Accounting Policies of Sunflag Iron & Steel Company Ltd. Company
Mar 31, 2018
I Basis of preparation
The financial statement of the Company has been prepared in accordance with the Indian accounting standards (Ind AS) notified under the Companies (Indian Accounting Standard), Rules 2015, as amended and other relevant provisions of the Companies Act, 2013. These financial statements have been prepared under the historical cost convention on the accrual basis, and certain financial instruments are measured atfairvalue, as explained in accounting policies.
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
The financial statements are presented in Indian Rupees (Rs.) and all values are rounded to the nearest lakh (Rs. 00,000), except when otherwise indicated.
The financial statements for the yearended 31stMarch, 2018 were authorized and approved for issue by the Board of Directors on 28th May, 2018.
II Property, plant and equipment
Property, plant and equipment are stated at original cost net of tax/duty credit availed, less accumulated depreciation and accumulated impairment losses, when significant part of the property, plant and equipment are required to be replaced at intervals, the company derecognised the replaced part and recognised the new parts with its own associated useful life and depreciated accordingly. Likewise when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance cost are recognised in the statement of the profit and loss as incurred. The present value of the expected cost or the decommissioning of the asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.
Capital work in progress includes property plant & equipment under installation / underdevelopment as at the balance sheet date.
Capital expenditure on tangible assets for research and development is classified under property, plant and equipment and is depreciated on the same basis as other property, plant and equipment.
Property, plant and equipment eliminated from the financial statement, either on disposal or when retired from the active use. Losses arising in the case of retirement of property, plant and equipment are a recognised in the statement of the profit and loss in the year.
III Intangible assets
Capital expenditure on purchase and development of identifiable assets without physical substance is recognized as intangible assets in accordance with principles given under Ind AS-38 Intangible Assets.
The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the assets are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates.
IV Depreciation and amortization
The assetsâ residual values, useful lives and methods of depreciation are reviewed each financial year end and adjusted prospectively, if applicable.
Depreciation on property, plant and equipment is provided over the useful life of assets as specified in schedule - II to the Companies Act, 2013 on straight line method except in case of heavy & light vehicles which are depreciated on written down basis.
However, in respect of certain plant & machinery and electric installation, depreciation is provided as per their useful lives assessed on the basis of technical evaluation by the technical expert and management estimate. The details of which are as follows
Property, plant and equipment which are added / disposed-off during the year, depreciation is provided on pro-rata basis with reference to the month of addition / deletion.
No depreciation is charged on free hold land and capital work in progress.
Intangible assets are amortised over its useful life not exceeding six years on straight line basis.
V Impairment of non-financial assets
Property, plant and equipment, intangible assets and assets classified as investment property with finite life are evaluated for recoverability whenever there is any indication that their carrying amounts may not be recoverable. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cashflows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. An impairment loss is recognized in the statement of profit or loss.
An impairment loss is reversed in the statement of profit and loss if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.
Impairment losses on continuing operations, including impairment on inventories are recognized in the statement of profit and loss, except for the assets previously revalued with the revaluation taken to other comprehensive income (OCI). For such assets, the impairment is recognized in OCI up to the amount of any previous revaluation surplus.
VI Inventories
Inventories are valued as under:
Cost represent, cost incurred in bringing the inventories to their present location and condition. Slow and non-moving material, obsolete, defective inventories are duly provided for and valued at net realisable value. Goods and materials in transit are valued at actual cost incurred up to the date of balance sheet.
Cost is calculated on weighted average basis.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and costs required to make the sale.
The cost of inventories has been computed to include all cost of purchases, cost of conversion and other related expenses.
Materials and supplies held for use in the production of inventories are not written down if the finished product in which they will be used are expected to be sold at above cost.
VII Cash and cash equivalents
Cash and cash equivalents includes cash on hand and at bank, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value and are held for the purpose of meeting short-term cash commitments.
For the purpose of the statement of cash flows, cash and cash equivalents consists of cash and short term deposits, as defined above, net of outstanding bank overdraft as they are being considered as integral part of the Companyâs cash management.
VIII Leases
Alease is classified at the inception date either as a finance lease or an operating lease. Alease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease When acquired, such assets are capitalized at fair value of the leased property or present value of minimum lease payments, at the inception of lease, whichever is lower.
Other leases are operating leases. Operating lease payments are recognised as an expense in the statement of profit and loss on a straight line basis over the lease term. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and amortised over the lease term on the straight line basis.
Where the Company is the lessor
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease, costs including depreciation are recognized as an expense in the statement of profit and loss.
Where the Company as a lessee
Leases in which significant portions of risks and reward of ownership are not transferred to the Company as lessee are classified as operating leases. Operating lease payments are recognised as an expense in the statement of profit and loss on a straight-line basis over the lease term.
IX Employee benefits
Expenses and liabilities in respect of employee benefits are recorded in accordance with Indian Accounting Standard Ind AS-19 Employee Benefits.
a) Long term benefit
i) Defined benefit plan
The Companyâs liabilities on account gratuity is determined at the end of each financial year on the basis of acturial valuation certificates obtained from registered actuary in accordance with the measurement procedure as per Indian Accounting Standard (INDAS)-19 âEmployee Benefitsâ. Gratuity liability is funded on year to year basis by contribution gratuity policy taken from Life Insurance Corporation (LIC). The costs of providing benefits under these plans are also determined on the basis of acturial valuation at each year end. Actuarial gains and losses for defined benefit plans are recognized through OCI in the period in which they occur.
II) Defined contribution plan
Retirement benefits in the form of provident fund are accrued as per the provisions of the Employees Provident Funds and Miscellaneous Provisions Act, 1952. Contributions payable to the employeeâs provident fund in respect of the company are charged to the statement of profit and loss. There are no other than the contribution payable to the provident fund / trust.
Liability towards superannuation is funded in accordance with the scheme with Life Insurance Corporation of India.
b) Shortterm benefits
Shortterm employee benefits are recognized as expenses in the statement of profit & loss of the year in which related services are rendered.
Leave salary in respect of accumulated earned leave has been provided for according to the service rules of the Company.
X Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average numberof equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average numberof shares outstanding during the period are adjusted forthe effects of all potential dilutive equity shares.
XI Provisions, contingent liabilities, contingent assets and commitments:
General
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the 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. When the Company expects some or all of provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating to provision presented in the statement of profit & loss net of any reimbursement.
If the effect of the time value of money is material, provisions are disclosed using a current pre-tax rate that reflects, when appropriate, the risk specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as finance cost.
Mine restoration orassets retirement obligation
Mine restoration expenditure is provided for in the statement of profit and loss based on present value of estimated expenditure required to be made towards restoration and rehabilitation at the time of vacation of mine. The cost estimates are reviewed periodically and are adjusted to reflect known developments which may have an impact on the cost estimates or life of operations. The unwinding of the discount on provision is shown as a finance cost in the statement of profit and loss.
Contingent liability Is disclosed In the case of:
- There is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or nonoccurence of one or more uncertain future events not wholly within the control of the Company.
- A present obligation arrising from past event, when it is not probable that as outflow of resources will be required to settle the obligation.
- Apresent obligation arises from the past event, when no reliable estimate is possible.
- Apresent obligation arises from the past event, unless the probability of outflow are remote.
- Commitments include the amount of purchase order (net of advances) issued to parties for completion of assets.
- Provisions, contingent liabilities, contingent assets and commitments are reviewed at each balance sheet date.
Onerous contract
A provision for onerous contracts is measured at the present value of the lower expected costs of terminating the contract and the expected cost of continuing with the contract. Before a provision is established, the company recognizes impairment on the assets with the contract.
Contingent assets
Contingent assets are not recognized. However, when the realization of income is virtually certain, then the related asset is no longer a contingent asset, but it is recognized as an asset.
XII Segment accounting and reporting
The companyâs business falls within a primary business segment viz. âIron and Steel Businessâ.
XIII Investment In subsidiaries, joint ventures & associates
Investment in subsidiaries, joint ventures & associates are carried at cost. The cost comprises price paid to acquire investment and directly attributable cost.
On transition to Ind AS, the company has adopted optional exemption under Ind AS-101 to consider carrying value as deemed cost.
XIV Government grant/assistance
Government grant with a condition to purchase, construct to otherwise acquire long term assets are initially measured based on grant receivable under the scheme. Such grant are recognized in the statement of profit & loss on a systematic basis over the useful life of the asset. Amount of benefits receivable in excess of grant income accrued based on usage of the assets is accounted as Government grant received in advance. Changes in estimate are recognized prospectively over the remaining useful of life of assets. Government revenue grants relating to costs are deferred and recognized in the statement of profit and loss over the period necessary to match them with the costs that they intended to compensate.
XV Taxes
Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961 enacted in India. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. Current income tax relating to items recognized directly in equity is recognised in equity and not in the statement of profit and loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Minimum alternate tax
Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. The Company recognizes MAT credit as an asset only to the extent that there is convincing evidence that the Company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. The Company reviews the âMAT credit entitlementâ asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will pay normal tax during the specified period.
Deferred Tax
Deferred tax is recognised on timing differences, being the difference between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantially enacted as at the reporting date. Deferred tax liabilities are recognised for all timing differences. Deferred tax assets in respect of unabsorbed depreciation and carry forward of losses are recognised only if there is virtual certainty that there will be future taxable income available to realise such assets.
Deferred tax assets are recognised timing differences of other items only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. Deferred tax assets and liabilities are offset is such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each Balance Sheet date for their reliability.
XVI Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue from sale of manufactured goods i.e. steel rolled products is recognised in accordance with Ind AS-18 issued by Ministry of Corporate Affairs and measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and exuding taxes or duties collected on behalf of the government.
The specific recognition criteria described below must be met before revenue is recognized:
a) Sale of goods
Revenue from sale of goods is recognized when all the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.
The Company provides cash in kind discounts at fair value to customers. These benefits are passed to customers on achievement of certain target of sales by respective customers.
Consideration received is allocated between the products sold and discount to be allowed to customers. Fair value of the in kind discount is determined by applying principle of Ind AS-113, i.e. at market rate. The fair value of the in kind discount is deferred and recognised as revenue when the in kind discount is issued.
b) Other operating income
Revenue from job work charges, incentives on exports and other government incentives related to operations are recognized in books after due consideration of certainty of utilization / receipt of such incentives.
c) Other income
Interest income on fixed deposit with banks is recognized on time proportion basis taking into account the amount outstanding and the rates applicable.
Dividend income from investments is recognized when the companyâs right to receive payment is established.
Insurance claims are accounted for on the basis of claims admitted / expected to be admitted and to the extent that there is no uncertainty in receiving the claims.
