Accounting Policies of Shrenuj & Company Ltd. Company

Mar 31, 2013

A. Basis of preparation of financial statements

The financial statements have been prepared and presented on an accrual basis under the historical cost convention except for certain fixed assets which are revalued in accordance with the provisions of the Companies Act, 1956 and the accounting principles generally accepted in India and comply with the accounting standards prescribed in the Companies (Accounting Standards) Rules, 2006 by Central Government, to the extent applicable.

Accounting Policies not specifically referred to otherwise are consistent with and in consonance with generally accepted accounting principles.

B. Use of estimates

The preparation of the financial statements in conformity with generally accepted accounting principles (GAAP) in India requires management to make estimates and assumptions that affect the reported amount of assets, liabilities and the disclosure of contingent liabilities on the date of the financial statements. Actual results could differ from those estimates. Any revision to the accounting estimates is recognised prospectively in current and future periods.

C. Fixed assets and depreciation

Fixed assets are stated at acquisition/construction cost net of recoverables taxes and includes amounts added on revaluation less accumulated depreciation and impairment loss if any. Cost of construction include cost attributable to bring the asset to its intended use, and includes related borrowing costs and adjustment arising from exchange rate variation attributable to fixed assets are capitalised.

Depreciation on fixed assets (other than Leasehold Land) has been provided on straight-line method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956. Cost of leasehold land is amortised over the life of the lease period and on amounts added on revaluation, depreciation is provided as aforesaid on residual life of the assets as certified by valuers. Assets costing individually Rs. 5,000 or less are depreciated fully in the year of purchase.

D. Intangible Assets and Amortisation

Intangible assets are stated at cost of acquisition less accumulated amortisation. These assets are amortised over a period of five years on a straight line basis.

E. Impairment of assets

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the profit and loss account. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.

F. Investments

Long term investments are stated at cost, less any other than, temporary diminution in value.

Current investments are carried at lower of cost or market/ fair value determined on an individual investment basis.

Profit or loss on sale of investments is determined on the basis of weighted average carrying amount of investments disposed off.

G. Foreign currency transactions

Foreign currency transactions are recorded using the exchange rates prevailing on the date of the transaction. Exchange differences arising on foreign exchange transactions settled during the year are generally recognised in the profit and loss account of the year.

Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the exchange rate on that date; the resultant exchange differences are recognized in the profit and loss account. In respect of Forward Exchange Contracts (excluding cash flow hedges), the differences between the contract rate and spot rate on the date of the contract is charged to Profit and Loss Account over the period of contract and the difference between the year end rate and spot rate on the date of contract is also recognised in Profit and Loss Account.

The exchange difference arising on translations and realised gains and losses on foreign currency transactions are generally recognised in Profit and Loss Account, except in case of long term liabilities where they relate to acquisition of fixed assets, in which case they are adjusted to the carrying cost of fixed assets. Non-monetary foreign currency items are carried at cost.

H. Derivative instruments and hedge accounting

The Company enters into derivative financial instruments (option contracts and forward contracts) to hedge foreign currency risk of firm commitments and highly probable forecast transactions.

In respect of Derivative financial instruments entered to hedge foreign currency risk of highly probable forecast transactions that qualify as Cash flow hedges, the gains or losses are reflected in the Hedging Reserve Account in the Balance Sheet and are subsequently recognised in the Profit and Loss Account of the period in which the hedged transaction materialises as per principles of hedge accounting enunciated in Accounting Standard (AS) - 30, "Financial Instruments: Recognition and Measurement". In respect of other derivative financial instruments, which are hedges, the gains or losses are accounted for in Profit and Loss Account.

I. Inventories Raw materials

Raw materials are valued at cost or net realizable value whichever is lower. Cost of Raw Materials - for Jewellery division is computed using the First in First out (FIFO) method, - for diamond division, specific items of cost are allocated and assigned to inventory wherever practicable and in other cases, the weighted average method is used to compute cost.

Stock in process

Stock in process is considered as part of stock of raw materials and is not valued separately.

Finished goods

For Jewellery division are valued at estimated cost or net realizable value, whichever is lower. For Diamond division, polished diamonds are valued at technical estimate of cost or net realizable value, whichever is lower. Cost includes cost of materials consumed and related conversion costs which are technically evaluated by the management, in view of the nature of the variation in the value of individual diamonds, existence of multiple grades and the differentials in conversion costs. The Company has therefore complied with AS2 - "Valuation of Inventories" issued by the Institute of Chartered Accountants of India to the extent practicable. Stores, spares parts and loose tools are valued at cost.

