Accounting Policies of KDL Biotech Ltd. Company

Mar 31, 2012

A) BASIS OF PREPARATION OF ACCOUNTS

The accounts have been prepared and presented under the historical cost convention on the accrual basis and comply in all material aspects with applicable accounting principals in India, the applicable Accounting Standards notified under Section 211 (3C) and relevent provisions of the Companies Act, 1956.All the assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in Schedule VI to the Companies Act, 1956. Based on the nature of services, the Company has ascertained its operating cycle to be less than 12 months.

b) SYSTEM OF ACCOUNTING

The Company follows the Mercantile system of accounting and recognises Income and Expenditure on accrual basis except stated otherwise.

c) FIXED ASSETS AND DEPRECIATION

i) Fixed Asset :

Tangible Assets:

1 Fixed Assets are stated at cost less accumulated depreciation.Cost of acquisition inclusive of borrowing cost, pilot plant batches and other incidental expenses incurred upto the date of installation/put to use.

2 Cenvat Credit wherever available on purchase of fixed assets is reduced from the cost of respective assets.

Intangible Assets

1 The measured and identified cost incurred for developing new production process, product development and process improvement are classified as intangible assets and the cost incurred in the development stage is segregated and shown as Intangible Assets.

2 Expenses incurred towards permanent transfer of the process know how are classified as Intangible Assets-Technical Know How.

3 The Non-Compete fees & expenses incurred thereon are classified as Intangible Asset.

ii) Depreciation / Amortisation :

1 Depreciation on Fixed Assets is provided on Straight Line Method (SLM) at the rates specified in Schedule XIV to the Companies Act, 1956.

2 Depreciation on Fixed Asset added/disposed off during the year is provided for on pro-rata basis with reference to the month of addition/disposal.

3 Technical now how is amortised over the period of ten years.

4 Non-Compete fees & expenses is amortised over the period of the terms and conditions of the agreement.

d) INVESTMENTS

Long term investments are stated at Cost. Provision for diminution in value is made only if, in the opinion of the management such a decline in value of investment is other than temporary.

e) INVENTORIES

1 Inventories are valued at the lower of cost (net of cenvat credit) or estimated net realisable value. Cost of raw materials, stores and spares and packing materials is ascertained on "First in First out (FIFO) basis".

2 Cost of Finished Goods include excise duty, cost of conversion & other cost incurred in bringing the inventories to their present location and condition.

3 Cost of Semi-Finished Goods include cost of materials and estimated overheads upto the stage of completion.

4 Obsolete, slow moving and defective inventories are identified at the time of physical verification of inventories and wherever necessary, provision is made for such inventories.

f) FOREIGN EXCHANGE TRANSACTIONS

Transactions denominated in foreign currencies are recorded at the exchange rates prevailing at the date of transaction, Monetary assets / liabilities denominated in foreign currency at the year end are translated at year end rates. In respect of monetary items, which are covered by forward exchange contracts, the difference between the year end rate and the rate on the date of the contract is recognised as exchange difference and the premium on such forward contract is recognised as exchange difference and the premium on such forward contracts is recognised over the life for the forward contract. The exchange differences arising on settlement / translation are recognised in the Statement of Profit and Loss.

g) REVENUE RECOGNITION

1 Sales are recognised when risk and rewards of ownership of the products are passed on to the customers, which is generally on despatch of goods. These are recorded at a price net of excise duty, sales return, sales tax, trade discounts and exchange difference arising on sale transactions and are inclusive of difference in exchange rate fluctuation arising out of working capital borrowed and used for business operations. Insurance claim and Interest on delayed payments is recognised as and when there is reasonable certainty of ultimate realisation. Interest income is recognised on time proportion basis.

2 Revenue from job work on completion of the assigned job.

h) EMPLOYEE BENEFITS

(i) Short Term Employees Benefits

Short Term Employees Benefits are recognized as an expense at the undiscounted amount in the Statement of Profit and Loss of the year/period in which the related services are rendered

(ii) Post employment benefits and other long term employee benefits are as follows:

Defined contribution plans - Provident and Pension Fund Contributions payable to the recognised provident fund and pension fund, which is a defined contribution scheme, are charged to the Statement of Profit and Loss.

