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Adhunik Metaliks

BSE: 532727|NSE: ADHUNIK|ISIN: INE400H01019|SECTOR: Steel - Sponge Iron
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« Jun 14
Accounting Policy Year : Jun '15
1.  CORPORATE INFORMATION
 
 Adhunik Metaliks Limited (the Company) is a public limited company
 domiciled in India and incorporated under the provisions of the
 Companies Act, 1956. Its equity shares are listed on stock exchanges in
 India. The Company is primarily engaged in the manufacture and sale of
 steel, both alloy & non alloy.
 
 A) Basis of Preparation
 
 The financial statements of the company have been prepared in
 accordance with the generally accepted accounting principles in India
 (Indian GAAP). The company has prepared these financial statements to
 comply in all material respects with the accounting standards notified
 under section 133 of the Companies Act, 2013 read together with
 paragraph 7 of the Companies (Accounts) Rules 2014. The financial
 statements have been prepared on an accrual basis and under the
 historical cost convention, except in case of fixed assets for which
 revaluation is carried out. Further, insurance & other claims, on the
 ground of prudence or uncertainty in realization, are accounted for as
 and when accepted / received. The accounting policies adopted in the
 preparation of financial statements are consistent with those of
 previous year, except for the change in accounting policy explained
 below.
 
 Change in accounting policy
 
 Depreciation on fixed assets:
 
 Till the year ended June 30, 2014, Schedule XIV to the Companies Act,
 1956, prescribed requirements concerning depreciation of fixed assets.
 From the current year, Schedule XIV has been replaced by Schedule II to
 the Companies Act, 2013. The applicability of Schedule II has resulted
 in the following changes related to depreciation of fixed assets.
 Unless stated otherwise, the impact mentioned for the current year is
 likely to hold good for future years also.
 
 (a) Useful life/ depreciation rates
 
 Till the year ended June 30, 2014, depreciation rates prescribed under
 Schedule XIV were treated as minimum rates and the company was not
 allowed to charge depreciation at lower rates even if such lower rates
 were justified by the estimated useful life of the asset.  Schedule II
 to the Companies Act, 2013 prescribes useful life for fixed assets
 which, in many cases, are different from life prescribed under the
 erstwhile Schedule XIV. However, Schedule II allows companies to use
 higher/ lower useful life and residual values if such useful life and
 residual values can be technically supported and justification for
 difference is disclosed in the financial statements.
 
 Considering the applicability of Schedule II, the management has
 re-estimated useful life and residual values of all its fixed assets.
 The management believes that depreciation rates currently used fairly
 reflect its estimate of the useful life and residual values of fixed
 assets, though these rates in certain cases are different from life
 prescribed under Schedule II.
 
 Had the company continued its earlier policy of charging depreciation
 based on earlier useful life / life determined by Schedule XIV of the
 Companies Act, 1956 rates as the case may be, loss for the current year
 would have been higher by Rs, 1,206.03 lacs.
 
 b) Depreciation on assets costing less than Rs, 5,000/-:
 
 Till year ended June 30, 2014, to comply with the requirements of
 Schedule XIV to the Companies Act, 1956, the company was charging 100%
 depreciation on assets costing less than Rs, 5,000/- in the year of
 purchase.
 
 However, Schedule II to the Companies Act 2013, applicable from the
 current year, does not recognize such practice. Hence, to comply with
 the requirement of Schedule II to the Companies Act, 2013, the company
 has changed its accounting policy for depreciation of assets costing
 less than Rs, 5,000/-. As per the revised policy, the company is
 depreciating such assets over their useful life as assessed by the
 management. The management has decided to apply the revised accounting
 policy prospectively from accounting periods commencing on or after
 July 1, 2014.
 
 The change in accounting for depreciation of assets costing less than
 Rs, 5,000/- did not have any material impact on financial statements of
 the company for the current year.
 
 B) Use of Estimates
 
 The preparation of financial statements in conformity with Indian GAAP
 requires the management to make judgments, estimates and assumptions
 that affect the reported amounts of revenues, expenses, assets and
 liabilities and the disclosure of contingent liabilities, at the end of
 the reporting period and the results from operations during the
 reporting period. Although these estimates are based on the managements
 best knowledge of current events and actions, uncertainty about these
 assumptions and estimates could result in the outcomes requiring a
 material adjustment to the carrying amounts of assets or liabilities in
 future periods.
 
