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Accounting Policies of Nitco Ltd. Company

Mar 31, 2014

A. Basis of Preparation of Financial Statements

i. The financial statements are prepared under the Historical Cost convention in accordance with generally accepted accounting principles and relevant provisions of the Companies Act, 1956, as adopted consistently by the Company. The Company during the last two financial years has incurred significant cash losses resulting in substantial erosion of its net worth and will be required to make a reference to BIFR as more than 50% of its peak net worth stands eroded. Despite several constraints faced by the Company including non release of sanctioned fresh working capital facilities by lenders and delayed sale of non core assets, the Company achieved a gross turnover of Rs. 840.19 crores. Considering the tremendous brand equity enjoyed by the Company, non core assets identified for sale, and several steps taken by the Company, the management is hopeful of a turnaround in near future. The management therefore believes, it is appropriate to prepare the financial statement on a going concern basis.

ii. The Company follows mercantile system of accounting and recognises significant items of income and expenditure on accrual basis.

B. Use of Estimate:

The preparation of financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. The difference between the actual results and estimates are recognized in the period in which the results are known/ materialized.

C. Revenue recognition:

Revenues are recognized when it is earned and when there is no significant uncertainty as to its measurement and realization. The specific revenue recognition policies are as under:

i. Gross sales are inclusive of excise duty and sales tax as applicable. Net sales are exclusive of excise duty and sales tax.

ii. Revenue from sale of finished properties / buildings is recognized on transfer of property and once significant risk and rewards of ownership have been transferred to the buyer.

iii. Income from providing facilities / lease of premises is accrued over the period mentioned in the facility / leave and license agreement.

iv. Revenue from Power distribution is accounted for on the basis of billings to consumers and includes unbilled revenues accrued up to the end of the accounting year.

v. Revenue from Services is recognized on performance of Service.

vi. Dividend income is recognized when the right to receive dividend is established.

vii. Other income is recognized when the right to receive is established.

D. Fixed Assets and Capital Work in Progress

Fixed Assets are stated at the cost of acquisition less accumulated depreciation and impairment losses, if any. All identifiable costs incurred up to the asset put to its intended use are capitalized. Costs include purchase price (including non-refundable taxes/ duties) and borrowing costs for the assets that necessarily take a substantial period of time to get ready for its intended use. Costs are adjusted for grants available to the company which are recognized based on reasonable assurance that the company will comply with the conditions attached to the grant and it is reasonably certain that the ultimate collection of grants will be made.

Intangible Assets are stated at the cost of acquisitions less accumulated amortization. In case of an internally generated assets cost includes all directly allocable expenditures. Intangible assets exclude the operating software, which forms an integral part of the hardware.

Capital Work In Progress include cost of fixed assets that are not yet ready for their intended use as at the balance sheet date.

E. Depreciation

The depreciation on fixed assets is provided pro-rata to the period of use of Assets using the straight-line method based on Economic useful lives estimated by the management. The aggregate depreciation provided based on estimated economic useful life is not less than the depreciation as calculated at the rates specified in Schedule XIV of the Companies Act, 1956 except motor vehicles, mobile phones and computers/ laptops which are depreciated based on their useful lives. Assets costing individually Rs. 5,000 or less are depreciated fully in the year purchase.

F. Expenditure during construction period

In case of new projects and substantial expansion of existing factories, expenditure incurred, including trial production expenses and attributable interest and financing costs, prior to commencement of commercial production are capitalized.

G. Impairment of Assets:

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

H. Inventories

i. Stores and spare parts are stated at cost.

ii. Inventories other than stores and spare parts are valued "At cost or Net Realizable Value, whichever is lower". Cost is generally determined on weighted average cost basis and inclusive of appropriate overheads as applicable. Net Realizable Value is the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated cost necessary to make the sale.

iii. Cost of raw materials, stores, spare parts and consumables is net of applicable Cenvat credit wherever applicable.

iv. Inventories of real estate are valued at cost or net realizable value, whichever is lower. Interest and other borrowing costs attributable to real estate inventories during the construction period are allocated as a part of cost of construction.

