Accounting Policies of Vanasthali Textile Industries Ltd. Company

Mar 31, 2011

1. Basis of preparation of Financial Statements

Except where otherwise stated, the financial statements are prepared under the historical cost convention in accordance with the generally accepted accounting principles in India and the provisions of the Companies Act, 1956.

2. Use of Estimates

The preparation of financial statement requires estimates and assumptions to be made that effect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reported period. Difference between the actual results and estimates are recognized in the period in which the results are known / materialized.

3. Fixed Assets

Fixed Assets are stated at cost net of CENVAT / Value added tax less accumulated depreciation and impairment loss, if any.

4. Depreciation

Depreciation on fixed assets has been provided on written down value method on pro rata basis at the rates specified in the Schedule XIV to the Companies Act, 1956.

5. Translation of Foreign Currency items

Transactions denominated in foreign currencies are recorded at exchange rate prevailing on the date of the transaction. Monetary items denominated in foreign currencies at the year end are restated at the year end rates. Any income or expense on account of exchange difference either on settlement or on translation is recognized in the profit & loss account.

6. Inventories

a) Raw Material, Stores & Spares and Consumables, Fuel and Packing Materials are valued at lower of cost or net realizable value.

b) Stock in process is valued at lower of cost or net realizable value.

c) Finished Goods are valued at lower of cost or net realizable value.

7. Investments

Current Investments are valued at cost or market price whichever is lower. Long Term investments are valued at cost. Provision for diminution in the value of Long Term Investments is made only if such a decline is other than temporary.

8. Sales —

a) Local Sales : Sales represent amount billed for goods sold, inclusive of excise duty net of all discounts, returns and allowances.

b) Export Sales: Sales represent CIF value of exports.

c) Export Sales are accounted for at the time of shipment from the factory.

9. Benefits on Exports

Refund of CST on material purchased, deemed drawback on inputs, export rebate/ DEPB/Drawback on Exports, DEPB and duty drawback on consumption of Furnace Oil / HSD is accounted for on accrual basis.

10. Employee Retirement Benefits :

Defined Contribution Plan

Company's contribution paid / payable during the year towards Provident Fund Scheme & Employee State Insurance Scheme are recognized in the Profit & Loss account.

Defined Benefit Plan

Employee Gratuity Fund Scheme is managed by LIC, using the Projected Unit Credit Method. Other Long Term Benefits such as Leave Encashment and other retirement benefits are accounted for on payment basis.

11. Taxation

Current Tax is determined as the amount of tax payable in respect of taxable income for the period. Deferred tax is recognized subject to the consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and is capable of reversal in one or more subsequent periods. Deferred tax assets in respect of carry forward of un-absorbed depreciation and the losses are recog- nized to the extent there is virtual certainty of their realization against future profit.

12. Interest under TUF scheme

The term loan of the company has been sanctioned under the TUF scheme of the Govt, of India. Under this scheme, interest subsidy @ 5% p.a. is given by the Government on the interest paid by the company on its term loan which is refunded quarterly after TUF claim is lodged. This refund is accounted for on mercantile basis and is treated as revenue receipt.

13. Borrowing costs

Borrowing costs that are attributable to the acquisition or construction of qualifying assets prior to commencement of commercial production are capitalized as a part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue.

14. Events occurring after balance sheet date

Significant events occurring after the balance sheet date have been considered in the preparation of financial statement.

15. Impairment of Fixed Assets

At the end of each year the company determines whether a provision should be made for impairment loss on fixed assets by considering the indications that on impairment loss may have occurred in accordance with the Accounting Standard- 28 on Impairment of Assets issued by the Institute of Chartered Accountants of India. An impairment loss is charged to profit & loss A/c in the year in which an asset is identified as impaired, when the carrying value of the asset exceeds its recoverable value. The impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

16. Accounting for Provisions. Contingent Liabilities & Contingent Assets.

Provisions are recognized in terms of Accounting Standard 29-'Provssions, Contingent Liabilities & Contingent Assets (AS-29), notified by the Companies (Accounting Standards) Rules, 2006 and when there is a present legal or constructive obligation as result of a past event, when there is probably that there will be an outflow of resources to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Contingent Liabilities are recognised only when there is a possible obligation arising from the past events, due to occurrence or non- occurrences of one or more uncertain future events, not wholly within the control of the company, or where any present obligation can not be measured in terms of future outflow of resources, or where a reliable estimate of the obligation cannot be made. Obligations are assessed on an ongoing basis and only those having the largely probable outflow of resources are provided for. Contingent Assets are not recognised in the Financial Statements.

