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Accounting Policies of Resonance Specialties Ltd. Company

Mar 31, 2015

GENERAL INFORMATION

M/s Resonance Specialties Limited (company) is incorporated under the companies Act 1956, and is listed with Bombay stock exchange, the main activity of company is manufacturing of Pyridine, Picoline, Cynopyridine and derivatives of the same. Bulks drugs and nutritional products are toll converted. In view of multi products manufacturing and fractional distillation in batches, overall average production cycle is around 2 to 4 months from the procurement till the disposal.

BASIS OF PREPARATION

The financial statements of the company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP), including the Accounting standards notified under the relevant provisions of the companies Act, 2013. The financial statements have been prepared on accrual basis and under historical cost convention.

a) Use of estimates:

The presentation of financial statements in conformity with the generally accepted accounting principles requires 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. Difference between the actual result and estimates are recognized in the period in which the results are known / materialized.

b) Fixed Assets :

Tangible Assets: These Fixed assets are stated at cost of acquisition or construction, net of Cenvat/Value Added Tax, less accumulated depreciation and impairment loss, if any. All costs, including finance cost till commencement of commercial production & net charges on forward exchange contracts attributable to the fixed assets are capitalized.

Depreciation is provided at straight line method as prescribed under Schedule II to the Companies Act, 2013. pro-rata depreciation is charged for the additions/deletion made during the year.

Intangible Assets: these assets are stated at cost incurred in respect of successful development of respective manufacturing/process technology.

c) Capital Work - in - Progress:

Assets under installation / commissioning are shown under the head Capital Work - in Progress.

d) Inventories :

I) In general, all inventories of Finished Goods, Work-in-Process etc., are stated at lower of cost or net realizable value. Finished goods stored in tanks pending final packing are included in the finished goods stock and valued accordingly. Cost of inventories comprises of all cost of purchase, cost of conversion and other cost incurred in bringing the inventory to their present location and condition. Raw Materials, Packing material & Stores and Spares are stated at cost on FIFO Basis. Inventories of Finished Goods include excise duty, wherever applicable.

II) Catalyst charged to Cyan pyridine plant is valued at cost and amortized over its estimated life of 10 yrs. However, the catalyst which is deactivated is fully written off in the year in which new catalyst is procured.

III) Cost Comprises all cost of purchases. Cost of conversion and other cost incurred in bringing the inventory to the present location and condition

e) Revenue Recognition:

Revenue is recognized only when there is no significant uncertainty as to measurability or collectiblity of the amount. Turnover includes sale of goods, and excise duty and are net of sales tax, value added tax, discounts and claims. Revenue for the technical assistance is recognized on accrual basis as per the terms of contract

f) Foreign Currency Transactions:

Foreign currency transactions are accounted for at the exchange rate prevailing on the date of transaction. The year- end balance receivable and payable in foreign currencies are translated at the exchange rate prevailing on that date. The gain / loss arising out of fluctuation in the exchange rate are recognized in the profit & loss Account in the period to which they relate.

g) Excise and Custom Duties:

Liability on account of Customs Duty on Imported materials is accounted for only on clearing / deboning of materials Excise duty on finished goods lying in stock is accounted on the basis of prevailing selling price at year end.

h) Export Incentives:

Export benefits are accounted for on accrual basis to the extent considered receivable. i) Depreciation /Amortization:

a) Depreciation on tangible fixed assets has been provided on straight-line method at the rates specified in Schedule II of the Companies Act, 2013. In case of additions, pro-rata depreciation is charged.

b) Intangible asset, are amortized over a period of ten years from the date of its development.

j) Impairment of Assets

At each balance sheet date the company reviews whether there is any indication of impairment of the carrying amount of the company's fixed assets. If any indication exists, an asset's recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount and charged to profit & loss account in the year in which asset is identified as impaired. The recoverable amount is the greater of the net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value based on an appropriate discount factor. The impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

k) Employees Benefits :

Short Term employees benefit payable wholly within twelve months of rendering services such as salaries, wages etc. are recognized in the period in which the employee renders the related service.

