SIGNIFICANT ACCOUNTING POLIsCt IES

(Forming part of Financial Statements for the year ended 31st March, 2015)

1. COMPANY'S OVERVIEW

Shivalik Bimetal Controls Limited referred to as "Shivalik" is a widely-held public limited Company which was incorporated in the year 1984 and has been in commercial production since October 1986. "Shivalik's " manufacturing Units are located at Chambaghat, Solan, in the state of Himachal Pradesh, India. The Company's shares are listed on Bombay Stock Exchange.

"Shivalik" is engaged in the business of manufacturing & sales of Thermostatic Bimetal / Trimetal strips, components and other clad materials, EB welded products, Cold Bonded Clad Strips and Parts etc., The application of "Shivalik"s Products are mainly in Switchgears, Circuit Breakers and various other Electrical and Electronic devices. The Company's products are exported to over 40 Countries around the world.

2. SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of Preparation of Financial Statements

These financial statements are brpared in accordance with Generally Accepted Accounting Principles (GAAP) under the historical cost convention on accrual basis. GAAP comprises mandatory accounting standards notified under the relevent provisons of the Companies Act, 2013. The Financial statements are brsented in Indian Rupee rounded off to the nearest Rupees in thousands.

2.2 Use of Estimates

The brparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires the management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures of contingent liabilities on the date of financial statements and the reported amounts of revenues and expenses during the reporting period.

Management believes that the estimates used in the brparation of financial statements are prudent and reasonable. Accounting estimates could change from period to period.

2.3 Inventories

Inventories are valued at the lower of cost and net realizable value, after providing for obsolescence, wherever considered necessary as under:

a. Raw materials, stores and spares: At cost, on "FIFO" basis;

b. Work-in-progress /Semi-Finished: At cost plus related cost of conversion including appropriate overheads;

c. Finished goods: At cost plus related cost of conversion including appropriate overheads and excise duty paid/ payable on such goods; and

d. Saleable Scrap is valued at estimated realizable value

2.4 Cash and cash equivalents

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.

2.5 Cash Flow Statements

Cash flows are reported using the indirect method, whereby Profit before tax is adjusted for the effects of transactions of a non cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating, financing and investing activities of the company are segregated.

2.6 Research & Development Expenditure

Expenditure in the nature of revenue, incurred for Research & Development relating to business, is charged to profit & loss account.

2.7 Revenue Recognition

a. Sales are recognized, net of returns and trade discount, on transfer of significant risks and rewards of ownership to the buyer, that coincides with the reliability and reasonableness to expect ultimate collection, which is generally on dispatch of goods. Sales include excise duty but excludes sales tax and value added tax.

b. For other incomes, the Company follows the accrual basis of accounting except interest on delayed payment from customers where there is no reasonable certainty regarding the amount and / or its Collectability.

2.8 Export Benefits

a. Imports entitlements/Export obligations under Advance Licenses are accounted for at the time of purchase of Raw Materials/ Export sales.

b. Other export incentives are accounted for as and when the claims thereof have been admitted by the authorities, at a value which can be fetched in the market.

2.9 Fixed Assets, Intangible Assets, Capital Work-in-Progress and Debrciation

a. Tangible Assets are stated at cost (Net of CENvATA/alue added tax, wherever applicable) less accumulated debrciation/amortization. Cost comprises the purchase price, freight, foreign exchange adjustments arising from exchange rate variations, borrowing cost attributable to the Qualifying Asset and any other directly attributable cost of bringing the asset to working condition for its intended use.

Subsequent expenditures related to an item of tangible assets are added to its book value only if they increase the future benefits from the existing assets beyond its brviously assessed standard of performance.

b. Intangible assets are recorded at consideration paid for acquisition of such assets and are carried at cost less accumulated debrciation or amortization and impairment, if any.

c. Capital work-in-progress rebrsents the cost of tangible assets that are not yet ready for their intended use at the reporting date.

d. Debrciation on Fixed Assets is provided based on useful lifes of assets as brscribed in Schedule-II to Companies Act 2013 except in respect of followings assets where estimated useful life is different than these mentioned in Schedule II are as follows:-

i) Plant & Machinery * 15-30 years

ii) Dies & Tools 2 years

iii) Assets costing below Rs. 5,000/- 1 year

iv) Intangibles 6 years

* For certain Plant & Machineries where the useful life of assets is different from those brscribed under Part C of Schedule II of Companies Act 2013, an internal assessment & Independent technical evaluation has been carried out by external Chartered Engineer. The management believes that the useful lives as given above, best rebrsents the period over which Company expects to use these assets.

e. Debrciation for double shift/ Triple shift is charged/ provided additionally for the period during which the assets are used for double or triple shift, respectively in accordance with Part C of Schedule II of Companies Act 2013

2.10 Foreign Currency Transactions

a. Foreign currency transactions are accounted for at the exchange rate brvailing on the transaction date.

b. Foreign currency denominated monetary assets and liabilities are converted at the exchange rate brvailing on the Balance Sheet date and the resultant difference is charged/ credited to Profit & Loss account.

c. Non-monetary assets and non-monetary liabilities denominated in a foreign currency, measured at historical cost are translated at the exchange rate brvalent at the date of transaction and any translation gain or losses are adjusted to the costs of the relevant assets according to newly inserted para 46A of Accounting Standard -11 vide notification issued by the Ministry of Corporate Affairs.

