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Accounting Policies of Runeecha Textiles Ltd. Company

Mar 31, 2015

(a) Basis of preparation

The Financial Statements have been prepared in accordance with the generally accepted accounting principles in India (Indian GAAP) under the historical cost convention on accrual basis. These financial statements have been prepared to comply in all material respects with the accounting standards notified under section 133 of Companies Act, 2013 ("the Act") read with Rules 7 of the Company (Accounts) Rules, 2014.

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

(b) Use of estimates

The preparation of financial statements in confirmity with Generally Accepted Accounting Principals require management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities as at the reported date and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management's best knowledge of current events and actions the Company may undertake in future, actual results ultimately may differ from estimates. Any revision to accounting estimates is recongnised prospectively in current and future periods.

(c) Tangible fixed assets

Tangible fixed assets are stated at cost of acquisition net of CENVAT (wherever applicable), less accumulated depreciation and impairment losses if any. Cost comprises the purchase price and any cost attributable to bringing the assets to its working condition for its intended use.Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day to day repair and maintenance and cost of replacing parts, are charged to the Statement of Profit and Loss for the period during which such expenses are incurred. Losses arising from the retirement of, and gain or losses arising from disposal of tangible asset are determined as the difference between the net disposal proceeds and the carrying amount of asset and recognised as income or expense in the Statement of Profit and Loss.

(d) Depreciation

Depreciation has been calculated on Straight Line Method at the useful lives, which are equal to useful lives specified as per schedule II to the Act. Depreciation and amortisation on addition to fixed assets is provided on pro-rata basis from the date the assets are ready for intended use. Depreciation and amortisation on sale/discard from fixed assets is provided for up to the date of sale, deduction or discard of fixed assets as the case may be.Schedule II to the Act has become applicable to the Company with effect from April 1, 2014. Accordingly, the Company has determined the useful life of its assets as per Schedule II except plant & machinery whose useful life has been determined with the help of an expert Northern India Textile Research Association ("NITRA").The tangible fixed assets for which useful life is different than the one prescribed in the Schedule II are as follows:

Description of Useful Life of Assets Useful life as per the Assets as per Schedule-II Valuation Report

(In Years) (In Years)

Plant & Machinery 15 30 - 35

In accordance with the transitional provisions of Schedule II, in respect of assets where the remaining useful life is 'Nil', their carrying amount aggregating Rs. 770,530 after retaining the residual value as on April 1, 2014 as determined by the management has been charged to statement of profit and loss.

As a consequence, had the company not adopted Schedule II to the Act, depreciation for the year would have been lower by Rs. 13,866,631 loss for the year would have been lower by Rs. 13,866,631 and the written down value of assets as at March 31, 2015 would have been Rs. 616,729,942 as against the reported wriiten down value Rs. 602,118,294. Impact of change in estimates of useful lives on subsequent periods is not realistically ascertainable.

(e) Impairment of assets

The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets' net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.

After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

(f) Inventories

Raw materials, packaging materials and stores and spare parts are valued at lower of cost and net realisable value. Cost includes purchase price, (excluding those subsequently recoverable by the enterprise from the concerned revenue authorities), freight inwards and other expenditure incurred in bringing such inventories to their present location and condition. In determining the cost, weighted average cost method is used.Work in progress, manufactured finished goods and traded goods are valued at the lower of cost and net realisable value. Cost of work in progress and manufactured finished goods is determined on the weighted average basis and comprises direct material, Cost of conversion and other costs incurred in bringing these inventories to their present location and condition. Cost of traded goods is determined on a weighted average basis.Excise duty liability, wherever applicable, is included in the valuation of closing inventory of finished goods. Excise duty payable, if any, on finished goods is accounted for upon manufacture and transfer of finished goods to the stores. Payment of excise duty, if any, is deferred till the clearance of goods from the factory premises. Provision of obsolescence on inventories is considered on the basis of management's estimate based on demand and market of the inventories. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and the estimated costs necessary to make the sale.

