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Accounting Policies of Orissa Sponge Iron & Steel Ltd. Company

Mar 31, 2015

1. CORPORATE IN FORMATIONS

a. Orissa Sponge Iron & Steel Limited was incorporated in the year 1979. The Company established manufacturing facilities to produce Sponge Iron, Steel Billets and Power at its works at Palaspanga, Dist Keonjhar, Odisha. The Company also provides engineering and technical services.

b- The Company suspended production from June, 2012 due to unviable cost economics and continuing losses. In the present scenario viability of the Company is largely dependent on availability of raw material from captive sources.

c. State Bank of India on behalf of itself, Bank of India and Punjab National Bank have issued Possession Notice dated 24.04.201 S under Section 13{4J of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) as per their demand for recall of loan issued under Section 13(2) of the Act caller could not be paid by the Company, As It stands, aforesaid banks have taken possession of the property described in the notice. In addition, State Bank of India and Edelweiss Asset Reconstruction Company Limited have also filed application under Section 19(1) of the Recovery of Debts due to Banks and Financial Institutions Act. 1993 before the Debt Recovery Tribunal (DRT).

d. The Company has mode representation before oil the lenders explaining the reasons for the current state of affairs and the action plan far revival of the Company In the near future. The Company is hopeful of receiving favorable response from the lenders for a comprehensive debt restructuring and working capital facility in view of the iron ore mines allotted to the Company which on commencement of mining operations has the potential to turnaround the Company into a profitable unit in the near future.

e. The Company was allotted Iron Ore Mines by the Central Government and the State Government of Odisha. Commencement of mining operations from the mines requires several approvals, clearances and fulfillment of conditions as specified in the respective documents. The Company has received all approvals and clearances Including State 1 Clearance from the Ministry of Environment and Forest and Compliance Certificate under the Scheduled Tribes and Other Traditional Dwellers {Recognition of Forest Rights Act), 2006 and are presently awaiting Stage II Clearance on receipt of which lease agreements could be executed for commencement of mining operations Availability of iron ore from captive mines will permit production ot higher capacity and significant improve profitability of the Company.

f. Despite stoppage of plant operations since 2012 due to unviable cast economic business situation, the Project and Engineering Division continued to operate and generate revenue from sale of technology during the year.

g. Having regard to the aforesaid developments, the Company has the potential to turnaround and revive as a profitable unit and accordingly the financial statements have been prepared on historical cost basis as a going concern.

I. Basis of preparation of financial statements

The financial statements of the Company have been prepared In accordance with the Generally Accepted Accounting Principles In India (Indian GAAP) to comply with the Accounting Standards specified under Section 1 33 of the Companies Act, 2013 read with the Rule 7 of the Companies {Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013. The financial statements have been prepared on accrual basis under the historical cost convention.

II. Use of estimates

The preparation of financial statements in conformity with Indian GAAP requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities and commitments on the date of financial statements and the results of operations during the year. Differences between actual results and estimates are recognized in the year in which the results are known or materialized. Actual results could differ Tram those estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.

III. Revenue Recognition

Revenue from sale of products is recognized when the products are dispatched against orders from customers in accordance with the contract terms, which coincides with the transfer of risks and rewards. Sales are stated Inclusive of excise duty and net of rebates, trade discounts and sales tax.

Revenue from services are recognized when services have been rendered in accordance with the contract terms.

Revenue From the sale of power is recognized based on monthly bill raised as per month-end meter reading.

Dividend income is recognized when the Company's right to receive dividend is established. Interest income is recognized on accrual basis on implicit interest rates.

Revenue from Certified Emission Reductions (CER) is recognized In the financial statements only after certification by accredited agency i.e. United Nation Framework Convention on Climate Change {UNFCCC).

IV. Tangible Assets

All tangible assets are stated at cost or at revalued amount less accumulated depreciation. The cost of an asset includes the purchase cost of materials, Including import duties and non refundable taxes and any deftly attributable costs of bringing an asset to the location and condition of its intended use. Interest on borrowings used to finance the construction of qualifying assets are capitalized as part of the cost of the asset until such time that the asset is ready for its intended use.

V. Intangible Assets

Intangible assets are carried at cost less accumulated amortization and impairment losses, if any. Intangible assets are amortized over the useful life of the assets.

VI. 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 interest if any.

VII. Depreciation

Depreciation on tangible fixed assets have been provided on the straight line method, aspect the useful life prescribed in Schedule 1J to the Companies Act 2013. Additional charge of depreciation on amount added on revaluation is adjusted against revaluation reserve.

VIII. Investments

Investments held by the Company which are long term in nature are stated at cost unless there is any permanent diminution in value, where provision for diminution is made on individual investment basis. Current investments are carried lower of cost and fair value.

IX. Inventories

Items of inventories are measured at lower of cost and net realizable value after providing for obsolescence, if any. Cost of inventories comprises of cost of purchase, cost of conversion and other costs including manufacturing overheads incurred in bringing them to their respective present location and condition. Cost of raw materials, stores and spares, packing materials and other products are determined on weighted average basis. By-products are valued at net realizable value.

