Accounting Policies of VMS Industries Ltd. Company
Mar 31, 2018
I BASIS OF PREPARATION OF FINANCIAL STATEMENTS
a) Accounting Conventions :
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 and with Companies (Indian Accounting Standards) (Amendment) Rules, 2017 and comply in all material aspects with the relevant provisions of the Companies Act,2013 to the extent applicable to it.
For the period upto 31st March, 2017, the Financial Statements of the Company were prepared under the historical cost convention on accrual basis of accounting and in accordance with the mandatory accounting standards issued by the Institute of Chartered Accountants of India and referred to in section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and generally accepted accounting principles in India.
The Financial Statements have been prepared on a historical cost basis except the following assets and liabilities which have been measured at fair values:
- Certain Financial Assets and Liabilities that are measured at Fair Value
b) Use of Estimates:
The preparation of financial statements requires management to make estimates and assumptions that are believed to be reasonable under the circumstances and such estimates and assumptions may affect the reported amount of assets and liabilities, classification of assets and liabilities into non-current and current and disclosures relating to contingent liabilities as at the date of financial statements and the reported amounts of income and expenses during the reporting period. Although the financial statements have been prepared based on the management''s best knowledge of current events and procedures/actions, the actual results may differ on the final outcome of the matter/transaction to which the estimates relates.
c) 1. Property, Plant and Equipment (PPE):
The cost of an item of property, plant and equipment is recognized as an asset if, and only if:
(a) it is probable that future economic benefits associated with the item will flow to the entity; and
(b) the cost of the item can be measured reliably.
The acquisition of property, plant and equipment, directly increasing the future economic benefits of any particular existing item of property, plant and equipment, which are necessary for the Company to obtain the future economic benefits from its other assets, are recognized as assets.
The items of Property, Plant and Equipment are stated at cost of acquisition/construction (less Accumulated Depreciation and Impairment, if any). The cost of Property, Plant and Equipment comprises of their purchase price including freight, duties, taxes or levies, directly attributable cost of bringing the assets to their working conditions for their intended use and applicable borrowing cost for qualifying assets. The Company capitalises its Property, Plant and Equipment at a value net of CENVAT/GST/ VAT received/receivable during the year in respect of eligible item of Property, Plant and Equipment. Subsequent expenditures on Property, Plant and Equipment have been capitalised only if such expenditures increase the future benefits from the existing items beyond their previously assessed standard of performance and cost of such items can be measured reliably.
The items of capital work- in-progress are carried at cost comprising of cost directly attributable to the acquisition net of CENVAT/GST/VAT received/receivable in respect of respective times and related incidental expenses.
For the purpose of measurement of cost as at 1st April, 2016, the cost represents the carrying value of Property, Plant and Equipment recognized as at 1st April, 2016 measured as per the previous GAAP.
The items of Property, Plant and Equipment that are under construction/erection or not fully acquired and therefore not available for productive use are shown as "Capital Work in Progress" under assets and will be transferred to respective item of Property, Plant and Equipment on completion of the construction/erection/acquisition activities.
2. Depreciation & Amortization:
The Depreciation on tangible items of Property, Plant and Equipment is provided on straight line method for the period of acquisition/construction i.e. from the period from which such assets were available for their intended use on pro-rata basis on the basis of useful life of each of the fixed assets as per Schedule II of the Companies Act, 2013 and in the manner specified in Schedule II of the Companies Act, 2013.
d) Inventories
The Inventories of Raw Materials-uncut ships and have been valued at cost. The Trading Goods have been valued at cost or net realisable value whichever is lower. The cost of Raw Materials and Trading Goods comprises of the purchase price including duties and taxes, freight inwards and other expenditure directly attributable to the acquisition.
Consumable Stores and Spares are considered too have been consumed at the time of purchases.
In ship recycling industry, the weight of ship purchased is accounted in terms of LDT/MT of the ship at the time of its construction. Ascertaining weight of ship at the time of purchase is not possible due to its nature and size. There is loss of weight of ship on account of corrosion and other factors during the usage of ship during its operating years and its voyage for long period. The inventory at the balance sheet date is ascertained by reducing the weight of the scrap sold together with the estimated wastage of the material.
e) Revenue Recognition:
Revenue is measured at the fair value of the consideration received or receivable from the customers/parties net of returns, rebates, value added taxes and discount to the customers and amounts collected on behalf of third parties. The Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made.
