Varun Shipping Company

31 03 2009   31.03.2008
                                               Rupees       Rupees
 1.  CONTINGENT LIABILITIES:
 a) On account of guarantees executed by 
    the Companys                             37,800,000   239,317,089
    bankers secured by charge on some of 
    the Companys vessels and fixed deposits 
    of Rs 41.00 lacs (Previous year
    Rs 66.60 lacs)
 
 b) Claims against the Company not 
    acknowledged as debts                     87,734,712   123,441,932
 
 c) Deputy Commissioner (CD Chennai had raised a demand for Rs.
 83,284,324 for earlier years on account of levy of Commercial tax on
 Charter-hire in respect of some of our ships. The Company was in appeal
 against the same and the Appellate authority has given the ruling in
 favour of the Company. However the Deputy Commissioner (CT) Chennai had
 preferred an appeal against the sam& with Sales Tax Appellate Tribun1al
 Chennai.
 
 The Appelate Tribunal vide its Order dated 1 0th November, 2008, has
 allowed the Appeal filed by the Revenue and has given the ruling in
 favour of the department. Company has been advised that this demand is
 not sustainable and accordingly Company has filed an Appeal against the
 said Order in the Madras High Court. Hence no provision has been made
 in the accounts.
 
 d) Outstanding commitment on capital account Rs. 3,901,61 5,000
 (Previous year- Rs. Nil) against which an advance payment of Rs.
 541,768,750 (Previous year - Rs. Nil ) has been made during the year.
 
 2.  The Company has not entered in any derivative transactions by way
 of currency and/or interest rate swap.
 
 3.  Government of India, Ministry of Corporate Affairs vide
 Notification No. GSR 225(E) dated 31st March, 2009 issued Companies
 (Accounting Standards) Amendment Rules, 2009 with effect from
 Accounting Year commencing on or after 7th December, 2006. In view of
 this, instead of early adoption of Accounting Standard 30, the Company
 has decided to exercise the option available under para 46 of the said
 notification. Hence, loss on account of revaluation of foreign currency
 loans which was charged to Profit and Loss Account as also amount
 transferred to Hedging Reserve Account during 1st April, 2008 to 31st
 December, 2008 has been reversed.
 
 In terms of the notification referred above, exchange differences
 arising on reporting of long term foreign currency loans, so far as
 they relate to acquisition of depreciable capital assets, is required
 to be added to or deducted from the cost of the asset and depreciated
 over the balance life of the asset and in other cases it is required to
 be accumulated in a Foreign Currency Monetary Items Translation
 Difference Account and amortized over balance period of such long term
 liability but not beyond 31st March, 2011 .
 
 Accordingly, differences arising due to change in exchange rate on
 foreign currency loans relating to acquisition of depreciable capital
 assets amounting to Rs. 51,477 lacs are added to the cost of such
 capital assets and in respect of other long term loans an amount of Rs.
 497 lacs has been transferred to Foreign Currency Monetary Items
 Translation Difference Account.
 
 Consequent to the change, the depreciation for the year is higher by
 Rs. 2,996 lacs and other expenses by Rs. 218 lacs.
 
 If the option provided under AS 11 (revised) issued by Ministry of
 Corporate Affairs vide Notification No.GSR 225(E) dated 31st March,
 2009, was not exercised, the profit referred above would have been a
 loss of Rs. 35,541 iacs and reserves would have been lower by Rs.
 34,172 lacs .
 
 The exchange gain of Rs. 14,438 lacs recognized in Profit & Loss
 Account during the last financial year ended 31st March, 2008 has been
 reversed from the opening balance of General Reserve (net of
 depreciation and other expenses of Rs.788 lacs) and deducted from the
 cost of such assets.  Similarily provision for exchange rate variation
 of Rs 5,000 lacs made in the last financial year ended March 31, 2008
 is reversed in current year.
 
 4. The Company has during the year recognized an impairment loss of Rs.
 938.22 lacs in respect of certain ships in accordance with the
 Accounting Standard (AS 28) consequent to fall in the valuation of the
 said assets. In the opinion of the management, the book value of these
 assets, after correcting for the impairment recognized, is aligned
 closer to the market value and also broadly reflects the earnings
 expectation from them.
 
 5.  DEFERRED TAX :
 
 The Company is assessed under special provisions relating to income of
 shipping companies which has been introduced by the Finance Act (No. 2)
 of 2004 under which taxable income is notionally determined based on
 net tonnage of ships operated during the year. Actual income from the
 operation of ships and expenses incurred for earning income from
 shipping operations is not considered for the purpose of determining
 taxable income. Hence, there are no timing differences arising in the
 tax assessments as envisaged under the Accounting Standard 22 of the
 Institute of Chartered Accountants of India CICAI) and accordingly
 there is no deferred tax liability for the Company.
 
 6.  An amount of Rs. 5,147,690,742 (previous year Rs. 1,443,826,790
 decrease) towards increase in rupee liability consequent to conversion
 of foreign currency loans at year end/contracted rates and costs in
 respect of forward covers for foreign currency loans incurred during
 the year for acquisition of assets has been added to the cost of fixed
 assets and Rs. 21,793,679 (previous year Rs.2,143,360 decrease)
 increase, arising on other exchange differences is charged to Profit
 and Loss Account.
 
 7.  There are no Micro, Small and Medium Enterprises, as defined in
 the Micro, Small, Medium Enterprises Development Act, 2006, to whom the
 Company owes on account of principal amount together with the interest
 and accordingly no additional disclosures have been made.
 
 The above information regarding Micro, Small and Medium Enterprises,
 has been determined to the extent such parties have been identified on
 the basis of information available with the Company. This has been
 relied upon by the auditors.
 
 8.  No amounts referred to in clauses (a) to (d) of Section 205C(2) of
 the Companies Act, 1956 have remained unclaimed for a period of seven
 years from the date they became due for payment.
 
 9.  The Company is engaged only in shipping business and there are no
 separate reportable segments as per Accounting Standard 17,
 
 10.  Previous years figures are regrouped wherever necessary.