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Accounting Policies of Scan Steels Ltd. Company

Mar 31, 2015

Corporate Information:

M/s Scan Steels Limited is a public limited company domiciled in India. The company has its primary listings on the BSE Limited in India. The company is engaged in manufacturing and filling of sponge iron, billet /ingot and TMT bars and in generation of power for captive consumption. The company is also involved in derivative contracts that are intended for trading.

i Basis of Accounting :

These financial statements are prepared in accordance with Indian Generally Accepted Ac- counting Principles (GAAP) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values. GAAP comprises manda- tory accounting stands as prescribed under Section 133 of the Companies Act.,2013 )'Act') read with Rule 7 of the Companies (Accounting) Rules, 2014 the provisions of the Act (to the extent notified ) and guidelines issued by the Securities and exchange Board of India (SEBI). Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

ii. Use of Estimates :

The preparation of the financial statements' in conformity with GAAP requires management to make judgment estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities and disclosures relating to contingent liabilities as at the end of the reporting period. Although these estimates are based on the management's best knowledge of current events and action uncertainty above these consumptions and estimates could not in the outcomes requiring a material adjustments to the carrying amounts of assets and liabilities in future periods.

Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as the Management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements.

iii. Classification of Assets and Liabilities :

All the asset and liabilities of the companies are segregated into current and non-current based on the principles and definitions as set out in the schedule III of the Companies Act.2013 as amended. The company has adopted a period of twelve months as its operating cycle.

iv Fixed Assets :

a. Tangible Assets are stated at cost net of CENVAT credit after deducting the accumulated depreciation. The cost of an asset comprises its purchase price and any attributable costs of bringing such assets to its working condition for intended use.

b. Intangible assets are recorded at the consideration paid for acquisition of such assets and an claimed at cost less accommodated amortization and impairment.

c. Capital Work-In-Progress comprises of the cost of Fixed Assets that are not yet ready for their intended use at the reporting date.

d. The whole of the finance charges paid on assets acquired under Hire Purchase Scheme are considered as "Un matured finance charges" under the head "Other Current Assets" in the Balance sheet. Subsequently, at the end of the year the portion of finance charges is transferred to profit & loss account on the basis of the number of installments due during the year.

v. Inventories :

a. a. Raw materials, components and stores & spares are valued at cost following FIFO method. Cost includes purchase price, freight, handling charges and other directly attributable costs to bring the material to its present location and are net of duties and taxes wherever appli- cable.

b. b. Work-in-progress and finished goods are valued at lower of cost or Net realizable value. Cost includes direct materials, labour and a proportion of manufacturing overheads based on average cost of production.

c. Cost of finished goods inside the plant includes excise duty.

d. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and estimated costs necessary to make the sale.

e. Shares held as stock-in trade are valued at current market price.

vi Revenue Recognition :

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the company and the revenue can be readily measured. The company adopts the following criteria as for recognizing the revenue:-

a. Sale of goods is recognized when all the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods, net of Value-added taxes.

b. Sale of traded goods is recognized when the goods are dispatched to the customers.

c. Sale of Share is accounted when contract for sale is entered into.

d. Net gain arising from trading of derivatives contracts is recognized after considering the offsetting effect of the net loss if any.

vii. Provisions and Contingent Liabilities :

A provision is recognized if, as a result of a past event, the Company has a present legal obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by the best estimate of the outflow of economic benefits required to settle the obligation at the reporting date. Where no reliable estimate can be made, a disclosure is made as contingent liability. Contingent assets are not recognised.

viii Foreign Currency Transactions :

Revenue, expense and cash-flow items denominated in foreign currencies are translated using the exchange rate in effect on the date of the transaction. Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled.

ix. Cash and Cash equivalents :

Cash and cash equivalents comprise cash and cash on deposit with banks. The Company considers all highly liquid investments with a remaining maturity of less than twelve months and that are readily convertible to known amounts of cash to be cash equivalents.

