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Accounting Policies of Umiya Tubes Ltd. Company

Mar 31, 2016

[ 1 ] CORPORATE INFORMATION :

Umiya Tubes Limited (The company) was incorporated on 7th May, 2013 as Private Limited Company. The Company was converted from Private Limited to Public Limited Company vide Fresh Certificate of Incorporation dated 1st October, 2015 issued by the Registrar of Companies, Gujarat. The Company is engaged in the business of manufacturing of stainless steel pipes with registered address at 208, 2nd Floor, Suman Tower, Sector-11, Gandhinagar, Gujarat, India Pin 382 011 and factory address at Survey No. 1584/1,2,3 and 4 (old survey numbers 284/1,2,3 & 4 ), At. Toraniya, Post Ujediya, Ta. Talod, Dist. Sabarkantha, Gujarat, India Pin 383 215.

The Company has made an Initial Public Offer of 20,00,000 Equity Shares of Rs. 10/- each for cash at par vide Prospectus dated 14th March, 2016. The Company has successfully completed the Initial Public Offering (IPO) in the current year pursuant to the applicable SEBI Rules and Regulations. The IPO opened on 18th March, 2016 and closed on 22nd March, 2016.

The IPO of the Company received an encouraging response from the investors and the public issue was oversubscribed. The Equity Shares of the Company have been listed on SME Platform of BSE Limited w.e.f 1st April, 2016.

[ 2 ] SIGNIFICANT ACCOUNTING POLICIES:

(A) General:

1. The accounts of the Company are prepared under the historical cost convention using the accrual method of accounting. However, insurance claims and other than cash compensatory incentives are accounted on the basis of receipt.

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

(B) Use of Estimates:

The presentation of the financial statements in conformity with the generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and disclosure of contingent liabilities. Such estimates and assumptions are based on management''s evaluation of relevant facts and circumstances as on the date of financial statement. The actual outcome may diverge from these estimates.

(C) Tangible assets:

1. All Fixed assets are stated at cost, net of depreciation and impairment losses where ever applicable and also net of tax, duty credits availed if any. The cost of Tangible Assets comprises its purchase price, borrowing cost and any cost directly attributable to bringing the asset to its working condition for its intended use.

2. Any subsequent expenditure incurred is added to an asset only if it increases its future life and usefulness as compared to past estimates. All other day to day or other repairing expenditure is charged directly to statement of profit and loss account for the period in which they are incurred.

(D) Intangible assets:

The company have its logo and brand which is created by the hard work and sincere efforts of the company management and the registration of trade mark is under progress as the application is already made and it is under the process of approval at government level. But as it is self generated and company have not paid any specific amount for it the same is not recognized with any specific value in the books of accounts.

(E) Depreciation :

Depreciation is calculated as per method given in schedule - II of the Companies Act 2013 on the straight line method on all assets. After considering the actual utilization time period of the machines along with total utilization of days, the management decided the percentage of utilization of machine and based on that depreciation is calculated.

The company adhered to the life of the assets as given in Schedule II of the companies act and so no management assumption required.

(F) Impairment :

1. The Company verifies/assesses at each reporting date as to whether there is any indication that an asset (tangible and intangible) may be impaired. An asset is treated as impaired, when the carrying cost of the asset exceeds its recoverable amount. Recoverable amount is higher of an asset''s or cash generating unit''s net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.

2. An impairment loss is charged to Profit and Loss Account in the year in which an asset is identified as impaired. On the balance sheet date, there is any indication that the impairment loss recognized in prior accounting period does not exist than it is reversed and the asset is reflected at the realizable value subject to the maximum of depreciated historical cost.

(G) Investment/deposits :

1. Current investments are carried at lower of cost and quoted/fair value, computed category-wise. Non Current investments are stated at cost. Provision for diminution in the value of Non Current investments is made only if such a decline is other than temporary in nature.

2. Investments that are readily realizable and liquid in nature and intended to be held for not more than 12 months from the date of acquisition are classified as current investment. All other investments are classified as noncurrent investments.