(g) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefit will flow to the Company and revenue can be reliably measured. Revenue on account of sale of goods is recognized on delivery of the goods to the customer, when the property in the goods is transferred for a price and significant risk and rewards have been transferred and no effective ownership control is retained. Sales are net off discounts and sales return, sales tax/ value added tax, if any. Revenue from interest on time deposits is recognised on the time proportion method taking into consideration the amount outstanding and the applicable interest rates.

(h) Employee benefits Short term employee benefits

All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits. Benefits such as salaries, wages, and bonus etc are recognised in the statement of profit and loss in the period in which the employee renders the related service.

Long term employee benefits

i) Defined contribution plan:

Provident Fund and employees' state insurance schemes:

a) All employees of the Company are entitled to receive benefits under the Provident Fund, which is a defined contribution plan. Both the employee and the employer make monthly contributions to the plan at a predetermined rate of the employees' basic salary. These contributions are made to the fund administered and managed by the Government of India.

b) In addition, some employees of the Company are covered under the employees' state insurance scheme, which is also a defined contribution scheme recognised and administered by the Government of India.

The Company's contributions to both these schemes are expensed off in the Statement of profit and loss. The Company has no further obligations under these plans beyond its monthly contributions.

ii) Defined Benefit Plans: Gratuity

The Company provides for retirement benefits in the form of Gratuity. Benefits payable to eligible employees of the company with respect to gratuity, a defined benefit plan is accounted for on the basis of an actuarial valuation as at the balance sheet date. In accordance with the Payment of Gratuity Act, 1972, the plan provides for lump sum payments to vested employees on retirement, death while in service or on termination of employment in an amount equivalent to 15 days basic salary for each completed year of service. Vesting occurs upon completion of five years of service. The present value of such obligation is determined by the projected unit credit method and adjusted for past service cost as at the balance sheet date through which the obligations are to be settled. The resultant actuarial gain or loss on change in present value of the defined benefit obligation is recognised as an income or expense in the statement of profit and loss.

iii) Other long term employee benefits: Leave encashment

Benefits under the Company's leave encashment scheme constitute other employee benefits. The liability in respect of leave encashment is provided on the basis of an actuarial valuation done by an independent actuary using Projected Unit Credit Method at the end of the year. Actuarial gain and losses are recognized immediately in the statement of profit and loss.

(i) Income Taxes

Tax expense for the year comprising current tax, deferred tax charge or benefit and MAT credit entitlement is included in determining the net profit for the year.

Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, 1961. Deferred tax charge or credit reflects the tax effects of timing differences between accounting income and taxable income for the period. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realized in future; however, where there is unabsorbed depreciation or carry forward of losses, deferred tax assets are recognised only if there is a virtual certainty backed by convincing evidence of realisation of such assets. Deferred tax assets are reviewed at each Balance Sheet date and are written-down or written-up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realised. The break-up of the major components of the deferred tax assets and liabilities as at Balance Sheet date has been arrived at after setting off deferred tax assets and liabilities where the entity has a legally enforceable right to set-off assets against liabilities and where such assets and liabilities relate to taxes on income levied by the same governing taxation laws.

Minimum alternate tax (MAT) under the Income Tax Act, 1961, payable for the year is charged to the Statement of Profit and Loss as current tax. The company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the Company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the Company recognizes MAT credit as an asset in accordance with the Guidance Note on accounting for credit available in respect of Minimum Alternative Tax under the Income-tax Act, 1961, the said asset is created by way of credit to the Statement of Profit and Loss and shown as "MAT Credit Entitlement." The Company reviews the "MAT credit entitlement" asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will pay normal tax during the specified period.

(j) Leases Operating Leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership over the lease term are classified as operating lease.

Operating lease payments are recognized as an expense in the statement of profit and loss on a straight line basis over the lease term.

(k) Provisions, contingent liabilities and contingent assets Provisions

Provisions are recognized when the Company has a present obligation as a result of past events and it is more likely that an outflow of resources will be required to settle the obligations and the amount has been reliably estimated. Such provisions are not discounted to 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 management's current estimates.