X. Retirement Benefits and Employee Benefits Schemes a) Provident Fund:

Retirement benefit in the form of Provident Fund is a defined benefit obligation of the Company and the contributions are charged to the Statement of Profit & Loss of the year when the contributions to the respective funds are due. Shortfall in the funds, if any, is adequately provided by the Company. b) Superannuation Fund:

Superannuation Fund (for certain class of employees) is a defined contribution scheme. Liability and contribution in respect of Superannuation Fund of the concerned employees Is accounted for as per Company's scheme and paid to the Life Insurance Corporation of India (LICI) every year. The contributions to the fund are charged in the Statement of Profit fit Loss of the year. The Company does not have any other obligations to the Fund other than the contribution payable to LICI.

c) Gratuity Fund:

Gratuity Fund is a defined benefit obligation and is provided on the basis of actuarial valuation on project unit credit method at the end of each financial year. The Company has taken a policy with LICI to cover the gratuity liabilities of the employees and contribution paid to LICI is charged to the Statement of Profit & Loss. The difference between the actuarial valuation of gratuity of the employees at the year end and the balance of fund with LICI is recognized as Liability in the Books of Accounts.

d) Leave Encashment:

Short term compensated absence are provided on the basis of actuarial valuation at the year end. The actuarial valuation Is as per project unit credit method.

Actuarial gains/losses are recognized immediately in the Statement of Profit & Loss and are not deferred,

XI. Research and Development

Revenue expenditure on research and development is charged to the Statement of Profit and Loss. Capital expenditure on tangible assets for research and development is shown as additions to Fixed Assets.

XII. Foreign Currency Transaction

Transactions in foreign currency are recorded initially at the exchange rate prevailing on the date of transaction. Monetary assets or liabilities in currency other than the reporting currency and foreign exchange transactions remaining unsettled at the Balance Sheet date are valued at the yearend exchange rate.

Exchange difference arising on the settlement of monetary items and on the re-settlement of the monetary items are recognized as income or expense in the Statement of Profit and Loss.

XIII. Relining Expenses

Expenditure on relining of kiln and cooler is charged to the Statement of Profit and Loss in the year in which it is incurred.

XIV. Taxation

a) Current Taxes:

Provision for current taxes is determined on the basis of taxable income and tax credits as per provision of the Income Tax Act,1961.

b) Deferred Taxes:

Deferred tax assets are recognized only to the extent that there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

The deferred tax charge or credit and the corresponding deferred tax liability and assets are recognized using the tax rates that have been enacted or substantially enacted and the Balance Sheet date.

Deferred tax assets arising from unabsorbed depreciation or carry forward losses are recognized only If there Is virtual certainty of realization of such amounts.

XV. Lease

Where the Company is a lessee, financial leases, effectively transferred to the Company substantially, the risk and benefits incidental to the ownership of the lease item, are capitalized at the lower of the fair value and present value of the minimum lease payment at the inception of the lease starts. Lease payments are apportioned between the finance charge and deduction of the lease liability based on the implicit rate of return. Finance charges are expensed.

XVI. Borrowing Cost

Borrowing Costs that are attributable to the acquisitions, construction or production of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. All other borrowing costs are recognized as an expense in the period in which they are incurred.

XVII Provisions and Contingent, Liabilities

A provision is recognized when it is more likely that an obligation will result in an outflow of resources. Provisions are not discounted at their present value and are determined based on the management's estimation of the obligation required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect current management estimates. A disclosure for a contingent liability is made where it is more likely than a present obligation or possible obligation would not result in or involve an outflow of resources.

XVIII. Eaming per share

Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of the equity shares outstanding during the period.

Diluted earnings during the year adjusted for the effects of all dilutive potential equity shares per share Is computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.

XIX, Impairment

At each Balance Sheet date, the Company reviews the carrying value of tangible and intangible assets for any possible impairment An impairment loss is recognized when the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is higher of the asset's net selling price or estimated future cash flows which are discounted to their present value based on appropriate discount rates. For the purpose of assessing impairment, assets are grouped at the levels for which there are separately identifiable cash flows (cash generating unit).


Mar 31, 2014

I. Basis of preparation of financial statements

The financial statements are prepared on accrual basis under the historical cost convention, in accordance with Indian Generally Accepted Accounting Principles (GAAP). Financial statements comply with the applicable Accounting Standards (AS) specified in Companies (Accounting Standard) Rules, 2006 and presentational requirement of the Companies Act, 1956.

II. Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles in India (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities and commitments on the date of financial statements and the result of operations during the year. Differences between actual results and estimates are recognized in the year in which the results are known or materialized. Actual results could differ from those estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.

