DISCLOSURE PRACTICE ON DISCLOSURE OF ACCOUNTING POLICIES (AS-1) --------------------------------------------------------------- 1. Where proper disclosures regarding changes in accouting policies have not been made by a company. The company has not disclosed in its accounts the fact of change, from this year, in the method of providing depreciation on plant and machinery from straightline method to written-down value method, as also the effect of this change. As a result of this change, the net profit for the year, the net block as well as the reserves and surplus are lower by Rs. ________ each as compared to the position which would have prevailed had this change not been made. 2. Where a company has not disclosed all significant accounting policies and has also not disclosed the accounting policies at one place. The company had disclosd those accounting policies the disclosure of which is required by the Companies Act, 1956. Other significant accounting policies, viz., those relating to treatment of research and development costs and treatment of exchange gains and losses have not beendisclosed nor have all the policies been disclosed at one place, which is contrary to Accounting Standard (AS) 1, `Disclosure of Accounting Policies' issued by the Institute of Chartered Accountants of India. DISCLOSURE PRACTICE ON VALUATION OF INVENTORIES (AS-2) ------------------------------------------------------ 1. That the company is valuing its stocks at `cost' instead of `lower of cost and net realisable vlaue". Further, in valuing the closing stock at cost, the company has incuded interest and other borrowings in `cost'. This is not in accordance with principles of valuation of inventory as laid down in Revised Accounting Standard AS-2 on `Valuation of Inventories', issued by the Institute of Chartered Accountants of India, which recommends, inter alia, that the inventories should be valued at `lower of cost and net realisable value' and that the interest and other borrowing should not normally be included in the cost. 2. Hitherto the Company in respect of its Chemical Division followed the practice of valuing its inventories of FIFO basis. This year it changed the basis of valuation from FIFO to LIFO basis. Had this change not been made, the profit of the Company would have been higher by Rs. ______________ lakhs and inventories would have been higher by Rs. _______ lakhs. This is not accordance with principles of valuation of inventory as laid down in Revised Accounting Standard AS-2 on `Valuation of Inventories', issued by the Institute of Chartered Accountants of India, which recommends, inter alia, that the inventories should be value at FIFO and at LIFO. 3. As per the past practice, the excise duty paid on finished goods inventory amounting to Rs. ___________ crores has been treated as prepayment till the goods are sold and estimated excise duty of Rs. ___________ crores on finished goods lying in the factory premises but not cleared from excise bonded warehouse as on March 31, _________ has not been provided and hence, not included in inventory valuaiton. This treatment, however, has no effect on the profits for the year. DISCLOSURE PRACTICE ON REVENUE RECOGNITION (AS-9) ------------------------------------------------- 1. Accounts of certain items of income on cash basis as per item 1 of Principal Accounting Policies, which is not in line with the Accounting Standard 9 regarding "Revenue Recognition" issued by the Institute of Chartered Accountants of India. 2. "The company has followed the policy of accounting for interest income on receipt basis rather than on accrual basis. As a result, the net profit for the year and current assets are understated by Rs. ________ each as compared to the position which would have prevailed if the company has accounted for interest income on accrual basis." DISCLOSURE PRACTICE ON ACCOUNTING FOR FIXED ASSETS (AS-10) ---------------------------------------------------------- 1. Where a company has capitalised financing costs related to certain fixed assets for periods after such assets were ready to be put to use. "Interest payable on borrowings related to the acquistion of fixed assets has been capitalized for the periods during which the assets were in use for commercial production. This is contrary to Accounting Standard (AS) 10, `Accounting for Fixed Assets.' issued by the Institute of Chartered Accountants of India. Consequently, the net profit for the year, the net block and the reserves and surplus have been overstated by Rs. ________ each as compared to the position which would have prevailed if the compnay had complied with the requirements of AS 10. 2. Where a company does not make adequate disclosure regarding the revaluation of its fixed assets. "During the year, the company revalued its land and buildings. The revalued amounts of land and buildings are adequately disclosed in the balance sheet. However, the mehtod adopted to compute the revalued amounts has not been disclosed, which is contrary to Accounting Standard (AS) 10," "Accounting for Fixed Assets issued by the Institute of Chartered Accountants of India." 