Salem Textiles Ltd. कंपली की लेखा नीति

Mar 31, 2012

I. GENERAL

The accounts are prepared under historical cost convention and mercantile basis of accounting. The accounts have been prepared in compliance with the applicable accounting principles in India and the Accounting Standards notified by the Companies (Accounting Standards) Rules, 2006 and the relevant presentational requirements of the Companies Act, 1956.

II. USE OF ESTIMATES

The preparation 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 and the disclosure of contingent liabilities as at the date of financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.

III. FIXED ASSETS AND DEPRECIATION

a). Expenditure which results in the creation of a new independent asset with an economic life of a sizeable period and considering the nature of the asset is capitalised. Assets whose costs are so capitalized are depreciated on straight line method at the rates specified in Schedule XIV of the Companies Act, 1956 for the period for which the asset is put to use. No depreciation is charged on the assets sold in the year of disposal

As the Plant and Machinery of Fibre Dyeing Plant at Trichy is not put to use during the year, no depreciation is provided on that Plant and Machinery.

b). Impairment of Assets

As per AS 28 prescribed by ICAI, the Company assesses at each Balance Sheet date whether there is any indication of impairment of carrying of amount of the Company's Fixed Assets. The recoverable amount of such assets are estimated, if any indication exists, and impairment of loss is recognized wherever the carrying amount of assets exceeds their recoverable amount.

IV). INVESTMENTS

a) Investments in unquoted Companies are valued at cost.

b) Appreciation or depreciation in the value of investment is reckoned only at the time of sale and therefore no entries are passed for the market value of those investments.

V). INVENTORIES

Stores and packing materials are valued at cost or market value whichever is lower.

There is no stock of raw materials, yarn, saleable waste, process stock and yarn at the end of the year.

There are certain items which are long time non-moving items in the stores inventories which has become obsolete due to the non usage for long time. All these items are valued at Zero Cost.

VI). LIABILITIES

All known and certain liabilities have been provided for in the accounts. Liabilities/Claims which in the opinion of the management is considered not tenable (will not ultimately result in actual liability) have not been provided in the accounts, but have been given as information elsewhere in the accounts.

VII). BORROWING COSTS

a) As the Financial Institutions and Banks have filed cases in the DRT, the Company has not provided interest from the year 2004-2005 onwards and the amount not provided upto the year ended March 2012 is Rs. 1358.92 lakhs (March 2011 Rs. 1189.54 lakhs) on term loans with Financial Institutions and Banks and Rs. 2288 lakhs (March 2011 Rs. 2019.71 lakhs) on Working Capital Loan with Banks. Also the Company has not provided interest from the year 2004-05 onwards on Non-Convertible privately placed debentures with UTI and the amount till March 2012 is Rs. 175.00 lakhs (March 2011 Rs. 153.13 lakhs).

b) The above interest is worked as per the prevailing rate.

c) The Company has not provided for penal interest from 1996-97 to 2001-02 of Rs. 1791.30 lakhs on term loans availed from Financial Institutions. For the years 2002-03 to 2011-12, no provision for penal interest has been made and the figures of penal interest are not available.

d) The Company has not provided interest on Inter Corporate Deposit availed from Companies and on bill discount facilities availed from Financial Companies as the Company will settle the dues, on most favourable terms and interest, if any will be accounted for in the year of settlement.

e) The Company has not provided interest from 1996-97 to 2011 -12 of Rs. 410.96 lakhs (upto 2010-11 is Rs. 390.91 lakhs) on Fixed Deposits received from Director and his relatives and from 2004-05 to 2011-12 of Rs. 125.00 lakhs (upto 2010-11 of Rs. 109.38 lakhs) on Short Term Loan received from UTI.

f) Interest on some public deposits and trade deposits was not provided. The interest will be accounted for as and when the payment of interest is made to them.