Defined benefit plans - Gratuity

Provision for gratuity is made on the basis of actuarial valuation at the balance sheet date carried out by independent actuary.

Leave Encashment

Liability for leave encashment payable to employees as at the end of the year is determined as per Company's rule and is charged to Statement of Profit and Loss.

i) EXPORT BENEFITS / INCENTIVES

1 The unutilised export benefits under Advance Licence against export as on balance sheet date are recognised as income of the year on accrual basis and same is adjusted against Raw material consumption.

2 Export incentives under DEPB accrued during the year, is recognised as income of the year and same is adjusted against Raw Material Consumption.

j) CENVAT / VALUE ADDED TAX

Cenvat/ Value Added Tax benefit is accounted for by reducing the cost of material, fixed assets and services.

k) BORROWING COSTS

Interest and Borrowing cost on specific borrowings relatable to qualifying assets are capitalised. Other interest and borrowing cost are charged to the Statement of Profit and Loss in the year they are incurred.

l) PRELIMINARY EXPENSES & SHARE ISSUE EXPENSES

Preliminary expenses & Share issue expenses are charged to Statement of Profit & Loss.

m) PRIOR PERIOD ITEMS

Prior Period expenses/income is accounted under the respective head of expenses/income account. Material items, if any are disclosed separately by way of a note.

n) EARNING PER SHARE

In accordance with the Accounting Standard-20 (AS-20) "Earning Per Share" issued by Institute of Charterred Accountants of India, earning per share is calculated by dividing net profit attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.

o) TAXATION

Income tax expense comprises of current tax (i.e. amount of tax for the year determined in accordance with the income tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the year). Provision for current tax is made on the basis of the assessable income as the tax rate applicable to the relevant assessment year. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets is recognized using the tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is a reasonable certainty that the assets can be realized in future. However, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognized only if there is a virtual certainty of realization of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonable or virtually certain (as the case may be) of realization.

p) IMPAIRMENT OF ASSETS

An asset is impaired when the carrying cost of assets exceeds its recoverable value. An impairment loss is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting periods is reversed, if there has been a change in the estimate or recoverable amount.

q) PROVISIONS & CONTINGENT LIABILITIES

The company creates a provision when there is a present obligation as result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation. or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

r) OTHER ACCOUNTING POLICIES

These are consistent with the generally accepted accounting practices.

---

Mar 31, 2010

A) BASIS OF PREPARATION OF ACCOUNTS

The accounts have been prepared under the historical cost convention on the basis of going concern and comply in all material aspects with applicable accounting principles in India, the Accounting Standards issued by the Institute of Chartered Accountants of India and relevent provisions of the Companies Act, 1956.

b) SYSTEM OF ACCOUNTING

The Company follows the Mercantile system of accounting and recognises Income and Expenditure on accrual basis except stated otherwise, C) FIXED ASSETS AND DEPRECIATION i) Fixed Asset: Tangible Assets:

1. Fixed Assets are stated at cost less accumulated depreciation. Cost of acquisition inclusive of borrowing cost, pilot plant batches and other incidental expenses incurred upto the date of installation/put to use. 2 Cenvat Credit wherever available on purchase of fixed assets is reduced from the cost of respective assets. Intangible Assets:

1 The measured and identified cost incurred for developing new production process, product development and process improvement are classified as intangible assets and the cost incurred in the development stage is segregated and shown as Intangible Assets,

2 Expenses incurred towards permanent transfer of the process know-how are classified as Intangible Assets-Technical Know-how.

3 The Non-Compete fees & expenses incurred thereon are classified as Intangible Asset.

ii) Depreciation / Amortisation:

1. Depreciation on Fixed Assets is provided on Straight Line Method (SLM) at the rates specified in Schedule XIV to the Companies Act, 1956.

2. Depreciation on Fixed Asset added/disposed off during the year is provided for on pro-rata basis with reference to the month of addition/disposal.