Contingent liabilities

A disclosure for a contingent liability is made where it is more likely than not that a present obligation or possible obligation may result in or involve an outflow of resources. When no present or possible obligation exists and the possibility of an outflow of resources is remote, no disclosure is made.

Contingent assets

Contingent assets are neither recorded nor disclosed in the financial statements.

(l) Cash and cash equivalents

Cash and cash equivalents include cash in hand, demand deposits with banks, other short term highly liquid investments with original maturity of three months or less.

(m) Borrowing cost

Borrowing costs relating to acquisition or construction or production of assets which take substantial period of time to get ready for its intended use are also included as cost of such assets to the extent they relate to the period till such assets are ready to be put to use. Other borrowing costs are recognised as an expense in the period in which they are incurred.

(n) Earnings Per Share

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

For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year is adjusted for the effects of all dilutive potential equity shares, except where the result would be anti-dilutive. The dilutive potential equity shares are deemed converted as of the beginning of the period, unless they have been issued at a later date.

(o) Material Events

Material Events occurring after Balance Sheet date are taken into cognizance.


Mar 31, 2014

(a) Basis of preparation

The Financial Statements have been prepared in accordance with the generally accepted accounting principles in India (Indian GAAP) under the historical cost convention on accrual basis. These financial statements have been prepared to comply in all material respects with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended) and relevant provision of the Companies Act, 1956. The accounting policies adopted in the preparation of financial statements are consistent with those of previous year.

(b) Use of estimates

The preparation of financial statements in confirmity with Generally Accepted Accounting Principals require management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities as at the reported date and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management''s best knowledge of current events and actions the Company may undertake in future, actual results ultimately may differ from estimates. Any revision to accounting estimates is recongnised prospectively in current and future period.

(c) Tangible fixed assets

Tangible fixed assets are stated at cost of acquisition net of CENVAT (wherever applicable), less accumulated depreciation and impairment losses if any. Cost comprises the purchase price and any cost attributable to bringing the assets to its working condition for its intended use. Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day to day repair and maintenance and cost of replacing parts, are charged to the Statement of Profit and Loss for the period during which such expenses are incurred. Losses arising from the retirement of, and gain or losses arising from disposal of tangible asset are determined as the difference between the net disposal proceeds and the carrying amount of asset and recognised as income or expense in the Statement of Profit and Loss.

(d) Depreciation

Depreciation on all tangible fixed assets is provided on the straight line method at rates specified in Schedule

XIV to the Companies Act, 1956. In case of revalued assets the difference between the depreciation on the revalued book value and on the original cost is withdrawn from revaluation reserve and credited to the Statement of Profit and Loss.

Depreciation on addition to tangible fixed assets is provided on pro-rata basis from the date the asset is put to use. Depreciation on sale/deduction from fixed assets is provided for up to the date of sale, deduction, discardment as the case may be.

All tangible fixed assets costing Rs. 5,000 or below are depreciated in full by way of a one-time depreciation charge.

(e) Impairment of assets

The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets'' net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.

After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

(f) Inventories

Raw materials, packaging materials and stores and spare parts are valued at lower of cost and net realizable value. Cost includes purchase price, (excluding those subsequently recoverable by the enterprise from the concerned revenue authorities), freight inwards and other expenditure incurred in bringing such inventories to their present location and condition. In determining the cost, weighted average cost method is used. Work in progress, manufactured finished goods and traded goods are valued at the lower of cost and net realisable value. Cost of work in progress and manufactured finished goods is determined on the weighted average basis and comprises direct material, Cost of conversion and other costs incurred in bringing these inventories to their present location and condition. Cost of traded goods is determined on a weighted average basis.Excise duty liability, wherever applicable, is included in the valuation of closing inventory of finished goods. Excise duty payable, if any, on finished goods is accounted for upon manufacture and transfer of finished goods to the stores. Payment of excise duty, if any, is deferred till the clearance of goods from the factory premises. Provision of obsolescence on inventories is considered on the basis of management''s estimate based on demand and market of the inventories. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and the estimated costs necessary to make the sale. The comparison of cost and net realizable value is made on item by item basis.

