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Accounting Policies of VMS Industries Ltd. Company

Mar 31, 2015

2.1. Basis of preparation of financial Statements:

a. These financial statements are prepared in accordance with Indian General Accepted Accounting Principles (GAAP) under the historical cost convention on the accrual basis except for the certain financial instruments which are measured at fair value. GAAP comprise the Companies Act, 2013(the Act) read with Rule 7 of the Companies (Accounts) Rules, 2014, the provision of the Act (to the extent notified) and Guidelines issued by the Securities and Exchange Board of the India (SEBI).

b. Accounting policies have been consistently applied except where a newly -issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

2.2. USE OF ESTIMATES:-

a. Preparation of financial statements in conformity with GAAP requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.

b. All material expenditure and income to the extent considered payable and receivable are accounted for on accrual basis, except for insurance claim and refunds/subsidy from statutory authorities, which are accounted on cash basis, keeping in view the concept of materiality.

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

2.3. REVENUE RECOGNATION:-

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured.

Sale of Goods

Revenue from sale of goods is recognized when all the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods. Further, sales are inclusive of all duties and taxes and net of returns, claims, rebates, discounts, etc.

Income from Rent-Services

Income from Rent-Services is recognized on performance of the contract and acceptance of the services by the parties.

Interest Income

Revenues of interest Income is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.

Insurance, duty drawback and other claims are accounted for on receipt basis or as acknowledged by the appropriate authorities.

2.4. TANGIBLE FIXED ASSETS:-

I. Capitalized at cost of acquisition.

II. Fixed Assets are stated at cost, less accumulated depreciation (other than 'Freehold Land'). Cost comprises the purchase price, including duties and other non-refundable taxes or levies any directly attributable cost of bringing the asset to its working condition and indirect costs specifically attributable to installation of specified fixed assets or to the acquisition of a fixed asset.

III. In the event of the same having been revalued, they are stated at the revalued figures. Expenditure relating to Tangible fixed assets is added to costs only when the same involved modification work whereby it increases the life of the assets.

2.5. DEPRECIATION ON TENGIBLE ASSETS:

I. Depreciation on tangible assets is provided on the straight line method, over the useful lives of assets estimated by the management. The management estimates the useful lives for the other fixed assets as follows:

Tanqibale Fixed Assets Estimated useful Life

Factory Shed & Building 25- 30 Years

Other Buildings 25 -30 Years

Plant & Machinery 10 -15 Years

Furniture & Fixtures, Office Equipments, etc 5 -10 Years

Vehicle 5 -8 Years

Computers 3 Years

For these classes of assets, based on internal assessment and independent technical evaluation carried by the management, which believes that the useful lives as given above best represent the period over which the management expects to use these assets. Hence the useful lives for above few assets is different from the useful lives as prescribed under part C of schedule II of the companies Act, 2013

II. Leasehold land is amortized over the period of lease.

III. No depreciation is provided for assets sold during the year whereas pro-rata depreciation is provided on assets acquired during the year.

2.6. VALUATION OF INVENTORIES:

Inventories of Raw Materials- Ships and its work -in -progress are stated at Cost values. Cost comprises all cost of purchase, cost of conversion and other cost incurred in bringing the inventories to their present location and condition. Cost formulas used are First -in -First -out.

Consumable stores and spares are written off at the time of purchase itself.

In ship recycling units, the weight of the ship purchased is accounted in terms of LDT/MT of the ship at the time of its construction. Ascertaining of weight of ship at the time of purchase is not possible due to its nature and size. There is loss of weight on account of corrosion and other factors during the usage of the ship and its voyage for long period of the years. Inventory at the close of the year is ascertained by reducing the weight of the scrap sold together with the estimated wastage of the material.

2.7. INVESTMENTS:-

Investments are classified into current and Long-term investment. Current Investments are stated at lower of cost and fair market value. Long Term Investments are stated at cost after deducting provision, if any, for diminution in value considered being other than temporary in nature.

