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Accounting Policies of Smiths & Founders (India) Ltd. Company

Mar 31, 2015

1. Basis Of Preparation Of Financial Statements

The Accompanying financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention and on the accrual basis. GAAP comprises of applicable provisions of the Companies Act, 2013 and mandatory Accounting Standards specified under Section 133 of the Act read with Rule 7 of Companies (Accounts) Rules, 2014. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

2. Revenue Recognition:

Revenue from Sale of goods is recognised at the point of dispatch to customers inclusive of duties & taxes.

Revenue from Sale of Services is recognized at the point of completion of service and incomplete services at 31st March, if any, the same is recognized as accrued revenue.

3. Fixed assets, Depreciation and amortisation:

a. Tangible Assets

Tangible assets are stated at cost less accumulated depreciation and impairment loss, if any.

Expenditure which are of a Capital nature are Capitalised at cost, which comprises purchase price (net of rebates and discounts), duties, levies and any directly attributable cost of bringing the assets to its working condition for the intended use.

b. Intangible Assets

Intangible asset are stated at cost of acquisition less accumulated amortisation and impairment losses, if any.

An intangible asset is recognised only if it is probable that the future economic benefits attributable to the asset will flow to the enterprise and the cost of such assets can be reliably measured.

Depreciation and Amortisation

(i) Upto 31st March, 2014, Depreciation is provided from the date the assets have been installed and put to use, on Straight Line Method at rates specified in Schedule XIV of the Companies Act, 1956.

(ii) With effect from April 1st, 2014, depreciation on assets carried at historical cost is provided on Straight line method based on useful life as under:

Category of the Asset No of useful life in years

Factory Building 30

Office Building 60

Wells 5

Plant and Machinery 15

Electrical Installations 10

Furniture and Fixtures 10

Office Equipment 5

Computer and Accessories 3

Vehicles 8

Software 6

(iii) The carrying value of the assets as on April 1st, 2014 is depreciated over the remaining useful life of the asset determined based on useful life mentioned in clause (b) supra.

(iv) Where the useful life of the asset is NIL as on April 1st, 2014, the carrying value as on April 1st, 2014 has been added to the opening balance of deficit in the Statement of Profit and Loss in accordance with Schedule II of the Companies Act, 2013.

4. Foreign Currency Translation:

Transactions in Foreign currencies are generally recorded at the exchange rate prevailing at the time of receipt / payment of money by the Company. Current Assets and Liabilities in foreign currencies are translated at the exchange rate prevailing at the Balance Sheet date. Any resulting loss/gain is charged / taken to the Profit & Loss Account.

5. Inventories:

Raw materials and consumables are valued at landed cost which includes freight.

In case of valuation of work-in-process, cost of materials as well as conversion cost is taken into consideration. Cost is determined using FIFO (first-in-first out) method.

Finished goods are valued based on retail method as per the 'Accounting Standard - 2' where a percentage profit margin is reduced from the sale value to arrive at the cost.

6. Employee Benefits:

i. Benefits in the form of provident fund whether in pursuance of law or otherwise which are defined contributions is accounted on accrual basis and charged to Statement of profit and loss.

ii. The company has formed employee superannuation trust to provide the benefit of superannuation to its employees.

iii. Defined benefit plans

Payment of present liability of future payment of gratuity is being made to approved gratuity funds, which fully cover the same under cash accumulation policy of the Life Insurance Corporation of India. The employee's gratuity is a defined benefit funded plan. The present value of the obligation under such defined benefit plan is determined based on the actuarial valuation as at the date of Balance Sheet. The company has created a group gratuity trust for the same.

Provisions for the liability on account of leave encashment has been made based on the actuarial valuation as at the date of Balance Sheet. The company has availed a policy under LIC's employee's group leave encashment cum life assurance scheme.

7. Income Tax & Deferred Tax:

Income Tax: Tax on income for the current period is determined on the basis of taxable income and tax credits computed in accordance with the provisions of Income Tax Act, 1961, and based on the expected outcome of assessments / appeals.

