NOTES FORMING PART OF THE FINANCIAL STATEMENTS

Note 1: NATURE OF OPERATIONS:

Regency Ceramics Limited was incorporated in 1983. The company manufactures ceramic floor and wall tiles suitable to domestic and international markets. The company introduced glazed vitrified tiles, parking tiles and heavy duty tiles for high traffic areas.

The company is operating from its Registered cum Corporate office in Hyderabad and operates through various Depot network across the country. The plant is located at Yanam, Union Territory of Puducherry. The Company delcared lock-out of its plant on 31st January, 2012 and since then, there is no production.

The company has recorded a Net Loss of Rs.1341.06 Lakhs for the year and has accumulated loss of Rs.9455.42 Lakhs as on 31.03.2015 resulting in erosion of the net worth. Further, there were no cash flows from the existing business activities. The company has defaulted in payment of dues to banks/financial institution and could not comply with the terms of sanction and/or repayment schedules of the lenders. Consequently, the lenders recalled the loans and initiated legal proceedings for recovery of the debts. However, the company is of the opinion that One Time Settlement package already sanctioned by the lenders where part amount is already paid and the promoters are in the process of arranging the balance amount, will be fulfilled shortly.

The matter was referred to Board for Industrial and Financial Reconstruction (BIFR) and the case was registered. The management is hopeful that BIFR will declare the company sick and grant an acceptable and viable rehabilitation package to the company.

Further, the company is confident of an amicable settlement with the agitating workers and is also hopeful of receiving insurance claim for refurbishing the plant and to recommence the plant operations. In view of the above, the financial statements have been brpared by the company on a "going concern" basis.

Note 2 : SIGNIFICANT ACCOUNTING POLICIES:

2.1. SYSTEM OF ACCOUNTING:

The company generally follows mercantile system of accounting and recognizes income and expenditure on accrual basis.

2.2. FIXED ASSETS:

Fixed Assets are stated at cost of acquisition inclusive of foreign exchange fluctuation, inland freight, duties and taxes and incidental expenses related to acquisition.

2.3. DEbrCIATION:

During the year, debrciation is provided on Straight Line Method and at the useful life and in the manner specified in Schedule II to the Companies Act, 2013.

2.4. SALES:

Gross sales are stated net of Sales Tax and inclusive of Excise duty.

2.5. EMPLOYEE BENEFITS:

Contribution to provident fund is remitted to the Provident Fund Commissioner and such paid/payable amounts are charged against revenue. Group Gratuity Scheme is administrated through Trustees for which policies are taken from LIC of India. The above payments/ provisions are charged to revenue. The liabilities towards such schemes are determined by an independent actuarial valuation as per the requirements of Accounting Standard-15.(Revised 2005) on "Employee Benefits". Encashment of leave is accounted for on accrual basis.

2.6. INVENTORIES:

Inventories are valued at lower of cost or net realizable value. The cost is calculated on weighted average method. Cost comprises expenditure incurred in the normal course of business in bringing such inventories to its location and includes, where applicable, appropriate overheads based on normal level of activity.

2.7. INVESTMENTS:

Long term investments are stated at cost. Any decline in the value of long term investment is recognized by providing for such diminution in the value of investments, unless the reduction is of temporary in nature.

2.8. RECOGNITION OF INCOME:

Advance Licenses and Import Entitlements received against exports made by the company are accounted in the books on accrual basis.

2.9. FOREIGN EXCHANGE TRANSACTIONS:

Foreign currency transactions are accounted at the exchange rates ruling on the date of transactions. The net gain/loss arising on revenue account during the year in respect of foreign exchange transaction is reckoned in the Profit and Loss Account.

2.10. BORROWING COSTS:

Borrowing costs that are attributable to the acquisition or construction of long lead time capital assets are capitalized as a part of cost of the asset. All other borrowing costs are charged to revenue.

2.11. DEFERRED TAXATION:

Deferred tax, being tax on timing difference between taxable income and accounting income that originate in one year and are capable of reversal in one or more subsequent years, has been recognized. Deferred tax assets, arising from temporary timing differences and out of unabsorbed loss or debrciation are recognized to the extent that there is reasonable certainty that the assets can be realized in future.

2.12. RESEARCH AND DEVELOPMENT:

i. Revenue expenditure is charged to Profit & Loss Account.

ii. Capital expenditure is shown as addition to fixed assets under natural heads.

2.13. CONTINGENT LIABILITIES:

Contingent liabilities not provided for are indicated by way of a Note and will be provided/ paid on crystallization