Accounting Policies of EL Forge Ltd. Company

Mar 31, 2015

01. Accounting Convention

The books of account have been maintained under the Historical Cost Convention, except certain fixed assets, which have been revalued, and on Going Concern basis. The financial statements have been prepared in accordance with, Generally Accepted Accounting Principals, in India (Indian GAAP), Accounting Standard prescribed under Section 133 of the Companies Act, 2013 read with Rule 7 of Companies (Accounts) Rules, 2014. The financial statements are presented in Indian rupees rounded off to the nearest rupees in lakhs.

02. Use of Estimates

(01) The preparation of financial statements requires making of estimates and assumptions by the management based on the information available and, wherever necessary, taking into account the applicable accounting principles/ Accounting Standards and such estimates and assumptions may affect:- (a) The reported amount of assets and liabilities on the date of the financial statements; and

(b) The reported revenues and expenses during the reporting period;

(02) Differences between the actual results and estimates/ assumptions are recognized in the period in which the results are known/ materialized.

03. System of Accounting

The books of account have been maintained on accrual basis (i.e., Mercantile Method of Accounting), except in the case of Bank Interest, which has been accounted on cash basis, and under Double Entry System of Accounting.

04. Expenditure during construction period

In case of new projects and substantial expansion of existing fixed assets, expenditure incurred including attributable interest and financing costs prior to commencement of commercial production is capitalized.

05. Fixed Assets

(01) Tangible

Fixed Assets are shown at cost less accumulated Depreciation. Cost includes cost of purchase/acquisition or construction and all other direct expenses (For example Transport, Transit Insurance, Loading and Unloading, installation and Erection Expenses, attributable interest and financial cost) till such assets are put in to use and includes allocation of pre operative Expenses. Till the Assets are put into use, the same shall be shown under the head Capital Work in Progress. Fixed Assets have been accounted net off central excise, wherever applicable.

(02) Intangible

Intangible Assets are stated at cost of acquisition net of recoverable taxes less accumulated amortization/ depletion and impairment loss, if any. The cost comprises purchase price, borrowing costs, and any cost directly attributable to bringing the asset to its working condition for the intended use.

06. Depreciation and Amortization

(01) Depreciation on all Fixed Assets has been charged under Straight Line Method (SLM) and Depreciation is provided based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013.

(02) Depreciation on additions to fixed assets is calculated on pro-rata basis from the date of addition (i.e., date of use) and in the case sale/ dispose depreciation shall be calculated up to the date of sale / disposal.

(03) Leasehold Land premium has been amortized on pro-rata basis, based on the lease period.

07. Impairment

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

08. Inventories

(01) Raw Material, Stores and Spares and Work in Progress are valued at cost. Finished goods are valued at cost or Net realizable value whichever is lower

(02) Cost on the Inventories comprises of cost of purchases, cost of conversion and other cost of manufacturing and other costs incurred in bringing the inventories to their present location and condition permission

09. Revenue Recognition and Expenses

(01) Revenue Recognition

Revenue is recognized only when risks and rewards incidental to ownership are transferred to the customer, it can be reliably measured and it is reasonable to expect ultimate collection. Revenue from operations includes sale of goods, services, excise duty and net of discounts, rebates, sales tax. Dividend income is recognized when the right to receive payment is established. Interest income is recognized on a time proportion basis taking into account the amount outstanding and the interest rate applicable.

(02) Expenses

(a) Expenses (i.e., relating to above revenue) are accounted in the year in which the revenue is recognized.

(b) The other expenses not related to (a) above, shall be, normally, charged to Statement of Profit and Loss, in the same year in which they are incurred (i.e., on the mercantile basis), unless the same is accounted on cash basis.

10. Foreign Currency Transactions

(01) Initial Reorganization

Foreign currency transactions are recorded in the reporting currency (i.e., Indian Rupees), by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

(02) Subsequent Reorganization

Monetary items, denominated in foreign currency, are restated/ reported using yearend foreign currency rate. Non-monetary items are carried at cost, using the rate of foreign exchange on the date of the transaction; and the gain or loss on account of realization or payments shall be shown in statement of profit and loss, as exchange rate difference.

11. Taxation

Tax expenses for the year comprises of current tax (Either normal tax or Minimum alternate tax), as per the provisions of Income Tax Act, 1961, and deferred tax. Deferred income tax reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws those are enacted or substantively enacted at the reporting date. Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized and carried forward only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations, where the Company has unabsorbed depreciation or carry forward losses under tax laws, all deferred tax assets are recognized only to the extent that there is virtual certainity supported by convincing evidence that they can be realized against future taxable profits. Deferred tax assets and deferred tax liabilities are off-set, if a legally enforceable right exists to set-off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to taxes on income levied by the same governing taxation laws

12. Segment Reporting

The segment reporting of the Company has been prepared in accordance with Accounting Standard – 17, "Segment Reporting" (Specified under section 133 of the Companies Act, 2013, read with Rule 7 of Companies (Accounts) Rules, 2014). segment Reporting Policies.