Deferred tax: Deferred tax liability is recognized,

subject to the consideration of prudence, on timing differences, being the difference between taxable incomes and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. The tax effect is calculated on the accumulated timing differences at the end of an accounting period based on prevailing enacted or substantially enacted regulations.

Deferred Tax assets are recognized only if there is reasonable certainty that they will be realized and are reviewed for the appropriateness of the respective carrying values at each Balance Sheet date.

8. Borrowing costs:

Interest on borrowings is recognised in the Statement of profit and loss, except interest incurred on borrowings, specifically raised for projects that is capitalised to the cost of the assets until such time as the asset is ready to put to use for its intended purpose, except where installation is extended beyond reasonable/normal time lines.

9. Provisions, Contingent Liabilities, Contingent Assets and Capital Commitments:

Provisions are recognized for liabilities that can be measured only by using a substantial degree of estimation, if

a) the Company has a present obligation as a result of a past event,

b) a probable outflow of resources is expected to settle the obligation; and

c) the amount of the obligation can be reliably estimated.

Contingent liability is disclosed in case of

d) a present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation,

e) a present obligation when no reliable estimate is possible; and

f) a possible obligation arising from past events where the probability of outflow of resources is not remote.

Contingent Assets are not recognized.

Provisions, Contingent Liabilities and Contingent Assets are reviewed at each Balance Sheet date.

Capital Commitments:

g) Capital Commitments: Estimated amount of contracts to be executed on capital account not provided for Rs. NIL (Previous year NIL)

10. Earnings Per Share

The earnings considered in ascertaining the Company's earnings per share comprise of the net profit after tax for the year. The number of shares used in computing basic earnings per share is the weighted average number of shares outstanding during the year. The number of shares used in computing diluted earnings per share comprises the weighted average shares considered for deriving basic earnings per share, and also the weighted average number of shares, which would have been issued on conversion of dilutive potential equity shares, if any.

11. Impairment of Assets:

An Asset is treated as impaired when the carrying cost of the assets exceeds its recoverable value. An impairment loss is charged to the statement of profit and loss in the year in which an asset is identified as impaired. The impairment loss recognized in prior

accounting period is reversed if there has been a change in the estimate of recoverable amount.

12. Cash Flow Statement:

The Company follows in-direct method in the preparation of statement of cash flows as required under Accounting Standard 3 - "Cash Flow Statements".


Mar 31, 2014

1. Basis Of Preparation Of Financial Statements

The financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention and on accrual basis. GAAP comprises of applicable provisions of the Companies Act, 1956 and mandatory Accounting Standards as per The Companies (Accounting Standards) Rules, 2006. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or revision to an existing accounting standard requires a change in the accounting policy hitherto in use. The company maintains its accounts on accrual basis.

2. Revenue Recognition:

Revenue from Sale of goods is recognised at the point of dispatch to customers, of converted and finished goods and is inclusive of duties & taxes. Expenses are accounted for on accrual basis and provisions are made for all known losses and liabilities.

3. Fixed assets, Depreciation and amortisation: a. Tangible Assets

Tangible assets are stated at cost less accumulated depreciation and impairment loss, if any.

Expenditure which are of a Capital nature are Capitalised at cost, which comprises purchase price (net of rebates and discounts), duties, levies and any directly attributable cost of bringing the assets to its working condition for the intended use.

Depreciation is provided, from the date the assets have been installed and put to use, on Straight Line Method at rates specified in Schedule XIV of the Companies Act, 1956.

b. Intangible Assets

Intangible asset are stated at cost of acquisition less accumulated amortisation and impairment losses, if any.

An intangible asset is recognised only if it is probable that the future economic benefits attributable to the asset will flow to the enterprise and the cost of such assets can be reliably measured.

Amortisation is provided, from the date the assets have been installed and put to use, on Straight Line Method at rates specified in Schedule XIV of the Companies Act, 1956.

