Accounting Policies of Birla Power Solutions Ltd. Company

Mar 31, 2012

A) Basis of preparation of Financial Statements

The financial statements have been prepared on an accrual basis and under historical cost convention (except freehold land which has been revalued) and in compliance, in all material aspects, with the applicable accounting principles in India, the applicable accounting standards notified under Section 211 (3C) and the relevant provisions of the Companies Act, 1956.

B) Use of Estimate

The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Differences between actual results and estimates are recognized in the period in which the results are known / materialized.

C) Revenue Recognition

(i) Revenues / Incomes and Costs / Expenditure are generally accounted on accrual, as they are earned or incurred.

(ii) Sale of Goods is recognized on transfer of significant risks and rewards of ownership, which is generally on the dispatch of goods. Export Sales is recognized on the basis of shipment of goods to customer.

(iii) Sales include sale of power produced at Windmill Power Plant.

(iv) Benefit on account of entitlement to import goods free of duty under the " Duty Entitlement Pass Book Scheme " and Duty Draw Back Scheme are accounted in the year of export.

(v) Insurance claims are recognized when there exists, no significant uncertainty with regard to the amount to be realized and the ultimate collection thereof.

(vi) Interest Income is accrued on time proportion basis over the period of loan / deposit / investment.

(vii) Dividend income is accounted for the year in which the right to receive the same is established.

D) Fixed Assets

(a) Fixed Assets are carried at cost of acquisition or construction including incidental expenses, less accumulated depreciation, amortization except freehold land. Expenditure on additions, improvements and renewals is capitalized.

(b) Freehold Land has been revalued as on 31st March, 2007 and accordingly carried thereafter at revalued figure.

E) Intangible Assets

Capital expenditure on purchase and development of identifiable assets viz., Computer Software is recognized as Intangible Assets in accordance with principles given under AS-26 - Intangible Assets.

F) Expenditure Incurred During Construction Period

In respect of new/ major expansion of the Units, the indirect expenditure incurred during construction period up to the date of commencement of commercial production is capitalized on various categories of fixed assets on proportionate basis.

G) Depreciation

i) Depreciation on Furniture and Fixtures, Vehicles and Office Equipments is provided on written down value method and on other assets it is provided on straight-line method at the rates given in Schedule XIV to the Companies Act, 1956.

ii) Depreciation on additions due to foreign exchange variations capitalized in earlier years is provided over the remaining useful life of the assets.

iii) Premium paid on Leasehold Land is amortized over the period of lease.

iv) Intangible assets, in form of Computer Software are amortized over a period of five years.

v) Depreciation is provided on pro-rata basis with reference to the month of addition / deletion. Assets costing less than Rs.5000/- each are fully depreciated in the year of purchase.

vi) Pursuant to the revision in the rates prescribed in Schedule XIV to the Companies Act, 1956 vide notification No. GSR 756 (E) dated 16.12.93 issued by the Ministry of Law, Justice and Company Affairs, depreciation has been calculated at new rates only on additions to assets made after the said date.

H) Investments

Long term Investments are stated at cost. Provision for diminution in value is made only if decline in the value of such Investments is other than temporary.

I) Inventories

Raw Materials, Work-in-Progress, Finished Goods (including purchased for trade), Packing Materials, Stores and Spares are stated 'at cost or net realizable value, whichever is lower'.

Cost comprises all costs of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost formulae used are 'Weighted Average Cost'

The excise duty in respect of closing inventory of finished goods is included as part of finished goods.

Due allowance is estimated and made for defective and obsolete items, wherever necessary, based on the past experience of the Company.

Research and Development inventories are written off over a period of three years.

J) Foreign Currency Translations

All transactions in foreign currency are recognized at the rates of exchange prevailing on the dates when the relevant transactions have taken place.

Monetary items in the form of Loans, Current and Non Current Assets and Current and Non Current Liabilities in foreign currency, outstanding at the close of the year, are converted in Indian Currency at the rates of exchange prevailing on the date of the Balance Sheet. Resultant gain or loss is accounted during the year.

K) Borrowing Costs

Interest and other borrowing costs attributable to the acquisition / construction of qualifying assets are capitalized. Other interest and borrowing costs are charged to revenue.

L) Employee Benefits

A. Short Term Employee Benefits:

All employee benefits payable within twelve months of rendering the service are classified as short term benefits. Such benefits include salaries, wages, bonus, short term compensated absences, awards, ex- gratia etc. and are recognized in the period in which the employee renders the related service.

