NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST MARCH, 2015

Note 1. CORPORATE INFORMATION

Vardhman Special Steels Limited is a Public Limited Company incorporated under the provisions of the companies Act, 1956 on 14th May, 2010. The Company is engaged in the Manufacturing of Billet, Steel bars & rods and Bright bars of various categories of special and alloy steels.

Note 2. SIGNIFICANT ACCOUNTING POLICIES:

a) Accounting Convention:

The accounts are brpared on accrual basis under the historical cost convention in accordance with the accounting standards referred to in section 133 of Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules 2014 and other relevant provisions of the said Act.

b) Revenue Recognition:

i) Sales:

Revenue from sale of goods is recognized:

a) When all the significant risks and rewards of ownership are transferred to the buyer and the company retains no effective control of the goods transferred to a degree usually associated with ownership; and

b) No significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of  goods.

c) Domestic Sales (Gross) include excise duty and freight and is recognized on dispatch of goods to customers.

ii) Insurance and Other Claims:

The revenue in respect of claims is recognized when no significant uncertainty exists with regard to the amount to be realised and the ultimate collection thereof.

iii) Benefit under Duty Entitlement Pass Book/Duty Drawback Scheme: Revenue in respect of the above benefits is recognized on post export basis.

c) Retirement Benefits:

i. Gratuity : Provision for gratuity, which is a defined benefit plan, is made on the basis of an actuarial valuation, as per AS-15 issued by Institute of Chartered Accountants of India, carried out by an independent actuary at the balance sheet date, 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 estimated future cash flows. The discount rates used for determining the brsent value of obligation is based on the market yields on Government securities as at the Balance Sheet date, having maturity periods approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the Profit and Loss Account.

ii. Leave Encashment: As per the Company's policy, eligible leaves can be accumulated by the employees and carried forward to future periods to either utilise during the service or encash. Encashment can be made during the service, on early retirement, on withdrawal of scheme, at resignation by employee or upon death of employee. The Company accounts for the liability for compensated absences payable in future based on an independent actuarial valuation, as per AS-15 issued by Institute of Chartered Accountants of India, carried out at the end of the period.

iii. Provident Fund : Contribution to Provident Fund is made in accordance with the provisions of the Provident Fund Act, 1952 and is treated as revenue expenditure.

iv. Superannuation: The liability in respect of eligible employees covered under the scheme is provided through a policy taken from Life Insurance Corporation of India by an approved trust formed for the purpose. The brmium in respect of such policy is recognized as an expense in the period in which it falls due.

d) Fixed Assets:

Fixed Assets are stated at historical cost less debrciation.

e) Intangible Assets:

Intangible assets are stated at cost less accumulated amount of amortization.

f) Debrciation:

i) Debrciation is provided on straight line method in accordance with and in the manner specified in Schedule II to the Companies Act, 2013.

ii) Debrciation on assets costing Rs. 5000 or below acquired during the year is charged @ 100% on proportionate basis keeping in view materiality aspect.

g) Amortization:

i) Intangible assets are amortized on straight line method over their estimated useful life.

ii) Right to use Power Lines is amortised on straight line method over their estimated useful life.

h) Investments:

Long term Investments are carried at cost less provision for diminution, other than temporary, in the value of investment. Current investments are carried at lower of cost and fair value.

i) Inventories:

Inventories are valued at cost or net realisable value, whichever is lower. The cost in respect of various items of inventories is computed as under:

o In case of raw materials-at weighted average cost plus direct expenses. o In case of stores & spares-at weighted average cost plus direct expenses.

o In case of finished goods-at raw material cost plus conversion cost, packing cost, excise duty and other overheads incurred to bring the goods to their brsent condition and location.

j) Subsidy:

Government grants available to the company are recognised when there is a reasonable assurance of compliance with the conditions attached to such grants and where benefits in respect thereof have been earned and it is reasonably certain that the ultimate collection will be made. Government subsidy in the nature of promoter's contribution is credited to capital reserve. Government subsidy received for a specific asset is reduced from the cost of the said asset.

k) Foreign Currency Conversion/Translation:

o Foreign currency transactions are recorded on initial recognition at the rate brvailing on the date of the transaction. Where export bills are negotiated with the bank, the export sales are recorded at the rate on the date of negotiation as the said rate approximates the actual rate on the date of transaction.

