Accounting Policies of BCL Forgings Ltd. Company

Mar 31, 2011

A. NATURE OF OPERATIONS:

The Company is engaged in. the business of manufacture of carbon and alloy steel. forgings. The said manufacturing activities are carried out on own basis and for others on job basis.

B. STATEMENT OF SIGNIFICANT ACCOUNTING. POLICIES:

1. GENERAL:

1.1 The financial statements have been prepared in accordance with the Generally Accepted Accounting Principles in India ("GAAP") under the historical cost convention on an accrual basis to comply in all material aspects with the Mandatory Accounting Standards prescribed by the Central Government, in consultation with the National Advisory Committee, Accounting Standards, under the Companies (Accounting Standards) Rules, 2006, referred to in Sub-Section (3C) of Section 211 of the Companies Act, 1956 and the relevant provisions of the Companies Act, 1956.

1.2 The preparation of the accounts requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the accounts and the reported amounts of revenues and expenses during the reporting period. Differences between the actual results and the estimates are recognised in the period in which the results are known/materialised.

2 FIXED ASSETS:

2.1 Fixed Assets other than those re-valued as stated under 2.2 hereunder, are stated at their costs of acquisition inclusive of freight, octroi and other direct and indirect costs (net of refund of duties and taxes) in respect thereof.

2.2 Leasehold Land, Office Buildings, Factory Building, Plant and Machinery and Electrical Installations acquired upto 31st March, 1995 and held as on 1st April, 1996 i.e. the date of revaluation are stated at their "Current Replacement Cost".

3 DEPRECIATION AND AMORTISATION:

3.1 Depreciation in respect of Building and Plant and Machinery is being provided for on "Straight Line Method" and in respect of Other Assets on "Written Down Value Method" in terms of Section 205(2)(b) and 205(2)(a) respectively read with Schedule XIV to the Companies Act, 1956.

3.2 Additional Depreciation in respect of re-valued amounts i.e. difference between the "Current Replacement Cost" and "Original Cost", is transferred from Revaluation Reserve Account to the Profit & Loss Account.

3.3 Premium on Leasehold Land is being amortized equally over a period of Ninety-Nine years.

4. IMPAIRMENT OF ASSETS:

An asset is treated as impaired when the carrying costs of assets exceeds its recoverable value. An impairment loss is charged off to the Profit and Loss Account in the year in , which an asset is identified as impaired. The impairment loss recognized in prior accounting periods is reversed if there is a change in the estimate of the recoverable amount.

5 VALUATION OF INVENTORIES:

5.1 .Stores & Spares, Oil, Die Steel: and Loose Tools are valued at cost on "Weighted Average"

5.2 . Die blocks are valued at cost or at their "Estimated Recovery Vahie", whichever is lower.

5.3 Raw Materials are valued at cost on "Weighted Average" basis.

5.4 Work in Progress and Finished Goods are. valued at "Estimated Cost or Market Value", whichever is lower. The cost 'for this purposed computed on the basis of cost of direct materials, direct and other overheads.

5.5 Scrap Materials are valued at their "Net Estimated Realizable Value".

6 . INVESTMENTS:

Long-term investments are stated at, cost. Provision for diminution in the value thereof is made to recognize a decline, other than of a temporary nature.

7. REVENUE RECOGNITION: .

Sales and Labour & Machining charges are being recognised upon transfer of property in goods and rendering of services. Sales are inclusive of excise duty and sales tax collected. Interest income is accounted for on time proportion basis. Export Incentive (Duty Entitlement Pass Book) is accounted for on recognising export sales.

8. EMPLOYEE BENEFITS:

8.1 The undiscounted amount of short term employee benefits, expected to be paid, in exchange for the services rendered, by die employees are recognized during the period when the employee renders the services.

8.2. Contributions payable .to the Government Provident Fund; which is -a defined contribution scheme, is charged off to the Profit and Loss Account,

8.3. The Liability in respect-of Gratuity is 'being funded with Met Life Insurance Company Limited. 'Under its "Group. Gratuity Scheme", [Refer Note No. C.3 (a).

8.4. The Company provided for un-encashed leave benefit on an accrual basis upto the year ; ended 31st March, 2004. [Refer Note No. C.3 (b)].