XVII Foreign currency translation I conversion
Financial statements have been presented in Indian Rupees (Rs.), which is the Companyâs functional and presentation currency.
a) Initial recognition
Foreign currency transactions are recorded in initial recognition in the functional currency, using the exchange rate at the date if the transaction.
b) Conversion
Foreign currency monetary items are retranslated using the exchange rate prevailing at the reporting date. Non-monetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction. Non-monetary items, which are measured at fair value or other similar valuation denominated in a foreign currency, are translated using the exchange rate at the date when such value was determined.
c) Exchange differences
Exchange differences arising on settlement / restatement of short-term foreign currency monetary assets and liabilities of the Company are recognized as income or expense in the statement of profit and loss.
d) Borrowings
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a prepayment for liquidity services and amortized over the period of the facility to which it relates.
e) Borrowing costs
Borrowing costs include interest, amortization of ancillary costs incurred and exchange difference arising from foreign currency borrowings to the extent are regarding as an adjustment to the interest cost. Costs in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the Statement of Profit and Loss over the tenure of the loan. Borrowing costs, allocated to and utilized for qualifying assets, pertaining to the period from commencement of activities relating to construction / development of the qualifying assets up to the date of capitalization of such assets is added to the cost of the assets.
Other borrowing costs are expensed in the period in which they are incurred.
XVIII Equity shares
Ordinary shares are classified as equity. Incremental cost net of taxes directly attributable to the issue of new equity shares are reduced from retained earnings, net of taxes.
XIX Financial Instruments
1. Initial recognition
The company recognise financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivable which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities that are not at fair value through profit or loss are added to the fair value on initial recognition.
2. Subsequent measurement Non-derivative financial instruments
a) Financial assets carried at amortized cost
Afinancial asset is subsequently measured at amortized if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
b) Financial assets atfairvalue through other comprehensive income
Afinancial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
c) Financial assets at fair value through profit or loss
Afinancial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss.
d) Financial assets at fair value through profit or loss (FVPL)
A financial asset i.e. equity which is not classified as FVOCL, are subsequently fair valued through profit or loss.
e) Financial guarantee contracts.
Financial guarantee contracts issued by the company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of debt instrument. Financial guarantee contracts are recognised initially as a liability atfairvalue adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently the liability is measured at the higher of the amount of loss allowance determined as per impairment requirement of Ind AS 109 and the amount recognised less cumulative amortisation.
f) Impairment of financial assets
The company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised is recognised as an impairment gain or loss profit or loss.
g) Cash and cash Equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
h) Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest method, for trade and other payables maturing with one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
3. De-recognition
The company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under Ind AS-109. Afinancial liability (ora part of financial liability) is derecognized from the companyâs balance sheet when the obligation specified in the contract is discharged or canceled or expires.
4. Reclassification of financial assets
The company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets.
Changes to the business model are expected to be infrequent. The companyâs senior management determines change in the business model as a result of external or internal changes which are significant to the Companyâs operations. Such changes are evident to external parties. Achange in the business model occurs when the company either begins or ceases to perform an activity that is significant to its operations. If the company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The company does not restate any previously recognised gains, losses (including, impairment gains or losses) or interest.
5. Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
6. Current and non-current classification
The company presents assets and liabilities in the balance sheet based on current / non-current classification. An asset is treated as currentwhenitis:
- Expected to be realized or intended to be sold or consumed in normal operating cycle.
- Held primarily forthe purpose of trading.
- Expected to be realized within twelve months afterthe reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
- All other liabilities are classified as non-current.
- Deferred tax assets and liabilities are classified as non-current and liabilities.
- The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The company has identified twelve months as its operating cycle.
XX Fairvalue measurement
The company measures financial instruments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fairvalue measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principle market for the asset or liability, or
- In the absence of a principle market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset ora liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act is their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and the best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets & liabilities on the basis of the nature, characteristics and the risks of the asset or liability and the level of the fair value hierarchy as explained above.
XXI Critical accounting estimates, assumptions and judgements
In the process of applying the Companyâs accounting policies, management has made the following estimates, assumptions and judgements, which have significant effect on the amounts recognised in the financial statement:
a) Property, plant and equipment
External adviser or internal technical team assess the remaining useful lives and residual value of property, plant and equipment. Management believes that the assigned useful lives and residual value are reasonable.
b) Income taxes
Management judgement is required for the calculation of provision for income taxes and deferred tax assets and liabilities. The Company reviews at each balance sheet date the carrying amount of deferred tax assets. The factors used in estimates may differ from actual outcome which could lead to significant adjustment to the amounts reported in the standalone financial statements.
c) Contingencies
Management judgement is required for estimating the possible outflow of resources, if any, in respect of Contingencies / claim / litigations against the Company as it is possible to predict the outcome of pending matters with accuracy.
d) Allowance for uncollected accounts receivable and advances
Trade receivables do not carry and interest and are stated at their normal value as reduced by appropriate allowances for estimated irrecoverable amounts. Individual trade receivables are written off when management deems them not to be collectible.
Impairment is made on the expected credit losses, which are the present value of the cash shortfall over the expected life of the financial assets.
e) Mine restoration obligation
In determining the fair value of the mine restoration obligation the company uses technical estimates to determine the expected cost to restore the mines and the expected timing of these costs. Discount rates are determined based on the government bond of similartenure.
XXII Recent accounting pronouncement:
In March 2018, the Ministry of corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2018, notifying lndAS-115, âRevenue from Contracts with Customersâamendments to lndAS-107, âFinancial Instrument Disclosuresâand Ind AS-109, âFinancial Instrumentsâ. The amendments are applicable to the Company from 1st April, 2018.
a) Ind AS-115âRevenuefrom Contracts with Customersâ
The new standard for revenue recognition will overhaul the existing revenue recognition standards Ind AS-18 Revenue and Ind AS-11Construction contracts. The new standard provides a control-based revenue recognition model and provides a five step application principle to be followed for revenue recognition :
i. Identification of the contracts with the customer
ii. Identification of the performance obligations in the contract
iii. Determination of the transaction price
iv. Allocation of transaction price to the performance obligations in the contract (as identified in step - ii)
v. Recognition of revenue when performance obligation is satisfied.
b) AppendixâBâtolndAS-21, Foreign currency transactions and advance consideration :
On 28th March, 2018, Ministry of Corporate Affairs (âMCAâ) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix âBâ to lndAS-21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The amendment will come into force from 1st April, 2018.
Mar 31, 2017
Notes forming part of the Financial Statements for the year ended 31st March, 2017
1. Corporate information
Sunflag Iron and Steel Company Limited (the ''Company'') was incorporated in 1984 and is engaged in the business of manufacturing and sale of Special Steel Rolled products. The Company is listed on The National Stock Exchange of India Limited (NSE) and BSE Limited (BSE)
The registered office of the Company is situated at 33, Mount Road, Sadar, Nagpur - 440001, Maharashtra, India.
These financial statements are presented in Indian Rupees ('')
2. Significant accounting policies
I. Basis of preparation
Ministry of Corporate Affairs notified roadmap to implement Indian Accounting Standards (''Ind AS'') notified under the Companies (Indian Accounting Standards) Rules 2015 as amended by the Companies (Indian Accounting Standards) (Amendments) Rules, 2016. As per the said roadmap, the Company is required to apply Ind AS starting from the financial year beginning on or after 1st April, 2016. Accordingly, the financial statements of the Company have been prepared in accordance with Ind AS.
For all the periods up to and including the year ended March 31, 2016, the Company has prepared its financial statements in accordance with the Accounting Standards notified under the Section 133 of the Companies Act 2013, read together with Companies (Accounts) Rules 2014 (Indian GAAP). These financial statements for the year ended 31st March, 2017 are the first the Company has prepared in accordance with Ind AS.
The financial statements have been prepared on historical cost basis, except as stated otherwise.
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or revision to an excising accounting standard requires a change in the accounting policy hitherto in use.
The financial statements are presented in Indian Rupees (Rs.) and all vlaues are rounded to the nearest lacs (NR 00,000), except when otherwise indicated.
II Property, plant and equipment
Property, plant and equipment are stated at original cost net of tax/duty credit availed, less accumulated depreciation and accumulated impairment losses, when significant part of the property, plant and equipment are required to be replaced at intervals, the company derecognized the replaced part and recognized the new parts with its own associated useful life and depreciated accordingly. Likewise when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance cost are recognized in the statement of the profit and loss as incurred. The present value of the expected cost or the decommissioning of the asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.
Capital work in progress includes property plant & equipment under installation/under development as at the balance sheet date.
Capital expenditure on tangible assets for research and development is classified under property and equipment and is depreciated on the same basis as other property, plant and equipment.
Property, plant and equipment eliminated from the financial statement, either on disposal or when retired from the active use. Losses arising in the case of retirement of property, plant and equipment are a recognized in the statement of the profit and loss in the year.
III. Intangible assets
Capital expenditure on purchase and development of identifiable assets without physical substance is recognized as intangible assets in accordance with principles given under Ind AS-38 - Intangible Assets.
The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the assets are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates.
IV. Depreciation and amortization
The assets'' residual values, useful lives and methods of depreciation are reviewed each financial year end and adjusted prospectively, if applicable.
Depreciation on property, plant and equipment is provided over the useful life of assets as specified in schedule II to the Companies Act, 2013 on straight line method except in case of heavy & light vehicles which are depreciated on written down basis.
Property, plant and equipment which are added / disposed-off during the year, depreciation is provided on pro-rata basis with reference to the month of addition / deletion.
No depreciation is charged on free hold land and capital work in progress.
Intangible assets are amortized over its useful life not exceeding six years on straight line basis.
V Impairment of non-financial assets
Property, plant and equipment, intangible assets and assets classified as investment property with finite life are evaluated for recoverability whenever there is any indication that their carrying amounts may not be recoverable. If any such indication exists, the recoverable amount (i.e. higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit (CGU) to which the asset belongs.
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. An impairment loss is recognized in the statement of profit or loss.
An impairment loss is reversed in the statement of profit and loss if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.
Impairment losses on continuing operations, including impairment on inventories are recognized in the statement of profit and loss, except for the assets previously revalued with the revaluation taken to other comprehensive income (OCI). For such assets, the impairment is recognized in OCI up to the amount of any previous revaluation surplus.
Cost incurred in bringing the inventories to their present location and condition. Slow and non-moving material, obsolete, defective inventories are duly provided for and valued at net realizable value. Goods and materials in transit are valued at actual cost incurred up to the date of balance sheet.
Cost is calculated on weighted average basis.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and costs required to make the sale.
