Accounting Policies of Malwa Cotton Spinning Mills Ltd. Company

Mar 31, 2015

A. Basis for preparation of financial statements

The financial statements are prepared on accrual basis under the historical cost convention in accordance with the applicable accounting standards referred to in section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rule2014. The accounting policies adopted in the preparations of financial statements are consistent with those of the previous year.

B. Use of Estimates

The preparation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amount of assets and liabilities as on the date of its financial statements and the reported amount of revenue and expenses during the reporting period. Difference between the actual results and estimates are recognized in the period in which the results materialize.

C. Revenue Recognition

(i) The revenue in respect of sale of goods and services is recognized when:

a) all significant risks and rewards of ownership is transferred to the buyer and the company retains no effective control of the goods transferred to a degree usually associated with ownership; and

b) no significant uncertainty exists regarding the amount of consideration that will be derived from the sale of goods.

(ii) Interest in respect of bank deposits is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable. Interest from customers and insurance claim received is recognized provided the ability to assess the ultimate collection with reasonable certainty is not lacking at the time of raising of any claim. Revenue recognition in both these cases i.e. interest from customers and insurance claims is postponed to the extent of uncertainty involved.

(iii) The revenue in respect of export benefits is recognized on post export basis at the rate at which the entitlement accrues.

(iv) Dividend:

Dividend Income is recognized as an income when the right to receive the payment is established.

D. Fixed Assets

Fixed assets are stated at historical cost less accumulated depreciation. Cost of fixed assets comprises its purchase price and any attributable expenditure (both direct and indirect) for bringing an asset to the working condition for its intended use.

E. Intangible Assets

Intangible fixed assets are stated at historical cost less accumulated amount of amortization.

F. Depreciation

(i) Depreciation on Plant and Machinery and Building is provided on straight line method and on the other assets on written down value method in accordance with and in the manner specified in schedule II to the Companies Act, 2013.

(ii) Depreciation at 100% is provided on assets costing Rs.5000 or below acquired during the year.

G. Amortization

Intangible assets are amortized on straight line method over their estimated useful life.

H. Inventories

Inventories are valued at cost or net realizable value whichever is lower. The cost formula adopted in respect of items of inventories is as under:

* Raw material At weighted average cost plus direct expenses

* Finished goods At raw material cost plus conversion cost and excise duty if applicable

* Work in process At raw material cost plus conversion cost depending upon the stage of completion

* Stores and spares At weighted average cost

* Material in transit At invoice price plus other expenses, if applicable

I. Investments

Long term investments are stated at cost less allowances, if any, for diminution in value is other than temporary. Current investments are valued at lower of cost and fair value.

J. Cenvat

Cenvat credit on excise duty paid goods is accounted for by reducing the purchase cost of related goods.

K. Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction or production of the qualifying asset are capitalized as part of the cost of the qualifying asset. Qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs are recognized as expense in the period in which these are incurred.

L. Foreign Currency Transactions

i) Foreign currency transaction is recorded on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of transaction except export sale effected in foreign currency which is recorded at exchange rate applicable on the date of negotiation of export invoice, such rate approximates the actual rate at the date of transaction.

ii) Monetary items denominated in foreign currency are reported using the closing rate.

iii) Non-monetary items which are carried in terms of historical cost denominated in foreign currency are reported at the exchange rate as at the date of transaction.

iv) Exchange differences arising on the settlement of monetary items or on reporting the monetary items at rates different from those at which they are initially recorded during the period or reported in previous financial statements are recognized as income or expenses in the period in which they arise.

v) The premium or discount arising at the inception of a forward exchange contract is amortized as expense or income over the life of the contract. Exchange difference in such a contract is recognized in the statement of profit and loss in the reporting period in which the exchange rates change. Profit or loss arising on cancellation or renewal of such a forward exchange contract is recognized as income or as expense for the period.

vi) The exchange difference to the extent of loss, arising on forward contract to hedge the transaction in the nature of firm commitments and/or highly probable forecast transactions is recognized in the statement of profit and loss. The profit, if any, arising thereon is ignored.