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Mar 31, 2010

1. Basis of preparation of Financial Statements

Except where otherwise stated, the financial statements are prepared under the historical cost convention in accordance with the generally accepted accounting principles in India and the provisions of the Companies Act, 1956.

2. Use of Estimates

The preparation of financial statement requires estimates and assumptions to be made that effect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reported period. Difference between the actual results and estimates are recognized in the period in which the results are known / materialized.

3. Fixed Assets

Fixed Assets are stated at cost net of CENVAT /Value added tax less accumulated depreciation and impairment loss, if any.

4. Depreciation

Depreciation on fixed assets has been provided on written down value method on pro rata basis at the rates specified in the Schedule XIV to the Companies Act, 1956.

5. Translation of Foreign Currency items

Transactions denominated in foreign currencies are recorded at exchange rate prevailing on the date of the transaction. Monetary items denominated in foreign currencies at the year end are restated at the year end rates. Any income or expense on account of exchange difference either on settlement or on translation is recognized in the profit & loss account.

6. Inventories

a) Raw Material, Stores & Spares and Consumables, Fuel and Packing Materials are valued at lower of cost or net realizable value.

b) Stock in process is valued at lower of cost or net realizable value.

c) Finished Goods are valued at lower of cost or net realizable value.

7. Investments

Current Investments are valued at cost or market price whichever is lower. Long Term investments are valued at cost. Provision for diminution in the value of Long Term Investments is made only if such a decline is other than temporary.

8. Sales

a) Local Sales : Sales represent amount billed for goods sold, inclusive of excise duty net of all discounts, returns and allowances.

b) Export Sales: Sales represent CIF value of exports.

c) Export Sales are accounted for at the time of shipment from the factory.

9. Benefits on Exports

Refund of CST on material purchased, deemed drawback on inputs, export rebate/ DEPB/Drawback on Exports, DEPB and duty drawback on consumption of Furnace Oil / HSD is accounted for on accrual basis.

10. Employee Retirement Benefits :

Defined Contribution Plan

Companys contribution paid / payable during the year towards Provident Fund Scheme & Employee State Insurance Scheme are recognized in the Profit & Loss account.

Defined Benefit Plan

Employee Gratuity Fund Scheme is managed by LIC, using the Projected Unit Credit Method. Other Long Term Benefits such as Leave Encashment and other retirement benefits are accounted for on payment basis.

11. Taxation

Current Tax is determined as the amount of tax payable in respect of taxable income for the period. Deferred tax is recognized subject to the consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and is capable of reversal in one or more subsequent periods. Deferred tax assets in respect of carry forward of un-absorbed depreciation and the losses are recognized to the extent there is virtual certainty of their realization against future profit.

12. Interest under TUF scheme

The term loan of the company has been sanctioned under the TUF scheme of the Govt, of India. Under this scheme, interest subsidy @ 5% p.a. is given by the Government on the interest paid by the company on its term loan which is refunded quarterly after TUF claim is lodged. This refund is accounted for on mercantile basis and is treated as revenue receipt.

13. Borrowing costs

Borrowing costs that are attributable to the acquisition or construction of qualifying assets prior to commencement of commercial production are capitalized as a part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue.

14. Events occurring after balance sheet date

Significant events occurring after the balance sheet date have been considered in the preparation of financial statement.

15. Impairment of Fixed Assets

At the end of each year the company determines whether a provision should be made for impairment loss on fixed assets by considering the indications that on impairment loss may have occurred in accordance with the Accounting Standard- 28 on Impairment of Assets issued by the Institute of Chartered Accountants of India. An impairment loss is charged to profit & loss A/c in the year in which an asset is identified as impaired, when the carrying value of the asset exceeds its recoverable value. The impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

16. Accounting for Provisions, Contingent Liabilities & Contingent Assets.

Provisions are recognized in terms of Accounting Standard 29-Provisions, Contingent Liabilities & Contingent Assets (AS-29), notified by the Companies (Accounting Standards) Rules, 2006 and when there is a present legal or constructive obligation as result of a past event, when there is probably that there will be an outflow of resources to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Contingent Liabilities are recognised only when there is a possible obligation arising from the past events, due to occurrence or non-occurrences of one or more uncertain future events, not wholly within the control of the company, or where any present obligation can not be measured in terms of future outflow of resources, or where a reliable estimate of the obligation cannot be made. Obligations are assessed on an ongoing basis and only those having the largely probable outflow of resources are provided for. Contingent Assets are not recognised in the Financial Statements.