B. Post Employment Benefits:

i. Defined Contribution Plans:

Company's contribution paid/payable during the period to Provident Fund, EDLI, Officer Superannuation Fund, ESIC and Labour Welfare Fund are recognized in the Statement of Profit and Loss.

ii. Defined Benefit Plans:

Provision for payments to the Employees Gratuity Fund after taking into account the funds available with the LIC is based on actuarial valuation done at the close of each financial year. At the reporting date Company's liabilities towards gratuity is determined by an independent actuarial valuation using the projected unit credit method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up final obligation. Past services are recognized on a straight line basis over the average period until the amended benefits become vested. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to market yields at the Balance Sheet date on Government Bonds where the currency and terms of the Government Bonds are consistent with the currency and estimated terms of the defined benefit obligation.

iii. Other Defined Benefits:

Provision for other defined benefits for long term leave encashment is made based on an independent actuarial valuation on projected unit credit method at the end of each financial year. Actuarial gains and losses are recognized immediately in the statement of Profit and Loss Account as income or expense. Company recognizes the undiscounted amount of short term employee benefits during the accounting period based on service rendered by the employee.

M) Miscellaneous Expenditure

Share Issue expenses are amortized over a period of five years.

N) Research and Development

Research and Development expenditure is charged to revenue under the natural heads of accounts in the year in which it is incurred. However, Research and Development expenditure on fixed assets is treated in the same way as expenditure on the other fixed assets. '

O) Taxation

Income Tax expense comprises current tax and deferred tax charge or credit.

Provision for Current Tax is made on the assessable income at the tax rate applicable to the relevant assessment year.

Deferred tax assets and deferred tax liability is calculated by applying tax rate and tax laws that have been enacted or substantively enacted by the Balance Sheet date.

Deferred tax assets arising mainly oh account of brought forward losses and unabsorbed depreciation under tax laws, are recognized only if there is a virtual certainty of its realization, and supported by convincing evidence. Deferred tax assets on account of other timing differences are recognized only to the extent there is a reasonable certainty of its realization. At each Balance Sheet date, the carrying amount of Deferred tax assets is reviewed to reassure realization.

P) Government Grants

Grants received against specific fixed assets are adjusted to the cost of the assets. Revenue Grants are recognized in the Profit and Loss Account in accordance with the related scheme and in the period in which these are accrued.

Q) Impairment of Assets

The carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal / external factors. An asset is impaired when the carrying amount of the asset exceeds its recoverable amount. An impairment loss is charged to the Profit and Loss Account in the year in which an asset is identified as impaired. An impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of the recoverable amount.

R) Provisions, Contingent Liabilities and Contingent Assets

Provisions involving a substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognized but are disclosed in the Financial Statements. Contingent assets are neither recognized nor disclosed in the Financial Statements.

S) Current & Non Current

All assets & liabilities are presented as current or non current as per the Company's normal operating cycle and other criteria set out in the revised Schedule VI of the Companies Act, 1956. Based on the nature of products and the time between the acquisition of assets of processing and the realisation of the Company has ascertained its operating cycle as 12 months for the purpose of current/non current assets/liabilities.

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Mar 31, 2011

A) Basis of preparation of Financial Statements

The financial statements have been prepared on an accrual basis and under historical cost convention (except freehold land which has been revalued) and in compliance, in all material aspects, with the applicable accounting principles in India, the applicable accounting standards notified under Section 211 (3C) and the relevant provisions of the Companies Act, 1956.

B) Use of Estimate

The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Differences between actual results and estimates are recognized in the period in which the results are known / materialized.

C) Revenue Recognition

(i) Revenues / Incomes and Costs / Expenditure are generally accounted on accrual, as they are earned or incurred.

(ii) Sale of Goods is recognized on transfer of significant risks and rewards of ownership, which is generally on the dispatch of goods. Export Sales is recognized on the basis of shipment of goods to customer.

(iii) Sales include sale of power produced at Windmill Power Plant.

(iv) Benefit on account of entitlement to import goods free of duty under the" Duty Entitlement Pass Book Scheme " and Duty Draw Back Scheme are accounted in the year of export.

(v) Insurance claims are recognized when there exists, no significant uncertainty with regard to the amount to be realized and the ultimate collection thereof.

(vi) Interest Income is accrued on time proportion basis over the period of loan / deposit / investment.