x. Excise Duty:

Excise duty is accounted for on dispatch of products from the factory and on closing stock.

xi Purchase:

Purchase of materials is recognized on dispatch of such goods by the suppliers based on certainty irrespective of receipt of such goods at the factory. It is shown net of CENV AT/VAT credit wherever applicable.

xii. Employee Benefits:

a. Short Term Employee Benefits:

All Short term employee benefits such as salaries, incentives, special award, medical benefits which fall due within 12 months of the period in which the employee renders related services, which entitles him to avail such benefits and non accumulating compensated absences (like maternity leave and sick leave) are recognized on an undiscounted basis and charged to Profit and Loss Statement.

b. Defined Contribution Plan:

Contribution to the provident fund, which is a defined contribution plan, made to the Regional Provident Fund Commissioner is charged to the Profit and loss Statement on accrual basis.

c. Defined Benefit Plan:

The company has not made any provision with regard to gratuity and superannuation benefits on actuarial basis in compliance to the provisions laid in accounting standard on ac- counting for retirement benefits. However, the Company has taken a group gratuity policy with Life Insurance Corporation of India in respect of retirement benefits of its employees, the annual premium of which is charged to the profit and loss statement

xiii. Borrowing costs:

Borrowing costs directly attributable to the acquisition, construction or production of quelling asset are capitalized as part of the respective asset. All other borrowing costs are ex- pended in the period they occur.

xiv. Depreciation:

a. The Company has with effective from 01.04.2014 revised the method of charging depreciation based on the useful life of its various tangible assets as prescribed in Part D of Schedule II to the Companies Act,2013. As a result, depreciation for the year ended 31st March, 2015 calculated on straight line method has been reduced by Rs. 5,13,40,175/-. Similarly in the case of those tangible assets, whose useful life has been completed as on 31st March, 2014 the carrying value (net of residual value) of those fixed assets amounting to Rs. 1,28,48,045/- (net of deferred tax of Rs. 57,41,435.00) have been debited to the opening balance of retained earnings.

b. Assets that are acquired during the year are depreciated fifty percent of the amount calculated for one year based on the new method and the balance is proposed to be in the year of disposal.

c. Intangible Assets are amortized on written down value method basis, commencing from the date the asset is available to the company for its use.

xv. Tax Expenses:

a. Current income tax expense comprises taxes on income from operations in India and is deter- mined in accordance with the provisions of the Income Tax Act, 1961.Minimum Alternate Tax (MAT) is paid in accordance with the tax laws, which gives rise to future economic benefits in the form of tax credit against future income tax liability. The company offsets on a year on basis, the current tax assets and liabilities, where it intends to settle such assets and liabilities on a net basis. The current tax expense recognised in the financial statements is net off MAT credit utilised during the period.

b Deferred tax liability or asset is recognised on timing difference related to depreciation on fixed assets being the difference between taxable incomes and accounting income that originate in one period and are capable of reversal in subsequent periods. Deferred tax assets and liabilities are calculated using the tax rates and tax laws prevailing on the balance sheet date.

xvi Segment Reporting:

a. The Company is primarily engaged in the business of manufacturing of steel and power for captive consumption and Trading of Sponge Iron. The Company has identified two primary business segments namely Manufacturing and trading, which in context of Accounting Standard 17 on Segment Reporting" constitute reportable segment. However, as the turnover of trading segment is less than 10% of the total revenue, no such reporting is required

b. The company's products are dispatched from plants located at Rajgangpur (Odisha), and Bellary (Karnataka) to various parts of the country and considering the customer base which is wide spread all over the country, no such geographical differentiation can be done for presenting the information.


