Accounting Policies of Kashipur Sugar Mills Ltd. Company

Sep 30, 2010

A. Basis of preparation of financial statements

The financial statements are prepared under the historical cost convention, on mercantile system of accounting unless otherwise specifically stated.

B. Fixed Assets

(a) Fixed assets are stated at cost, net of cenvat and/or at revalued price, less accumulated depreciation. All cost including financing cost relating to borrowed funds attirbutatble to construction or acquisition of fixed assets till commencement of commercial production and/or put to use are capitalised.

(b) Assets identified and evaluated technically as obsolete and held for disposal are stated at their estimated net realisable value.

C. Depreciation

a) Depreciation on Plants & Machinery and Buildings has been provided on straight line method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.

(b) Depreciation on other fixed assets is provided on written down value method at the rates and in the manner prescribed in Schedule xiv to the Companies Act, 1956.

D. Inventories

(a) Raw material and finished goods (except molasses) are valued at lower of cost and net realisable value.

(b) Stock of molasses is valuated on estimated realisable value.

(c) Packing materials, stores & spares are valued at cost.

(d) Stock in process is valued at estimated cost.

(e) Cost is determined on the weighted average method.

E. Cess & Taxes

Cess & Taxes in respect of finished goods held in stock has been accounted for at the end of the Year and is included in the value of closing stock.

F. Employees Retirement Benefits

(a) Defined Contribution Plan

Company's contributions paid / payable during the year to Provident Fund and Employee pension scheme are recognised in the profit and loss account.

(b) Defined Benefit Plan

'Company's liabilities towards gratuity are determined using the projected unit credit method which considers each period of service rise to additional unit of benefit entitlement and measures each unit separately to build up the final obligation. Actuarial gain and losses are recognised immediately in the profit and loss account as income or expenses. Obligation 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 or government bonds where the currency and terms of the government are consistent with the currency and estimated terms of the defined benefit obligation.

(c) Short term benefits (namely leave encashment) are provided for on accrual basis.

G. Borrowing Costs

Borrowing costs that are attributable to the acquisition or construction of qualifying capital assets are capitalised. Other borrowing costs are recognised as an expense in the period in which they are incurred.

H. Investments

(a) Current investments are stated at lower of cost or fair market value.

(b) Long term investments are stated at cost. However, provision for diminution is made to recognise decline, other than temporary, in the value of investments if any

I. Interest Revenue

Revenue arising from the use by others of enterprise resources yielding interest and dividends etc. are recognised when no significant uncertainty as to measurability or collect ability exists.

J. Impairment of Assets

The carrying amount 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 the recoverable amount. An impairment is charged to the Profit and Loss Account in the year in which an asset is identified as impaired. Impairment losses recognised in prior accounting periods are reversed if there is any change in the estimate of the recoverable amount.

K. Provisions, Contingent Liabilities and Assets

Provisions are recognised in respect of obligations where, based on the evidence available, their existence at the Balance Sheet date is considered probable.

Contingent liabilities are shown by way of notes to the accounts in respect of obligations where, based on the evidence available their existence at the Balance Sheet date is considered not probable.

Contingent assets are not recognised in the accounts.

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Sep 30, 2009

(Amount in Lacs)

PARTICULARS Current Year Previous Year

30.09.2009 30.09.2008

1 Contingent Liabilities:

(a) Claims not acknowledged as debts ( Disputed) :

(i) Trade Tax / Central Sales Tax (Excluding Interest) 658.09 577.71

(ii) Income Tax 1.37 00

(iii) Demand against Cane price for the Year 1978-79 21.20 21.20

(iv) Excise duty 4.76 76.22

(Amt Deposited under protest -Nil (PY. Rs. 8.00 lacs)

(b) The Companys claim for exemption of excise duty on account of expansion of production capacity as per government of India notification no.50/2003 dated 10.06.2003 is under adjudication The Commissioner of Central Excise Commissionerate , Meerut II has decided various cases up to 30.09.2008 and raised demand for excise duty aggregating for Rs. 2678.57 lacs along with interest due there on and penalty aggregating to Rs.2678.57 lacs The company has filed appeals with Honble Customs, Excise and Service tax Appellate Tribunal. Pending final adjudication on the matter, no provision has been made in respect of excise duty of Rs.301 5.26 Lacs including Rs. 253.67 Lacs for the year. 301 5.26 2761.59

(Amt Deposited under protest 120.46 lacs)

(c) Penalty levied by Commissioner of Central Excise Commissionerate -Meerut-ll 2678.57 191 1.78

(d) Arrears of Preference Shares Dividend 276.76 196.51

(e) The Company has challanged the validity of applicability of Entry Tax Act. With 00 00 Honble Uttrakhand High Court pending decision of the Court, no liability has been ascertained and provided for.

2. Estimated amount of Contract remaining to be executed on capital account not provided for Nil Nil

3. Managerial Remuneration Payment to Whole Time Director

(i) Salary 388296.40 611744.61

(ii) Contribution to Prov. and Other Funds 34670.00 60293.00

422966.40 672037.61

4 Fees and Reimbursement of expenses to Statutory Auditors :

(i) Audit Fees 276471.00 280900.00

(ii) Taxation and other services 89037.00 58989.00

(iii) Reimbursement of Expenses 29646.44 39281.00 395154.44 379170.00

(Rs. in Lacs) (Rs. in Lacs)

5 Details of Deferred Liabilities

Extra realisation of Levy Sugar and Excise Duty along with accrued interest 2.86 2.86

Employees Benefits :

The required disclosures of employees benefits as per Accounting Standard-15 are given hereunder :-

(i) In respect of short term employee benefits :

The Company has at present only the Scheme of cumulative benefit of leave encashment

payable at the end of each calendar year and the same have been provided for on accrual basis.

(ii) In respect of Defined Benefit Scheme (Based on Actuarial Valuation) of Gratuity :

A) Change in Obligation over the year ended 30.09.2009 Present Value of defined obligation as on 01-10-2008 345.82 310.20

Current Service Cost 15.54 14.44

6.Related Party Disclosure

(a)Name of related parties and nature of relationship

(i)Key Management Personnel Sri Gaurav Goel -Director Sri Rajeev Kumar Agarwat -Whole Time Director

(ii)Associate Concerns Dhampur Sugar Mills Limited Saraswati Properties Limited Associated Metals Company Limited Goel Investment Limited K.S.M.Holdings Limited Sudh Edible Products Pvt.Limited Sonitron Limited.

7.The Company has Accounted for Cane Purchases for the Sugar Season 2007-2008 at Rs.l 10.00 per quintal,which was paid on the basis of Interim Order of The Honble Supreme Court as against the price of Rs.l 27 per quintal fixed by the Uttarkhand Government such differential price aggregate to Rs.622.66 Lacs. The necessary adjustments will be made in accordance with the Final Decision in the matter.

8.There are no separate reportable segments as prescribed in accounting standard on segment reporting issued by The Institute of Chartered Accountant of India.

9.Opening &Closing Stock of Sugar includes 1 760 Bags of Sugar seized by Excise Department.

10.In absence of virtual certaintity the company has not recognised deferred tax assets in accordance with Para No.l 7 of the Accounting Standard-22 issued by The Institute of Chartered Accountants of India.

11.Figures for the previous year have been regrouped/recasted wherever considered necessary.