I. Foreign currency transactions:

i. Transactions in foreign currencies are normally recorded at the exchange rate prevailing on the date of the transaction.

ii. Monetary foreign currency items are reported at the exchange rates as at Balance Sheet date.

iii. In respect of transaction covered under forward exchange contracts, the difference between the exchange rates prevailing at the Balance Sheet date and rate on the date of the contract is recognized as exchange difference. The premium on forward contracts is amortized over the life of the contract.

iv. Non-monetary foreign currency items are carried at cost.

v. Any gains or losses on account of exchange difference either on settlement or on translation are recognized in the Statement of Profit and Loss.

J. Employee Benefits:

i. Short-term employee benefits are recognised as an expense at the undiscounted amount in the Profit and Loss account of the year in which the related service is rendered.

ii. Post employment and other long term employee benefits are recognised as an expense in the Profit and Loss account for the year in which the employee has rendered services. The expense is recognised at the present value of the amounts payable determined using actuarial valuation techniques. Actuarial gains and losses in respect of post employment and other long term benefits are charged to the Profit and Loss account.

K. Provision for Current and Deferred Tax:

Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income-tax Act, 1961.

Deferred tax resulting from "timing difference" between taxable and accounting income is accounted for using the tax rates and laws that are enacted or substantively enacted as on the balance sheet date. Deferred tax asset is recognized and carried forward only to the extent that there is a virtual certainty that the asset will be realised in future.

L. Provisions, Contingent Liabilities and Contingent Assets :

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

M. Financial Derivatives and Hedging Transactions:

In respect of Derivatives Contracts, premium paid provision for losses on restatement and gains / losses on settlement are recognised in Statement of Profit and Loss.

N. Borrowing Cost:

i. Borrowing costs, less any income on the temporary investment out of those borrowings that are directly attributable to acquisition of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalized as a part of the cost of that asset.

ii. Other borrowing costs are recognized as expense in the period in which they are incurred.

O. Leases:

Assets taken on lease under which the lessor effectively retains all the risks and rewards of ownership are classified as operating lease. Operating lease payments are recognized as expense in Statement of Profit and Loss on a straight-line basis over the lease term. Assets acquired under leases where all the risks and rewards of ownership are substantially transferred to company are classified as Finance leases. Such leases are capitalized at the inception of the lease at the lower of fair value or the present value of minimum lease payments and liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each period.

P. Investments

Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline, other than temporary. Current investments are stated at cost or fair value whichever is lower. Cost is determined on a weighted average basis.

Q. Customs & Excise Duty/Service Tax and Sales Tax/Value Added Tax

Customs Duty/service tax and Excise Duty have been accounted on the basis of both payments made in respect of goods cleared and also provision made for goods lying in bonded warehouses. Sales tax/VAT tax paid is charged to profit and Loss account.

R. Segment reporting

The Company identifies primary segments based on the dominant source, nature of risks and returns and the internal organisation and management structure. The operating segments are the segments for which separate financial information is available and for which operating profit/loss amounts are evaluated regularly by the executive Management in deciding how to allocate resources and in assessing performance.

The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment.

Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors.

Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under "unallocated revenue / expenses / assets / liabilities".

S. Earnings Per Share

In determining the earnings per share, the Company considers the net profit/loss after tax and post tax effect of any extra ordinary/ exceptional item is shown separately. The number of shares considered in computing basic earnings per share is the weighted average number of shares outstanding during the year. The number of shares considered for computing diluted earnings per share comprises the weighted average number of shares used for deriving the basic earnings per share and also the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares which includes potential CCD conversions. The number of shares and potentially dilutive equity shares are adjusted for any stock splits and bonus shares issues.

T. Balances of sundry debtors, sundry creditors, loans and advances, deposits are subject to confirmation and reconciliation. Accounts receivables are net of advances.