Defined Contribution Plan: The Company's Contribution to the state governed employee's provident fund scheme is a defined contribution plan. The contribution paid / payable under the scheme is recognized during the period in which the employee renders the related service.

Defined Benefit Plan: The Company's gratuity fund is not funded. The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the projected unit credit method.

l) Research & Development Expenses:

Revenue expenditure pertaining to Research & Development which are not for enduring benefit are charged to Profit & Loss Account.

Expenditure incurred for enduring benefit for the development of the products /processes which will generate future economic benefit by way of improvement in yield and efficiency of those products are carried over as R & D work in progress under the head 'Capital Work in Progress'. The value of the process/products so developed is amortized over a period of ten years from the year of successful development.

m) Borrowing Costs.

Borrowing Cost that is attributable to the acquisition or construction of qualifying assets is capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended its use. All other borrowing cost is charged to revenue.

n) Taxation

Provision for income taxes comprises of current taxes including deferred taxes. Current Tax is determined on the basis of taxable income and tax credits computed in accordance with provisions of Income Tax act, 1961.

Deferred Tax liability is recognized for the future tax consequences of the timing differences between the tax basis and the carrying value of assets and liabilities. Deferred tax assets are recognized on the basis only if there is virtual certainty that they will be realized and are reviewed every year. The tax effect is calculated on the accumulated timing differences using the tax rates and laws enacted or substantially enacted as on the balance sheet date.

o) Provisions & Contingent Liability:

A provision is recognized when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions 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.

All material known liabilities are provided for and liabilities which are material and whose future outcome cannot be ascertained with reasonable certainty are treated as contingent and disclosed by way of notes to account. Contingent assets are neither recognized nor disclosed in financial statements.

p) Cash and cash equivalent

Cash and cash equivalent for the purposes of cash flow statement comprise cash at bank and in hand and short term investments with an original maturity of three months or less.

d) As per the records of the company, including its register of the shareholders/ members and other declarations received from the shareholders regarding beneficial interest, the above shareholding represent both legal and beneficial ownerships of shares.

b) Terms/ rights attached to equity shares

1. The Company has only one class of shares referred to as equity shares having a par value of Rs.10/-.Each holder of equity shares is entitled to one vote per share.

b) The Company had received certain refunds towards Sales Tax/Vat during the year 2009-10 after completion of assessment /refund audit. However, the sales tax department, on their visit to the company asserted that the said refund were erroneous. The company, pending assessment /reassessment had made payment of Rs. 130.00 Lacs under protest and shown the net liability of Rs. 166.88 Lacs as payable in the books of account till 31.3.2014. Meanwhile, the sales tax department made the exported assessment for the period from 2005-06 to 2009-10, due to non availability of certain documents which could not be received from sales tax consultant, and levied demand of Rs 20.01 crore along with interest and penalty. The Company preferred the appeal against the said demand with Commissioner of sales tax (Appeal ). The company provided the calculation for the dues as per books of accounts to the appellate authority and made payment of Rs. 66.94 Lacs. Pending disposal of appeal by the Appellate authority , the company obtained an expert opinion that after considering the payments already made there will not be any additional liability and therefore, written back excess outstanding of Rs. 99.18 Lacs.

c) Note on Nature of Security on secured loan

(The above borrowing from Bank is secured by hypothecation of present and future stock of raw material, stock in process and Finished goods and book debts of the company, and further secured by first charge by way of equitable mortgage of land and building, plant and machineries and all immovable properties of the company situated at T 140 MIDC Tarapur, Dist-Thane and further guaranteed by Managing Director of the company and is repayable on demand).

d) Working capital borrowing, being cash credit and packing credit facility carry interest rate of 13.25% per annum and 11.75% respectively.


Mar 31, 2014

NOTE-1

GENERAL INFORMATION

M/s Resonance Specialties Limited (company) is incorporated under the companies Act 1956, and is listed with Bombay stock exchange, the main activity of company is manufacturing of Pyridine, Picoline, Cynopyridine and derivatives of the same. Bulks drugs and nutritional products are toll converted. In view of multi products manufacturing and fractional distillation in batches, overall average production cycle is around 2 to 4 months from the procurement till the disposal.

