Accounting Policies of Servalakshmi Paper Ltd. Company

Mar 31, 2015

1.1 Basis of Preparation

The financial statements have been prepared to comply with the Generally Accepted Accounting Principles in India including the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2014 and the relevent provisions of the Companies Act, 2013. The accounting policies have been consistently applied by the company and are consistent with those used in the previous year.

The company's operating results continue to be materially affected by various factors, such as, high cost of servicing the debt , technical problem in stabilisation of the production at the units, higher cost of raw materials, import of newsprint, causing pricing pressures and general economic slow down. The company has incurred a net loss of Rs.4,210 lakhs during the year ended March 31, 2015 and as of that date, the Company's total liabilities exceeded its total assets by Rs.11,214 lakhs. The company faced severe working capital problems due to non-implementation of CDR scheme by the banks. The company has initiated various steps to improve its operation performance/liquidity, remove bottlenecks in the process, modify the product mix to maximise the realisation. The Company has undertaken a review of its action to improve efficiency in its operations. These measures along with consistent improvement in yields and enhancement in revenues are expected to drive growth in revenues in the future. The company believes that it would be able to realise the assets and settle the liabilities in the normal course at their carrying values and no adjustments would be required in respect of the carrying value of assets/liabilities as at March 31, 2015. Accordingly, the financial statements have been prepared on going concern basis.

1.2 Use of Estimates

The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognised in the period in which the results are known/materialised.

1.3 Revenue Recognition

Income and expenditure are accounted on accrual basis. Sales are accounted net of Sales Tax .Material consumption is net of Cenvat. Excise duty in respect of Goods manufactured other than what is in Stock at the close of the period is accounted at the time of removal of goods from the factory of sales.

1.4 Fixed Assets and depreciation

Fixed assets are stated at cost net of CENVAT less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use.

Depreciation on fixed assets has been provided on straight line method adopting the useful lives of the respective fixed assets, and the residual value in accordance with Schedule II to the Companies Act, 2013. In respect of additions during the year, depreciation has been provided on pro-rata basis.

Assets acquired under Hire Purchase agreements are capitalized and finance charges thereon are expensed over the period of agreements.

1.5 Inventory valuation

Inventories have been valued at lower of cost and net realizable value

a) Finished goods are valued at lower of cost of production and net realizable value inclusive of excise duty

b) Semi finished goods are valued at cost of raw materials and other manufacturing cost on historical basis

c) Raw materials, components and stores and spares are valued at identifiable cost.

1.6 Foreign Currency Transactions

Foreign currency transactions are recorded at the rate of exchange prevailing on the date of respective transactions. Resultant gain/loss at the time of realization/payment are recognized separately. Carrying value of foreign currency assets and liabilities are restated at the year end rates.

1.7 Impairment of assets

Impairment in the value of Fixed Assets is recognized to the extent that the recoverable amount of an asset is less than its carrying value and would be charged to Profit and Loss account as prescribed by ICAI in AS 28.

1.8 Borrowing costs

Borrowing costs that are directly attributable to the cost of acquisition, construction, or production of a qualifying asset is capitalized as part of that asset, other borrowing costs are recognized as expense in the period in which they are incurred

1.9 Employee benefits

Gratuity liability is a defined benefit obligation and is provided for based on actuarial valuation performed in accordance with the projected unit redit method, as at the balance sheet date.

Contributions to Provident fund, Employee pension fund and cost of other benefits are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due. The Company has no further obligations under the plan beyond its monthly contributions.

1.10 Segment Reporting

a) The company has identified two business segment viz. Paper and Power. Revenue and expenses have been identified to respective segments on the basis of operating activities of the enterprises. Revenue and expenses which related to the enterprises as a whole and are not allocable to a segment on reasonable basis have been disclosed as unallocated revenue and expenses.

b) Segment assets and liabilities represent assets and liabilities in respective segments. Other assets and liabilities that cannot be allocated to a segment on a reasonable basis have been disclosed as unallocated assets and liabilities.

c) Inter segment revenue / expenditure is recognized at cost.

1.11 Earnings per Share

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

1.12 Provisions

A provision is recognised 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.