(g) Revenue recognition

Revenue on account of sale of goods is recognized on delivery of the goods to the customer, when the property in the goods is transferred for a price and significant risk and rewards have been transferred and no effective ownership control is retained. Sales are net off discounts and sales return, sales tax/ value added tax, if any. Income from interest on deposits is recognized on the time proportion method.

(h) Employee benefits

Short term employee benefits

All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits. Benefits such as salaries, wages, and bonus etc are recognised in the statement of profit and loss in the period in which the employee renders the related service.

Long term employee benefits i) Defined contribution plan:

Provident Fund and employees'' state insurance schemes:

a) All employees of the Company are entitled to receive benefits under the Provident Fund, which is a defined contribution plan. Both the employee and the employer make monthly contributions to the plan at a predetermined rate of the employees'' basic salary. These contributions are made to the fund administered and managed by the Government of India.

b) In addition, some employees of the Company are covered under the employees'' state insurance scheme, which is also a defined contribution scheme recognised and administered by the Government of India.

The Company''s contributions to both these schemes are expensed off in the Statement of profit and loss. The Company has no further obligations under these plans beyond its monthly contributions.

ii) Defined Benefit Plans: Gratuity

The Company provides for retirement benefits in the form of Gratuity. Benefits payable to eligible employees of the company with respect to gratuity, a defined benefit plan is accounted for on the basis of an actuarial valuation as at the balance sheet date. In accordance with the Payment of Gratuity Act, 1972, the plan provides for lump sum payments to vested employees on retirement, death while in service or on termination of employment in an amount equivalent to 15 days basic salary for each completed year of service. Vesting occurs upon completion of five years of service. The present value of such obligation is determined by the projected unit credit method and adjusted for past service cost and fair value of plan assets as at the balance sheet date through which the obligations are to be settled. The resultant actuarial gain or loss on change in present value of the defined benefit obligation or change in return of the plan assets is recognised as an income or expense in the statement of profit and loss.

iii) Other long term employee benefits: Leave encashment

Benefits under the Company''s leave encashment scheme constitute other employee benefits. The liability in respect of leave encashment is provided on the basis of an actuarial valuation done by an independent actuary using Projected Unit Credit Method at the end of the year. Actuarial gain and losses are recognized immediately in the statement of profit and loss.

(i) Income Taxes

Income tax expense comprises current tax (i.e. amount of tax for the year determined in accordance with the Income-tax law) and deferred tax charge or credit.

Deferred tax charge or credit reflects the tax effects of timing differences between accounting income and taxable income for the period. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carry forward of losses, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each balance sheet date and are written-down or written up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realised.

Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. The company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-tax Act, 1961 issued by the Institute of Chartered Accountant of India, the said asset is created by way of credit to the statement of profit and loss and shown as "MAT Credit Entitlement." The company reviews the "MAT credit entitlement" asset at each reporting date and writes down the asset to the extent the company does not have convincing evidence that it will pay normal tax during the specified period.

(j) Leases

Operating Leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership over the lease term are classified as operating lease.

Operating lease payments are recognized as an expense in the statement of profit and loss on a straight line basis over the lease term.

(k) Provision, contingent liabilities and contingent assets

Provision

Provisions are recognized when the Company has a present obligation as a result of past events and it is more likely that an outflow of resources will be required to settle the obligations and the amount has been reliably estimated. Such provisions are not discounted to 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 management''s current estimates.

Contingent liabilities

A disclosure for a contingent liability is made where it is more likely than not that a present obligation or possible obligation may result in or involve an outflow of resources. When no present or possible obligation exists and the possibility of an outflow of resources is remote, no disclosure is made.

Contingent assets

Contingent assets are neither recorded nor disclosed in the financial statements.

(l) Cash and cash equivalents

Cash and cash equivalents include cash in hand, demand deposits with banks, other short term highly liquid investments with original maturity of three months or less.

