1. SIGNIFICANT ACCOUNTING POLICIES 1 Background Kuantum Papers Limited("The Company") is a Company incorporated under the provisions of the Companies Act, 1956. The Company is listed on Bombay Stock Exchange.The Company's business primarily consists of manufacture and sales of paper, mainly in the domestic markets. The manufacturing facilities and registered office of the Company are situated in SailaKhurd, District Hoshiarpur in the State of Punjab, with corporate office in Chandigarh. 2 Significant accounting policies a. Basis of brparation of financial statements These financial statements have been brpared and brsented on the accrual basis of accounting and comply with the Accounting Standards referred to in section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014, the relevant provisions of the Companies Act, 2013, pronouncements of the Institute of Chartered Accountants of India and other accounting principles generally accepted in India, to the extent applicable. The financial statements are brsented in Indian rupees. b. Use of estimates The brparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Examples of such estimates include estimation of future obligations under employee retirement benefit plans, estimated useful life of fixed assets, classification of assets / liabilities as current or non-current, etc. Actual results could differ from these estimates. Any revision to accounting estimates is recognised in accordance with the requirements of the respective accounting standards. c. Current and Non-current classification Operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current - non-current classification of assets and liabilities. All assets and liabilities are classified into current and non-current. Assets An asset is classified as current when it satisfies any of the following criteria: - it is expected to be realized in, or is intended for sale or consumption in, the Company's normal operating cycle; - it is held primarily for the purpose of being traded; - it is expected to be realised within 12 months after the reporting date; or - it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date. Current assets include the current portion of non-current financial assets. All other assets are classified as non-current. Liabilities A liability is classified as current when it satisfies any of the following criteria: - it is expected to be settled in Company's normal operating cycle; - it is held primarily for the purpose of being traded; - it is due to be settled within 12 months after the reporting date; or - the Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the counter party, result in its settlement by the issue of equity instruments do not affect its classification. Current liabilities include current portion of non-current financial liabilities. All other liabilities are classified as non-current. d. Fixed assets and debrciation Tangible assets(excluding land) are carried at cost of acquisition less accumulated debrciation. Cost is inclusive of freight, duties, taxes,borrowing cost and other directly attributable normal costs to bring the assets to their working condition for intended use and net of Cenvat/VAT availed. The Company revalued its freehold land. (Refer Note no. 1.10) Intangible assets are recognised if it is probable that the future economic benefits that are attributable to the asset will flow to the Company and the cost of the asset can be measured reliably. These assets are valued at cost which comprises its purchase price and any directly attributable expenditure. Modification or extension to an existing asset, which is of capital nature and which becomes an integral part thereof is debrciated prospectively over the remaining useful life of that asset. The Company is providing debrciation on its tangible fixed assets on straight line method except on second hand captive power plant on which it is on written down value method. Intangible assets in the form of paper brands/trade marks are continued to be amortised under the straight line method over their estimated useful life of 10 years. Upto 31 March 2014, debrciation was provided on pro-rata basis at the rates brscribed under Schedule XIV to the Companies Act, 1956 except: - assets taken on finance lease and leasehold improvements on which debrciation is provided on the straight line method over the useful life of assets as estimated by the management (brsently 3 years) or lease term, whichever is shorter; and - assets individually costing upto Rs. 5,000 were fully debrciated in the year of purchase. Pursuant to Companies Act, 2013 ('the Act') being effective from 1 April 2014, the Company has revised debrciation rates, wherever required, on its tangible fixed assets to align with the useful life specified in Part 'C' of Schedule II to the Act. Consequently, the debrciation charge for the year ended 31 March 2015 is lower by Rs. 538.28 lacs. Further based on transitional provision provided in Schedule II, an amount of Rs. 57.33 lacs (after adjustment of related tax impact) has been debited to opening balance of retained earnings in respect of fixed assets where life has expired as on 31 March 2014. e. Capital subsidy Government grants are deducted from the value of the concerned asset if the grant is specifically received for the purchase, construction or acquisition of the asset. However, if it is received as a contribution towards the total investment or by way of contribution to its capital outlay and no repayment is ordinarily required to be made, such grants are treated as capital reserves. f. Impairment The carrying amounts of assets are reviewed at each balance sheet date in accordance with Accounting Standard 28, 'Impairment of Assets', to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the Statement of Profit and Loss. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined net of debrciation or amortisation, if no impairment loss had been recognised. g. Inventories Inventories are valued at the lower of cost and net realisable value. Cost of inventories includes all costs incurred in bringing the inventories to their brsent location and condition. Cost of raw materials, chemicals and fuels, stores and spare parts, packing materials and loose tools are determined on weighted average cost method. Cost of work-in-process and manufactured goods includes direct materials, direct labour and appropriate overheads. Soda ash (by-product) is measured at its net realisable value. h. Foreign currency transactions The Company accounts for effects of differences in foreign exchange rates in accordance with Accounting Standard 11, notified by the Companies (Accounting Standards) Rules, 2006. Foreign currency transactions are recorded using the exchange rates brvailing on the date of the transaction. Exchange differences arising on foreign currency transactions settled during the year, are recognised in the Statement of Profit and Loss. Monetary assets and liabilities denominated in foreign currency are restated at the exchange rates brvailing at the year end. The resultant differences are recognised in the Statement of Profit and Loss. I. Revenue recognition Revenue from sale of products is recognised on transfer of all significant risk and rewards of ownership to the buyer which coincides with despatch of goods from factory brmises and is recognised on accrual basis. The sales are recorded net of rebates / trade discounts, sales tax and returns and including excise duties. Interest income is recognised on an accrual basis on time proportion method, taking into account the amount outstanding and the rate applicable. Dividend income is recognised when the right to receive payment is established by the balance sheet date. Exports benefits are recognized on an accrual basis at the anticipated realisable value, based on past experience. j. Employee benefits Short term employee benefits All employee benefits payable/ available within twelve months of rendering the service are classified as short term employee benefits. Benefits such as salaries, wages and bonus, short term compensated absences, etc., are recognised in the Statement of Profit and Loss in the period in which the employee renders the related service. Post employment benefits Defined contribution plans The employee's provident fund scheme and employees state insurance scheme of the Company are defined contribution plans. The Company's contribution paid/payable under the schemes are recognised as an expense in the Statement of Profit and Loss during the year in which the employee renders the related service. The Company contributes to the Regional Provident Fund Commissioner to cover its liability towards employees' provident fund dues. Defined benefit plans The Company's gratuity scheme is a defined benefit plan. The brsent value of the obligation under such defined benefit plan is determined based on actuarial valuation carried at the year end using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured at the brsent value of the estimated future cash flows. Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss. The Company contributes to a registered trust administered by it to cover its liabilities towards employees' gratuity. Liability with respect to the Gratuity plan determined as above and any differential between the fund amount as per the trust and the liabilities as per actuarial valuation is recognised as an asset or liability. Assets are recognised only to the extent that it is likely to be adjusted against future contribution. Other long term employee benefits Benefits under the Company's compensated absences plan constitute other long term employee benefits. Other long-term employee benefits are recognised as an expense in the Statement of Profit and Loss for the period in which the employee has rendered services. Estimated liability on account of long-term benefits is actuarially determined based on the projected unit credit method using the yield on government bonds, as on the date of balance sheet, as the discounting rate. Actuarial gains and losses are recognized in the Statement of Profit and Loss. k. Research and development expenditure Revenue expenditure on research and development is charged under respective heads of account in the year in which it is incurred. Capital expenditure on research and development is included as part of fixed assets and debrciated on the same basis as other fixed assets. l. Taxes on income Income tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income-tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period). The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets will be realised in future. However, where there is unabsorbed debrciation or carry forward of losses, deferred tax assets are recognized only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written-up