INDIAN RAYON AND INDUSTRIES LIMITED - Aditya Birla Nuvo, Ltd

NOTES TO THE ACCOUNTS1. INCORPORATION AND ACTIVITY2. ACCOUNTING POLICIES(a) Basis of accounting(b) Intangible assets(c) Transactions in foreign currencies(d) Cash and cash equivalents(e) Preliminary expenses(f) Interest incomeInterest income is recorded on an accruals basis.3. TAXATION4. INTANGIBLE ASSETS123FOR THE PERIOD FROM 21 DECEMBER 1999, THE DATE OFINCORPORATION, TO 31 DECEMBER 2000The company is incorporated in Mauritius under the Companies Act 1984 as a private companywith limited liability. The main activity of the Company is to acquire brand, technical knowhowand undertake other activities, carry on business of general merchant and traders,manufacturers’ agents and representatives to enhance the global presence of the holdingcompany.The financial statements are prepared in accordance with applicable International AccountingStandards. A summary of the more important accounting policies, which have been appliedconsistently, is set out below.The financial statements are prepared under the historical cost convention on an accrualsbasis and is in accordance with International Accounting Standards.Intangible assets are stated at cost and permanent impairment, if any, is provided for.Intangible assets are amortised in accordance with IAS 38.Transactions denominated in foreign currencies are recorded in United States dollars atthe rates of exchange ruling at the dates of the transactions. Monetary assets and liabilitiesat the balance sheet date which are denominated in foreign currencies are translatedinto United States dollars at the rates of exchange ruling at that date. Exchange differencesare taken to the income statement.Cash comprises cash at bank. Cash equivalents are short term, highly liquid investmentsthat are readily convertible to known amounts of cash and which are subject to aninsignificant risk of change in value.The preliminary expenses of the Company are written off to the profit and loss account inthe year in which they arise.The Company is liable to income tax in Mauritius at a rate of 15% against which foreign taxcredit is available in respect of tax withheld in India on payments of income to the Company.For the period ended 31 December 2000, no provision for Mauritian taxes has been made dueto the availability of foreign tax credit.The Company had acquired ownership / permanent / exclusive rights to use of brands / trademarksalong with the technical know-how.In accordance with IAS 38, the intangible assets will be amortised over 15 years.2000USDIntangible assets 13,060,000Less: Amortisation (720,000)Net book value of intangibles assets 12,340,0005. PAYABLES2000USDUpfront fee on term loan 11,250Interest accrued 366,960Licensing support services payable 58,995Design consultancy fee payable 26,4796. SHARE CAPITALAuthorised463,6842000USD1,000,000 Ordinary shares of USD 1.00 each 1,000,000Issued and fully paid850,000 Ordinary shares of USD 1.00 each 850,0007. LOANLoan of USD 10 million is guaranteed by the holding company and the balance of USD 2.25million is unsecured. Both loans are repayable in full in nine equal semi-annual instalmentsand carry interest payable accrued from 1% to 1.3% over Libor payable on half yearly basis.8. FINANCIAL INSTRUMENTSFair valuesThe carrying amounts of debtors, cash at bank and creditors are approximate to their fairvalues. Financial assets and liabilities which are accounted for at historical cost are carried atvalues which may differ materially from their fair values.9. REPORTING CURRENCYThe financial statements are presented in United States dollars. The Company has been grantedan Offshore Certificate under the Mauritius Offshore Business Activities Act 1992 which requiresthat the company’s business or other activity is carried on in a currency other than theMauritian Rupee.10. HOLDING COMPANYThe directors regard Indian Rayon And Industries Limited, a company incorporated in India,as its holding company.