J. revenue recognition

Revenue is recognised only when it can be reliably measured and it is reasonable to expect ultimate collection. Turnover includes sale of goods and services and gain / loss on corresponding hedge contract.

Dividend income is recognised when right to receive is established.

Interest income is recognized on time proportionate basis.

K. Employee''s retirement benefits Short term employee benefits

All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits. These benefits include compensated absences such as paid annual leave and sickness leave. The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognized during the year.

Post employment benefits Defined Contribution Plans

The Company''s provident fund scheme is a defined contribution plan.

The Company''s contribution paid/payable under the schemes is recognised as expense in the Profit and Loss account during the period in which the employee renders the related service. The Company makes specified monthly contributions towards employee provident fund.

Defined Benefit Plans

The Company''s gratuity benefit scheme is a defined benefit plan. The Company''s net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees will earn in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets is deducted.

The present value of the obligation under such defined benefit plan is determined based on actuarial valuation by an independent actuary at each balance sheet date using the Projected Unit Credit Method, which recognises 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 rates used for determining the present value of the obligation under defined benefit plans, are based on the market yields on Government securities as at the balance sheet date.

Actuarial gains and losses are recognized immediately in the Profit and Loss Account.

Other Long term employment benefits

The Company''s liabilities towards Compensated Absences to employees are determined on the basis of valuations, as at balance sheet date, carried out by an independent actuary using Projected Unit Credit Method. Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial assumptions and are recognized immediately in the Profit and Loss Account.

L. Leases

Lease payments under an operating lease are recognised in the profit and loss account on a straight line basis, over the lease term.

M. Taxation

Income tax expense comprises of current tax (i.e. amount of tax for the year determined in accordance with the income tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the year).

The deferred tax charge or credits and the corresponding deferred tax liabilities or assets are recognised using the tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that there is a reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is virtually/reasonably (as the case may be) certain to be realised.

N. Borrowing cost

Borrowing Costs that are attributable to the acquisition or construction of qualifying assets are capitalised 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.

O. provisions and contingent liabilities and contingent assets

The Company creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may or may not require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent assets are neither recognised nor disclosed in the financial statements.

P. Earnings per share (''Eps'')

Basic EPS is computed using the weighted average number of equity shares outstanding during the year. Diluted EPS is computed using the weighted average number of equity and dilutive equity equivalent shares outstanding during the year except where the results would be anti-dilutive.

Q. Employee stock option based compensation

The Company calculates the compensation cost based on the intrinsic value method wherein the excess of value of underlying equity shares as of the date of the grant of options over the exercise price of such options is recognised and amortised over the vesting period on a straight line basis. The Company follows SEBI guidelines for accounting of employee stock options.

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Mar 31, 2012

A. Basis of preparation of financial statements

The financial statements have been prepared and presented on an accrual basis under the historical cost convention except for certain fixed assets which are revalued in accordance with the provisions of the Companies Act, 1956 and the accounting principles generally accepted in India and comply with the accounting standards prescribed in the Companies (Accounting Standards) Rules, 2006 by Central Government, to the extent applicable.

Accounting Policies not specifically referred to otherwise are consistent with and in consonance with generally accepted accounting principles.

B. Use of estimates

The preparation of the financial statements in conformity with generally accepted accounting principles (GAAP) in India requires management to make estimates and assumptions that affect the reported amount of assets, liabilities and the disclosure of contingent liabilities on the date of the financial statements. Actual results could differ from those estimates. Any revision to the accounting estimates is recognised prospectively in current and future periods.

C. Fixed assets and depreciation

Fixed assets are stated at acquisition/construction cost net of recoverables taxes and includes amounts added on revaluation less accumulated depreciation and impairment loss if any. Cost of construction include cost attributable to bring the asset to its intended use, and includes related borrowing costs and adjustment arising from exchange rate variation attributable to fixed assets are capitalised.

Depreciation on fixed assets (other than Leasehold Land) has been provided on straight-line method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956. Cost of leasehold land is amortised over the life of the lease period and on amounts added on revaluation, depreciation is provided as aforesaid on residual life of the assets as certified by valuers. Assets costing individually Rs. 5,000 or less are depreciated fully in the year of purchase.

D. Intangible Assets and Amortisation

Intangible assets are stated at cost of acquisition less accumulated amortisation. These assets are amortised over a period of five years on a straight line basis.