M. EMPLOYEE BENEFITS:

(a) Short Term Employee Benefits:

Short Term Employee Benefits are recognized as an expense on an undiscounted basis in the statement of profit and loss of the year in which the related service is rendered.

(b) Post Employment Benefits:

(i) Defined Contribution Plans:

(1.1) Provident Fund: The Employer's contribution to Provident Fund and Employees Pension Scheme, a defined contribution plan is made in accordance with the Provident Fund Act, 1952 read with the Employees Pension Scheme, 1995.

(1.2) Superannuation: The liability in respect of eligible employees covered under the scheme is provided through a policy taken from Life Insurance Corporation of India by an approved trust formed for the purpose. The premium in respect of such policy is recognized as an expense in the period in which it falls due.

(ii) Defined Benefit Plans

Gratuity: The Employees Gratuity Fund Scheme, managed by Employee's Group Gratuity Trust is a defined benefit plan. The liability for gratuity is provided on the basis of actuarial valuation carried out by an independent actuary at the balance sheet date using projected unit credit method. The Present Value of the company's obligation is determined on the basis of actuarial valuation at the year end and the fair value of plan assets is reduced from the gross obligations under the gratuity scheme to recognize the obligation on a net basis.

(iii) Actuarial gain or loss is recognized immediately in the statement of profit or loss.

(iv) Long Term Employee Benefits:

The liability for leave encashment and other compensated absences is recognized on the basis of actuarial valuation carried out by an independent actuary at the balance sheet date by using projected unit credit method.

N. LEASES:

Assets acquired on lease wherein significant risk and rewards incident to ownership are retained by lessor are classified as operating leases. Lease rent paid for such leases are recognized as expense on systematic basis over the term of lease.

O. Earning per share

Basic earning per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of computing diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average of number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.

P. Accounting for Taxes on Income

i) Provision for taxation for the year comprises of current tax and deferred tax.

ii) Current tax is the amount of income tax determined to be payable in respect of taxable income for the year. Deferred tax is the tax effect of timing difference between taxable income and accounting income for a period that originate in one period and is capable of reversal in one or more subsequent periods.

Q. Impairment of Assets

At each balance sheet date an assessment is made whether any indication exists that an asset has been impaired. If any such indication exists, an impairment loss i.e. the amount by which the carrying amount of an assets exceeds its recoverable amount is provided in the books of account.

R. Provision and Contingent Liabilities

i) Provisions are recognized for liability that can be measured by using a substantial degree of estimation if -

a) there is a present obligation arising as a result of past event

b) it is probable that an outflow of resources embodying economic benefits is expected to settle the obligation; and

c) a reliable estimate can be made of the amount of the obligation.

ii) Contingent liability is disclosed in the case of :

a) A present obligation that arises from past events

i) when it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or

ii) a reliable estimate of the amount of the obligation cannot be made.

b) A possible obligation, that arises from past events and existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the enterprise.

---

Mar 31, 2014

A. Basis for preparation of financial statements

The financial statements are prepared on accrual basis under the historical cost convention in accordance with the applicable accounting standards referred to in sub section (3C) of section 211 and other relevant provisions of the Companies Act, 1956. The accounting policies adopted in the preparations of financial statements are consistent with those of the previous year.

B. Use of Estimates

The preparation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amount of assets and liabilities as on the date of its financial statements and the reported amount of revenue and expenses during the reporting period. Difference between the actual results and estimates are recognized in the period in which the results materialize.

C. Revenue Recognition

(i) The revenue in respect of sale of goods and services is recognized when:

a) all significant risks and rewards of ownership is transferred to the buyer and the company retains no effective control of the goods transferred to a degree usually associated with ownership; and

b) no significant uncertainty exists regarding the amount of consideration that will be derived from the sale of goods.