(H) Inventories :

1. Items of inventories like raw material, finished goods, work-in-progress, store and spares etc. are measured at lower of cost and net realizable value after providing for obsolescence, if any, except in case of by-products which are valued at net realizable value.

2. Cost of inventories comprises of cost of purchase, cost of conversion and other costs including manufacturing overheads net of recoverable taxes based on normal capacity of production incurred in bringing them to their respective present location and condition

3. Net realizable value is estimated selling price in ordinary course of business.

(I) Revenue:

1. The sales revenue is recognized on issuance of sales invoice and taken to sales excluding all taxes applicable to that sale.

2. Sales is taken net of taxes collected on behalf government like excise, vat etc. and so revenue from operation is net of all such taxes and cess.

3. Company received provisional sanction from government authorities for interest subsidy and visit by concerned authorities is also finished and it satisfied all conditions there in and so having not only reasonable but virtual certainty for receipt of same and so interest subsidy income is recognized as income for the period under audit.

(J) Excise duty Vat Service tax etc Tax items:

1. Excise duty is accounted as separate item of taxation liability and directly taken to this head at both sales and purchase time. Then, any payable is paid to government authorities on monthly or quarterly bases as per applicability.

2. The same system is followed for vat and service tax also.

3. Service tax is also accounted on same bases. Service tax as per RCM is paid and CENVAT credit of the same is taken. Service tax payable for service provided is also taken to liability and paid as per rules.

(K) Employee Benefits:

This is the second year of company for production and sales or operation and all employee benefits like PF, Residential Facility, Refreshment Area, Plot area, their safety and security, their insurance etc. is taken care by the company.

(L) Prior period and extraordinary items:

There is no prior period item in the current year.

(M) Preliminary expense or expenses to be written off.

Preliminary expenses of expenses to be written off includes the expenses incurred for public issue during the year but as whole the issue proceeds is received in next year and not utilized during the current year, the issue expenditure incurred are recognized and the head Misc. expenditure incurred not written off as per the matching concept and the same will be written of in the next financial year.

(N) Provisions :

Provision is recognized in the accounts when there is a present obligation as a result of past event(s) and it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.

(O) Contingent Liabilities and Contingent Assets :

1. Contingent liabilities are disclosed unless the possibility of outflow of resources is remote.

2. Contingent assets are neither recognized nor disclosed in the financial statements.

(P) Export benefits:

There is no export made by company during year under audit.

(Q) Foreign currency transactions:

There are no direct business foreign currency transactions but however one delegation of company visited abroad for export marketing and in that foreign tour they incurred the expenditure of Rs. 0.79 lakhs in the current financial year.

(R) Borrowing Cost:

Borrowing Costs that are attributable to the acquisition and construction of the qualifying asset are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to Revenue.

(S) Cash & Cash equivalents :

Cash and cash equivalents includes cash in hand and cash at bank and cheques received but not deposited.

(U) Taxes on Income:

Current tax is determined as the amount of tax payable in respect of taxable income for the period. Deferred tax is to be recognized, subject to the consideration of prudence in respect of deferred tax liability/assets, on timing difference, 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.

Tax expense comprises of current tax and deferred tax. Current tax is reported at the amount expected to be paid to the tax authorities, as per the prevailing taxation rates. Deferred income tax shows the current period timing differences between taxable income and accounting income and reversals of timing differences of earlier years/ period wherever required.

Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized only to the extent that there is a reasonable certainty or virtual certainty that sufficient future income will be available against which such deferred tax assets can be realized. The company re-assesses at every balance sheet date weather reasonable or virtual certainty exist for future income against which unrecognized deferred tax assets can be recognized/realized. except that deferred tax assets, in case there are unabsorbed depreciation or losses, are recognized if there is virtual certainty that sufficient future taxable income will be available to realize the same.

Deferred tax assets and liabilities are measured using the tax rates and tax law that have been enacted or substantively enacted by the Balance Sheet date.

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