2.8. Retirement Benefits:-

Liability for employee benefits, both short and long term, for present and past services which are due as per terms of employment are recorded in accordance with Accounting Standard (AS) 15 "Employee Benefits" as notified by the Companies (accounting Standards), read with Rule 7 of the Companies (Accounts) Rules, 2014

i) Gratuity

The management is of the opinion that since none of the employees of the company were in continuous service of more than five years and accordingly making provision of the gratuity does not arise. However, if payment on account of gratuity arises due to happening of any incidents as provided under the applicable provisions of the law, the same will be accounted for on cash basis.

ii) Pension

The management is also of the opinion that the payment under Pension Act does not applicable to the Company.

iii) Contribution to Provident Funds

The company contributes to the employee's provident fund maintained under the Employees Provident Fund Scheme of the Central Government and the same is charged to the Profit & Loss Account. The company has no obligation, other than the contribution payable to the provident fund.

iv) Other short term benefits

Expense in respect of other short term benefits is recognized on the basis of the amount paid or payable for the period during which services are rendered by the employee.

2.9. TAXES ON INCOME :

Current Tax

Provision for current Tax is determined as the tax payable in respect of taxable income for the year and is computed in accordance with relevant tax regulations and the provisions of Income Tax Act, 1961.

Advance taxes and provisions for current income taxes are presented in the balance sheet after off-setting advance taxes paid and TDS/TCS receivables.

Deferred Tax

Deferred tax resulting from timing differences between taxable Income and accounting income is accounted for at the current rate of tax or substantively enacted tax rates as at reporting date, to the extent that the timing differences are expected to crystallize.

Deferred tax assets are recognized where realization is reasonably certain whereas in case of carried forward losses or unabsorbed depreciation, deferred tax assets are recognized only if there is a virtual certainty supported by convincing evidence that such deferred tax assets will be realized. Deferred tax assets are reviewed for the appropriateness of their respective carrying values at each reporting date.

2.10. EXCISE DUTY AND CENVAT:-

Excise duty is payable on the assessed value of ship determined by the departmental authorities and is payable under the CENVAT before beaching of the Ship at Port. The excise duty is collected on sales and is adjusted against the CENVAT credits, to the extent it is available and balance duty is paid and debited to revenue expenditure.

2.11. BORROWING COST:

Borrowing cost, if any attributable to acquisition or construction of a qualifying asset are capitalized as part of cost of such assets. Qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs are recognized as expenses in the period in which they are incurred are charged to the Statement of Profit and Loss.

2.12. CONSOLIDATED FINANCIAL STATEMENTS:

The Ministry of Corporate Affairs (MCA) has vide notification dated October 14, 2014 amended the Companies (Accounts) Rules, 2014 (Amended Rules). Section 129 (3) read with Rule 6 of the Companies (Accounts) Rules, 2014 (Rules) provides manner of consolidation pursuant to Schedule III of the Companies Act, 2013 (Act) and the applicable accounting standards. The amended Rules seemingly exempt a company not having subsidiaries from consolidation requirement but having associates or joint ventures (JVs).

2.13. FOREIGN CURRENCY TRANSACTIONS:

The company is exposed to currency fluctuations on foreign currency transactions. Transactions denominated in foreign currency are recorded at the original rates of exchange in force/notional determined exchange rates at the time transactions are affected. Exchange difference arising on foreign exchange transactions settled during the year is recognized in the Statement of profit and loss of the year.

In the case of forward contract, if any, difference between the forward rates and the exchange rates on the transaction dates is recognized as income or expenses over the lives of the related contracts. The Profit/Loss arising out of the cancellation or renewal of forward exchange contract is recorded as Income /Expense for the period.

Monetary assets/liabilities relating to foreign currency transaction are stated at exchange rate prevailing at the end of the year and exchange difference in respect thereof is charged to statement of Profit & Loss except foreign exchange loss/gain on reporting long-term currency monetary item used for depreciable assets, which are capitalized.

2.14. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:-

Provisions are recognized only when there is a present obligation, as a result of past events, and when a reliable estimate of the amount of obligation can be made. Contingent liability is disclosed for:

i) Possible obligations which will be confirmed only by future events not within the control of the Company or,

ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.

Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

2.15. DISCOUNTING OPERATION:

The company has discounted operations of its gas division namely "VARUN GAS" located at Sihor, GIDC, Bhavnagar, in the year 1997. The said division has no reportable operations as per accounting stranded -24.