2.11 Forward Contracts

a. The Company uses foreign exchange forward contracts to hedge its exposure to movements in foreign exchange rates. The use of these foreign exchange forward contracts reduces the risk or cost to the Company and the company does not use those for trading or speculation purposes.

b. In case of items which are covered by forward exchange contracts, the difference between the year end rate and rate on the date of the contract is recognised as exchange difference and the brmium paid on forward contracts is recognised over the life of the contract.

c. In respect of Commodity Hedging transactions, gain/ losses on settlement are recognized in the profit & loss account.

2.12 Investments

Current investments are carried at lower of cost and fair value, computed category wise. Long -term Investments are stated at cost, unless there is a decline, other than temporary in the value of Investments.

2.13 Employees' Benefits

a. Defined Contribution Plans:

The Company has contributed to State Governed Provident Fund scheme, Employees State Insurance scheme and Employee Pension Scheme which are defined contribution plans. Contribution paid or payable under the scheme is recognized as expense during the period in which employee renders the related service.

b. Defined Benefit Plans:

The employees' gratuity is a defined benefit plan. The brsent value of the obligation under such plan is determined based on the Actuarial valuation using the projected unit credit method which recognizes each period of service as giving rise to an additional unit of employee benefit entitlement and measures each unit separately to build up the financial obligation. The Company has an employee gratuity fund managed by Life Insurance Corporation of India (LIC). The gains or losses are charged to Profit and Loss Account.

c. Liability in respect of leave encashment is provided for based on Actuarial valuation basis using the same projected unit credit method as above.

d. Compensation to employees, who opted for retirement under the voluntary Retirement Scheme of the company, is charged to the statement of Profit & Loss in the year of exercise of option by the employee.

2.14 Borrowing Costs

a. Borrowing Costs that are attributable to the acquisition or construction of qualifying assets as defined in Accounting Standard-16 are capitalized as part of the cost of such asset till such time as the asset is ready for its intended use. A qualifying asset is an asset that necessarily requires a substantial period of time to get ready for its intended use. All other borrowing costs are recognized as expenses in the period in which they are incurred.

b. Borrowing costs include interest and exchange difference arising from currency borrowing to the extent they are regarded as an adjustment to the interest cost.

2.15 Inter unit Transactions

The Inter unit sale / purchase of materials/Job work transactions are accounted for at the brvailing market prices. Annual Accounts are reported excluding inter-unit transfers/transactions.

2.16 Earnings Per share

Basic Earnings per Share is computed by dividing net profit or loss for the period attributable to equity shareholders by the weighted average number of Equity Shares outstanding during the period.

2.17 Taxes on Income

Tax on income for the current period is determined on the basis of taxable income and tax credits/ benefits computed in accordance with the provisions of the Income Tax Act 1961.

Deferred tax charge/ credit is recognized on timing differences between the accounting income and the taxable income for the year, and quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date.

Deferred tax assets are recognized and carried forward to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

Deferred tax assets and liabilities are measured at the tax rates that has been enacted or substantively enacted at the balance sheet date.

2.18 Impairment

The Carrying amounts of assets are reviewed at each Balance Sheet date and if there is any indication to the effect that the recoverable amount of the Asset/ CGU (Cash Generating Unit) is less than its carrying amount, the difference is treated as "Impairment Loss". The recoverable amount is greater of the asset's net selling price and value in use.

2.19 Provision, Contingent Liabilities and Contingent Assets

Provisions are recognized for liabilities that can be measured only by using substantial degree of estimation, if

a. the company has a brsent obligation as a result of past event,

b. a probable outflow of resources is expected to settle the obligation; and

c. the amount of the obligation can be reliably estimated. Contingent liability is disclosed in case of

i. a brsent obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation;

ii. a brsent obligation arising from past events, when no reliable estimate is possible; and

iii. a possible obligation arising from past events where the probability of outflow of resources is not remote. Contingent assets are neither recognized nor disclosed.

Provisions, contingent liabilities and contingent assets are reviewed at each Balance Sheet date.

33. The Company was issued SCNs (Show Cause Notices) w.r.t. admissibility of Cenvat Credit amounting to Rs.51,533 thousands of Service Tax availed (Previous Year Rs. 49,195 thousands) and Rs.1,787 thousands (Previous Year Rs. 1,787 thousands) towards cenvat credit of excise duty and Rs.345 thousands (Previous Year Rs. 345 thousands) towards demand of excise duty on "dies and tools written off" by the Company.

The Company has sought legal opinion on the stated issue and has been advised that the SCNs issued by the department are bad in Law as such not tenable. Accordingly , the company has submitted replies to the referred SCNs, however the final decision from the appropriate authority is pending.

34. Customs Duty not provided for in respect of materials lying in Bonded Warehouses / Materials in Transit as on Balance Sheet date, is of Rs.25,142 thousands inclusive of Cenvatable amount of Rs. 19,229 thousands (Previous Year Rs.9,983 thousands inclusive of Cenvatable amount of Rs.7,583 thousands). However, the above policy has no impact on the operating results of the Company.

35. Foreign currency exposures (Net) that are not hedged by forward contracts as on 31st March, 2015 amount to Rs. 2,89,285 thousands (Previous year ^2,21,802 thousands).