3. Non-compliance with provision of Accounting Standard 10 on accounting for fixed assets. * Excise Modvat Credit of Rs. _______ lacs availed in respect of capital goods has been ocnsidered as an additon to the cost of the Fixed Assets and the same is recognised as income during the year. This is not strictly in consonance with the accounting standard 10 regarding accounting for Fixed Assets issued by the ICAI. * The company on the basis of legal opinion obtained has set off the debit balance in Profit and Loss Account amounting to Rs. _________ lacs against revaluation reserve account. Had it been acocunted for Accounting Standard 10 issued by the Institute of Chartered Accountants of India (ICAI), the balance in Profit & Loss Account and Revaluation Reserve would have been higher by the same amount. DISCLOSURE PRACTICE OF ACCOUNTING FOR THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES (AS-11) ------------------------------------------------------------------------ 1. The assets and liabilities in foreign currencies and forward contract have been valued as per FEDAI guidelines and not as per Accounting Standard 11, issued by the Institute of Chartered Accountants of India, as directed by RBI. Consequently, income for the current year is less by Rs. _______ lakhs. 2. Foreign Exchange gain (amount unascertained) by applying exchange rate at close of the year in accordance with the Accounting Standard issued by ICAI, in respect of overdue debts have not been accounted for since closing rate may not reflect with reasonable accuracy the amount that is likely to be realised. DISCLOSURE PRACTICE ON ACCOUNTING FOR INVESTMENTS (AS-13) --------------------------------------------------------- 1. The diminution in the value of long term quoted investments as at the year end amounted to Rs. ______ lac. 2. "No provision for diminution in vlaue of investments other than those of temporary nature amounting to Rs. _________ lakh ( previus year Rs. _______ lakh ) has been made in these accounts as required by the mandatory Accounting Standard 13 issued by the Institute of Chartered Accountants of India." 3. AS-13 issued by the Institute of Chartered Accountants of India requires long-term inventments to be valued at cost, subject to provision for decline in vlaue, other than temporary, in cost thereof. However, considering the long-term nature and other related matters investments in subsidiary companies have been valued at cost. 4. The Company has equity investments aggregating to Rs. _________ crores (31.3._______ Rs. __________) in its subsidiary company, ________ Ltd. As at 31st March ______, an amount of Rs. _______ crores (31.3._______ Rs. _________ crores) is due from _______ Ltd. on account of loans and advances and Rs. _________ crores (31.3._____ Rs. _________ crores) as interest thereon _______ Ltd. is a sick company and a proposal for its revival is pending with BIFR. The Company has submitted revival/ modernisation package to the Government, which envisages relief towards accumulated losses of _________ Ltd. through Steel Development Fund (SDF) mechanism, besides other reliefs and concessions. In view of the long-term nature of investments, pending consideration of its proposals/packages with the Government and decision on its revival by BIFR, no provision is considered necessary in respect of the above investments and loans and advances (including interest). 5. The Company has equity investments aggregating to Rs. _________ crores (31.3.______ Rs. _______ crores) in its subsidiary company ___________ Ltd. As at 31st March, _________ an amount of Rs. _____________ crores (31.3.________ Rs. __________ crore) is due from _____________ Ltd. on account of loans and advances _____________ Ltd. is likely to become a potentially sick company in terms of provisions of seciton 23 of the Sicks Industrial Companies (Special Provisions) Act, 1985. In view of the long-term nature of investments, no provision is considered necessary in respect of the above investments and loans and advances. DISCLOSURE PRACTICE ON ACCOUNTING STANDARDS (AS-10), (AS-13) AND (AS-15) ------------------------------------------------------------------------ 1. The Company has duly complied with the accounting standards referred to in clause 3C of Section 211 of the Companies Act, 1956 except for the following matters, for the reasons mentioned therein, with consequential impact on the Company's loss, valuation of investments, inventories and fixed assets and under-statement of liability and overstatement of reserves etc., to the extent indicated in the respective notes below : * Fixed assets retired from active use, quantum not fully ascertained, continue to be exhibited under Fixed Assets at their book value. Since the net realisble vlaue of such assets is not ascertainable, loss, if any, on such items is accounted for on acceptance of disposal proposals (Accounting Standard (AS) 10). * AS-13 issued by the Institute of Chartered Accountants of India requires long-term investments to be valued at cost, subject to provision for decline in vlue, other than temporary, in cost thereof. However, considering the long-term nature and other related matters, investments is subsidiary companies have been vlaued at cost. * The Company has equity investments aggregating to Rs. ________ crores (31.3._______ Rs. _________) in its subsidiary company, ___________________ Ltd. As at 31st March ______, an amount of Rs. _________ crores (31.3.