g) i. Interest/Penalty on arrears of statutory dues has not been provided, and the actual amount of interest/penalty if any, will be accounted for in the year of payment.

ii. With regard to Sales Tax penalty of Rs. 429 lakhs on the arrear taxes, the company had filed appeal to the appellate authorities in time. The appellate authorities had returned the appeal documents on the ground that the arrear tax has not been paid. The Company will resubmit the appeal documents after paying the arrears of tax and penalty if any and account the same in the year of payment.

iii. With regard to Excise Duty arrears of Rs. 27 lakhs and penalty and other charges of Rs. 230 lakhs levied by the Central Excise Department, the Company has hot filed any appeal for the reason that the Company has to make payment of duty of Rs. 27 lakhs before filing appeal. Because of the sickness, the Company could not pay duty arrears. It will make the payment in future and file the appeal subsequently for the pending and other dues. Because of the sickness the penalty and other dues are not booked in the accounts.

VIII). REVENUE RECOGNITION

a) SALES

There is no sales during the year.

b) OTHER INCOME

Other incomes are accounted on accrual basis.

IX). EMPLOYEE BENEFITS

(a) Short term employee benefits are recognized as an expense at the undiscounted mount in the statement of Profit and Loss of the year in which the related service is rendered.

(b) Post employment and other long term benefits which are defined benefit plans are recognized as an expense in the statement of profit and loss for the year in which the employee has rendered service. The expense is recognized based on the present value of the obligation determined in accordance with Revised Accounting Standard 15 on Employee Benefits.

(c) Gratuity

Provided as per the actuarial valuation as given by the approved valuers. However the Company has not paid the gratuity amount to the Trust.

(d) Bonus

The Company pays bonus for the period from October to September every year. The Company has provided taking the rate of bonus given to all the permanent employees of the Company. However the actual liability would be ascertained and short or excess provision would be adjusted at the time of payment of Bonus.

X). SEGMENT REPORTING

The Company is only engaged in the manufacturing of yarn and therefore segment wise reporting as defined in Accounting Standard 17 does not apply.

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Mar 31, 2011

I. GENERAL

The accounts are prepared under historical cost convention and mercantile basis of accounting. The accounts have been prepared in compliance with the applicable accounting principles in India and the Accounting Standards notified by the Companies (Accounting Standards) Rules, 2006 and the relevant presentational requirements of the Companies Act, 1956.

ii. USE OF ESTIMATES

The preparation 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 and the disclosure of contingent liabilities as at the date of financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.

iii. FIXED ASSETS AND DEPRECIATION

a) Expenditure which results in the creation of a new independent asset with an economic life of a sizeable period and considering the nature of the asset is capitalised. Assets whose costs are so capitalized are depreciated on straight line method at the rates specified in Schedule XIV of the Companies Act , 1956 for the period for which the asset is put to use. No depreciation is charged on the assets sold in the year of disposal As the Plant and Machinery of Fibre Dyeing Plant at Trichy is not put to use during the year, no depreciation is provided on that Plant and Machinery.

b) Impairment of Assets

As per AS 28 prescribed by ICAI, the Company assesses at each Balance Sheet date whether there is any indication of impairment of carrying of amount of the Company's Fixed Assets. The recoverable amount of such assets are estimated, if any indication exists, and impairment of loss is recognized wherever the carrying amount of assets exceeds their recoverable amount.

iv. INVESTMENTS

a) Investments in unquoted Companies are valued at cost.

b) Appreciation or depreciation in the value of investment is reckoned only at the time of sale and therefore no entries are passed for the market value of those investments.

v). INVENTORIES

Stores and packing materials are valued at cost or market value whichever is lower. There is no stock of raw materials, yarn, saleable waste, process stock and yarn at the end of the year.

