Accounting Policies of Chennai Ferrous Industries Ltd. Company

Mar 31, 2024

2. Significant Accounting Policies:

2.1 Basis of preparation

The financial statements of the company have been prepared in accordance with Indian accounting
standards (Ind AS) as notified under Section 133 of the Companies Act, 2013 read with the Companies
(Indian Accounting Standards) Rules, 2015 (as amended from time to time) and presentation
requirements of Division II of Schedule III to the Companies Act, 2013.

2.2 Use of Estimates

The preparation of the financial statements in conformity with IND AS requires the Management to
make estimates and assumptions that affect the reported balances of assets and liabilities and
disclosures relating to contingent liabilities as at the date of the financial statements and reported
amounts of income and expenses during the period. The Company believes that the estimates used in
the preparation of the financial statements as prudent and reasonable. Accounting estimates could
change from period to period. Actual results could differ from those estimates.

2.3 Revenue Recognition:

i) Revenue is recognized to the extent that is probable that the economic benefits will flow to
the company and the revenue can be reliably measured.

ii) Sale of products is recognized when the significant risk and reward of ownership of the
goods have been passed to the buyer. Revenue is measured at fair value of the
consideration received or receivable, after deduction of any taxes or duties collected on
behalf of the government which are levied on sales such as VAT, GST, etc.

iii) Dividend income, if any, is recognized when the company''s right to receive dividend is
established by the reporting date.

iv) Interest income from financial assets is recognized at the effective interest rate applicable
on initial recognition.

v) Scrap sales is recognized at the fair value of consideration received or receivable upon
transfer of significant risk and rewards. It comprises of invoice value of goods and after
deducting applicable taxes on sale.

vi) Operating Lease rentals are accounted on the straight-line basis over the lease term.

2.4 Depreciation:

Depreciation on Tangible assets is provided on the straight-line method over the useful lives of assets
as per the rates specified under Schedule II of the Companies Act, 2013 on pro-rata basis.

2.5 Property, Plant and Equipment (PPE) :

i) Property, Plant and Equipment are stated at cost of acquisition net of accumulated
depreciation/amortization and impairment losses if any, except free hold land which is
carried at cost less impairment losses if any. The cost comprises purchase prices, borrowing
cost if capitalization criteria are met and directly attributable cost of bringing the asset to
its working condition for the intended use.

ii) The Company identifies the significant parts of plant and equipment separately which are
required to be replaced at intervals. Such parts are depreciated separately based on their
specific useful lives. The cost of replacement of significant parts are capitalized and the
carrying amount of replaced parts are de-recognized. When each major inception/
overhauling is performed, its cost is recognized in the carrying amount of the item of
property, plant and equipment as a replacement if the recognition criteria are satisfied. Any
remaining carrying amount of the cost of the previous inspection/ overhauling (as distinct
from physical parts) is de- recognized.

iii) Other expenses on fixed assets, including day-to-day repair and maintenance expenditure
and cost of replacing parts that does not meet the capitalization criteria in accordance with
IND AS 16 are charged to the Statement of Profit and Loss for the period during which such
expenses are incurred.

iv) PPEs are eliminated from the financial statements on disposal or when no further benefit is
expected from its use or disposal. Gains or losses arising from disposal of plant, property
and equipment are measured as the difference between the net disposal proceeds and the
carrying amount of such assets are recognized in the statement of profit and loss.

v) During the course of the year, the company has revalued its Property, plant and equipment
based on the valuation report issued by the Valuer as defined by the Companies Act Rules.

2.6 Impairment of Non - Financial Assets:

i) The carrying values of non-financial assets are reviewed for impairment at each Balance
Sheet date, if there is any indication of impairment based on internal and external factors.

ii) Non-financial assets are treated as impaired when the carrying amount of such asset
exceeds its recoverable value. After recognition of impairment loss, the depreciation
/amortization for the said assets is provided for remaining useful life based on the revised
carrying amount, less its residual value if any, on straight line basis.

iii) An impairment loss is charged to the Statement of Profit and Loss in the year in which an
asset is identified as impaired.

iv) An impairment loss is reversed when there is an indication that the impairment loss may no
longer exist or may have decreased.

2.7 Foreign Exchange Transactions:

Foreign Currency Transactions are translated into the functional currency using exchange rates at the
date of the transaction. Foreign exchange gains and losses from settlement of these transactions and
from translation of monetary assets and liabilities at the reporting date exchange rates are recognized
in the statement of Profit and Loss. Non- monetary items which are carried at historical cost
denominated in foreign currency are reported using the exchange rates at the time of transaction.

During the year, the company has not entered into any foreign exchange contract under review.

2.8 Borrowing Cost:

All borrowing costs are charged to revenue except to the extent they are attributable to qualifying
assets, which are capitalized. During the year under review, there was no borrowing attributable to
qualifying assets and hence no borrowing cost was capitalized.

2.9 Segment Accounting:

The company is principally engaged in a single business segment viz., Trading of coal.

2.10 Current versus non-current classification:

The Company presents assets and liabilities in the balance sheet based on current/ non-current
classification.

An asset is treated as current when it is:

- Expected to be realized or intended to be sold or consumed in normal operating cycle;

- Held primarily for the purpose of trading;

- Expected to be realized within twelve months after the reporting period, or

- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least
twelve months after the reporting period

All other assets are classified as non-current.

