Atul Ltd 2008-09

Schedules forming part of the Account s Financial Derivatives Hedging Transactions: (3) (a) The Company has entered into currency option contracts to the tune of US$54 million for hedging its future US$ revenue for a period upto three years based on highly probable forecast | firm commitment transactions. These range forward contracts are covered under “Forex risk management policy” of the company and meets the test of hedge effectiveness. Under the said options, the rate of US$ - INR has been fixed for the entire period of the option. The outstanding currency option contracts as at March 31, 2009 was US$51.5 million. The MTM loss valuation of Rs5,484.09 lacs in respect of these range forward contracts as at March 31, 2009 provided by the bank indicates the amount, the Company will have to pay to bankers, if it wishes to rescind the options contract as at the date of Balance Sheet. The MTM valuation also assumes that the Company has no US$ inflows that would arise to it during the tenure of the option contracts and it therefore assumes that Company would be meeting this obligation by acquiring the relevant foreign exchange from the open market. Based on the past history of the operations of the Company as well as the projected plans in the future, the Company will have robust inflow in US$ during the tenure of the said options. The Company believes that the options would safeguard it from US$ fluctuation in future. The unrealised loss consequent to foreign currency fluctuations in respect of these effective hedging instruments though not recognised now will be ultimately set off in the Profit and Loss Account when the underlying transaction arises when it will be possible to precisely know the impact. Considering the above facts and due to material uncertainty arising from future events mentioned in the range forward contracts and rate over the period of three years, the management is of the view that it is not "known loss" and it is not a prudent practice to deliberately overstate liabilities or expenses because, if such notional losses are provided for, the reliability and quality of the financial statement will be vitiated and therefore no provision for the liability and MTM loss of Rs5,484.09 lacs on account of such range forward contracts has been made in the books as at March 31, 2009. In the view of the management this will give more reliable financial statements without unrepresentative volatility in the Profit and Loss Account (b) Rs0.97 lacs (realised loss), Rs18.05 lacs (realised gain) and Rs13.47 lacs (unrealised loss) on interest SWAP is included in interest paid on loan. Rs63.81 lacs (realised loss), Rs1.70 lacs (realised gain) and Rs461.32 lacs (unrealised loss) on currency SWAP (principal) are included in exchange rate difference. Provision on forward contract transactions has been recorded as per Accounting Standard - 11 on "The Effects of Changes in Foreign Exchange Rates (Revised 2003)". 19 Significant accounting policies followed by the Company are as stated in the statement annexed to this Schedule. 20 Loans and advances in nature of loans: (Rs in lacs) Particulars Amount outstanding Maximum balance as at March 31, 2009 during the year (i) Subsidiary: Ameer Trading Corporation Ltd (including interest) 823.24 823.24 (ii) Associate companies: AtRo Ltd (a) 0.11 0.11 Amal Ltd (including interest) 2,241.58 2,241.58 (iii) Loan to others where there is no interest or repayment schedule: Atul club 135.92 135.92 Note: (a) No repayment Schedule. (b) Loans given to employees as per the policy of the Company are not considered. SCHEDULE 16 NOTES FORMING PART OF THE ACCOUNTS (Contd.) 78