(ii) Interest in respect of bank deposits is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable. Interest from customers and insurance claim received is recognized provided the ability to assess the ultimate collection with reasonable certainty is not lacking at the time of raising of any claim. Revenue recognition in both these cases i.e. interest from customers and insurance claims is postponed to the extent of uncertainty involved.

(iii) The revenue in respect of export benefits is recognized on post export basis at the rate at which the entitlement accrues.

(iv) Dividend:

Dividend Income is recognized as an income when the right to receive the payment is established.

D. Fixed Assets

Fixed assets are stated at historical cost less accumulated depreciation. Cost of fixed assets comprises its purchase price and any attributable expenditure (both direct and indirect) for bringing an asset to the working condition for its intended use.

E. Intangible Assets

Intangible fixed assets are stated at historical cost less accumulated amount of amortization.

F. Depreciation

(i) Depreciation on Plant and Machinery and Building is provided on straight line method and on the other assets on written down value method in accordance with and in the manner specified in schedule XIV to the Companies Act, 1956.

(ii) Depreciation at 100% is provided on assets costing Rs.5000 or below acquired during the year.

G. Amortization

Intangible assets are amortized on straight line method over their estimated useful life.

H. Inventories

Inventories are valued at cost or net realizable value whichever is lower. The cost formula adopted in respect of items of inventories is as under:

- Raw material

At weighted average cost plus direct expenses

- Finished goods

At raw material cost plus conversion cost and excise duty if applicable

- Work in process

At raw material cost plus conversion cost depending upon the stage of completion

- Stores and spares At weighted average cost

- Material in transit

At invoice price plus other expenses, if applicable

NOTES FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST MARCH. 2014

I. Investments

Long term investments are stated at cost less allowances, if any, for diminution in value is other than temporary. Current investments are valued at lower of cost and fair value.

J. Cenvat

Cenvat credit on excise duty paid goods is accounted for by reducing the purchase cost of related goods.

K. Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction or production of the qualifying asset are capitalized as part of the cost of the qualifying asset. Qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs are recognized as expense in the period in which these are incurred.

L. Foreign Currency Transactions

i) Foreign currency transaction is recorded on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of transaction except export sale effected in foreign currency which is recorded at exchange rate applicable on the date of negotiation of export invoice, such rate approximates the actual rate at the date of transaction.

ii) Monetary items denominated in foreign currency are reported using the closing rate.

iii) Non-monetary items which are carried in terms of historical cost denominated in foreign currency are reported at the exchange rate as at the date of transaction.

iv) Exchange differences arising on the settlement of monetary items or on reporting the monetary items at rates different from those at which they are initially recorded during the period or reported in previous financial statements are recognized as income or expenses in the period in which they arise.

v) The premium or discount arising at the inception of a forward exchange contract is amortized as expense or income over the life of the contract. Exchange difference in such a contract is recognized in the statement of profit and loss in the reporting period in which the exchange rates change. Profit or loss arising on cancellation or renewal of such a forward exchange contract is recognized as income or as expense for the period.

vi) The exchange difference to the extent of loss, arising on forward contract to hedge the transaction in the nature of firm commitments and/or highly probable forecast transactions is recognized in the statement of profit and loss. The profit, if any, arising thereon is ignored.

M. EMPLOYEE BENEFITS:

(a) Short T erm Employee B enefits:

Short Term Employee Benefits are recognized as an expense on an undiscounted basis in the statement of profit and loss of the year in which the related service is rendered.

(b) Post Employment Benefits:

(i) Defined Contribution Plans:

(1.1) Provident Fund: The Employer''s contribution to Provident Fund and Employees Pension Scheme, a defined contribution plan is made in accordance with the Provident Fund Act, 1952 read with the Employees Pension Scheme, 1995.

(1.2) Superannuation: The liability in respect of eligible employees covered under the scheme is provided through a policy taken from Life Insurance Corporation of India by an approved trust formed for the purpose. The premium in respect of such policy is recognized as an expense in the period in which it falls due.