(m) Borrowing cost

Borrowing costs relating to acquisition or construction or production of assets which take substantial period of time to get ready for its intended use are also included as cost of such assets to the extent they relate to the period till such assets are ready to be put to use. Other borrowing costs are recognised as an expense in the period in which they are incurred.

(n) Earnings Per Share

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

For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year is adjusted for the effects of all dilutive potential equity shares, except where the result would be anti-dilutive. The dilutive potential equity shares are deemed converted as of the beginning of the period, unless they have been issued at a later date.

(o) Material Events

Material Events occurring after Balance Sheet date are taken into cognizance.

*During the financial year 2008-09 as per terms of Shareholders'' Subscription Agreement executed with SIDBI Venture Capital Limited on July 22, 2008, the Company had allotted 2,500,000 16% optionally cumulative convertible preference shares to SIDBI Venture Capital Limited amounting Rs. 25,000,000. The dividend on these preference shares are payable from the date of allotment @16% p.a., however in view of brought forward losses, the Company has not provided/paid any dividend on such shares. The corresponding entries in respect of the dividend and taxes thereon will be done in the year of payment of such dividend or in the year in which the shares are converted/ redeemed.

b) Terms/rights attached to equity share Equity shares Voting Each holder of equity share is entitled to one vote per share held.

Dividends

The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in ensuing Annual General Meeting, except in the case where interim dividend is distributed.

Liquidation

In the event of liquidation of the Company, the holders of equity shares shall be entitled to receive all of the remaining assets of the Company, after distribution of all preferential amounts, if any. Such distribution amounts will be in proportion to the number of equity shares held by the shareholders.

Preference shares Dividend

The Company shall pay preferential dividend @ 16% per annum on the optionally convertible cumulative preference shares subscribed by the investor from the date of allotment. The investor shall have the option to convert (either fully, partly or none) the accumulated unpaid dividend into equity shares at par in the ratio of 1:1.

i) Secured against –

a) First charge on land situated at A-3, Sector-22, Jagdishpur Industrial Area, Jagdishpur, Distt. Amethi-227 817 (UP).

b) Entire fixed assets situated at A-3, Sector-22, Jagdishpur Industrial Area, Jagdishpur, Distt. Amethi-227 817 (UP).

c) Personal Guarantee of Mr. Pradeep Jain (Managing Director) and Mrs. Usha Jain (Director).

d) Collateral security: Equitable mortgage of house property in the name of Mr. Pradeep Jain (Manging Director) valued around Rs. 30.2 million and second pari-passu charge over the entire current assets of the Company including raw material, WIP, FG, Chemicals, stores/ spares not relating to plant both present and future.

ii) Term loan from bank carries interest rate of AB base rate 0.25%. The loan is repayable in pre-scheduled 28 quarterly instalments commencing from quarter ending December 31, 2013.

i) Secured against charge over entire current assets of the Company including stock of raw material, work in process, finished goods, stores and spares, book debts, receivables and other current assets of the Company, both present and future.Collateral security: Equitable mortgage of house property in the name of Mr. Pradeep Jain (Manging Director) valued around Rs. 30.2 million and Second Pari-passu charge on the entire factory land/ Building (33673 sq meter), other fixed assets of the Company, both present and future.

ii) Working capital loan from bank carries interest rate of AB base rate 0.25% p.a. and Funded Interest Term Loan carrying interest rate of AB base rate p.a.

iii) The unsecured loans taken from various parties including related parties are interest free. The said loans are payable on demand.


Mar 31, 2013

(a) Basis of preparation

The Financial Statements have been prepared in accordance with the generally accepted accounting principles in India (Indian GAAP) under the historical cost convention on accrual basis. These financial statements have been prepared to comply in all material respects with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended) and relevant provision of the Companies Act, 1956.

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

(b) Use of estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principals require management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities as at the reported date and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management''s best knowledge of current events and actions the Company may undertake in future, actual results ultimately may differ from estimates. Any revision to accounting estimates is recognised prospectively in current and future period.

