Accounting Policies of Kailash Auto Finance Ltd. Company

Mar 31, 2015

2.1 Basis of preparation:

The Financial Statements have been prepared in accordance with the generally accepted accounting principles ('GAAP') applicable in India. The Company has prepared these financial statements to comply in all material respects with the provisions of the Companies Act,2013 ('the Act') and accounting standards notified under Section 133 of the Companies Act, 2013 read together with paragraph 7 of the companies (Accounts) Rules, 2014. The financial statements have been prepared on an accrual basis and under the historical cost convention. The financial statements are presented in Indian Rupees.

All Assets and Liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in Schedule III of the Companies Act, 2013.

The accounting policies adopted in the preparation of the financial statements are consistent with those of the previous year.

2.2 Use of Estimates:

The preparation of Financial Statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made by management that affect the reported amount of assets and liabilities and disclosure of contingent liabilities as on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Differences between the actual results and estimates are recognized in the period in which the results are known / materialized.

2.3 Revenue Recognition:

Income and expenditure are recognized and accounted on accrual basis as and when they are earned or incurred. Revenue from sales transaction is recognized as and when the significant risk and reward attached to ownership in goods is transferred to the buyer. However leave with wages and bonus is accounted on cash basis.

Profit on sale of investments is recorded on transfer of title from the company and is determined as the difference between the sale price and the carrying value of the investment. Interest income is accounted on accrual basis. Dividend income is accounted for when the right to receive it is established.

Hire purchase and Lease Income is accounted by using the internal rate of return (IRR) implicit in contracts to provide a constant periodic rate of return on the net outstanding on those contracts.

Prompt payment rebate and overdue charges are determined and accounted for on termination of the contracts.

The company follows prudential norms for recognition of Income of Non Performing Assets as per the directions prescribed by Reserve bank of India for NBFC.

2.4 Fixed Assets and Depreciation:

Tangible Assets are stated at cost (or revalued amount as the case may be) less accumulated depreciation and accumulated impairment losses if any. Cost Comprises purchase price and any other attributable cost of bringing the asset to its working condition for its intended use. Subsequent expenditure related to an item of fixed asset are added to its book value only if they increase the future benefits from the existing asset beyond its previously assessed standard of performance.

Gain or loss arising from de-recognition of assets are measured as the difference between the net disposal proceeds and the carrying amount of the assets and are recognized in the statement of profit and loss when the asset is derecognized.

Depreciation on fixed assets is provided on written down value method (WDV) at the rates and in the manner prescribed in Schedule II to the Companies Act, 2013. The residual life of an asset is taken as 5%. The details of the estimated life of each category of asset are as under

S.no Asset Useful Life (Years)

1 Computer 3

2 Printer 3

3 Furniture & Fixture 10

2.5 Investments

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 in accordance with the RBI guidelines and Accounting Standard 13 on 'Accounting for Investments' as notified under the companies (Accounting Standards) Rules, 2006.Current investments also include current maturities of long- term investments. All other investments are classified as non- current investments. Current investments are carried at lower of cost and market price determined category- wise. All non - current investments are carried at cost. However, provision for diminution in value, other than temporary in nature, is made to recognize a decline, on an individual basis.

Investment in Venture Capital Fund is valued at cost.

2.6 Impairment:

The carrying amounts of assets are reviewed at each balance sheet date for any indication of impairment based on internal/external factors. Where the carrying value exceeds the estimated recoverable amount, provision for impairment is made to adjust the carrying value to the recoverable amount. The recoverable amount is the greater of the assets estimated net realizable value and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using an appropriate discounting rate. If at the Balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to maximum of depreciable historical cost.

2.7 Borrowing Costs:

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized. Other borrowing costs are recognized as an expense in the period in which they are incurred.

2.8 Inventories

Stock in trades are valued at cost.

2.9 Derivatives:

Pursuant to the announcement on Accounting for derivatives issued by the Institute of Chartered Accountants of India (ICAI), the company in accordance with the principle of prudence as enunciated in Accounting Standard 1 on 'Disclosure of Accounting Policies' provides for losses in respect of all outstanding derivative contracts at the Balance Sheet date by marking them to market. Any gains arising on such mark to market are not recognized as income.

2.10 Foreign Currency:

Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of the transaction. Monetary items in foreign currencies are stated at the closing exchange rate. Gains/losses on conversion/translation are recognized in the Statement of Profit and Loss. All forward exchange contracts are backed by underlying transactions and the premium or discount arising at inception of such a forward exchange contract is amortized as expense or income over the life of the contract and the exchange differences on such contracts are recognized in the statement of profit and loss in the reporting period in which the exchange rates change.