Mar 31, 2013

A. Basis of Preparation of Financial Statements:

i. The financial statements are prepared underthe Historical Cost convention in accordance with generally accepted accounting principles and relevant provisions of the Companies Act, 1956, as adopted consistently by the Company The same are prepared on a going concern basis.

ii. The Company follows mercantile system of accounting and recognises significant items of income and expenditure on accrual basis.

B. Use of Estimate:

The preparation of financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period.The difference between the actual results and estimates are recognized in the period in which the results are known/ materialized.

C. Revenue recognition:

Revenues are recognized when it is earned and when there is no significant uncertainty as to its measurement and realization.The specific revenue recognition policies are as under:

i. Gross sales are inclusive of excise duty and sales tax as applicable. Net sales are exclusive of excise duty and sales tax.

ii. Revenue from sale of finished properties / buildings is recognized on transfer of property and once significant risk and rewards of ownership have been transferred to the buyer

iii. Income from providing facilities / lease of premises is accrued over the period mentioned in the facility / leave and license agreement.

iv Revenue from Power distribution is accounted for on the basis of billings to consumers and includes unbilled revenues accrued up to the end of the accounting year

v. Revenue from Services is recognized on performance of Service.

vi. Dividend income is recognized when the right to receive dividend is established.

vii. Other income is recognized when the right to receive is established.

D. Fixed Assets and Capital Work in Progress:

Fixed Assets are stated at the cost of acquisition less accumulated depreciation and impairment losses, if any All identifiable costs incurred up to the asset put to its intended use are capitalized . Costs include purchase price (including non-refundable taxes/ duties) and borrowing costs for the assets that necessarily take a substantial period of time to get ready for its intended use. Costs are adjusted for grants available to the company which are recognized based on reasonable assurance that the company will comply with the conditions attached to the grant and it is reasonably certain that the ultimate collection of grants will be made.

Intangible Assets are stated at the cost of acquisitions less accumulated amortization. In case of an internally generated assets cost includes all directly allocable expenditures. Intangible assets exclude the operating software, which forms an integral part of the hardware.

Capital Work In Progress include cost of fixed assets that are not yet ready for their intended use as at the balance sheet date.

E. Depreciation:

The depreciation on fixed assets is provided pro-rata to the period of use of Assets using the straight-line method based on Economic useful lives estimated by the management.The aggregate depreciation provided based on estimated economic useful life is not less than the depreciation as calculated at the rates specified in Schedule XIV of the Companies Act, 1956. Assets costing individually Rs. 5,000 or less are depreciated fully in the year purchase.

F. Expenditure during construction period:

In case of new projects and substantial expansion of existing factories, expenditure incurred, including trial production expenses and attributable interest and financing costs, prior to commencement of commercial production are capitalized.

G. Impairment of Assets:

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

H. Inventories:

i. Stores and spare parts are stated at or below cost.

ii. Inventories other than stores and spare parts are valued "At cost or Net Realizable Value, whichever is lower". Cost is generally determined on weighted average cost basis and inclusive of appropriate overheads as applicable. Net Realizable Value is the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated cost necessary to make the sale.

iii. Cost of raw materials, stores, spare parts and consumables is net of applicable Cenvat credit wherever applicable.

iv. Inventories of real estate are valued at cost or net realizable value, whichever is lower Interest and other borrowing costs attributable to real estate inventories during the construction period are allocated as a part of cost of construction.

I. Foreign currency transactions:

i. Transactions in foreign currencies are normally recorded at the exchange rate prevailing on the date of the transaction.

ii. Monetary foreign currency items are reported at the exchange rates as at Balance Sheet date.

iii. In respect of transaction covered under forward exchange contracts, the difference between the exchange rates prevailing at the Balance Sheet date and rate on the date of the contract is recognized as exchange difference.The premium on forward contracts is amortized over the life of the contract.

iv. Non-monetary foreign currency items are carried at cost.

v. Any gains or losses on account of exchange difference either on settlement or on translation are recognized in the Statement of Profit and Loss.