1.13 Expenditure on new projects and substantial expansion

Expenditure directly relating to construction activity is capitalised. Indirect expenditure incurred during construction period is capitalised as part of the indirect construction cost to the extent to which the expenditure is indirectly related to construction or is incidental thereto. Other indirect expenditure incurred during the construction period which is neither related to the construction activity nor incidental thereto is charged to the Profit and Loss Account.

1.14 There are no amounts payable to Micro, Small and Medium Enterprises as defined under the Micro, Small and Medium Enterprises Development Act, 2006 based on information available with the Company. Further, the Company has not paid any interest to any Micro, Small and Medium Enterprises during the current year. This information has been determined to the extent such parties have been identified on the basis of information available with the Company and relied upon by the Auditors.

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Mar 31, 2014

1.1 Basis of Preparation

The financial statements have been prepared to comply in all material respects with the Notifiec accounting standard issued by Companies (Accounting Standards) Rules, 2006, as amended, and the relevant provisions of the Companies Act, 1956. The accounting policies have been consistently applied by the company and are consistent with those used in the previous year.

1.2 Use of Estimates

The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of financial statements and the reported amount ol revenues and expenses during the reporting period. Difference between the actual results and estimates are recognised in the period in which the results are known/materialised.

1.3 Revenue Recognition

Income and expenditure are accounted on accrual basis. Sales are accounted net of Sales Tax. Material consumption is net of Cenvat. Excise duty in respect of Goods manufactured other than what is in Stock at the close of the period is accounted at the time of removal of goods from the factory for sales.

1.4 Fixed Assets and depreciation

Fixed assets are stated at cost net of CENVAT less accumulated depreciation and impairment losses, if any.

Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use.

Depreciation on fixed assets is provided using the straight-line method based on useful economic life as estimated by the management or at the rates prescribed under schedule XIV of the Companies Act, 1956.

Individual assets costing Rs. 5,000 or less are depreciated in full in the year of purchase.

Assets acquired under Hire Purchase agreements are capitalized and finance charges thereon are expensed over the period of agreements.

1.5 Inventory valuation

a) Finished goods are valued at lower of cost of production and net realizable value inclusive of excise duty.

b) Semi finished goods are valued at cost of raw materials and other manufacturing cost on historical basis.

c) Raw materials, components and stores and spares are valued at identifiable cost.

1.6 Foreign Currency Transactions

Foreign currency transactions are recorded at the rate of exchange prevailing on the date of respective transactions. Resultant gain/loss at the time of realization/payment are recognized separately. Carrying value of foreign currency assets and liabilities are restated at the year end rates.

1.7 Impairment of assets

Impairment in the value of Fixed Assets is recognized to the extent that the recoverable amount of an asset is less than its carrying value and would be charged to Profit and Loss account as prescribed by ICAI in AS 28.

1.8 Borrowing costs

Borrowing costs that are directly attributable to the cost of acquisition,construction, or production of a qualifying asset is capitalized as part of that asset, other borrowing costs are recognized as expens in the period in which they are incurred.

1.9 Employee benefits

Gratuity liability is a defined benefit obligation and is provided for based on actuarial valuation performed in accordance with the projected unit redit method, as at the balance sheet date.

Contributions to Provident fund, Employee pension fund and cost of other benefits are charged t< the Profit and Loss Account of the year when the contributions to the respective funds are due. The Company has no further obligations under the plan beyond its monthly contributions.

1.10 Segment Reporting

a) The company has identified two business segment viz. Paper and Power. Revenue and expense: have been identified to respective segments on the basis of operating activities of the enterprises Revenue and expenses which related to the enterprises as a whole and are not allocable to a segment on reasonable basis have been disclosed as unallocated revenue and expenses.

b) Segment assets and liabilities represent assets and liabilities in respective segments. Other assets and liabilities that cannot be allocated to a segment on a reasonable basis have been disclosed as unallocated assets and liabilities.

c) Inter segment revenue/expenditure is recognized at cost.

1.11 Earnings per Share

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

1.12 Provisions

A provision is recognised 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 reliable estimate can be made. Provisions are not discounted to its present value and are determine 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.

1.13 Expenditure on new projects and substantial expansion

Expenditure directly relating to construction activity is capitalised. Indirect expenditure incurred during construction period is capitalised as part of the indirect construction cost to the extent to which the expenditure is indirectly related to construction or is incidental thereto. Other indirect expenditure incurred during the construction period which is neither related to the construction activity nor incidental thereto is charged to the Profit and Loss Account.

