2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A BASIS OF ACCOUNTING

"These financial statements have been brpared in accordance with the generally accepted accounting principles in India under the historical cost convention on accrual basis, These financial statements have been brpared to comply in all material aspects with the accounting standards notified under Section 211(3C) read with Companies (Accounting Standards) Rules, 2006, as amended and the other relevant provisions of the Companies Act, 1956.

All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and 12 months or other criteria as set out in the Schedule VI to the Companies Act, 1956. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company ascertains its operating cycle."

B USE OF ESTIMATES

The brparation of financial statements in conformity with Generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosures relating to contingent liabilities and assets as at the balance sheet date and the reported amounts of income and expenses during the year. Examples of such estimates include provision for doubtful debts, employees retirement benefit plan, provision for income and other taxes, useful life of fixed assets etc. Actual results could differ from the estimates made. Any revision to accounting estimates is recognized prospectively in current and future periods.

C TANGIBLE FIXED ASSETS and DEbrCIATION

"Fixed assets are stated at cost less accumulated debrciation and impairment losses. Cost comprises the purchase price less rebates and discounts directly attributable cost to its working condition for its intended use, including broperative expenses. The effects of changes in foreign exchange rates are being charged to statement of profit and loss.

Debrciation on fixed assets is provided on Straight Line Method at the rates brscribed under the Companies Act, 1956. Individual assets costing less than Rs.5000/- each are debrciated fully during the year of purchase."

D IMPAIRMENT OF ASSET

"The carrying amounts of assets are reviewed to see 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 brsent value at the weighted average cost of capital after impairment, debrciation is provided on the revised carrying amount of the asset over its remaining useful life.

A brviously recognized impairment loss is increased or decreased based on reassessment of recoverable amount, which is carried out if the change is significant. However the carrying value after reversal is not increased beyond the carrying value that would have brvailed by charging usual debrciation if there was no impairment.
"

E LEASES

Where the company is lessor
"The Company has leased certain tangible assets and such leases where the Company has substantially retained all the risks and rewards of ownership are classified as operating leases. Lease income on such operating leases are recognised in the Statement of Profit and Loss on a
straight line basis over the lease term which is rebrsentative of the time pattern in which benefit derived from the use of the leased asset is diminished. "

Where the company is lessee

"Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the Statement of Profit and Loss on a over the period of the lease determined in the respective agreements which is rebrsentative of the time pattern in which benefit derived from the use of the leased asset.

The Company leases certain tangible assets and such leases where the Company has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the inception of the lease at the lower of the fair value of the leased asset and the brsent value of the minimum lease payments.

Each lease payment is apportioned between the finance charge and the reduction of the outstanding liability. The outstanding liability is included in other long-term borrowings. The finance charge is charged to the Statement of Profit and Loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period."
18
F REVENUE RECOGNITION

"a) Sales revenues are accounted on delivery of goods. Delivery is reckoned on the handing over of the goods to the transporter, who as custom of trade acts as agent of customer.

b) Other Income is recognized on accrual with due consideration for significant uncertainty if any in the realization of such income."

G INVENTORIES

"a) Closing Stock of Inventories are valued at lower of cost which comprises purchase price, freight, other attributable cost less rebates and discounts determined on FIFO basis or net realizable value. Cost includes inward freight and applicable taxes not eligible for credit.

b) All items of Stock which are considered to be damaged, unmarketable or unserviceable and have become otherwise obsolete are valued at the estimated net realizable value.
"

H INVESTMENTS

Investments that are readily realizable and intended to be held for not more than a year are classified as current investment. All other investments are classified as long term investments. Current investments are carried at lower of cost and fair value determined on individual investment basis. Long term investments are carried at cost, less provision for diminution (other than temporary) in value.

I EMPLOYEE BENEFITS

"a) The liability for gratuity, considered as defined benefit is determined on the basis of actuarial valuation at the end of the year using projected unit credit method. Actuarial gains and losses which comprise experience adjustments and effect of change in actuarial assumptions are recognized in the statement of profit and loss.

b) In respect of defined contribution plan the company makes the stipulated contributions in respect of employees to the respective authorities under which the liability of the company is limited to the extent of the contribution.

c) Liabilities in respect of compensated absences are provided for in the year in which such benefit accrues net of encashments made.
"

J INCOME TAX

"a) Taxes on Income for the current year is determined on the basis of taxable income and after considering the various deduction available under the Income Tax, 1961

b) Deferred Tax Asset/Liability resulting from timing differences between the book profits and Income for tax purpose is accounted for at the appropriate tax rate. Deferred tax asset are recognized only if there is reasonable certainty that they will be realized and are reviewed for the appropriateness of the respective carrying amount at each balance sheet date. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. "

K THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATE

"Foreign currency transactions are recorded at the rate brvalent on the date of transactions. Monetary Assets and liabilities denominated in foreign currency are stated at closing rates at the year end and the resultant differences are recognized in the statement of Profit and Loss.
"

L PROVISION, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

Provisions involving substantial degree of estimation in measurement are recognized when there is a brsent obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized but are disclosed in the notes. Contingent Assets are neither recognized nor disclosed in the financial statements.

M EARNING PER SHARE

Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity share shareholders (after deducting brference dividends and attributable taxes if any) by the weighted average number of equity shares outstanding during the period. Partly paid equity shares (if any) are treated as a fraction of an equity share to the extent that they were entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average numbers of equity shares outstanding during the period are adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and consolidation of shares if any. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

N BORROWING COSTS

Borrowing costs attributable to acquisition and construction of qualifying assets are capitalized as part of the asset up to the date when such asset is ready for its intended use. Other borrowing costs are charged to the statement of profit and loss.