The cost of inventories have been computed to include all cost of purchases, cost of conversion and other related.
Materials and supplies held for use in the production of inventories are not written down if the finished product in which they will be used are expected to be sold at above cost.
VII. Cash and cash equivalents
Cash and cash equivalents includes cash on hand and at bank, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value and are held for the purpose of meeting short-term cash commitments.
For the purpose of the statement of cash flows, cash and csh equivalents consists of cash and short term deposits, as defined above, net of outstanding bank overdraft as they are being considered as integral part of the Company''s cash management.
VIII. Leases
For arrangements entered into prior to 1 April 2015, the company has determined whether the arrangement contain lease on the basis of facts and circumstances existing on the date of transition.
Where the Company is the lessee
Operating lease payments are recognized as an operating expense in the statement of profit and loss on a straight-line basis over the lease term.
Where the Company is the less or
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease, costs including depreciation are recognized as an expense in the statement of profit and loss.
IX Employee benefits
Expenses and liabilities in respect of employee benefits are recorded in accordance with Indian Accounting Standard Ind AS-19
- Employee Benefits.
a) Long term benefit
i) Defined benefit plan
The Company''s liabilities on account gratuity is determined at the end of each financial year on the basis of actuarial valuation certificates obtained from registered actuary in accordance with the measurement procedure as per Indian Accounting Standard (INDAS)-19- ''Employee Benefits''. Gratuity liability is funded on year to year basis by contribution gratuity policy taken from Life Insurance Corporation (LIC). The costs of providing benefits under these plans are also determined on the basis of actuarial valuation at each year end. Actuarial gains and losses for defined benefit plans are recognized through OCI in the period in which they occur.
ii) Defined contribution plan
Retirement benefits in the form of provident fund are accrued as per the provisions of the Employees Provident Funds and Miscellaneous Provisions Act, 1952. Contributions payable to the employee''s provident fund in respect of the company are charged to the statement of profit and loss. There are no other than the contribution payable to the provident fund/trust.
Liability towards superannuation is funded in accordance with the scheme with Life Insurance Corporation of India.
b) Short term benefits
Short term employee benefits are recognized as expenses in the statement of profit & loss of the year in which related services are rendered.
Leave salary in respect of accumulated earned leave has been provided for according to the service rules of the Company. X. Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all potential dilutive equity shares.
XI Provisions, contingent liabilities, contingent assets and commitments :
General
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the 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. When the Company expects some or all of provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating to provision presented in the statement of profit & loss net of any reimbursement.
If the effect of the time value of money is material, provisions are disclosed using a current pre-tax rate that relects, when appropriate, the risk specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as finance cost.
Mine restoration or assets retirement obligation
Mine restoration expenditure is provided for in the statement of profit and loss based on present value of estimated expenditure required to be made towards restoration and rehabilitation at the time of vacation of mine. The cost estimates are reviewed periodically and are adjusted to reflect known developments which may have an impact on the cost estimates or life of operations. The unwinding of the discount on provision is shown as a finance cost in the statement of profit and loss.
Contingent liability is disclosed in the case of :
* There is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurence of one or more uncertain future events not wholly within the control of the Company.
* A present obligation arising from past event, when it is not probable that as outflow of resources will be required to settle the obligation.
* A present obligation arises from the past event, when no reliable estimate is possible.
* A present obligation arises from the past event, unless the probability of outflow are remote.
Commitments include the amount of purchase order (net of advances) issued to parties for completion of assets.
Provisions, contingent liabilities, contingent assets and commitments are reviewed at each balance sheet date.
Onerous contract
A provision for onerous contracts is measured at the present value of the lower expected costs of terminating the contract and the expected cost of continuing with the contract. Before a provision is established, the Company recognizes impairment on the assets with the contract.
Contingent assets
Contingent assets are not recognized. However, when the realization of income is virtually certain, then the related asset is no longer a contingent asset, but it is recognized as an asset.
XII. Segment accounting and reporting
The chief operational decision maker monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit and loss and is measured consistently with profit and loss in the financial statements.
The operating segments have been identified on the basis of the nature of products/services.
i. Segment revenue includes sales and other income directly identifiable with/allocable to the segment including inter-segment revenue.
ii. Expenses that are directly identifiable with/allocable to the segments are considered for determining the segment result. Expenses not allocable to segments are included under unallowable expenditure.
iii. Income not allocable to the segments is included in unallowable income.
iv. Segment results includes margin or inter segment and sales which are reduced in arriving at the profit before tax of the Company.
v Segment assets and Liabilities include those directly identifiable with the respective segments. Assets and liabilities not allocable to any segment are classified under unlovable category.
XIII. Investment in joint ventures & associates
Investment in subsidiaries are carried at cost. The cost comprises price paid to acquire investment and directly attributable cost.
On transition to IND AS, the company has adopted optional exemption under IND AS 101 to consider carrying value as deemed cost.
XV. Government grant / assistance
Government grant with a condition to purchase, construct to otherwise acquire long term assets are initially measured based on grant receivable under the scheme. Such grant are recognized in the statement of profit & loss on a systematic basis over the useful life of the asset. Amount of benefits receivable in excess of grant income accrued based on usage of the assets is accounted as Government grant received in advance. Changes in estimate are recognized prospectively over the remaining useful of life of assets. Government revenue grants relating to costs are deferred and recognized in the statement of profit and loss over the period necessary to match them with the costs that they intended to compensate.
XVI. Taxes
Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-Tax Act, 1961 enacted in India. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. Current income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Minimum alternate tax
Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. The Company recognizes MAT credit as an asset only to the extent that there is convincing evidence that the Company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. The Company reviews the "MAT credit entitlement" asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will pay normal tax during the specified period.
Deferred Tax
Deferred tax is recognized on timing differences, being the difference between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantially enacted as at the reporting date. Deferred tax liabilities are recognized for all timing differences. Deferred tax assets in respect of unabsorbed depreciation and carry forward of losses are recognized only if there is virtual certainty that there will be future taxable income available to realize such assets.
Deferred tax assets are recognized timing differences of other items only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realized. Deferred tax assets and liabilities are offset is such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each Balance Sheet date for their reliability.
XVII Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue from sale of manufactured goods i.e. steel rolled products is recognized in accordance with Ind AS 18 issued by Ministry of Corporate Affairs and measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government.
The specific recognition criteria described below must be met before revenue is recognized : i. Sale of goods
Revenue from sale of goods is recognized when all the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.
The Company provides cash in kind discounts at fair value to customers. These benefits are passed to customers on achievement of certain target of sales by respective customers.
Consideration received is allocated between the products sold and discount to be allowed to customers. Fair value of the in kind discount is determined by applying principle of Ind AS 113, i.e. at market rate. The fair value of the in kind discount is deferred and recognized as revenue when the in kind discount is issued.
ii Other operating income
Revenue from job work charges, incentives on exports and other government incentives related to operations are recognized in books after due consideration of certainty of utilization / receipt of such incentives.
iii Other income
Interest income on fixed deposit with banks is recognized on time proportion basis taking into account the amount outstanding and the rates applicable.
Dividend income from investments is recognized when the company''s right to receive payment is established.
Insurance claims are accounted for on the basis of claims admitted / expected to be admitted and to the extent that there is no uncertainty in receiving the claims.
XVIII. Foreign currency translation / conversion
Standalone financial statements have been presented in Indian Rupees (Rs), which is the Company''s functional and presentation currency.
i. Initial recognition
Foreign currency transactions are recorded in initial recognition in the functional currency, using the exchange rate at the date if the transaction.
ii. Conversion
Foreign currency monetary items are retranslated using the exchange rate prevailing at the reporting date. Non-monetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction. Non-monetary items, which are measured at fair value or other similar valuation denominated in a foreign currency, are translated using the exchange rate at the date when such value was determined.
iii. Exchange differences
Exchanged differences arising on settlement / restatement of short-term foreign currency monetary assets and liabilities of the Company are recognized as income or expense in the statement of profit and loss.
iv. Borrowings
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a prepayment for liquidity services and amortized over the period of the facility to which it relates.
v. Borrowing costs
Borrowing costs include interest, amortization of ancillary costs incurred and exchange difference arising from foreign currency borrowings to the extent are regarding as an adjustment to the interest cost. Costs in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the Statement of Profit and Loss over the tenure of the loan. Borrowing costs, allocated to and utilized for qualifying assets, pertaining to the period from commencement of activities relating to construction / development of the qualifying assets up to the date of capitalization of such asset is added to the cost of the assets.
Other borrowing costs are expensed in the period in which they are incurred
XIX. Use of estimates
The preparation of 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 and the results of operations during the reporting period. Although these estimates are based upon management''s best knowledge of current events and actions, 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.
XX Equity shares
Ordinary shares are classified as equity. Incremental cost net of taxes directly attributable to the issue of new equity shares are reduced from retained earnings, net of taxes.
XXI. Standards issued but not yet effective :
In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7, ''Statement of cash flows'' and IFRS 2, ''Share based payment'', respectively. The amendments are applicable to the Company from April 1, 2017
Amendment to Ind AS 7
The amendment to Ind As 7 requires the entities to provides disclosures that enables users of financial statements to evaluate charges in liabilities arising from financing activities, including both charges arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financial activities, to meet the disclosure requirement.
The company is evaluating the requirements of the amendment and the effect on the financial statements is being evaluated. Amendment to Ind AS 102
The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes.
It clarifies that the fair value of cash-settled awards is determined on a basis consistent with that used for equity-settled awards. Market-based performance conditions and non-vesting conditions are reflected in the ''fair-values'', but non-market performance conditions and service vesting conditions are reflected in the estimate of the number of awards expected to vest. Also, the amendment clarifies that if the terms and conditions of a cash-settled share-based payment transaction, the transaction is accounted for as such from the date of the modification. Further, the amendment requires the award that include a net settlement feature in respect of withholding taxes to be treated as equity-settled in its entirety. The cash payment to the tax authority is treated as if it was part of an equity settlement.
