Accounting Policies of Sovereign Diamonds Ltd. Company

Mar 31, 2015

1.1 Basis of Preparation of Financial Statements :

The accounts are prepared under the historical cost convention and on the basis of going concern. All expenses and income to the extent considered payable and receivable respectively, unless stated otherwise, have been accounted for on accrual basis.

1.2 Use of Estimates :

The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period.

Difference between the actual results and estimates are recognised in the period in which the result are known /materialized.

1.3 Fixed Assets :

Fixed Assets are stated at cost net of recoverable taxes and includes amounts added on revaluation, less accumulates depreciation and impairment loss, if any. All costs, including financing costs till commencement of commercial production, net charges on foreign exchange contracts and adjustments arising from exchange rate variation attributable to the fixed assets are capitalized.

1.4 Depreciation & Amortisation :

(a) Consequent to the enactment of the Companies Act, 2013 and its applicability for accounting period commencing after 1st April,2014, the Company has reviewed and revised the estimated useful lives of its fixed assets, generally in accordance provisions of schedule II of the Act, except in machinery. The company has changed the method of providing depreciation from Written Down Value to Straight Line Method. The written down value of Fixed Assets whose lives have expired as at 1st April 2014 have been adjusted net of tax, in the opening balance of General Reserve amounting to Rs.14.87 Lacs.

(b) In the opinion of management the useful life of machinery is expected for 8 years. Accordingly depreciation in case of machinery is worked out and provided by assuming useful life of 8 years.

1.5 Impairment of Assets :

An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value.

An impairment loss is charged to the profit and loss account in the year in which an asset is identified as impaired.

1.6 Foreign Currency Transaction :

(a) Foreign currency transactions are accounted at the rate of exchange prevailing on the date of the transactions.

(b) At the date of balance sheet, monetary items determined in foreign currencies are converted into rupee equivalents at the exchange rate prevailing at the year end.

(c) Any gain or loss arising at the time of actual realization are credited or debited to the exchange rate difference Account.

1.7 Inventories :

i) Raw Material and trading goods are valued at lower of cost or net realisable value.

ii) Finished Goods are valued "At Cost Direct and Variable over heads".

iii) Consumable stores and spares are valued "At Cost"

1.8 Revenue Recognition :

i) Revenue from Export Sales is recognised when delivery of goods is physically given to custom authorities. Revenue from Domestic Sales is generally recognised when goods are dispatched to the customers with Sales Invoice.

ii) Refund of sales Tax/VAT is accounted in the year of receipt.

1.9 Employee Benefits :

i) Retirement benefit in the form of Provident Fund is charged to the Profit & Loss Account of the year when the contributions to the fund are made.

ii) The company has taken a policy with Life Insurance Corporation of India to cover the gratuity liability of the employees and when the premium is paid to the LIC the same is charged to Profit and Loss Account.

1.10 Borrowing Costs :

Borrowing costs that are directly attributable to the acquisition/construction of the qualifying assets are capitalized as part of the cost of the assets, up to the date of acquisition/completion of construction. All other borrowing costs are charged to revenue.

1.11 Segment Reporting :

a) Business Segment :

The Company's main business is manufacturing of Jewellery. All other activities of the company revolve around this main business. There are no separate segments within the company as defined by AS 17 (Segment Reporting) issued by The Institute of Chartered Accountants of India.

b) Geographical Segment :

The geographical segments considered for disclosures are :

i) Sales within India made to Customers located within India Rs.5320.32 Lacs.

ii) Sales outside Indiarepresents sales made to customers located outside India Rs.680.49 Lacs.

The entire activity pertaining to sales outside India is carried out from India

1.12 Accounting for Tax :

a) Current Tax is accounted on the basis of estimated taxable income for the current accounting year and in accordance with the provisions of the Income Tax Act,1961.

b) Deferred Tax resulting from "timing differences" between accounting and taxable profit for the period is accounted by using tax rates and laws that have been enacted or substantially enacted as at the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty thatcan be realized in future. Net deferred tax liability is arrived at after setting off deferred tax assets.

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Mar 31, 2014

1.1 Basis of Preparation of Financial Statements :

The accounts are prepared under the historical cost convention and on the basis of going concern. All expenses and income to the extent considered payable and receivable respectively, unless stated otherwise, have been accounted for on accrual basis.

1.2 Use of Estimates :

The preparation of financial statements requires estimates and assumptions to be made

that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period.

Difference between the actual results and estimates are recognised in the period in which the result are known /materialized.

1.3 Fixed Assets :

Fixed Assets are stated at cost net of recoverable taxes and includes amounts added on revaluation, less accumulates depreciation and impairment loss, if any. All costs, including fnancing costs till commencement of commercial production, net charges on foreign exchange contracts and adjustments arising from exchange rate variation attributable to the fixed assets are capitalized.

