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Annexure I
SIGNIFICANT ACCOUNTING POLICIES:
A. Basis of preparation of financial statements:
The financial statements are prepared under the historical
cost convention on the accrual basis of accounting in
accordance with the generally accepted accounting
principles, the applicable mandatory Accounting Standards
and the relevant provisions of the Companies Act, 1956.
B. Use of Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires
estimates and assumptions to be made that affect the
reported amounts of assets and liabilities on the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Differences
between actual results and estimates are recognised in the
period in which the results are known.
C. Recognition of Revenue and Expenditure:
a. Revenue / Income and Cost / Expenditure are generally
accounted for on accrual as they are earned or incurred
except in case of significant uncertainties;
b. Sale of goods is recognized on transfer of significant
risks and rewards of ownership. Recognition in the case
of local sales is generally on the despatch of goods.
Export Sales are generally accounted for on the basis
of the dates of ‘On Board Bill of Lading’;
c. Export Benefits are recognised in the year of export;
d. Share Issue Expenses are charged first against
available balance in the Securities Premium Account;
e. Dividend income is recognised in the year in which the
right to receive dividend is established.
D. Employee Benefits:
a. Short term employee benefits are recognised as an
expense at the undiscounted amount in the Profit and
Loss Account of the year in which the related service is
rendered;
b. Post employment benefits
i. Defined contribution plans:
Company’s contribution to the superannuation
scheme, state governed provident fund scheme,
etc. are recognised during the year in which the
related service is rendered;
ii. Defined benefit plans:
The present value of the obligation under such
plans is determined based on an actuarial
valuation using the Projected Unit Credit Method.
Actuarial gains and losses arising on such
valuation are recognised immediately in the Profit
EVEREST KANTO CYLINDER LIMITED
and Loss Account. In the case of gratuity which is
funded with the Life Insurance Corporation of
India, the fair value of the plan assets is reduced
from the gross obligation under the defined benefit
plan to recognise the obligation on net basis;
c. Long term compensated absences are provided on
the basis of an actuarial valuation;
d. Termination Benefits are recognised as an expense
in the Profit and Loss Account of the year in which they
are incurred.
E. Foreign Currency Translations:
a. All transactions in foreign currency are recorded at the
rates of exchange prevailing on the dates when the
relevant transactions take place;
b. Monetary assets and liabilities in foreign currency
outstanding at the close of the year are converted in
Indian Currency at the appropriate rates of exchange
prevailing on the date of the Balance Sheet. Resultant
gain or loss is accounted for during the year;
c. In respect of forward exchange contracts entered into
to hedge foreign currency risks the difference between
the forward rate and exchange rate at the inception of
the contract is recognized as income or expense over
the life of the contract. Further, the exchange differences
arising on such contracts are recognised as income or
expense along with the exchange differences on the
underlying assets / liabilities. Profit or loss on
cancellations / renewals of forward contracts is
recognised during the year;
d. Exchange differences arising on other derivative
contracts entered into to hedge foreign currency
exposure on account of highly probable forecast
transactions, were recognized and marked to market,
in line with principles laid down in Accounting Standard
30 – Financial Instruments – Recognition and
Measurement, issued by The Institute of Chartered
Accountants of India, to the extent, no specific
accounting treatment is prescribed under Company
law or by any other regulatory authority. Accordingly,
such gain or loss on effective hedges was carried
forward under Hedging Reserve to be recognized in
the Profit and Loss Account only in the year in which
underlying transactions are complete. In the absence
of a designation as effective hedge, the gain or loss
would be immediately recognized in the Profit and Loss
Account. With effect from 1st April, 2010, the Company
has discontinued the aforesaid accounting treatment
and is accordingly, recognizing mark to market losses
in the Profit and Loss Account (Refer Note ‘21’ in
Schedule ‘U’)
Schedules forming part of Financial Statements Annual Report 2010-11
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