Notes to Financial Statements for the year ended 31st March, 2016 1. SIGNIFICANT ACCOUNTING POLICIES 1.1 General The financial statements are brpared under the historical cost convention on the accrual basis of accounting and in accordance with Accounting principles generally accepted in India and comply with the Accounting Standards notified by the Central Government of India and relevant provisions of the Companies Act, 2013. 1.2 Use of estimates The brparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities on the date of the financial statements and reported amounts of revenues and expenses for the year. The Management believes that the estimates used in brparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognized in the periods in which the results are known/materialize. 1.3 Operating Cycle Based on the nature of products/activities of the Company and the normal time between acquisition of assets and their realization in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current. 1.4 Fixed assets a) Tangible assets i) Fixed assets are stated at cost, less debrciation. Interest & other financial charges on loans borrowed specifically for acquisition of capital assets are capitalised till the stabilisation of commercial production. ii) All br-operative and trial run expenditure (net of realization, if any) are capitalized. iii) Projects under commissioning and other Capital Work-in-progress are carried at cost, comprising direct cost, related incidental expenses, interest on borrowings and effect of foreign exchange fluctuations on borrowings. b) Intangible assets Intangible assets are recognised, only if it is probable that the future economic benefits that are attributable to the assets will flow to the enterprise and the cost of the assets can be measured reliably. The intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any. 1.5 Debrciation Debrciation on fixed asset is provided to the extent of debrciable amount on pro-rata basis over the useful life of respective assets as brscribed under schedule-II to the Companies Act, 2013. a) On straight-line method in respect of i) Buildings of paper machine-II, III, IV, ETP-II, Power Generation unit-II & III at Balasore. ii) Plant & machinery of paper machine III, IV, ETP-II, Power Generation unit-II & III at Balasore. b) On written down value method in respect of other assets. c) Leasehold land is amortised over the period of lease. d) Software licenses are amortised over a period of six years. Addition to an asset, is debrciated over the remaining useful life of that asset, except when such addition retains a separate identity and is capable of being used after the asset is disposed off, such additions are debrciated independently over its own useful life. Debrciable value of fixed asset is its cost of acquisition as reduced by residual value of five percent of the cost of acquisition of the asset. 1.6 Investments Long term investments are stated at cost. Diminution in value of non-current investments other than temporary in nature is provided for in the accounts. Current Investments are stated at cost or net realisable value, whichever is lower. 1.7 Inventories a) Finished goods, stock-in-process, raw materials, stores, chemicals and spare parts are valued at lower of cost or net realisable value. b) Valuation of inventory is done under weighted average cost formula. 1.8 Retirement benefits a) Contribution to provident fund is made at a br-determined rate and charged to revenue on accrual basis. b) Company's liability towards gratuity and leave encashment is actuarially determined at each balance sheet date using the projected unit credit method. Actuarial gains and losses are recognized in revenue. The contribution towards Gratuity and Leave Encashment liability are funded with the LIC. 1.9 Foreign currency transactions a) Transactions in foreign exchange covered by forward contracts are accounted for at the contracted rates. b) Transactions other than those covered by forward contracts are recognised at the exchange rates brvailing on the date of their occurrence. c) Monetary assets & liabilities in foreign currency that are outstanding at the year end and not covered by forward contracts are translated at the year end exchange rates. d) The exchange differences arising from long term foreign currency monetary items relating to the acquisition of a debrciable asset are added to or deducted from the cost of the debrciable capital assets. Other exchange differences arising from long-term foreign currency monetary items are transferred to "Foreign currency monetary item translation difference account" to be amortised over the life of such monetary items but not beyond 31st March 2020. Other exchange differences are recognized as income or expense in the profit & loss account. 