XXII. Critical accounting estimates, assumptions and judgments
In the process of applying the Company''s accounting policies, management has made the following estimates, assumptions and judgments, which have significant effect on the amounts recognized in the financial statement :
i. Property, plant and equipment
External adviser or internal technical team assess the remaining useful lives and residual value of property, plant and equipment. Management believes that the assigned useful lives and residual value are reasonable.
ii. Income taxes
Management judgment is required for the calculation of provision for income taxes and deferred tax assets and liabilities. The Company reviews at each balance sheet date the carrying amount of deferred tax assets. The factors used in estimates may differ from actual outcome which could lead to significant adjustment to the amounts reported in the standalone financial statements.
iii. Contingencies
Management judgment is required for estimating the possible outflow of resources, if any, in respect of Contingencies / claim / litigations against the Company as it is possible to predict the outcome of pending matters with accuracy.
iv. Allowance for uncollected accounts receivable and advances
Trade receivables do not carry and interest and are stated at their normal value as reduced by appropriate allowances for estimated irrecoverable amounts. Individual trade receivables are written off when management deems them not to be collectible. Impairment is made on the expected credit losses, which are the present value of the cash shortfall over the expected life of the financial assets.
v. Mine restoration obligation
In determining the fair value of the mine restoration obligation the company uses technical estimates to determine the expected cost to restore the mines and the expected timing of these costs. Discount rates are determined based on the government bond of similar tenure.
XXIII Fair value measurement
The Company measures financial instruments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either :
* In the principle market for the asset or liability, or
* In the absence of a principle market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act is their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and the best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole :
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets & liabilities on the basis of the nature, characteristics and the risks of the asset or liability and the level of the fair value hierarchy as explained above.
XXIV Financial Instruments
i Initial recognition
The company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivable which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities that are not at fair value through profit or loss are added to the fair value on initial recognition.
ii Subsequent measurement Non-derivative financial instruments Financial assets carried at amortized cost-debt
A financial asset is subsequently measured at amortized if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
* Financial assets at fair value through other comprehensive income-debt
A financial asset is subsequently measured at fair value through other comprehensive income it it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
* Financial assets at fair value through profit or loss-debt
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss.
* Financial assets at fair value through profit or loss (FVPL) - equity
A financial asset i.e. equity which is not classified as FVOCL, are subsequently fair valued through profit or loss.
* Financial guarantee contracts
Financial guarantee contracts issued by the company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of debt instrument. Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirement of Ind AS 109 and the amount recognized less cumulative amortization.
* Impairment of Financial Assets
The company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized is recognized as an impairment gain or loss profit or loss.
* Investment in subsidiaries / associates / joint ventures
Investment in subsidiaries/associates/joint venture is carried at cost in the financial statements.
* Cash and cash Equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
* Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest method, for trade and other payables maturing with one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
iii De-recognition
The company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under Ind AS 109. A financial liability (or a part of financial liability) is derecognized from the company''s balance sheet when the obligation specified in the contract is discharged or cancelled or expires.
iv. Reclassification of financial assets
The company determines classification of financial assets and liabilities on intial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the company either begins or ceases to perform an activity that is significant to its operations. If the company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The company does not restate any previously recognized gains, losses (including, impairment gains or losses) or interest.
v. Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
vi. Current and non-current classification
The company presents assets and liabilities in the balance sheet based on current / non-current classification. An asset is treated as current when it is :
* Expected to be realized or intended to be sold or consumed in normal operating cycle.
* Held primarily for the purpose of trading
* Expected to be realized within twelve months after the reporting period, or
* There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The company has identified twelve months as its operating cycle.
During the year the company acquired a 49% stake in Ramesh Sunwire Private Limited on 18th March 2017.
It also applied to ROC Bhubaneshwar for striking off the name of Sunflag Special Steels Limited on 17th April 2017.
Pursuant to the Supreme Court Order dated 24th September, 2014, the Coal Block allocated to the Company with other JV partners in the names of Khappa Coal Company Pvt. Ltd, Madanpur (North) Coal Co. Pvt Ltd, and CT Mining Pvt. Ltd., stands cancelled. Subsequent to the cancellation of previous allocation, the Government of India, Ministry of Law and Justice (Legislative Department) has promulgated. The Coal Mines (Special Provisions) Act, 2015 for implementing the order of Supreme Court and fixation of compensation etc to the prior allottees. But the process of re-allotment and crystallization of compensation amount in respect of the Companyâs above mines, is pending, as the re-auctioning process of these mines are not yet completed.
During the previous year, the company had written off an amount of Rs, 2.45 Lakhs investment in Gujarat State Mining & Resources Corporation Ltd pursuant to that company applied for striking off of its name from ROC, Gujarat. The Company had received a letter dated 03.05.2016 from RoC, Ahmedabad confirming receipt of application.
i. Working capital borrowings are secured by way of hypothecation of Inventories and book debts and further secured by way of second charge ranking pari passu over the fixed assets situated at Village Warthi, Eklari & Sirsi District Bhandara both present and future, subject to prior charges created by the Company in favour of banks for securing term loan. Working capital borrowings are secured by the personal guarantee of Shri Ravi Bhushan Bhardwaj, Chairman of the Company.
ii. The Company has not defaulted in either repayment of principal or interest during the year.
Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. Moreover the Company is in the process of updating its suppliers data, as to the status as a Micro Small & Medium Enterprise with a copy of the Memorandum filed as per the provisions of Section 8 of the Micro Small
& Medium Enterprises Development Act, 2006.
Mar 31, 2016
1. Corporate information
Sunflag Iron and Steel Company Limited was incorporated in 1984 and engaged in the business of manufacturing and sale of Special Steel Rolled products.
2. Significant accounting policies
The significant accounting policies have been predominantly presented below in the order of the Accounting Standards specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014.
2.1 Basis of accounting and preparation of financial statements
The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014. The financial statements have been prepared on accrual basis under the historical cost convention.
2.2 Use of estimates
The preparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognized in the periods in which the results are known / materialize.
2.3 Inventories
a) Raw materials : Valued at weighted average cost
b) Consumables, stores & spares : At or below cost
c) Finished and Semi finished goods produced and purchased by the Company : Carried at lower of cost or net realizable value.
d) Work in process : At cost
e) Any other saleable products of the manufacturing process are considered as finished goods and these are valued at the lower of the estimated net realizable value or cost.
2.4 Cash and cash equivalents (for purposes of 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.
2.5 Cash flow statement
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.
2.6 Tangible fixed assets
Fixed assets are carried at cost less accumulated depreciation and impairment losses, if any. The cost of fixed assets includes interest on borrowings attributable to acquisition of qualifying fixed assets up to the date the asset is ready for its intended use and other incidental expenses incurred up to that date. Subsequent expenditure relating to fixed assets is capitalized only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance. Assets are valued net of CENVAT claimed.
Capital work-in-progress :
Projects under which assets are not ready for their intended use and other capital work-in-progress are carried at cost, comprising direct cost, related incidental expenses and attributable interest.
2.7 Intangible assets
Intangible assets are carried at cost less accumulated amortization and impairment losses, if any. The cost of an intangible asset comprises its purchase price, including any import duties and other taxes (other than those subsequently recoverable from the taxing authorities), and any directly attributable expenditure on making the asset ready for its intended use and net of any trade discounts and rebates. Subsequent expenditure on an intangible asset after its purchase / completion is recognized as an expense when incurred unless it is probable that such expenditure will enable the asset to generate future economic benefits in excess of its originally assessed standards of performance and such expenditure can be measured and attributed to the asset reliably, in which case such expenditure is added to the cost of the asset.
2.8 Depreciation and amortization
Depreciation has been provided on the straight-line method as per the useful lives prescribed in Part - C of Schedule II to the Companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under. In respect of additions / deletions made during the year, depreciation is provided on a pro-rata basis.
a) Leasehold land is amortized over the duration of the lease
b) No depreciation has been provided on the freehold land and Capital Work in Progress
c) Office Equipment costing less than Rupees one Lac is charged to revenue in the year of purchase
d) Depreciation on Heavy and Light Vehicles are provided on Written Down Value method
e) Intangible assets are amortized over their estimated useful life
2.9 Revenue recognition
a) Sale of goods
Sales comprises sale of goods and services, but net of sales returns. In order to comply with the âAccounting Standards Interpretation-14â issued by the Institute of Chartered Accountants of India, gross turnover includes both Sales Tax and Excise Duty. Net turnover excludes Excise Duty. The Sales Tax paid is shown as part of other manufacturing expenses.
b) Other income
i) Interest income is accounted on accrual basis.
ii) Government Incentives Scheme is recognized when there is reasonable assurance that the Company will comply with the terms and conditions attached to them. Accordingly subsidy under such scheme is recognized on the basis of actual / applied / receipt of approval letter from the Government Authority.
iii) Export benefits are accounted for in the year of exports based on eligibility and when there is no uncertainty in receiving the same.
2.10 Foreign currency transactions and translations
a) Initial recognition
Transactions in foreign currencies entered into by the Company are accounted at the exchange rates prevailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction.
b) Measurement of foreign currency monetary items at the Balance Sheet date
Foreign currency monetary items (other than derivative contracts) of the Company outstanding at the Balance Sheet date are restated at the year-end rates.
c) Treatment of exchange differences
Exchange differences arising on settlement / restatement of short-term foreign currency monetary assets and liabilities of the Company are recognized as income or expense in the Statement of Profit and Loss.
2.11 Investments
Long-term investments (excluding investment in properties), are carried individually at cost less provision for diminution, other than temporary, in the value of such investments. Current investments are carried individually, at the lower of cost or fair value.
2.12 Employee benefits Long Term Benefits
a) The company has taken group gratuity policy with the Life Insurance Corporation of India (LIC) for future payment of gratuity. The gratuity liability is determined based on an actuarial valuation performed by LIC.
b) Liability towards superannuation is funded in accordance with the scheme with LIC.
c) Contribution to Provident Fund are accrued as per the provisions of the Employees Provident Funds and Miscellaneous Provisions Act, 1952. Contributions payable to the Employees Provident Fund in respect of the Company are charged to the Statement of Profit and Loss. The Company pays contribution to a recognized Provident Fund.
Short Term Benefits
Leave salary payable in respect of earned leave has been provided for according to the service rules of the Company.
2.13 Borrowing costs
Borrowing costs include interest, amortization of ancillary costs incurred and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Costs in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the Statement of Profit and Loss over the tenure of the loan. Borrowing costs, allocated to and utilized for qualifying assets, pertaining to the period from commencement of activities relating to construction / development of the qualifying asset up to the date of capitalization of such asset is added to the cost of the assets.
2.14 Leases
For assets acquired under operating lease, rentals payable are charged to the Statement of Profit and Loss.
2.15 Earnings per share
Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.
2.16 Taxes on income
Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of the Income Tax Act, 1961.
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 recognized 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 is recognized on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantially enacted as at the reporting date. Deferred tax liabilities are recognized for all timing differences. Deferred tax assets in respect of unabsorbed depreciation and carry forward of losses are recognized only if there is virtual certainty that there will be sufficient future taxable income available to realize such assets. Deferred tax assets are recognized for timing differences of other items only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realized. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each Balance Sheet date for their reliability.