The company has discontinued operations of its off Shore division from October, 2012.

2.16. CASH & CASH EQUIVALENTS:

Cash and cash equivalents comprise cash and cash on deposit with banks. The company considers all highly liquid investment with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.

2.17. CASH FLOW STATEMENT:-

Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transaction of a non- cash nature, any deferral or accruals of past or future operating cash receipts or payment and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.

2.18. IMPAIRMENT OF ASSETS:

The company assesses at each balance sheet date, the management reviews the carrying amounts of its assets included in each cash generating unit to determine whether there is any indication that those assets were impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of impairment. Recoverable amount is the higher of an asset's net selling price and value in use. In assessing value in use, the estimated future cash flows expected from the continuing use of the asset and from its disposal are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of time value of money and the risks specific to the asset.

2.19. MISCELLANEOUS EXPENDITURES:

I. Preliminary Expenses :

Written off over a period of five years or the period over which the benefit of the expenditure is expected to be derived.

II. Public Issue Expenses:

The public issue expenses are written off against Securities Premium Reserve as per the provision of section 78 of the Companies Act 1956 for the period of 10 years and the balancing figure under the head miscellaneous expenditure- to the extent not written off in the balance sheet.

2.20. MICRO SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006:-

a) Based on information available with the company in respect of MSME (as defined in the Micro Small and Medium Enterprises Development Act, 2006) there are no delays in the payment of dues to such Enterprises during the year.

b) As per information available with the company about suppliers whether they are covered under Micro, Small and Medium Enterprise Act, 2006. As on date, the company has not received confirmation any suppliers who have registered under the "Micro, Small and Medium Enterprise Development Act, 2006" and hence no disclosure has been made under the said Act.

2.21. EARNING PER SHARE:-

Basic and Diluted Earnings per shares are calculated by dividing the net profit attributable to the ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

2.22. SEGMENT INFORMATION:-

Under the provisions of the Accounting Standard- 17, the company at present operates in the single business segment of Ship Recycling activated and therefore, separate segment discloser has not been given.

2.23. Earnings Per Share:-

The Company reports basic and diluted earnings per share in accordance with Accounting Standard issued by the Institute of Chartered Accountant of India. Basic earnings per share are computed by dividing the net profit for the year by the Weighted Average Number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the net profit for the year by weighted average number of equity shares outstanding during the year as adjusted for the effects of all dilutive potential equity shares except where results are anti-dilutive. Statement showing the computation of EPS is as under"-

(Rs. In Lacs)

Particulars As at 31st As at 31st March, 2015 March, 2014 Net Profit as per Profit & Loss Account (Rs. in lacs) 54.68 102.30

Number of Shares Outstanding during the year 1,64,73,391 1,64,73,391

Weighted Average Number of Equity Shares Outstanding during the year 1,64,73,391 1,64,73,391

Basic Earning Per Share 0.33 0.62

Diluted Earning Per Share 0.33 0.62

Under the provisions of the Accounting Standard- 17, the company at present operates in the single business segment of Ship Recycling activated and therefore, separate segment discloser has not been given.




Mar 31, 2014

1. Basis of Accounting :

- The financial statements have been prepared and presented under historical cost convention on the accrual basis of accounting in accordance with the accounting principles generally accepted in India ("GAAP") and comply with the mandatory Accounting Standards ("AS") as notified as per the Companies Accounting Standards (Rules), 2006 to the extent applicable and with the relevant provisions of the Companies Act, 1956.

- Accounting policies not specifically referred to otherwise are consistent and in consonance with generally accepted accounting principles. It is assumed that company is Going Concern at least for one year minimum.

2. Use of Estimates:

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities on the date of financial statements and reported amount of revenues and expenses for the year. Actual results could differ from these estimates. Difference between the actual result and estimates are recognized in the period in which the results are known/ materialized. Any revision to an accounting estimate is recognized prospectively in the year of revision.

3. Prior Period and Change in Accounting Policies:

There is no prior period item and there is no change in accounting estimate and policies.

4. Revenue Recognition :

Sale of goods is recognized on dispatch to the customers. Sales are inclusive of all duties and taxes. Income/Expenses are accounted for on accrual basis and provisions are made for all known expenditure. The revenue from services is recognized on mercantile basis.