A liability is current when:

- It is expected to be settled in normal operating cycle;

- It is held primarily for the purpose of trading;

- It is due to be settled within twelve months after the reporting period, or

- There is no unconditional right to defer the settlement of the liability for at least twelve
Months after the reporting period.

All other liabilities are classified as non-current.

The operating cycle is the time between the acquisition of assets for processing and their realization in
cash and cash equivalents. The Company has evaluated and considered its operating cycle as 12 months.

Deferred tax assets/ liabilities are classified as non-current assets/ liabilities.

2.11 Inventories:

i) Inventories are valued at cost or net realizable value whichever is lower. Cost includes the
cost incurred in bringing the inventories to their present location and condition.

ii) Raw materials, stores and spares are valued at cost or net realizable value whichever is
lower. Cost includes the cost incurred in bringing the inventories to their present location
and condition. For cost calculation of Raw materials as it is not ordinarily inter changeable
specific identification method is used. For cost calculation of stores and spares weighted
average method is used.

iii) For valuation of finished goods / stock-in-process, cost includes material, direct labour,
overheads (other than abnormal amount of wasted materials, storage costs, selling and
Administrative overheads) wherever applicable.

2.12 Taxes on Income:

Provision for current tax is made in accordance with the Income Tax Act, 1961.

In accordance with the IND AS 12, Deferred Tax Liability / Asset arising from timing differences between
book and income tax profits is accounted for at the current rate of tax to the extent these differences
are expected to crystallize in later years. However, Deferred Tax Assets are recognized only if there is a
reasonable / virtual certainty of realization thereof.

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Mar 31, 2015

1.1. Basis of preparation of financial statements:

The financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on the accrual method of accounting except as disclosed in the notes. GAAP comprises mandatory accounting standards as prescribed under Section 133 of the Companies Act,2013 ('the Act'), read with Rule 7 of the Companies(Accounts) Rules, 2014 and guidelines issued by the Securities and Exchange Board of India (SEBI). The accounting policies adopted in preparation of financial statements are consistent with those of previous year except for change in accounting policy initially adopted or a revision to the existing accounting policy that requires a change as against the one hitherto in use.

1.2. Use of Estimates

The preparation of the financial statements in conformity with GAAP requires the Management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. The Company believes that the estimates used in the preparation of the financial statements as prudent and reasonable. Accounting estimates could change from period to period. Actual results could differ from those estimates.

1.3. Revenue Recognition:

Sale is recognized on dispatch of goods. Sale is net of trade discount, includes excise duty and excludes sales tax recovered. Insurance claim is accounted in the year of receipt.

1.4. Depreciation:

Depreciation on Tangible assets is provided on the straight line method over the useful lives of assets as per the rates specified under Schedule II of the Companies Act, 2013 on pro-rata basis.

1.5. Fixed Assets:

Fixed Assets are stated at cost less accumulated depreciation and impairment, if any. Direct costs like inland freight, duties, taxes and incidental expenses related to acquisition are capitalized with due adjustments for Cenvat / VAT credits.

1.6. Impairment

At each Balance sheet date, the Management assesses, whether there is any indication that Fixed Asset have suffered an impairment loss. If any such indication exists the recoverable amount of the Assets is estimated in order to determine the extent of the impairment if any. Where it is not possible to estimate the recoverable amount of individual asset, the Company estimates the recoverable amount of the cash generating unit to which the asset belongs.

As per the assessment conducted by the company at March 31, 2015, there was no indication that fixed asset have suffered an impairment loss.

1.7. Foreign Exchange Transactions:

Transactions in foreign currencies are recorded at the exchange rates prevailing at the date of the transactions. In respect of the transactions covered by Forward Exchange Contracts, the difference between the forward rate and the exchange rate on the date of the transaction is recognized as Income or Expense over the life of the Contract. Transactions not covered by forward exchange rates and outstanding at year end are translated at exchange rates prevailing at the year end and the profit/loss so determined and also the realized exchange gain/losses are recognized in the Statement of Profit & Loss.

During the year, the company has not entered into any foreign exchange contract under review.

1.8. Borrowing Cost:

All borrowing costs are charged to revenue except to the extent they are attributable to qualifying assets, which are capitalized. During the year under review, there was no borrowing attributable to qualifying assets and hence no borrowing cost was capitalized.

1.9. Segment Accounting:

The company's primary segment is identified as business segment based on nature of product, risks, returns and internal business reporting system and secondary segment is identified based on geographical locations of the customers as per Accounting Standard-17. The company is principally engaged in a single business segment viz., Manufacture of Sponge Iron. Further there is no reportable secondary segment. Ie., Geographical segment.

1.10. Taxes on Income:

(a) Provision for current tax is made in accordance with the Income Tax Act, 1961.

(b) in accordance with the Accounting Standard AS-22 'Accounting for Taxes on Income' issued by the Institute of Chartered Accountants of India, Deferred Tax Liability / Asset arising from timing differences between book and income tax profits is accounted for at the current rate of tax to the extent these differences are expected to crystallize in later years. However, Deferred Tax Assets are recognized only if there is a reasonable / virtual certainty of realization thereof. During the year, the company has generated deferred tax asset to the extent of Rs.7,138,006/- under review.

1.11. Provisions and Contingencies:

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 accounts by way of a note. Contingent assets are neither recognized nor disclosed in the financial statements.

Contingencies are recorded when it is probable that a liability will be incurred and the amounts can reasonably be estimated.

Differences between the actual results and estimates are recognized in the year in which the results are known materialized.