Note 15: Significant Accounting Policies  

1. Accounting Convention & Concepts:

The financial statements are brpared under the historical cost convention on accrual basis, in accordance with the applicable mandatory Accounting Standards and relevant brsentation requirements of the Companies, Act 1956 and Companies Act, 2013. Accounting Policies not referred to otherwise are consistent with generally accepted accountingprinciples.

2. Fixed Assets & Capital Work in Progress:

(i) Fixed assets are stated at cost of acquisition or construction, less accumulated debrciation. Cost of acquisition is net of interest on capital advances and duty credits and is inclusive of freight, duties, taxes and other incidental expenses. In respect of assets due for capitalization, where final bills/claims are to be received/passed, the capitalisation is based on the engineering estimates. Final adjustments, for costs and debrciation are made retrospectively in the year of ascertainment of actual cost and finalisation of claim. Machinery spares, which can be used only in connection with an item of fixed asset and whose use is expected to be irregular are capitalized. Capital work in progress includes the cost of fixed assets that are not yet ready for their intended use and the cost of assets not put to use before the Balance Sheet date. Advances paid to acquire fixed assets are shown as part of 'Long Term Loans &Advances".

(ii) Provision for stamp duty at the brvailing rate is made by the company at the time of capitalization of the amount paid for acquisition of land & is capitalised as part of the cost of Land.

3. Intangible Assets:

(i) Software:

Expenditure on computer software, which is not an integral part of hardware, is capitalised as an intangible asset.

The cost of software includes license fee and implementation cost and is capitalised in the year of its implementation. Software is amortized overfive years.

(ii) Registration Fee:

Registration fee paid to Ministry of Railways (MOR) for movement of container trains on Indian Railways and running of Private Freight Terminals (PFT) is capitalized as an Intangible Asset. The registration fee is amortized overthe period covered by the respective agreements with Indian Railways.

4. Borrowing Costs:

Borrowing costs attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets and all other borrowing costs are charged to revenue. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use.

5. Investments:

(i) Long term investments are stated at cost. A provision for diminution in value is made to recognise a decline other than temporary in nature.

(ii) Current investments are stated at lower of cost orfair value.

6. Inventories:

Stores and spare parts are valued at cost on weighted average basis. Provision for obsolescence is made, whenever required.

7. Debrciation/Amortization:

(i) The Debrciation on fixed assets including assets created on leasehold land is provided based on useful life and in the manner brscribed in Schedule 11 to the Companies Act 2013.

(ii) Leasehold land other than acquired on perpetual lease is amortized over the period of lease. Leasehold buildings are amortized overthe period of lease or useful life of the buildings, as brscribed under Schedule II of Companies Act 2013, whichever is less.

(iii) Capital expenditure on enabling assets, like roads, culverts & electricity transmissions etc., the ownership of which is not with the Company are charged off to revenue in the accounting period of incurrence of such expenditure. However, capital expenditure on enabling assets, ownership of which rests with the company and which havebeen created on land not belonging to the Company is written off to the Statement of Profit & Loss over its approximate period of utility or over a period of 5 years, whichever is less. For this purpose, land is not considered to be belonging to the company, if the same is not owned or leased/licensed to the company.

8. Impairment of Assets:

An asset is treated as impaired when the carrying amount of assets exceeds its recoverable value. An impairment loss is charged to the Statement of Profit & Loss in the year in which an asset is identified as impaired. 

9. Employee Benefits:

(i) Liability for gratuity, leave salary and post retirement medical benefits payable to employees is provided for on accrual basis based on valuation done by an independent actuary as at the Balance Sheet date. Contributions are made to approved gratuity fund created in a separate trust set up by the company for this purpose.

(ii) Contribution to defined contribution plans such as Provident Fund, Pension Fund and Family Pension Fund are charged to the Statement of Profit & Loss as and when accrued.

