Accounting Policies of Alcobex Metals Ltd. Company

Mar 31, 2010

1. BASIS OF PREPARATION

i) The financial statements have been prepared to comply in all material aspects in respect with the Notified Accounting Standard by Companies Accounting Standards Rules, 2006 and the relevant provisions of the Companies Act, 1956.

ii) Accounting policies have been consistently applied by the Company and are consistent with those used in the previous year.

2. ACCOUNTING CONVENTION AND REVENUE RECOGNITION

The financial statements have been prepared in accordance with historical cost convention and on the basis of going concern concept. The Board and the Audit Committee of the Company are of the opinion and also virtually certain that future operations of the Company are viable. Both income and expenditure items are recognized on accrual basis.

3. USE OF ESTIMATES

The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of financial statements and the reported amount of revenues and expenses during the reported period. Differences between the actual results and estimates are recognized in the period in the results are known / materialized.

4. INVESTMENTS

Investments held by the Company, which are long term in nature, are stated at cost less permanent diminution in value. Earnings on investments are accounted for when the right to receive payment is established.

5. FIXED ASSETS

Fixed Assets are stated at cost of acquisition / construction (inclusive of taxes, duties, freight and other incidental expenditure related to acquisition/construction and installation) less Depreciation. Interest during construction period to finance fixed assets is capitalized.

Capital work in progress is stated at cost. Expenditure directly attributable to construction is accumulated as capital work in progress and is allocated to relevant fixed assets on pro rata basis depending on the prime cost of assets.

6. IMPAIRMENT OF ASSETS

The Company on an annual basis makes an assessment of any indication that may lead to impairment of assets. If any such indication exists, the company estimates the recoverable amount of assets. If such recoverable amount is less than the carrying amount, then the carrying amount is reduced to its recoverable amount by treating the difference between them as impairment loss and is charged to the Profit Loss Account. The impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount

7. DEPRECIATION

Depreciation on fixed assets other than land is provided on straight line method at the rates, which are in conformity with the requirements of the Companies Act, 1956. Leasehold land is amortized over the period of lease. No extra shift depreciation on plant and machinery and other equipment is provided as the Company is operating on single shift except furnace, which has been considered as a continuous processing plant as per technical assessment and is depreciated accordingly.

8. INVENTORIES

Raw materials are valued at cost (on FIFO) basis. In arriving at cost, freight and other charges have been included at estimates considered appropriate by the management. Stores & spares (inclusive of packing material) are valued at cost (on weighted average method) except dies, which are suitably depreciated. Goods in transit are valued at cost.

Finished goods are valued at lower of cost or realizable value. Cost for this purpose includes direct material, direct labour, excise duty and other appropriate production overheads.

Semi finished goods are accounted for based on technical estimates since various technicalities are involved in assessing such stocks with various details and is valued at cost. Cost of raw material included in Semi Finished products are determined on quarterly weighted average rate.

Inventories at the year end are as per physical verification conducted by the management. Unserviced / damaged / obsolete stocks and shortages are charged to Profit & Loss Account.

9. EXCISE DUTY

Excise duty recovered is included in the sale of products. The Company accrues for excise duty in respect of stocks of finished goods lying bond, factory premises and warehouse.

The excise duty shown as a deduction from turnover is the total excise duty for the year except the excise duty related to the difference between closing stock and opening stock. The difference in excise between opening and closing stocks is recognized separately in the Profit & Loss Account.

10. EMPLOYEES BENEFITS

i) Provident Fund & Employees State Insurance

The Company makes contribution towards Provident Fund and ESIC to a defined contribution retirement benefit plan for qualifying employees. The Provident Fund & ESIC plans are operated by Regional Provident Fund Commissioner and Director Employees State Insurance Corporation. The Company is required to contribute a specified percentage of payroll cost to the retirement benefit schemes to fund the benefits. The only obligation of the Company with respect to their retirement benefit plan is to make specified contribution at specified rates.

ii) Defined Benefit Plans

Company provides retirement benefits in the form of gratuity (unfunded) and leave encashment (unfunded) which are measured using the Projected unit credit method with actuarial valuation being carried out at each valuation date.

iii) Termination benefits are recognized as an expense as and when incurred.

iv) Actuarial gains / losses are immediately taken to Profit & Loss Account and are not deferred.

11. SALES

Sales are exclusive of excise duty and sales tax. Sales revenue is recognised at the time of raising the invoice/dispatch of goods. Return of Goods are recognized in the year of return.

12. LEASE

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets are classified as operating leases. Operating lease payments are recognized as an expense in the profit & loss account on a straight-line basis over the lease term.

13. SUBSIDIES, CLAIMS & CUSTOM DUTY

a) Investment subsidy not specifically related to a fixed asset is credited to Capital Reserve.

b) Claims are accounted at the time of settlement/receipt and claims payable are accounted at the time of acceptance.

c) Claims raised by Government authorities regarding taxes & duties, which are disputed by the Company, are accounted based on legality at each claim. Adjustments, if any, are made in the year in which disputes are finally settled.

d) Custom duty/demurrage payable on stocks (including rejected materials) lying at customs/port are accounted for on clearance of good.

14. TRANSACTIONS IN FOREIGN EXCHANGE

Transactions in foreign exchange are recorded at exchange rates prevailing on the date of the transactions. Gain/Loss arising out of fluctuation in exchange rate is accounted on realisation. Foreign currency assets and liability at the year end are translated at the year end, exchange rates and the resultant exchange difference is recognised in the Profit & Loss Account except those relating to acquisition of fixed assets which are adjusted in the cost of fixed assets.

15. BORROWING COST

Borrowing cost that are attributable to the acquisition/ construction of fixed assets are capitalised as part of the cost of the respective assets. Other borrowing costs are recognised as expenses in the year in which they are incurred.

16. TAXES ON INCOME

Tax expenses comprises current tax, deferred tax and fringe benefit tax after taking into consideration benefits available under the provisions of Income tax Act, 1961, Wealth tax Act, 1957 etc.

The deferred tax charged or credit is recognised using current tax rates. Where there is unabsorbed depreciation or carried forward losses, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Other deferred tax assets are recognised only to the extent there is a reasonable certainty of realisation in future. Deferred tax assets / liabilities are reviewed at each balance sheet date based on developments during the year and available case laws, to re-asses realisation /liabilities. The Company has provided / accounted Fringe Benefit tax in accordance with applicable Income Tax Laws.

17. PRIOR PERIOD ADJUSTMENTS, EXTRAORDINARY & EXCEPTIONAL ITEMS, AND CHANGES IN ACCOUNTING POLICIES

Prior period and Extra Ordinary items and Changes in Accounting Policies having material impact on the financial affairs of the Company are disclosed.

18. CONTINGENT LIABILITY

A provision is recognized when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources embodying economic benefit will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounfed to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. A contingent liability is disclosed unless the possibility of an outflow of resources embodying the economic benefit is remote.

19. EVENTS AFTERTHE BALANCE SHEET DATE:

Events occurring after the date of the Balance Sheet which affect the financial position to a material extent are taken into cognizance.