8.5 The Company had provided for leave wages in terms of earlier "Union Settlement" at the rate of five days wages for every, completed year of service' which are payable to the employees at the time of their retirement. As per tire new understanding between the management and labour, the employees are not entitled to such leave wages effective year ended 31st March, 2002 and onwards. The balance of provision is /shall be utilised for paying the accumulated un-encashed'.leave wages till 31s' March, 2001 at 'the time of retirement. The difference between the amounts provided for and paid to the employees is / shall be charged in the year of payment.

9 . BORROWING COSTS:

Borrowing costs that are attributable 'to the acquisition or construction of qualifying assets are capitalized as a' part of cost ofsuch assets till their capitalisation. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other, borrowing costs are, charged to revenue.

10. FOREIGN CURRENCY TRANSACTIONS AND TRANSLATIONS:

Foreign "currency transactions are initially recorded at the exchange rate prevailing at the time of entering of the relevant transaction.

Monetary items denominated in foreign currency are translated at the closing rate.

Gains/Losses arising out of fluctuations in exchange rate on settlement/ translation are accounted for in the Profit and Loss Account.

11. TAXES ON INCOME:

Tax expenses comprises of current and deferred tax.

Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable provisions of the Income-tax Act, 1961.

Deferred tax is recognized, on timing differences, being the" differences between the taxable income and accounting income that originate in one year and are capable of reversal in one or more subsequent year(s).

12 PROVISION AND CONTINGENCIES: Provisions are recognized when there is a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation, in' respect of which reliable estimate can be made.

A disclosure for a contingent liability is made when there is a possible or present obligation that may, but probably will not require an outflow of resources. When there is a possible obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

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

13 CASH FLOW STATEMENT: Cash flows from operating activities are reported by using the indirect method, whereby net profit or loss is adjusted for the effects of transactions of hon'-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and items of income or expenses associated with investing or financing cash flows. Cash flows from investing and financing activities include major gross cash receipts and payments arising from each stream of the activities.

14. EARNING PER SHARE:

The basic and diluted earnings per share is computed by dividing the net profit/ (loss) attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding during the reporting year. In case of confuting the diluted earnings 'per share, the net profit/(loss) attributable to the equity shareholders for the year and the weighted average number of equity shares outstanding during the reporting year are adjusted for the effects of all dilutive potential equity shares.

15 Accounting policies not specifically referred to above are in consonance with the generally accepted accounting policies.

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Mar 31, 2010

1. GENERAL:

1.1 The financial statements have been prepared in accordance with the Generally Accepted Accounting Principles in India ("GAAP") under the historical cost convention on an accrual basis to comply in all material aspects with the Mandatory Accounting Standards prescribed by the Central Government, in consultation with the National Advisory Committee, Account- ing Standards, under the Companies (Accounting Standards) Rules, 2006, referred to in Sub-Section (3C) of Section 211 of the Companies Act, 1956 and the relevant provisions of the Companies Act, 1956.

1.2 The preparation of the accounts requires estimates and assumptions to be made that affect the reported amounts of the assets and liabilities on the date of the accounts and the re- ported amount of revenues and expenses during the reporting period. Differences between the actual results and the estimates are recognised in the period in which the results are known /materialised.

2 FIXED ASSETS:

2.1 Fixed Assets other than those re-valued as stated under 2.2 hereunder, are stated at their costs of acquisition inclusive of freight, octroi and other direct and indirect costs (net of refund of duties and taxes) in respect thereof.

2.2 Leasehold Land, Office Buildings, Factory Building, Plant and Machinery and Electrical In- stallations acquired upto 31st March, 1995 and held as on 1st April, 1996 i.e. the date of revaluation are stated at their "Current Replacement Cost".

3 DEPRECIATION AND AMORTISATION:

3.1 Depreciation in respect of Building and Plant and Machinery is being provided on "Straight Line Method" and in respect of Other Assets on "Written Down Value Method" in terms of Section 205(2)(b) and 205(2)(a) respectively read with Schedule XIV to the Companies Act, 1956.

3.2 Additional Depreciation in respect of re-valued amounts i.e. difference between the "Current Replacement Cost" and "Original Cost", is transferred from Revaluation Reserve Account to the Profit &.Loss Account.