(01) Identification of Segments : Primary – Business Segment : The Company has identified four reportable segments viz., Forgnings and Land Developments on the basis of the nature of products, the risk and return profile of individual business and the internal business reporting systems.

(02) Secondary – Geographical Segment the Aanalysis of geographical segment is based on geographical location of the customers.

(03) Property Development

The company is also engaged in the business of Property Development business. For this purpose, the company has converted the Fixed Assets (Land) into Stock-in-trade. But the company has not purchased any property. This is considered as a separate segment

13. Provisions and Contingent Liabilities

(01) Provisions

A provision (subject to the method of accounting followed by the company, including recognizing particular item of expenses) is recognized when the Company has a present obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.

(02) Contingent liabilities

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.

14. Investment :

Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are long term investments and classified as non-current Investments. On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties. Provision for diminution in the value of Non-Current investments is made only if such a decline is other than temporary.

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Mar 31, 2014

I. Financial statements are prepared on Historical Cost and on Accrual basis.(Except interest on Bank Borrowings which shall be accounted on cash basis with effect from 01.07.2013).

ii. Fixed Assets are stated at their original cost (Except those fixed assets which have been revalued) including taxes, duties, freight and other incidental expenses related to acquisition and installation wherever MODVAT/CENVAT/TNVAT Credit has been availed Excise element is excluded from the original cost

Depreciation on fixed assets is calculated on straight-line basis on historical cost commensurate with Section 205, read with Schedule XIV of the Companies Act 1956. (Double Shift rates for Plant & Machinery). The depreciation on the difference between revalued cost and historical cost has also been provided at the rates specified in Schedule XIV of the Companies Act 1956 and the same has been debited to Revaluation of Fixed Assets. Reserve account.

Freehold land is not depreciated.

iii. Raw Material, Stores Spares and work in progress are valued at cost. Finished Goods are valued at cost or Net realizable value whichever is lower, as per Accounting Standard (AS2) prescribed under section 211(3C) of the Companies Act,1956 & Rules made there under.

iv. Investments are stated at Cost. Earnings from Investments has been taken into account as accrued or on declaration or receipt basis, Wherever appropriate and the tax deducted at source thereon is treated as advance tax.

v. Normal Retirement Benefits as per contract of employment are provided in the books of account and payments are made to the Trustees of the Company''s respective Funds on the basis of accrued liability where appropriate.

vi. Research and Development : (a) Revenue expenditure is charged to profit & Loss Account of the year during which it is incurred. (b) Capital expenditure is shown as addition to fixed assets or where Capital assets have been taken on lease, the lease rentals will be amortized from profits over the useful economic life of the lease asset.

vii. Miscellaneous Expenditure : Miscellaneous Expenditure incurred is amortized from profits over the expected period of future benefit.

viii. All transactions in foreign currency are entered in the books of account at the rates prevailing on the date of transaction.

ix. Deferred Tax Assets / Liability shall be recognized as required by Accounting Standard (AS22)prescribed under section 211(3c) of the Companies Act 1956 & rules made there under. However deferred Tax Assets shall be recognized only where there is a virtual certainty supported by convincing evidence.

X Use of Estimates:

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from these estimates. Any revisions to financial estimates are recognized prospectively in the financial statements when revised

Xi Revenue Recognition: Income is accounted on accrual basis.

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Jun 30, 2013

01. Financial statements are prepared on Historical Cost and on Accrual basis.

02. Fixed Assets are stated at their original cost (except those fixed assets which have been revalued) including taxes, duties, freight and other incidental expenses related to acquisition and installation. Wherever MODVAT/CENVAT Credit has been availed, Excise element excluded from Original Cost.

Depreciation on fixed assets is calculated on straight-line basis on historical Book cost, commensurate with Section 205 read with Schedule XIV of the Companies Act, 1956. (Double shift rates for Plant & Machinery). The depreciation on the difference between revalued cost and historical cost has also been provided at the rates specified in Schedule XIV of the Companies Act, 1956, and the same has been debited to Revaluation of Fixed Assets Reserve Account. Freehold land is not depreciated. .

03. Raw Material, Stores and Spares and Work-in-Progress are valued at cost. Finished Goods are valued at cost or net releasable value, whichever is lower as per Accounting Standard (AS2) prescribed under section 211{3C) of the Companies Act, 1956 & Rules made there under.