______ Rs. _________ crores) is due from _______________ Ltd. on account of loans and advances and Rs. ___________ crores (31.3.3______ Rs. __________ crores) as interest thereon ________________ Ltd. is a sick company and a proposal for its revival is pending with BIFR. The Company has submitted a revival/modernisation package to the Government, which envisages relief towards accumulated losses of ____________________ Ltd. through Steel Development Fund (SDF) mechanism, besides other reliefs and concessions. In view of the long-term nature of investments, pending consideration of its proposals/packages with the Government and decision on its revival by BIFR, no provision is considered necessary in respect of the above investments and loans and advances (including interest). * The Company has equity investments aggregating to Rs. ________ crores (31.3. ________ Rs. _________ crores) in it subsidiary company _______________ Ltd. As at 31st ________ Rs. _________ crores) in its subsidiary crores (31.3. _________ Rs. ________ crore) is due from ______________ Ltd. on account of loans and advances ______________ Ltd. is likely to become a potentially sick company in terms of the provisions of Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985. In view of the long-term nature of investments, no provision is considered necessary in respect of the above investments and loans and advances. * In the opinion of the management, leave is meant to be availed of and employees have been advised to plan their leave in advance while in service and also immediatley before superannuation. Accordingly, leave encashment liability for the year has been recognised and provided for only when such encashment is allowed. The quantum of leave encashment liability on actuarial basis upto 31.3._______ is Rs. ________ crores (previous year Rs. _________ crores) which has not been provided for (AS-15). * Compensation payable to the emplyees who have availed of the benefits under the Voluntary Retirement Scheme-1998 which envisages deferred payments on monthly basis, accrues as and when payable and thus, is accounted for accordingly. The presentvlaue of future monthly payments under the scheme on actuarial basis upto 31.3.______ is Rs. ______ crores (current year's liability not specifically determined), which has not been provided for (AS-15). DISCLOSURE PRACTICE ON ACCOUNTING FOR RETIREMENT BENEFITS (AS-15) ----------------------------------------------------------------- 1. Liability for leave encashment on retirement has neither been actuarially determined nor any provision has been made in accordance with AS-15 issued by the Institute of Chartered Accountants of India. 2. In the opinion of the management, leave is meant to be availed of and employees have been advised to plan their leave in advance while in service and also immediately before superannuation. Accordingly, leave encashment liability for the year has been recognised and provided for only when such encashment is allowed. The quantum of leave encashment liability on actuarial basis upto 31.3.______ is Rs. _______ crores (previous year Rs. ___________ crores) which has not been provided for (AS-15). 3. Compensation payable to the employees who have availed of the benefits under the Voluntary Retirment Scheme-1998 which envisages deferred payments on monthly basis, accrues as and when payable and thus, is accounted for accordinlgy. The present value of future monthly payment under the scheme on actuarial basis upto 31.3.______ is Rs. __________ crores (current year's liability not specifically determined), which has not been provided for (AS-15). DISCLOSURE PRACTICE ON BORROWING COSTS (AS-16) ---------------------------------------------- 1. Interest costs on borrowed funds attributable to major projects are capitalised as part of the cost of the assets. 2. Accounting Standard (AS 16) of the Institute of Chartered Accountants of India requries borrowing costs that are directly attributable to the acquisition and construction of fixed assets to be capitalised as part as the cost of that asset. In accordance with its past practice, the company charges such borrowing costs to the profit and loss account. During the year ended 31.3.20______ such borrowing costs were not capitalised. In respect thereof, the effect on the profit of the year, fixed assets and reserve at the end of the year have not been determined. 3. With effect from 1st April 20________ interest on borrowing during the period of construction of investment properties is added to the cost of fixed assets. 4. Borrowing cost during the construciton period on loans raised for/allocated to long term projects is capitalised. 5. Interest and other costs incurred by the Company in connection with the borrowing of funds are recognised as an expense in the peirod in which they are incurred unless activities that are necessary to prepare the qualifying asset for its intended use or sale are in progress. 6. Interest with effect from 01.04_______ on term Loans/Debentures/ Working capital facilities of the Financial Institutions/Banks had been provided at the rates as per restructuring plan submitted to the Financial Institutions and Banks which is under their consideration. Had the interest been provided at the agreement rates on accrual basis in accordance with the Accounting Standard issued by ICAI the charge to the profit and loss account for the year would have been higher by Rs. _________ (Previous Year Rs. _______ lacs) and the Capital Work in Progress would have been higher by Rs. ___________ lacs (Previous Year Rs. ________ Lacs). DISCLOSURE PRACTICE ON LEASES (AS-19) ------------------------------------- 1. Operating Leases : The Company has various operating leases for office facilities, guest houses and residential premises for employees that are renewable on a periodic basic, and cancelable at its option. Rental expenses for operating leases included in the Income Statements for the period is Rs. ___________. As of 31st