E. Impairmentofassets

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the profit and loss account. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.

F. Investments

Long term investments are stated at cost, less any other than, temporary diminution in value.

Current investments are carried at lower of cost or market/ fair value determined on an individual investment basis.

Profit or loss on sale of investments is determined on the basis of weighted average carrying amount of investments disposed off.

G. Foreign currency transactions

Foreign currency transactions are recorded using the exchange rates prevailing on the date of the transaction. Exchange differences arising on foreign exchange transactions settled during the year are generally recognised in the profit and loss account of the year.

Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the exchange rate on that date, the resultant exchange differences are recognized in the profit and loss account.

In respect of Forward Exchange Contracts (excluding cash flow hedges), the differences between the contract rate and spot rate on the date of the contract is charged to Profit and Loss Account over the period of contract and the difference between the year end rate and spot rate on the date of contract is also recognised in Profit and Loss Account.

The exchange difference arising on translations and realised gains and losses on foreign currency transactions are generally recognised in Profit and Loss Account, except in case of long term liabilities where they relate to acquisition of fixed assets, in which case they are adjusted to the carrying cost of fixed assets.

Non-monetary foreign currency items are carried at cost.

H. Derivative instruments and hedge accounting

The Company enters into derivative financial instruments (option contracts and forward contracts) to hedge foreign currency risk of firm commitments and highly probable forecast transactions.

In respect of Derivative financial instruments entered to hedge foreign currency risk of highly probable forecast transactions that qualify as Cash flow hedges, the gains or losses are reflected in the Hedging Reserve Account in the Balance Sheet and are subsequently recognised in the Profit and Loss Account of the period in which the hedged transaction materialises as per principles of hedge accounting enunciated in Accounting Standard (AS) - 30, "Financial Instruments: Recognition and Measurement". In respect of other derivative financial instruments, which are hedges, the gains or losses are accounted for in Profit and Loss Account.

I. Inventories Raw materials

Raw materials are valued at cost or net realizable value whichever is lower. Cost of Raw Materials - for Jewellery division is computed using the First in First out (FIFO) method, - for diamond division, specific items of cost are allocated and assigned to inventory wherever practicable and in other cases, the weighted average method is used to compute cost.

Stock in process

Stock in process is considered as part of stock of raw materials and is not valued separately.

Finished goods

For Jewellery division are valued at estimated cost or net realizable value, whichever is lower. For Diamond division, polished diamonds are valued at technical estimate of cost or net realizable value, whichever is lower. Cost includes cost of materials consumed and related conversion costs which are technically evaluated by the management, in view of the nature of the variation in the value of individual diamonds, existence of multiple grades and the differentials in conversion costs. The company has therefore complied with AS2 - "Valuation of Inventories" issued by the Institute of Chartered Accountants of India to the extent practicable.

Stores, spares parts and loose tools are valued at cost.

J. Revenue Recognition

Revenue is recognised only when it can be reliably measured and it is reasonable to expect ultimate collection. Turnover includes sale of goods and services and gain / loss on corresponding hedge contract.

Dividend income is recognised when right to receive is established.

Interest income is recognized on time proportionate basis.

K. Employee's retirementbenefits

Short term employee benefits

All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits. These benefits include compensated absences such as paid annual leave and sickness leave. The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognized during the year.

Post employment benefits

Defined Contribution Plans

The Company's provident fund scheme is a defined contribution plan.

The Company's contribution paid/payable under the schemes is recognised as expense in the Profit and Loss account during the period in which the employee renders the related service. The Company makes specified monthly contributions towards employee provident fund.

Defined Benefit Plans

The Company's gratuity benefit scheme is a defined benefit plan. The Company's net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees will earn in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets is deducted.

The present value of the obligation under such defined benefit plan is determined based on actuarial valuation by an independent actuary at each balance sheet date using the Projected Unit Credit Method, which recognises 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 rates used for determining the present value of the obligation under defined benefit plans, are based on the market yields on Government securities as at the balance sheet date.

Actuarial gains and losses are recognized immediately in the Profit and Loss Account.

Other Long term employment benefits

The Company's liabilities towards Compensated Absences to employees are determined on the basis of valuations, as at balance sheet date, carried out by an independent actuary using Projected Unit Credit Method. Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial assumptions and are recognized immediately in the Profit and Loss Account.