III. Revenue Recognition

Revenue from sale of products is recognized when the products are dispatched against orders from customers in accordance with the

contract terms, which coincides with the transfer of risks and rewards. Sales are stated inclusive of excise duty and net of rebates, trade discounts and sales tax.

Revenue from the sale of power is recognized based on monthly bill raised as per month-end meter reading.

Dividend income is recognized when the Company''s right to receive dividend is established. Interest income is recognized on accrual basis on implicit interest rates.

Revenue from Certified Emission Reductions (CER) is recognized in the financial statements only after certification by accredited agency

i.e. United Nation Framework Convention on Climate Change (UNFCCC).

IV. Tangible Assets

All tangible assets are stated at cost or at revalued amount less accumulated depreciation. The cost of an asset includes the purchase cost of materials, including import duties and non refundable taxes and any directly attributable costs of bringing an asset to the location and condition of its intended use. Interest on borrowings used to finance the construction of qualifying assets are capitalized as part of the cost of the asset until such time that the asset is ready for its intended use.

V. Intangible Assets

Intangible assets are carried at cost less accumulated amortization and impairment losses, if any. Intangible assets are amortized over the useful life of the assets.

VI. 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 interest, if any.

VII. Depreciation

Depreciation is computed on the straight line method, as per the rates prescribed in Schedule XIV to the Companies Act, 1956 on the assets which are in use. Additional charge of depreciation on amount added on revaluation is adjusted against revaluation reserve.

VIII. Investments

Investments held by the Company which are long term in nature are stated at cost unless there is any permanent diminution in value, where provision for diminution is made on individual investment basis. Current investments are carried lower of cost and fair value.

IX. Inventories

Items of inventories are measured at lower of cost and net realizable value after providing for obsolescence, if any. Cost of inventories comprises of cost of purchase, cost of conversion and other costs including manufacturing overheads incurred in bringing them to their respective present location and condition. Cost of raw materials, stores and spares, packing materials and other products are determined on weighted average basis. By-products are valued at net realizable value.

X. Retirement Benefits and Employee Benefits Schemes a) Provident Fund:

Retirement benefit in the form of Provident Fund is a defined benefit obligation of the Company and the contributions are charged to the Statement of Profit & Loss of the year when the contributions to the respective funds are due. Shortfall in the funds, if any, is adequately provided by the Company.

b) Superannuation Fund:

Superannuation Fund (for certain class of employees) is a defined contribution scheme. Liability and contribution in respect of Superannuation Fund of the concerned employees is accounted for as per Company''s scheme and paid to the Life Insurance Corporation of India (LICI) every year. The contributions to the fund are charged in the Statement of Profit & Loss of the year. The Company does not have any other obligations to the Fund other than the contribution payable to LICI.

c) Gratuity Fund:

Gratuity Fund is a defined benefit obligation and is provided on the basis of actuarial valuation on project unit credit method at the end of each financial year. The Company has taken a policy with LICI to cover the gratuity liabilities of the employees and contribution paid to LICI is charged to the Statement of Profit & Loss. The difference between the actuarial valuation of gratuity of the employees at the year end and the balance of fund with LICI is recognized as Liability in the Books of Accounts.

d) Leave Encashment:

Short term compensated absence are provided on the basis of actuarial valuation at the year end. The actuarial valuation is as

per project unit credit method.

Actuarial gains/losses are recognized immediately in the Statement of Profit & Loss and are not deferred.

XI. Research and Development

Revenue expenditure on research and development is charged to the Statement of Profit and Loss. Capital expenditure on tangible assets for research and development is shown as additions to Fixed Assets.

XII. Foreign Currency Transaction

Transactions in foreign currency are recorded initially at the exchange rate prevailing on the date of transaction. Monetary assets or liabilities in currency other than the reporting currency and foreign exchange transactions remaining unsettled at the Balance Sheet date are valued at the year end exchange rate.

Exchange difference arising on the settlement of monetary items and on the re-settlement of the monetary items are recognized as income or expense in the Statement of Profit and Loss.

XIII. Relining Expenses

Expenditure on relining of kiln and cooler is charged to the Statement of Profit and Loss in the year in which it is incurred.

XIV. Taxation

a) Current Taxes:

Provision for current taxes is determined on the basis of taxable income and tax credits as per provision of the Income Tax Act, 1961.

b) Deferred Taxes:

Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will

be available against which such deferred tax assets can be realized.

The deferred tax charge or credit and the corresponding deferred tax liability and assets are recognized using the tax rates that

have been enacted or substantially enacted on the Balance Sheet date.

Deferred tax assets arising from unabsorbed depreciation or carry forward losses are recognized only if there is virtual certainty

of realization of such amounts.

XV. Lease

Where the Company is a lessee, financial leases, effectively transferred to the Company substantially, the risk and benefits incidental to the ownership of the lease item, are capitalized at the lower of the fair value and present value of the minimum lease payment at the inception of the lease starts. Lease payments are apportioned between the finance charge and deduction of the lease liability based on the implicit rate of return. Finance charges are expensed.