NOTE-2

BASIS OF PREPARATION

The financial statements of the company have been prepared in accordance with generally accepted accounting principals in India (Indian GAAP). The Company has prepared these financial statement to comply in all material respect with the accounting standards notifed under the Companies (Accounting Standards) Rules, 2006.(as amended) and the relevant provisions of the Companies Act, 1956. Pursuant to circular 15/2013 dated 13th September 2013 read with circular 08/2014 dated 4th April 2014 till the Standards of accounting or any addendum there to are prescribed by central govt. The financial statements have been prepared on an accrual basis and under historical cost convention.

a) Change in accounting policy:

Presentation and disclosure of financial statements-During the year ended 31st March 2014, the revised Schedule VI notifed under the Companies Act, 1956 has become applicable to the company, for preparation and presentation of its financial statements. The company has reclassified the previous year figures in accordance with the requirements applicable in the current year''s financial statements have been prepared under historical cost convention and on accrual basis in accordance with the provisions of the Companies Act, 1956; and generally accepted accounting principles.

b) Use of estimates:

The presentation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made that afect 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. Diference between the actual result and estimates are recognised in the period in which the results are known / materialised.

c) Fixed Assets :

Tangible Assets: These Fixed assets are stated at cost of acquisition or construction, net of Cenvat/Value Added Tax, less accumulated depreciation and impairment loss, if any. All costs, including finance cost till commencement of commercial production & net charges on forward exchange contracts attributable to the fixed assets are capitalized.

Intangible Assets: These assets are stated at cost incurred in respect of successful development of respective manufacturing/process technology.

d) Capital Work - in - Progress:

Assets under installation / commissioning are shown under the head Capital Work – in Progress.

e) Inventories :

I) In general, all inventories of Finished Goods, Work-in-Process etc., are stated at lower of cost or net realizable value. Finished goods stored in tanks pending final packing are included in the fnished goods stock and valued accordingly. Cost of inventories comprises of all cost of purchase, cost of conversion and other cost incurred in bringing the inventory to their present location and condition. Raw Materials, Packing material & Stores and Spares are stated at cost on FIFO Basis. Inventories of Finished Goods include excise duty, wherever applicable.

II) Catalyst charged to Cyanopyridine plant is valued at cost and amortised over its estimated life of 10 yrs. However, the catalyst which is deactivated is fully written of in the year in which new catalyst is procured.

III) Cost Comprises all cost of purchases. Cost of conversion and other cost incurred in bringing the inventory to the present location and condition

f) Revenue Recognition:

Revenue is recognized only when there is no significant uncertainty as to measurability or collectiblity of the amount. Turnover includes sale of goods, and excise duty and are net of sales tax, value added tax, discounts and claims. Revenue for the technical assistance is recognized on accrual basis as per the terms of contract

g) Foreign Currency Transactions:

Foreign currency transactions are accounted for at the exchange rate prevailing on the date of transaction. The year end balance receivable and payable in foreign currencies are translated at the exchange rate prevailing on that date. The gain / loss arising out of fuctuation in the exchange rate are recognised in the profit & loss Account in the period to which they relate.

h) Excise and Custom Duties:

Liability on account of Customs Duty on Imported materials is accounted for only on clearing / debonding of materials Excise duty on fnished goods lying in stock is accounted on the basis of prevailing selling price at year end.

i) Export Incentives:

Export benefits are accounted for on accrual basis to the extent considered receivable.

j) Depreciation /Amortisation:

a) Depreciation on tangible fixed assets has been provided on straight-line method at the rates specified in Schedule XIV of the Companies Act, 1956. In case of additions, pro-rata depreciation is charged. Any software purchased during the year is charged to revenue in conformity with AS-26 except which have licensing period exceeding one year, which is amortised over the license period. . Leasehold land is being amortized over a period of lease.

