A. FINANCIAL STATEMENTS
The financial statements are prepared under historical cost convention
on accrual basis as a going concern and in accordance with the
Generally Accepted Accounting Principles (GAAP), the Companies Act,
1956 and in compliance with Companies (Accounting Standard) Rules,
2006, except those with significant uncertainty. Accounting policies
not stated explicitly otherwise are consistent with Generally Accepted
Accounting Principles.
B. USE OF ESTIMATES
The preparation of financial statements in conformity with Indian GAAP
requires management to make estimates and assumptions that affect the
balances of assets and liabilities and disclosures relating to
contingent liabilities as at the Balance Sheet date and amounts of
income and expenses during the year. Examples of such estimates include
income taxes and future obligation under employee retirement benefit
plans. Management periodically assesses whether there is an indication
that an asset may be impaired and makes provision in the accounts for
any impairment losses estimated. Actual results could differ from those
estimates. The effects of adjustment arising from revisions made to the
estimates are included in the Profit and Loss statement of the year in
which such revisions are made.
C. REVENUE RECOGNITION
a) Revenue from sale of goods is recognised on transfer of all
significant risks and rewards of ownership to the buyer.
b) Revenue from services are recognised on rendering of services to
customers except otherwise stated.
c) Rental income from assets given on operating lease is recognised
using straight line method. Contingent rent is recognised as income to
reflect systematic allocation of earning over the lease period. This
policy is not applicable for variable rental income based on turnover
of the tenant.
d) Interest income is recognised on accrual basis on a time proportion
basis.
D. FIXED ASSETS
Fixed Assets, including those given on operating lease, are stated at
cost of acquisition inclusive of freight incurred, duties and taxes
(net of CENVAT/ Sales Tax) and incidental expenses less accumulated
depreciation. Cost incurred on construction of fixed assets consists of
all directly attributable expenditure. Fixed assets is net off of
value of compensation received against non performance of full capacity
of machine.
E. DEPRECIATION
Depreciation is provided on fixed assets including those given on
operating lease on written down value method at the rates and in the
manner specified in Schedule-XIV of the Companies Act, 1956.
Depreciation on reduced amount of fixed assets is net off depreciation
on that compensation amount excess charged in earlier years.
F. INVESTMENTS
All investments are bifurcated into Long Term Investments and Current
Investments. Investments that are readily realisable and intended to be
held for not more than a year are classified as Current Investments.
All other investments are classified as Long Term. Current Investments
are carried at lower of cost or fair market value, determined on an
individual investment basis. Long Term Investments are carried at cost.
Provision for Diminution in the value of Long Term Investments is made,
only if such a diminution is other than temporary.
G. INVENTORIES
Tobacco Division
a) Raw Materials: At lower of weighted average cost or net realisable
value.
b) Work in Progress: At lower of cost or net realisable value.
c) Finished Goods: At lower of cost or net realisable value.
d) Stores, Packing & Other Materials: At lower of weighted average cost
or net realisable value.
H. EXCISE DUTY
Excise duty has been accounted for at the time of manufacture of goods,
accordingly excise duty on finished goods lying as stock in factory has
been considered for valuation.
I. FOREIGN CURRENCY TRANSACTION
Transactions in foreign currencies are recorded at the exchange rate
prevailing at the time of occurrence of payments/receipts.
Exchange differences arising on foreign exchange transactions settled
during the year are recognized in the profit and loss account of the
year
J. SALES
Sales represents invoice value of finished goods sold inclusive of
excise duty and value added tax but excludes sales returns, claims,
rate difference etc. Rental income is exclusive of service tax.
K. CLAIMS/REFUNDS
Excise, Insurance and other claims/refunds are accounted for on
acceptance/actual receipt/ payment basis.
L. EMPLOYEE BENEFITS
i) Short term employee benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short- term employee benefits. Benefits
such as salaries, wages and short term compensated absences, etc. and
the expected cost of ex-gratia is recognised in the period in which the
employee renders the related service. (ii) Post-employment benefits
a) Defined Contribution Plan: Employee benefits in the form of
Employees State Insurance Corporation and Provident Fund are considered
as defined contribution plan and the contributions are charged to the
Profit and Loss Account of the year when the contributions to the
respective funds are due.
b) Defined Benefit Plan: Employee benefits in the form of Gratuity and
Leave Encashment are considered as defined benefit plan and are
provided for on the basis of an independent actuarial valuation, using
the projected unit credit method, as at the Balance Sheet date as per
requirements of Accounting Standard- 15 (Revised 2005) on Employee
Benefits.
Actuarial gains/losses, if any, are immediately recognised in the
Profit and Loss Account.
M. TAXATION
a) Current Tax: Current tax is determined as the amount of tax payable
in respect of taxable income for the year in accordance with the
provisions of the Income Tax Act, 1961. Minimum Alternative Tax credit
available under section 115JB of the Income Tax Act, 1961 will be
accounted in the year in which the benefits are claimed.
b) Deferred Tax: Deferred tax is recognised subject to consideration of
prudence on the basis of timing differences being the differences
between taxable income and accounting income that originate in one
period and capable of reversal in one or more subsequent periods using
the tax rates and laws that have been enacted or substantially enacted
as on the balance sheet date. Deferred tax asset is recognised and
carried forward only to the extent that there is reasonable certainty
that the asset will be realised in future.
N. IMPAIRMENT OF ASSETS
An asset is treated as impaired when the carrying cost of the same
exceeds its recoverable amount. Impairment is charged to the Profit
and Loss account in the year in which an asset is identified as
impaired. The impairment loss recognised in prior accounting period is
reversed if there has been a change in the estimate of the recoverable
amount.
O. BORROWING COSTS
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use or sale. Other
borrowing costs are recognised as an expense in the year in which they
are incurred.
P. PROVISIONS/CONTINGENCIES
A provision is recognised for a present obligation as a result of past
events if it is probable that an outflow of resources will be required
to settle the obligation and in respect of which a reliable estimate
can be made. Provisions are determined based on best estimate of the
amount required to settle the obligation as at the Balance Sheet date.
Liabilities which are material and whose future outcome cannot be
ascertained with reasonable certainty are treated as contingent
liability and are disclosed by way of note.
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