2.17 Research and development expenses
Revenue expenditure pertaining to research and development is charged to the Statement of Profit and Loss.
2.18 Unamortized Expenses
Preliminary expenses and other deferred revenue expenditure including share issue expenses are amortized over a period of five years.
2.19 Joint venture operations
The accounts of the Company reflect its share of the Assets, Liabilities, Income and Expenditure of the Joint Venture Operations which are accounted on the basis of the audited accounts of the Joint Ventures on line-by-line basis with similar items in the Companyâs accounts to the extent of the participating interest of the Company as per the Joint Venture Agreements.
2.20 Impairment of assets
The carrying values of assets / cash generating units at each Balance Sheet date are reviewed for impairment. If any indication of impairment exists, the recoverable amount of such assets is estimated and impairment is recognized , if the carrying amount of these assets exceeds their recoverable amount. The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor. When there is indication that an impairment loss recognized for an asset in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognized in the Statement of Profit and Loss, except in case of revalued assets.
2.21 Provisions and contingencies
A provision is recognized when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed in the Notes.
2.22 Insurance claims
Insurance claims are accounted for on the basis of claims admitted / expected to be admitted and to the extent that there is no uncertainty in receiving the claims.
2.23 Service tax input credit
Service tax input credit is accounted for in the books in the period in which the underlying service received is accounted and when there is no uncertainty in availing / utilizing the credits.
2.24 Excise & Custom Duty
Customs Duty payable on imported items are accounted for when cleared from the bonded warehouse. Excise Duty payable on year end stock of finished goods lying in stock at factory is provided for.
a) Terms / Voting Rights attached to the Equity Shares
The paid up capital of the Company consists of only equity shares of Rs, 10/- each. Every equity shareholder is entitled to one vote per share.
In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion of the number of the Equity shares held by the Shareholders.
@ The Unsecured loans comprising interest free loans given by Promotors. There is no stipulation as to the repayment hence there is no default in repayment during the period.
# The Unsecured loans comprising interest free Sales Tax Loan. The repayment of the Sales Tax Loan is made as per the schedule and there is no default in repayment during the period.
i) Term Loans from Banks are secured by a first mortgage of all the Company''s immovable properties, situated at villages Warthi, Eklari & Sirsi, District Bhandara, both present and future ranking pari passu interse and a first charge by way of hypothecation of all the Company''s movables subject to prior charges created in favour of Company''s bankers on inventories, book debts and other movables for securing the borrowings for working capital requirement.
ii) Term loan of Rs, 40 Crores (outstanding Rs, 16 Crores) borrowed from State Bank of India and State Bank of Bikaner & Jaipur are further secured by Personal Guarantee of Shri Ravi Bhushan Bhardwaj, Vice Chairman of the Company.
iii) The Company has not defaulted in either repayment of principle or interest during the year. i. Working Capital Borrowings are secured by way of hypothecation of inventories and book debts and further secured by way of second charge ranking pari passu over the fixed assets, situated at villages Warthi, Eklari and Sirsi District Bhandara, both present and future, subject to prior charges created by the Company in favour of banks for securing term loans. Working capital borrowings are further secured by the personal guarantee of Shri Ravi Bhushan Bhardwaj, Vice Chairman of the Company.
ii. The Company has not defaulted either in repayment of principle or interest during the year.
a) Pursuant to the Supreme Court Order dated 24th September 2014, the Coal Block allocated to the Company with other JV partners in the names of Khappa Coal Company Private Limited, Madanpur (North) Coal Company Private Limited and CT Mining Private Limited, stands cancelled. Subsequent to the cancellation of previous allocation, the Government of India, Ministry of Law and Justice (Legislative Department) has promulgated "The Coal Mines (Special Provisions) Act, 2015" for implementing the order of Supreme Court and fixation of compensation etc to the prior allottees. But the process of re-allotment and crystallization of compensation amount in respect of the Company''s above mines, is pending as the re-auctioning process of these mines are not yet completed. In view of aforesaid, the Company has not recognized any amount towards diminution in the value of the investments made in the JV companies.
b) During the year the Company has written off an amount of Rs, 2.45 Lacs investment in Gujarat State Mining Resources Corporation Limited pursuant to that Company applied for striking off its name from Registrar of Companies, Gujarat at Ahmadabad (RoC). The Company has received a letter dated 03.05.2016 from RoC, Ahmadabad confirming receipt of application.
27.4 Disclosures required under Section 22 of the Micro, Small and Medium Enterprises Development Act, 2006
The Company is in the process of compelling information from its suppliers in respect of their registration under the Micro, Small and Medium Enterprises Development Act, 2006. However based on the information available with the Company, there were no dues to Micro, Small and Medium Enterprises as on 31st March, 2016 due for a period of more than 45 days. Further no interest during the year under review was paid / is payable in terms of the said Act.
27.5 Disclosure under Regulation 34 of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015
Loans and advances in the nature of loans given to subsidiaries, associates and others and investment in shares of the Company by such Companies. (^ in Lacs)
27.10 Segment information
The Company''s business activity primarily falls within a single business segment i.e., Iron & Steel business, however, the Company also generate power from its Captive Plant, which is entirely consumed in Iron & Steel Manufacturing Unit and no sale to third party has been made. The details of such consumed units are shown below. Hence there are no additional disclosures to be made under Accounting Standard (AS) 17, other than those already provided in the financial statements.
27.11 Employee benefit plans
In view of the mandatory applicability of the revised Accounting Standard on Employee Benefits (AS 15 Revised) to the Company effective 1st January 2007, the additional charges are paid and charged to the statement of Profit & Loss according to the provisions of AS-15 (Revised) as under :
- Employees Provident Fund, the Company has made good the shortfall of interest on fund Rs, 39.00 Lacs (previous year ''Nil'' )
a) The investment details of Gratuity funds are as per the Scheme of Life Insurance Corporation of India (LIC).
b) The investment details of Superannuation funds are as per the Scheme of Life Insurance Corporation of India (LIC) under two plans. Even though these plans are still continuing, Company has stopped making contribution towards One plan i.e., Superannuation Scheme of Workers w.e.f. 01.04.1995 on payment of bonus in the year 1995 as per the terms and conditions of Rules framed at the time of subscribing to the designated policy of LIC. Company was liable as per terms and conditions of the Trust deed to pay contributions only till applicability of provisions of payment of Bonus Act.
Mar 31, 2015
The significant accounting policies have been predominantly presented
below in the order of the Accounting Standards specified under Section
133 of the Companies Act, 2013 read with Rule 7 of the Companies
(Accounts) Rules, 2014.
2.1 Basis of accounting and preparation of financial statements
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards specified under
Section 133 of the Companies Act, 2013 read with Rule 7 of the
Companies (Accounts) Rules, 2014. The financial statements have been
prepared on accrual basis under the historical cost convention.
2.2 Use of estimates
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialise.
2.3 Inventories
a) Raw materials : Valued at weighted average cost
b) Consumables, stores & spares : At or below cost
c) Finished and Semi finished goods produced and purchased by the
Company : Carried at lower of cost or net realisable value.
d) Work in process : At cost
e) Any other saleable products of the manufacturing process are
considered as finished goods and these are valued at the lower of the
estimated net realisable value or cost.
2.4 Cash and cash equivalents (for purposes of 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.
2.5 Cash flow statement
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.
2.6 Tangible fixed assets
Fixed assets are carried at cost less accumulated depreciation and
impairment losses, if any. The cost of fixed assets includes interest
on borrowings attributable to acquisition of qualifying fixed assets up
to the date the asset is ready for its intended use and other
incidental expenses incurred up to that date. Subsequent expenditure
relating to fixed assets is capitalised only if such expenditure
results in an increase in the future benefits from such asset beyond
its previously assessed standard of performance. Assets are valued net
of CENVAT claimed.
Capital work-in-progress :
Projects under which assets are not ready for their intended use and
other capital work-in-progress are carried at cost, comprising direct
cost, related incidental expenses and attributable interest.
2.7 Intangible assets
Intangible assets are carried at cost less accumulated amortisation and
impairment losses, if any. The cost of an intangible asset comprises
its purchase price, including any import duties and other taxes (other
than those subsequently recoverable from the taxing authorities), and
any directly attributable expenditure on making the asset ready for its
intended use and net of any trade discounts and rebates. Subsequent
expenditure on an intangible asset after its purchase / completion is
recognised as an expense when incurred unless it is probable that such
expenditure will enable the asset to generate future economic benefits
in excess of its originally assessed standards of performance and such
expenditure can be measured and attributed to the asset reliably, in
which case such expenditure is added to the cost of the asset.
2.8 Depreciation and amortisation
Depreciation has been provided on the straight-line method as per the
useful lives prescribed in Part - C of Schedule II to the Companies
Act, 2013 except in respect of the following categories of assets, in
whose case the life of the assets has been assessed as under. In
respect of additions / deletions made during the year, depreciation is
provided on a pro-rata basis.
a) Leasehold land is amortised over the duration of the lease
b) No depreciation has been provided on the freehold land and Capital
Work in Progress
c) Office Equipment costing less than Rupees one Lac is charged to
revenue in the year of purchase
d) Depreciation on Heavy and Light Vehicles are provided on Written
Down Value method
e) Intangible assets are amortised over their estimated useful life
2.9 Revenue recognition
a) Sale of goods
Sales comprises sale of goods and services, but net of sales returns.
In order to comply with the "Accounting Standards
Interpretation-14" issued by the Institute of Chartered Accountants
of India, gross turnover includes both Sales Tax and Excise Duty. Net
turnover excludes Excise Duty. The Sales Tax paid is shown as part of
other manufacturing expenses.
b) Other income
i) Interest income is accounted on accrual basis.
ii) Government Incentives Scheme is recognised when there is reasonable
assurance that the Company will comply with the terms and conditions
attached to them. Accordingly subsidy under such scheme is recognised
on the basis of actual / applied / receipt of approval letter from the
Government Authority.
iii) Export benefits are accounted for in the year of exports based on
eligibility and when there is no uncertainty in receiving the same.
2.10 Foreign currency transactions and translations
a) Initial recognition
Transactions in foreign currencies entered into by the Company are
accounted at the exchange rates prevailing on the date of the
transaction or at rates that closely approximate the rate at the date
of the transaction.
b) Measurement of foreign currency monetary items at the Balance Sheet
date
Foreign currency monetary items (other than derivative contracts) of
the Company outstanding at the Balance Sheet date are restated at the
year-end rates.
c) Treatment of exchange differences
Exchange differences arising on settlement / restatement of short-term
foreign currency monetary assets and liabilities of the Company are
recognised as income or expense in the Statement of Profit and Loss.