(vii) Dividend income is accounted for the year in which the right to receive the same is established.

D) Fixed Assets

(a) Fixed Assets are carried at cost of acquisition or construction including incidental expenses, less accumulated depreciation, amortization except freehold land. Expenditure on additions, improvements and renewals is capitalized.

(b) Freehold Land has been revalued as on 31st March, 2007 and accordingly carried thereafter at revalued figure.

E) Intangible Assets

Capital expenditure on purchase and development of identifiable assets viz., Computer Software is recognized as Intangible Assets in accordance with principles given under AS-26 - Intangible Assets.

F) Expenditure Incurred During Construction Period

In respect of new/ major expansion of the Units, the indirect expenditure incurred during construction period up to the date of commencement of commercial production is capitalized on various categories of fixed assets on proportionate basis.

G) Depreciation

i) Depreciation on Furniture and Fixtures, Vehicles and Office Equipments is provided on written down value method and on other assets it is provided on straight-line method at the rates given in Schedule XIV to the Companies Act, 1956.

ii) Depreciation on additions due to foreign exchange variations capitalized in earlier years is provided over the remaining useful life of the assets.

iii) Premium paid on Leasehold Land is amortized over the period of lease.

iv) Intangible assets, in form of Computer Software are amortized over a period of five years.

v) Depreciation is provided on pro-rata basis with reference to the month of addition / deletion. Assets costing less than ^5000/- each are fully depreciated in the year of purchase.

vi) Pursuant to the revision in the rates prescribed in Schedule XIV to the Companies Act, 1956 vide notification No. GSR 756 (E) dated 16.12.93 issued by the Ministry of Law, Justice and Company Affairs, depreciation has been calculated at new rates only on additions to assets made after the said date.

H) Investments

Long term Investments are stated at cost. Provision for diminution in value is made only if decline in the value of such Investments is other than temporary.

I) Inventories

Inventories of Raw Materials, Work-in-Progress, Finished Goods (including purchased for trade), Packing Materials, Stores and Spares are stated 'at cost or net realizable value, whichever is lower". Cost comprises all costs of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. The excise duty in respect of closing inventory of finished goods is included as part of finished goods., Cost formulae used are 'Weighted Average Cost'. Due allowance is estimated and made for defective and obsolete items, wherever necessary, based on the past experience of the Company. Research and Development inventories are written off over a period of three years.

J) Foreign Currency Translations

All transactions in foreign currency are recognized at the rates of exchange prevailing on the dates when the relevant transactions have taken place.

Monetary items in the form of Loans, Current Assets and Current Liabilities in foreign currency, outstanding at the close of the year, are converted in Indian Currency at the rates of exchange prevailing on the date of the Balance Sheet. Resultant gain or loss is accounted during the year.

K) Borrowing Costs

Interest and other borrowing costs attributable to the acquisition / construction of qualifying assets are capitalized. Other interest and borrowing costs are charged to revenue.

L) Employee Benefits

A. Short Term Employee Benefits:

All employee benefits payable within twelve months of rendering the service are classified as short term benefits. Such benefits include salaries, wages, bonus, short term compensated absences, awards, ex-gratia etc. and are recognized in the period in which the employee renders the related service.

B. Post Employment Benefits:

i. Defined Contribution Plans:

Company's contribution paid/payable during the period to Provident Fund, EDLI, Officer Superannuation Fund, ESIC and Labour Welfare Fund are recognized in the Profit and Loss Account.

ii. Defined Benefit Plans:

Provision for payments to the Employees Gratuity Fund after taking into account the funds available with the LIC is based on acturial valuation done at the close of each financial year. At the reporting date Company's liabilities towards gratuity is determined by an independent actuarial valuation using the projected unit credit method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up final Obligation. Past services are recognized on a straight line basis over the average period until the amended benefits become vested. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to market yields at the Balance Sheet date on Government Bonds where the currency and terms of the Government Bonds are consistent with the currency and estimated terms of the defined benefit obligation.

Hi. Other Defined Benefits:

Provision for other defined benefits for long term leave encashment is made based on an independent actuarial valuation on projected unit credit method at the end of each financial year. Actuarial gains and losses are recognized immediately in the statement of Profit and Loss Account as income or expense. Company recognizes the undiscounted amount of short term employee benefits during the accounting period based on service rendered by the employee.

M) Miscellaneous Expenditure

Share Issue expenses are amortized over a period of five years.