(c) Tangible fixed assets

Fixed are stated at cost of acquisition or at revalued amounts wherever such assets have been revalued less accumulated depreciation and accumulated impairment loss, if any. Cost includes original cost of acquisition and incidental expenses related to such acquisition and installation. In respect of revalued assets, the appreciation in value of assets over its book value is credited to the Revaluation Reserve.

(d) Depreciation

Depreciation on all tangible fixed assets is provided on the straight line method at rates specified in Schedule XIV to the Companies Act, 1956. In case of revalued assets the difference between the depreciation on the revalued book value and on the original cost is withdrawn from revaluation reserve and credited to the Statement of Profit and Loss.

Depreciation on addition to tangible fixed assets is provided on pro-rata basis from the date the asset is put to use. Depreciation on sale/deduction from fixed assets is provided for up to the date of sale, deduction, discardment as the case may be.

All tangible fixed assets costing Rs. 5,000 or below are depreciated in full by way of a one-time depreciation charge.

(e) Impairment of assets

The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets'' net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.

After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

(f) Inventories

Raw material, packaging material and stores and spares parts are carried at cost. Cost includes purchase price and other expenses incurred to bring such inventory to their present location and condition. In determining the cost, weighted average method is used. The carrying cost of raw material is appropriately written down when the finished goods in which such raw material is incorporated are expected to sell below cost.

Work in progress, manufactured finished goods and traded goods are valued at the lower of cost and net realisable value. Cost of work in progress and manufactured finished goods is determined on weighted average cost basis and comprises direct material, cost of conversion and other costs incurred in bringing such inventory to their present location and condition. Cost of traded goods is determined on a weighted average cost basis.

(g) Revenue recognition

Revenue on account of sale of goods is recognized on delivery of the goods to the customer, when the property in the goods is transferred for a price and significant risk and rewards have been transferred and no effective ownership control is retained. Sales are net off discounts and sales return, sales tax/ value added tax, if any.

Interest and other income is recognized on accrual basis.

(h) Employee benefits

Short term employee benefits

All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits. Benefits such as salaries, wages, and bonus etc are recognised in the statement of profit and loss in the period in which the employee renders the related service.

Long term employee benefits

i) Defined contribution plan:

Provident Fund and employees'' state insurance schemes:

a) All employees of the Company are entitled to receive benefits under the Provident Fund, which is a defined contribution plan. Both the employee and the employer make monthly contributions to the plan at a predetermined rate [presently 12% restricted to Maximum salary limit of Rs. 6500 p.m.] of the employees'' basic salary. These contributions are made to the fund administered and managed by the Government of India.

b) In addition, some employees of the Company are covered under the employees'' state insurance scheme, which is also a defined contribution scheme recognised and administered by the Government of India.

The Company''s contributions to both these schemes are expensed off in the Statement of profit and loss. The Company has no further obligations under these plans beyond its monthly contributions.

ii) Defined Benefit Plans: Gratuity

The Company provides for retirement benefits in the form of Gratuity. Benefits payable to eligible employees of the company with respect to gratuity, a defined benefit plan is accounted for on the basis of an actuarial valuation as at the balance sheet date. In accordance with the Payment of Gratuity Act, 1972, the plan provides for lump sum payments to vested employees on retirement, death while in service or on termination of employment in an amount equivalent to 15 days basic salary for each completed year of service. Vesting occurs upon completion of five years of service. The present value of such obligation is determined by the projected unit credit method and adjusted for past service cost and fair value of plan assets as at the balance sheet date through which the obligations are to be settled. The resultant actuarial gain or loss on change in present value of the defined benefit obligation or change in return of the plan assets is recognised as an income or expense in the statement of profit and loss.

iii) Other long term employee benefits: Leave encashment

Benefits under the Company''s leave encashment scheme constitute other employee benefits. The liability in respect of leave encashment is provided on the basis of an actuarial valuation done by an independent actuary using Projected Unit Credit Method at the end of the year. Actuarial gain and losses are recognized immediately in the statement of profit and loss.

