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Moneycontrol.com India | Accounting Policy > Packaging > Accounting Policy followed by Gujarat Raffia Industries - BSE: 523836, NSE: GUJRAFFIA
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Gujarat Raffia Industries

BSE: 523836|NSE: GUJRAFFIA|ISIN: INE610B01024|SECTOR: Packaging
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Accounting Policy Year : Mar '14
1) Method of Accounting :
 
 The Financial Statements are prepared as per Historical Cost Convention
 on Accrual Concept and in compliance, in all material aspects, of
 accountancy in accordance with the Generally Accepted Accounting
 Principles in India, applicable provisions of the Companies Act 1956,
 the applicable Accounting Standards notified under the Companies
 (Accounting Standards) Rules, 2006 by the Central Government or any
 other relevant provisions of the Companies Act, 1956. All Income and
 Expenditures having material bearing on the Financial Statements are
 recognized on accrual basis.
 
 Based on the nature of the products and the time between the
 acquisition of assets for processing and their realization in cash and
 cash equivalent, the company has ascertained its operating cycle to be
 less than 12 months.
 
 2) Use of Estimates :
 
 The preparation of the Financial Statements in conformity of Accounting
 Standard generally accepted in India requires, the management to make
 estimates and assumptions that affect the reported amount of Assets and
 Liabilities and disclosure of Contingent Liabilities as on the date of
 the financial statements and the reported amount of revenues and
 expenses during the reporting period. Difference between the actual
 results and estimates are recognized in the period in which the results
 are known / materialized.
 
 3) Revenue Recognition :
 
 A.  Revenue from sale of goods is recognized when significant risks and
 rewards of ownership of the goods have been passed to the buyer. Sales
 are stated inclusive of Excise and Sales Tax and net of rebate and
 trade discount.
 
 B.  Service income is recognized as per the terms of contracts with the
 customers when the related services are performed or the agreed
 milestones are achieved and are net of service tax wherever applicable.
 
 C.  Dividend income is recognized when the unconditional right to
 receive the income is established.
 
 D.  Interest income is recognized on time proportionate method taking
 into accounts the amount outstanding and rate applicable.
 
 E.  Revenue in respect of other income is recognized when no
 significant uncertainty as to its determination or realization exists.
 
 4) Fixed Assets :
 
 A.  Fixed Assets are stated at historical cost of
 acquisition/construction less accumulated depreciation (except free
 hold land, where no depreciation is charged) and impairment loss. Cost
 includes the purchase price (Net of Input tax credit received/
 receivable or refundable taxes), and expenses directly attributable to
 assets to bring it to the factory and in the working condition for its
 intended use and pre-operative and project expenses for the period up
 to completion of construction/assets are put to use.
 
 B.  The loss or gain on exchange rates on long term foreign currency
 loans attributable to fixed assets, effective from April 1,2007 is
 adjusted to the cost of respective fixed assets.
 
 C.  Where the construction or development of any such asset requiring a
 substantial period of time to set up for its intended use, is funded by
 borrowings if any, the corresponding borrowing cost are capitalized up
 to the date when the asset is ready for its intended use.
 
 D.  Intangible Assets are reported at acquisition value with deductions
 for accumulated amortization and any impairment losses.
 
 E.  Capital work in progress includes cost of assets (Net of Input tax
 credit received/ receivable or refundable taxes) at sites, construction
 expenditure, advances made for acquisition of capital assets.
 
 F.  The expenditure incidental to the expansion/new projects are
 allocated to fixed assets in the year of the commencement of commercial
 production.
 
 5) Depreciation :
 
 A.  Depreciation is provided on Straight Line Method on all assets
 (except freehold land, where no depreciation is provided) as per
 Section 205 (2) (b) of the Companies Act, 1956 at the rates prescribed
 in Schedule XIV thereto as amended from time to time.
 
 B.  Depreciation on impaired assets is calculated on its residual
 value, if any, on a systematic basis over its remaining useful life.
 
 C.  Depreciation on additions/disposals of the fixed assets during the
 year is provided on pro-rata basis according to the period during which
 assets are put to use.
 
 D.  Fixed assets costing Rs. 5000/- or less are fully depreciated in
 the year of acquisition.
 
 6) Impairment of Assets :
 
 The carrying value of assets of the Company''s cash generating units are
 reviewed for impairment annually at each Balance Sheet Date or more
 often if there is an indication of decline in value. If any indication
 of such impairment exists based on internal/external, the recoverable
 amounts of those assets are estimated and impairment loss is
 recognized, if the carrying amount of those assets exceeds their
 recoverable amount. The recoverable amount is the greater of the net
 selling price and their value in use. Value in use is arrived at by
 discounting the estimated future cash flows to their present value
 based on appropriate discount factor. The impairment loss recognized in
 prior accounting period is reversed if there has been a change in
 recoverable amount.
 
 7) Investments :
 
 Investments are classified as Long Term and Current Investments. Long
 Term Investments are valued at cost less provision for diminution other
 than temporary, in value, if any. Current Investments are valued at
 cost or fair value whichever is lower.
 
 8) Inventories :
 
 A.  Raw Materials, Stores and Spare Parts, Packing Materials, Finished
 Goods and Works-in-Progress are valued at lower of cost and net
 realizable value after providing for obsolescence, if any.
 
 B.  Cost [Net of Input tax credit availed] of Raw Materials, Stores and
 Spare Parts, Packing Materials and Finished Goods are determined on
 FIFO Method.
 