There are certain items which are long time non-moving items in the stores inventories which has become obsolete due to the non usage for long time. All these items are valued at Zero Cost.

vi. LIABILITIES

All known and certain liabilities have been provided for in the accounts. Liabilities/ Claims which in the opinion of the management is considered not tenable (will not ultimately result in actual liability) have not been provided in the accounts, but have been given as information elsewhere in the accounts.

vii. BORROWING COSTS

a) As the Financial Institutions and Banks have filed cases in the DRT, the Company has not provided interest from the year 2004-2005 onwards and the amount not provided upto the year ended March 2011 is Rs.1189.54 lakhs (March 2010 Rs.1020.16 lakhs) on term loans with Financial Institutions and Banks and Rs.2019.71 lakhs (March 2010 Rs.1751.42 lakhs) on Working Capital Loan with Banks. Also the Company has not provided interest from the year 2004-05 onwards on Non-Convertible privately placed debentures with UTI and the amount till March 2011 is Rs.153.13 lakhs ( March 2010 Rs.131.26 lakhs)

b) The above interest is worked as per the prevailing rate.

c) The Company has not provided for penal interest from 1996-97 to 2001-02 of Rs. 1791.30 lakhs on term loans availed from Financial Institutions. For the years 2002- 03 to 2010-11,no provision for penal interest has been made and the figures of penal interest are not available.

d) The Company has not provided interest on Inter Corporate Deposit availed from Companies and on bill discount facilities availed from Financial Companies as the Company will settle the dues, on most favourable terms and interest, if any will be accounted for in the year of settlement.

e) The Company has not provided interest from 1996-97 to 2010-11 of Rs.391.75 lakhs (upto 2009-10 is Rs.370.86 lakhs) on Fixed Deposits received from Director and his relatives and from 2004-05 to 2010-11 of Rs.109.38 lacs (upto 2009-10 of Rs.93.75 lacs) on Short Term Loan received from UTI.

f) Interest on some public deposits and trade deposits was not provided. The interest will be accounted for as and when the payment of interest is made to them.

g) i. Interest/Penalty on arrears of statutory dues has not been provided, and the actual amount of interest/penalty if any, will be accounted for in the year of payment. ii. With regard to Sales Tax penalty of Rs.429 lakhs on the arrear taxes, the company had filed appeal to the appellate authorities in time. The appellate authorities had returned the appeal documents on the ground that the arrear tax has not been paid. The Company will resubmit the appeal documents after paying the arrears of tax and penalty if any and account the same in the year of payment. iii. With regard to Excise Duty arrears of Rs.27 lakhs and penalty and other charges of Rs.230 lakhs levied by the Central Excise Department, the Company has not filed any appeal for the reason that the Company has to make payment of duty of Rs.27 lakhs before filing appeal. Because of the sickness, the Company could not pay duty arrears. It will make the payment in future and file the appeal subsequently for the pending and other dues. Because of the sickness the penalty and other dues are not booked in the accounts.

viii. REVENUE RECOGNITION

a) SALES

Local sales income is recognised when the goods are actually sold and supplied.

b) OTHER INCOME

Other incomes are accounted on accrual basis. This includes an amount of Rs.14.28 Lacs/- by way of Profit on Land acquired by NHA1.

ix. EMPLOYEE BENEFITS

(a) Short term employee benefits are recognized as an expense at the undiscounted amount in the Profit and Loss account of the year in which the related service is rendered.

(b) Post employment and other long term benefits which are defined benefit plans are recognized as an expense in the profit and loss account for the year in which the employee has rendered service. The expense is recognized based on the present value of the obligation determined in accordance with Revised Accounting Standard15 on Employee Benefits.

(c )Gratuity

Provided as per the actuarial valuation as given by the approved valuers. However the Company has not paid the gratuity amount to the Trust.

(d) Bonus

The Company pays bonus for the period from October to September every year. The Company has provided taking the rate of bonus given to all the permanent employees of the Company. However the actual liability would be ascertained and short or excess provision would be adjusted at the time of payment of Bonus.

x. SEGMENT REPORTING

The Company is only engaged in the manufacturing of yarn and therefore segment wise reporting as defined in Accounting Standard 17 does not apply.