(ii) Defined Benefit Plans

(1.1) Gratuity: The Employees Gratuity Fund Scheme, managed by Employee''s Group Gratuity Trust is a defined benefit plan. The liability for gratuity is provided on the basis of actuarial valuation carried out by an independent actuary at the balance sheet date using projected unit credit method. The Present Value of the company''s obligation is determined on the basis of actuarial valuation at the year end and the fair value of plan assets is reduced from the gross obligations under the gratuity scheme to recognize the obligation on a net basis.

(iii) Actuarial gain or loss is recognized immediately in the statement of profit or loss.

(iv) Long Term Employee Benefits:

The liability for leave encashment and other compensated absences is recognized on the basis of actuarial valuation carried out by an independent actuary at the balance sheet date by using projected unit credit method.

N. LEASES:

Assets acquired on lease wherein significant risk and rewards incident to ownership are retained by lessor are classified as operating leases. Lease rent paid for such leases are recognized as expense on systematic basis over the term of lease.

NOTES FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST MARCH. 2014

O. Earning per share

Basic earning per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of computing diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average of number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.

P. Accounting for Taxes on Income

i) Provision for taxation for the year comprises of current tax and deferred tax.

ii) Current tax is the amount of income tax determined to be payable in respect of taxable income for the year. Deferred tax is the tax effect of timing difference between taxable income and accounting income for a period that originate in one period and is capable of reversal in one or more subsequent periods.

Q. Impairment of Assets

At each balance sheet date an assessment is made whether any indication exists that an asset has been impaired. If any such indication exists, an impairment loss i.e. the amount by which the carrying amount of an assets exceeds its recoverable amount is provided in the books of account.

R. Provision and Contingent Liabilities

i) Provisions are recognized for liability that can be measured by using a substantial degree of estimation if -

a) there is a present obligation arising as a result of past event

b) it is probable that an outflow of resources embodying economic benefits is expected to settle the obligation; and

c) a reliable estimate can be made of the amount of the obligation.

ii) Contingent liability is disclosed in the case of :

a) A present obligation that arises from past events

i) when it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or

ii) a reliable estimate of the amount of the obligation cannot be made.

b) A possible obligation, that arises from past events and existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the enterprise.

b. Terms/rights attached to equity shares

The company has only one class of equity shares having a par value of Rs 10 per share. Each holder of equity share is entitled to one vote per share.

The dividend proposed by the board of directors is subject to the approval of the shareholders in the ensuing annual general meeting and each equity share is entitled for the such dividend. In the event of liquidation of the company, the holder of equity shares will be entitled to receive remaining assets the company after distribution of all preferential amounts.

c. Terms/rights attached with Cumulative redeemable preference shares

The company has presently 9% cumulative redeemable preference shares. These preference shares are redeemable at a premium of 5% payable at the time of redemption. Schedule of repayment of Cumulative redeemable preference shares.

The earliest date of redemption was 30th September, 2011

Arrear of fixed cumulative dividend on preference shares as at 31st March, 2014 Rs. 3800.00 Lac (As at 31st March, 2013 Rs. 3555.00 Lac). Cumulative preference shares due for redemption during the year and in the proceeding year but not redeemed are shown as Preference shares capital. The preference share holders have option to convert the defaulted cumulative Redeemable preference shares in to equity shares at par in terms of subscription agreement entered in to with the company.

d. Shares of the company held by the holding company, the ultimate holding company their subsidiaries and associates.

There is no holding or ultimate holding of the company.

Security :

i) Primary - Pari-passu first charge on fixed assets of the Company (present and future).