2.11 Investments
Long-term investments (excluding investment in properties), are carried
individually at cost less provision for diminution, other than
temporary, in the value of such investments. Current investments are
carried individually, at the lower of cost or fair value.
2.12 Employee benefits Long Term Benefits
a) The company has taken group gratuity policy with the Life Insurance
Corporation of India (LIC) for future payment of gratuity. The
gratuity liability is determined based on an actuarial valuation
performed by LIC.
b) Liability towards superannuation is funded in accordance with the
scheme with LIC.
c) Contribution to Provident Fund are accrued as per the provisions of
the Employees Provident Funds and Miscellaneous Provisions Act, 1952.
Contributions payable to the Employees Provident Fund in respect of the
Company are charged to the Statement of Profit and Loss. The Company
pays contribution to a recognized Provident Fund.
Short Term Benefits
Leave salary payable in respect of earned leave has been provided for
according to the service rules of the Company.
2.13 Borrowing costs
Borrowing costs include interest, amortisation of ancillary costs
incurred and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost. Costs in connection with the borrowing of funds to the
extent not directly related to the acquisition of qualifying assets are
charged to the Statement of Profit and Loss over the tenure of the
loan. Borrowing costs, allocated to and utilised for qualifying assets,
pertaining to the period from commencement of activities relating to
construction / development of the qualifying asset upto the date of
capitalisation of such asset is added to the cost of the assets.
2.14 Leases
For assets acquired under operating lease, rentals payable are charged
to the Statement of Profit and Loss.
2.15 Earnings per share
Basic earnings per share is computed by dividing the profit / (loss)
after tax (including the post tax effect of extraordinary items, if
any) by the weighted average number of equity shares outstanding during
the year. Diluted earnings per share is computed by dividing the profit
/ (loss) after tax (including the post tax effect of extraordinary
items, if any) as adjusted for dividend, interest and other charges to
expense or income relating to the dilutive potential equity shares, by
the weighted average number of equity shares considered for deriving
basic earnings per share and the weighted average number of equity
shares which could have been issued on the conversion of all dilutive
potential equity shares.
2.16 Taxes on income
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Act, 1961.
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 is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantially enacted as at the reporting date. Deferred tax
liabilities are recognised for all timing differences. Deferred tax
assets in respect of unabsorbed depreciation and carry forward of
losses are recognised only if there is virtual certainty that there
will be sufficient future taxable income available to realise such
assets. Deferred tax assets are recognised for timing differences of
other items only to the extent that reasonable certainty exists that
sufficient future taxable income will be available against which these
can be realised. Deferred tax assets and liabilities are offset if such
items relate to taxes on income levied by the same governing tax laws
and the Company has a legally enforceable right for such set off.
Deferred tax assets are reviewed at each Balance Sheet date for their
realisability.
2.17 Research and development expenses
Revenue expenditure pertaining to research and development is charged
to the Statement of Profit and Loss.
2.18 Unamortised Expenses
Preliminary expenses and other deferred revenue expenditure including
share issue expenses are amortised over a period of five years.
2.19 Joint venture operations
The accounts of the Company reflect its share of the Assets,
Liabilities, Income and Expenditure of the Joint Venture Operations
which are accounted on the basis of the audited accounts of the Joint
Ventures on line-by-line basis with similar items in the Company's
accounts to the extent of the participating interest of the Company as
per the Joint Venture Agreements.
2.20 Impairment of assets
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment. If any indication of impairment
exists, the recoverable amount of such assets is estimated and
impairment is recognised, if the carrying amount of these assets
exceeds their recoverable amount. The recoverable amount is the greater
of the net selling price and their value in use. Value in use is
arrived at by discounting the future cash flows to their present value
based on an appropriate discount factor. When there is indication that
an impairment loss recognised for an asset in earlier accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognised in the Statement of Profit and Loss,
except in case of revalued assets.
2.21 Provisions and contingencies
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
Balance Sheet date. These are reviewed at each Balance Sheet date and
adjusted to reflect the current best estimates. Contingent liabilities
are disclosed in the Notes.
2.22 Insurance claims
Insurance claims are accounted for on the basis of claims admitted /
expected to be admitted and to the extent that there is no uncertainty
in receiving the claims.
2.23 Service tax input credit
Service tax input credit is accounted for in the books in the period in
which the underlying service received is accounted and when there is no
uncertainty in availing / utilising the credits.
2.24 Excise & Custom Duty
Customs Duty payable on imported items are accounted for when cleared
from the bonded warehouse. Excise Duty payable on year end stock of
finished goods lying in stock at factory is provided for.
Mar 31, 2013
The significant accounting policies have been predominantly presented
below in the order of the Accounting Standards notified under the
Companies (Accounting Standards) Rules, 2006 (as amended).
1.1 Basis of accounting and preparation of financial statements
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
the Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on accrual basis under the historical
cost convention.
1.2 Use of estimates
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialise.
1.3 Inventories
a) Raw materials : Valued at weighted average cost
b) Consumables, stores & spares : At or below cost
c) Finished and Semi finished goods produced and purchased by the
Company : Carried at lower of cost or net realisable value
d) Work in process : At cost
e) Any other saleable products of the manufacturing process are
considered as finished goods and these are valued at the lower of the
estimated net realisable value or cost
1.4 Cash and cash equivalents (for purposes of 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.
1.5 Cash flow statement
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 fixed assets
Fixed assets are carried at cost less accumulated depreciation and
impairment losses, if any. The cost of fixed assets includes interest
on borrowings attributable to acquisition of qualifying fixed assets up
to the date the asset is ready for its intended use and other
incidental expenses incurred up to that date. Subsequent expenditure
relating to fixed assets is capitalised only if such expenditure
results in an increase in the future benefits from such asset beyond
its previously assessed standard of performance. Assets are valued net
of CENVAT claimed.
Capital work-in-progress :
Projects under which assets are not ready for their intended use and
other capital work-in-progress are carried at cost, comprising direct
cost, related incidental expenses and attributable interest.
1.7 Intangible assets
Intangible assets are carried at cost less accumulated amortisation and
impairment losses, if any. The cost of an intangible asset comprises
its purchase price, including any import duties and other taxes (other
than those subsequently recoverable from the taxing authorities), and
any directly attributable expenditure on making the asset ready for its
intended use and net of any trade discounts and rebates. Subsequent
expenditure on an intangible asset after its purchase / completion is
recognised as an expense when incurred unless it is probable that such
expenditure will enable the asset to generate future economic benefits
in excess of its originally assessed standards of performance and such
expenditure can be measured and attributed to the asset reliably, in
which case such expenditure is added to the cost of the asset.
1.8 Depreciation and amortisation
Depreciation has been provided on the straight-line method as per the
rates prescribed in Schedule XIV to the Companies Act, 1956 except in
respect of the following categories of assets, in whose case the life
of the assets has been assessed as under. In respect of
additions/deletions made during the year, depreciation is provided on a
pro-rata basis.
- Assets under Plant, Machinery and related buildings have been
depreciated over a period of 14 years
- Leasehold land is amortised over the duration of the lease
- No depreciation has been provided on the freehold land and Capital
Work-in Progress
- Office Equipment costing less than Rupees one Lac is charged to
revenue in the year of purchase
- Depreciation on Heavy and Light Vehicles are provided on Written Down
Value method
- Intangible assets are amortised over their estimated useful life
1.9 Revenue recognition
a) Sale of goods
Sales comprises sale of goods and services, but net of sales returns.
In order to comply with the "Accounting Standards Interpretation-14"
issued by the Institute of Chartered Accountants of India, gross
turnover includes both Sales Tax and Excise Duty. Net turnover excludes
Excise Duty. The Sales Tax paid is shown as part of other manufacturing
expenses.
b) Other income
i. Interest income is accounted on accrual basis.
ii. Government Incentives Scheme is recognised when there is reasonable
assurance that the Company will comply with the terms and conditions
attached to them. Accordingly subsidy under such scheme is recognised
on the basis of actual /applied /receipt of approval letter from the
Government Authority.
iii. Export benefits are accounted for in the year of exports based on
eligibility and when there is no uncertainty in receiving the same.
1.10 Foreign currency transactions and translations
a) Initial recognition
Transactions in foreign currencies entered into by the Company are
accounted at the exchange rates prevailing on the date of the
transaction or at rates that closely approximate the rate at the date
of the transaction.
b) Measurement of foreign currency monetary items at the Balance Sheet
date
Foreign currency monetary items (other than derivative contracts) of
the Company outstanding at the Balance Sheet date are restated at the
year-end rates.
c) Treatment of exchange differences
Exchange differences arising on settlement/restatement of short-term
foreign currency monetary assets and liabilities of the Company are
recognised as income or expense in the Statement of Profit and Loss.
1.11 Investments
Long-term investments (excluding investment in properties), are carried
individually at cost less provision for diminution, other than
temporary, in the value of such investments. Current investments are
carried individually, at the lower of cost or fair value.
1.12 Employee Benefits Long Term Benefits
a) The Company has taken group gratuity policy with the Life Insurance
Corporation of India (LIC) for future payment of gratuity. The gratuity
liability is determined based on an actuarial valuation performed by
LIC.
b) Liability towards superannuation is funded in accordance with the
scheme with LIC.
c) Contribution to Provident Fund are accrued as per the provisions of
the Employees Provident Funds and Miscellaneous Provisions Act, 1952.
Contributions payable to the Employees Provident Fund in respect of the
Company are charged to the Statement of Profit and Loss. The Company
pays contribution to a recognised Provident Fund.
Short Term Benefits
Leave salary payable in respect of earned leave has been provided for
according to the service rules of the Company.
1.13 Borrowing Costs
Borrowing costs include interest, amortisation of ancillary costs
incurred and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost. Costs in connection with the borrowing of funds to the
extent not directly related to the acquisition of qualifying assets are
charged to the Statement of Profit and Loss over the tenure of the
loan. Borrowing costs, allocated to and utilised for qualifying assets,
pertaining to the period from commencement of activities relating to
construction / development of the qualifying asset upto the date of
capitalisation of such asset is added to the cost of the assets.
1.14 Leases
For assets acquired under operating lease, rentals payable are charged
to the Statement of Profit and Loss.
1.15 Earnings per share
Basic earnings per share is computed by dividing the profit/(loss)
after tax (including the post tax effect of extraordinary items, if
any) by the weighted average number of equity shares outstanding during
the year. Diluted earnings per share is computed by dividing the profit
/ (loss) after tax (including the post tax effect of extraordinary
items, if any) as adjusted for dividend, interest and other charges to
expense or income relating to the dilutive potential equity shares, by
the weighted average number of equity shares considered for deriving
basic earnings per share and the weighted average number of equity
shares which could have been issued on the conversion of all dilutive
potential equity shares.