March, 2002 future minimum lease payments for non- cancelable operating leases for the next five fiscal years are provided below : For the period ending Amount is Rs. 31.3.2003 -- 31.3.2004 -- 31.3.2005 -- 31.3.2006 -- 31.3.2007 -- 2. Finance Lease Obligations The Company normally acquired computers and vehicles under finance lease with respective underlying as security. Minimum lease payments outstanding as of __________________ in respect of these assets are as under : Total Minimum Interest Not Present Value Lease Payments Due of Minimum outstanding as Lease Payment on _________ Within one year -- -- -- Later than one year and not later than five years -- -- -- -- -- -- DISCLOSURE PRACTICE ON SEGMENT REPORTING (AS-17) ------------------------------------------------ 1. Segment Information (A) Primary Segment Reporting (by Business Segments) (i) Composition of Business Segments The Company's business segments are organised around customers on industry and product lines as under : Utilities (UT) Segment manufactures, engineers, supplies and provides solutions for high voltage and medium voltage substations, power line carrier communication equipment, relay control panels, networking management and services to utilities Process Industries (PI) Segment serves the chemical, pharmaceutical, petroleum, gas, marine, metals, minerals, mining, cement, pulp, paper and printing with a variety of power, automation and uniqute process industry technology products. Manufacturing and Consumer Industries (MC) Segment sells air handling equipment and provide solutions for industrial and environmental processes. Power Technology Products (PT) Segment produces power transformers, switchgears, breakers, capacitors as well as other products and technologies for high and medium voltage applications. Automation Technology Products (AT) Segment provides products, system, software and services for the automation and optimisation of discrete, process and batch manufacutirng operations and related business aspects. Key technologies inlcude measurement control, instrumentation, process analysis, drives and motors, power electronics, robots and low voltage products, all geared towards a common industrial IT architecture. (ii) Inter Segment Transfer Pricing Inter Segment prices are normally negotiated amongst the segments with reference to the costs, market prices and business risks, within an overall optimisation objective for the Company. (iii) Segment Revenues, Results and other Information Total of Reportable UT PI MC PT AT Segments External Sales - - - - - - Inter Segment Sales - - - - - - Other Income - - - - - - Segment Revenues - - - - - - Segment Results - - - - - - Segment Assets - - - - - - Segment Liabilities - - - - - - Capital Expenditure - - - - - - Depreciation/ Amortisation - - - - - - (iv) Reconciliation of Reportabel Segmentswith the Financial Statements (Rs.) Revenues Results/ Assets Liabilities Net Profit Total Reportable Segments - - - - Corporate-Unallocated/ Others (net) - - - - Inter Segment Sales - - - - Interest Expenses - - - - Taxes - - - - As per Financial Statement - - - - (B) Secondary Segment Reporting (by Geographical Segments) (Rs.) Domestic Exports Total Revenues - - - Total Assets - - - Capital Expenditure - - - 2. Business Segments : For management purpose, the Company is currently organised into two operative divisions Power and Marine. These divisions are the basis on which Company reports its primary segment information : The principal activities are as follow : Power : Manufacture, Supply, Engineering, Project Management, Construction, Commissioning, Service, Operations and Maintenance. Marine ; Supply and Service. Segment information on these business is presented below : Power Marine Total Revenue External Sales - - - Inter-segment sales - - - Total Revenue - - - Results Segment Results - - - Total Results - - - Unallocated Corporate Expenses - Profit from Operations - Income from investments - Interest expenses - Profit before tax - Tax - Profit after tax - Other Information - Segment Assets - Unallocated corporate assets - Total Assets - - - Segment Liabilities - - - Unallocated corporate Liabilities - - - Total Liabilities - - - Capital Expenditure - - Depreciation - - Non-cash expenses other than depreciation - - Note : As this is the first period which segment information is presented, comparative figures are not available. Geographical segments The operations of the Company are in India and all assets and liabilities are located in India. An analysis of the sales and services by geographical market is given below : Name of the Country Segment Revenue by geographical market 2001 Rs. India - U.S.A. - Nepal - Other Countries - Total - Segment assets and liabilities - Segment assets and liabilities include operating assets used by a segment and consists of sundry debtors, inventories and fixed assets, net of allowances and provisions which are reported in the Balance Sheet. Segment liabilities include all operating liabilities and consist principally of sundry creditors and accrued liabilities. Segment assets and liabilities do not include deferred income taxes. There are no material inter-segment transfers. 