b) Assets costing less than Rs. 5,000/- fully depreciated in the year of Purchases.

c) Intangible asset, are amortised over a period of ten years from the date of its development. k) Impairment of Assets

At each balance sheet date the company reviews whether there is any indication of impairment of the carrying amount of the company''s fixed assets. If any indication exists, an asset''s recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount. and charged to profit & loss account in the year in which asset is identified as impaired The recoverable amount is the greater of the net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value based on an appropriate discount factor. The impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

l) Employees benefits :

Short Term employees benefit payable wholly within twelve months of rendering services such as salaries, wages etc. are recognized in the period in which the employee renders the related service.

Defined Contribution Plan: The Company''s Contribution to the state governed employee''s provident fund scheme is a Defined contribution plan. The contribution paid / payable under the scheme is recognized during the period in which the employee renders the related service.

Defined benefit Plan: The Company''s gratuity fund is not funded. The present value of the obligation under such Defined benefit plan is determined based on actuarial valuation using the projected unit credit method.

As per the policy of the Company, no leave encashment is allowed.

m) Research & Development Expenses:

Revenue expenditure pertaining to Research & Development which are not for enduring benefit are charged to profit & Loss Account.

Expenditure incurred for enduring benefit for the development of the products /processes which will generate future economic benefit by way of improvement in yield and efciency of those products are carried over as R & D work in progress under the head ''Capital Work in Progress''. The value of the process/products so developed is amortized over a period of ten years from the year of successful development.

n) Borrowing Costs:

Borrowing Cost that is attributable to the acquisition or construction of qualifying assets is capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended its use. All other cost is charged to revenue.

o) Taxation:

Provision for income taxes comprises of current taxes including deferred taxes.

Current Tax is determined on the basis of taxable income and tax credits computed in accordance with provisions of Income Tax act, 1961.

Deferred Tax liability is recognized for the future tax consequences of the timing diferences between the tax basis and the carrying value of assets and liabilities. Deferred tax assets are recognized on the basis only if there is virtual certainty that they will be realized and are reviewed every year. The tax efect is calculated on the accumulated timing diferences using the tax rates and laws enacted or substantially enacted as on the balance sheet date.

p) Provisions & Contingent Liability:

A provision is recognized when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions 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 refect the current best estimates.

All material known liabilities are provided for and liabilities which are material and whose future outcome cannot be ascertained with reasonable certainty are treated as contingent and disclosed by way of notes to account. Contingent assets are neither recognized nor disclosed in financial statements.

q) Cash and Bank balances

Cash and cash equivalent for the purposes of cash fow statement comprise cash at bank and in hand and short term investments with an original maturity of three months or less.

r) Measurement of EBITDA

As permitted by the Guidance Note on the revised schedule VI to the Companies Act, 1956, the Company has elected to present earnings before interest, tax, depreciation and amortization (EBITDA) as a separate line item on the face of the statement of profit and loss. The Company measures EBITDA on the basis of profit/(loss) from continuing operations. In its measurement, the Company does not include depreciation and amortization expenses, finance costs and tax expenses.


Mar 31, 2013

A) Change in accounting policy:

Presentation and disclosure of financial statements-During the year ended March 31, 2013, the revised Schedule VI notified under the Companies Act, 1956 has become applicable to the company, for preparation and presentation of its financial statements. The company has reclassified the previous year figures in accordance with the requirements applicable in the current year''s financial statements have been prepared under historical cost convention and on accrual basis in accordance with the provisions ofthe Companies Act, 1956; and generally accepted accounting principles.

b) Use of estimates:

The presentation of financial statements in conformity with the generally accepted accounting principles requires 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 reyenues and expenses during the reporting period. Difference between the actual result and estimates are recognised in the period in which the results are known / materialised.

c) Fixed Assets :

Tangible Assets: These Fixed assets are stated at cost of acquisition or construction, net of CenvaWalue Added Tax, less accumulated depreciation and impairment loss, if any. All costs, including finance cost till commencement of commercial production & net charges on forward exchange contracts attributable to the fixed assets are capitalized.