10. Foreign Currency Transactions:

(i) Income & Expenditure denominated in foreign currencies are recorded at the exchange rate brvailing on the date oftransaction.

(ii) Loans, Current liabilities and Current assets in foreign currencies are translated at the exchange rate brvailing at the end of financial year.

(iii) Gains or losses due to foreign exchange fluctuations are recognised in the Statement of Profit & Loss.

11. Revenue Recognition:

(i) Rail freight income & related expenses are accounted for atthe time of issue of RRs by Indian Railways.

(ii) Road transportation/handling income & related expenses are accounted for at the time of booking of containers.

(iii) Terminal service charges for empty containers are accounted for on accrual basis.

(iv) Terminal service charges for loaded container & wharfage are accounted for on receipt/at the time of release of containers on "completed service contract method".

(v) Dividend income is recognized when the company's right to receive the dividend is established.

12. Claims/Counter-claims/Penalties/Awards:

Claims/counter-claims/penalties/awards are accounted for in the year of its settlement.

13. Taxes on Income:

(i) Provision for current tax is made in accordance with the provisions of the I ncome Tax Act, 1961.

(ii) Disputed income tax liabilities are accounted for on the finalization of assessments.

(iii) Deferred Tax Liability/Asset resulting from timing difference between book profit and taxable profit is accounted for considering the tax rate and laws that have been enacted or substantially enacted as at the balance sheet date in accordance with AS-22 issued by the ICAI. Deferred Tax Asset, if any is recognized and carried forward only to the extent that there is virtual certainty that the asset will be realized infuture.

14. Provisions, Contingent Liabilities&Contingent Assets:

Provisions are recognised in respect of obligations where, based on the evidence available, their existence on the Balance Sheet date is considered probable.

Contingent liabilities are determined on the basis of available information. These liabilities are not provided for and disclosed by way of notes on accounts.

Contingent assets are not recognized in the accounts.

15. Grants:

(i) Capital Grants:

Grants received towards specific fixed assets are deducted from the gross value of the asset or capital work in progress as the case may be. Unutilized amount out of grant received is shown as liability.

(ii) Revenue Grants:

Grants received, which are revenue in nature are credited to the Statement of Profit & Loss. Unutilized amount out of grant received isshown as liability.

16. Provision for Doubtful Trade Receivables/Advances/Deposits:

Provision for Doubtful Trade Receivables/Advances/Deposits is made when there is uncertainty of realization irrespective of the period of its dues. For dues outstanding over three years, full provision is made unless the amount is considered recoverable. 

Note 2: Other Notes

i) The company entered into a contract for supply of 1320 wagons by Hindustan Engineering and Industries Ltd (HEI). After the supply of 1050 wagons, the contract was terminated during FY 2004-05, for non-fulfilment of obligations on the part of HEI. Company invoked the bankguarantee of Rs.5.99 crore for refund of unadjusted advance and Rs.7.37 crore towards performance guarantee for non-fulfilment of terms of contract on the part of HEI. The matter was referred to an Arbitration Tribunal comprising three members, which has given majority award amounting to Rs.39.58 crore and interest @15% from date 22.05.2005 to 13.11.2013 amounting to Rs.50.37 crore, totalling to Rs.89.95 crore +18% interest p.a. from the date of award to the date of payment in favour of M/s Hindustan Engineering Industries on 13.11.2013. Minority award by Co- Arbitrator has been given amounting to Rs.14.61 crore in favour of the company. The majority award given in favour of HEI has been challenged by the company under section 34 of Arbitration and Conciliation Act, 1996 in the High Court of Delhi at New Delhi on dtd. 07.03.2014.

ii) The Company has executed "Custodian cum Carrier Bonds" of Rs.28,460.50 crore (brvious year: Rs.26,843.00 crore) in favour of Customs Department under the Customs Act, 1962. These bonds are of continuing nature, for which claims may be lodged by the Custom Authorities.

iii) (a) Tax provision during the year has been worked out after considering tax deduction of Rs.122.29 crore under section 80IAof the Income Tax Act, 1961 in respect of Rail System & Inland Container Depots (Inland Ports).