XVI. Borrowing Cost

Borrowing Costs that are attributable to the acquisitions, construction or production of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. All other borrowing costs are recognized as an expense in the period in which they are incurred.

XVII. Provisions and Contingent Liabilities

A provision is recognized when it is more likely that an obligation will result in an outflow of resources. Provisions are not discounted at their present value and are determined based on the management''s estimation of the obligation required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect current management estimates. A disclosure for a contingent liability is made where it is more likely than a present obligation or possible obligation would not result in or involve an outflow of resources.

XVIII. Earning per share

Basic earning per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of the equity shares outstanding during the period.

Diluted earnings during the year adjusted for the effects of all dilutive potential equity shares per share is computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.

XIX. Impairment

At each Balance Sheet date, the Company reviews the carrying value of tangible and intangible assets for any possible impairment. An impairment loss is recognized when the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is higher of the asset''s net selling price or estimated future cash flows which are discounted to their present value based on appropriate discount rates. For the purpose of assessing impairment, assets are grouped at the levels for which there are separately identifiable cash flows (cash generating unit).

3.3 Rights, Preferences and Restrictions attached to Shares:

a) Equity shares

The Company has issued Equity Shares having a par value of ? 10. Each holder of equity shares is entitled to one vote per share. The dividend proposed by the Board of Directors, if any, is subject to the approval of shareholders in Annual General Meeting. In the event of liquidation of the Company the holder of the equity shares will be entitled to receive remaining assets of the Company after settlement of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the equity shareholders.

b) Preference Shares

Company''s Article of Association provdes for issuance of Redeemable Preference Shares. Redeemale Preference Shares can be redeemed only out of profits in accordance with the Article of Association of the Company and the Companies Act.

3.4 Rights attached to 30 lacs equity shares out of warrant conversion cannot be exercised as the matter is sub-judice.

3.5 The details of Shareholders holding more than 5 % shares

* Note : During the year Lease Hold and Free Hold Land of the Company at Palaspanga has been revalued by an accredited valuer.

The difference between the cost of Acquisition and Revaluation of ?11,711.80 lacs has been created by Revaluation Reserve.

5. a) Money received against Share Warrants

Equity share warrants amounting to ? 601.50 lacs represent 10 % consideration received from a party against share warrants issued on preferential basis during the year 2007-08. The conversion of share warrants to equity is sub-judice. b) Advance received for issue of Preference Share

The money received from strategic partner of the company i.e. Monnet Ispat & Energy Limited and an Associated Company of the Promoter i.e. Torsteel Services Pvt. Ltd. amounting to ? 2,000 lacs will be adjusted by issuing Redeemable Preference Share as per the terms and conditions agreed between the two parties and in accordance to the Company''s Article of Association/Companies Act.

6.1 Term loans from banks and other parties are secured / to be secured by joint equitable mortgage by deposit of title deed of immovable properties and hypothecation of all moveable assets of the Company both present and future (save and except book debts) ranking pari-passu subject to prior charge created in favour of the Company''s bankers for securing working capital finance on stock of raw material, finished goods etc. and also by second charge on current assets. Further, the above term loans have been guaranteed by the personal guarantee of the Vice Chairman & Managing Director of the Company.

6.2 Interest and maturity profile on Term Loans are set out below :

Interest on term loan from banks and other parties carry interest @ 15.75 % to 16.75 % and 10% to 12.89 % respectively.

7.1 Disclosure as required under AS 29

Provision for Entry Tax, Sales Tax and Interest on Bank Borrowings have been recognized in the financial statements considering the following:

i) The Company has a present obligation as a result of past event.

ii) It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

iii) A reliable estimate can be made of the amount of the obligation.

8.1 Cash Credit from banks are sanctioned on a consortium basis by hypothecation of raw materials, finished goods, stores and spares, book debts etc. pari-passu secured charge on immovable properties and other fixed assets and also guaranteed by personal guarantee of vice- chairman of the Company (Dr. P. K. Mohanty). The above cash credit is repayable on demand and carries interest @15.75 % to 17.15 %.

* Based on and to the extent of information obtained from suppliers regarding their status as Micro, Small or Medium enterprises under the Micro, Small and Medium Enterprises Development Act, 2006, there are no amounts due to them as at the end of the year.

13.1 Loans and advances to related parties includes:

Advances to Bilati (Orissa) Ltd (BOL) - doubtful ? 1,927.51 lacs (? 1,901 A3 lacs)

Advance to Bamra Iron & Steel Company (India) Ltd. (Bamra) - ? 84.70 lacs (? 84.10 lacs)

As the prospect of reviving of Bilati (Orissa) Ltd. (which is under BIFR). appears to be uncertain, provision has been made for

advanced due from Bilati (Orissa) Ltd.