Intangible Assets: these assets are stated at cost incurred in respect of successful development of respective manufacturing/process technology.

d) Capital Work - in - Progress:

Assets under installation / commissioning are shown under the head Capital Work - in Progress.

e) Inventories:

I) In general, all inventories of Finished Goods, Work-in-Process etc., are stated at lower of cost or net realizable value. Finished goods stored in tanks pending final packing are included in the finished goods stock and valued accordingly. Cost of inventories comprises of all cost of purchase, cost of conversion and other cost incurred in bringing the inventory to their present location and condition. Raw Materials, Packing material & Stores and Spares are stated at cost on FIFO Basis. Inventories of Finished Goods include excise duty, wherever applicable.

II) Catalyst charged to Cyanopyridine plant is valued at cost and amortised over its estimated life of 10 yrs. However, the catalyst which is deactivated is fully written off in the year in which new catalyst is procured.

III) Cost Comprises all cost of purchases. Cost of conversion and other cost incurred in bringing the inventory to the present location and condition

f) Revenue Recognition:

Revenue is recognized only when there is no significant uncertainty as to measurability or collectiblity of the amount. Turnover includes sale of goods, and excise duty and are net of sales tax, value added tax, discounts and claims. Revenue for the technical assistance is recognized on accrual basis as per the terms of contract

g) Foreign Currency Transactions:

Foreign currency transactions are accounted for at the exchange rate prevailing on the date of transaction. The year- end balance receivable and payable in foreign currencies are translated at the exchange rate prevailing on that date. The gain / loss arising out of fluctuation in the exchange rate are recognised in the profit & loss Account in the period to which they relate.

h) Excise and Custom Duties:

Liability on account of Customs Duty on Imported materials is accounted for only on clearing / debonding of materials Excise duty on finished goods lying in stock is accounted on the basis of prevailing selling price at year end.

i) Export Incentives:

Export benefits are accounted for on accrual basis to the extent considered receivable.

j) Depreciation /Amortisation:

a) Depreciation on tangible fixed assets has been provided on straight-line method at the rates specified in Schedule XIV of the Companies Act, 1956. In case of additions, pro-rata depreciation is charged. Any software purchased during the year is charged to revenue in conformity with AS-26 except which have licensing period exceeding one year, which is amortised over the license period.. Leasehold land is being amortized over a period of lease.

b) Assets costing less than Rs. 5,000/-fully depreciated in the year of Purchases.

c) Intangible asset, are amortised over a period of ten years from the date of its development.

k) Impairment of Assets

At each balance sheet date the company reviews whether there is any indication of impairment of the carrying amount of the company''s fixed assets. If any indication exists, an asset''s recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount, and charged to profit & loss account in the year in which asset is identified as impaired The recoverable amount is the greater of the net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value based on an appropriate discount factor. The impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

I) Employees Benefits:

Short Term employees benefit payable wholly within twelve months of rendering services such as salaries, wages etc. are recognized in the period in which the employee renders the related service.

Defined Contribution Plan: The Company''s Contribution to the state governed employee''s provident fund scheme is a defined contribution plan. The contribution paid / payable under the scheme is recognized during the period in which the employee renders the related service.

Defined Benefit Plan: The Company''s gratuity fund is not funded. The presentvalue of the obligation under such defined benefit plan is determined based on actuarial valuation using the projected unit credit method.

As per the policy of the Company, no leave encashment is allowed.

m) Research & Development Expenses:

Revenue expenditure pertaining to Research & Development which are not for enduring benefit are charged to Profit & Loss Account.

Expenditure incurred for enduring benefit for the development of the products /processes which will generate future economic benefit by way of improvement in yield and efficiency of those products are carried over as R & D work in progress under the head ‘Capital Work in Progress''. The value of the process/products so developed is amortized over a period of ten years from the year of successful development.

n) Borrowing Costs.