1.4 Depreciation & Amortisation :

Depreciation on Tangible Fixed Assets is provided on written down value method, and at the rate prescribed in schedule XIV of the Companies Act, 1956.

1.5 Impairment of Assets :

An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value.

An impairment loss is charged to the profit and loss account in the year in which an asset is identified as impaired.

1.6 Foreign Currency Transaction :

(a) Foreign currency transactions are accounted at the rate of exchange prevailing on the date of the transactions.

(b) At the date of balanace sheet, monetary items determined in foreign currencies are converted into rupee equivalents at the exchange rate prevailing at the year end.

(c) Any gain or loss arising at the time of actual realization are credited or debited to the exchange rate difference Account.

1.7 Inventories :

i) Raw Material and trading goods are valued at lower of cost or net realisable value ii) Finished Goods are valued "At Cost Direct and Variable over heads". iii) Consumable stores and spares are valued "At Cost"

1.8 Revenue Recognition :

i) Revenue from Export Sales is recognised when delivery of goods is physically given to custom authorities. Revenue from Domestic Sales is generally recognised when goods are dispatched to the customers with Sales Invoice.

ii) Refund of sales Tax/VAT is accounted in the year of receipt.

1.9 Employee benefits :

i) Retirement benefit in the form of Provident Fund is charged to the profit & Loss Account of the year when the contributions to the fund are made.

ii) The company has taken a policy with Life Insurance Corporation of India to cover the gratuity liability of the employees and when the premium is paid to the LIC the same is charged to profit and Loss Account.

1.10 Borrowing Costs :

Borrowing costs that are directly attributable to the acquisition/construction of the qualifying assets are capitalized as part of the cost of the assets, up to the date of acquisition/completion of construction. All other borrowing costs are charged to revenue.

1.11 Segment Reporting :

a) Business Segment :

The Company''s main business is manufacturing of Jewellery. All other activities of the company revolve around this main business. There are no separate segments within the company as Defined by AS 17 (Segment Reporting) issued by The Institute of Chartered Accountants of India.

b) Geographical Segment :

The geographical segments considered for disclosures are :

i) Sales within India made to Customers located within India Rs.3786.81Lacs

ii) Sales outside India represents sales made to customers located outside India Rs.219.23 Lacs The entire activity pertaining to sales outside India is carried out from India

1.12 Accounting for Tax :

a) Current Tax is accounted on the basis of estimated taxable income for the current accounting year and in accordance with the provisions of the Income Tax Act,1961.

b) Deferred Tax resulting from "timing differences" between accounting and taxable profit for the period is accounted by using tax rates and laws that have been enacted or substantially enacted as at the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that can be realized in future. Net deferred tax liability is arrived at after setting off deferred tax assets.

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Mar 31, 2013

1.1 Basis of Preparation of Financial Statements :

The accounts are prepared under the historical cost convention and on the basis of going concern. All expenses and income to the extent considered payable and receivable re- spectively, unless stated otherwise, have been accounted for on accrual basis.

1.2 Use of Estimates :

The preparation of financial statements requires estimates and assumptions to be made that the affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period.

Difference between the actual results and estimates are recognised in the period in which the result are known /materialized.

1.3 Fixed Assets :

Fixed Assets are stated at cost net of recoverable taxes and includes amounts added on revaluation, less accumulates depreciation and impairment loss, if any. All costs, including financing costs till commencement of commercial production, net charges on foreign exchange contracts and adjustments arising from exchange rate variation attributable to the fixed assets are capitalized.

1.4 Depreciation & Amortisation :

Depreciation on Tangible Fixed Assets is provided on written down value method, and at the rate prescribed in schedule XIV of the Companies Act, 1956.

1.5 Impairment of Assets :

An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value.

An impairment loss is charged to the profit and loss account in the year in which an asset is identified as impaired.

1.6 Foreign Currency Transaction :

(a) Foreign currency transactions are accounted at the rate of exchange prevailing on the date of the transactions.

(b) Any gain or loss arising at the time of actual realization are credited or debited to the exchange rate difference Account.

1.7 Inventories : i) Raw Material and trading goods are valued at lower of cost or net realisable value. ii) Finished Goods are valued "At Cost Direct and Variable over heads". iii) Consumable stores and spares are valued "At Cost"

1.8 Revenue Recognition :

i) Revenue from Export Sales is recognised when delivery of goods is physically given to custom authorities. Revenue from Domestic Sales is generally recognised when goods are dispatched to the customers with Sales Invoice.

ii) Refund of sales Tax/VAT is accounted in the year of receipt.