N) Research and Development

Research and Development expenditure is charged to revenue under the natural heads of accounts in the year in which it is incurred. However, Research and Development expenditure on fixed assets is treated in the same way as expenditure on the other fixed assets. >

O) Taxation

Income Tax expense comprises current tax and deferred tax charge or credit.

Provision for Current Tax is made on the assessable income at the tax rate applicable to the relevant assessment year.

Deferred tax assets and deferred tax liability is calculated by applying tax rate and tax laws that have been enacted or substantively enacted by the Balance Sheet date.

Deferred tax assets arising mainly on account of brought forward losses and unabsorbed depreciation under tax laws, are recognized only if there is a virtual certainty of its realization, and supported by convincing evidence. Deferred tax assets on account of other timing differences are recognized only to the extent there is a reasonable certainty of its realization. At each Balance Sheet date, the carrying amount of Deferred tax assets is reviewed to reassure realization.

P) Government Grants

Grants received against specific fixed assets are adjusted to the cost of the assets. Revenue Grants are recognized in the Profit and Loss Account in accordance with the related scheme and in the period in which these are accrued.

Q) Impairment of Assets

The carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal / external factors. An asset is impaired when the carrying amount of the asset exceeds its recoverable amount. An impairment loss is charged to the Profit and Loss Account in the year in which an asset is identified as impaired. An impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of the recoverable amount.

R) Provisions, Contingent Liabilities and Contingent Assets

Provisions involving a substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognized but are disclosed in the Financial Statements. Contingent assets are neither recognized nor disclosed in the Financial Statements.

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Mar 31, 2010

A) Basis of preparation of Financial Statements

The financial statements have been prepared on an accrual basis and under historical cost convention (except freehold land which has been revalued) and in compliance, in all material aspects, with the applicable accounting principles in India, the applicable accounting standards notified under Section 211 (3C ) and the relevant provisions of the Companies

Act, 1956.

B) Use of Estimate

The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Differences between actual results and estimates are recognized in the period in which the results are known / materialized.

C) Revenue Recognition

(i) Revenues / Incomes and Costs / Expenditure are generally accounted on accrual, as they earned or incurred.

(ii) Sale of Goods is recognized on transfer of significant risks and rewards of ownership, which is generally on the dispatch of goods. Export Sales is recognized on the basis of shipment of goods to customer.

(iii) Sales include sale of power produced at Wndmill Power Plant.

(iv) Benefit on account of entitlement to import goods free of duty under the - Duty Entitlement Pass Book Scheme" and Duty Draw Back Scheme are accounted in the year of export.

(v) Insurance claims are recognized when there exists, no significant uncertainty with regard to the amount to be realized and the ultimate collection thereof.

(vi) Interest Income is accrued on time proportion basis over the period of loan / deposit / investment.

(vii) Dividend income is accounted for the year in which the right to receive the same is established.

D) Fixed Assets

(a) Fixed Assets are carried at cost of acquisition or construction including incidental expenses, less accumulated depreciation, amortization except freehold land. Expenditure on additions, improvements and renewals is capitalized.

(b) Freehold Land have been revalued as on 31st March, 2007 and accordingly carried thereafter at revalued figure.

E) Intangible Assets

Capital expenditure on purchase and development of identifiable assets viz., Computer Software is recognized as Intangible Assets in accordance with principles given under AS-26 - Intangible Assets.

F) Expenditure Incurred During Construction Period

In respect of new/ major expansion of the Units, the indirect expenditure incurred during construction period up to the date of commencement of commercial production is capitalized on various categories of fixed assets on proportionate basis.

G) Depreciation

i ) Depreciation on Furniture and Fixtures, Vehicles and Office Equipments is provided on written down value method and on other assets it is provided on straight-line method at the rates given in Schedule XIV to the Companies Act, 1956.

i) Depreciation on additions due to foreign exchange variations capitalized in earlier years is provided over the remaining useful life of the assets.

iii) Premium paid on Leasehold Land is amortized over the period of lease.

iv) Intangible assets, in form of Computer Software is amortized over a period of five years.

v) Depreciation is provided on pro-rata basis with reference to the month of addition / deletion. Assets costing less than Rs.5000/- each are fully depreciated in the year of purchase.

vi) Pursuant to the revision in the rates prescribed in Schedule XIV to the Companies Act, 1956 vide notification No. GSR 756 (E) dated 16.12.93 issued by the Ministry of Law, Justice and Company Affairs, depreciation has been calculated at new rates only on additions to assets made after the said date.

