SENSEX NIFTY India | Accounting Policy > Cement - Products & Building Materials > Accounting Policy followed by Sanghi Industries - BSE: 526521, NSE: SANGHIIND

Sanghi Industries

BSE: 526521|NSE: SANGHIIND|ISIN: INE999B01013|SECTOR: Cement - Products & Building Materials
May 29, 16:00
-1.6 (-2.04%)
VOLUME 81,290
May 29, 15:50
-0.95 (-1.21%)
VOLUME 257,195
Jun 15
Accounting Policy Year : Mar '16


Sanghi Industries Limited was incorporated in 1985 and is engaged in the manufacturing and marketing of cement and cement products in domestic and export market. The Company''s manufacturing facilities are at Sanghipuram, Gujarat. Equity shares of the Company are listed on The National Stock Exchange and Bombay Stock Exchange.


In conformity to the Companies Act 2013, the Company has changed its Accounting year to 31st March and hence, the current reporting period ended on 31st March 2016 is for the period of 9 months.

1. The financial statements are prepared and presented under the historical cost convention on accrual basis of accounting in accordance of generally accepted accounting principles in India. These financial statements comply in all material aspects with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014, the relevant provisions of the Companies Act, 2013/Companies Act, 1956 as applicable and guidelines issued by the Securities and Exchange Board of India (SEBI), as applicable.

2. 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. Differences between actual results and estimates are recognized in the period in which the results are known / materialized.

3. Significant Accounting Policies adopted in preparation of financial statements are consistent with those of previous years, unless otherwise stated, and are as under:-

a) Fixed Assets & Depreciation/Amortization:

Fixed Assets (Tangible or Intangible) are stated at cost of acquisition or construction and all costs, net of accumulated depreciation/ amortization and accumulated impairment losses, if any, relating to the acquisition and installation of fixed assets are capitalized up to the date the asset is put to use.

Depreciation on Fixed assets is provided on straight line method as per useful life provided in Schedule II of the Companies Act, 2013. Cement manufacturing plant is considered as continuous process plant. Expenditure on Power Transmission Lines is depreciated over the period of useful life of Thermal Power Plant.

b) Foreign Currency Transactions:

Foreign Currency transactions are initially recognized at the exchange rates prevailing on the date of the transaction. Monetary assets and liabilities denominated in foreign currency are translated in to rupees at exchange rate prevailing on the date of Balance Sheet. All exchange differences are dealt with in the Statement of Profit & Loss except in case of long-term liabilities where they relate to acquisition of fixed assets, in which case, they are adjusted to carrying cost of such assets as per MCA notification dated December 29, 2011, Para 46A,GSR_914 for accounting period starting from 01.04.2011.

c) Inventory and its valuation:

i) Finished and semi-finished goods are valued at lower of cost and net realizable value.

ii) Raw Materials, Consumables, Stores, Packing Material and Work-in-Progress are valued at lower of cost and net realizable value. However, these items are considered to be realizable at cost, if the finished products, in which they will be used, are expected to be sold at or above cost.

iii) Cost is determined on a weighted average basis.

d) Employee Benefits:

i) Defined Benefit Plans: Retirement benefits in the form of gratuity are considered as defined benefit obligations and are provided for on the basis of an actuarial valuation, using the projected unit credit method, as at the date of Balance Sheet.

ii) Other long Term Benefits: Long Term compensated absences are provided for on the basis of an actuarial valuation, using the projected unit credit method, as at the date of the Balance Sheet.

iii) Actuarial gain/losses, if any, are immediately recognized in the Statement of Profit and Loss.

iv) Defined Contribution Plans: Contributions payable to the recognized Provident Fund which are defined contribution schemes are charged to the statement of profit and loss.

e) Borrowing Cost:

Borrowing Costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets, wherever applicable, till the assets are ready for their intended use. A qualifying asset is one which necessarily takes substantial period to get ready for intended use. All other borrowing costs are charged to revenue account.

f) Revenue Recognition:

i) Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer. Accordingly Domestic sales are accounted on dispatch of products to customers and Export sales are accounted on the basis of date of Bill of Lading. Revenue from operations includes sale of goods and services, Excise Duty and adjustment for discounts and exclusive of VAT/CST

ii) Export Incentives and insurance claims are recognized when the right to receive materializes and there is no significant uncertainty regarding realization of the claims.

iii) Interest Income is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.

g) Provisions, Contingent Liabilities and Contingent Assets:

A provision is recognized when an enterprise has a present obligation as a result of past event 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. A provision is derecognized when the enterprise has ascertained, based on sufficient documentary evidence, that the present obligation does not require an outflow of resources to settle that obligation. Provisions are not discounted to its present value and are determined based on management estimate required to settle the obligation at the balance sheet date and adjusted to reflect the current management estimates.