1.9 Employee Benefits :

i) Retirement benefit in the form of Provident Fund is charged to the Profit & Loss Account of the year when the contributions to the fund are made.

ii) The company has taken a policy with Life Insurance Corporation of India to cover the gratuity liability of the employees and when the premium is paid to the LIC the same is charged to Profit and Loss Account.

iii) Liability for encashment of leave is recognised and charged to profit and loss account in the year in which it is encashed and paid to the employees.

1.10Borrowing Costs :

Borrowing costs that are directly attributable to the acquisition/construction of the qualify- ing assets are capitalized as part of the cost of the assets, up to the date of acquisition/ completion of construction. All other borrowing costs are charged to revenue.

1.11Segment Reporting :

a) Business Segment :

The Company''s main business is manufacturing of Jewellery. All other activities of the company revolve around this main business. There are no separate segments within the company as defined by AS 17 (Segment Reporting) issued by The Institute of Chartered Accountants of India.

b) Geographical Segment : The geographical segments considered for disclosures are : i) Sales within India made to Customers located within India Rs.33,74,42,488/- ii) Sales outside India represents sales made to customers located outside India

Rs.42,17,273/- The entire activity pertaining to sales outside India is carried out from India 1.12 Accounting for Tax :

a) Current Tax is accounted on the basis of estimated taxable income for the current accounting year and in accordance with the provisions of the Income Tax Act,1961.

b) Deferred Tax resulting from "timing differences" between accounting and taxable profit for the period is accounted by using tax rates and laws that have been enacted or substantially enacted as at the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that can be realized in future. Net deferred tax liability is arrived at after setting off deferred tax assets.

1.13Gratuity :

The Company is in the process of working and obtaining gratuity liability certificate from LIC as required under AS 15. On determining the said liability, provision shall be made in the account of following year by adjustment from General Reserve or charge to Profit & Loss Account.

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Mar 31, 2012

1.1 Basis of Preparation of Financial Statements :

The accounts are prepared under the historical cost convention and on the basis of going concern. All expenses and income to the extent considered payable and receivable respectively, unless stated otherwise, have been accounted for on accrual basis.

During the year ended March 31st 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 disclosures made in the financial statements. The Company has also reclassified the previous year figures in accordance with the requirements applicable in the current year.

1.2 Use of Estimates :

The preparation of financial statements requires estimates and assumptions to be made that the affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognized in the period in which the result are known /materialized.

1.3 Fixed Assets :

Fixed Assets are stated at cost net of recoverable taxes and includes amounts added on revaluation, less accumulates depreciation and impairment loss, if any. All costs, including financing costs till commencement of commercial production, net charges on foreign exchange contracts and adjustments arising from exchange rate variation attributable to the fixed assets are capitalized.

1.4 Depreciation & Amortization :

Depreciation on Tangible Fixed Assets is provided on written down value method, and at the rate prescribed in schedule XIV of the Companies Act, 1956.

1.5 Impairment of Assets :

An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value.

An impairment loss is charged to the profit and loss account in the year in which an asset is identified as impaired.

1.6 Foreign Currency Transaction :

(a) Foreign currency transactions are accounted at the rate of exchange prevailing on the date of the transactions.

(b) Any gain or loss arising at the time of actual realization are credited or debited to the exchange rate difference Account.

1.7 Inventories :

i) Raw Material and trading goods are valued at lower of cost or net realizable value.

ii) Finished Goods are valued "At Cost Direct and Variable over heads".

iii) Consumable stores and spares are valued "At Cost"

1.8 Revenue Recognition :

i) Revenue from Export Sales is recognized when delivery of goods is physically given to custom authorities. Revenue from Domestic Sales is generally recognized when goods are dispatched to the customers with Sales Invoice.

ii) Refund of sales Tax/VAT is accounted in the year of receipt.

1.9 Employee Benefits :

i) Retirement benefit in the form of Provident Fund is charged to the Profit & Loss Account of the year when the contributions to the fund are made.

ii) The company has taken a policy with Life Insurance Corporation of India to cover the gratuity liability of the employees and when the premium is paid to the LIC the same is charged to Profit and Loss Account.

iii) Liability for encashment of leave is recognized and charged to profit and loss account in the year in which it is encased and paid to the employees.

1.10 Borrowing Costs :

Borrowing costs that are directly attributable to the acquisition/construction of the qualifying assets are capitalized as part of the cost of the assets, up to the date of acquisition/completion of construction. All other borrowing costs are charged to revenue.