3 Amortisation of Technical know-how will be done over the period of ten years.

4 Non-Compete fees & expenses will be amortised over the period of the terms and conditions of the agreement.

d) INVESTMENTS

Long term investments are stated at Cost. Provision for diminution in value is made only if, in the opinion of the management such a decline is other than temporary.

e) INVENTORIES

Inventories are valued at the lower of cost (net of cenvat credit) or estimated net realisable value. Cost of raw materials, stores and spares and packing materials is ascertained on "First in First out" (FIFO) basis. Cost of Finished Goods include excise duty, cost of conversion and other cost incurred in bringing the inventories to their present location and condition.

Cost of Semi-Finished Goods include cost of materials and estimated overheads upto the stage of completion.

Obsolete, slow moving and detective inventories are identified at the time of physical verification of inventories and wherever necessary, provision is made for such inventories.

f) FOREIGN EXCHANGE TRANSACTIONS

i) Transaction in foreign currency are recorded at the exchange rate prevailing as on the date of transaction.

ii) Foreign Currency assets/liabilities as on the balance sheet date are translated at the exchange rate prevailing on the date of balance sheet or forward cover rate as applicable.

iii) The resulting exchange difference, if any, is recognised as income or expense, as the case may be for the period charged to Revenue Account.

g) REVENUE RECOGNITION

Sales are recognised on despatch to customers. These are recorded at a price net of excise duty, sales return, sales tax, trade discounts and exchange difference arising on sale transactions and are inclusive of difference in exchange rate fluctuation arising out of working capital borrowed and used for business operations. Insurance claim and Interest on delayed payments is recognised as and when there is reasonable certainty of ultimate realisation. h) RETIREMENT BENEFITS

i) Contribution to Provident Fund and Pension Fund is charged to Revenue Account.

ii) Liability for Gratuity is determined at the end of the year, on the basis of Actuarial Valuation and deficit, if any, is charged to Profit and Loss Account. iii) Liability for leave encashment payable to employees as at the end of the year is determined as per Companys rule and is charged to Profit and Loss Account.

i) EXPORT BENEFITS / INCENTIVES

i) The unutilised export benefits under Advance Licence against export as on balance sheet date are recognised as income of the year on accrual basis and same is adjusted against Raw material consumption.

ii) Export incentives under DEPB accrued during the year, is recognised as income of the year and same is adjusted against Raw Material Consumption.

j) CENVAT CREDIT

CENVAT credit availed on raw material, packing material during the year is credited to cost of raw material and packing material.

k) MVAT SET OFF

Sales Tax / MVAT Set Off availed on raw material, packing material during the year is adjusted against the cost of Raw Material & Packing Material.

l) BORROWING COSTS

Interest and Borrowing cost on specific borrowings relatable to qualifying assets are capitalised. Other interest and borrowing cost are charged to the Profit and Loss Account in the year they are incurred.

m) PRELIMINARY EXPENSES & SHARE ISSUE EXPENSES Preliminary expenses & Share issue expenses are charged to Profit & Loss account.

n) PRIOR PERIOD ITEMS

Prior Period expenses/income is accounted under the respective head of expenses/income account. Material items, if any are disclosed separately by way of a note.

0) EARNING PER SHARE

In accordance with the Accounting Standard-20 (AS-20) "Earning Per Share" issued by Institute of Chartered Accountants of India, earning per share is calculated by dividing net profit attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.

p) TAXATION

Income tax comprises the current tax provision and the net changes in the Deferred tax assets or liability in the year. Provision for current tax is made after taking into consideration benefits admissible under the provisions of Income Tax Act, 1961. Deferred tax is recognised, subject to the consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

q) IMPAIRMENT OF ASSETS

An asset is impaired when the carrying cost of assets exceeds its recoverable value. An impairment loss is charged to the Profit and Loss account in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting periods is reversed, if there has been a change in the estimate or recoverable amount.

r) PROVISIONS & CONTINGENT LIABILITIES

The company creates a provision when there is a present obligation as result of a pas? event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

s) OTHER ACCOUNTING POLICIES

These are consistent with the generally accepted accounting practices.