Borrowing Cost that is attributable to the acquisition or construction of qualifying assets is capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended its use. All other cost is charged to revenue.

o) Taxation

Provision for income taxes comprises of current taxes including deferred taxes.

Current Tax is determined on the basis of taxable income and tax credits computed in accordance with provisions of Income Tax act, 1961.

Deferred Tax liability is recognized for the future tax consequences of the timing differences between the tax basis and the carrying value of assets and liabilities. Deferred tax assets are recognized on the basis only if there is virtual certainty that they will be realized and are reviewed every year. The tax effect is calculated on the accumulated timing differences using the tax rates and laws enacted or substantially enacted as on the balance sheet date.

p) Provisions & Contingent Liability:

A provision is recognized when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions 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.

All material known liabilities are provided for and liabilities which are material and whose future outcome cannot be ascertained with reasonable certainty are treated as contingent and disclosed by way of notes to account. Contingent assets are neither recognized nor disclosed in financial statements.

q) Cash and cash equivalent

Cash and cash equivalent for the purposes of cash flow statement comprise cash at bank and in hand and short term investments with an original maturity of three months or less.

r) Measurement of EBITDA

As permitted by the Guidance Note on the revised schedule VI to the Companies Act, 1956, the Company has elected to present earnings before interest, tax, depreciation and amortization (EBITDA) as a separate line item on the face of the statement of profit and loss. The Company measures EBITDA on the basis of profit/(loss) from continuing operations. In its measurement, the Company does not include depreciation and amortization expenses, finance costs and tax expenses.


Mar 31, 2012

A) Change in accounting policy:

Presentation and disclosure of financial statements-During the year ended 31 March 2012, the revised Schedule VI notified under the Companies Act, 1956 has become applicable to the company, for preparation and presentation of its financial statements. The company has reclassified the previous year figures in accordance with the requirements applicable in the current year's financial statements have been prepared under historical cost convention and on accrual basis in accordance with the provisions of the Companies Act, 1956; and generally accepted accounting principles.

b) Use of estimates:

The presentation of financial statements in conformity with the generally accepted accounting principles requires 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. Difference between the actual result and estimates are recognised in the period in which the results are known / materialised.

c) Fixed Assets :

Tangible Assets: These Fixed assets are stated at cost of acquisition or construction, net of Cenvat/Value Added Tax, less accumulated depreciation and impairment loss, if any. All costs, including finance cost till commencement of commercial production & net charges on forward exchange contracts attributable to the fixed assets are capitalized.

Intangible Assets: these assets are stated at cost incurred in respect of successful development of respective manufacturing/process technology.

d) Capital Work - in - Progress:

Assets under installation / commissioning are shown under the head Capital Work - in Progress.

e) Inventories :

I) In general, all inventories of Finished Goods, Work-in-Process etc., are stated at lower of cost or net realizable value. Finished goods stored in tanks pending final packing are included in the finished goods stock and valued accordingly. Cost of inventories comprises of all cost of purchase, cost of conversion and other cost incurred in bringing the inventory to their present location and condition. Raw Materials, Packing material & Stores and Spares are stated at cost on FIFO Basis. Inventories of Finished Goods include excise duty, wherever applicable.

II) Catalyst charged to Cyanopyridine plant is valued at cost and amortised over its estimated life of 10 yrs. However, the catalyst which is deactivated is fully written off in the year in which new catalyst is procured.

III) Cost Comprises all cost of purchases, Cost of conversion and other cost incurred in bringing the inventory to the present location and condition

f) Revenue Recognition:

Revenue is recognized only when there is no significant uncertainty as to measurability or collectiblity of the amount. Turnover includes sale of goods, and excise duty and are net of sales tax, value added tax, discounts and claims. Revenue for the technical assistance is recognized on accrual basis as per the terms of contract

g) Foreign Currency Transactions:

Foreign currency transactions are accounted for at the exchange rate prevailing on the date of transaction. The year-end balance receivable and payable in foreign currencies are translated at the exchange rate prevailing on that date. The gain / loss arising out of fluctuation in the exchange rate are recognised in the profit & loss Account in the period to which they relate.