 
 C) Tangible Fixed Assets
 
 (i) Tangible Fixed Assets are stated at cost (or revalued amount, as
 the case may be), less accumulated depreciation and impairment, if any.
 The cost of acquisition comprises of purchase price inclusive of duties
 (net of CENVAT / VAT), taxes, incidental expenses,
 erection/commissioning expenses/trial run expenses and borrowing cost,
 etc. up to the date the asset are ready for intended use.  In case of
 revaluation of tangible fixed assets, the cost as assessed by the
 approved values is considered in the accounts and the differential
 amount is credited to revaluation reserve.
 
 The carrying amounts of assets are reviewed at each balance sheet date
 to determine if there is any indication of impairment based on external
 / internal factors. An impairment loss is recognized wherever the
 carrying amount of an asset exceeds its recoverable amount which
 represents the greater of the net selling price of assets and their
 ''Value in use''. The estimated future cash flows are discounted to their
 present value using pre tax discount rates and risks specific to the
 asset.
 
 (ii) Machinery spares which can be used only in connection with an item
 of fixed assets and whose use as per technical assessment is expected
 to be irregular, are capitalized and depreciated over the residual
 useful life of the respective assets.
 
 (iii) Expenditure on new projects and substantial expansion:
 
 Expenditure directly relating to construction activity are capitalized.
 Indirect expenditure incurred during construction period are
 capitalized as part of the indirect construction cost to the extent to
 which the expenditure are related to construction activity or are
 incidental thereto. Other indirect expenditure (including borrowing
 costs) incurred during the construction period which are not related to
 the construction activity nor are incidental thereto, are charged to
 the Statement of Profit and Loss. Income earned during construction
 period is deducted from the total of the indirect expenditure.
 
 D) Intangibles
 
 (i) Acquired computer software''s and licenses are capitalized on the
 basis of costs incurred to bring the specific intangibles to its
 intended use. These costs are amortized on a straight line basis over
 their estimated useful life of three years.
 
 (ii) Net Present Value paid to the various State Governments for
 restoration of forest as a pre-condition of granting license for mining
 in non-broken forest area (Mining Rights) are capitalized and amortized
 prospectively on a straight line basis over the remaining lease period.
 
 E) Depreciation
 
 (i) Depreciation is provided prorata basis on straight line method at
 the rates determined based on estimated useful life of tangible assets
 where applicable, specified in Schedule II to the Act.
 
 (ii) Leasehold Land is amortized over the tenure of respective leases.
 
 (iii) Mining lease and Development is amortized over the tenure of
 lease or estimated useful life of the mine, whichever is shorter.
 
 (iv) Intangible assets (computer software''s) are amortized on
 straight-line method at the rates determined based on estimated useful
 life which vary from 2 years to 5 years.
 
 F) Foreign Currency Transactions
 
 i) Initial Recognition
 
 Foreign currency transactions are recorded in the reporting currency by
 applying to the foreign currency amount the exchange rate between the
 reporting currency and the foreign currency at the date of the
 transaction.
 
 ii) Conversion
 
 Foreign currency monetary items are reported 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 reported using the
 exchange rate at the date when such value was determined.
 
 iii) Exchange Differences
 
 Exchange differences arising on the settlement of monetary items or on
 reporting of such monetary items at rates different from those at which
 they were initially recorded during the year or reported in previous
 financial statements are recognized as income or as expenses in the
 year in which they arise.
 
 iv) Forward Exchange Contracts not intended for trading or speculation
 purposes
 
 The premium or discount arising at the inception of forward exchange
 contracts is amortized as expense or income over the life of the
 contract. Exchange differences on such contracts are recognized in the
 statement of profit and loss in the year in which the exchange rates
 change. Any profit or loss arising on cancellation or renewal of
 forward exchange contract is recognized as income or as expense for the
 year.
 
 G) Investments
 
 Investments that are readily realizable and intended to be held for not
 more than a year are classified as current investments. All other
 investments are classified as long-term investments. Current
 investments are carried at lower of cost and fair value determined on
 an individual investment basis. Long-term investments are carried at
 cost. However, provision for diminution in value is made to recognize a
 decline ''other than temporary'' in the value of the investments.
 
 H) Inventories
 
 (i) Raw materials, stores and spares and trading goods are valued at
 lower of cost computed on moving weighted average basis and net
 realizable value. However, materials and other items held for use in
 the production of inventories are not written down below cost if the
 finished products in which they will be incorporated are expected to be
 sold at or above cost.
 