2.11 Cash Flow Statement:

Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information

2.12 Employee Benefits:

Short term benefits and post employment benefits are accounted in the period during which the services have been rendered.

2.13 Taxation:

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

In accordance with the guidance note issued by the Institute of Chartered Accountants of India ('ICAI') on accounting for credit available in respect of Minimum Alternate Tax (MAT) under the Income Tax Act, 1961, the Company recognizes MAT credit as an asset only when and to the extent there is convincing evidence that the Company will be liable to pay normal income tax during the specified period.

Deferred tax charge or credit and correspondingly deferred tax liability or asset is recognized using tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognized, subject to the consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. In the event of unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realized. Deferred tax assets are reviewed at each balance sheet date and written down or written up to reflect the amount i.e. reasonable/virtually certain (as the case may be) to be realized.

2.14 Provisions, Contingent Liabilities and Contingent Assets:

Provisions are recognized only when there is a present obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

Contingent Liability is disclosed for (i) Possible obligation which will be confirmed only by future events not wholly within the control of the company or (ii) Present obligations arising from the 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.

2.15 Earnings per Share:

The basic earnings per share are computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding during the reporting period. Diluted EPS is computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity and dilutive equity equivalent shares outstanding during the year, except where the results would be anti-dilutive.

2.16 Provisioning For Standard Assets

The Reserve Bank of India (RBI) vide Notification no. DNBS 223/CGM/(US)-2011 dated January 17, 2011 has issued direction to all NBFCs to make provision of 0.25% on standard assets. Accordingly, the company has made provision @0.25% on standard assets in accordance with RBI directions.

2.17 Segment Reporting:

The generally accepted accounting principles used in the preparation of the financial statements are applied to record revenue and expenditure in individual segments.

Segment revenue and segment results include transfers between business segments. Such transfers are accounted for at the agreed transaction value and such transfers are eliminated in the consolidation of the segments.

Expenses that are directly identifiable to segments are considered for determining the segment result. Expenses, which relate to the company as a whole and are not allocable to segments, are included under unallocated corporate expenses.

Segment assets and liabilities include those directly identifiable with the respective segments. Unallocated corporate assets and liabilities represent the assets and liabilities that relate to the company as a whole and not allocable to any segment.

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Mar 31, 2014

1.1 Basis of preparation of Financial Statements:

The Financial Statements have been prepared in accordance with the generally accepted accounting principles (''GAAP'') applicable in India under the historical cost convention on accrual basis. These financial statements have been prepared to comply in all material aspects with the accounting standards notified under Section 211 (3C), Companies (Accounting Standard) Rules, 2006, as amended from time to time and the other relevant provisions of the Companies Act, 1956 read with General Circular 8/2014 dated 04.04.204 issued by the Ministry of Corporate Affairs and the directives as prescribed by the Reserve Bank of India.

All Assets and Liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in Schedule VI of the Companies Act, 1956.

1.2 Investments

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 in accordance with the RBI guidelines and Accounting Standard 13 on ''Accounting for Investments'' as notified under the companies (Accounting Standards) Rules, 2006.Current investments also include current maturities of long-term investments. All other investments are classified as non-current investments. Current investments are carried at lower of cost and market price determined categorywise. All non-current investments are carried at cost. However, provision for diminution in value, other than temporary in nature, is made to recognize a decline, on an individual basis.

Investment in Venture Capital is valued at cost.

1.3 Use of Estimates:

The preparation of Financial Statements in conformity with GAAP requires that the management of the Company makes estimates and assumptions that affect the reported amounts of income and expenses of the period, the reported balances of assets and liabilities and the disclosures relating to contingent liabilities as of the date of the financial statements. Actual results could differ from these estimates. Difference between the actual results and estimates are recognized in the period in which the results are known / materialized. Management believes that the estimates used in preparation of financial statements are prudent and reasonable.

1.4 Inventories

Stock in trade are valued at cost.

1.5 Cash Flow Statement:

Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short- term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.

1.6 Tangible Assets:

Tangible Assets are stated at cost (or revalued amount as the case may be) less accumulated depreciation and accumulated impairment losses if any. Cost Comprises purchase price and any other attributable cost of bringing the asset to its working condition for its intended use. Subsequent expenditure related to an item of fixed asset are added to its book value only if they increase the future benefits from the existing asset beyond its previously assessed standard of performance.

Gain or loss arising from de-recognition of assets are measured as the difference between the net disposal proceeds and the carrying amount of the assets and are recognized in the statement of profit and loss when the asset is derecognized.