o Foreign Currency monetary items are reported using the closing rate. Exchange differences arising on the settlement of monetary items or on reporting the same at the closing rate as at the balance sheet date are recognised as income or expense in the period in which they arise.

o The brmium or discount arising at the inception of forward exchange contracts is amortised as an expense or income over the life of the contract.

o Exchange differences on the aforesaid forward exchange contract are recognised in the statement of profit & loss in the reporting period in which the exchange rates change. Profit or loss arising on cancellation or renewal of such contracts is recognised as income or expense in the period in which such profit or loss arises.

l) Borrowing Costs:

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of the asset. Other borrowing costs are recognised as expense in the period in which they are incurred.

m) Expenditure incurred during construction period:

In respect of major expansion, the indirect expenses incurred during construction period up to the date of commercial production is capitalised on various categories of fixed assets on proportionate basis.

n) Provisions and contingencies:

A provision is recognised when the Company has a brsent obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and reliable estimate can be made of the amount of the obligation. A contingent liability is disclosed where there is a possible obligation or a brsent obligation that may, but probably will not, require an outflow of resource.

o) Operating Leases:

Assets acquired on leases wherein a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Lease rentals paid for such leases are recognised as an expense on systematic basis over the term of lease.

p) Employee benefits

Short Term Benefits

All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits. Benefits such as salaries, wages, short term compensated absences and bonus, etc. are recognized in the profit and loss account in the period in which the employee renders the related service.

q) Earnings per share

Basic earnings per share is calculated by dividing the net profit/(loss) for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of equity and dilutive potential equity shares outstanding during the period, except where the results would be anti-dilutive.

r) Accounting for Tax on Income:

The accounting treatment followed for taxes on income is to provide for Current Tax and Deferred Tax. Current Tax is the amount of income-tax determined to be payable in respect of taxable income for a period. Deferred Tax is the tax effect of all timing differences.

s) Impairment of Assets

At each Balance Sheet date, an assessment is made whether any indication exists that an asset has been impaired. If any such indication exists, an impairment loss i.e. the amount by which the carrying amount of an asset exceeds its recoverable amount is provided in the books of accounts.

t) Segment Information:

The Company has only one reporting segment i.e. manufacturing of Steel. The Company is mainly operating in India which is considered to be the only reportable geographical segment.

u) Cenvat Credit:

Cenvat credit of excise duty paid on inputs, capital assets and input services is recognised in accordance with the Cenvat Credit Rules, 2004.

1. No asset qualifies for impairment for the current year according to AS-28 issued by The Institute of Chartered Accountants of India.

2. Figures in brackets indicate deductions. Figures have been rounded off to nearest lacs. Figures for brvious year have been recast/regrouped, wherever necessary to make them comparable with current year's figures.

3. Debrciation for the year has been provided on Straight Line Method on the basis of useful lives specified in the Schedule-II of the Companies Act, 2013 as against the amount of debrciation calculated on the basis of rates of debrciation in respect of various assets contained in Schedule XIV to the Companies Act 1956.

In view of this change, carrying amounts of various tangible fixed assets as at 1st April, 2014 after retaining the residual value an amount of Rs. 89.77 lacs has been recognized in the opening balance of retained earning (net of deferred tax) where the useful life of an asset is Nil. In other cases, the carrying amounts as at lst April, 2014 have been debrciated over the revised remaining useful life of the asset as per Schedule II. The debrciation for the year ended 31st March, 2015 would have been higher by Rs. 154.62 lacs, had the Company continued with the brviously brscribed debrciation rates as per Schedule-XIV of Companies Act, 1956.

4. The company uses forward contracts to hedge its risk associated with fluctuation in foreign currency relating to foreign currency assets and liabilities, firm commitment and highly probable forecast transactions. The use of the aforesaid financial instruments is governed by the company's overall strategy

As per our separate report of even date

For S.S.Kothari Mehta & Co.

Chartered Accountants

(Firm Regn No.022150N)

(CA Dinesh K.Abrol)  

Partner

M.No.087899  

For and on behalf of the Board of Directors

SONAM TANEJA   

(Company Secretary

SANJEEV SINGLA  

(Chief Financial Officer)

NARESH BANSAL  

(Chief Executive)

SUCHITA JAIN  

(Director)

SACHIT JAIN

(Managing Director)

Place : Gurgaon

Dated : 2nd May, 2015