No provision is recognized for any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events and not wholly within the control of the Company; or any present obligation that arises from past events but is not recognized because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or a reliable estimate of the amount of obligation cannot be made. Such obligations are recorded as contingent liabilities. These are assessed continually and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made. Contingent assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

h) Taxation:

Income-tax expense comprises current tax and deferred tax charge or credit. Provision for current tax is made on the basis of the assessable income at the tax rate applicable to the relevant assessment year.

Deferred tax asset and deferred tax liability are calculated by applying tax rate and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets on account of timing differences are recognized, only to the extent there is a reasonable certainty of its realization. Deferred tax assets are reviewed at each Balance Sheet date to reassure realization.

MAT credit asset is recognized and carried forward only if there is a reasonable certainty of it being set off against regular tax payable within the stipulated statutory period. Deferred tax asset on unabsorbed depreciation and carried forward losses is recognized only if there is virtual certainty supported by convincing evidence.

i) Impairment of Fixed Assets:

The carrying amounts of assets are reviewed at each balance sheet date, if there is any indication of impairment based on internal/ external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset''s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.

After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

j) Earnings per Share:

The Company reports basic and diluted Earnings Per Share in accordance with Accounting Standard 20 on ‘Earnings Per Share''. Basic earnings per share are computed by dividing the net profit or loss for the period by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing the net profit or loss for the period by the weighted average number of equity shares outstanding during the period adjusted for the effects of all diluted potential equity shares except where the results are anti-dilutive.

k) Segment reporting:

The Company is engaged mainly in the business of manufacturing of cement. This, in the context of Accounting Standard 17 on Segment Reporting are considered to constitute a single primary segment. Further, the sales of the Company are made primarily in a domestic market and a small proportion is exported. The geographical segments identified on this basis have been reported as the secondary segment.

l) Investment:

Long-term investments are carried at cost. Provision for diminution is made to recognize a decline, other than temporary in value of long-term investments and is determined separately for each individual investment. Current investments are carried at lower of cost and fair value computed separately in respect of each category of investment.

m) Leases:

Where the Company is the lessee:

Leases where the less or effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating Lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term.

Where the Company is the less or:

i. Assets given under finance lease are recognized as a receivable at an amount equal to the net investment in the lease. Lease rentals are apportioned between principal and interest on the internal rate of return method. The principal amount received reduces the net investment in the lease and interest is recognized as revenue. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the statement of profit and loss.

ii. Assets subject to operating leases are included in fixed assets. Lease income is recognized in the statement of profit and loss on a straight-line basis over the lease term. Costs including depreciation, are recognized as an expense in the statement of profit and loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the statement of profit and loss.

n) Cash Flow Statement:

Cash flows are reported using the indirect method, whereby profit/(loss) before 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.

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.

a. Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs,10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian Rupees. The Dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

b. Terms of redemption of redeemable Preference Shares

Preference Shares has been fully redeemed during the financial period ended on 31st March 2016

There is no principal amount and interest overdue to Micro and Small Enterprises. During the year no interest has been paid to such parties (Previous year Rs, 0.004 Cr.). This information has been determined to the extent such parties have been identified on the basis of information available with the Company and the same has been relied upon by the auditors.

Footnote 2 : Corporate Social responsibility Expenses

a) Gross amount required to be spent by the Company during the year is Rs, 0.85 Cr. based on average net profit of last three years as per Section 198 of the Companies Act, 2013.

b) Amount spent during the year in cash on purposes other than construction/acquisition of any asset is Rs, 2.32 Cr.

During the year, the company has raised Rs, 256.48 Crores by issue of 15.50% Redeemable Non-Convertible Debentures on Private Placement basis. The funds have been partly utilized to make early settlement of Loans and redemption of Preference Shares. The balance funds are retained for general corporate expenses. Net expenditure arising out of this transactions aggregating to Rs, 60.39 Crores is shown under exceptional items.

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