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Accounting Policies Essay

2388 words - 10 pages

Overview

Company was incorporated under the provisions of Companies Act, 1956 as a limited Company.

1. Significant accounting policies

a) Basis of preparation of financial statements

The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting in accordance with the Generally Accepted Accounting Principles in India and comply with the Accounting Standards (AS) notified by the Central Government of India under Section 211 (3C) of the Companies Act, 1956, other pronouncements of Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 1956, to the extent applicable. The ...view middle of the document...

Borrowing costs directly attributable to acquisition of those fixed assets which necessarily take a substantial period of time to get ready for their intended use are capitalised. Preoperative expenses attributable to construction activity, form part of the cost of assets and are capitalised.

Advances paid towards the acquisition of fixed assets outstanding at each balance sheet date and the cost of fixed assets acquired but not ready for their intended use before such date are disclosed as capital work-in-progress.

e) Depreciation

Depreciation on fixed assets other than assets mentioned below is provided on straight line method at the rates specified in Schedule XIV to the Companies Act, 1956 and in the opinion of the management, these rates reflects the useful life of the assets.
* Audio-video, office equipments and software- 20% per annum
* Computers– 16.21% per annum
* Leasehold improvements are amortised over the primary period of the lease or estimated useful life of the asset, whichever is lower.
Depreciation is calculated on a pro-rata basis from / upto the date the assets are purchased / sold. Individual assets costing less than ` 5,000 are depreciated in full in the year of purchase.

f) Cash and cash equivalents

Cash and cash equivalents are short-term, highly liquid investments that are readily convertible into cash with original maturities of three months or less. Cash and cash equivalents consist principally of cash on deposits with banks.

g) Cash flow statement

Cash flows are reported using the indirect method, whereby excess of income over expenditure before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating, investing and financing activities of the COMPANY are segregated.

h) Impairment

COMPANY assesses at each balance sheet date whether there is any indication that any assets forming part of its cash generating units may be impaired. If any such indication exists, COMPANY estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs to is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the income and expenditure account. If at the balance sheet date, there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the reassessed recoverable amount subject to a maximum of depreciated historical cost.

i) Investments

Investments are classified as current or long term based on Management’s intention at the time of purchase. Long-term Investments are carried at cost less provision recorded to recognise any decline, other than...

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