(i) Income Taxes

Income tax expense comprises current tax (i.e. amount of tax for the year determined in accordance with the Income-tax law) and deferred tax charge or credit.

Deferred tax charge or credit reflects the tax effects of timing differences between accounting income and taxable income for the period. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carry forward of losses, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each balance sheet date and are written-down or written up to reflect the amount that is reasonably / virtually certain (as the case may be) to be realised.

Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. The company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-tax Act, 1961 issued by the Institute of Chartered Accountant of India, the said asset is created by way of credit to the statement of profit and loss and shown as "MAT Credit Entitlement." The company reviews the "MAT credit entitlement" asset at each reporting date and writes down the asset to the extent the company does not have convincing evidence that it will pay normal tax during the specified period.

(j) Leases

Operating Leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership over the lease term are classified as operating lease.

Operating lease payments are recognized as an expense in the statement of profit and loss on a straight line basis over the lease term.

(k) Provision, contingent liabilities and contingent assets

Provision

Provisions are recognized when the Company has a present obligation as a result of past events and it is more likely that an outflow of resources will be required to settle the obligations and the amount has been reliably estimated. Such provisions are not discounted to 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 management''s current estimates.

Contingent liabilities

A disclosure for a contingent liability is made where it is more likely than not that a present obligation or possible obligation may result in or involve an outflow of resources. When no present or possible obligation exists and the possibility of an outflow of resources is remote, no disclosure is made.

Contingent assets

Contingent assets are neither recorded nor disclosed in the financial statements.

(l) Cash and cash equivalents

Cash and cash equivalents include cash in hand, demand deposits with banks, other short term highly liquid investments with original maturity of three months or less.

(m) Borrowing Cost

Borrowing Costs relating to acquisition or construction or production of assets which take substantial period of time to get ready for its intended use are also included as cost of such assets to the extent they relate to the period till such assets are ready to be put to use. Other borrowing costs are recognised as an expense in the period in which they are incurred.

(n) Earnings Per Share

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

For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares, except where the result would be anti-dilutive. The dilutive potential equity shares are deemed converted as of the beginning of the period, unless they have been issued at a later date.

(o) Material Events

Material Events occurring after Balance Sheet date are taken into cognizance.


Mar 31, 2012

(a) Basis of preparation

The Financial Statements have been prepared in accordance with the generally accepted accounting principles in India (Indian GAAP) under the historical cost convention on accrual basis. These financial statements have been prepared to comply in all material respects with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended) and relevant provision of the Companies Act, 1956.

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

(b) Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the years presented. Actual results could differ from those estimates.

(c) Tangible fixed assets

Fixed are stated at cost of acquisition or at revalued amounts wherever such assets have been revalued less accumulated depreciation and accumulated impairment loss, if any. Cost includes original cost of acquisition and incidental expenses related to such acquisition and installation. In respect of revalued assets, the appreciation in value of assets over its book value is credited to the Revaluation Reserve.

(d) Depreciation

Depreciation on all tangible fixed assets is provided on the straight line method at minimum rates specified in Schedule XIV to the Companies Act, 1956.

Depreciation on addition to tangible fixed assets is provided on pro-rata basis from the date the asset is put to use. Depreciation on sale/deduction from fixed assets is provided for up to the date of sale, deduction, discardment as the case may be.

All tangible fixed assets costing Rs. 5,000 or below are depreciated in full by way of a one-time depreciation charge.

Depreciation on revalued building has been provided on straight line method at the rates prescribed by Schedule XIV to the Companies Act, 1956. However, the difference between the depreciation on the revalued book value and on the original cost is withdrawn from revaluation reserve and credited to the Statement of Profit and Loss.

Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.

(e) Impairment of assets

The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets' net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.

After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

(f) Inventories

Raw material, packaging material and stores and spares parts are carried at cost. Cost includes purchase price and other expenses incurred to bring such inventory to their present location and condition. In determining the cost, weighted average method is used. The carrying cost of raw material is appropriately written down when the finished goods in which such raw material is incorporated are expected to sell below cost.