h) Excise and Custom Duties:

Liability on account of Customs Duty on Imported materials is accounted for only on clearing / debonding of materials

Excise duty on finished goods lying in stock is accounted on the basis of prevailing selling price at year end.

i) Export Incentives:

Export benefits are accounted for on accrual basis to the extent considered receivable.

j) Depreciation /Amortisation:

a) Depreciation on tangible fixed assets has been provided on straight-line method at the rates specified in Schedule XIV of the Companies Act, 1956. In case of additions, pro-rata depreciation is charged. Any software purchased during the year is charged to revenue in conformity with AS-26 except which have licensing period exceeding one year, which is amortised over the license period. Leasehold land is being amortized over a period of lease.

b) Assets costing less than Rs 5,000/- fully depreciated in the year of Purchases.

c) Intangible asset, are amortised over a period of ten years from the date of its development.

k) Impairment of Assets

At each balance sheet date the company reviews whether there is any indication of impairment of the carrying amount of the company's fixed assets. If any indication exists, an asset's recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount. and charged to profit & loss account in the year in which asset is identified as impaired The recoverable amount is the greater of the net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value based on an appropriate discount factor. The impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

l) Employees Benefits :

Short Term employees benefit payable wholly within twelve months of rendering services such as salaries, wages etc. are recognized in the period in which the employee renders the related service.

Defined Contribution Plan: The Company's Contribution to the state governed employee's provident fund scheme is a defined contribution plan. The contribution paid / payable under the scheme is recognized during the period in which the employee renders the related service.

Defined Benefit Plan: The Company's gratuity fund is not funded. The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the projected unit credit method.

As per the policy of the Company, no leave encashment is allowed. m) Research & Development Expenses:

Revenue expenditure pertaining to Research & Development which are not for enduring benefit are charged to Profit & Loss Account.

Expenditure incurred for enduring benefit for the development of the products /processes which will generate future economic benefit by way of improvement in yield and efficiency of those products are carried over as R

& D work in progress under the head 'Capital Work in Progress'. The value of the process/products so developed is amortized over a period of ten years from the year of successful development. n) Borrowing Costs.

Borrowing Cost that is attributable to the acquisition or construction of qualifying assets is capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended its use. All other cost is charged to revenue. o) Taxation

Provision for income taxes comprises of current taxes including deferred taxes.

Current Tax is determined on the basis of taxable income and tax credits computed in accordance with provisions of Income Tax act, 1961.

Deferred Tax liability is recognized for the future tax consequences of the timing differences between the tax basis and the carrying value of assets and liabilities. Deferred tax assets are recognized on the basis only if there is virtual certainty that they will be realized and are reviewed every year. The tax effect is calculated on the accumulated timing differences using the tax rates and laws enacted or substantially enacted as on the balance sheet date.

p) Provisions & Contingent Liability:

A provision is recognized when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions 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.

All material known liabilities are provided for and liabilities which are material and whose future outcome cannot be ascertained with reasonable certainty are treated as contingent and disclosed by way of notes to account. Contingent assets are neither recognized nor disclosed in financial statements.

q) Cash and cash equivalent

Cash and cash equivalent for the purposes of cash flow statement comprise cash at bank and in hand and short term investments with an original maturity of three months or less.

r) Measurement of EBITDA

As permitted by the Guidance Note on the revised schedule VI to the Companies Act, 1956, the Company has elected to present earnings before interest, tax, depreciation and amortization (EBITDA) as a separate line item on the face of the statement of profit and loss. The Company measures EBITDA on the basis of profit/(loss) from continuing operations. In its measurement, the Company does not include depreciation and amortization expenses, finance costs and tax expenses.


