Miscellaneous

    Significant Accounting Policies :

    1. Under wheeling and banking arrangement :

    Units generated from windmills are adjusted against the consumption of power at our factories. The monetary value of the units so adjusted, calculated at the prevailing EB rates net of wheeling charges has been included in power and fuel. The value of unadjusted units as on the Balance Sheet date has been included in Advances recoverable in cash or in kind under the schedule loans and advances.

    2. Under power purchase agreement :

    Units generated from windmills are sold to State Electricity Board at agreed rates and the income is included in value of power generated from wind mills.

    Kirloskar Oil Engines Ltd. — (31-3-2009)

From Notes to Accounts :

    The Company has promoted and incorporated a wholly-owned subsidiary in the name of Kirloskar Engines India Limited on 12 January 2009. The said Company will be used for the purpose of taking over the Engine and Auto Component business of demerged company on a going-concern basis pursuant to the proposed Scheme of Arrangement.

    As such investment in subsidiary is held exclusively for such a purpose, in view of para 11(a) of Accounting Standard (AS-21) ‘Consolidated Financial Statement’ prescribed by the Companies (Accounting Standards) Amendment Rules, 2009, the consolidated accounts have not been prepared.

    Moreover, first financial year of the subsidiary company is from 12 January 2009 to 31 March 2010. In view of the extended financial year of the subsidiary, its accounts are not attached in this Annual Report as required under Section 212 of the Companies Act, 1956.

  6.  Scheme for Demerger of Passive Infrastructure at Nil value to a subsidiary, and loss arising therefrom adjusted against ‘Reserve for Business Restructuring’

    IDEA Cellular Ltd. — (31-3-2009)

    From Notes to Accounts :

    A Scheme of Arrangement was filed with the High Court of Gujarat at Ahmedabad to de-merge Passive Infrastructure (PI) assets in the telecom service areas of Andhra Pradesh, Delhi, Gujarat, Uttar Pradesh (both East & West including Uttaranchal), Harayana, Kerala, Rajasthan and Mumbai at nil consideration with an appointed date of 1st January 2009 to Idea Cellular Towers Infrastructure Limited (ICTIL), a 100% subsidiary of Aditya Birla Telecom Limited (ABTL). ABTL is a 100% subsidiary of the company. The High Court of Delhi at New Delhi and the High Court of Gujarat at Ahmedabad approved the scheme on 3rd August 2009 and 31st August 2009, respectively. The scheme became effective on 29th September 2009. As per the scheme :

    (i) PI assets having book value of Rs.16,227.76 Mn. as on 31st December 2008 has been debited to the Profit & Loss Account.

    (ii) Investment in ABTL has been increased by the book value of PI assets vested with ICTIL as part of this scheme, by creating ‘Reserve for Business Restructuring’.

    (iii) An amount equal to net book values of PI assets as per point (i) above, has been withdrawn from ‘Reserve for Business Restructuring’ recognised as per point (ii) above.

    Had the scheme not mandated the above accounting treatment, the value of investment in ABTL would not have included the book values of Rs.16,227.76 Mn. of the PI assets de-merged to ICTIL but would have remained at Rs.100.00 Mn. Consequently, there would have been no creation of ‘Reserve for Business Restructuring’ of Rs.16,227.76 Mn. and withdrawal of the same to the credit of P&L.

    From Notes to Accounts :

    ERP System :

    (i) Change in costing methodology consequent to introduction of ERP

    With the introduction of ERP system, stage level production orders are opened vis-à-vis batch work orders under the Legacy system. The valuation of such stage level production orders is done on standard cost basis. There is a provision to review the cost and revise the same to bring it as close as possible to actual cost. Thus the closing stock of work-in-progress and finished goods though valued at standard cost are adjusted to nearly the actual cost and the difference, if any, is not material. Variances arising on account of difference between standard cost and the actual cost, on account of change in the nature of inputs from bought-out to internally manufactured or vice versa, timing difference between standard cost and actual occurrence during the financial period and fluctuations in the material prices and the exchange rate, is adjusted in the Cost of Production in order not to carry forward period variances to subsequent financial period. Cost redistributions between work orders have been made to reduce the impact of material variances between standard cost and actual cost.

    (ii) Provision towards Obsolescence is made as per provisioning norms consistently followed and is based on ageing of inventory as per ERP.

iii) Physically verified and reconciled inventory balances have been uploaded in ERP at the time of migration to ERP. Physical verification has been done on a perpetual basis while reconciliation of the physical balance with ERP balance could not be online. No significant discrepancies have been noticed on subsequent reconciliation of physical balances as per stock verification with ERP balances to the extent identified.

iv) Balances with Government Departments are subject to reconciliation and consequential adjustment, if any.

v) Consequent to migration from Legacy to ERP system covering all Regional offices, District offices and Marketing divisions at KGF and Mysore during Financial year 2008-09, the date of entry of transactions including sale of spares in certain cases is after 31-3-2009 though the transactions have occurred on or before 31-3-2009.