Accounting Policies of Shri Gang Industries and Allied Products Ltd. Company

Jun 30, 2010

1. RECOGNITION OF INCOME AND EXPENDITURE

a) The accounts are made on historical cost convention on going concern basis and Revenues/Incomes and Costs/Expenditure are generally accounted on accrual, as they are earned or incurred in accordance with the generally accepted accounting principles, applicable accounting standard notified under the companies accounting Standards Rules, 2006 and the provision of the Companies Act,1956.

b) The liability towards excise duty on the manufactured goods is accounted for at the time of clearance of the . goods from the factory when the same is actually accrued. This has, however, no substantial impact on the operating results of the Company.

2. EMPLOYEES BENEFITS

a) Retirement benefits in the form of Provident fund and Family Pension fund is a defined contribution scheme and the contributions are charged to the profit and loss account of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective funds.

b) Gratuity is a defined benefit obligation. Liability in respect of gratuity is being paid to fund maintained by LIC of India and administered through a separated irrevocable trust set up by the company. Difference between the fund balance and accrued liability at the end of the year based on actuarial valuation is charged to the P& L A/c.

c) Long term compensated balances in the form of leave encashment are provided for based on actuarial valuation at the end of the financial year. The actuarial valuation is done as per projected unit credit method.

d) Actuarial gains/losses are debited to profit and loss account and are not deferred.

3. FIXED ASSETS

a) Fixed Assets are stated at cost, less accumulated depreciation (other than leasehold Land', where no amortization is made)

b) In respect of Finance lease effective from 1.4.2001, the asset is capitalized with corresponding present value. The Lease payments are segregated in to interest, charge off to revenue and principal amount adjusted against lease liability. In case of operating lease its lease rental are charged off to profit and loss account.

c) Assets acquired under Hire Purchase agreement are capitalised and the outstanding principal is shown as creditors for Hire Purchase.

4. METHOD OF DEPRECIATION AND AMORTIZATION

a)

(i) Depreciation on Fixed Assets is provided at the relevant rates of depreciation in respect of Straight line method as specified in Schedule XIV to the Companies Act, 1956;

(ii) In view of the amendment in Schedule XIV, depreciation on assets costing up to Rs.5000/- are depreciated at the rate of 100% on pro-rata basis except those which constitute more than 10% of the total actual cost of Plant and Machinery on which the applicable rate to such Plant and Machinery is charged.

b) Depreciation on additions to assets or on sale/ discard of assets is calculated pro-rata from the date of such addition or up to the date of such sale/ discardment as the case may be.

c) No amounts are written off against Leasehold Land by way of amortization.

5. INVESTMENTS

Investments are stated at cost or at book value, which is arrived at after addition thereto Income accrued, wherever applicable. Any diminution of permanent nature in the value of investment is charged to revenue.

6. VALUATION OF INVENTORIES

Type of Inventory Method of Valuation

Raw Material, Packing Materials At Cost Consumables

Finished Goods At Cost or net realisable (Including Goods in Transit) ValueWhichever is lower.



Stock in Process At Cost

By Products At net realisable value

Loose Tools At cost and charged off when discarded

In the above, cost is arrived at by weighted average cost method and in case of Finished Goods and Stock in Process it also includes manufacturing and establishment overheads, applicable taxes, interest on working capital and depreciation relating to units of production.

7. RESEARCH AND DEVELOPMENT

Revenue expenditure including overheads on Research and Development is charged out as an expense through the natural heads of account in the year in which incurred. Expenditure, which results in the creation of capital assets, is taken to Fixed Assets and depreciation is provided on such assets as are depreciable.

8. EXPENDITURE DURING CONSTRUCTION AND ON NEW PROJECTS

In the case of expansion, all expenditure, directly related to the expansion including interest on borrowings for the project, incurred upto the date of installation, are capitalised and added pro-rata to the cost of factory buildings and plant and machinery relating thereto.

9. INCOME TAX

Provision for current Income Tax is made on the basis of estimated taxable income. The company provides for deferred tax liability (after netting off deferred tax assets), based on the tax effect of timing difference resulting from the recognition of items in the financial statements. Deferred tax assets (after, netting of deferred tax liabilities), are generally not recognised unless there is strong circumstances exists for its adjustment/ realisation in near future.

10. FOREIGN CURRENCY TRANSACTIONS

Foreign Currency transactions during the year are recorded at rates of exchange prevailing on the date of transaction. Current Assets and Current Liabilities are translated at using the year-end exchange rate. Exchange gains and losses are duly recognised in the Profit and Loss Account.

11. PROVISIONS AND CONTINGENCIES

A Provision is recognised when the company has a present obligation as a result of past eyent and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on management estimate of the amount required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates.

12. IMPAIRMENT OF ASSETS

Consideration is given by the management of the company at each balance sheet date to determine whether there is any indication of impairment of the carrying amount of assets. If any indication exists, impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is greater of the net selling price and value in use. Reversal of impairment losses recognised in prior years is recorded when there is indication that the impairment losses for the assets are no longer exist.