4. Foreign Currency Translation:

Transactions in Foreign currencies are generally recorded at the exchange rate prevailing at the time of receipt / payment of money by the Company. Current Assets and Liabilities in foreign currencies are translated at the exchange rate prevailing at the Balance Sheet date. Any resulting loss/gain is charged / taken to the Profit & Loss Account.

5. Inventories:

Raw materials, consumable stores, work in progress & finished goods are valued at lower of cost and net realizable value. In valuation of work-in-process and finished goods, cost of materials as well as conversion cost is taken into consideration. Cost is determined using FIFO (first-in-first out) method.

In case of finished goods of Forging Division, the valuation is done on the basis of retail method where a percentage profit margin is reduced from the sale value to arrive at the cost.

6. Employee Benefits:

i. Benefits in the form of provident fund whether in pursuance of law or otherwise which are defined contributions is accounted on accrual basis and charged to Statement of profit and loss.

ii. The company has formed employee superannuation trust to provide the benefit of superannuation to its employees.

iii. Defined benefit plans:

Payment of present liability of future payment of gratuity is being made to approved gratuity funds, which fully cover the same under cash accumulation policy of the Life Insurance Corporation of India. The employee''s gratuity is a defined benefit funded plan. The present value of the obligation under such defined benefit plan is determined based on the actuarial valuation as at the date of Balance Sheet. The company has created a group gratuity trust for the same.

Provisions for the liability on account of leave encashment has been made based on the actuarial valuation as at the date of Balance Sheet. The company has availed a policy under LIC''s employee''s group leave encashment cum life assurance scheme.

7. Income Tax & Deferred Tax:

Income Tax: Tax on income for the current period is determined on the basis of taxable income and tax credits computed in accordance with the provisions of Income Tax Act, 1961, and based on the expected outcome of assessments / appeals.

Deferred tax: Deferred tax liability is recognized,

subject to the consideration of prudence, on timing differences, being the difference between taxable incomes and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. The tax effect is calculated on the accumulated timing differences at the end of an accounting period based on prevailing enacted or substantially enacted regulations.

Deferred Tax assets are recognized only if there is reasonable certainty that they will be realized and are reviewed for the appropriateness of the respective carrying values at each Balance Sheet date.

8. Borrowing costs:

Interest on borrowings is recognised in the Statement of profit and loss, except interest incurred on borrowings, specifically raised for projects that is capitalised to the cost of the assets until such time as the asset is ready to put to use for its intended purpose, except where installation is extended beyond reasonable/normal time lines.

9. Provisions, Contingent Liabilities, Contingent Assets and Capital Commitments:

Provisions are recognized for liabilities that can be measured only by using a substantial degree of estimation, if

a) the Company has a present obligation as a result of a past event,

b) a probable outflow of resources is expected to settle the obligation; and

c) the amount of the obligation can be reliably estimated.

Contingent liability is disclosed in case of

d) a present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation,

e) a present obligation when no reliable estimate is possible; and

f) a possible obligation arising from past events where the probability of outflow of resources is not remote.

Contingent Assets are not recognized.

Provisions, Contingent Liabilities and Contingent Assets are reviewed at each Balance Sheet date.

Capital Commitments:

g) Capital Commitments: Estimated amount of contracts to be executed on capital account not provided for Rs. NIL (Previous year NIL)

10. Earnings Per Share

The earnings considered in ascertaining the Company''s earnings per share comprise of the net profit after tax for the year. The number of shares used in computing basic earnings per share is the weighted average number of shares outstanding during the year. The number of shares used in computing diluted earnings per share comprises the weighted average shares considered for deriving basic earnings per share, and also the weighted average number of shares, which would have been issued on conversion of dilutive potential equity shares, if any.