13.2 Long Term Advances under doubtful includes claim receivable amounting to ? 119.00 lacs from Mahanadi Coalfield Ltd. Mahanadi Coalfield Ltd. enchashed the bank guarantee given to them for purchasing of coal under the fuel supply agreement. The company has contested such encashment of bank guarantee and the matter is subjudice.

b) Defined Benefit Plans :

i) Compensated Absences: Liability for Compensated Absences is provided on the basis of valuation, as at the Balance Sheet date, carried out by an independent actuary. The actuarial valuation method used for measuring the liability is the Projected Unit Credit method. Under this method, the Defined Benefit Obligation is calculated taking into account pattern of availment of leave while in service and qualifying salary on the date of availment of leave. In respect of encashment of leave, the Defined Benefit obligation is calculated taking into account in qualifying salary projected up to the assumed date of encashment.


Mar 31, 2013

I. Basis of preparation of financial statements

The financial statements are prepared on accrual basis under the historical cost convention, in accordance with Indian Generally Accepted Accounting Principles (GAPP). Financial statements comply with the applicable Accounting Standards (AS) specified in Companies (Accounting Standard) Rules, 2006 and presentational requirement of the Companies Act, 1956.

II. Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles in India (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities and commitments on the date of financial statements and the result of operations during the year. Differences between actual results and estimates are recognized in the year in which the results are known or materialized. Actual results could differ from those estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.

III. Revenue Recognition

Revenue from sale of products is recognized when the products are despatched against orders from customers in accordance with the contract terms, which coincides with the transfer of risks and rewards. Sales are stated inclusive of excise duty and net of rebates, trade discounts and sales tax.

Revenue from services are recognized when services have been rendered in accordance with the contract terms.

Revenue from the sale of power is recognized based on monthly bill raised as per month-end meter reading.

Dividend income is recognized when the Company''s right to receive dividend is established. Interest income is recognized on accrual basis on implicit interest rates.

Revenue from Certified Emission Reductions (CER) is recognized in the financial statements only after certification by accredited agency

i.e. United National Framework Convention on Climate Change (UNFCCC).

IV. Tangible Assets

All tangible assets are valued at cost less depreciation. The cost of an asset includes the purchase cost of materials, including import duties and non refundable taxes and any directly attributable costs of bringing an asset to the location and condition of its intended use. Interest on borrowings used to finance the construction of qualifying assets are capitalized as part of the cost of the asset until such time that the asset is ready for its intended use.

V. Intangible Assets

Intangible assets are carried at cost less accumulated amortizatin and impairment losses, if any. Intangible assets are amortized over the useful life of the assets.

VI. 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 interest, if any.

VII. Depreciation

Depreciation for the year is computed on the straight line method, as per the rates prescribed in Schedule XIV to the Companies Act, 1956. Additional charge of depreciation on amount added on revaluation is adjusted against revaluation reserve.

VIII. Investments

Investments held by the Company which are long term in nature are stated at cost unless there is any permanent diminution in value, where provision for diminution is made on individual investment basis. Current investments are carried lower of cost and fair value.

IX. Inventories

Items of inventories are measured at lower of cost and net realizable value after providing for obsolescence, if any. Cost of inventories comprises of cost of purchase, cost of conversion and other costs including manufacturing overheads incurred in bringing them to their respective present location and condition. Cost of raw materials, stores and spares, packing materials and other products are determined on weighted average basis. By-products are valued at net realizable value.

X. Retirement Benefits and Employee Benefits Schemes a) Provident Fund:

Retirement benefit in the form of Provident Fund is a defined benefit obligation of the Company and the contributions are charged to the Statement of Profit & Loss of the year when the contributions to the respective funds are due. Shortfall in the funds, if any, is adequately provided by the Company.

b) Superannuation Fund:

Superannuation Fund (for certain class of employees) is a defined contribution scheme. Liability and contribution in respect of Superannuation Fund of the concerned employees is accounted for as per Company''s scheme and paid to the Life Insurance Corporation of India (LICI) every year. The contributions to the fund are charged in the Statement of Profit & Loss of the year. The Company does not have any other obligations to the Fund other than the contribution payable to LICI.

c) Gratuity Fund:

Gratuity Fund is a defined benefit obligation and is provided on the basis of actuarial valuation on project unit credit method at the end of each financial year. The Company has taken a policy with LICI to cover the gratuity liabilities of the employees and contribution paid to LICI is charged to the Statement of Profit & Loss. The difference between the actuarial valuation of gratuity of the employees at the year end and the balance of fund with LICI is recognized as Liability in the Books of Accounts.

d) Leave Encashment:

Short term compensated absence are provided on the basis of actuarial valuation at the year end. The actuarial valuation is as per project unit credit method.

Actuarial gains/losses are recognized immediately in the Statement of Profit & Loss and are not deferred.

XI. Research and Development

Revenue expenditure on research and development is charged to the Statement of Profit and Loss. Capital expenditure on tangible assets for research and development is shown as additions to Fixed Assets.