Collateral - Pari-passu second charge on the current assets of the Company.

ii) Exclusive securities:

a) IFCI/IDBI: The 7,86,700 Equity Shares of promoters pledged & 7,56,150 Equity Shares physically held with IFCI/IDBI for term loan outstanding of Rs. 9697.26 lacs (previous year Rs. 9697.26 lacs).

b) PNB/SBI: Equitable mortgage of immovable properties situated at Ludhiana and Barnala as additional collateral security for long term loans out standing of Rs. 5477.27 lacs(previous year Rs 5477.27 lac).

iii) Pledge of 24,88,715 equity shares of Promoters as Additional Collateral security for entire CDR debts (Existing and fresh) to be shared by all CDR lenders on pari-passu basis.

iv) Equitable Mortgage of immovable properties situated at Kolkata, Bhilwara, Kanpur, Dehradun and Delhi as Additional Collateral Security for entire CDR debts (Existing and Fresh) to be shared by all CDR Lenders on pari-passu basis.

v) Personal Guarantee of three Promoter Directors of the Company.

Cash credit is repayable on demand and carries interest @12.75% to 13.25%. Cash credit from banks is secured against :

i) Primary - Pari-passu first charge on the current assets of the company.

Collateral - Pari-passu second charge on the fixed assets of the company (present and future).

ii) Exclusive securities:

a) IFCI/IDBI: The 7,86,700 Equity Shares of promoters pledged & 7,56,150 Equity Shares physically held with IFCI/IDBI for working capital loans outstanding of Rs. 471.25 lacs (previous year Rs. 471.25 lacs).

b) PNB/SBI: Equitable Mortgage of properties at Ludhiana & Barnala on Pari Passu basis to secure its enhanced WC Limits with PNB/SBI exclusively for working capital loans outstanding of Rs. 10942.50 lac (previous year Rs. 11054.41 lac.).

iii) Pledge of 24,88,715 equity shares of Promoters as Additional Collateral security for entire CDR debts (existing and fresh) to be shared by all CDR lenders on pari-passu basis.

iv) Equitable Mortgage of immoveable properties situated at Kolkata, Bhilwara, Kanpur, Dehradun and Delhi as Additional Collateral Security for entire CDR debts as long-term loan and short-term loans (Existing and Fresh) to be shared by all CDR Lenders on pari-passu basis.

---

Mar 31, 2010

A) Accounting Convention

The accounts are prepared on accrual basis under the historical cost convention in accordance with the applicable accounting standards referred to in sub section (3C) of section 211 and other relevant provisions of the Companies Act, 1956.

b) Use of Estimates

The preparation of financial statements in conformity with the generally accepted accounting principles, require estimates and assumptions to be made that affect the reported amount of assets and liabilities as on the date of its financial statements and the reported amount of revenue and expenses during the reporting period. Difference between the actual results and estimates are recognized in the period in which the results materialize. C) Revenue Recognition

(i) The revenue in respect of sales is recognized when:

a) All significant risks and rewards of ownership is transferred to the buyer and the company retains no effective control of the goods transferred to a degree usually associated with ownership; and

b) No significant uncertainty exists regarding the amount of consideration that will be derived for the sale of goods.

(ii) Interest in respect of bank deposits is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable. Interest from customers and insurance claim received is recognized provided the ability to assess the ultimate collection with reasonable certainty is not lacking at the time of raising of any claim. Revenue recognition in both these cases i.e. interest from customers & insurance claims is postponed to the extent of uncertainty involved.

(iii) The revenue in respect of export benefit is recognized on post export basis at the rate at which the entitlement accrues.

d) Fixed Assets

Fixed assets are stated at historical cost less accumulated depreciation.

e) Intangible Assets

Intangible fixed assets are stated at historical cost less accumulated amount of amortization

f) Depreciation

(i) Depreciation on Plant and Machinery and Building is provided on straight line method and on the other assets on written down value method in accordance with and in the manner specified in schedule XIV to the Companies Act, 1956.