Sale of Goods:
The revenue from the sale of goods is recognized when the company had transferred the property in Goods to the buyer for a price or all significant risks and rewards of ownership had been transferred to the buyer and no significant uncertainty existed as to the amount of considerati''on that would be derived from such sale. The recognition event is usually the dispatch of goods to the buyer such that the Company retains no effective control over the goods dispatched.
Rent Income:
Rental income is recognized in the period to which such income relates.
Interest Income:
Income from investments and deposits, where appropriate, is taken into revenue in full on declaration or accrual on time basis and tax deducted at source thereon is treated as advance tax. The interest income from a financial assets is recognized when it is probable that the economic benefits will flow to the company and the amount interest income can be measured reliably.
f) Foreign Currency Transactions
The Company''s financial statements have been prepared and presented in Indian Rupees ('') which is also its functional currency.
The transactions in foreign currency initially have been recorded using the rate of exchange prevailing on the date of transactions. The differences arising on the settlement/restatement of the foreign currency denominated Financial Assets/Liabilities into Indian rupees have been recognized as expenses/income (net) of the year and carried to the statement of profit and loss.
The monetary items denominated in foreign currencies outstanding as at the end of the reporting period, are translated at the exchange rates prevailing as at the end of the reporting period.
g) Employee Benefits:
1. Short Term Obligations:
Short term employee benefits of like wages, salaries and other monetary and non-monetary benefits are recognized in the period during which services are rendered by the employees and are recognized at the value at amounts at which liabilities have been settled or are expected to be settled.
2. Post-Employment and Other Long Term Employee Benefits:
2.1 Contribution to Provident Fund:
The Company''s contribution to the Provident Fund is remitted as per the provisions relating to the Employee Provident Fund Scheme and such contribution is charged to the Statement of Profit & Loss of the period to which contribution relates.
2.2 Gratuity:
The management of the company is of the view that none of the employees were eligible in respect of the of which the company was required to make contribution as per the provisions relating to the Payment of Gratuity and accordingly provision for gratuity was not required to be made. However, if the company is required to make payment of gratuity on happening any event/incident due to which the provisions relating to payment of gratuity becomes applicable to the company, the same will be accounted as and when incurred.
h) Borrowing Costs
The borrowing costs incurred during the year have been debited to the Statement of Profit and Loss of the current year.
i) Operating Segment
The Company identifies operating segments on the basis of dominant source, nature of risks and returns and the internal organization. The operating segments are the segments for which separate financial information is available and for which operating profit/loss amounts are evaluated regularly by the Managing Director/Chief Executive Officer who is Company''s chief operating maker in deciding how to allocate resources and in assessing performance.
The dominant source of income of the company is from Ship Breaking Activities and Trading of Scrap of Iron and Steel which in the opinion of the management based on their regular internal evaluation do not materially differ in respect of risk perception and the return realized/to be realized. Even the geographical/regulatory environment in which the company operates does not materially differ considering the political and economic environment, the type of customers, assets employed and the risk and return associated in respect of each of the geographical area. So, the disclosure requirements pursuant to Ind As-108-"0perating Segments" are not applicable.
j) Taxes On Income:
1. Current Tax:
The provision for current tax is made as per the provisions of the Income Tax Act, 1961.
Taxes on income have been determined based on the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. The current tax liabilities and assets are measured at the amounts expected to be paid or to be recovered from the taxation authorities as at the balance sheet date.
The current tax liabilities and assets are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis or to realise the assets and settle the liabilities simultaneously.
The current income tax relating to items recognized outside profit or loss is recognized either in the Other Comprehensive Income or in Other Equity Directly.
2. Deferred Tax:
Deferred tax is provided on temporary differences between the tax bases of assets and liabilities as per the provisions of the Income Tax Act, 1961 and their carrying amounts for financial reporting purposes as at the balance sheet date.
Deferred tax liabilities are recognized for all taxable temporary timing differences. Deferred tax assets are recognized for all deductible taxable temporary timing differences, the carry forward of unused tax losses and unused tax credits to the extent to which future taxable profits are expected to be available against which the deductible temporary differences and the carry forward of unused tax losses and unused tax credits can be utilized/set-off.
k) Impairment of Non-Financial Assets:
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.