Mar 31, 2014

I. Use of Estimates:

The preparation of financial statements are in conformity with the generally accepted accounting principles which requires estimates and assumptions to be made, that affect the reported amounts of assets and liabilities on the date of financial statements and the reported amounts of revenues and expenses during the reported period. Differences between the actual results and estimates are recognised in the year in which the results are known/ materialized.

ii. Fixed Assets:

a. Fixed Assets are stated at cost net of CENVAT credit after deducting the accumulated depreciation. The cost of an asset comprises its purchase price and any attributable costs of bringing such assets to its working condition for intended use.

b. Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalized till the date on which the asset is put for its intended use. Other borrowing costs are recognised as an expense in the period in which these are incurred.

c. The whole of the finance charges paid on assets acquired under Hire Purchase Scheme are considered as "Un matured finance charges" under the head "Other Current Assets" in the Balance sheet. Subsequently, at the end of the year the portion of finance charges is transferred to profit & loss account on the basis of the number of installments due during the year.

iii. Investments:

Investments which are readily realizable and not intended to be held for more than one year from the date on which such investments are made, are classified as Current Investments. All other investments are classified as long-term investments.

Current Investments are carried in financial statements at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost.

iv. Secured Loans:

a. The term loans are secured by charge on the company''s immovable and movable assets both present and future financed by the lenders ranking paripassu among member banks depending upon exposure of particular bank.

b. The term loan repayment is to be made in quarterly installments specified against each loan commencing from 01.04.2014 as per banker''s specification.

v. Inventory

Raw materials, components and stores & spares are valued at cost following FIFO method. Cost includes purchase price, freight, handling charges and other directly attributable costs to bring the material to its present location and are net of duties and taxes wherever applicable.

Work-in-progress and finished goods are valued at lower of cost or Net realizable value. Cost includes direct materials, labour and a proportion of manufacturing overheads based on average cost of production.

Cost of finished goods inside the plant includes excise duty.

Stock of Equity Shares held as stock in trade by the company is valued at lower of cost or market value.Cost is determined on "first in first out basis"

Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and estimated costs necessary to make the sale.

vi. Revenue Recognition:

a. Sale of manufactured goods is accounted for on transfer of title on the goods to the buyer.

b. Sale of Stock in Trade is recognized on despatch of such goods to customers.

c. Sales figure stated in Statement of Profit and Loss is inclusive of Excise Duty.

d. Sale of shares is accounted when the contract for sale is entered into.

vii. Excise Duty:

Excise duty is accounted for on despatch of products from the factory and on closing stock.

viii. Purchase:

Purchase of materials is recognized on despatch of such goods by the suppliers based on certainty irrespective of receipt of such goods at the factory. It is shown net of CENVAT/VAT credit wherever applicable.

ix. Employee Benefits:

a. Short Term Employee Benefits:

All Short term employee benefits such as salaries, incentives, special award, medical benefits which fall due within 12 months of the period in which the employee renders related services, which entitles him to avail such benefits and non accumulating compensated absences (like maternity leave and sick leave) are recognized on an undiscounted basis and charged to Profit and Loss Statement.

b. Defined Contribution Plan:

Contribution to the provident fund, which is a defined contribution plan, made to the Regional Provident Fund Commissioner is charged to the Profit and loss Statement on accrual basis.

c. Defined Benefit Plan:

The company has not made any provision with regard to gratuity and superannuation benefits on actuarial basis in compliance to the provisions laid in accounting standard on accounting for retirement benefits. However, the Company has taken a group gratuity policy with Life Insurance Corporation of India in respect of retirement benefits of its employees, the annual premium of which is charged to the profit and loss statement.

x. Borrowing costs:

Borrowing costs are accounted for as an expense in the period in which they are incurred except those that are attributable to qualifying assets which is dealt in Para 1.ii.b

xi. Depreciation:

a. Depreciation on Fixed Assets is provided on straight line method at the rates and in the manner prescribed under schedule XIV to the Companies Act, 1956.

b. Assets that cost less than Rupees five thousand is depreciated at the rate of hundred percent on a proportionate basis for the number of days for which it is put to use during the year.

