a) Accounting Assumptions
The financial statements of Sagar Cements Ltd have been prepared and
presented in accordance with Indian Generally Accepted Accounting
Principles (GAAP) under the historical cost convention on the basis of
a going concern and on an accrual basis. GAAP comprises accounting
standards notified by the Central Government of India U/s.211 (3C) of
the Companies Act, 1956, other pronouncements of Institute of Chartered
Accountants of India, the provisions of Companies Act,1956 and
guidelines issued by Securities Exchange Board of India. The financial
statements are rounded off to the nearest Rupees millions.
The company has prepared these financial statements as per the format
prescribed by the Revised Schedule VI to the Companies Act, 1956 (''the
schedule'') issued by Ministry of Corporate Affairs. Previous periods''
figures have been recast/restated to conform to the classification
required by the Revised Schedule VI.
The adoption of Revised Schedule VI does not materially impact
recognition and measurement principles followed for the preparation of
financial statements. However, it impacts preparation and disclosures
made in the financial statements, particularly in presentation of
b) Fixed Assets and depreciation
Fixed Assets are carried at the cost of acquisition or construction
less accumulated depreciation. The cost of fixed assets includes non
refundable taxes, duties, freight and other incidental expenses related
to the acquisition and installation of the respective assets. Borrowing
costs directly attributable to the acquisition or construction of those
fixed assets which necessarily take a substantial period of time to get
ready for their intended use are capitalized.
Depreciation on plant and machinery is charged under straight line
method and on other assets depreciation is charged under WDV method
applying the rates worked out in accordance with Schedule XIV of the
Companies Act, 1956.
Freehold land is not depreciated. Depreciation is calculated on a pro-
rata basis from the date of installation till the date the assets are
sold or disposed. Individual assets costing less than Rs.5,000 are
depreciated in full in the year of acquisition.
c) Revenue recognition
Sales are recognized on dispatch of goods to customers and include
excise duty but exclude returns and taxes on sales collected from the
customers on behalf of the government.
Dividend income is recognized when the unconditional right to receive
the income is established. Income from interest on deposits and loans
is recognized on the time proportionate method.
Investments are either classified as current or long term. Current
investments are carried at the lower of cost and market value. Long
term investments are carried at cost less any permanent diminution in
value, determined separately for each individual investment. The
reduction in the carrying amount is reversed when there is a rise in
the value of the investment or if the reasons for the reduction no
Inventories including work-in-progress are valued at lower of cost and
net realizable value. Cost of inventory comprises all cost of purchase,
cost of conversion and other costs incurred in bringing the inventories
to their present location and condition.
The cost of Raw Materials, Stores and Spares and Packing Materials is
determined by using the Weighted Average Cost Method. The cost of
Work-in-Progress and Finished Goods is determined by weighted average
Cost Method and includes appropriate share of production overheads
f) Employee Benefits Short term benefits
Short term employee benefits are charged off at the undiscounted amount
in the year in which the related services are rendered.
Long term benefits
Payments to the defined contribution retirement benefit schemes are
charged as an expense as they fall due. Gratuity
Under defined benefit scheme, Company provides for gratuity, a defined
benefit retirement plan (the Gratuity Plan) covering eligible
employees. In accordance with the Payment of Gratuity Act, 1972, the
Gratuity Plan provides a lump sum payment to vested employees at
retirement, death, incapacitation or termination of employment, of an
amount based on the respective employee''s salary and the tenure of
employment. The company has taken master policy with Life Insurance
Corporation of India under group gratuity scheme. Liabilities with
regard to the Gratuity Plan are determined by actuarial valuation as of
the balance sheet date, based upon which, the Company contributes all
the ascertained liabilities to the Life Insurance Corporation of India.
Employee Leave Encashment
The leave encashment payable to the employees is provided based on the
actuarial valuation carried out in accordance with the AS 15 and is not
The company has defined contribution plan for Provident Fund under
which the company contributes the fund to Regional Provident Fund
The company contributes to superannuation which is a defined
contribution plan as per policy. The company fully contributes all
ascertained liabilities to the superannuation fund maintained with Life
Insurance Corporation of India.
g) Income-Tax expense
Income tax expense comprises current tax and deferred tax charge or
The current charge for income taxes is calculated in accordance with
the relevant tax regulations applicable to the company.
Deferred tax charge or credit reflects the tax effects timing
differences between accounting income and taxable income for the
period. The deferred tax charge or credit and the corresponding
deferred tax liabilities or assets are recognized using the tax rates
that have been enacted or substantially enacted by the balance sheet
tax assets are recognized only to the extent there is reasonable
certainty that assets can be realized in future; however, where there
is unabsorbed depreciation or carry forward of losses, deferred tax
assets are recognized only if there is a virtual certainty of
realization of such assets. Deferred tax assets are reviewed at each
balance sheet date and written down or written up to reflect the amount
that is reasonably/virtually certain (as the case may be) to be
Minimum alternate tax credit
MAT credit entitlement represents the amounts paid in a year under
Section 115JB of the Income Tax Act 1961 (IT Act) which is in excess of
the tax payable, computed on the basis of normal provisions of the IT
Act. Such excess amount can be carried forward for set off in future
periods in accordance with the relevant provisions of the IT Act.
Since such credit represents a resource controlled by the Company as a
result of past events and there is evidence as at the reporting date
that the Company will pay normal income tax during the specified
period, when such credit would be adjusted, the same has been disclosed
as MAT credit entitlement, in the balance sheet with a corresponding
credit to the profit and loss account, as a separate line item.
h) Earnings per share
The basic earnings per share (''EPS'') is computed by dividing the net
profit after tax for the year by weighted average number of equity
shares outstanding during the year. For the purpose of calculating
diluted earnings per share, net profit after tax for the year and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
i) Provisions and contingent liabilities
The Company creates a provision where there is a present obligation as
a result of a past event that probably requires an outflow of resources
and a reliable estimate can be made of the amount of the obligation. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. Where there is possible obligation or
a present obligation in respect of which the likelihood of outflow
resources is remote, no provision or disclosure is made.
j) Government Grants
Government grants receivable under Industrial Investment Promotion
Policy 2005-10 of Government of Andhra Pradesh are accounted based on
verification and recommendation of the competent authority as per the
policy of Government and in accordance with Accounting Standards 9 and