate on the date of the transaction. Exchange differences arising on settlement thereof during the year are recognised as income or expenses in the Statement of Profit and Loss.

Cash and bank balances, receivables and liabilities (monetary items) in foreign currencies as at the year end are translated at closing-date rates, and unrealised translation differences are included in the Statement of Profit and Loss.

Investments in foreign currency (non-monetary items) are reported using the exchange rate at the date of the transaction.

10. Borrowing Cost

Borrowing costs are recognised in the period to which they relate, regardless of how the funds have been utilised, except where it relates to the financing of construction or development of assets requiring a substantial period of time to prepare for their intended future use. Interest on borrowings if any is capitalized upto the date when the asset is ready for its intended use.

11. Valuation of Inventories

Inventories of Raw Materials and Stores are valued at cost or net realisable value whichever is lower after considering the credit of VAT and Cenvat.

Inventories of Work in Process are valued at lower of cost or net realisable value.

Inventories of Finished Goods are valued at cost or net realisable value whichever is lower. Cost of Finished Goods and Work-in-Process are determined using the absorption costing principles Costs include the cost of materials consumed, labour and a systematic allocation of variable and fixed production overheads, Excise duties at the applicable rates are also included in the cost of Finished Goods.

12. Earnings per Share:

Basic earnings per share is calculated by dividing the net profit after tax for the year attributable to Equity Shareholders of the Company by the weighted average number of Equity Shares outstanding during the year. Diluted earnings per Share is calculated by dividing net profit attributable to equity Shareholders (after adjustment for diluted earnings) by average number of weighted equity shares outstanding during the year.

13. Income Tax

Provision for Current Tax is made as per the provisions of the Income Tax Act, 1961 and Wealth Tax Act, 1957.

Deferred Tax resulting from "timing differences that are temporary in nature" between accounting and taxable profit is accounted for, using the tax rates and laws that have been enacted as on the Balance Sheet date. The deferred tax asset is recognised and carried forward only to the extent that there is a reasonable or virtual certainty, as the case may be, that the asset will be realised in future.

14. Provisions, contingent liabilities and contingent assets

A provision is recognised when the Company has a present legal or constructive obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which reliable estimate can be made. Provisions (excluding long term benefits) are not discounted to its present value and are determined based on 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 not recognised but are disclosed in the notes to the Financial Statements. A contingent asset is neither recognised nor disclosed.

15. Cash Flow Statement:

The Cash Flow Statement is prepared by the "indirect method" set out in Accounting Standard 3 on "Cash Flow Statements" and presents the cash flows by operating, investing and financing activities of the Company. Cash and Cash equivalents presented in the Cash Flow Statement consist of cash on hand and Short term highly liquid financial instruments which are readily convertible into cash and have original maturities of three months or less from date of purchase.

Jun 30, 2010

1. Basis of Preparation of Financial Statements

The company follows the accrual method of accounting. The financial statements have been prepared in accordance with the historical cost convention as modified where required by Accounting Standards and as per accounting principles generally accepted in India.

Expenditure on R & D, Trademark, development of markets, which are determined to have a useful life spanning more than one year are amortized over its useful life.

2. Fixed Assets

Fixed assets are capitalized at cost i.e. direct cost and other expenses including interest and other finance cost incurred in connection with acquisition of assets apportioned thereto and is net of MODVAT / CENVAT taken. Assets related to R&D are capitalized as such.

Capital Work in Progress

Capital work in Progress includes advances for pre-production expenses and expenditure on project under implementation including interest and other expenses to be capitalized.

3. Depreciation

Depreciation on Fixed assets has been provided on Straight Line Method at the rates prescribed in Schedule XIV to the Companies Act, 1956 on pro rata basis with reference to the actual date of Purchase/Installation, on basis of efflux of time.

4. Impairment

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 is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.

5. Revenue recognition

Revenue is recognised only when it can be reliably measured and it is reasonable to expect ultimate collection. Sales include Excise duty, Service tax and Sales tax.

6. Excise Duty

The Excise Duty payable on finished goods is accounted for on the clearance of the goods from factory.

7. Employee Benefits

- Gratuity benefits are accounted for on the basis of amount determined by actuarial valuation made by Life Insurance Corporation of India (LIC) and are funded accordingly by the approved Trust. Any shortfall between liabilities determined on actuarial basis and funds available is charged to Profit and Loss Account. Contribution made to LIC is charged to Profit and Loss Account. In respect of certain employees who are not covered under approved Gratuity Fund, the liability is determined on the basis of actuarial valuation and is charged to Profit and Loss Account.

- Retirement benefits in the form of provident fund and pension scheme are accounted on accrual basis and charged to the Profit and Loss Account for the year.

- The monetary value of leave encashment benefit is provided on the basis of actuarial valuation.

8. Investments

Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long term investments. Current investments are carried at lower of cost and fair value. Long term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary, if any in the value of the investments.

9. Foreign Currency Transactions

- Monetary assets and liabilities related to foreign currency transactions remaining unsettled at the end of the year are translated at closing rates.

- The difference in translation of monetary assets and liabilities and realised gains and losses on foreign transactions are recognized in the Profit and Loss Account.

10.Borrowing Cost

Borrowing costs attributable to the acquisition, construction of assets are capitalized as part of such assets. All other borrowing costs are recognized as expense in the period for which they are incurred.

11.Valuation of Inventories

Inventories relating to Raw Materials, Stores and Spares, Stock in Process and Finished Goods are valued at lower of Cost or Net Realizable Value and after providing for obsolescence if any.

12.Income Tax

Income Tax has been computed using the tax effect accounting method, where taxes are accrued in the same period as the related revenue expenses. Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to timing differences between the taxable income and the accounting income for a period. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the timing differences are expected to be recovered or settled. The effect of changes in the tax rates on deferred tax assets and liabilities is recognized in the statement of income in the period of change. Deferred tax assets are recognized based on managements judgment as to the sufficiency of future taxable income against which the deferred tax asset can be real ized.

13.Provisions, contingent liabilities and contingent assets

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

14.Contingent liabilities not provided for are disclosed in accounts by way of notes explaining the nature and quantum of such liabilities.

15.Prior period adjustments are accounted for in relation to all identified items of income and expenditure relating to prior period.

16.Deferred Revenue Expenses identified in accordance with AS -26 are amortized over the period for which the benefit is estimated to accrue. The management reviews the amortization period on a regular basis and if expected future benefits from such expenditure are significantly lower from previous estimates, the amortization period is accordingly changed.

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