NOTE NO. 1.1 SIGNIFICANT ACCOUNTING POLICIES 1 Accounting for fixed assets (a) Valuation of fixed assets Fixed assets are maintained at cost less accumulated debrciation. (b) Debrciation and amortization Debrciation is calculated (i) on straight line method in case of Wind Turbine Generators and (ii) on written down value method on all other assets, based on useful life of various assets, as specified in Schedule II to Companies Act, 2013, as amended from time to time. Debrciation for full month is calculated when any asset is first put to use on any day during that month. Cost of leasehold land, including net brsent value of diverted forest land is amortised over the period of lease. (c) Write-off losses on assets All assets dismantled/discarded are written off assuming that scrap value for the same is Nil. If and when such discarded assets are disposed off partially or fully, the amounts realized during the year on account of sale are credited to profit and loss account of that year. (d) Expenditure during construction period All expenditure during construction period on specific projects, identifiable as relating to such projects, is debited to the said projects up to the date of completion and commissioning thereof. (e) Interest during construction period Interest on loans (including other related financing costs on loans) pertaining to specific assets incurred during construction period upto completion is capitalized. (f) Impairment of assets Company assesses, at each balance sheet date, whether there is any indication that asset may be impaired. If any such indication exists, Company estimates the recoverable amount of assets. If such recoverable amount is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the profit and loss account. If there is any indication that brviously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount. 2 Investments Long term investments in shares are carried at cost. Diminution in value, if any, is provided for, if it is not of temporary nature. 3 Valuation of closing stock Inventories are valued on following basis. (a) Finished goods (i) Manganese ore of all grades (except fines, hutch dust and HIMS rejects) :- At cost at mines including debrciation on mine assets or net realizable value, whichever is less. (ii) Manganese ore fines, hutch dust and HIMS rejects :- At cost per tonne on jigging/processing, transportation, etc., allocated on technical estimates or net realizable value, whichever is less. (iii) Manganese ore at port :- At landed cost at the port or net realizable value, whichever is less. Landed cost includes freight, unloading charges, sampling charges, etc. Difference between physical and book stocks are not adjusted, so long as the overall position of stocks at mines is found to be excess when compared with overall book stocks. As and when ore is actually dispatched, excess or shortage after railing/shipment against each stack is ascertained and the same is accounted for in the books of the company in that year. (iv) Electrolytic manganese di-oxide [EMD] (including stock as on 31st March at different stages of production, ascertained by technical estimation as to percentage of completed units of EMD) :- At current year's cost of production including plant's debrciation or net realizable value, whichever is less. (v) (a) Ferro manganese/silico manganese including stock in cake form as on 31stMarch, determined by technical assessment:-At current year's cost of production including plant's debrciation(less realizable value of slag) or net realizable price, whichever is less. (b) Stock in process :- The quantity of ferro manganese/silico manganese in process cannot be weighed, seen or assessed and, hence, no value is assigned. (c) Stock of slag :- Slag is a molten mass of impurities generated during manufacture of ferro manganese, which is treated as scrap and, accordingly, valued at net realizable price. (b) Stores inventory (Stores, spares, timber, explosives, fuel and lubricants and raw materials) :- At cost on weighted average method. (i) Physical verification of all stores, spares, etc., is conducted at the end of each year. Difference between physical stock and book stock is investigated and necessary adjustments are carried out in the books of accounts. (ii) In case of ferro manganese plant, stock of raw materials, except manganese ore at plant, is valued at cost on weighted average method. The stock of manganese ore at plant is valued at current year's cost of production or net realizable value, whichever is less, plus cost of transport and other charges, if any. Opening and closing stock of ore at the plant is grouped under the head "Stock of raw materials" 4 Sales Sales invoices are raised and revenue is recognized in the books of accounts only after dispatch of goods based on railway receipt/lorry receipt/delivery challan. (a) Manganese ore sales (i) Supplementary invoices are raised for variation in quality on receipt of laboratory analysis reports. Analysis reports received in subsequent year up to a cut-off date are considered in year of dispatch. Accordingly, supplementary invoices are raised and accounted for in the same year. In respect of analysis reports received after the cut-off date, the same are raised in subsequent year. (ii) Sales include royalty. (b) EMD/ferro manganese/silico manganese/slag sales Sales of EMD, ferro manganese and slag include excise duty and education cess applicable thereon. (c) Sale of electricity to M. P. Electricity Distribution Company Limited Revenue is recognized on the basis of energy injected into grid for sale, at tariff rate agreed in power purchase agreement. 