5. Fixed Assets :

Fixed assets are stated at cost less accumulated depreciation and impairment loss, if any. Cost comprises the purchase price and any directly attributable cost of bringing the assets to its working condition for its intended use. Borrowing cost directly attributable to acquisition or construction of those fixed assets which necessarily take a substantial period of time to get ready for their intended use is capitalized. Expenditure relating to fixed assets is added to cost only when the same involved modification of work and whereby it can increase the life of the assets.

6. Depreciation :

- Depreciation has been provided on the Straight Line Method at the rate specified in Schedule - XIV of the Companies Act, 1956.

- Depreciation has been provided on pro-rata basis for both assets acquired and sold during the accounting period.

- Leasehold land is amortized over the period of lease.

7. Inventories :

The Finished goods, Raw Material -Ships and Other Stock are valued at lower of cost or net realizable value.

Consumable Stores & Spares are written off at the time of purchase itself.

No accounting is done for the invisible waste resulting during recycling process of ships.

In ship recycling unit, the weight of the ship purchased is accounted in terms of LDT/MT of the ship at the time of its construction. Ascertaining of weight of the ship at the time of purchase is not possible due to its nature and size. There is loss of weight on account of corrosion and other factors during the usage of ships and its voyage for long period. Inventory at the close of the year is ascertained by reducing the weight of the scrap sold together with the ascertained wastage during cutting process.

8. Investments :

Investments of long term nature are valued at cost. Current investments, if any, are carried at the lower of cost or fair market value. Provision for diminution in the value of long - term investments is made only if such a decline is other than a temporary.

9. Retirement Benefits :

Liability for employee benefits, both short and long term, for present and past services which are due as per terms of employment are recorded in accordance with Accounting Standard (AS) 15 "Employee Benefits" as notified by the Companies (Accounting Standards)Rules, 2006

i) Gratuity

The management is of the opinion that since none of the employees of the company were in continuous service of more than five years and accordingly making provision of the gratuity does not arise. However, if payment on account of gratuity arises due to happening of any incidents as provided under the applicable provisions of the law, the same will be accounted for on cash basis.

ii) Pension

The management is also of the opinion that the payment under Pension Act is not applicable to the Company.

iii) Provident Fund

Contribution to Provident Fund is recognized and accounted for on accrual basis.

10. Taxes on Income:

a) Current Tax

The current charge for income tax is calculated in accordance with the relevant provisions as prescribed under the Income Tax Act, 1961.

b) Deferred Tax

Deferred tax charge or credit reflects the tax effects of timing differences between accounting income and taxable income for the period. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are recognized only if there is virtual certainty of realization of such assets. Deferred tax assets are reviewed at each balance sheet date. Deferred tax Assets is created by reversal of entry for fixed Asset sold

11. Excise Duty and Cenvat :

Excise Duty is payable on the assessed value of ship determined by the departmental authorities and is payable under the head Cenvat before beaching of the ship. The excise duty is collected on sales and is adjusted against the Cenvat available and excess duty payable is recognized as revenue expenditure.

12. Borrowing Cost :

Borrowing Cost, if any, is attributable to acquisition or construction of qualifying assets and is capitalized as part of the cost of such assets up to the date when such asset is ready for its intended use. Other borrowing costs are charged to the profit and loss account in the year in which they are incurred.

13. Consolidated Financial Statements:

The Ministry of Corporate Affairs, Government of India, vide General Circular No 2 and 3 dated 8th February, 2011 and 21st February, 2011 respectively read with General Circular No. 08/2014 dated 4th April, 2014 has granted a general exemption from compliance with section 212 of the Companies Act, 1956, subject to fulfillment of conditions stipulated in the circular. The Company has satisfied the conditions stipulated in the circular and hence is entitled to the exemption. Necessary information relating to the subsidiary has been included in the Consolidated Financial Statements.