XII. Foreign Currency Transaction

Transactions in foreign currency are recorded initially at the exchange rate prevailing at the date of transaction. Monetary assets or liability in currencies other than the reporting currency and foreign exchange transactions remaining unsettled at the Balance Sheet date are valued at the year end exchange rate.

Exchange difference arising on the settlement of monetary items and on the re-settlement of the monetary items are recognized as income or expense in the Statement of Profit and Loss.

XIII. Relining Expenses

Expenditure on relining of kiln and cooler is charged to the Statement of Profit and Loss in the year in which it is incurred.

XIV. Taxation

a) Current Taxes:

Provision for current taxes is determined on the basis of taxable income and tax credits as per provision of the Income Tax Act, 1961.

b) Deferred Taxes:

Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will

be available against which such deferred tax assets can be realized.

The deferred tax charge or credit and the corresponding deferred tax liability and assets are recognized using the tax rates that have been enacted or substantially enacted on the Balance Sheet date. Deferred tax assets arising from unabsorbed depreciation or carry forward losses are recognized only if there is virtual certainty of realization of such amounts.

XV. Lease

Where the Company is a lessee, financial leases, effectively transferred to the Company substantially, the risk and benefits incidental to the ownership of the lease item, are capitalized at the lower of the fair value and present value of the minimum lease payment at the inception of the lease starts. Lease payments are apportioned between the finance charge and deduction of the lease liability based on the implicit rate of return. Finance charges are expensed.

XVI. Borrowing Cost

Borrowing Costs that are attributable to the acquisitions, construction or production of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. All other borrowing costs are recognized as an expense in the period in which they are incurred.

XVII. Provisions and Contingent Liabilities

A provision is recognized when it is more likely that an obligation will result in an outflow of resources. Provisions are not discounted at their present value and are determined based on the management''s estimation of the obligation required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect current management estimates. A disclosure for a contingent liability is made where it is more likely than a present obligation or possible obligation would not result in or involve an outflow of resources.

XVIII. Earning per share

Basic earning per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of the equity shares outstanding during the period.

Diluted earnings during the year adjusted for the effects of all dilutive potential equity shares per share is computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.

XIX. Impairment

At each Balance Sheet date, the Company reviews the carrying value of tangible and intangible assets for any possible impairment. An impairment loss is recognized when the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is higher of the asset''s net selling price or estimated future cash flows which are discounted to their present value based on appropriate discount rates. For the purpose of assessing impairment, assets are grouped at the levels for which there are separately identifiable cash flows (cash generation unit).


Mar 31, 2012

I. Basis of preparation of financial statements

The financial statements are prepared on accrual basis under the historical cost convention, in accordance with Indian Generally Accepted Accounting Principles (GAPP). Financial statements comply with the applicable Accounting Standards (AS) specified in Companies (Accounting Standard) Rules, 2006 and presentational requirement of the Companies Act, 1956.

II. Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles in India (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities and commitments on the date of financial statements and the result of operations during the year. Differences between actual results and estimates are recognized in the year in which the results are known or materialized. Actual results could differ from those estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.

III. Fixed Assets / Depreciation

Fixed assets are stated at cost or at revalued amounts less accumulated depreciation. Cost of fixed assets includes all incidental expenses and interest costs on borrowings, attributable to the acquisition of the assets, upto the date of commissioning of the assets. Depreciation for the year is computed on the straight line method, as per the rates prescribed in Schedule XIV to the Companies Act,1956. Additional charge of depreciation on amount added on revaluation is adjusted against revaluation reserve.

Fixed assets are reviewed for impairment on each Balance Sheet date, in accordance with AS 28 "Impairment of Assets".

IV. Revenue Recognition

Revenue from sale of products is recognized when the products are dispatched against orders from customers in accordance with the contract terms, which coincides with the transfer of risks and rewards. Revenue from services are recognized when services have been rendered in accordance with the contract terms.

Revenue from the sale of power is recognized based on monthly bill raised as per month-end meter reading.

Sales are stated inclusive of excise duty and net of rebates, trade discounts and sales tax.

Dividend income is recognized when the Company's right to receive dividend is established. Interest income is recognized on accrual basis on implicit interest rates.

V. Carbon Credit

Till 31st March 2011, Certified Emission Reductions (CER) was accounted for on estimated accrued CER valued at net realizable value. From 2011 -12, following the Guidance Notes on Accounting for self-generated CER issued by Accounting Standards Board of the Institute of Chartered Accountants of India (ICAI), CER is recognized in the financial statements only after certification by accredited agency i.e. United Nation Framework Convention on Climate Change (UNFCCC).

VI. Investments

Investments held by the Company which are long term in nature are stated at cost unless there is any permanent diminution in value, where provision for diminution is made on individual investment basis. Current investments are carried lower of cost and fair value.

VII. Inventories

Items of inventories are measured at lower of cost and net realizable value after providing for obsolescence, if any. Cost of inventories comprises of cost of purchase, cost of conversion and other costs including manufacturing overheads incurred in bringing them to their respective present location and condition. Cost of raw materials, stores and spares, packing materials and other products are determined on weighted average basis. By-products are valued at net realizable value.