5 Other income (a) Interest income from sundry debtors is recognized in line with AS-9 of the Institute of Chartered Accountants of India as under - (i) In as far as the realization is supported by letter of credit through bank from the debtors, where there is certainty of its realization, the recognition is made on accrual basis. Interest billed to customers for credit terms beyond current financial year is recognized in the year to which it pertains. (ii) In as far as the realization is not supported by letter of credit through bank and directly billed by the company where its realization is uncertain, based on management's experience, as and when actual realization made is recognized as income. (b) Interest income on deposits and advances is recognized on accrual basis. (c) Memorandum records have been kept in respect of replaced/worn-out parts/scrap capital items. When they are disposed off, proceeds are taken as miscellaneous receipt of that year. 6 Captive consumption Manganese ore Manganese ore, fines, HIMS rejects issued as raw material for production of EMD/ferro manganese is valued at current year's cost of production and fines/HIMS rejects are valued at per tonne rate, as adopted for valuation of stock. Consumption of the ore is accounted on average cost. Value of ore issued is reduced from ore raising/operating expenses and is considered as raw material consumption in "Manufacturing Expenses". Electricity Power generated at wind turbine generator units and consumed at mine/plant, are charged to respective units at the cost of generation. 7 Sales tax, income tax, etc. (a) In respect of sales tax, income tax, etc., the amount payable or receivable as per assessment order is accounted for in the year in which the said order is received and accepted by the company, irrespective of the year to which the order relates. (b) Set off is claimed on sales tax on purchases. Difference between set off claimed and actual set off allowed is accounted for in the year in which the assessment order is received and accepted by the company. 8 Employee benefits : (a) Short term employee benefits Short term employee benefits are recognized as expense at the undiscounted amount in the statement of profit and loss in the year in which the related service is rendered. (b) Post-employment benefits Post-employment benefits consist of benefits like provident fund, gratuity, leave encashment, pension and medical facilities. (i) Defined benefit plan Post-employment benefits like gratuity and leave encashment are recognized as an expense in the statement of profit and loss in the year in which the employee has rendered services. The expenses are recognized at the brsent value of the amounts payable, determined by using actuarial valuation techniques. Actuarial gains and losses in respect of these post-employment benefits are charged to the statement of profit and loss. Benefits like medical facilities are covered by an insurance policy and amount of insurance brmium is charged to the statement of profit and loss in the year in which it is incurred. (ii) Defined contribution plan Defined contribution plans (provident fund, pension) are post-employment benefit plans, under which the company pays fixed contributions into separate entities (funds). The company's contribution to defined contribution plans is recognized in the statement of profit and loss of the year to which it relates 9 V.R.S. expenditure The company charges full amount of the expenditure in profit and loss account in the year of incurrence. 10 Accounting for subsidies from Welfare Commissioner (a) Labour quarters The company has constructed/under construction some labour quarters, for which the company is receiving subsidy from the Welfare Commissioner. Since the land on which such quarters are constructed is surrendered to the Welfare Commissioner and the property (quarters constructed) vests with the Welfare Commissioner, the entire expenditure incurred by the company is charged to and the subsidy received is also credited to revenue in the year in which the expenditure is incurred/ subsidy is received. (c) Welfare assets Entire expenditure for acquisition of assets like school bus, ambulance, water supply scheme, etc., under welfare schemes is debited to relevant asset account in the year in which expenditure is incurred. Amount of subsidy received is credited to the same asset head in the year of receipt and debrciation is then charged on such reduced value of the asset from that year. 11 Claims by the company Amount of claims lodged with insurance company/railways are accounted for on the basis of amount claimed during the year on assessing reasonable certainty of their realisation and the difference, if any, is adjusted on settlement of the claims. 