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Jun 30, 2009

1. RECOGNITION OF INCOME AND EXPENDITURE:

A. The accounts are made on historical cost convention on going concern basis and Revenues/Incomes and Costs/Expenditure are generally accounted on accrual, as they are earned or incurred in accordance with the generally accepted accounting principles, applicable accounting standard notified under the companies accounting Standards Rules, 2006 and the provision of the Companies Act,1956.

B. The liability towards excise duty on the manufactured goods is accounted for at the time of clearance of the goods from the factory when the same is actually accrued. This has, however, no substantial impact on the operating results of the Company.

2. EMPLOYEES BENEFITS :

A. Retirement benefits in the form of Provident fund and Family Pension fund is a defined contribution scheme and the contributions are charged to the profit and loss account of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective funds.

B. Gratuity is a defined benefit obligation. Liability in respect of gratuity is being paid to fund maintained by LIC of India and administered through a separated irrevocable trust set up by the company. Difference between the fund balance and accrued liability at the end of the year based on actuarial valuation is charged to the P& L A/c

C. Long term compensated balances in the form of leave encashment are provided for based on actuarial valuation at the end of the financial year. The actuarial valuation is done as per projected unit credit method.

D. Actuarial gains/losses are debited to profit and loss account and are not deferred.

3. FIXED ASSETS:

A. Fixed Assets are stated at cost, less accumulated depreciation (other than Leasehold Land, where no amortization is made)

B. In respect of Finance lease effective from 1.4.2001, the asset is capitalized witii corresponding present value. The Lease payments are segregated in to interest, charge off to revenue and principal amount adjusted against lease liability. In case of operating lease its lease rental are charged off to profit and loss account.

C. Assets acquired under Hire Purchase agreement are capitalised and the outstanding principal is shown as creditors for Hire Purchase.

4. METHOD OF DEPRECIATION AND AMORTIZATION:

A.

(i) Depreciation on Fixed Assets is provided at the relevant rates of depreciation in respect of Straight line method as specified in Schedule XTV to the Companies Act, 1956;

(ii) In view of the amendment in Schedule XIV, depreciation on assets costing upto Rs.5000/- are depreciated at me rate of 100% on pro-rata basis except those which constitute more than 10% of the total actual cost of Plant and Machinery on which the applicable rate to such Plant and Machinery is charged.

B. Depreciation on additions to assets or on sale/ discard of assets, is calculated pro-rata from the date of such addition or up to the date of such sale/ discardment as the case may be.

C. No amounts are written off against Leasehold Land by way of amortization.

5. INVESTMENTS :

Investments are stated at cost or at book value, which is arrived at after addition thereto Income accrued, wherever applicable. Any diminution of permanent nature in the value of investment is charged to revenue.

6. VALUATION OF INVENTORIES:

Type of Inventory Method of Valuation

Raw Material, Packing Material & Consumables : At Cost

Finished Goods : At Cost or net realisable Value

(Including Goods in Transit) whichever is lower.

Stock in Process : At Cost

By Products : At net realisable value

Loose Tools : At cost and charged off when discarded

In the above, cost is arrived at by weighted average cost method and in case of Finished Goods and Stock in

Process it also includes manufacturing and establishment overheads, applicable taxes, interest on working capital

and depreciation relating to units of production.

7. RESEARCH AND DEVELOPMENT:

Revenue expenditure including overheads on Research and Development is charged out as an expense through the natural heads of account in the year in which incurred. Expenditure, which results in the creation of capital assets, is taken to Fixed Assets and depreciation is provided on such assets as are depreciable.

8. EXPENDITURE DURING CONSTRUCTION AND ON NEW PROJECTS:

In the case of expansion, all expenditure, directly related to the expansion including interest on borrowings for the project, incurred upto the date of installation, are capitalised and added pro-rata to the cost of factory buildings and plant and machinery relating thereto.

9. INCOME TAX

Provision for current Income Tax is made on the basis of estimated taxable income. The company provides for deferred tax liability (after netting off deferred tax assets), based on the tax effect of timing difference resulting from the recognition of items in the financial statements. Deferred tax assets (after, netting of deferred tax liabilities), are generally not recognised unless there is strong circumstances exists for its adjustment / realisation in near future.

10. FOREIGN CURRENCY TRANSACTIONS

Foreign Currency transactions during the year are recorded at rates of exchange prevailing on the date of transaction. Current Assets and Current Liabilities are translated at using the year-end exchange rate. Exchange gains and losses are duly recognised in the Profit and Loss Account.

11. PROVISIONS AND CONTINGENCIES:

A Provision is recognised when the company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on management estimate of the amount required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates.

12. IMPAIRMENT OF ASSETS:

Consideration is given by the management of the company at each balance sheet date to determine whether there is any indication of impairment of the carrying amount of assets. If any indication exists, impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is greater of the net selling price and value in use. Reversal of impairment losses recognised in prior years is recorded when there is indication that the impairment losses for the assets are no longer exist.