3. Segment Information The Company's operations predominantly relate manufacture of bearings, accounting for approximately 95% of the total revenue, which is shown as a separate segment. (i) Business Segments Bearings Others Total 2002 2001 2002 2001 2002 2001 Revenue External Sales - - - - - - Result Segment Result - - - - - - Unallocated Corporate cost - - Other Income - - Operating Profit - - Interest expense - - Interest income - - Profit/(loss) before restructu- ing cost and tax - - (Provision) write-back of surplus Provision for restructuring cost Income taxes-current - - Income taxes0deferred tax credit - - Net Profit - - Other Information Segment assets - - - - - - Unallocated corporate assets Total assets Segment liabilities - - - - - - Unallocated corporate liabilities - - - - - - Total liabilities - - - - - - Capital expenditure - - - - - - Depreciation - - - - - - Non-cash expenses others than depreciation - - (ii) Geographical Segments (a) The following table shows the distribution of the Company' sales by geographical market : Revenue 2002 2001 India - - Outside India - - Total - - (b) The Company's tangible fixed assets are located entirly in India. Segment Revenue and Result The expenses which are not directly attributable to the business segment are shown as unallocated corporate cost. Segment assets and liabilities Segment assets include all operating assets used by the business segment and consist principally of fixed assets, debtors and inventories. Segment liabilities primarily inlcude creditors and other liabilities. Assets and liabilities that cannot be allocated between the segments areshown as a part of unallocated corporate assets and liabilities respectively. 4. The company operates only in one business segment viz. `Pharmaceuticals' and hence no separae information or segment wise disclosure is required. The above disclosure practice as given above can be adopted with or without modification to meet the individual company's needs and requirements. DISCLOSURE PRACTICE ON RELATED PARTIES DISCLOSURES (AS-18) ---------------------------------------------------------- An enterprise may disclose related party disclosure in the following manner by way of a note in the annual accounts. 1. Related Party Disclosure : (a) Related Party relationships : S.No. Name of the Related Party Relationship 1. ______________________ Co. Fellow subsidiary 2. ______________________ Ltd. 100% owned subsidiary 3. ______________________ Ltd. Fellow subsidiary 4. Key Management Personnel : Mr. __________________ - Managing Director and President Mr. __________________ - Director - Finance Mr. __________________ - Director - Marketing Mr. __________________ - Director-Supply Chain Mr. __________________ - Vice President-Finance Mr. __________________ - Vice President and Company Secretary Mr. __________________ - Vice President - Human Resource and Administration Mr. __________________ - Vice President - Quality Control and Development 5. Relative of key Management Personnel Mrs. __________________ - Relative of Key Management Personnel Mrs. __________________ - Relative of Key Management Personnel Mrs. __________________ - Relative of Key Management Personnel (b) Transactions during the period with Related Parties/Key Management Personnel are as under : Sr. Name of the Relationship Description Rupees Outstanding No. Related Party of in Balance as Transaction lakhs on 31 March 2002 1. _______ Co. Fellow (a) Purchase - - Subsidiary of finished goods (b) Royalty - - Nil Expenses 2. _______ Ltd. 100% owned Subsidiary (a) Marketing - Nil Fees - Expenses (b) General Adminis- trative Charges - - Nil Income (c) Interest Income (Net) - Nil (d) Dividend Income - Nil 3. _______ Ltd. Fellow (a) Marketing - Nil Subsidiary & Distribu- tion Fees - Income (b) General Adminis- trative charges - Income. - Nil (c) Interest Expense - Nil (d) Purchase of finished goods - Nil 4. Key Management Personnel (a) Remunera- tion - Nil (b) Rent for leased Flats - Nil (c) Deposit for leased Flats - - 5. Relative of key (a) Rent for Management leased Flat - Nil Personnel (b) Deposit for leased Flat - - (c) There are no provisions for doubtful debts or amounts written off in respect of debts due to or duefrom related parties. 2. Related Party Disclosures (a) List ofRelated Parties Parties where control exists : ABC Limited. (Holding Company) Other Related parties with whom transactions have taken place during the year : Follow subsidiaries : ABC Co. Germany ABC Automation Inc. USA ABC Ltd. UK X.Y.Z. Ltd. Associate : MNC Co. Limited O.P.Q. Limited Directors : Mr. __________ Mr. __________ Mr. __________ Mr. __________ Mr. __________ Mr. __________ Mr. __________ Rs. (b) Transactions with related parties (i) Sales, Services and other income Fellow Subsidiaries - Associates - (ii) Purchases of Raw Materials and Components - Fellow Subsidiaries - (iii) Expenditure on Royalty, Trade-mark, Technical Services Holding Company Fellow Subsidiaries - (iv) Expenditure on Other Services Felow Subsidiaries - (v) Capital expenditure for Technical Know-how - Fellow Subsidiaries (vi) Outstanding balances as at 31st March 2002 - Debtors Holding Company - Felow Subsidiaries - Associates - Creditors Holding Company - Fellow Subsidiaries - (vii) Provision for doubtful advance written back Associates - (viii) Amount written off during the year Associates (net of Rs. _____ written back) - (ix) Dividend Paid for the year 20______ Holding Company - Fellow Subsidiaries - (x) Shares Issued on amalgamation Holding Company - Equity Shares - Fellow Subsidiaries - Preference Shares - (xi) Managerial Remuneration - Note : As this is the first period for which related party transactions are presented, comparative figures are not available. 