Work in progress, manufactured finished goods and traded goods are valued at the lower of cost and net realisable value. Cost of work in progress and manufactured finished goods is determined on weighted average cost basis and comprises direct material, cost of conversion and other costs incurred in bringing such inventory to their present location and condition. Cost of traded goods is determined on a weighted average cost basis.

(g) Revenue recognition

Revenue on account of sale of goods is recognized on delivery of the goods to the customer, when the property in the goods is transferred for a price and significant risk and rewards have been transferred and no effective ownership control is retained. Sales are net off discounts and sales return, sales tax/ value added tax, if any, are reduced from turnover.

Interest and other income is recognized on accrual basis.

(h) Employee benefits

Short term employee benefits

All employee benefits payable wholly within twelve months of rendering the service are classified as Short term employee benefits. Benefits such as salaries, wages, and bonus etc are recognized in the Statement of Profit and Loss in the period in which the employee renders the related service.

Long term employee benefits

i) Defined contribution plan:

The Contributions for Provident Funds and E.S.I.C are deposited with the appropriate government authorities and are recognized in the Statement of Profit and Loss in the financial year to which they relate and there is no further obligation in this regard.

ii) Defined benefit plan:

The Company provides for retirement benefits in the form of Gratuity. The Company's gratuity plan is a defined benefit plan. The present value of gratuity obligation under such defined plan is determined based on an actuarial valuation carried out by an independent actuary using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured at the present value of the estimated future cash flows. The discount rate used for determining the present value of the obligation under the defined benefit plans, is based on the market yields on Government securities as at the valuation date having maturity periods approximating to the terms of the related obligations. Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss.

iii) Other long term employee benefits:

Benefits under the Company's leave encashment scheme constitute other employee benefits. The liability in respect of leave encashment is provided on the basis of an actuarial valuation done by an independent actuary at the year end using the Projected Unit Credit Method. Actuarial gain and losses are recognized immediately in the Statement of Profit and Loss.

(i) Tax Expense

Tax expense comprises of current tax and deferred tax considered in determining the net profit or loss for the year. Current Tax

Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, 1961.

Deferred Tax

Deferred income tax reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax law enacted or substantially enacted at the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that sufficient future taxable income will be available against which these assets can be realized in future where as in cases of existence of carry forward of losses or unabsorbed depreciation, deferred tax assets are recognised only if there is virtual certainty of realization backed by convincing evidence. Deferred tax assets are reviewed at each balance sheet date.

MAT Credit

Minimum alternative tax payable under the provisions of the Income-tax Act 1961 is recognized as an asset in the year in which credit become eligible and is set off to the extent allowed in the year in which the Indian entity becomes liable to pay income tax at the enacted tax rates.

(j) Leases

Operating Leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership over the lease term are classified as operating lease.

Operating lease payments are recognized as an expense in the statement of profit and loss on a straight line basis over the lease term.

(k) Provision, contingent liabilities and contingent assets

Provision

Provisions are recognized when the Company has a present obligation as a result of past events and it is more likely that an outflow of resources will be required to settle the obligations and the amount has been reliably estimated. Such provisions are not discounted to 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 management's current estimates.

Contingent liabilities

A disclosure for a contingent liability is made where it is more likely than not that a present obligation or possible obligation may result in or involve an outflow of resources. When no present or possible obligation exists and the possibility of an outflow of resources is remote, no disclosure is made.

Contingent assets

Contingent assets are neither recorded nor disclosed in the financial statements.

(l) Cash and cash equivalents

Cash and cash equivalents include cash in hand, bank balances and margin money if due to be matured within 3 months deposited with bank.

(m) Borrowing cost

Borrowing costs are determined in accordance with the provisions of Accounting Standard 16 "Borrowing Costs" Borrowing costs that are attributable to the acquisition or construction of qualifying assets are 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 use. All other borrowing costs are charged to revenue.

(n) Earnings Per Share

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

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

(o) Material Events

Material Events occurring after Balance Sheet date are taken into cognizance.