xii. Deferred Taxation:

a. Current income tax expense comprises of taxes on income from operations in India and is determined in accordance with the provisions of the Income Tax Act, 1961.

b. Deferred tax expense or benefit is recognized on timing difference being the difference between taxable incomes and accounting income that originate in one period and are capable of reversal in subsequent periods. Deferred tax assets and liabilities are calculated using the tax rates and tax laws prevailing on the balance sheet date.

xiii. Segment Reporting:

a. The Company is primarily engaged in the business of manufacture, Trading of Sponge Iron, Ingot/Billet, TMT Rod etc. along with the financial segment also. The Company has identified three primary business segments namely Manufacturing, trading,of manufactured goods and sale of shares, which in context of Accounting Standard 17 on Segment Reporting" constitute reportable segment. However, as the turnover of trading segment and financial segments are less than 10% of the total revenue, no such reporting is required.

b. The company''s manufactured products are dispatched from plants located at Rajgangpur (Odisha), and Bellary (Karnataka) to various parts of the country and considering the customer base which is wide spread all over the country, no such geographical differentiation can be done for presenting the information.

xiv. Earning Per Shares:

Earning per Share has been Computed in accordance with accounting standard 20 Earning per shares'' by diluting the net profit or less for the period attributable to equity shares holders, by the weighted average number of equity shares outstanding during the period, the earning considered for accenting the company''s earnings per share is the Net Profit after tax.


Mar 31, 2010

A. Basis of Preparation of Financial Statements

Financial statements are prepared on the historical cost convention, on accrual basis, in accordance with the Generally Accepted Accounting Principals (GAAP), and applicable accounting standards and the provisions of the Companies Act, 1956.

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. Revenue Recognition

Incomes/Expenses/Revenues are accounted for on accrual basis in accordance with the Accounting Standard (AS-9) issued by the Institute of Chartered Accountants of India except for dividend and interest on income-tax. Revenue is recognised to the extent that it is probable that the economic benefit will flow to the company and the revenue can be reliably measured.

Sale of shares is accounted when the contract for sale is entered into.

d. Inventories

Stock of equity shares held as stock-in-trade by the company is valued at lower of cost or market value. Cost is determined on "first in first out basis.

e. Fixed Assets

Fixed Assets are stated at cost including all incidental expenses incurred for bringing the asset to its current position, less depreciation at rates prescribed in Schedule XIV to the Companies Act, 1956, subject to provisions of Accounting Standard 26 "Intangible Assets" issued by Institute of Chartered Accountants of India.

f. Depreciation

Depreciation has been provided on Straight Line Method in accordance with section 205(2) of the Companies Act, 1956 at the rates specified in schedule XIV to the Companies Act, 1956, on pro-rata basis with reference to the period of use of such assets. Assets costing less than Rs. 5,000/- per item are depreciated at 100% in the year of purchase.

g. Retirement Benefits

All short-term employee benefits are recognised at their undiscounted amount in the accounting period in which they are incurred.

Retirement Benefits in the form of gratuity and leave salary is accounted on payment basis in the year of payment.

h. Income Tax

Provision for current tax is made for the tax liability payable on taxable income after considering the allowances, deductions and exemptions and disallowances if any determined in accordance with the prevailing tax laws.

The differences between the taxable income and the net profit or loss before tax for the period as per the financial statements are identified and the tax effect on the "timing differences" is recognised as deferred tax asset or deferred tax liability. The tax effect is calculated on the accumulated timing differences at the end of the accounting period based on the tax rates and laws, enacted or substantively enacted as of the balance sheet date. i. Provisions, Contingent Liabilities & Contingent Assets

The Company creates a provision when there is a present obligation as a result of an obligating event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the outflow.

Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not within the control of the company.

Contingent Assets are neither recognised nor disclosed in the Financial Statements as a matter of prudence.



 
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