VIII. Retirement Benefits and Employee Benefits Schemes

a) Provident Fund:

Retirement benefit in the form of Provident Fund is a defined benefit obligation of the Company and the contributions are charged to the Profit & Loss Account of the year when the contributions to the respective funds are due. Shortfall in the funds, if any, is adequately provided by the Company.

b) Superannuation Fund:

Superannuation Fund (for certain class of employees) is a defined contribution scheme liability and contribution in respect of Superannuation Fund of the concerned employees is accounted for as per Company's scheme and paid to the Life Insurance Corporation of India (LICI) every year. The contributions to the fund are charged in the Profit & Loss Account of the year. The Company does not have any other obligations to the Fund other than the contribution payable to LICI.

c) Gratuity Fund:

Gratuity Fund is a defined benefit obligation and is provided on the basis of actuarial valuation on project unit credit method at the end of each financial year. The Company has taken a policy with LICI to cover the gratuity liabilities of the employees and contribution paid to LICI is charged to Profit & Loss Account. The difference between the actuarial valuation of gratuity of the employees at the year end and the balance of fund with LICI is recognized as Liability in the Books of Accounts.

d) Leave Encashment:

Short term compensated absence are provided on the basis of actuarial valuation at the year end. The actuarial valuation is as per project unit credit method.

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

IX. Research and Development

Revenue expenditure on research and development is charged to Profit and Loss Account. Capital expenditure on tangible assets for research and development is shown as additions to Fixed Assets.

X. Foreign Currency Transaction

Transactions in foreign currency are recorded initially at the exchange rate prevailing at the date of transaction. Monetary assets or liability in currencies other than the reporting currency and foreign exchange transactions remaining unsettled at the balance sheet date are valued at the yearend exchange rate.

Exchange difference arising on the settlement of monetary items and on the re-settlement of the monetary items are recognized as income or expense in the Profit and Loss Account.

XI. Relining Expenses

Expenditure on relining of kiln and cooler is charged to Profit and Loss Account in the year in which it is incurred.

XII. Taxation

a) Current Taxes:

Provision for current taxes is determined on the basis of taxable income and tax credits as per provision of the Income Tax Act 1961.

b) Deferred Taxes:

Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

The deferred tax charge or credit and the corresponding deferred tax liability and assets are recognized using the tax rates that have been enacted or substantially enacted on the Balance Sheet date.

Deferred tax assets arising from unabsorbed depreciation or carry forward losses are recognized only if there is virtual certainty of realization of such amounts.

XIII. Lease

Where the Company is a lessee, financial leases, effectively transferred to the Company substantially, the risk and benefits incidental to the ownership of the lease item, are capitalized at the lower of the fair value and present value of the minimum lease payment at the inception of the lease starts. Lease payments are apportioned between the finance charge and deduction of the lease liability based on the implicit rate of return. Finance charges are expensed.

XIV. Borrowing Cost

Borrowing Costs that are attributable to the acquisitions, construction or production of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. All other borrowing costs are recognized as an expense in the period in which they are incurred.

XV. Provisions and Contingent Liabilities

A provision is recognized when it is more likely that an obligation will result in an outflow of resources. Provisions are not discounted at their present value and are determined based on the management's estimation of the obligation required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect current management estimates.

A disclosure for a contingent liability is made where it is more likely than a present obligation or possible obligation would not result in or involve an outflow of resources.

XVI. Earnings per share

Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of the equity shares outstanding during the period.

For the purpose of calculating diluted earnings per share, net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effect of all dilutive potential equity shares.


Mar 31, 2010

I. Basis of preparation of financial statements

The financial statements are prepared on accrual basis under the historical cost convention, in accordance with Indian Generally Accepted Accounting Principles (GAPP). Financial statements comply with the applicable Accounting Standards (AS) specified in Companies (Accounting Standard) Rules, 2006 and presentational requirement of the Companies Act, 1956.

II. Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles in India (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of financial statements and the result of operations during the year. Differences between actual results and estimates are recognized in the year in which the results are known or materialized. Actual results could differ from those estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.

III. Fixed Assets / Depreciation

Fixed assets are stated at cost or at revalued amounts less accumulated depreciation. Cost of fixed assets includes all incidental expenses and interest costs on borrowings, attributable to the acquisition of the assets, upto the date of commissioning of the assets. Depreciation for the year is computed on the straight line method, as per the rates prescribed in Schedule XIV to the Companies Act,1956. Additional charge of depreciation on amount added on revaluation is adjusted against revaluation reserve.

Fixed assets are reviewed for impairment on each Balance Sheet date, in accordance with AS 28 "Impairment of Assets".

IV. Revenue Recognition

Revenue from sale of products is recognized when the products are despatched against orders from customers in accordance with the contract terms, which coincides with the transfer of risks and rewards. Revenue from services are recognized when services have been rendered in accordance with the contract terms.