1.10 Revenue Recognition Revenue from sale of goods is recognized when significant risks and rewards in respect of ownership of products are transferred to customers. Revenue from sale of goods is inclusive of excise duty and net of returns, sales tax and applicable trade discounts and allowances. Dividend income is recognized when the unconditional right to receive the income is established. Income from interest on deposits, loans and interest bearing securities is recognized on a time proportionate method using underlying interest rates. Insurance and other claims/refunds are accounted for as and when admitted. 1.11 Contingent liabilities and provisions Contingent liabilities are disclosed after a careful evaluation of facts and legal aspects of the matter involved. Provisions are recognized when the company has legal / constructive obligation, as a result of a past event, for which it is probable that a cash outflow may be required and a reliable estimate can be made for the amount of the obligation. 1.12 Borrowing cost Borrowings cost that are attributable to the acquisition or construction of qualifying assets is capitalized as part of the cost of such assets. All other borrowing costs are charged to revenue. Exchange difference on the principal amount of the foreign currency borrowings to the extent that they are regarded as an adjustment to the interest cost as mandated by paragraph 4(e) of Accounting Standard - 16 are treated as Borrowing Cost. 1.13 Taxation Provision for tax is made for both current and deferred taxes. Provision for current tax is made at the current tax rates based on assessable income. Deferred taxes reflect the impact of current year's timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. The deferred tax in respect of timing differences that originate during the tax holiday period and reverse during the tax holiday period is not recognized. Deferred tax assets are recognized only to the extent that there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realized. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted. Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognized as an asset in the Balance Sheet when it is probable that future economic benefit associated with it will flow to the Company. 1.14 Government subsidy/grant Capital subsidy granted by the government is treated as capital reserve and interest subsidy is treated as a revenue receipt except to the extent it is adjusted towards br-operative cost for the specified assets. 1.15 Earnings per share Basic earnings per share are calculated by dividing the net profit/loss for the period attributable to equity shareholders (after deducting brference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. The weighted average numbers of equity shares outstanding during the period are adjusted for the events of bonus issue and share split. 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 equity shares outstanding during the period are adjusted for the effects for all dilutive potential equity shares. 1.16 Impairment of assets The company identifies impairable assets at the year-end in accordance with the guiding principles of Accounting Standard 28, notified by the Central Government of India, for the purpose of arriving at impairment loss thereon being the difference between the book value and recoverable value of relevant assets. Impairment loss, when crystallizes, are charged against revenues for the year. 1.17 Segment reporting Segments have been identified and reported taking into account nature of products, the differing risks and returns associated with operations. 1.18 Operating lease Leases where the lessor effectively retains substantially all the risks and benefits of ownership over the leased term are classified as operating leases. Operating lease payments are recognised as an expense in the profit and loss account on a straight-line basis over the lease term. 1.19 Cash and cash equivalents In the cash flow statement, cash and cash equivalents includes cash in hand, demand deposits with banks, other short term highly liquid investments with original maturities of three months or less. 1.20 Cash Flow Statement Cash flows are reported using the indirect method, whereby profit/(loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information. Note 2.1 CONTINGENT LIABILITIES AND COMMITMENTS a) Contingent liabilities not provided for in respect of : i) Outstanding guarantees and letters of credit furnished by the bankers on behalf of the Company amounting to Rs. 4,178.45 lacs (Rs. 1,735.86 lacs) are secured by hypothecation of current assets, as specified in Note 2.7 and those amounting