 (ii) Finished goods, work in progress and by products are valued at the
 lower of cost computed on weighted average basis and net realizable
 value. Cost includes direct materials and labor and a part of
 manufacturing overheads based on normal operating capacity. Cost of
 finished goods includes excise duty.
 
 (iii) The Closing stock of materials inter-transferred from one unit to
 another is valued at cost of the transferor unit or net realizable
 value, whichever is lower.
 
 (iv) Net realizable value mentioned above is the estimated selling
 price in the ordinary course of business less estimated costs of
 completion and estimated cost necessary to make the sale.
 
 I) Borrowing Costs
 
 Borrowing costs relating to the acquisition / construction of
 qualifying assets are capitalized until the time all substantial
 activities necessary to prepare the qualifying assets for their
 intended use are complete. 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.
 
 J) Excise Duty and Custom Duty
 
 Excise duty is accounted for at the point of manufacture of goods and
 accordingly is considered for valuation of finished goods stock lying
 in the factories as on the balance sheet date. Similarly, customs duty
 on imported materials in transit / lying in bonded warehouse is
 accounted for at the time of import / bonding of materials.
 
 K) Earnings Per Share
 
 Basic earnings per share is calculated by dividing the net profit or
 loss for the year attributable to equity shareholders by the weighted
 average number of equity shares outstanding during the year.
 
 For the purpose of calculating diluted earnings per share, the net
 profit or loss for the year attributable to equity shareholders and the
 weighted average number of shares outstanding during the year are
 adjusted for the effects of all dilutive potential equity shares.
 
 L) 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.
 
 Sale of Goods
 
 Revenue from sale of goods is recognized when all the significant risks
 and rewards of ownership of the goods have passed to the buyer, which
 generally coincides with delivery. Sales are net of returns, claims,
 trade discounts, Sales Tax and VAT etc. Export turnover includes
 related export benefits.
 
 Sale of Services
 
 Revenue is recognized when it is earned and no significant uncertainty
 exists as to its realization or collection.
 
 Interest Income
 
 Interest income is recognized on a time proportion basis taking into
 account the amount outstanding and the applicable interest rate.
 
 Dividends
 
 Dividends are recognized when the shareholders right to receive payment
 is established by the balance sheet date.
 
 M) Retirement and other Employee Benefits
 
 i) Retirement benefit in the form of Provident Fund is a defined
 contribution scheme and is charged to the Statement of Profit and Loss
 of the year when the contributions to the respective fund is due. The
 Company has no obligation other than the contribution payable to
 respective fund.
 
 ii) Gratuity liability is a defined benefit obligation and is provided
 for on the basis of an actuarial valuation, as per projected unit
 credit method made at the balance sheet date.
 
 iii) Short term compensated absences are provided for based on
 estimates. Long term compensated absences are provided for based on
 actuarial valuation, as per projected unit credit method.
 
 iv) Actuarial gains/losses are immediately taken to the Statement of
 Profit and Loss and are not deferred.
 
 N) Stock Compensation Expenses
 
 Measurement and disclosure of the employee share-based payment plans is
 done in accordance with SEBI (Employee Stock Option Scheme and Employee
 Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
 Accounting for Employee Share - based Payments, issued by the Institute
 of Chartered Accountants of India. The Company accounts for stock
 compensation expenses based on the fair value of the options granted,
 determined on the date of grant. Compensation cost is amortized over
 the vesting period of the option on straight line basis. The accounting
 value of the options outstanding net of the Deferred Compensation
 Expenses is reflected as Employee Stock Options Outstanding.
 
 O) Taxation
 
 (i) 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 provisions of the Indian Income Tax
 Act, 1961.
 
 (ii) Deferred income taxes reflect the impact of current year timing
 differences between taxable income and accounting income for the period
 and reversal of timing differences of earlier years. Deferred tax is
 measured using income tax rates enacted or substantively enacted at the
 Balance Sheet date. Deferred tax assets are recognized only to the
 extent that there is reasonable certainty that sufficient future
 taxable income will be available against which such deferred tax assets
 can be realized. In situations where the Company has unabsorbed
 depreciation or carry forward losses, all deferred tax assets are
 recognized only if there is virtual certainty supported by convincing
 evidence that they can be realized against future taxable profits.
 
 (iii) The carrying amounts of deferred tax assets are reviewed at each
 balance sheet date. The Company writes-down the carrying amount of
 deferred tax asset to the extent that it is no longer reasonable
 certain or virtually certain, as the case may be, that sufficient
 future taxable income will be available against which deferred tax
 asset can be realized. Any such write-down is reversed to the extent
 that it becomes reasonable certain or virtually certain, as the case
 may be, that sufficient future taxable income will be available.
 