3. Related Party DFisclosures Relatedparty disclosures is in accordance with the Accounting Standard 18 issued by the Institute of Chartered Accountants of India ("ICAI") and effective from April 1, 2001 (a) Related parties and nature of relationship (i) ABC Company USA ) - Foreign collaborators ) holding 40% of equity share ) capital of the Company XYZ Company, USA ) (ii) DEF Ltd. India - Associated Company, 40% of whose equity share capital is held by DEF, USA (iii) ABC India Private - 100% subsidiary company of DEF., USA (iv) ABC Pharmaceuticals South Africa - Affiliate Company (b) Transactions that have taken place during the Year from ______________ to _______________ with related parties by the Company (i) (a) ABC Company, USA - Purchase of raw materials by the Company - - Outstanding balance as at ______ - Included in Sundry Creditors (b) ABC Company, USA SYZ Company, USA - Dividend paid by the Company - (ii) DEF Limited, India - Services received by the Company - Outstanding balance as at _____ - . Included in Sundry Creditors (iii) ABC India Private Limited, India - Services rendered by the Company - Loan given by the Company . Interest Income on above Loan - Outstanding balance as at _____ . Included in sundry Debtors - . Included in Loan and Advances - . Included in Other Current Assets - (iv) ABC Pharmaceuticals, Sourth Africa - Sale of goods by the Company - Outstanding balance as at _____ - . Inlcuded in Sundry Debtors (c) Directors of the Company Whole-time Directors Mr. ___________ Mr. ___________ Non-executive Directors Mr. ___________ Mr. ___________ Mr. ___________ Details of remuneration to Directors is disclosed in Note no._____ Amount paid to relatives of Directors towards rent Rs. _____ lakhs (d) Amount written off or written back in respect of debts due from or to related parties is Nil. 4. Related Party Disclosures In accordance with Accounting Standard 18,`Related Party Disclosures', issued bythe Institute of Chartered Accountants of India, the Company has complied the required information in the attached table. (i) Transactions with affiliates (a) The company has recognised revenues from sale of goods and Direct Indent commission (DIC) aggregating to Rs. _________lacs (previus year Rs. ___________ lacs) from the following companies which are under the common control of ABC. Name of the Transactions during Outstanding Maximum Party the year balance as balance at Dec. 31, during the year Dec. 31, ------------------------- ----------- ----------- 2001 2000 Sales DIC Sales DIC 2001 2000 2001 2000 ABC - - - - - - - - ABC U.K. Ltd. - - - - - - - - ABC South East Asia Ltd. - - - - - - - - ABC China Ltd. - - - - - - - - ABC Korea Ltd. - - - - - - - - Total - - - - - - - - (b) The Company has procured raw materials and finished goods aggregating to Rs. ____________ lacs (previous year Rs. ___________ lacs) from the following companies which are under the common control of ABC. Name of the Party Transactions during Outstanding balance the year as at December 31 December 31, ------------------- -------------------- 2001 2000 2001 2000 ABC U.K. Ltd. - - - - ABC South Africa (Pty) Ltd. - - - - ABC China Ltd. - - - - ABC Korea Ltd. - - - - ABC ABC Sourth East Asia Ltd. - - - - Total - - - - (c) Debentures issued to ABC shareholders : As of December 31, 2001, the Company has issued _________ non- convertible debenture of Rs. 500 each to ABC, of the total amount of Rs. _________ lacs bearing interest of 9% (refer schedule No. ______). (d) Royalty agreement ABC the parent company of the Company is providing technology to the Company. For the year ended December 31, 2001, the charge related to these services was Rs. _________ lacs (previous year Rs. _______ lacs) and is recorded in manufacturing and other expenses. At December 31, 2001, an amount of Rs. ________ (previous year Rs. _______ lacs) was payable to ABC (e) Administrative and Management Services During the year ended December 31, 2001, the Company has incurred Rs. __________ lacs (previous year Rs. _________ lacs) for centralised training, use of software, reimbursements of travel costs (net of recharges) with the following companies which are under the common control of ABC. Name of the Party Transactions during Outstanding balance the year as at ------------------- -------------------- 2001 2000 2001 2000 ABC China Ltd. - - - - ABC - - - - ABC South East Asia Ltd. - - ABC Korea Ltd. - - ABC UK Ltd. - - Total - - - (ii) Transactions with key management personnel The Company has entered into an agreement with the Managing Director, Mr. ______________ pursuant to the approval of the shareholders at the Annual General Meeting held on ___________. As per the agreement he is entitled to receive a remuneration of Rs. _____________ lacs per annum inclusive of all perquisites apart from gratuity, encashment of leave at end of tenure, children's education allowance, holiday passage for children staying outside India and leave travel concession. The Company has also entered into an agreement with its erstwhile Senior Deputy Managing Director, Mr. ____________ pursuant to the approval ofthe shareholders at the Annual General held on __________. As per this agreement, he is entitled to a salary of Rs. __________ lacs per annum apart from perquisites as applicable. Mr. __________________ has taken an early retirement from the position of Senior Deputy Managing Director with effect from _____________ from which date he has been appointed as an Additional Director of the Company. As a consequence of his retirement as a Whole-time Director after 30 years of loyal service with the Company of which the last 10 years were