1.11 Segment Reporting :

a) Business Segment :

The Company's main business is manufacturing of Jewellery. All other activities of the company revolve around this main business. There are no separate segments within the company as defined by AS 17 (Segment Reporting) issued by The Institute of Chartered Accountants of India.

b) Geographical Segment :

The geographical segments considered for disclosures are :

i) Sales within India made to Customers located within India Rs.25.04/- Lacs

ii) Sales outside India represents sales made to customers located outside India Rs.185.80/- Lacs

The entire activity pertaining to sales outside India is carried out from India

1.12 Accounting for Tax :

a) Current Tax is accounted on the basis of estimated taxable income for the current accounting year and in accordance with the provisions of the Income Tax Act,1961.

b) Deferred Tax resulting from "timing differences" between accounting and taxable profit for the period is accounted by using tax rates and laws that have been enacted or substantially enacted as at the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that can be realized in future. Net deferred tax liability is arrived at after setting off deferred tax assets.

1.13 Gratuity :

The Company is in the process of working and obtaining gratuity liability certificate from LIC as required under AS 15. On determining the said liability, provision shall be made in the account of following year by adjustment from General Reserve or charge to Profit & Loss Account.

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Mar 31, 2011

(a) System of Accounting :

The accounts are prepared under the historical cost convention and on the basis of going concern. All expenses and income to the extent considered payable and receivable respectively, unless stated otherwise, have been accounted for on accrual basis.

(b) Fixed Assets :

Fixed Assets stated at cost of acquisition or construction. (Including expenses incurred before commencement of production). They are stated at historical cost less accumulated depreciation.

(c) Depreciation :

Depreciation on Fixed Assets is provided on written down value method, and at the rate prescribed in schedule XIV of the Companies Act, 1956.

(d) Inventories :

(i) Raw Material and trading goods are valued at lower of cost or net realisable value. (ii) Finished Goods are valued "At Cost Direct and Variable over heads". (iii) Consumable stores and spares are valued "At Cost"

(e) Revenue Recognition :

(i) Revenue from Export Sales is recognised when delivery of goods is physically given to custom authorities. Revenue from Domestic Sales is generally recognised when goods are despatched to the customers with Sales Invoice.

(ii) Refund of sales Tax/VAT is accounted in the year of receipt.

(f) Foreign Currency Transaction :

(a) Foreign curreny transactions are accounted at the rate of exchange prevailing on the date of the transactions.

(b) Any gain or loss arising at the time of actual realisation are credited or debited to the exchange rate difference Account.

(g) Employee Benefits :

(i) Retirement benefit in the form of Provident Fund is charged to the Profit & Loss Account of the year when the contributions to the fund are made.

(ii) The company has taken a policy with Life Insurance Corporation of India to cover the gratuity liability of the employees and when the premium is paid to the LIC the same is charged to Profit and Loss Account.

(iii) Liability for encashment of leave is recognised and charged to profit and loss account in the year in which it is encashed and paid to the employees.

(h) Borrwing Cost :

Borrowing costs that are directly attributable to the acquisition/construction of the qualifying assets are capitalised as part of the cost of the assets, upto the date of acquisition/completion of construction. All other borrowing costs are charged to revenue.

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Mar 31, 2010

(a) System of Accounting :

The accounts are prepared under the historical cost convention and on the basis of going concern.

All expenses and income to the extent considered payable and receivable respectively, unless stated otherwise, have been accounted for on accrual basis.

(b) Fixed Assets :

Fixed Assets stated at cost of acquisition or construction. (Including expenses incurred before commencement of production). They are stated at historical cost less accumulated depreciation.

(c) Depreciation :

Depreciation on Fixed Assets is provided on written down value method, and at the rate prescribed in schedule XIV of the Companies Act, 1956.

(d) Inventories :

(i) Raw Material and trading goods are valued at lower of cost or net realisable value. (ii) Finished Goods are valued "At Cost + Direct and Variable over heads”. (iii) Consumable stores and spares are valued "At Cost”

(e) Revenue Recognition :

(i) Revenue from Export Sales is recognised when delivery of goods is physically given to custom authorities. Revenue from Domestic Sales is generally recognised when goods are despatched to the customers with Sales Invoice.

(ii) Refund of sales Tax/VAT is accounted in the year of receipt.

(f) Foreign Currency Transaction :

(a) Foreign curreny transactions are accounted at the rate of exchange prevailing on the date of the transactions.

(b) Any gain or loss arising at the time of actual realisation are credited or debited to the exchange rate difference Account.

(g) Employee Benefits :

(i) Retirement benefit in the form of Provident Fund is charged to the Profit & Loss Account of the year when the contributions to the fund are made.

(ii) The company has taken a policy with Life Insurance Corporation of India to cover the gratuity liability of the employees and when the premium is paid to the LIC the same is charged to Profit and Loss Account.

(iii) Liability for encashment of leave is recognised and charged to profit and loss account in the year in which it is encashed and paid to the employees.

(h) Borrwing Cost :

Borrowing costs that are directly attributable to the acquisition/construction of the qualifying assets are capitalised as part of the cost of the assets, upto the date of acquisition/completion of construction. All other borrowing costs are charged to revenue.