Mar 31, 2010

A) Accounts:

The accounts are prepared under historical cost convention and on accrual basis in accordance with the provisions of the Companies Act, 1956; and generally accepted accounting principles.

b) Fixed Assets:

Fixed assets are stated at cost of acquisition less accumulated depreciation. Assets costing less than Rs 5,000/- are depreciated fully in the year of acquisition. The cost of fixed assets includes interest on specific borrowing obtained for acquiring fixed assets upto the date of commissioning of the assets and incidental expenses / overhead incurred.

c) Capital Work - in - Progress:

Assets under installation / commissioning are shown under the head Capital Work - in Progress.

d) Inventories :

I) Inventories are valued at lower of cost (adopting FIFO basis) and net realizable value. Finished goods stored in tanks pending final packing are included in the finished goods stock and valued accordingly.

II) Catalyst charged to Cyanopyridine plant is valued at cost and amortised over its estimated life of 10 yrs. However, the catalyst which is deactivated is fully written off in the year in which new catalyst is procured.

e) Revenue Recognition:

Sales are recognised at the point of dispatch of material to customers. Revenue is recognized only when there is no significant uncertainty as to measurability or collectibles of the amount. Revenue for the technical assistance is recognized as per the terms of contract.

f) Foreign Currency Transactions:

Foreign currency transactions are accounted for at the exchange rate prevailing on the date of transaction. The year-end balance receivable and payable in foreign currencies are translated at the exchange rate prevailing on that date. The gain / loss arising out of fluctuation in the exchange rate are recognised in the profit & loss Account in the period to which they relate.

g) Excise and Custom Duties:

Excise and Custom Duties are accounted for only on clearing / debonding of materials. Excise

duty on finished goods lying in stock is accounted on the basis of prevailing selling price at

year end. h) Export Incentives:

Export benefits are accounted for on accrual basis to the extent considered receivable. i) Depreciation:

a) Depreciation on fixed assets has been provided on straight-line method at the rates specified in Schedule XIV of the Companies Act, 1956. In case of additions, pro-rata depreciation is calculated and no depreciation is provided in the year of sale. Any software purchased during the year is charged to revenue in conformity with AS-26. Leasehold land is being amortized over a period of lease.

b) Assets costing less than Rs 5,000/- fully depreciated in the year of Purchases.

j) Impairment of Assets

At each balance sheet date the company reviews whether there is any indication of impairment of the carrying amount of the companys fixed assets. If any indication exists, an assets recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value based on an appropriate discount factor. k) Employee Benefits:

Short Term employees benefit payable wholly within twelve months of rendering services as salaries, wages etc. are recognized in the period in which the employee renders the related service.

Defined Contribution Plan: The Companys Contribution to the state governed employees provident fund scheme is a defined contribution plan. The contribution paid / payable under the scheme is recognized during the period in which the employee renders the related service.

Defined Benefit Plan: The Companys gratuity fund is not funded. The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the projected unit credit method.

As per the policy of the Company no leave encashment is allowed. I) Research & Development Expenses:

Revenue expenditure pertaining to Research & Development which is not for enduring benefit is charged to Profit & Loss Account.

Expenditure incurred for enduring benefit for the development of the products /processes which will generate future economic benefit by way of improvement in yield and efficiency of those products are carried over as R & D work in progress under the head Capital Work in Progress. The value of the process/products so developed is amortized over a period of ten years from the year of successful development. m) Borrowing Costs.

Borrowing costs attributable to production, construction or acquisition of the qualifying assets are capitalized till the date the asset is ready for use. n) Taxation Provision for income taxes comprises of current taxes including Fringe benefit tax and deferred taxes.

Current Tax is determined on the basis of taxable income and tax credits computed in accordance with provisions of Income Tax act, 1961.

Deferred Tax liability is recognized for the future tax consequences of the timing differences between the tax basis and the carrying value of assets and liabilities. Deferred tax assets are recognized on the basis only if there is virtual certainty that they will be realized and are reviewed every year. The tax effect is calculated on the accumulated timing differences using the tax rates and laws enacted or substantially enacted as on the balance sheet date.

0) Provisions & Contingent Liability:

A provision is recognized when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions 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.

All material known liabilities are provided for and liabilities which are material and whose future outcome cannot be ascertained with reasonable certainty are treated as contingent and disclosed by way of notes to account

 
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