as a Whole-time Director the Company has, pursuant to a resolution passed by the Board of Directors entered into an agreement which allows Mr. ___________ the following : (a) To continue to stay in the Company's flat during his and his spouse's lifetime for the use of which he would pay the Company a license fee of Rs. ___________ per month in addition to the society's dues. (b) To use the facilities of one club in respect of which he would bear all expenses except annual subscription charges. (c) To use the Company's maintained car till October 31, 20 ______ for which he would reimburse an amount of Rs. ____________ per month to the Company. The above disclosure practice can be adoptedwith or without modification to meet the individual company's needs and requirements. DISCLOSURE PRACTICE ON EARNING PER SHARE (AS-20) ------------------------------------------------ An enterprise should disclose earnings per share in the Financial Statement in the following manner : Current Year Previous Year ------------ ------------- 1. Earnings per share Net profit for the year - - (Rs.___in 000s) Number of ordinary shares - - (Nos. in 000s) Basic and Diluted Earnings per share - - (Rupees Per Share) 2. Earnings Per Share (a) Calculation of Weighted Average number of Equity Shares of Rs.10 each Number of shares at the beginning - - of the year Share issued on 31.12.2001 to shareholders of XYZ Ltd. and ABC ltd. on their amalgamation with the Company (Appointed date of amalgamation 1 April 2001) - - Total number of equity shares outstanding at the end of the year - - Equity shares outstanding for - - three months Equity Shares outstanding for - - nine months Weighted Average number of equity shres outstanding during the year (b) Net profit after tax available for - - equity Shareholders (in Rs.) (c) Basic and Diluted Earnings (in Rupees) Per Share - - 3. Earnings per share Earnings per Share - Basic and Diluted Face Value per share Rs. ____ Rs. ____ Profit after Tax available to Equity Shareholders Rs. ____ Rs. ____ Number of Shares used in computing earnings per share - Basic and Diluted ________ ________ The above disclosure practice can be adopted with or without modification to meet the individual company's needs and requirements. DISCLOSURE PRACTICE FOR SIGNIFICANT ACCOUNTING POLICIES ON CONSOLIDATED FINANCIAL STATEMENTS (AS-21) ---------------------------------------------------------- 1. Basis of Consolidation : (a) Basis of preparation : The consolidated financial statements are prepared in accordance with Accounting Standard 21 on Consolidated Financial Statements issued by the Institute of Chartered Accountants of India. (b) Principles of consolidation : The consolidated financial statements comprise the financial statements of ____________________ Ltd. (the Company) and its 100% owned subsidiary. The financial statements of both the companies are prepared according to uniform accounting policies,in accordance with generally accepted accounting principles in India. The effects of inter company transactions between consolidated companies are eliminated on consolidation. (c) Company included in consolidation : Name : ______________________ Ltd. Country of Incorporation : India Proportion of ownership interest : 100% owned subsidiary 2. Basis of Accounting : The financial statements are prepared under historical cost convention on an accrual basis. 3. Fixed Assets and Depreciation : All fixed assets are stated at cost of acquisition less accumulated depreciation. Depreciation has been provided on the written down value method at the rates specified in Scheduled XIV of the Companies Act, 1956 except in respect of Computers, Photocopies. Facsimile machines, Modems and Appliances where depreciation has been provided at 80% on written down value method. Depreciation on addition/deletion to assets during the period is provided on pro-rata basis. Cost of Leasehold land is amortised over the period of lease. 4. Foreign Currency Transactions : The foreign currency balances receivable/payable as at the period end are converted at the closing rate, and exchange difference has been recognised in the Profit and Loss Account or adjusted in the value of fixed assets, as applicble. 5. Investments : Long term Investments are carried at cost less provision, if, any for permanent diminution in vlaue of such investment. Current Investments are stated at lower of cost and net realisable value. 6. Inventories : Inventories are valued at lower of cost and net realisable value on a FIFO basis. 7. Research and Development : Capital expenditure on Research and Development is treated in the same way as expenditure on Fixed Assets. The Revenue expenditure on Research and Development is written of in the peirod in which it is incurred. 8. Retirement Benefits : ______________________ Ltd, Holding Company : The Company has various schemes of Retirement Benefits such as Provided Fund, Superannuation Fund and Gratuity Fund duly recognised by Income-tax authorities and the Company's contributions are charged against revenue for the period. These schemes are administered by the Trustees. The Gratuity and Superannuation fund benefits are funded through the Group Schems of the Life Insurance Corporation of India. The liability for encashment of earned leave on retirement and pension has been provided on the basis actuarial valuation thereof. _____________________ Ltd. subsidary company The Company has various schems of Retirement Benefits such as Provided Fund and Gratuity Fund and the Company's contributions are charged against revenue for the period. The Gratuity Fund benefits are funded through the Group Schemes of the Life Insurance Corporation of India. The liability for encashment of earned leave on retirements has been provided on the basis of actuarial valuaton thereof. 