H) Investments

Long term Investments are stated at cost. Provision for diminution in value is made only if decline in the value of such Investments is other than temporary.

I) Inventories

Inventories of Raw Materials, Work-in-Progress, Finished Goods (including purchased for trade), Packing Materials, Stores and Spares are stated at cost or net realizable value, whichever is lower. Cost comprise all costs of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. The excise duty in respect of closing inventory of finished goods is included as part of finished goods. Cost formulae used is Weighted Average Cost. Due allowance is estimated and made for defective and obsolete items, wherever necessary, based on the past experience of the Company. Research and Development inventories are written off over a period of three ¦years.

J) Foreign Currency Translations

All transactions in foreign currency are recognized at the rates of exchange prevailing on the dates when the relevant transactions have taken place.

Monetary items in the form of Loans, Current Assets and Current Liabilities in foreign currency, outstanding at the close of the year, are converted in Indian Currency at the rates of exchange prevailing on the date of the Balance Sheet. Resultant gain or loss is accounted during the year.

K) Borrowing Costs

Interest and other borrowing costs attributable to the acquisition / construction of qualifying assets are capitalized. Other interest and borrowing costs are charged to revenue.

L) Employee Benefits

A. Short Term Employee Benefits:

All employee benefits payable within twelve months of rendering the service are classified as short term benefits. Such benefits include salaries, wages, bonus, short term compensated absences, awards, ex-gratia etc. and are recognized in the period in which the employee renders the related service.

B. Post Employment Benefits :

i. Defined Contributions Plans:

Companys contribution paid/payable during the period to Provident Fund, EDLI, Officer Superannuation Fund, ESIC and Labour Welfare Fund are recognized in the Profit and Loss Account.

ii. Defined Benefit Plans :

Provision for payments to the Employees Gratuity Fund after taking into account the funds available with the LIC is based on acturial valuation done at the close of each financial year. At the reporting date Companys liabilities towards gratuity is determined by an independent actuarial valuation using the projected unit credit method which considers each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up final obligation. Past services are recognized on a straight line basis over the average period until the amended benefits becomes vested. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to market yields at the Balance Sheet date on Government Bonds where the currency and terms of the Government Bonds are consistent with the currency and estimated terms of the defined benefit obligation.

III. Other Defined Benefits:

Provision for other defined benefits for long term leave encashment is made based on an independent actuarial valuation on projected unit credit method at the end of each financial year. Actuarial gains and losses are recognized immediately in the statement of Profit and Loss Account as income or expense. Company recognizes the undiscounted amount of short term employee benefits during the accounting period based on service rendered by the employee.

M) Miscellaneous Expenditure

Share Issue expenses is amortised over a period of five years.

N) Research and Development

Research and Development expenditure is charged to revenue under the natural heads of accounts in the year in which it is incurred. However, Research and Development expenditure on fixed assets is treated in the same way as expenditure on the other fixed assets.

O) Taxation

Income Tax expense comprises current tax and deferred tax charge or credit.

Provision for Current Tax is made on the assessable income at the tax rate applicable to the relevant assessment year.

Deferred tax assets and deferred tax liability is calculated by applying tax rate and tax laws that have been enacted or substantively enacted by the Balance Sheet date.

Deferred tax assets arising mainly on account brought forward losses and unabsorbed depreciation under tax laws, are recognized only if there is a virtual certainity of its realization, supported by convincing evidence. Deferred tax assets on account of other timing differences are recognized only to the extent there is a reasonable certainty of its realization. At each Balance Sheet date, the carrying amount of Deferred tax assets are reviewed to reassure realization.

P) Government Grants

Grants received against specific fixed assets are adjusted to the cost of the assets. Revenue Grants are recognized in the Profit and Loss Account in accordance with the related scheme and in the period in which these are accrued.

Q) Impairment of Assets

The carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal / external factors. An asset is impaired when the carrying amount of the asset exceeds its recoverable amount. An impairment loss is charged to the Profit and Loss Account in the year in which an asset is identified as impaired. An impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of the recoverable amount.

R) Provisions, Contingent Liabilities and Contingent Assets

Provisions involving a substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and i is probable that there will be an outflow of resources. Contingent Liabilities are not recognized but are disclosed in the Financial Statements. Contingent assets are neither recognized nor disclosed in the Financial Statements.