L. Leases

Lease payments under an operating lease are recognised in the profit and loss account on a straight line basis, over the lease term.

M. Taxation

Income tax expense comprises of current tax (i.e. amount of tax for the year determined in accordance with the income tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the year).

The deferred tax charge or credits and the corresponding deferred tax liabilities or assets are recognised using the tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that there is a reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is virtually/reasonably (as the case may be) certain to be realised.

N. Borrowing cost

Borrowing Costs that are attributable to the acquisition or construction of qualifying assets are capitalised 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.

O. Provisions and contingent liabilities and contingentassets

The Company creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may or may not require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent assets are neither recognised nor disclosed in the financial statements. P. Earnings pershare ('EPS')

Basic EPS is computed using the weighted average number of equity shares outstanding during the year. Diluted EPS is computed using the weighted average number of equity and dilutive equity equivalent shares outstanding during the year except where the results would be anti-dilutive.

Q. Employee stock option based compensation

The Company calculates the compensation cost based on the intrinsic value method wherein the excess of value of underlying equity shares as of the date of the grant of options over the exercise price of such options is recognised and amortised over the vesting period on a straight line basis. The Company follows SEBI guidelines for accounting of employee stock options.

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Mar 31, 2011

A Basis of preparation of financial statements:

(i) The financial statements have been prepared and presented under the historical cost convention except for certain fixed assets which are revalued in accordance with the provisions of the Companies Act, 1956 and the accounting principles generally accepted in India and comply with the accounting standards prescribed in the Companies (Accounting Standards) Rules, 2006' by Central Government, to the extent applicable.

(ii) Accounting Policies not specifically referred to otherwise are consistent with and in consonance with generally accepted accounting principles.

B. Use of estimates

The preparation of the financial statements in conformity with generally accepted accounting principles (GAAP) in India requires management to make estimates and assumptions that affect the reported amount of assets, liabilities and the disclosure of contingent liabilities on the date of the financial statements. Actual results could differ from those estimates. Any revision to the accounting estimates is recognised prospectively in current and future periods.

C. Fixed assets and depreciation:

i) Fixed assets are stated at acquisition/construction cost net of recoverable taxes and includes amounts added on revaluation less accumulated depreciation and impairment loss if any. Cost of construction include cost attributable to bring the asset to its intended use, and includes related borrowing costs and adjustment arising from exchange rate variation, attributable to fixed assets are capitalised.

ii) Depreciation on fixed assets (other than Leasehold Land) has been provided on straight-line method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956. Cost of leasehold land is amortised over the life of the lease period and on amounts added on revaluation, depreciation is provided as aforesaid on residual life of the assets as certified by valuers.

D. Intangible assets are stated at cost of acquisition less accumulated amortisation. These assets are amortised over a period of five years on a straight line basis.

E. Impairment of assets:

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the profit and loss account. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.

F. Investments

Long term investments are stated at cost, less any other than, temporary diminution in value.

Current investments are carried at lower of cost or market/ fair value determined on an individual investment basis.

Profit or loss on sale of investments is determined on the basis of weighted average carrying amount of investments disposed off.

G. Foreign currency transactions:

Foreign currency transactions are recorded using the exchange rates prevailing on the date of the transaction. Exchange differences arising on foreign exchange transactions settled during the year are generally recognised in the profit and loss account of the year.

Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the exchange rate on that date; the resultant exchange differences are recognized in the profit and loss account.

In respect of Forward Exchange Contracts (excluding cash flow hedges), the differences between the contract rate and spot rate on the date of the contract is charged to Profit and Loss Account over the period of contract and the difference between the year end rate and spot rate on the date of contract is also recognised in Profit and Loss Account.

The exchange difference arising on translations and realised gains and losses on foreign currency transactions are generally recognised in Profit and Loss Account, except in case of long term liabilities where they relate to acquisition of fixed assets, in which case they are adjusted to the carrying cost of fixed assets.

Non-monetary foreign currency items are carried at cost.

H. Derivative instruments and hedge accounting:

The Company enters into derivative financial instruments (option contracts and forward contracts) to hedge foreign currency risk of firm commitments and highly probable forecast transactions.

In respect of Derivative financial instruments entered to hedge foreign currency risk of highly probable forecast transactions that qualify as Cash flow hedges, the gains or losses are reflected in the Hedging Reserve Account in the Balance Sheet and are subsequently recognised in the Profit and Loss Account of the period in which the hedged transaction materialises as per principles of hedge accounting enunciated in Accounting Standard (AS) – 30, "Financial Instruments: Recognition and Measurement". In respect of other derivative financial instruments, which are hedges, the gains or losses are accounted for in Profit and Loss Account.