9. Excise Duty : Excise Duty paid on goods manufactured by the Company and remaining in inventory, is included as part of valuation of Finished Goods. 10. Taxation : The provision for taxation is made at the average rate of tax as applicable for the income of the previous year as defined under the Income-tax Act, 1961. The Company has accounted for deferred taxation in line with Accounting Standard 22 on Accounting for Taxes on Income isued by the Institute of Chartered Accountants of India. DISCLOSURE PRACTICE ON ACCOUNTING FOR TAXES ON INCOME (AS-22) ------------------------------------------------------------- 1. Deferred Tax (i) The Company has adopted Accounting Standard 22 - Accounting for Taxes on Income with effect from 1 April 2001. The accumulated net deferred tax liability amounting to Rs. __________ on account of timing differences between book and tax profits as of 1 April 2001 has been debitedto the General Reserve Account. (ii) The break up of net deferred tax liability as at 31 March 2002 is as under : Deferred tax Deferred tax asset liability Timing difference on account of : Difference between book depreciation and depreciation under the Income Tax Act, 1961 - Expenditure under Sectin 43B of the Income-tax Act,1961 - Lease Finance - Provisions for doubtful debts and advances - Others - Net Deferred Tax Liability - - 2. Taxation The Company has adopted the Accounting Standard 22, "Accounting for Taxes on Income". Consequently, tax expenses for the period comprise of current tax, deferred tax and tax for previous periods. The deferred tax balance of Rs. ________ that has accumulated prior to the adoption of this standard has been charged to General Reserve. The significant component and classification of deferred tax assets and liabilities on account of temporary differences are : As at As at 31-12-2001 31-12-2000 ---------- ---------- (Rs. in 000s) (Rs. in 000s) Deferred tax assets Provision for diminution in value of Investments - - Provision for doubtful debts - - Other temporary differences - - Deferred tax liabilities - - Depreciation - - Net deferred tax asset/(liability) on account of temporary differences - - The tax expenses for the period comprises of Income Tax - Current year - - - Previous years - - - Deferred tax - - Wealth Tax The tax year of the Company being the year ending 31st March 2002, the provision for current tax is the aggregate of the provisions made for the three months ended 31st March, 2001 and the provision based on the figures for the remaining nine months upto 31st December, 2001. 3. Deferred Tax (a) In accordance with Accounting Standard 22 "Accounting for Taxes on Income" issued by the Institute of Chartered Accountants of India, which has become mandatory from 1st April, 2001, the Company has accounted for deferred tax during the year, Consequently, the cumulative net deferred tax liability of Rs. ____________ Crores as on 31st March, 2001 has been recognised and adjusted from General Reserve. The deferred tax liability for the year amounting to Rs. _____________ Crores has been recognised in the Profit and Loss Account. Due to the above, the profit for the year is lower by Rs. ____________ Crores and the reserves and surplus as at the year end is lower by Rs. ________ crores. (b) The break up of deferred tax assets and deferred tax liabilities is as given below : (Rs. in Crores) Opening As Charge/(Credit) Closing As at 1.4.2001 During the Year at 31.3.2002 Deferred Tax Assets Expenses allowable on Payment basis - - - Gratuity - - - Others - - - -------- -------- -------- Total - - - -------- -------- -------- Deferred Tax Liabilities Depreciation and related items (______) (______) (______) Net Deferred Tax Liabilities (______) (______) (______) 4. Income Tax The Income-tax liability is provided in accordance with the provisions of the 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 peirods. 5. Deferred Tax During the year, the Company has for the first time accounted for Deferred Tax in accordance with Accounting Standard 22 "Accounting for Taxes on Income" issued by the Institute of Chartered Accountants of India. Consequently, the Company has recognised in these financial statements the deferred tax assets/liabilities accumulated prior to April 01, 2001 and charged the net deferred tax liability of Rs. ___________ crore to General Reserve as on April 01, 2001; and has charged the Profit and Loss Account with the Deferred Tax Liability relating to the year net of Rs. _______ crore pertaining to an earlier year consequent to developments during the year. As a result of the adoption of this policy, the profit for the year is lower by Rs. ________ crore. The year end position is as follows - 2001-2002 Rupees Crore Deferred Tax Liabilities Depreciation differences ............ Others ............ ------------ ............ ------------ Deferred Tax Assets - Unabsorbed Depreciation ............ Others ............ ------------ ............ ------------ Net Deferred Tax Assets/(Liabilities) ............ ------------ Deferred Tax Asset on account of unabsorbed depreciation has been recognised, as the Company is of the opinion that there is virtual certainty of realisation of the same in view of the profits of the Company. *******