(ii) Depreciation at 100% is provided on assets costing Rs.5,000/- or below acquired during the year.

g) Amortization

intangible assets are amortized on straight line method. These assets are amortized over their estimated useful life. h) Inventories

Inventories are valued at cost or net realisable value whichever is lower. The cost formula adopted in respect of items of inventories is as under:

- Raw material At weighted average cost plus

direct expenses

- Finished goods At raw material cost plus

conversion cost and excise duty if applicable

- Work in process At raw material cost plus

conversion cost depending upon the stage of completion

- Stores and spares At weighted average cost

- Material in transit At invoice price plus other

expenses if applicable

i) Investments

Long term investments are stated at cost less allowance, if any, for diminution in value which is other than temporary.

j) Cenvat

Cenvat credit on excise duty paid goods is accounted for by reducing the purchase cost of related goods.

k) Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction or production of the qualifying asset are capitalized as part of the cost of the qualifying asset. Qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs are recognized as expense in the period in which these are incurred. I) Expenditure incurred during construction period

Indirect expenditure incurred during the construction period attributable to bringing the assets to its working condition for its intended use is added to the cost of fixed asset. m) Foreign Currency Transactions

i) Foreign currency transaction is recorded on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of transaction except export sale effected in foreign currency which is recorded at exchange rate applicable on the date of negotiation of export invoice, such rate approximates the actual rate at the date of transaction.

ii) Monetary items denominated in foreign currency are reported using the closing rate.

iii) Non-monetary items, which are carried in terms of historical cost denominated in foreign currency are reported at the exchange rate as at the date of transaction. iv) Exchange differences arising on the settlement of monetary items or on reporting the monetary items at rates different from those at which they are initially recorded during the period or reported in previous financial statements are recognised as income or expenses in the period in which they arise.

The premium or discount arising at the inception of a forward exchange contract is amortized as expense or income over the life of the contract. Exchange difference in such a contract is recognized in the statement of profit and loss account in the reporting period in which the exchange rates change. Profit or loss arising on cancellation or renewal of such a forward exchange contract is recognized as income or as expense for the period. n) Employees Benefits

a) Short Term Employee Benefits

Short Term Employee Benefits are recognized as an expense on an undiscounted basis in the Profit and Loss Account of the year in which the related service is rendered.

b) Post Employment Benefits:

i) Defined Contribution Plans: Provident Fund:

Contribution to Provident Fund is made in accordance with the provisions of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 and is recognised as an expense to the profit and loss account.

ii) Defined Benefit Plans

(1.1) Gratuity:

Provision for gratuity liability to employees is made on the basis of actuarial valuation as at the close of the year.

(1.2) Leave Encashment:

Provision for leave encashment is made on the basis of actuarial valuation as at the close of the year. (c) The actuarial gain/loss is recognized in statement of profit and loss account. o) LEASES:

Assets acquired on lease wherein significant risk and rewards incident to ownership are retained by lessor are classified as operating leases. Lease rent paid for such leases are recognized as expense on systematic basis over the term of lease p) Earning per Share

Basic earning per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of computing diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average of number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares. q) Accounting for Taxes on Income

i) Provision for taxation for the year comprises of

current tax and deferred tax. ii) Current tax is the amount of income tax determined to be payable in respect of taxable income for the year. Deferred tax is the tax effect of timing difference between taxable income and accounting income for a period that originate in one period and is capable of reversal in one or more subsequent periods.

Deferred tax asset except relating to unabsorbed depreciation or brought forward of losses is recognized and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. Deferred tax in respect of unabsorbed depreciation or brought forward losses under tax laws is recognized when there is a virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. r) Impairment of Assets

At each balance sheet date an assessment is made whether any indication exists that an asset has been impaired. If any such indication exists, an impairment loss i.e. the amount by which the carrying amount of an assets exceeds its recoverable amount is provided in the books of account. s) Provision and Contingent Liabilities

i) Provisions are recognized for liability that can be measured by using a substantial degree of estimation if -

a) there is a present obigation arising as a result of past event

b) it is probable that an outflow of resources embodying economic benefits is expected to settle the obligation; and

c) a reliable estimate can be made of the amount of the obligation.

ii) Contingent liability is disclosed in the case of:

a) a present obligation that arises from past events

i) when it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or

ii) a reliable estimate of the amount of the obligation cannot be made.

b) a possible obligation, that arises from past events and existence of which will be confirmed only by the occurrence or non occurrence of one more uncertain future events not wholly within the control of the enterprise.