Impairment loss is recognized when the carrying amount of an asset exceeds recoverable amount.
I) Provisions, Contingent Liabilities and Contingent Assets
The Company recognises a provision when it has a present obligation as a result of a past event that probably requires an outflow of the Company''s resources embodying economic benefits at the time of settlement and a reliable estimate can be made of the amount of the obligation. The provisions are measured at the best estimate of the amounts required to settle the present obligation as at the balance sheet date and are not discounted to its present value.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only on the occurrence or non-occurrence of one or more future uncertain events not wholly or substantially within the control of the Company or a present obligation that arises from the past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made.
When demand notices are issued by the Government Authorities and demand is disputed by the company and it is probable that the company will not be required to settle/pay such demands then these are classified as disputed obligations.
Contingent Assets, if any, are not recognised in the financial statements. If it becomes certain that inflow of economic benefit will arise then such asset and the relative income are recognised in financial statements.
m) Share Issue Expenses:
The share issue expenses are amortized on proportionate basis and are adjusted against the Securities Premium as per permissible as per the provision of Section 52 of the Companies Act, 2013 to the extent of balance in the Securities Premium.
n) Current/Non-Current Classifications:
The Company presents assets and liabilities in the balance sheet on the basis of their classifications into current and non-current.
Assets:
An asset is treated as current when it is:
- Expected to be realised or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realised within twelve months after the reporting period
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
Liabilities:
A liability is treated as current when it is:
- Expected to be settled in normal operating cycle
- Held primarily for the purpose of trading
- Due to be settled within twelve months after the reporting period
- No unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
All other liabilities are classified as non-current.
o) Financial Instruments, Financial Assets, Financial Liabilities and Equity Instruments
The financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the relevant instrument and are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities measured at fair value through profit or loss) are added to or deducted from the fair value on initial recognition of financial assets or financial liabilities.
A. Financial Assets:
Initial Recognition:
Financial Assets include Investments, Trade Receivables, Security Deposits, Cash and Cash Equivalents and eligible current and non-current assets. The financial assets are initially recognized at the transaction price when the Company becomes party to contractual obligations. The transaction price includes transaction costs unless the asset is being value at fair value through the Statement Of Profit and Loss.
Subsequent Measurement:
The subsequent measurement of financial assets depends upon the initial classification of financial assets. For the purpose of subsequent measurement, financial assets are classified as under:
i. Financial Assets At Amortized Cost where the financial assets are held solely for collection of cash flows and contractual terms of the assets give rise on specified dates to cash flows that are solely payments of principal and interest on principal amount outstanding.
ii. fair value through other comprehensive income (FVTOCI), where the financial assets are held not only for realization of principal and interest but also from the sale of such assets. Such assets are subsequently measured at fair value, with unrealised gains and losses arising from changes in the fair value being recognised in other comprehensive income.
iii. Fair value through profit or loss (FVTPL), where the assets are managed in accordance with an approved investment strategy that triggers purchase and sale decisions based on the fair value of such assets. Such assets are subsequently measured at fair value, with unrealised gains and losses arising from changes in the fair value being recognised in the Statement of Profit and Loss in the period in which they arise.
Trade Receivables, Security Deposits, Cash and Cash Equivalents, Investments in Equity where reliable data for fair value is not available and eligible current and non-current assets are classified for measurement at amortized cost. Impairment:
If the recoverable amount of an asset (or cash-generating unit/Fixed Assets) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a re-valued amount if any, in which case the impairment loss is treated as a revaluation decrease.
Financial assets, other than those at Fair Value through Profit and Loss (FVTPL), are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
The company recognises impairment loss on trade receivables using expected credit loss model.
B. Financial Liabilities:
Financial liabilities, which include long and short-term loans and borrowings, trade payables, eligible current and non-current liabilities. The borrowings, trade payables and other financial liabilities are initially recognised at the value of the respective contractual obligations. They are subsequently measured at amortised cost. Financial liabilities are derecognised when the liability is extinguished, that is, when the contractual obligation is discharged, cancelled and on expiry of the terms,
p) Fair Value Measurement:
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or In the absence of a principal market, in the most advantageous market for the asset or liability
- The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fai rvalue, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fairvalue is measured or disclosed in the financial statements are categorised within the fairvalue hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fairvalue measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fairvalue hierarchy as explained above,
q) Cash and Cash Equivalents-For the Purpose of Cash Flow Statements:
Cash and cash equivalent in the balance sheet comprise cash at banks and in hand and short-term deposits, which are subject to an insignificant risk of changes in value,
r) Operating Cycle:
Based on the activities of the company and normal time between incurring of liabilities and their settlement in cash or cash equivalents and acquisition/right to assets and their realization in cash or cash equivalents, the company has considered its operating cycle as 12 months for the purpose of classification of its liabilities and assets as current and non-current,
s) First Time of Adoption of Ind-AS:
These financial statements, for the year ended 31st March 2018, are the first the Company has prepared in accordance with Ind AS. For periods up to and including the year ended 31st March 2017, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).
Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on 31st March 2018, together with the comparative period data as at and for the year ended 31st March 2017, as described in the summary of significant accounting policies applying the exemptions, classifications, recognition, de-recognition, measurement criterion as prescribed in Ind-AS.
The company has adopted the carrying value determined in accordance with GAAP as applicable on the date of transition for all of its property plant & equipment and investment property as deemed cost of such assets at the transition date.
The estimates as at April 1, 2016 and at March 31, 2017 are consistent with those made for the same dates in accordance with existing GAAP before transition to Ind-AS.
Mar 31, 2016
1. CORPORATE INFORMATION
VMS Industries Limited is a public limited company domiciled in India and incorporated under the provisions of the Companies Act.
The company has its primary listing on BSE limited.
During the year, the Company was engaged in the ship breaking business. However, as and when any surplus fund are available, the same is given on interest to other parties and also invested in the shares and securities to earn short term and long term capital gains.
2. SIGNIFICANT ACCOUNTING POLICIES ON ACCOUNTS:
2.1. Basis of preparation of financial Statements:
a. The financial statements are prepared under the historical cost convention, ongoing concern basis and all material respects with the Accounting Standards notified under Section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014. The Company follows the mercantile system of accounting and recognizes income and expenditure on accrual basis to the extent measurable and where there is certainty of ultimate realization of incomes. The accounting policies adopted in the preparation of financial statements are consistent with those of previous year.
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 RECOGNITION:-
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 TANGIBLE ASSETS:
I. Depreciation on tangible assets is provided on the straight-line method over the useful lives of the assets estimated by the Management. Depreciation for assets purchased during a period is proportionately charged.
Useful lives and residual values of assets are reviewed periodically.
II. 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:-
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 as and when incurred.
ii) Pension
The management is also of the opinion that the payment under Pension Act is 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 liability 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. 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.
2.11. 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.
2.12. 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 Standard - 24 Discontinuing Operations. The Tangible assets forming part of the said discontinued business have been shown as single item in Balance Sheet under the Tangible Assets and no depreciation has been provided on said assets.
2.13. 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.
2.14. 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.
2.15. 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 pretax discount rate that reflects the current market assessments of time value of money and the risks specific to the asset.
2.16. SHARE ISSUE EXPENSES :
Share issue expenses are amortized adjusted against the Securities Premium Account as permissible under Section 52 of the Companies Act, 2013 to the extent any balance is available for utilization in the Securities Premium Account.
2.17. 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.
2.18. Earnings 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.
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:
i) There is demand of Income tax for the A.Y.2010-11 and A.Y.2012-13 of ''8.99 Lacs and ''15.33 respectively raised by Assessing Officer u/s 143(3). The company has filed appeal before CIT. in the opinion of the Management the company has fair chances of succeeding in the said appeal. therefore no provision has been made for the said demand.
ii) There are outstanding demand of VAT for F.Y 2009-10 amounting Rs.19,27,984/- and for F.Y 2010-11 amounting Rs.34,72,252/- raised by from Deputy Commissioner of Tax, Division-9, Bhavangar, However, Both the case are pending with the first appellate authority. Management is of the opinion that they have fair chances of succeeding in the said appeal. There for, no provision has been made for the said demand.
iii) The Company has given bank guarantee in favour of M/s Eternal Automobiles, in which the Directors are interested for working Capital finance of Rs.4.80 Crores availed by them from Standard Chartered Bank, Mumbai Branch and Oriental Bank of Commerce, Bhavnagar. The Outstanding amounts of such finance availed by M/s. Eternal Automobiles as at 31.03.2016 is Rs.4.28 Cr.
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 ÂShips 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 Â
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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