Depreciation on fixed assets is provided on written down value method (WDV) at the rates and in the manner prescribed in Schedule XIV of the Companies Act, 1956 over their useful life. Depreciation of asset sold / discarded during the period is proportionately charged. Individual low cost assets (acquired for less than Rs 5000/-) are depreciated within a year of acquisition. Intangible assets are amortized over their estimated useful life on a straight line basis.

1.7 Borrowing Costs :

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

1.8 Impairment of assets :

As on Balance Sheet date, the Company reviews the carrying amount of Fixed Assets to determine whether there are any indications that those assets have suffered "Impairment Loss". Impairment loss, if any, is provided to the extent, the carrying amount of assets exceeds their recoverable amount. Recoverable amount is higher of an asset''s net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from continuing use of an asset and from its disposal at the end of its useful life.

1.9 Revenue Recognition:

Income and expenditure are recognized and accounted on accrual basis as and when they are earned or incurred. Revenue from sales transaction is recognized as and when the significant risk and reward attached to ownership in goods is transferred to the buyer. However leave with wages and bonus is accounted on cash basis.

Profit on sale of investments is recorded on transfer of title from the company and is determined as the difference between the sale price and the carrying value of the investment. Interest income is accounted on accrual basis. Dividend income is accounted for when the right to receive it is established.

Hire purchase and Lease Income is accounted by using the internal rate of return (IRR) implicit in contracts to provide a constant periodic rate of return on the net outstanding on those contracts.

Prompt payment rebate and overdue charges are determined and accounted for on termination of the contracts.

The company follows prudential norms for recognition of Income of Non Performing Assets as per the directions prescribed by Reserve bank of India for NBFC.

1.10 Employee Benefits:

Short term benefits and post employment benefits are accounted in the period during which the services have been rendered.

1.11 Foreign Exchange Transactions:

Foreign currency transactions are recorded at the rate of exchange prevailing on the date of the respective transactions.

Foreign Exchange monetary items in the Balance Sheet are translated at the year-end rates. Exchange differences on settlement / conversion are adjusted to Profit and Loss Account.

1.12 Tax Expense:

Tax expenses for the year comprise of current tax and deferred tax. Current tax is measured after taking into consideration the deductions and exemptions admissible under the provision of Income Tax Act, 1961 and in accordance with Accounting Standard 22 on "Accounting for Taxes on Income.

Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognised as an asset in the Balance Sheet when it is probable that future economic benefit associated with it will flow to the Company.

Deferred Tax represents the tax effect of timing differences between taxable income and accounting income for the reporting period and is capable of reversal in one or more subsequent periods. Deferred tax are quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet Date.

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. Deferred tax asset on unabsorbed depreciation and carry forward of losses are not recognized unless there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

1.13 Contingent Liabilities and Provisions:

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

a. Possible obligation which will be confirmed only by future events not wholly within the control of the company or

b. Present obligations arising from the 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.

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

1.14 Earnings per Share:

In determining the Earnings Per share, the company considers the net profit after tax including any post tax effect of any extraordinary / exceptional item. The number of shares used in computing basic earnings per share is the weighted average number of shares outstanding during the period.

The number of shares used in computing Diluted earnings per share comprises the weighted average number of shares considered for computing Basic Earnings per share and also the weighted number of equity shares that would have been issued on conversion of all potentially dilutive shares.

In the event of issue of bonus shares, or share split the number of equity shares outstanding is increased without an increase in the resources. The number of Equity shares outstanding before the event is adjusted for the proportionate change in the number of equity shares outstanding as if the event had occurred at the beginning of the earliest period reported.

1.15 Provisioning For Standard Assets

The Reserve Bank of India (RBI) vide Notification no. DNBS 223/CGM/(US)-2011 dated January 17, 2011 has issued direction to all NBFCs to make provision of 0.25% on standard assets. Accordingly, the company has made provision @0.25% on standard assets in accordance with RBI directions.

1.16 Segment Reporting:

The generally accepted accounting principles used in the preparation of the financial statements are applied to record revenue and expenditure in individual segments.

Segment revenue and segment results include transfers between business segments. Such transfers are accounted for at the agreed transaction value and such transfers are eliminated in the consolidation of the segments.

Expenses that are directly identifiable to segments are considered for determining the segment result. Expenses, which relate to the company as a whole and are not allocable to segments, are included under unallocated corporate expenses.

Segment assets and liabilities include those directly identifiable with the respective segments. Unallocated corporate assets and liabilities represent the assets and liabilities that relate to the company as a whole and not allocable to any segment.

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Mar 31, 2012

A. Change in accounting policy

Presentation and disclosure of financial statements

During the year ended on 31 March 2012 the revised Schedule VI notified under the Companies Act, 1956, has become applicable to the company, for preparation and presentation of its financial statements.