1.14 There are no amounts payable to Micro, Small and Medium Enterprises as defined under the Micro, Small and Medium Enterprises Development Act, 2006 based on information available with the Company. Further, the Company has not paid any interest to any Micro, Small and Medium Enterprises during the current year. This information has been determined to the extent such parties have been identified on the basis of information available with the Company and relied upon by the Auditors.

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Mar 31, 2012

1.1 Basis of Preparation

The financial statements have been prepared to comply in all material respects with the Notified accounting standard issued by Companies (Accounting Standards) Rules, 2006, as amended, and the relevant provisions of the Companies Act, 1956. The accounting policies have been consistently applied by the company and are consistent with those used in the previous year.

1.2 Use of Estimates

The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognised in the period in which the results are known/materialised

1.3 Revenue Recognition

Income and expenditure are accounted on accrual basis. Sales are accounted net of Sales Tax .Material consumption is net of Cenvat. Excise duty in respect of Goods manufactured other than what is in Stock at the close of the period is accounted at the time of removal of goods from the factory sales.

1.4 Fixed Assets and depreciation

Fixed assets are stated at cost net of CENVAT less accumulated depreciation and impairment losses, if any.

Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use.

Depreciation on fixed assets is provided using the straight-line method based on useful economic life as estimated by the management or at the rates prescribed under schedule XIV of the Companies Act, 1956.

Individual assets costing Rs. 5,000 or less are depreciated in full in the year of purchase.

Assets acquired under Hire Purchase agreements are capitalized and finance charges thereon are expensed over the period of agreements.

1.5 Inventory valuation

a) Finished goods are valued at lower of cost of production and net realizable value inclusive of excise duty

b) Semi finished goods are valued at cost of raw materials and other manufacturing cost on historical basis

c) Raw materials, components and stores and spares are valued at identifiable cost.

1.6 Foreign Currency Transactions

Foreign currency transactions are recorded at the rate of exchange prevailing on the date of respective transactions. Resultant gain/loss at the time of realization/payment are recognized separately. Carrying value of foreign currency assets and liabilities are restated at the year end rates

1.7 Impairment of assets

Impairment in the value of Fixed Assets is recognized to the extent that the recoverable amount of an asset is less than its carrying value and would be charged to Profit and Loss account as prescribed by ICAI in AS 28.

1.8 Borrowing costs

Borrowing costs that are directly attributable to the cost of acquisition, construction, or production of a qualifying asset is capitalized as part of that asset, other borrowing costs are recognized as expense in the period in which they are incurred.

1.9 Employee benefits

Gratuity liability is a defined benefit obligation and is provided for based on actuarial valuation performed in accordance with the projected unit redit method, as at the balance sheet date.

Contributions to Provident fund, Employee pension fund and cost of other benefits are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due. The Company has no further obligations under the plan beyond its monthly contributions.

1.10 Segment Reporting

a) The company has identified two business segment viz Paper and Power. Revenue and expenses have been identified to respective segments on the basis of operating activities of the enterprises. Revenue and expenses which related to the enterprises as a whole and are not allocable to a segment on reasonable basis have been disclosed as unallocated revenue and expenses.

b) Segment assets and liabilities represent assets and liabilities in respective segments. Other assets and liabilities that cannot be allocated to a segment on a reasonable basis have been disclosed as unallocated assets and liabilities.

c) Inter segment revenue / expenditure is recognized at cost.

1.11 Earnings per Share

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

1.12 Provisions

A provision is recognised 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.

1.13 Expenditure on new projects and substantial expansion

Expenditure directly relating to construction activity is capitalised. Indirect expenditure incurred during construction period is capitalised as part of the indirect construction cost to the extent to which the expenditure is indirectly related to construction or is incidental thereto. Other indirect expenditure incurred during the construction period which is neither related to the construction activity nor incidental thereto is charged to the Profit and Loss Account.

1.14 There are no amounts payable to Micro, Small and Medium Enterprises as defined under the Micro, Small and Medium Enterprises Development Act, 2006 based on information available with the Company. Further, the Company has not paid any interest to any Micro, Small and Medium Enterprises during the current year. This information has been determined to the extent such parties have been identified on the basis of information available with the Company and relied upon by the Auditors.