 (iv) Minimum Alternative tax (MAT) credit is recognized as an asset
 only when and to the extent there is convincing evidence that the
 company will pay normal income tax during the specified period. In the
 year in which the MAT credit becomes eligible to be recognized as an
 asset in accordance with the recommendations contained in guidance note
 issued by the Institute of Chartered Accountants of India, the said
 asset is created by way of a credit to the Statement of Profit and Loss
 and shown as MAT Credit Entitlement. The company reviews the same at
 each balance sheet date and writes-down the carrying amount of MAT
 Credit Entitlement to the extent there is no longer convincing evidence
 to the effect that the company will pay normal income tax during the
 specified period.
 
 P) Segment Reporting
 
 Identification of Segments
 
 The Company has identified Iron & Steel products as its sole operating
 segment and the same has been treated as primary segment.  The
 Company''s secondary geographical segments have been identified based on
 the location of customers and then demarcated into Indian and overseas
 revenue earnings.
 
 Q) Leases
 
 (i) Finance Lease
 
 Assets acquired under finance leases, which effectively transfer to the
 Company substantially all the risks and benefits incidental to the
 ownership of the leased items, are capitalized at the lower of the fair
 value and present value of the minimum lease payments after discounting
 them at an interest rate implicit in the lease at the inception of the
 lease term and disclosed as leased assets.  Lease payments are
 apportioned between the finance charges and reduction of the lease
 liability so as to achieve a constant rate of interest on the remaining
 balance of the liability. Finance charges are charged directly to
 expenses account.
 
 Leased assets capitalized are depreciated over the shorter of the
 estimated useful life of the asset or the lease term.
 
 (ii) Operating Lease
 
 Leases where the less or effectively retains substantially all the
 risks and rewards incidental to the ownership of the leased assets are
 classified as operating leases. Operating lease payments are recognized
 as an expense in the Statement of Profit and Loss on straight line
 basis over the lease term.
 
 R) Cash and Cash Equivalents
 
 Cash and cash equivalents as indicated in cash flow statement comprise
 cash at bank and in hand and short-term investments with an original
 maturity of three months or less.
 
 S) Impairment of Assets
 
 The carrying amounts of assets are reviewed at each Balance Sheet date
 to determine if there is any indication of impairment based on
 external/internal factors. An impairment loss is recognized wherever
 the carrying amount of an asset exceeds its recoverable amount which
 represents the greater of the net selling price and value in use of the
 respective assets. The estimated future cash flows considered for
 determining the value in use, are discounted to their present value at
 the pre tax discount rate that reflects current market assessments of
 the time value of money and risks specific to the asset.
 
 After impairment, depreciation is provided on the revised carrying
 amount of the assets over its remaining useful life.
 
 T) Derivative instruments
 
 In accordance with the ICAI announcement, derivative contracts, other
 than foreign currency forward contracts covered under Accounting
 Standard 11, are marked to market on a portfolio basis, and the net
 loss, if any, after considering the offsetting effect of gain on the
 underlying hedged item, is charged to the Statement of Profit and Loss.
 Net gain, if any, after considering the offsetting effect of loss on
 the underlying hedged item, is ignored.
 
 U) Provision
 
 A provision is recognized when the company has a present obligation as
 a result of past event, it is probable that an outflow of resources
 embodying economic benefits will be required to settle the obligation
 and a reliable estimate can be made of the amount of the obligation.
 Provisions are not discounted to its present value and are determined
 based on 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.
 
 V) Contingent Liabilities
 
 A contingent liability is a possible obligation that arises from past
 events whose existence will be confirmed by the occurrence or non-
 occurrence of one or more uncertain future events beyond the control of
 the Company or a present obligation that is not recognized because it
 is not probable that an outflow of resources will be required to settle
 the obligation. The company does not recognize a contingent liability
 but discloses its existence in the financial statements.
 
 W) Measurement of EBITDA
 
 As permitted by the Guidance Note on Revised Schedule VI to the
 Companies Act, 1956, the Company has elected to present earnings before
 interest, tax, depreciation and amortization (EBITDA) as a separate
 line item on the face of the Statement of Profit and Loss. The Company
 measures EBITDA on the basis of profit/ (loss) for the year excluding
 depreciation & amortization expenses, finance cost and tax expenses.
Source : Dion Global Solutions Limited
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