14. Foreign Currency Transaction :

a) The Company is exposed to currency fluctuations on foreign currency transactions. Transactions denominated in foreign currency are recorded at the original rates of exchange in force / notional determined exchange rates at the time the transactions are affected. Exchange differences arising on foreign exchange transactions settled during the year are recognized in the profit and loss account of the year.

b) In case of forward contracts, if any, the difference between the forward rates and the exchange rates on the transaction dates is recognized as income or expenses over the lives of the related contracts. The profit/loss arising out of the cancellation or renewal of forward exchanges contracts are recorded as income/expense for the period.

c) Monetary assets and liabilities relating to foreign currency transactions are stated at exchange rate prevailing at the end of the year and exchange difference in respect thereof is charged to Profit and Loss Account except foreign exchange loss/gain on reporting of long - term currency monetary items used for depreciable assets, which are capitalized.

15. Provision, Contingent Liabilities and Contingent Assets :

Provisions involving substantial degree of estimation in measurement are recognized 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 recognized in the books of accounts and disclosed as notes to accounts. Contingent assets are neither recognized nor disclosed in the financial statements.

16. Discontinuing Operation:

The Company has discontinued operations of its Gas Division namely "Varun Gas" located at Sihor, GIDC, Bhavnagar in the year 1997. The said division has no reportable operations as per Accounting Standard - 24.

The Company has discontinued operations of its off Shore Division from October, 2012.

17. 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 assets. If such recoverable amount of the assets or the recoverable amount of the cash generating unit to which the assets 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 if a previously assessed impairment loss no longer exits, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.

18. Miscellaneous Expenditure :

a) Preliminary Expenditure :

Written off over a period of five years or the period over which the benefit of the expenditure is expected to be derived.

b) Public Issue Expense :

The public issue expenses are written off against Securities Premium Reserve as per the provision of Section 78 of the Companies Act, 1956 for the period of 10 years and the balancing figure are shown under the head Miscellaneous Expenditure - to the extent not written off in the Balance Sheet.

19. Micro, Small and Medium Enterprises Development Act, 2006:

a) Based on the information available with the company in respect of MSME (as defined in the Micro Small & Medium Enterprise Development Act, 2006) there are no delays in payment of dues to such enterprises during the year.

b) As per information available with the Company about suppliers whether they are covered under Micro, Small and Medium Enterprises Act, 2006. As on date, the Company has not received confirmation from any suppliers who have registered under the "Micro, Small and Medium Enterprise Development Act, 2006" and hence no disclosure has been made under the said Act.

20. Segment Information:

Under the provisions of Accounting Standard - 17, the Company at present operates in the single business segment of ship recycling activities and therefore, separate segment disclosure has not been given.


Mar 31, 2013

1. Basis of Accounting :-

- The financial statements have been prepared and presented under historical cost convention on the accrual basis of accounting in accordance with the accounting principles generally accepted in India ("GAAP") and comply with the mandatory Accounting Standards ("AS") as notified as per the Companies Accounting Standards (Rules), 2006 to the extent applicable and with the relevant provisions of the Companies Act, 1956.

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

2. Use of Estimates :-

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities on the date of financial statements and reported amount of revenues and expenses for the year. Actual results could differ from these estimates. Difference between the actual result and estimates are recognized in the period in which the results are known/ materialized. Any revision to an accounting estimate is recognized prospectively in the year of revision.

3. Revenue Recognition :-

Sale of goods is recognized on dispatch to the customers. Sales are inclusive of all duties and taxes. Income/Expenses are accounted for on accrual basis and provisions are made for all known expenditure. The revenue from services is recognized on mercantile basis.

The Upset Premium paid for recycling plot at the time of its allotment is accounted for as deferred revenue expenditure and is charged to Profit & Loss Account proportionately based for balance period of its use as per allotment agreement.

4. Fixed Assets :-

Fixed assets are stated at cost less accumulated depreciation and impairment loss, if any. Cost comprises the purchase price and any directly attributable cost of bringing the assets to its working condition for its intended use. Borrowing cost directly attributable to acquisition or construction of those fixed assets which necessarily take a substantial period of time to get ready for their intended use is capitalized. Expenditure relating to fixed assets is added to cost only when the same involved modification of work and whereby it can increase the life of the assets.

5. Depreciation :-

- Depreciation has been provided on the Straight Line Method at the rate specified in Schedule – XIV of the Companies Act, 1956.