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Mar 31, 2010

1. Method of Accounting:

The Accounts of the Company are prepared under the historical cost convention and on mercantile basis as a going concern in accordance with the applicable accounting standards referred to in Section 211 (3c) of the Companies Act, 1956.

2. Revenue Recognition:

Income and expenditure are accounted on accrual basis. Sales are accounted net of Sales Tax. Material Consumption is net of Cenvat. Excise Duty in respect of Goods manufactured other than what is in Stock at the close of the year is accounted at the time of removal of goods from the factory for sale.

3. Accounting for Fixed Assets:

a. Fixed Assets are stated at cost net of Cenvat including all direct and indirect expenses and allocable borrowing costs relating thereto.

b. Depreciation has been provided under Written Down Value method at the rates prescribed in Schedule I XIV to the Companies Act, 1956 prorated to the number of days used during the year in accordance with the provisions of Section of 205(2)(b)of Act.

c. Individual assets whose actual costs do not exceed Rs 5000/- are fully depreciated in the year of purchase.

d. Capital Work In Progress consists of factory buildings, plant and machinery, electrical equipments, instrumentation, etc., relating to new project under implementation pending capitalisation.

4. Valuation of Inventories:

a. Finished Goods has been valued at lower of cost of production and net realisable value inclusive of excise duty wherever applicable.

b. Semi Finished Goods has been valued at cost of Raw Materials and other Manufacturing Cost on historical basis.

c. Raw materials, components and Stores and spares are valued at identifiable Cost.

5. Foreign Currency Transactions

Foreign currency transactions are recorded at the rate of exchange prevailing on the date of respective transactions. Resultant gain/loss at the time of realisataion/payment are recognised separately. Carrying value of Foreign Currency, Assets and liabilities are restated at the year-end rates.

6. Impairment of Assets

Impairment in the value of Fixed Assets is recognised to the extent that the recoverable amount of an asset is less than its carrying value and would be charged to Profit and Loss account as prescribed by ICAI in AS 28.

7. Employee Benefits:

Retirement Benefit: No provision has been made towards Gratuity liability, which will arise as and when employees complete five years of service as per the provisions of Gratuity Act. Other Schemes of Benefits are not applicable to the Company at this stage.

8. Taxation

Provision for Taxation is made in terms of the Income Tax Act, 1961 in respect of Income liable to tax at either special or normal rates.

Deferred Tax is recognised for all the timing differences as per AS22. As the Company has not yet started its commercial operations, no provision for Deferred Tax Liability is required.

9. Leases

Leases are classified as financial lease or operating lease as per AS19.

10. The Company has complied with the Accounting Standards to the extent applicable for the project under trial production. Particulars as per Part II of the Schedule VI of the Companies Act, 1956 have been furnished as far as they are applicable to the company.

II STATUTORY AND OTHER INFORMATION;

1. Value of Imports calculated on CIF basis.

Plant & Machinery Rs.2,55,66,697/- (Previous year -Rs.29,18,97,997/-)

Raw Materials Rs.8,21,16,069/- (Previous year -NIL)

3. In respect of Micro, Small and Medium Enterprises, the information required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company. No amount is payable to such parties as at the close of the year. No interest has been paid or is payable to such parties.

4. There are no amount due and outstanding to be credited to the Investor Education and Protection Fund.

5. The future minimum payments under Hire Purchase of vehicles are Rs 7.47 lakhs and its net present value is Rs 6.74 lakhs.

6. The Company has carried out an exercise to ascertain the impairment, if any, in the carrying values of its fixed assets. This has not revealed any impairment during the year.

7. Contingent Liabilities: a. Liabilities on unexpired Letters of Credit is Rs. 478.89 Lacs (Previous year Rs. NIL) b. Obligation under EPCG is Rs. 10726 Lacs. (Previous year Rs. 10726 lacs)

8. Borrowing Cost: Amount of Borrowing Cost treated as Pre Operative Expenses pending capitalisation is Rs 21,83,65,929/- (Previous year Rs. 8,59,15,560/-)

9. The fee paid for increase in Share Capital are included under preliminary expenses.