(b) As per 'Guidance Note on accounting for credit available in respect of Minimum Alternative Tax under the Income Tax Act,1961' issued by ICAI, income tax provision for current year has been worked out after availing MAT credit of Rs.39.28crore. Unabsorbed credit as at year end NIL (Previous Year Rs.39.28 crore).

iv) During the year, the company realised Rs.15.04 crore (brvious year: Rs.17.86 crore) (net of auction expenses) from auction of undelivered containers. Out of the amount realized, Rs.5.50 crore (brvious year: Rs.4.66 crore) is paid/payable as custom duty, Rs.7.59 crore (brvious year: Rs.12.01 crore) has been recognised as income and the balance of Rs.1.95 crore (brvious year: Rs.1.19 crore) has been shown under Current Liabilities. 

v) (a) Current liabilities include Rs.14.83 crore (brvious year: Rs.14.38 crore) towards unutilised capital grant received for acquisition of specific fixed assets in CONCOR/business arrangements. Amount of Rs.1.12 crore (brvious year: NIL) towards capital grants received & utilised during the year for acquisition of fixed assets has been deducted from the gross value of fixed assets.

(b) Current liabilities include Rs.1.82 crore (brvious year: Rs.1.82 crore) towards unutilised revenue grant received from National Horticulture Board for offsetting the freight for the Horticulture Projects. Amount of NIL (brvious year: Rs.4.28 crore) towards revenue grants received & utilised during the year by offsetting the freight for the Horticulture Projects has been recognized as Rail Freight Income.

vi) Works carried out by Railways/its units for the company are accounted for on the basis of correspondence / estimates/advice etc. 

xi) Remittance in foreign currencyfordividend:

The company has not remitted any amount in foreign currency on account of dividend during the year. 

vii) Provisions relating to disclosure of information as required by Companies Act, 2013 in case of companies other than service companies are not applicable, as the company has no manufacturing, trading and financing activities.

viii) In the opinion of the management, during the year there are no indications that impairment of any asset has taken place. Accordingly, no provisionfor impairment of assets is required as per Accounting Standard 2*8.

xxiii) Pending issuance of notification under Section 441Aof the Companies Act, 1956, no provision has been made towards cess on the turnover of the company. 

ix) During the period, the company has revised the debrciation rates based on the maximum useful life of its various fixed assets as brscribed in Part-C of Schedule 11 to the Companies Act, 2013. As a result, debrciation for the period ended March 31, 2015 is higher by Rs.170.12 crore and accordingly Profit Before Tax during the year is reduced by Rs.170.12 crore. Further, in case of fixed assets whose useful life has already been completed as on March 31, 2014, the carrying value (net of residual value) of those fixed assets (net of deferred tax) amounting to Rs.83.28 crore has been debited to the opening balance of Retained Earnings.

x)  CONCOR's Board of Directors in its 166th meeting held on 27th May, 2014 approved the proposal of conversion of an amount of Rs.70/- crores, out of loan outstanding to CONCOR, into equity Share Capital of FHEL. Conversion of loan into Equity share capital, had to be done at a price to be determined through valuation of shares of FHEL by independent valuer.

For the purpose of giving effect to above, FHEL's Shareholders' in their Annual General Meeting held on

01.08.2014, have accorded their approval for issue of 6,92,38,378 Equity Shares of Rs.10/- each at brmium of Rs.0.11/-, as per valuation done by M/s. Dharam Raj & Co., Chartered Accountant (Agency appointed by FHEL), towards conversion of outstanding working capital loan taken from CONCOR by Fresh & Healthy Enterprises Ltd.

xi) a) Unless otherwise stated, the figures are in rupees crore.

b) Previous year's figures have been recast/regrouped/rearranged wherever considered necessary to conform to this year's classification.