04. Investments are stated at Cost. Earnings from investments has been taken into account as accrued or on declaration or receipt basis, wherever appropriate and the tax deducted at source thereon is treated as advance tax.

05. Normal Retirement Benefits as per contract of employment are provided in the books of account and payments are made to the Trustees of the Company''s respective Funds on the basis of accrued liability, where appropriate.

06. Research and Development: a) Revenue expenditure is charged to Profit & Loss of the Year during which it is incurred, (b) Capital expenditure is shown as addition to fixed assets or where Capital assets have been taken on lease, the lease rentals will be amortized from profits over the useful economic life of the leased asset,

07. Miscellaneous Expenditure: Miscellaneous Expenditure incurred is amortized from profits over the expected period of future benefit.

08. All transactions in foreign currency are entered in the books of accounts at the rates prevailing on the date of transaction.

09. Deferred Tax Assets / Liability shall be recognized, as required by Accounting Standard (AS-22), prescribed under section 211{3C) of the Companies Act, 1956 & Rules made there under. However deferred Tax Assets shall be recognized only where there is a virtual certainty supported by convincing evidence.

10. Use of Estimate:

The preparation of the financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from these estimates. Any revisions to financial estimates are recognized prospectively in the financial statements when revised.

11. Revenue Recognition: Income is accounted on accrual basis.

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Jun 30, 2012

01. Financial statements are prepared on Historical Cost and on Accrual basis.

02. Fixed Assets are stated at their original cost (except those fixed assets which have been revalued) including taxes, duties, freight and other incidental expenses related to acquisition and installation. Wherever MODVAT/CENVAT Credit has been availed, Excise element excluded from Original Cost.

Depreciation on fixed assets is calculated on straight-line basis on historical Book cost, commensurate with Section 205 read with Schedule XIV of the Companies Act, 1956. (Double shift rates for Plant & Machinery). The depreciation on the difference between revalued cost and historical cost has also been provided at the rates specified in Schedule XIV of the Companies Act, 1956, and the same has been debited to Revaluation of Fixed Assets Reserve Account. Freehold land is not depreciated.

03. Raw Material, Stores and Spares and Work-in-Progress are valued at cost. Finished Goods are valued at cost or net realiasable value, whichever is lower as per Accounting Standard (AS2) prescribed under section 211(3c) of the Companies Act, 1956 & rules made there under.

04. Investments are stated at Cost. Earnings from Investments has been taken into account as accrued or on declaration or receipt basis, wherever appropriate and the tax deducted at source thereon is treated as advance tax.

05. Normal Retirement Benefits as per contract of employment are provided in the books of account and payments are made to the Trustees of the Company's respective Funds on the basis of accrued liability, where appropriate.

06. Research and Development: a) Revenue expenditure is charged to Profit & Loss of the Year during which it is incurred, (b) Capital expenditure is shown as addition to fixed assets or where Capital assets have been taken on lease, the lease rentals will be amortized from profits over the useful economic life of the leased asset.

07. Miscellaneous Expenditure: Miscellaneous Expenditure incurred is amortized from profits over the expected period of future benefit.

08. All transactions in foreign currency are entered in the books of accounts at the rates prevailing on the date of transaction.

09. Deferred Tax Assets / Liability shall be recognized, as required by Accounting Standard (AS-22), prescribed under section 211(3c) of the Companies Act, 1956 & rules made there under. However deferred Tax Assets shall be recognized only where there is a virtual certainty supported by convincing evidence.

10. Use of Estimate:

The preparation of the financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from these estimates. Any revisions to financial estimates are recognised prospectively in the financial statements when revised.

11. Revenue Recognition: Income is accounted on accrual basis.

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Mar 31, 2010

01. Financial statements are prepared on Historical Cost and on Accrual basis.

02. Fixed Assets are stated at their original cost (Except those assets which have been revalued) including taxes, duties, freight and other incidental expenses related to acquisition and installation. Wherever MODVAT/CENVAT Credit has been availed, Excise element excluded from Original Cost.

03. Depreciation on fixed assets is calculated on straight-line basis on historical Book cost, commensurate with Section 205 read with Schedule XIV of the Companies Act, 1956. (Double shift rates for Plant & Machinery). The depreciation on the difference between revalued cost and historical cost has also been provided at the rates specified in Schedule XIV of the Companies Act, 1956, and the same has been debited to Revaluation of Fixed Assets Reserve Account. Freehold land is not depreciated.

04. Raw Material, Stores and Spares and Work-in-Progress are valued at cost. Finished Goods are valued at cost or net relisable value, whichever is lower as per Accounting Standard (AS2) issued by the Institute of Chartered Accountants of India.