J. Employee Benefits:

i. Short-term employee benefits are recognised as an expense at the undiscounted amount in the Profit and Loss account of the year in which the related service is rendered.

ii. Post employment and other longterm employee benefits are recognised as an expense in the Profit and Loss account for the year in which the employee has rendered services.The expense is recognised at the present value of the amounts payable determined using actuarial valuation techniques. Actuarial gains and losses in respect of post employment and other longterm benefits are charged to the Profit and Loss account.

K. Provision for Current and Deferred Tax:

Provision for current tax is made after taking into consideration benefits admissible underthe provisions of the Income-tax Act, 1961.

Deferred tax resulting from "timing difference" between taxable and accounting income is accounted for using the tax rates and laws that are enacted or substantively enacted as on the balance sheet date. Deferred tax asset is recognized and carried forward only to the extent that there is a virtual certainty that the asset will be realised in future.

L Provisions, Contingent Liabilities and Contingent Assets:

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

M. Financial Derivatives and Hedging Transactions:

In respect of Derivatives Contracts, premium paid provision for losses on restatement and gains / losses on settlement are recognised in Statement of Profit and Loss.

N. Borrowing Cost:

i. Borrowing costs, less any income on the temporary investment out of those borrowings, that are directly attributable to acquisition of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalized as a part of the cost of that asset.

ii. Other borrowing costs are recognized as expense in the period in which they are incurred.

O. Leases:

Assets taken on lease under which the lessor effectively retains all the risks and rewards of ownership are classified as operating lease. Operating lease payments are recognized as expense in Statement of Profit and Loss on a straight-line basis over the lease term. Assets acquired under leases where all the risks and rewards of ownership are substantially transferred to company are classified as Finance leases. Such leases are capitalized at the inception of the lease at the lower of fair value or the present value of minimum lease payments and liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each period.

P. Investments:

Long-term investments are carried at cost. However; provision for diminution in value is made to recognize a decline, other than temporary. Current investments are stated at cost or fair value whichever is lower Cost is determined on a weighted average basis.

Q. Customs & Excise Duty/Service Tax and Sales Tax/Value Added Tax:

Customs Duty/service tax and Excise Duty have been accounted on the basis of both payments made in respect of goods cleared and also provision made for goods lying in bonded warehouses. Sales tax/VAT tax paid is charged to profit and Loss account.

R. Segment reporting:

The Company identifies primary segments based on the dominant source, nature of risks and returns and the internal organisation and management structure.The operating segments are the segments for which separate financial information is available and for which operating profit/loss amounts are evaluated regularly by the executive Management in deciding how to allocate resources and in assessing performance.

The accounting policies adopted for segment reporting are in line with the accounting policies of the Company Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment.

Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors.

Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under "unallocated revenue / expenses / assets / liabilities".

S. Earnings Per Share:

In determining the earnings per share, the Company considers the net profit/loss aftertax and post tax effect of any extra "''ordinary/ exceptional item is shown separately The number of shares considered in computing basic earnings per share is the weighted average number of shares outstanding during the year The number of shares considered for computing diluted earnings per share comprises the weighted average number of shares used for deriving the basic earnings per share and also the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares which includes potential CCD conversions.The number of shares and potentially dilutive equity shares are adjusted for any stock splits and bonus shares issues.

T. Balances of sundry debtors, sundry creditors, loans and advances, deposits are subject to confirmation and reconciliation. Accounts receivables are net of advances.


Mar 31, 2012

A. Basis of Preparation of Financial Statements

i) The financial statements are prepared under the Historical Cost convention in accordance with generally accepted accounting principles and relevant provisions of the Companies Act, 1956, as adopted consistently by the Company The same are prepared on a going concern basis.

ii) The Company follows mercantile system of accounting and recognises significant items of income and expenditure on accrual basis.