- Depreciation has been provided on pro-rata basis for both assets acquired and sold during the accounting period.

- Leasehold land is amortized over the period of lease.

6. Inventories :-

The Finished goods, Raw Material –Ships and Other Stock are valued at lower of cost or net realizable value.

Consumable Stores & Spares are written off at the time of purchase itself.

No accounting is done for the invisible waste resulting during recycling process of ships.

In ship recycling unit, the weight of the ship purchased is accounted in terms of LDT/MT of the ship at the time of its construction. Ascertaining of weight of the ship at the time of purchase is not possible due to its nature and size. There is loss of weight on account of corrosion and other factors during the usage of ships and its voyage for long period. Inventory at the close of the year is ascertained by reducing the weight of the scrap sold together with the ascertained wastage during cutting process.

7. Investments :-

Investments of long term nature are valued at cost. The Company had made an investment in Partnership firms which has been reflected in the Financial Statements. Current investments, if any, are carried at the lower of cost or fair market value. Provision for diminution in the value of long – term investments is made only if such a decline is other than a temporary.

8. Retirement Benefits :-

Liability for employee benefits, both short and long term, for present and past services which are due as per terms of employment are recorded in accordance with Accounting Standard (AS) 15 "Employee Benefits" as notified by the Companies (Accounting Standards)Rules, 2006

i) Gratuity

The management is of the opinion that since none of the employees of the company were in continuous service of more than five years and accordingly making provision of the gratuity does not arise. However, if payment on account of gratuity arises due to happening of any incidents as provided under the applicable provisions of the law, the same will be accounted for on cash basis.

ii) Pension

The management is also of the opinion that the payment under Pension Act is not applicable to the Company.

iii) Provident Fund

Contribution to Provident Fund is recognized and accounted for on accrual basis.

9. Taxes on Income: -

a) Current Tax

The current charge for income tax is calculated in accordance with the relevant provisions as prescribed under the Income Tax Act, 1961.

b) Deferred Tax

Deferred tax charge or credit reflects the tax effects of timing differences between accounting income and taxable income for the period. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are recognized only if there is virtual certainty of realization of such assets. Deferred tax assets are reviewed at each balance sheet date. Deferred tax Assets is created by reversal of entry for fixed Asset sold

10. Excise Duty and Cenvat :-

Excise Duty is payable on the assessed value of ship determined by the departmental authorities and is payable under the head Cenvat before beaching of the ship. The excise duty is collected on sales and is adjusted against the Cenvat available and excess duty payable is recognized as revenue expenditure.

11. Borrowing Cost :-

Borrowing Cost, if any, is attributable to acquisition or construction of qualifying assets and is capitalized as part of the cost of such assets up to the date when such asset is ready for its intended use. Other borrowing costs are charged to the profit and loss account in the year in which they are incurred.

12. Foreign Currency Transaction :- a) The Company is exposed to currency fluctuations on foreign currency transactions. Transactions denominated in foreign currency are recorded at the original rates of exchange in force / notional determined exchange rates at the time the transactions are affected. Exchange differences arising on foreign exchange transactions settled during the year are recognized in the profit and loss account of the year.

b) In case of forward contracts, if any, the difference between the forward rates and the exchange rates on the transaction dates is recognized as income or expenses over the lives of the related contracts. The profit/loss arising out of the cancellation or renewal of forward exchanges contracts are recorded as income/expense for the period.

c) Monetary assets and liabilities relating to foreign currency transactions are stated at exchange rate prevailing at the end of the year and exchange difference in respect thereof is charged to Profit and Loss Account except foreign exchange loss/gain on reporting of long – term currency monetary items used for depreciable assets, which are capitalized.

13. Provision, Contingent Liabilities and Contingent Assets :-

Provisions involving substantial degree of estimation in measurement are recognized 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 recognized in the books of accounts and disclosed as notes to accounts. Contingent assets are neither recognized nor disclosed in the financial statements.

14. Discontinuing Operation:-

The Company has discontinued operations of its Gas Division namely "Varun Gas" located at Sihor, GIDC, Bhavnagar in the year 1997. The said division has no reportable operations as per Accounting Standard – 24.