Revenue from the sale of power is recognized based on monthly bill raised as per month-end meter reading.

Sales are stated inclusive of excise duty and net of rebates, trade discounts and sales tax.

Dividend income is recognized when the Companys right to receive dividend is established. Interest income is recognized on accrual basis on implicit interest rates.

V. Carbon Credit

Waste Heat Power Project commissioned in 2001 is a registered CDM (Clean Development Mechanism) project and eligible for allotment of Certified Emission Reduction (CER) credits for a period of ten years upto 30th June, 2011. CER credits are accounted for on an accrual basis as estimated / certified by the Accredited Agencies. Year end unsold CER CREDITS is valued at net realizable value.

VI. Investments

Long term investments are stated at cost less provision for permanent diminution, if any, in the value of such investments. Current investments are carried lower of cost and fair value.

VII. Inventories

Finished goods and saleable products are valued at lower of costs, computed on weighted average basis, and net realizable value. Cost includes on appropriate portion of manufacturing and other overheads. Excise duty on finished goods is included in the value of finished goods.

Raw materials are carried at cost computed on a weighted average basis, after providing for obsolescence. In case there is a decline in replacement cost of such material and the net realizable value of finished product in which they will be used is expected to be below cost, the value is appropriately written down.

Stores and Spare parts are valued at cost and are computed on a weighted average basis.

VIII. Retirement Benefits and Employee Benefits Schemes

a) Provident Fund:

Retirement benefit in the form of Provident Fund is a defined benefit obligation of the Company and the contributions are charged to the Profit & Loss Account of the year when the contributions to the respective funds are due. Shortfall in the funds, if any, is adequately provided by the Company.

b) Superannuation Fund:

Superannuation Fund (for certain class of employees) is a defined contribution scheme liability and contribution in respect of Superannuation Fund of the concerned employees is accounted for as per Companys scheme and paid to the Life Insurance Corporation of India (LICI) every year. The contributions to the fund are charged in the Profit & Loss Account of the year. The Company does not have any other obligations to the Fund other than the contribution payable to LICI.

c) Gratuity Fund:

Gratuity Fund is a defined benefit obligation and is provided on the basis of actuarial valuation on project unit credit method at the end of each financial year. The Company has taken a policy with LICI to cover the gratuity liabilities of the employees and contribution paid to LICI is charged to Profit & Loss Account. The difference between the actuarial valuation of gratuity of the employees at the year end and the balance of fund with LICI is recognized as Liability in the Books of Accounts.

d) Leave Encashment:

Short term compensated absence are provided on the basis of actuarial valuation at the year end. The actuarial valuation is as per project unit credit method.

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

IX. Research and Development

Revenue expenditure on research and development is charged to Profit and Loss Account. Capital expenditure on tangible assets for research and development is shown as additions to Fixed Assets.

X. Foreign Currency Transaction

Transactions in foreign currency are recorded initially at the exchange rate prevailing at the date of transaction. Monetary assets or liability in currencies other than the reporting currency and foreign exchange transactions remaining unsettled at the balance sheet date are valued at the year end exchange rate.

Exchange difference arising on the settlement of monetary items and on the re-settlement of the monetary items are recognized as income or expense in the Profit and Loss Account.

XI. Relining Expenses

Expenditure on relining of kiln and cooler is charged to Profit and Loss Account in the year in which it is incurred.

XII. Taxation

a) Current Taxes:

Provision for current taxes is determined on the basis of taxable income and tax credits as per provision of the Income Tax Act 1961.

b) Deferred Taxes:

Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

The deferred tax charge or credit and the corresponding deferred tax liability and assets are recognized using the tax rates that have been enacted or substantially enacted on the Balance Sheet date.

Deferred tax assets arising from unabsorbed depreciation or carry forward losses are recognized only if there is virtual certainty of realization of such amounts.

XIII. Lease

Where the Company is a lessee, financial leases, effectively transferred to the Company substantially, of the risk and benefits incidental to the ownership of the lease item, are capitalized at the lower of the fair value and present value of the minimum lease payment at the inception of the lease starts. Lease payments are apportioned between the finance charge and deduction of the lease liability based on the implicit rate of return. Finance charges are expensed.

XIV. Borrowing Cost

Borrowing Costs that are attributable to the acquisitions, construction or production of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. All other borrowing costs are recognized as an expense in the period in which they are incurred.

XV. Provisions and Contingent Liabilities

A provision is recognized when it is more likely that an obligation will result in an outflow of resources. Provisions are not discounted at their present value and are determined based on the managements estimation of the obligation required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect current management estimates.

A disclosure for a contingent liability is made where it is more likely than a present obligation or possible obligation would not result in or involve an outflow of resources.

XVI. Earning per share

Basic earning per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of the equity shares outstanding during the period.

For the purpose of calculating diluted earnings per share, net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effect of all dilutive potential equity shares.

 
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