(ii).List of Related Parties with whom transactions taken place :

a. R.P.Rajaram( Relative) : Deposit outstanding Rs.30.00 Lacs

b. Salem Spices Private Limited : Car Rent paid Rs. 4.80 Lacs

xi. DEFERRED TAXATION

The Company became Sick since 1997-98. The Company made reference to the BIFR. As the matter is pending before BIFR, the working of deferred tax asset/liability is not made in view of the uncertainty of earning taxable income in the near future. The same will be worked out and shown in the accounts as soon as the BIFR approves the proposal for rehabilitation of the Company.

xii. FOREIGN CURRENCY TRANSACTIONS

During the year, the Company had not entered into any foreign currency transactions.

xiii. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

As prescribed by the ICAI in AS 29, Provisions are recognised when there is a present obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and in respect of which reliable estimate can be made.

Contingent liabilities are disclosed unless the possibility of any outflow in settlement is remote, in the Notes on Accounts. Contingent Assets are neither recognised nor disclosed.

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Mar 31, 2010

I. GENERAL

The accounts are prepared under historical cost convention and mercantile basis of accounting. The accounts have been prepared in compliance with the applicable accounting principles in India and the Accounting Standards notified by the Companies (Accounting Standards) Rules, 2006 and the relevant presentational requirements of the Companies Act, 1956.

ii. USE OF ESTIMATES

The preparation 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 and the disclosure of contingent liabilities as at the date of financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.

iii. FIXED ASSETS AND DEPRECIATION

a) Expenditure which results in the creation of a new independent asset with an economic life of a sizeable period and considering the nature of the asset is capitalised. Assets whose costs are so capitalized are depreciated on straight line method at the rates specified in Schedule XIV of the Companies Act , 1956 for the period for which the asset is put to use. No depreciation is charged on the assets sold in the year of disposal

As the Plant and Machinery of Fibre Dyeing Plant at Trichy is not put to use during the year, no depreciation was provided on that Plant and Machinery.

b) Impairment of Assets

As per AS 28 prescribed by ICAI, the Company assesses at each Balance Sheet date whether there is any indication of impairment of carrying of amount of the Companys Fixed Assets. The recoverable amount of such assets are estimated, if any indication exists, and impairment of loss is recognized wherever the carrying amount of assets exceeds their recoverable amount.

iv. INVESTMENTS

a) Investments in unquoted Companies are valued at cost.

b) Appreciation or depreciation in the value of investment is reckoned only at the time of sale and therefore no entries are passed for the market value of those investments.

v). INVENTORIES

Stores and packing materials are valued at cost or market value whichever is lower.

There is no Stock of Raw materials, yarn, Saleable Waste and process stock at the end of the year.

There are certain items which are long time non-moving items in the stores inventories which has become obsolete due to the non usage for long time. All these items are valued at Zero Cost.

vi. LIABILITIES

All known and certain liabilities have been provided for in the accounts. Liabilities/ Claims which in the opinion of the management is considered not tenable (will not ultimately result in actual liability) have not been provided in the accounts, but have been given as information elsewhere in the accounts.

vii. BORROWING COSTS

a) As the Financial Institutions and Banks have filed cases in the DRT, the Company has not provided interest from the year 2004-2005 onwards and the amount not provided upto the year ended March 2010 is Rs.1020.16 lakhs (March 2009 Rs.850.78 lakhs) on term loans with Financial Institutions and Banks and Rs.1751.42 lakhs (March 2009 Rs.1483.13 lakhs) on Working Capital Loan with Banks. Also the Company has not provided interest from the year 2004-05 onwards on Non-Convertible privately placed Debentures with UTI and the amount till March 2010 is Rs.131.26 lakhs (March 2009 Rs.109.38 lakhs).