The Company has discontinued operations of its off Shore Division from 0ctober, 2012.

15. 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 assets. If such recoverable amount of the assets or the recoverable amount of the cash generating unit to which the assets 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 if a previously assessed impairment loss no longer exits, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.

16. Miscellaneous Expenditure :-

a) Preliminary Expenditure :

Written off over a period of five years or the period over which the benefit of the expenditure is expected to be derived.

b) Public Issue Expense :

The public issue expenses are written off against Securities Premium Reserve as per the provision of Section 78 of the Companies Act, 1956 for the period of 10 years and the balancing figure are shown under the head Miscellaneous Expenditure - to the extent not written off in the Balance Sheet.

17. Segment Reporting:-

The Company is operating its business unit wise, and according to the nature of the business, Incomes and Expenditure are recognized in segments representing one or more strategic business units that offer services of different nature.

18. Commitments and Contingent Liabilities:-

(Rs.In Lacs)

Sr. No Particulars As at As at 31st March, 2013 31st March, 2012

I. Claims against the Company not acknowledged as debts NIL NIL

II. Bank Guarantee NIL 12.75

III. Corporate Guarantee for Partnership Firm 170 170

There is demand of income tax for the A.Y 2007-08 of Rs.523.57 lacs raised by A.O u/s 143(3). The Company has filed appeal before CIT. In the opinion of the management have fair chances of succeeding in the said appeal. So no provision has been created for the said demand.


Mar 31, 2012

1. Basis of Accounting :-

- The financial statements have been prepared and presented under historical cost convention on the accrual basis of accounting in accordance with the accounting principles generally accepted in India ("GAAP") and comply with the mandatory Accounting Standards ("AS") as notified as per the Companies Accounting Standards (Rules), 2006 to the extent applicable and with the relevant provisions of the Companies Act, 1956.

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

2. Use of Estimates :-

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities on the date of financial statements and reported amount of revenues and expenses for the year. Actual results could differ from these estimates. Difference between the actual result and estimates are recognized in the period in which the results are known/ materialized. Any revision to an accounting estimate is recognized prospectively in the year of revision.

3. Revenue Recognition :-

Sale of goods is recognized on dispatch to the customers. Sales are inclusive of all duties and taxes. Income/Expenses are accounted for on accrual basis and provisions are made for all known expenditure. The revenue from services is recognized on mercantile basis. The Upset Premium paid for recycling plot at the time of its allotment is accounted for as deferred revenue expenditure and is charged to Profit & Loss Account proportionately based for balance period of its use as per allotment agreement.

4. Fixed Assets :-

Fixed assets are stated at cost less accumulated depreciation and impairment loss, if any. Cost comprises the purchase price and any directly attributable cost of bringing the assets to its working condition for its intended use. Borrowing cost directly attributable to acquisition or construction of those fixed assets which necessarily take a substantial period of time to get ready for their intended use is capitalized. Expenditure relating to fixed assets is added to cost only when the same involved modification of work and whereby it can increase the life of the assets.

5. Depreciation :-

- Depreciation has been provided on the Straight Line Method at the rate specified in Schedule - XIV of the Companies Act, 1956.

- Depreciation has been provided on pro-rata basis for both assets acquired and sold during the accounting period.

- Leasehold land is amortized over the period of lease.

6. Inventories :-

The Finished goods, Raw Material -Ships and Other Stock are valued at lower of cost or net realizable value.

Consumable Stores & Spares are written off at the time of purchase itself except bunker for tug.

No accounting is done for the invisible waste resulting during recycling process of ships.

In ship recycling unit, the weight of the ship purchased is accounted in terms of LDT/MT of the ship at the time of its construction. Ascertaining of weight of the ship at the time of purchase is not possible due to its nature and size. There is loss of weight on account of corrosion and other factors during the usage of ships and its voyage for long period. Inventory at the close of the year is ascertained by reducing the weight of the scrap sold together with the ascertained wastage during cutting process.

7. Investments :-

Investments of long term nature are valued at cost. The Company had made an investment in Partnership firm which is been reflected in the Financial Statements. Current investments, if any, are carried at the lower of cost or fair market value. Provision for diminution in the value of long - term investments is made only if such a decline is other than a temporary.