I. Inventories:

i) Raw materials are valued at cost or net realizable value whichever is lower. Cost of Raw Materials – for Jewellery division is computed using the First in First out (FIFO) method, – for diamond division, specific items of cost are allocated and assigned to inventory wherever practicable and in other cases, the weighted average method is used to compute cost.

ii) Stock in process is considered as part of stock of raw materials and is not valued separately.

iii) Finished goods – for Jewellery division are valued at estimated cost or net realizable value, whichever is lower, - for Diamond division, polished diamonds are valued at technical estimate of cost or net realizable value, whichever is lower. Cost includes cost of materials consumed and related conversion costs which are technically evaluated by the management, in view of the nature of the variation in the value of individual diamonds, existence of multiple grades and the differentials in conversion costs. The Company has therefore complied with AS2 – "Valuation of Inventories" issued by the Institute of Chartered Accountants of India to the extent practicable.

iv) Stores, spares parts and loose tools are valued at cost.

J. Basis of accounting:

All significant items of income and expenditure having a material bearing on the financial statements are recognised on accrual basis.

K. Employee's retirement benefits:

a) Short term employee benefits:

All employee benefits payable wholly within twelve months of rendering the service are classified as short- term employee benefits. These benefits include compensated absences such as paid annual leave and sickness leave. The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognized during the year.

(b) Post employment benefits:

i) Defined Contribution Plans:

The Company's provident fund scheme is a defined contribution plan.

The Company's contribution paid/payable under the schemes is recognised as expense in the Profit and Loss account during the period in which the employee renders the related service. The Company makes specified monthly contributions towards employee provident fund.

(ii) Defined Benefit Plans:

The Company's gratuity benefit scheme is a defined benefit plan. The Company's net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees will earn in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets is deducted.

The present value of the obligation under such defined benefit plan is determined based on actuarial valuation by an independent actuary at each balance sheet date using the Projected Unit Credit Method, which recognises 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 rates used for determining the present value of the obligation under defined benefit plans, are based on the market yields on Government securities as at the balance sheet date.

Actuarial gains and losses are recognized immediately in the Profit and Loss Account.

(iii) Other Long term employment benefits:

Company's liabilities towards Compensated Absences to employees are determined on the basis of valuations, as at balance sheet date, carried out by an independent actuary using Projected Unit Credit Method. Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial assumptions and are recognized immediately in the Profit and Loss Account.

L. Taxation:

Income tax expense comprises of current tax (i.e. amount of tax for the year determined in accordance with the income tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the year).

The deferred tax charge or credits and the corresponding deferred tax liabilities or assets are recognised using the tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that there is a reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is virtually/reasonably (as the case may be) certain to be realised.

M. Borrowing cost:

Borrowing Costs that are attributable to the acquisition or construction of qualifying assets are capitalised 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. Provisions, contingent liabilities and contingent assets:

The Company creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may or may not require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent assets are neither recognised nor disclosed in the financial statements.

O. Revenue recognition:

Revenue is recognised only when it can be reliably measured and it is reasonable to expect ultimate collection. Turnover includes sale of goods and services and gain / loss on corresponding hedge contract.

Dividend income is recognised when right to receive is established.

Interest income is recognised on time proportion basis.

P. Earnings per share (‘EPS'):

Basic EPS is computed using the weighted average number of equity shares outstanding during the year. Diluted EPS is computed using the weighted average number of equity and dilutive equity equivalent shares outstanding during the year except where the results would be anti-dilutive.

Q. Employee stock option based compensation:

The Company calculates the compensation cost based on the intrinsic value method wherein the excess of value of underlying equity shares as of the date of the grant of options over the exercise price of such options is recognised and amortised over the vesting period on a straight line basis. The Company follows SEBI guidelines for accounting of employee stock options.

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Mar 31, 2010

A. Basis of preparation of financial statements:

(i) The Financial statements have been prepared under the historical cost convention in accordance with the normally accepted accounting principles and the provisions of the Companies Act, 1956 as adopted consistently by the Company. (ii) Accounting Policies not specifically referred to otherwise are consistent with and in consonance with generally accepted accounting principles.