05. Investments are stated at Cost. Earnings from Investments has been taken into account as accrued or on declaration or receipt basis, wherever appropriate and the tax deducted at source thereon is treated as advance tax.

06. Normal Retirement Benefits as per contract of employment are provided in the books of account and payments are made to the Trustees of the Companys respective Funds on the basis of accrued liability, where appropriate.

07. Research and Development: a) Revenue expenditure is charged to Profit & Loss Account of the year during which it is incurred, (b) Capital expenditure is shown as addition to fixed assets or where Capital assets have been taken on lease, the lease rentals will be amortised from profits over the useful economic life of the asset.

08. Miscellaneous Expenditure: Miscellaneous Expenditure incurred is amortized from profits over the expected period of future benefit.

09. All transactions in foreign currency are entered in the books of accounts at the rates prevailing on the date of transaction.

10. Deferred Tax Assets / Liability shall be recognized, as required by Accounting Standard (AS-22), issued by Institute of Chartered Accountants of India. However deferred Tax Assets shall be recognized only where there is a virtual certainity supported by convincing evidence.

11. The Retirement Benefit Funds towards gratuity are administered by LIC under Group Gratuity Scheme The amounts provided by the Company and accumulated in the Fund is sufficient to cover the liability.

12. Revenue Recognition: Income is accounted on accrual basis.

01. Principles of Consolidation:

The Consolidated financial statements relate to El Forge Limited (the Company or Parent Company), its wholly subsidiary (there is no Joint Venture companies and Associate Companies). The consolidated financial statements have been prepared on the following basis:

(01) The financial statements of the Parent Company and its Subsidiary Companies have been combined on a line-by-line basis by adding together the book values of like items of assets liabilities, income and expenses, after eliminating the intra-group balances, intra-group transactions and unrealized profits or losses in accordance with Accounting Standard (AS-21) on Consolidated Financial Statements issued by the Institute of Chartered Accountants of India.

(02) The consolidated financial statements have been prepared using uniform accounting policies for like transactions and events in similar circumstances and are presented to the extent possible, in the same manner as the Parent Companys separate financial statements. The excess/shortfall of cost of Investments in the subsidiary,- over the net assets at the time of acquisition of shares in the subsidiary, is recognized in the financial statements of the Parent Company as goodwill/capital reserve respectively

06. Miscellaneous Expenditure:

Due to the Loss during the year the company has not written off any deferred revenue expense during the year (Previous year Rs. Nil) and same is to be amortised from profit over a period of Succeeding Ten Years.

07. The Company has made Corporate Debt Restructure (CDR) arrangements with Companys

Banks/Financial Institutions, during the year under report. The CDR scheme takes retrospective effect from 01-01-2009. Among other benefits, The Company enjoys concessional rate of interest, in terms of the CDR Schemes. Under the CDR Scheme, the interest on Term Loans is also funded; hence it does not involve any outflow of resources. Under the terms of the CDR Scheme, the interest on Term Loans will be treated as optionally convert able cumulative preference capital. In view of the above, the management is of the opinion that interest is not an expense for the year under report. Accordingly, interest amounting to Rs. 5,50,11,053/- has not been charged; but treated as deferred Interest, grouped under Loans & Advances. The Management is of the opinion to write off the deferred interest proportionately to amount converted, from the financial year during which the options is exercised by the lender.

08. Segment Reporting:

The Company has only one business segment of manufacture and sale of steel forgings.

09. Use of Estimates:

The preparation of the financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from those estimates. Any revisions to financial estimates are recognized prospectively in the financial statements when revised.

10. Hire Purchase:

Out of the total liability Rs. 1767 Thousands (Previous Year Rs. 2678 Thousands), towards fixed assets purchased under HP, the amount due within One Year Amount to Rs. 1125 Thousands (Previous Year Rs. 1396 Thousands).

12. The Company has incurred costs in respect of relocation and project cost following their takeover by El Forge, a company registered in India. In the opinion of the directors these cost if written off to the profit and loss account would not show a true and fair view of the state of the companys affairs. Therefore in contradiction to FRS 10 goodwill and intangible assets these costs have been capitalized. These costs have been incurred due to relocation of the companys trading activities following a scaling down of their manufacturing activity and development costs incurred with the relocation of certain of the manufacturing activities to India. In the opinion of the directors these costs will generate cost saving in the future.

These costs will be written off over a period of 5 and 10 years respectively. An Impairment review will be undertaken on an annual basis to ensure; in the opinion of the directors their carry values are reasonable.

13. Previous years figures have been regrouped wherever necessary to conform to current year Classification / grouping.

14. All the figures have been rounded off to the nearest Thousands.