The adoption of revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statements. However, it has significant impact on presentation and disclosure made in the financial statements. The company has also reclassified the previous years figures in accordance with the requirements applicable in the current year.

b. ACCOUNTING METHODS

(i) The Financial statements are prepared under the Historical Cost convention and on Accrual basis expect as otherwise stated.

(ii) There exists Nil assets as on 31-03-2012 on account of transfer of the company's business to its sister concern namely M/s Kailash Motors Finance Pvt. Ltd. during the year which has effected the going concern concept of the company. However, there has been change in the management control of the company by purchase of 2616517 nos shares of the company i.e. 68.74% of the issued capital of the company by M/s Padma Impex Pvt. Ltd. vide order of the Hon'ble Bombay High Court, in arbitration petition no. 304 of 2011 dated 22-02-2012. Further, the company has transferred all its old outstanding debit and credit balances at book value to one of its sister concern namely M/s Kailash Motors Finance Pvt. Ltd. Jabalpur. As informed by the management that the said action will help in improving the operating start and capabilities. The Management of the view that the company by the above said change will perform better and fully comply with the statutory norms.

c. REVENUE

(i) The non banking business of the company under category "A" of Reserve bank of India has been converted to category "B" i.e. non public deposit acceptance company w.e.f. 12th Jan 2009.

(ii) Hire Purchase and Lease Income is accounted by using the internal rate of return (IRR) implicit in contracts to provide a constant periodic rate of return on the net investment outstanding on those contracts.

(iii) Prompt payment rebate and overdue charges are determined and accounted for on termination of the contract.

(iv) The company follows prudential norms for recognition of Income in respect of Non Performing Assets as per the directions prescribed by Reserve Bank of India for NBFC.

d. RETIREMENT BENEFITS

The facility towards Gratuity, and Leave Encashment has been computed and provided for on the assumption of retirement of all the employees at the end of the year. ln the absense of Actuarial valuation we could not comment on the reasonbleness of the provision made. However provision related to Bonus & Gratuity has been transferred to, M/s Kailash Motors Finance Pvt. Ltd. on the premise that all the employees of the company are now the employees of M/s Kailash Motors Finance Pvt. Ltd.

e. DEPRECIATION

Depreciation on the assets is provided at the rates and in the manner provided in schedule XIV of the companies Act, 1956:

(i) On assets held for own use - Written Down Method

(ii) On leased asset - Straight Line Method

(iii) Fixed asset as on 31-03-2012 - Nil

f. INVESTMENT Investment are valued at cost. All the investment of the company during the year had been transferred at book value to M/s Kailash Motors Finance Pvt. Ltd. Jabalpur to vide assignment agreement dtd. 13-02-2012. Investment as on 31-03-2012 is Nil.

g. STOCK - Stock in trade and Repossessed stock is valued at cost or market value whichever is lower. Stock as on 31-03-2012 is Nil.

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Mar 31, 2010

1- ACCOUNTING METHODS

(i) The Financial statements are prepared under the Historical Cost convention and on Accrual basis expect as otherwise stated.

(ii) There exsist Nil assets as on 31-03-2010 on account of transfer of the companys business to its sister concern namely

M/s Kailash Motors Finance Pvt. Ltd. during the year which has effected the going concern concept of the company.

However, the management is planning to induct new directors under SEBI Takeover Code, so as to have fresh funds and operating start and capabilities. The Management of the view that the company by the above said change will perform better and fully comply with the statutory norms.

2- REVENUE

(i) The non banking business of the company under category" A" of Reserve bank of India has been converted to category "B" i.e.non public deposit acceptance company w.e.f.12th Jan 2009.

(ii) Hire Purchase and Lease.Income is accounted by using the internal rate of return (IRR) implicit in contracts to provide a constant periodic rate of return on the net investment outstanding on those contracts.

(iii) Prompt payment rebate and overdue chargse are determinded and accounted for on termination of the contract.

(iv) The company follows prudential norms for recognition of Income in respect of Non Performing Assets as per the directions prescribed by Reserve Bank of India for NBFC.

3- RETIREMENT BENEFITS

The facility towards Gratuity, and Leave Encashment has been computed and provided for on the assumption of retirement of all the employees at the end of the year. ln the absense of Acutuarial valuation we could not comment on the reasonbleness of the provision made.

4- DEPRECIATION

Depreciation on the assets is provided at the rates and in the manner provided in schedule XIV of the companies Act, 1956:

(i) On assets held for own use - Written Down Method

(ii) On leased asset - Straight Line Method

5- INVESTMENT - Investment are valued at cost.

6- STOCK - Stock in trade and Repossessed stock is valued at cost or market value whichever is lower.