B. Use of Estimates:

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

C. Fixed Assets and Depreciation:

i) Fixed Assets are stated at acquisition/construction cost less accumulated depreciation. Cost of construction include cost attributable to bring the asset to its intended use, and includes related borrowing costs.

ii) Depreciation on fixed assets (other than Leasehold Land) has been provided on straight-line method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956. Cost of leasehold land is amortised over the life of the lease period.

D. Intangible Assets are stated at cost of acquisition less accumulated amortisation. These assets are amortised over a period of five years on a straight line basis.

E. Impairment of Assets:

An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value and impairment loss is charged to the revenue. The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

F. Long term Investments are stated at Cost. Provision for diminution in value is made only if such diminution is other than a temporary in the opinion of the management. Current investments are stated at lower of cost or net realisable value.

G. Foreign currency transactions:

Foreign Currency Transactions (FCT) are initially recognised at the spot rate on the date of the transaction.

Monetary assets and liabilities relating to foreign currency transactions remaining outstanding at the end of the year are translated at year end rates.

In respect of Forward Exchange Contracts (excluding cash flow hedges), the differences between the contract rate and spot rate on the date of the contract is charged to Profit and Loss Account over the period of contract and the difference between the year end rate and spot rate on the date of contract is recognised as exchange difference.

The differences on translations and realised gains and losses on foreign currency transactions are generally recognised in Profit and Loss Account. Non-monetary items are carried at cost.

H. Derivative instruments and hedge accounting:

The Company enters into derivative financial instruments (option contracts and forward contracts) to hedge foreign currency risk of firm commitments and highly probable forecast transactions.

In respect of Derivative financial instruments entered to hedge foreign currency risk of highly probable forecast transactions that qualify as Cash flow hedges, the gains or losses are reflected in the Hedging Reserve Account in the Balance Sheet and are subsequently recognised in the Profit and Loss Account of the period in which the hedged transaction materialises as per principles of hedge accounting enunciated in Accounting Standard (AS) – 30, “Financial Instruments: Recognition and Measurement”. In respect of other derivative financial instruments, which are hedges, the gains or losses are accounted for in Profit and Loss Account.

I. Inventories:

i) Raw Materials are valued at cost or net realizable value whichever is lower. Cost of Raw Materials – for Jewellery division is computed using the First in First out (FIFO) method, – for diamond division, specific items of cost are allocated and assigned to inventory wherever practicable and in other cases, the weighted average method is used to compute cost.

ii) Stock in Process is considered as part of Stock of Raw Materials and is not valued separately.

iii) Finished goods – for Jewellery division are valued at estimated cost or net realizable value, whichever is lower, - for Diamond division, polished diamonds are valued at technical estimate of cost or net realizable value, whichever is lower. Cost includes cost of materials consumed and related conversion costs which are technically evaluated by the management, in view of the nature of the variation in the value of individual diamonds, existence of multiple grades and the differentials in conversion costs. The company has therefore complied with AS2 – “Valuation of Inventories” issued by the Institute of Chartered Accountants of India to the extent practicable.

iv) Stores, Spares parts and Loose Tools are valued at cost.

J. Basis of Accounting:

All significant items of income and expenditure having a material bearing on the financial statements are recognised on accrual basis.

K. Employee’s Retirement Benefits:

(i) Short-term employee benefits are recognised as an expenses at the undiscounted amount in the profit and loss account for the year in which the related service is rendered.

(ii) Post-employment and other long term employee benefits are recognised as an expense in the profit and loss account for the year in which the employee has rendered services. The expense is recognised at the present value of the amount payable determined using the actuarial valuation techniques. Actuarial gains and losses in respect of post-employment and other long term benefits are charged to the profit and loss account.

L. Taxation:

Provision for current taxation is made after considering various reliefs admissible under the provisions of the Income Ta x Act.

Deferred tax is recognised on timing differences being the difference between taxable income and accounting income that originate in one period and

are capable of reversal in one or more subsequent periods.

M. Borrowing Cost:

Borrowing Costs that are attributable to the acquisition or construction of qualifying assets are capitalised 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. Provisions, Contingent Liabilities and Contingent Assets:

Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognised but are disclosed in the notes. Contingent Assets are neither recognised nor disclosed in the financial statements.

O. Revenue Recognition:

Revenue is recognised only when it can be reliably measured and it is reasonable to expect ultimate collection. Turnover includes sale of goods and services and gain/loss on corresponding hedge contract. Dividend income is recognised when right to receive is established. Interest income is recognised on time proportion basis.