12 Prepaid expenses Expenses are treated as brpaid only where the payments exceed Rs. 1.00 lakh in each case. 13 Provision for doubtful debts Provision for bad and doubtful debts is made based on a case-to-case review of sundry debtors outstanding for more than two years. Debts outstanding from private parties for more than three years are invariably provided. 14 Research and development expenditure Research and development expenditure is charged to profit and loss account in the year of incurrence. However, expenditure on fixed assets relating to research and development is treated in the same way as other fixed assets. 15 Mine closure expenditure Financial implications towards final mine closure plans under relevant Acts and Rules are technically estimated, based on total available ore reserves of all mines. The same are provided in accounts, on year to year basis, after taking into consideration overall production of all mines. 16 Net brsent value for diversion of forest land for non-forest purposes The liability is recognized on receipt of necessary permission from the concerned authorities. Corrections of fundamental errors of commission or omission in earlier year(s) are done by debiting/crediting prior period adjustments account. Impact of significant events after the date of balance sheet and approval thereof is given effect to either by moderation of the balance sheet and profit and loss statement or by specific mention in the Directors' Report. NOTE NO. 1.2 NOTES ON ACCOUNTS FOR YEAR ENDED 31st MARCH, 2015 1 Change in accounting policy - During the year under consideration, the company has changed its accounting policy on debrciation and amortization of fixed assets, in line with Schedule II of Companies Act, 2013. The change has resulted in increase in current year's debrciation by Rs. 548.28 lakhs. According to transition provisions contained in Part C, Schedule II of Companies Act, 2013 an amount of Rs. 117.90 lakhs has been reduced from deferred tax liability and the net amount of Rs. 228.97 lakhs has been charged to retained earnings. 2 Land measuring 761.60 Sq. Mtrs. belonging to the company is acquired by Nagpur Improvement Trust for its Integrated Road Development Plan. Writ petition filed by the company seeking compensation is admitted by the High Court, Nagpur. Pending outcome of writ petition, no adjustment is done in books. Additions to plant and machinery [Note No. 6.1] include vertical shafts at Munsar and Ukwa mines 3865.92 lakhs), which are commissioned during the year. Production from these shafts is expected to commence within a time span of eighteen to twenty-four months, after completion of initial development. 3 (a) Physical verification of inventories is carried out at the end of the year. (b) Production and inventory of manganese ore as well as bulk raw materials and ferro manganese are determined as per weight volume ratio by the production/technical department and the same are accounted for accordingly. (c) Inventory of raw materials includes stock of manganese ore of 145.14 (60.50) MT valuing Rs. 6.49 (Rs. 3.17) lakhs lying in ferro manganese plant site on 31.03.2015. 4 Letters for year-end balance confirmation of sundry debtors and sundry creditors have been sent to the parties. Out of total outstanding of Rs. 11114.77 lakhs as on 31.03.2015,balance of Rs. 288.15 lakhs have been reconciled. In respect of confirmations received, the company is under process of scrutinizing and reconciling the balances. 5 Documentation in respect of secured loans to employees is pending in some cases. 6 For anticipated loss on disposal of obsolete stores/spares, provision of Rs. 1.49 (Rs. 3.23) lakhs made in accounts is considered adequate. 7 During the financial year 2012-13, the company has detected embezzlement of funds committed by one of its employees to the tune of Rs. 31.03 lakh. The matter has been investigated and no further cases have been detected. Provision is not considered necessary since the amount is recoverable. 8 Income tax deducted at source from interest and rent received by the company amounts to Rs. 2763.59 ( Rs. 2663.53) lakhs. Tax deduction certificates are awaited in some cases. 9 Imports of capital goods during the year Rs. Nil (Rs. 398.71) lakh. 10 Expenditure in foreign currency for travelling Rs. 5.57 (Rs. 28.56) lakh and miscellaneous expenses Rs. 27.83 (Rs. 22.43) lakh 11 Provisions no longer required to the tune of Rs. 2441.09 (Rs. 4481.84) lakhs are on account of employee benefits expenses. For M/s J.S Uberoi & Co. Chartered Accountants, Firm Registration Number 111107W CA. Amarjeet Singh Sandhu Partner Membership Number : 108665 Neeraj Pandey Company Secretary Nitin P.Kajarekar Dy. General Manager (Finance) Mukund P.Chaudhari Director (Finance) G.P.Kundargi Chairman-cum-Managing Director Place : New Delhi Date : 29th May, 2015 |