O GOVERNMENT GRANTS AND SUBSIDIES:

Grants and subsidies from the government are recognized when there is reasonable assurance that the grant / subsidy will be received and all attached conditions will be complied with. Grants related to specific fixed assets are brsented in the Balance Sheet by showing such grant as deduction from the fixed asset concerned. Grants received with reference to total investment in an undertaking are credited to capital reserve.
P SEGMENT REPORTING

i. The company identifies business segment as the primary segment as per AS-17. Under the primary segment, there are two reportable segments viz., Trading and Manufacturing. These are identified considering the nature of the products, the differing risks and returns and their contribution to company's sales and revnue profits. The valuation of inter segment transfers are based on the comparable market prices of the Transfering segment.
ii. The company caters mainly to the needs of the domestic market and thus there are no reportable geographical segments.
iii. Costs are allocated to the respective segment based upon the actual incidence of respective cost. Unallocated items include general corporate income and expenses.
iv. The company brpares its segment information in conformity with accounting policies adopted for brparing and brsenting the financial statements of the company as a whole.

DISCLOSURE PURSUANT ACCOUNTING STANDERED 15 (REVISED)-EMPLOYEES BENIFITS

The Company has during the year funded the gratuity liability ascertained on actuarial basis, wherein every employee who has completed five years or more of service is entitled to gratuity on retirement or Resignation or Death calculated at 15 days salary for each completed year of service.

The Disclosure relating to defined benefit plans under AS-15:

Particulars For the year ended 31 March 2013 For the year ended 31 March 2012 For the year ended 31 March 2011 For the year ended 31 March 2010
Amount (Rs) Amount (Rs) Amount (Rs)
I. Table Showing Change in brset Value Obligation :
Liability at the beginning of the year 12,391,869 8,569,960 6,117,672 5,514,852
Interest Cost 1,053,309 685,597 489,414 427,401
Current Service Cost 1,924,446 1,200,542 868,825 856,722
Benefit Paid (342,865) (180,635) (226,285) (333,063)
Past Service Cost (Vested Benefit) - - 78,214 -
Actuarial (gain)/loss on obligations 1,888,748 2,116,405 1,242,120 (348,240)
Liability at the end of the year 16,915,507 12,391,869 8,569,960 6,117,672
II. Change in Fair value of Plan Assets :
Fair Value of Plan Assets at the beginning of the year 12,168,471 8,619,916 5,522,489 -
Expected Return on Plan Assets 1,034,320 689,593 441,799 -
Contributions 67,510 3,012,217 2,881,537 5,506,310
Benefit Paid (342,865) (180,635) (226,285) (333,063)
Actuarial gain/(loss) on Plan Assets 390,368 27,380 376 349,242
Fair Value of Plan Assets at the end of the year 13,317,804 12,168,471 8,619,916 5,522,489
Total Actuarial Gain/(Loss) To Be Recognised (1,498,380) (2,089,025) (1,241,744) 697,482
III. Actual Return on Plan Assets : For the year ended 31 March 2010
Expected Return on Plan Assets 1,034,320 689,593 441,799 -
Actuarial gain/(loss) on Plan Assets 390,368 27,380 376 349,242
Actual Return on Plan Assets 1,424,688 716,973 442,175 349,242
IV. Amount Recognised in the Balance Sheet :
Liability at the end of the year 16,915,507 12,391,869 8,569,960 6,117,672
Fair Value of Plan Assets at the end of the year 13,317,804 12,168,471 8,619,916 5,522,489
Difference (3,597,703) (223,398) 49,956 (595,183)
Amount Recognised in the Balance Sheet (3,597,703) (223,398) 49,956 (595,183)
V. Expenses Recognised in the Income Statement :
Current Service Cost 1,924,446 1,200,542 868,825 856,722
Interest Cost 1,053,309 685,597 489,414 427,401
Expected Return on Plan Assets (1,034,320) (689,593) (441,799) -
Past Service Cost (Vested Benefit) Recognised - - 78,214 -
Actuarial (Gain) or Loss 1,498,380 2,089,025 1,241,744 (697,482)
Expense Recognised in Pand L 3,441,815 3,285,571 2,236,398 586,641
VI. Balance Sheet Reconciliation
Opening Net Liability 223,398 (49,956) 595,183 5,514,852
Expense as above 3,441,815 3,285,571 2,236,398 586,641
Employers Contribution (67,510) (3,012,217) (2,881,537) (5,506,310)
Amount Recognised in Balance Sheet 3,597,703 223,398 (49,956) 595,183
VII Category of Assets as a percentage of total plan assets
Insurance company 100% 100% 100% 100%
VIII. Assumptions :
Discount Rate 8.50% 8.50% 8.00% 8.00%
Rate of Return on Plan Assets 8.50% 8.50% 8.00% 8.00%
Salary Escalation 10.00% 6.50% 6.00% 6.00%
Attrition Rate 2.00% 2.00% 1.00% 1.00%

"The disclosure of brsent value of defined benefit obligation, the fair value of plan are furnished for financial years commencing for the year in which Accounting Standard 15 was adopted for compliance by the company. The non-disclosure of such information for periods prior to that date has no financial impact.
"

Defined Contribution Plans

Contribution to Defined Contribution Plans, recognised as an expense for the year is as under:

Particulars For the year ended 31 March 2013 For the year ended 31 March 2012
Amount (Rs) Amount (Rs)

Employer's Contribution to Provident Fund (includes pension fund) 9,321,334 6,783,475
Employer's Contribution to Employee State Insurance 2,016,938 1,625,810

Total 11,338,272 8,409,285

Shankara Infrastructure Materials Limited is one of India's brmier and largest distributor of a wide range of steel pipes and tubes. The Company also manufactures MS pipes,GI Pipes and Precision tubes at its manufacturing unit at Hyderabad. The ISO 9001 Company is sbrad across nine states in India.