b) The above interest is worked as per the prevailing rate.

c) The Company has not provided for penal interest from 1996-97 to 2001-02 of Rs. 1791.30 lakhs on term loans availed from Financial Institutions. For the years 2002- 03 to 2009-10, the figures of penal interest are not available.

d) The Company has not provided interest on Inter Corporate Deposit availed from Companies and on bill discount facilities availed from Financial Companies as the Company will settle the dues, on most favourable terms and interest, if any will be accounted for in the year of settlement.

e) The Company has not provided interest from 1996-97 to 2009-10 of Rs.370.86 lakhs (upto 2008-09 is Rs.350.81 lakhs) on Fixed Deposits received from Director and his relatives and from 2004-05 to 2009-10 of Rs.93.75 lacs (upto 2008-09 of Rs.78.13 lacs) on Short Term Loan received from UTI.

f) Interest on some public deposits and trade deposits was not provided. The interest will be accounted for as and when the payment of interest is made to them.

g) I. Interest/Penalty on arrears of statutory dues has not been provided, and the actual amount of interest/penalty if any, will be accounted for in the year of payment.

II. With regard to Sales Tax penalty of Rs.429 lakhs on the arrear taxes, the company had filed appeal to the appellate authorities in time. The appellate authorities had returned the appeal documents on the ground that the arrear tax has not been paid. The Company will resubmit the appeal documents after paying the arrears of tax and penalty if any and account the same in the year of payment.

III. With regard to Excise Duty arrears of Rs.27 lakhs and penalty and other charges of Rs.230 lakhs levied by the Central Excise Department, the Company has not filed any appeal for the reason that the Company has to make payment of duty of Rs.27 lakhs before filing appeal. Because of the sickness, the Company could not pay duty arrears. It will make the payment in future and file the appeal subsequently for the pending and other dues. Because of the sickness the penalty and other dues are not booked in the accounts.

viii. REVENUE RECOGNITION

a) SALES

Local sales income is recognised when the goods are actually sold and supplied.

b) OTHER INCOME

Other incomes are accounted on accrual basis. This amount includes a amount of Rs.54.46 Lacs/- by way of Profit on disposal of Assets acquired by NHA1.

ix. EMPLOYEE BENEFITS

(a) Short term employee benefits are recognized as an expense at the undiscounted amount in the Profit and Loss account of the year in which the related service is rendered.

(b) Post employment and other long term benefits which are defined benefit plans are recognized as an expense in the profit and loss account for the year in which the employee has rendered service. The expense is recognized based on the present value of the obligation determined in accordance with Revised Accounting Standard15 on Employee Benefits.

(c )Gratuity

Provided as per the actuarial valuation as given by the approved valuers. However the Company has not paid the gratuity amount to the Trust.

(d) Bonus

The Company pays bonus for the period from October to September every year. The Company has provided taking the rate of bonus given to all the permanent employees of the Company. However the actual liability would be ascertained and short or excess provision would be adjusted at the time of payment of bonus.

x. SEGMENT REPORTING

The Company is only engaged in the manufacturing of yarn and therefore segment wise reporting as defined in Accounting Standard 17 does not apply.

xiii. DEFERRED TAXATION

The Company became Sick since 1997-98. The Company made reference to the BIFR. As the matter is pending before BIFR, the working of deferred tax asset/liability is not made in view of the uncertainty of earning taxable income in the near future. The same will be worked out and shown in the accounts as soon as the BIFR approves the proposal for rehabilitation of the Company.

xvi. FOREIGN CURRENCY TRANSACTIONS

During the year, the Company had not entered into any foreign currency transactions.

xv. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

As prescribed by the ICAI in AS 29, Provisions are recognised when there is a present obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and in respect of which reliable estimate can be made.

Contingent liabilities are disclosed unless the possibility of any outflow in settlement is remote, in the Notes on Accounts. Contingent Assets are neither recognised nor disclosed.