8. Retirement Benefits :-

Liability for employee benefits, both short and long term, for present and past services which are due as per terms of employment are recorded in accordance with Accounting Standard (AS) 15 "Employee Benefits" as notified by the Companies (Accounting Standards)Rules, 2006

i) Gratuity

The management is of the opinion that since none of the employees of the company were in continuous service of more than five years and accordingly making provision of the gratuity does not arise. However, if payment on account of gratuity arises due to happening of any incidents as provided under the applicable provisions of the law, the same will be accounted for on cash basis.

ii) Pension

The management is also of the opinion that the payment under Pension Act is not applicable to the Company.

iii) Provident Fund

Contribution to Provident Fund is recognized and accounted for on accrual basis.

9. Taxes on Income: -

a) Current Tax

The current charge for income tax is calculated in accordance with the relevant provisions as prescribed under the Income Tax Act, 1961.

b) Deferred Tax

Deferred tax charge or credit reflects the tax effects of timing differences between accounting income and taxable income for the period. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are recognized only if there is virtual certainty of realization of such assets. Deferred tax assets are reviewed at each balance sheet date.

10. Excise Duty and Cenvat :-

Excise Duty is payable on the assessed value of ship determined by the departmental authorities and is payable under the head Cenvat before beaching of the ship. The excise duty is collected on sales and is adjusted against the Cenvat available and excess duty payable is recognized as revenue expenditure.

11. Borrowing Cost :-

Borrowing Cost, if any, is attributable to acquisition or construction of qualifying assets and is capitalized as part of the cost of such assets up to the date when such asset is ready for its intended use. Other borrowing costs are charged to the profit and loss account in the year in which they are incurred.

12. Foreign Currency Transaction :-

a) The Company is exposed to currency fluctuations on foreign currency transactions. Transactions denominated in foreign currency are recorded at the original rates of exchange in force / notional determined exchange rates at the time the transactions are affected. Exchange differences arising on foreign exchange transactions settled during the year are recognized in the profit and loss account of the year.

b) In case of forward contracts, if any, the difference between the forward rates and the exchange rates on the transaction dates is recognized as income or expenses over the lives of the related contracts. The profit/loss arising out of the cancellation or renewal of forward exchanges contracts are recorded as income/expense for the period.

c) Monetary assets and liabilities relating to foreign currency transactions are stated at exchange rate prevailing at the end of the year and exchange difference in respect thereof is charged to Profit and Loss Account except foreign exchange loss/gain on reporting of long - term currency monetary items used for depreciable assets, which are capitalized.

13. Provision, Contingent Liabilities and Contingent Assets :-

Provisions involving substantial degree of estimation in measurement are recognized 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 recognized in the books of accounts and disclosed as notes to accounts. Contingent assets are neither recognized nor disclosed in the financial statements.

14. Discontinuing Operation:-

The Company has discontinued operations of its Gas Division namely "Varun Gas" located at Sihor, GIDC, Bhavnagar in the year 1997. The said division has no reportable operations as per Accounting Standard - 24.

15. 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 assets. If such recoverable amount of the assets or the recoverable amount of the cash generating unit to which the assets 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 if a previously assessed impairment loss no longer exits, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.

16. Miscellaneous Expenditure :-

a) Preliminary Expenditure :

Written off over a period of five years or the period over which the benefit of the expenditure is expected to be derived.

b) Public Issue Expense :

The public issue expenses are written off against Securities Premium Reserve as per the provision of Section 78 of the Companies Act, 1956 for the period of 10 years and the balancing figure are shown under the head Miscellaneous Expenditure - to the extent not written off in the Balance Sheet.

17. Segment Reporting:-

The Company is operating its business unit wise, and according to the nature of the business, Incomes and Expenditure are recognized in segments representing one or more strategic business units that offer services of different nature.

18. Commitments and Contingent Liabilities:- (Rs. In Lacs)

Sr. No Particulars As at As at 31st March, 2012 31st March, 2011

I. Claims against the Company not acknowledged as debts NIL NIL

II. Bank Guarantee 12.75 8.42

III. Corporate Guarantee for Partnership Firm 170.00 234.00

 
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