to Rs. 1,062.09 lacs (Rs. 436.03 lacs) are secured by deposit of title deeds of immovable properties and hypothecation of movable fixed assets, as specified in Note 2.3. ii) Sales tax / VAT / Income tax / entry tax / central excise duties / service tax / ESI contribution and other taxes under appeal / review - Rs. 469.19 lacs net of advances of Rs. 171.98 lacs (Rs. 238.31 lacs net of advances of Rs. 137.47 lacs). iii) Bonds / undertakings given under EPCG scheme to custom authority - Rs. 5,565.02 lacs (Rs. 5,963.21 lacs). iv) Withdrawal of incentive tariff of electricity by NESCO Rs. 46.26 lacs net of deposit of Rs. 61.93 lacs (Rs. 46.26 lacs net of deposit of Rs. 61.93 lacs). b) Capital and other commitments : Estimated amounts of capital contracts remaining to be executed and not provided for (net of advances) Rs. 1,583.93 lacs (Rs. 2,890.95 lacs). Note 2.2 ENTRY TAX As per the interim order of Honourable Subrme Court of India dated 03.02.2010 and 09.04.2013 the company is directed to deposit 1/3rd and 50% respectively of the entry tax on goods imported from outside and not manufactured within the state of Odisha. In pursuance to the said orders the company has deposited a sum of Rs. 506.93 lacs (Rs. 377.35 lacs) as against total amount of Rs. 1,026.98 lacs (Rs. 848.90 lacs) for the financial year from 2008-09 to 2015-16. 2.3 DEFERRAL/CAPITALIZATION OF EXCHANGE DIFFERENCES The Company has exercised the option permitted by Accounting Standard Amendment Rule, 2009 under the transitional provisions contained in Para 46 of Accounting Standard (AS) 11 (vide GOI Notification No. GSR 225(E) dated 31st March 2009 as amended by Notifications No. GSR 378(E) dated 11th May, 2011 and GSR 913 (E) dated 29th December, 2011). Accordingly, a sum of Rs. 1,462.45 lacs (Rs. 1,208.65 lacs) being the exchange loss for the year arising on reporting of Long-Term Foreign Currency Monetary Items has been added to the cost of debrciable capital asset as at 31st March 2016. The net exchange loss of Rs. 13,645.86 lacs (Rs. 12,183.41 lacs) in the carrying amount of the debrciable capital asset(s) as on the Balance Sheet date would be debrciated over the remaining useful life of the assets. Note 2.4 The company has incurred during the year a sum of Rs. 177.29 lacs (Rs. 155.95 lacs) towards Corporate Social Responsibility within the purview of CSR expenditure as specified in Schedule-VII to the Companies Act,2013. Note 2.5 DISCLOSURES REQUIRED UNDER THE MICRO SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT Delayed payment made during the year on account of principal - Nil (Previous Year Nil) and delayed payment due as at the end of the year on account of principal - Nil (Previous Year Nil); hence, no interest is paid / payable under MSMED Act, 2006. 2.6 REVALUATION Land, buildings and plant & machinery of the Gulmohar unit and paper machine-1 of Balasore unit were revalued as on 01.04.1998 and 01.04.1999 respectively. Since such revaluation does not exhibit true valuation of the assets involved, the same has been de-recognized in the year 2014-15. As such net book value of Rs. 629.27 lacs arisen on such revaluation has been written off and adjusted with the corresponding assets during the year 2014-15. Note 2.7 The company has started commercial production of newly commissioned Board Plant at Balasore, Odisha from 25th March, 2016. Note 2.8 The company's business activity falls within a single primary business segment which is "Manufacture of Paper & Paper Board" and the Company primarily operates in India and thus the disclosure requirements of AS- 17 "segment Reporting', notified in the Companies (Accounting Standard) Rules, 2006 are not applicable. Note 2.9 Amount due and outstanding to be credited to Investor education and protection fund - Nil (PY Nil). Note 2.10 The Company has entered into operating lease agreements for office space, godowns, and guest house. The total charge to statement of profit and loss for the year on account of operating lease is Rs. 35.42 lacs.(Rs. 32.83 lacs). Lease rental are charged on the basis of agreed terms. No significant restrictions have been imposed by the lessor on the leases. The leases can be renewed after completion of the lease term by mutually discussing the renewal terms with the lessor. Note 2.11 Previous years figures have been reclassified/ regrouped / rearranged wherever necessary. In terms of our attached report of even date For S. K. AGRAWAL & CO. Chartered Accountants Firm Registration Number : 306033E S. K. Agrawal Partner Membership No. 9067 President (Finance) & CFO S. K. Khetan President (Finance) & CFO G. Saraf V. P. (Finance) & Secretary A. V. Agarwal Manish Goenka P. S. Patwari Directors Place : Kolkata Date : 24th May, 2016 |