to reflect the amount that is reasonably/ virtually certain (as the case may be) to be realised. Further, no deferred tax assets/liabilities are recognised in respect of timing differences that reverse within the tax holiday period. Minimum Alternative Tax ('MAT') under the provisions of the Income-tax Act, 1961 is recognized as current tax in the Statement of Profit and Loss. The credit available under the Income-tax Act in respect of MAT paid is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the period for which the MAT credit can be carried forward for set-off against the normal tax liability. MAT credit recognised as an asset is reviewed at each balance sheet date. m. Leases Operating leases Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset are classified as operating leases. Operating lease charges are recognised as an expense in the Statement of Profit and Loss on a straight line basis. Finance leases Assets under finance leases are recognised at the fair value of leased asset at the inception of the lease. However, in cases where the fair value of the leased asset from the standpoint of the lessee exceeds the brsent value of minimum lease payments, the asset is recognised at the brsent value of the minimum lease payments. Lease payments are apportioned between the finance charges and the reduction of the outstanding liability. The finance charge is allocated to periods during the lease term at a constant periodic rate of interest on the remaining balance of the liability. n. Provisions and contingencies The Company recognises a provision when there is a brsent obligation as a result of a past event and it is more likely than not that there will be an outflow of resources embodying economic benefits to settle such obligation and the amount of such obligation can be reliably estimated. Provisions are not discounted to its brsent value, and are determined based on the management's best estimate of the amount of obligation required at the year end. These are reviewed at each balance sheet date and adjusted to reflect current management estimates. Provision for onerous contracts, i.e., contracts where the expected unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it, are recognised when it is probable that an outflow of resources embodying economic benefits will be required to settle a brsent obligation as a result of an obligating event, based on a reliable estimate of such obligation. Contingent liabilities are disclosed in respect of possible obligations that have arisen from past events and the existence of which will be confirmed only by the occurrence or non occurrence of future events not wholly within the control of the Company. Contingent liabilities are also disclosed for brsent obligations in respect of which it is not probable that there will be an outflow of resources or a reliable estimate of the amount of obligation cannot be made. When there is a possible obligation or a brsent obligation where the likelihood of an outflow of resources is remote, no disclosure or provision is made. o. Borrowing costs Borrowing costs are interest, ancillary cost and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs incurred by the Company in connection with the borrowing of funds. Borrowing costs are recognised in the Statement of Profit and Loss in the period in which it is incurred, except where the cost is incurred for acquisition, construction, production or development of an asset that takes a substantial period of time to get ready for its intended use in which case it is capitalised up to the date the assets are ready for their intended use. Ancillary costs incurred in connection with the arrangement of borrowings are amortised over the period of such borrowings. p. Earnings per share Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. For calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares except where the results are anti-dilutive. At brsent the Company does not have any dilutive potential equity shares. q. Cash and cash equivalents Cash and cash equivalents comprise cash balances on hand, cash balance with bank, and highly liquid investments with maturity period of three months or less from the date of investment. 1. The Company has established a combrhensive system of maintenance of information and documents as required by the transfer pricing legislation under sections 92-92F of the Income Tax Act, 1961. Since the law requires such information and documentation to be contemporaneous in nature, the Company is in the process of updating the documentation of transactions with associated enterprises during the financial year and expects such records to be in existence latest by the due date as required under that law. The management is of the opinion that the above transactions are at arm's length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation. 2 Previous year figures have been regrouped / reclassified wherever considered necessary. As per our report of even date attached. For B S R & Co. LLP Chartered Accountants ICAI Firm Registration No. 101248W/W-100022 For and on behalf of Board of Directors of Kuantum Papers Limited Jagesh K Khaitan Chairman DIN - 00026264 Roshan Garg President-Finance & CFO Pavan Khaitan Managing Director DIN - 00026256 Vivek Trehan Company Secretary Pravin Tulsyan Partner Membership No.: 108044 Place : Chandigarh Date : 26 May 2015 |