1.16 Taxes on Income
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Ta x
Act, 1961.
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 is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantially enacted as at the reporting date. Deferred tax
liabilities are recognised for all timing differences. Deferred tax
assets in respect of unabsorbed depreciation and carry forward of
losses are recognised only if there is virtual certainty that there
will be sufficient future taxable income available to realise such
assets. Deferred tax assets are recognised for timing differences of
other items only to the extent that reasonable certainty exists that
sufficient future taxable income will be available against which these
can be realised. Deferred tax assets and liabilities are offset if such
items relate to taxes on income levied by the same governing tax laws
and the Company has a legally enforceable right for such set off.
Deferred tax assets are reviewed at each Balance Sheet date for their
realisability.
1.17 Research and development expenses
Revenue expenditure pertaining to research and development is charged
to the Statement of Profit and Loss.
1.18 Unamortised Expenses
Preliminary expenses and other deferred revenue expenditure including
share issue expenses are amortised over a period of five years.
1.19 Joint Venture operations
The accounts of the Company reflect its share of the Assets,
Liabilities, Income and Expenditure of the Joint Venture Operations
which are accounted on the basis of the audited accounts of the Joint
Ventures on line-by-line basis with similar items in the Company''s
accounts to the extent of the participating interest of the Company as
per the Joint Venture Agreements.
1.20 Impairment of assets
The carrying values of assets /cash generating units at each Balance
Sheet date are reviewed for impairment. If any indication of impairment
exists, the recoverable amount of such assets is estimated and
impairment is recognised, if the carrying amount of these assets
exceeds their recoverable amount. The recoverable amount is the greater
of the net selling price and their value in use. Value in use is
arrived at by discounting the future cash flows to their present value
based on an appropriate discount factor. When there is indication that
an impairment loss recognised for an asset in earlier accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognised in the Statement of Profit and Loss,
except in case of revalued assets.
1.21 Provisions and contingencies
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
Balance Sheet date. These are reviewed at each Balance Sheet date and
adjusted to reflect the current best estimates. Contingent liabilities
are disclosed in the Notes.
1.22 Insurance claims
Insurance claims are accounted for on the basis of claims admitted /
expected to be admitted and to the extent that there is no uncertainty
in receiving the claims.
1.23 Service tax input credit
Service tax input credit is accounted for in the books in the period in
which the underlying service received is accounted and when there is no
uncertainty in availing / utilising the credits.
1.24 Excise & Custom Duty
Customs Duty payable on imported items are accounted for when cleared
from the bonded warehouse. Excise Duty payable on year end stock of
finished goods lying in stock at factory is provided for.
Mar 31, 2012
The significant accounting policies have been predominantly presented
below in the order of the Accounting Standards notified under the
Companies (Accounting Standards) Rules, 2006 (as amended).
1.1 Basis of accounting and preparation of financial statements
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
the Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on accrual basis under the historical
cost convention.
1.2 Use of estimates
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialise.
1.3 Inventories
a) Raw materials : Valued at weighted average cost
b) Consumables, stores & spares : At or below cost
c) Finished and Semi finished goods produced and purchased by the
Company : Carried at lower of cost or net realisable value
d) Work in process : At cost
e) Any other saleable products of the manufacturing process are
considered as finished goods and these are valued at the lower of the
estimated net realisable value or cost
1.4 Cash and cash equivalents (for purposes of 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.
1.5 Cash flow statement
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 fixed assets
Fixed assets are carried at cost less accumulated depreciation and
impairment losses, if any. The cost of fixed assets includes interest
on borrowings attributable to acquisition of qualifying fixed assets up
to the date the asset is ready for its intended use and other
incidental expenses incurred up to that date. Subsequent expenditure
relating to fixed assets is capitalised only if such expenditure
results in an increase in the future benefits from such asset beyond
its previously assessed standard of performance. Assets are valued net
of CENVAT claimed.
Capital work-in-progress :
Projects under which assets are not ready for their intended use and
other capital work-in-progress are carried at cost, comprising direct
cost, related incidental expenses and attributable interest.
1.7 Intangible assets
Intangible assets are carried at cost less accumulated amortisation and
impairment losses, if any. The cost of an intangible asset comprises
its purchase price, including any import duties and other taxes (other
than those subsequently recoverable from the taxing authorities), and
any directly attributable expenditure on making the asset ready for its
intended use and net of any trade discounts and rebates. Subsequent
expenditure on an intangible asset after its purchase / completion is
recognised as an expense when incurred unless it is probable that such
expenditure will enable the asset to generate future economic benefits
in excess of its originally assessed standards of performance and such
expenditure can be measured and attributed to the asset reliably, in
which case such expenditure is added to the cost of the asset.
1.8 Depreciation and amortisation
Depreciation has been provided on the straight-line method as per the
rates prescribed in Schedule XIV to the Companies Act, 1956 except in
respect of the following categories of assets, in whose case the life
of the assets has been assessed as under. In respect of additions /
deletions made during the year, depreciation is provided on a pro-rata
basis.
- Assets under Plant, Machinery and related buildings have been
depreciated over a period of 14 years
- Leasehold land is amortised over the duration of the lease
- No depreciation has been provided on the freehold land and Capital
Work-in Progress
- Office Equipment costing less than Rupees one Lac is charged to
revenue in the year of purchase
- Depreciation on Heavy and Light Vehicles are provided on Written
Down Value method
- Intangible assets are amortised over their estimated useful life
1.9 Revenue recognition
a) Sale of goods
Sales comprises sale of goods and services, but net of sales returns.
In order to comply with the "Accounting Standards Interpretation-14"
issued by the Institute of Chartered Accountants of India, gross
turnover includes both Sales Tax and Excise Duty. Net turnover excludes
Excise Duty. The Sales Tax paid is shown as part of other manufacturing
expenses.
b) Other income
i. Interest income is accounted on accrual basis.
ii. Government Incentives Scheme is recognised when there is
reasonable assurance that the Company will comply with the terms and
conditions attached to them. Accordingly subsidy under such scheme is
recognised on the basis of actual / applied / receipt of approval
letter from the Government Authority.
iii. Export benefits are accounted for in the year of exports based on
eligibility and when there is no uncertainty in receiving the same.
1.10 Foreign currency transactions and translations
a) Initial recognition
Transactions in foreign currencies entered into by the Company are
accounted at the exchange rates prevailing on the date of the
transaction or at rates that closely approximate the rate at the date
of the transaction.
b) Measurement of foreign currency monetary items at the Balance Sheet
date
Foreign currency monetary items (other than derivative contracts) of
the Company outstanding at the Balance Sheet date are restated at the
year-end rates.
c) Treatment of exchange differences
Exchange differences arising on settlement / restatement of short-term
foreign currency monetary assets and liabilities of the Company are
recognised as income or expense in the Statement of Profit and Loss.
1.11 Investments
Long-term investments (excluding investment properties), are carried
individually at cost less provision for diminution, other than
temporary, in the value of such investments. Current investments are
carried individually, at the lower of cost or fair value.
1.12 Employee Benefits Long Term Benefits
a) The company has taken group gratuity policy with the Life Insurance
Corporation of India (LIC) for future payment of gratuity. The gratuity
liability is determined based on an actuarial valuation performed by
LIC.
b) Liability towards superannuation is funded in accordance with the
scheme with LIC.
c) Contribution to Provident Fund are accrued as per the provisions of
the Employees Provident Funds and Miscellaneous Provisions Act, 1952.
Contributions payable to the Employees Provident Fund in respect of the
Company are charged to the Statement of Profit and Loss. The Company
pays contribution to a recognised Provident Fund.
Short Term Benefits
Leave salary payable in respect of earned leave has been provided for
according to the service rules of the Company.
1.13 Borrowing Costs
Borrowing costs include interest, amortisation of ancillary costs
incurred and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost. Costs in connection with the borrowing of funds to the
extent not directly related to the acquisition of qualifying assets are
charged to the Statement of Profit and Loss over the tenure of the
loan. Borrowing costs, allocated to and utilised for qualifying assets,
pertaining to the period from commencement of activities relating to
construction / development of the qualifying asset upto the date of
capitalisation of such asset is added to the cost of the assets.
1.14 Leases
For assets acquired under operating lease, rentals payable are charged
to the Statement of Profit and Loss.
1.15 Earnings per share
Basic earnings per share is computed by dividing the profit / (loss)
after tax (including the post tax effect of extraordinary items, if
any) by the weighted average number of equity shares outstanding during
the year. Diluted earnings per share is computed by dividing the profit
/ (loss) after tax (including the post tax effect of extraordinary
items, if any) as adjusted for dividend, interest and other charges to
expense or income relating to the dilutive potential equity shares, by
the weighted average number of equity shares considered for deriving
basic earnings per share and the weighted average number of equity
shares which could have been issued on the conversion of all dilutive
potential equity shares.
1.16 Taxes on Income
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Act, 1961.
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 is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantially enacted as at the reporting date. Deferred tax
liabilities are recognised for all timing differences. Deferred tax
assets in respect of unabsorbed depreciation and carry forward of
losses are recognised only if there is virtual certainty that there
will be sufficient future taxable income available to realise such
assets. Deferred tax assets are recognised for timing differences of
other items only to the extent that reasonable certainty exists that
sufficient future taxable income will be available against which these
can be realised. Deferred tax assets and liabilities are offset if such
items relate to taxes on income levied by the same governing tax laws
and the Company has a legally enforceable right for such set off.
Deferred tax assets are reviewed at each Balance Sheet date for their
realisability.
1.17 Research and development expenses
Revenue expenditure pertaining to research and development is charged
to the Statement of Profit and Loss.
1.18 Unamortised Expenses
Preliminary expenses and other deferred revenue expenditure including
share issue expenses are amortised over a period of five years.
1.19 Joint venture operations
The accounts of the Company reflect its share of the Assets,
Liabilities, Income and Expenditure of the Joint Venture Operations
which are accounted on the basis of the audited accounts of the Joint
Ventures on line-by-line basis with similar items in the Company's
accounts to the extent of the participating interest of the Company as
per the Joint Venture Agreements.
1.20 Impairment of assets
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment. If any indication of impairment
exists, the recoverable amount of such assets is estimated and
impairment is recognised, if the carrying amount of these assets
exceeds their recoverable amount. The recoverable amount is the greater
of the net selling price and their value in use. Value in use is
arrived at by discounting the future cash flows to their present value
based on an appropriate discount factor. When there is indication that
an impairment loss recognised for an asset in earlier accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognised in the Statement of Profit and Loss,
except in case of revalued assets.