3.3 Premium on Leasehold Land is being amortized equally over a period of Ninety-Nine years.

4. IMPAIRMENT OF ASSETS:

An asset is treated as impaired when the carrying costs of assets exceeds its recoverable value. An impairment loss is charged off to the Profit and Loss Account in the year in which an asse* is identified as impaired. The impairment loss recognized in prior accounting peri- ods is reversed if there is a change in the estimate of the recoverable amount.

5 VALUATION OF INVENTORIES:

5.1 Stores & Spares, Oil, Die Steel and Loose Tools are valued at cost on "Weighted Average" basis.

5.2 Die blocks are valued at cost or at their "Estimated Recovery Value", whichever is lower.

5.3 Raw Materials are valued at cost on "Weighted Average" basis.

5.4 Work in Progress and Finished Goods are valued at "Estimated Cost or Market Value", whichever is lower. The cost for this purpose is computed on the basis of cost of direct materials, direct and other overheads.

5.5 Scrap Materials are valued at their "Net Estimated Realizable Value".

6 INVESTMENTS:

Long-term investments are stated at cost. Provision for diminution in the value thereof is made to recognize a decline, other than of a temporary nature.

7. REVENUE RECOGNITION:

Sales and Labour & Machining charges are being recognised upon transfer of property in goods and rendering of services. Sales are inclusive of excise duty and sales tax collected. Interest income is accounted for on time proportion basis. Export Incentive (Duty Entitlement Pass Book) is accounted for on recognising export sales.

8 EMPLOYEE BENEFITS:

8.1 The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by the employees are recognized during the period when the employee renders the services.

8.2 Contributions payable to the Government Provident Fund, which is a defined contribution scheme, is charged off to the Profit and Loss Account.

8.3 The Liability in respect of Gratuity is being funded with Life Insurance Corporation of India under its "Group Gratuity Scheme". [Refer Note No. C.2 (a)]

8.4 The Company provided for un-encashed leave benefit on an accrual basis upto the year ended 31st March, 2004. [Refer Note No. C.2 (b)]

8.5 The Company had provided for leave wages in terms of earlier "Union Settlement" at the rate of five days wages for every completed year of service which are payable to the employees at the time of their retirement. As per the new understanding between the management and labour, the employees are not entitled to such leave wages effective year ended 31st March, 2002 and onwards. The balance of provision is / shall be utilised for paying the accumulated un-encashed leave wages till 31st March, 2001 at the time of retirement. The difference between the amounts provided and paid to the employees is / shall be charged in the year of payment.

9 BORROWING COSTS:

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

10. FOREIGN CURRENCY TRANSACTIONS AND TRANSLATIONS:

Foreign currency transactions are initially recorded at the exchange rate prevailing at the time of entering of the relevant transaction.

Monetary items denominated in foreign currency are translated at the closing rate.

Gains/Losses arising out of fluctuations in exchange rate on settlement/ translation are accounted for in the Profit and Loss Account.

11 TAXES ON INCOME:

Tax expenses comprises of current and deferred tax.

Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable provisions of the Income-tax Act, 1961.

Deferred tax is recognized, on timing differences, being the differences between the taxable income and accounting income that originate in one year and are capable of reversal in one or more subsequent year(s).

12 PROVISION AND CONTINGENCIES:

Provisions are recognized when there is a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation, in respect of which reliable estimate can be made.

A disclosure for a contingent liability is made when there is a possible or present obligation that may, but probably will not require an outflow of resources. When there is a possible obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

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

13 SHARE ISSUE EXPENSES:

Share issue expenses represent expenses incurred in connection with increase in authorised share capital of the Company and are being amortised over a period of 60 months from the date of such increase.

14 CASH FLOW STATEMENT:

Cash flows from operating activities are reported by using the indirect method, whereby net profit or loss is adjusted for the effects of transactions of non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and items of income or expenses associated with investing or financing cash flows. Cash flows from investing and financing activities include major gross cash receipts and payments arising from each stream of the activities.

15 EARNING PER SHARE:

The basic and diluted earnings per share is computed by dividing the net profit/ (loss) attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding during the reporting year. In case of computing the diluted earn- ings per share, the net profit/(loss) attributable to the equity shareholders for the year and the weighted average number of equity shares outstanding during the reporting year are adjusted for the effects of all dilutive potential equity shares.

16 Accounting policies not specifically referred to above are in consonance with the generally accepted accounting policies.