 C.  Cost of Finished Goods and Works-in-Progress is determined by
 taking material cost [Net of Input tax credit availed], labour and
 relevant appropriate overheads using the absorption costing method and
 other costs incurred in bringing them to their respective present
 location and condition.
 
 9) Employee Benefit :
 
 (a) Short Term :
 
 Short Term employee benefits are recognized as an expense at the
 undiscounted amount expected to be paid over the period of services
 rendered by the employees to the company.
 
 (b) Long Term :
 
 The Company has both defined contribution and defined benefit plans.
 These plans are financed by the Company in the case of defined
 contribution plans.
 
 (c) Defined Contribution Plans :
 
 These are plans in which the Company pays pre-defined amounts to
 separate funds and does not have any legal or informal obligation to
 pay additional sums. These comprise of contributions to Employees
 Provident Fund. The Company''s payments to the defined contribution
 plans are reported as expenses during the period in which the employees
 perform the services that the payment covers.
 
 (d) Defined Benefit Plans :
 
 Expenses for defined benefit i.e. gratuity payment plans are calculated
 as at the balance sheet date by independent actuaries in the manner
 that distributes expenses over the employees working life. These
 commitments are valued at the present value of the expected future
 payments, with consideration for calculated future salary increases,
 using a discounted rate corresponding to the interest rate estimated by
 the actuary having regard to the interest rate on Government Bonds with
 a remaining term i.e. almost equivalent to the average balance working
 period of employees.
 
 (e) Leave Liability :
 
 The employees of the company are entitled to leave as per the leave
 policy of the company. The liability on account of accumulated leave as
 on last day of the accounting year is recognized as at the balance
 sheet date.
 
 (f) Termination Benefits/Other Long Term Benefits :
 
 Termination benefits are recognized as and when incurred. Other long
 term employee benefits are recognized in the same manner as defined
 benefit plans.
 
 10) Central Excise Duty :
 
 A.  Excise duty is accounted gross of Cenvat benefit availed on inputs,
 fixed assets and eligible services.
 
 B.  Excise duty is accounted on the basis of both, payments made in
 respect of goods cleared as also provision made for goods lying in
 stock/bonded warehouses.
 
 11) Foreign Currency Transactions :
 
 A.  The transactions in foreign currencies on revenue accounts are
 stated at the rates of exchange prevailing on the dates of
 transactions.
 
 B.  Assets and liabilities (monetary items) in foreign currencies
 outstanding at the close of year are, converted in Indian currency at
 the appropriate rate of exchange prevailing on the date of the balance
 sheet. The resultant gain or loss is accounted during the year.
 
 C.  The net gain or loss on account of exchange differences either on
 settlement or on translation of short term monetary items is recognized
 in the Profit and Loss Account.
 
 D.  The net gain or loss on account of exchange differences either on
 settlement or on translation of short term monetary.
 
 E.  The net gain or loss on account of exchange differences either on
 settlement or on translation of long term monetary items including long
 term forward contracts is recognised under Foreign Currency Monetary
 Items Translation Difference Account [FCMITDA], except in case of
 foreign currency loans taken for funding of fixed assets, where such
 difference is adjusted to the cost of respective fixed assets. The
 FCMITDA is amortized during the tenure of loans but not beyond March
 31,2020.
 
 F.  Investments in foreign subsidiaries are recorded in Indian Currency
 at the rates of exchange prevailing at the time when the investments
 were made.
 
 G.  The foreign currency assets and liabilities including forward
 contracts are restated at the prevailing exchange rates at the year
 end. The premium in respect of forward contracts is accounted over the
 period of the contract.
 
 12) Borrowing Cost :
 
 A.  Borrowing costs that are attributable to the acquisition or
 construction of qualifying assets are capitalized as part of the cost
 of such assets. A qualifying asset is one that necessarily takes
 substantial period of time to get ready for its intended use.
 
 B.  All other borrowing costs are charged to Profit and Loss Account in
 which they are incurred.
 
 13) Earning per Share :
 
 A.  Basic earnings per share are calculated by dividing the net profit
 after tax for the year attributable to Equity Shareholders of the
 Company by the weighted average number of Equity Shares in issue during
 the year.
 
 B.  Diluted earnings per Share is calculated by dividing net profit
 attributable to equity Shareholders (after adjustment for diluted
 earnings) by average number of weighted equity shares outstanding
 during the year.
 
 14) Provisions, Contingent Liabilities and Contingent Assets :
 
 Provision is recognized when the Company has a present legal or
 constructive 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 reliable estimate can be made. Provisions
 (excluding long term benefits) 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.
 Contingent liabilities are not recognized but are disclosed in the
 notes to the Financial Statements. A contingent asset is neither
 recognized nor disclosed.
 
 15) Taxation :
 
 Current Tax :
 
 Current tax is the amount of tax payable on the taxable income for the
 year as determined in accordance with the provisions of Income Tax Act,
 1961.
 
 Deferred Tax :
 
 Deferred Tax is recognized on timing differences being the difference
 between taxable income and accounting income that originate in one
 period and are capable of reversal in one or more subsequent periods.
 Deferred tax assets are not recognized on unabsorbed depreciation and
 carry forward of losses unless there is virtual certainly that
 sufficient future taxable income will be available against which such
 deferred tax assets can be realized.
 
 16) Cash Flow Statement :
 
 A.  The Cash Flow Statement is prepared by the Indirect Method set
 out in Accounting Standard 3 on Cash Flow Statements and presents the
 cash flows by operating, investing and financing activities of the
 Company.
 
 B.  Cash and Cash equivalents presented in the Cash Flow Statement
 consist of cash on hand and demand deposits with banks.
Source : Dion Global Solutions Limited
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