1.21 Provisions and contingencies
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
Balance Sheet date. These are reviewed at each Balance Sheet date and
adjusted to reflect the current best estimates. Contingent liabilities
are disclosed in the Notes.
1.22 Insurance claims
Insurance claims are accounted for on the basis of claims admitted /
expected to be admitted and to the extent that there is no uncertainty
in receiving the claims.
1.23 Service tax input credit
Service tax input credit is accounted for in the books in the period in
which the underlying service received is accounted and when there is no
uncertainty in availing / utilising the credits.
1.24 Excise & Custom Duty
Customs Duty payable on imported items are accounted for when cleared
from the bonded warehouse. Excise Duty payable on year end stock of
finished goods lying in stock at factory is provided for.
Mar 31, 2011
1. Basis of Preparation of Accounts
The financial statements have been prepared under the historical cost
convention and in accordance with applicable Accounting Standards
issued by the Institute of Chartered Accountants of India and the
relevant provisions of the Companies Act, 1956, except export
incentives which has been accounted for on cash basis as stated below.
2. Fixed Assets and Depreciation
i) Fixed assets are valued at their cost of acquisition or construction
and include interest and other costs incurred till the asset is put to
use, less depreciation accumulated to date. Assets are valued net of
CENVAT claimed. Depreciation has been charged as under:
a. Freehold Land : Nil
b. Leasehold Land : Over the period of the lease
c. Heavy & Light Vehicles : On reducing balance method
d. All other assets are depreciated as per the rates and manner
specified in Schedule XIV of the Companies Act, 1956. In respect of
additions / deletions made during the year, depreciation is provided on
a pro-rata basis. The Company has decided to depreciate Plant &
Machinery and related buildings over a period of fourteen years.
Accordingly, Depreciation is provided on these assets. No depreciation
is provided on Capital Work in Progress.
ii) Expenses on development of Belgaon Mine are accounted for as
development expenditure.
3. Investments
Long Term Investments are stated at cost less provision for diminution
other than temporary, if any, in value of such investments. Current
investments are carried at lower of cost or fair value.
4. Deferred Revenue Expenditure
Preliminary expenses and other deferred revenue expenditure including
share issue expenses are amortised over a period of five years.
5. Foreign Currency Transactions
Transactions in foreign currencies are accounted for at the rate
prevailing on the date of transaction. Assets and liabilities
outstanding at the year end are translated at the rate prevailing as on
the Balance Sheet date. Any exchange gain or loss is accounted for in
the profit and loss account.
6. Inventories
a. Raw Materials: Valued at weighted average cost.
b. Consumables, stores & spares: At or below cost.
c. Finished and Semi finished goods produced and purchased by the
Company : Carried at lower of cost or market value.
d. Work in process : At cost.
e. Any other saleable products of the manufacturing process are
considered as finished goods and these are valued at the lower of the
estimated net realisable value or cost.
7. Excise and Custom Duty
Customs Duty payable on imported items are accounted for when cleared
from the bonded warehouse. Excise Duty payable on year end stock of
finished goods lying in stock at factory is provided for.
8. Insurance Claims
Insurance claims are accounted for on accrual basis and any unrealised
year end claims are accounted for on an estimated basis.
9. Employee Benefits
a. The Company has taken group gratuity policy with the Life Insurance
Corporation of India (LIC) for future payment of gratuity. The gratuity
liability is determined based on an actuarial valuation performed by
LIC.
b. Liability towards superannuation is funded in accordance with the
scheme with LIC.
c. Contribution to Provident Fund are accrued as per the provisions of
the Employees Provident Funds and Miscellaneous Provisions Act, 1952.
Contributions payable to the Employees Provident Fund in respect of the
Company are charged to the profit and loss account. The Company pays
contribution to a recognised Provident Fund.
d. Leave salary payable in respect of earned leave has been provided
for according to the new service rules of the Company.
10. Research & Development Expenses
Research & Development expenses are charged to revenue under the
respective heads of accounts in the year in which they are incurred.
11. Revenue Recognition
Sales comprises sale of goods and services, but net of sales returns.
In order to comply with the Accounting Standards Interpretation
(ASI-14) issued by the Institute of Chartered Accountants of India,
gross turnover includes both Sales Tax and Excise Duty. Net turnover
excludes Excise Duty. The Sales Tax paid is shown as part of other
manufacturing expenses.
12. Deferred Sales Tax
a. In view of expiry of Eligibility period under Package Scheme of
Incentive - 1993 (PSI - 1993), the Company now accounts for this
liability at its actual value.
b. The Company is eligible for the sales tax exemption owing to its
investments in Capital Assets and the State Industrial Policy under
Industrial Promotion Subsidy (Mega Project). Accordingly the subsidy
under the said scheme is recognised on the basis of actual receipt /
applied / sanction letter from the Government Authority.
13. Export Benefits
Export benefits are recognised as and when utilised or sold.
14. Impairment of Assets
Specified assets are reviewed for impairment wherever events or changes
in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount for which
the asset's carrying amount exceeds its recoverable amount being the
higher of the asset's net selling price and its value in use. Value in
use is based on the present value of the estimated future cash flows
relating to the asset. For the purpose of assessing impairment, assets
are grouped at the lowest level for which, there are separately
identifiable cash flows (i.e. cash generating units).
15. Borrowing Costs
Borrowing costs relating to the acquisition / construction of
qualifying assets are capitalised until the time all substantial
activities necessary to prepare the qualifying assets for their
intended use are complete and commercially stabilised. A qualifying
asset is one that necessarily takes substantial period of time to get
ready for its intended use. All other borrowing costs are charged to
revenue.
16. Deferred Tax
Deferred tax is recognised, subject to consideration of prudence, on
timing difference, 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.
17. Leases
For assets acquired under operating lease, rentals payable are charged
to the Profit & Loss account.
Significant Accounting Policies and Notes forming part of the Accounts
for the year ended 31st March 2011
Mar 31, 2010
1. Basis of Preparation of Accounts
The financial statements have been prepared under the historical cost
convention and in accordance with applicable Accounting Standards
issued by the Institute of Chartered Accountants of India and the
relevant provisions of the Companies Act, 1956, except export
incentives which has been accounted for on cash basis as stated below.
2. Fixed Assets and Depreciation
i) Fixed assets are valued at their cost of acquisition or construction
and include interest and other costs incurred till the asset is put to
use, less depreciation accumulated to date. Assets are valued net of
CENVAT claimed. Depreciation has been charged as under:
a. Freehold Land : Nil
b. Leasehold Land : Over the period of the lease
c. Heavy & Light Vehicles : On reducing balance method
d. All other assets are depreciated as per the rates and manner
specified in Schedule XIV of the Companies Act, 1956. In respect of
additions/deletions made during the year, depreciation is provided on a
pro-rata basis. The Company has decided to depreciate Plant & Machinery
and related buildings over a period of fourteen years. Accordingly
Depreciation is provided on these assets. No depreciation is provided
on Capital Work in Progress.
ii) Expenses on development of Belgaon Mine are accounted for as
Development expenditure.
3. Investments
Investments are stated at cost.
4. Deferred Revenue Expenditure
Preliminary expenses and other deferred revenue expenditure including
share issue expenses are amortised over a period of five years.
5. Foreign Currency Transactions
Transactions in foreign currencies are accounted for at the rate
prevailing on the date of transaction. Assets and liabilities
outstanding at the year end are translated at the rate prevailing as on
the Balance Sheet date. Any exchange gain or loss is accounted for in
the profit and loss account.
6. Inventories
a. Raw Materials: Valued at weighted average cost.
b. Consumables, stores & spares: At or below cost.
c. Finished and Semi finished goods produced and purchased by the
Company : Carried at lower of cost or market value.
d. Work in process : At cost.
e. Any other saleable products of the manufacturing process are
considered as finished goods and these are valued at the lower of the
estimated net realisable value or cost.
7. Excise and Custom Duty
Customs Duty payable on imported items are accounted for when cleared
from the bonded warehouse. Excise Duty payable on year end stock of
finished goods lying in stock at factory is provided for.
8. Insurance Claims
Insurance claims are accounted for on accrual basis and any unrealised
year end claims are accounted for on an estimated basis.
9. Employee Benefits
a. The company has taken group gratuity policy with the Life Insurance
Corporation of India (LIC) for future payment of gratuity. The gratuity
liability is determined based on an actuarial valuation performed by
LIC.
b. Liability towards superannuation is funded in accordance with the
scheme with LIC.
c. Contribution to Provident Fund are accrued as per the provisions of
the Employees Provident Funds and Miscellaneous Provisions Act, 1952.
Contributions payable to the Employees Provident Fund in respect of the
Company are charged to the profit and loss account. The Company pays
contribution to a recognised Provident Fund.
d. Leave salary payable in respect of earned leave has been provided
for according to the new service rules of the Company.
10. Research & Development Expenses
Research & Development expenses are charged to revenue under the
respective heads of accounts in the year in which they are incurred.
11. Revenue Recognition
Sales comprises sale of goods and services, but net of sales returns.
In order to comply with the Accounting Standards Interpretation
(ASI-14) issued by the Institute of Chartered Accountants of India,
gross turnover includes both Sales Tax and Excise Duty. Net turnover
excludes Excise Duty. The Sales Tax paid is shown as part of other
manufacturing expenses.
12. Deferred Sales Tax
In view of expiry of Eligibility period under Package Scheme of
Incentive - 1993 (PSI - 1993), the Company now accounts for this
liability at its actual value instead of determining the same on a net
present value basis.
13. Export Benefits
Export benefits are recognised as and when utilised or sold.
14. Impairment of Assets
Specified assets are reviewed for impairment wherever events or changes
in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount for which
the assets carrying amount exceeds its recoverable amount being the
higher of the assets net selling price and its value in use. Value in
use is based on the present value of the estimated future cash flows
relating to the asset. For the purpose of assessing impairment, assets
are grouped at the lowest level for which, there are separately
identifiable cash flows (i.e. cash generating units)
15. Borrowing Costs
Borrowing costs relating to the acquisition / construction of
qualifying assets are capitalised until the time all substantial
activities necessary to prepare the qualifying assets for their
intended use are complete and commercially stabilised. A qualifying
asset is one that necessarily takes substantial period of time to get
ready for its intended use. All other borrowing costs are charged to
revenue.
16. Deferred Tax
Deferred tax is recognised, subject to consideration of prudence, on
timing difference, 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.
17. Leases
For assets acquired under operating lease, rentals payable are charged
to the Profit & Loss account.
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