11. Impairment of Assets:

An Asset is treated as impaired when the carrying cost of the assets exceeds its recoverable value. An impairment loss is charged to the statement of profit and loss in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

12. Cash Flow Statement:

The Company follows in-direct method in the preparation of statement of cash flows as required under Accounting Standard 3 - "Cash Flow Statements".


Mar 31, 2010

I) The financial statements are prepared under the historical cost convention in accordance with the generally accepted accounting principles in India and the provisions of the Companies Act, 1956. The company maintains its accounts on accrual basis.

ii) Sale of goods is recognised at the point of despatch of finished and converted goods to customers and is inclusive of duties & taxes. Income from operating lease is recognised on a straight line basis over the lease term.

iii) Preliminary, share issue and other deferred revenue expenses are written off to the extent of one tenth per annum.

iv) Fixed Assets & Depreciation:

a) Fixed assets including Dies and Tools are capitalised at acquisition cost including directly attributable cost of bringing the assets to their working condition for the intended use.

b) Depreciation on Fixed assets is provided on straight line method in accordance with Schedule XIV of the Companies Act, 1956. As in previous years, based on expert opinion obtained, depreciation on Plant and Machinery is provided at the rates applicable for continuous processing plants.

v) Impairment of Assets:

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

vi) Inventories:

Raw materials, work in progress & finished goods are valued at lower of cost and net realizable value. In valuing of work-in-process and finished goods, cost of materials as well as conversion cost is taken into consideration. Finished goods are valued inclusive of excise duty payable thereon. Cost is determined using FIFO method.

vii) Employee Benefits:

Retirement and Gratuity benefits:

Retirement benefits in the form of Provident Fund and Superannuation Scheme are defined contribution schemes and the contributions are charged to the profit and loss account of the year when the contributions to the respective funds. are due. There are no obligations other than the contribution payable to the Provident Fund authorities/The Life Insurance Corporation of India who maintain and administer the Superannuation Scheme. During the year there were no employees and as such there is no charge to the profit and loss account of the year.

Gratuity liability is a defined benefit obligation and is provided on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year. The scheme is maintained and administered by the Life Insurance Corporation of India to Which the company makes periodic contributions. All the employees of the Company have resigned at the close of business hours on 31/03/2009. Provision was therefore made on the basis of the amount due as on 31/03/2009 in the previous year. Since there are no employees during the year there is no charge to the profit and loss account.

Leave Encashment payable as per the companys rules and calculated as per the amount payable towards a policy with LIC has been charged to the Profit & Loss Account during the previous year. The scheme is maintained and administered by the Life Insurance Corporation of India to which the company makes periodic contributions. Since there are no employees during the year there is no charge to the profit and loss account.

Short term compensated absences are recognised as an expense at the undiscounted amount in the profit and loss account of the year in which the related service is rendered. Long term compensated absences are provided for based on actuarial valuation made at the end of each financial year. The actuarial valuation is done as per projected unit credit method. All the employees of the Company have resigned at the close of business hours on 31/03/2009. Provision has been made on the basis of the amount determined by LIC as it is higher than the amountdue as on 31/03/2009.

Actuarial gains/losses are immediately taken to the profit and loss account and are not deferred.

viii) Borrowing Costs:

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 takes necessarily substantial period of time to get ready for its intended use. All other borrowing costs are charged to revenue.

ix) Provision for Current and Deferred Tax:

Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961. Deferred tax resulting from liming differences" between taxable and accounting income is accounted for using the tax rates and laws that are enacted or substantively enacted as on the balance sheet date. The deferred tax asset is recognised and carried forward only to the extent that there is virtual certainty that the asset will be realised in future.

x) Earnings Per Share: Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.

The number of shares used in computing diluted earnings per share comprises the weighted average shares considered for deriving basic earnings per share, and also the weighted average number of equity shares that could have been issued on conversion of all dilutive potential equity shares.

xi) Provision, 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 resou.ces. Contingent Liabilities are not recognised but are disclosed in the notes. Contingent Assets are neither recognised nor disclosed in the financial statements.

 
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