B. Fixed Assets and Depreciation

i) Fixed assets are net of cenvat and stated at cost / professional valuation less accumulated depreciation and impairment loss, if any Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets.

ii) Depreciation on fixed assets is provided in the books of accounts on straight line method in accordance with and at the rates prescribed in the Companies Act, 1956.

C. Inventories

i) Stores and spare parts are stated at or below cost.

ii) Inventories other than stores and spare parts are valued "At cost or Net Realizable Value, whichever is lower". Cost is generally determined on weighted average cost basis and inclusive of appropriate overheads as applicable. Net Realizable Value is the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated cost necessary to make the sale.

iii) Cost of raw materials, stores, spare parts and consumables is net of applicable Cenvat credit wherever applicable.

iv) Inventories of real estate are valued at cost or net realizable value, whichever is lower. Interest and other borrowing costs attributable to real estate inventories during the construction period are allocated as a part of cost of construction.

D. Impairment of Assets

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

E. Expenditure during construction period

In case of new projects and substantial expansion of existing factories, expenditure incurred, including trial production expenses and attributable interest and financing costs, prior to commencement of commercial production are capitalized.

F. Investments

Long-term investments are carried at cost. However provision for diminution in value is made to recognize a decline, other than temporary. Current investments are stated at cost or fair value whichever is lower. Cost is determined on a weighted average basis.

G. Customs & Excise Duty

Customs Duty and Excise Duty have been accounted on the basis of both payments made in respect of goods cleared and also provision made for goods lying in bonded warehouses.

H. Sales

Gross sales are inclusive of excise duty and sales tax as applicable. Net sales are exclusive of excise duty and sales tax.

Revenue from sale of finished properties / buildings is recognised on transfer of property and once significant risk and rewards of ownership have been transferred to the buyer

Income from providing facilities / lease of premises is accrued over the period mentioned in the facility / leave and license agreement.

I. Foreign Currency Transactions

i) All loans repayable in foreign currency and outstanding at the close of the year are expressed in Indian Currency at the appropriate rates of exchange prevailing on the date of the Balance Sheet. The difference between the rate prevailing on the date of the transaction and on the date of the settlement is recognised as income or expense as the case may be.

ii) Balances in the form of Current Assets and Current Liabilities in foreign currency, outstanding at the close of the year, are converted in Indian Currency at the appropriate rates of exchange prevailing on the date of the Balance Sheet.

iii) All other incomes or expenditure in foreign currency are recorded at the rates of exchange prevailing on the date of the transaction. The difference between the rate prevailing on the date of the transaction and on the date of the settlement is recognised as income or expense as the case may be.

iv) In respect of forward exchange contracts the difference between the forward rate and the exchange rate at the inception of the contract is recognised as income or expense over the period of the contract.

J. Employment / Retirement Benefits

i) Company's contribution to Provident Fund, Superannuation Fund and other Funds for the year is accounted for on accrual basis and charged to the Profit & Loss Account of the year

ii) Liability for Leave encashment benefits has been provided on accrual basis as per actuarial valuation.

iii) The Company has taken a Group Gratuity cum Life Insurance Policy with the Life Insurance Corporation of India for all eligible employees. The liability is actuarially assessed by LIC and accounted for on accrual basis.

K. Taxation Current Tax

Current tax is provided on the basis of tax payable on estimated taxable income computed in accordance with the applicable provisions of Income tax Act, 1961 after considering the benefits available under the said Act.

Deferred Taxes

In accordance with Accounting Standard 22 - Accounting for Taxes on Income, issued by the Institute of Chartered Accountants of India, the deferred tax for timing difference between the book and tax profits for the year is accounted for using the tax rates and laws that have been enacted or substantially enacted as of the balance sheet date.

No Deferred Tax Assets is recognised in respect of carried forward losses under Income Tax Act, 1961, considering the principle of prudence. However, the position will be reviewed every year

 
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