fixed asset management kesoram 2012.doc

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Introduction:

Fixed Assets are the assets held with the intention of being used on continuous basis for

the purpose of producing or providing goods or services and are not held for resale in the normal

course of business.

E.g.: Land and Buildings, Plant and Machinery, Motor Vehicles, Furniture and Fixtures.

Valuation of fixed assets is important to have fair measure of profit or loss and

financial position of the concern. Fixed assets are meant for use for many years. The value of

these assets decreases with their use or with time or many other reasons. A portion of fixed assets

are reduced by usage are converted into cash through charging depreciation. For correct

measurement of income, proper measurement of depreciation is essential, as depreciation

constitutes a Part of total cost of production.

Financial transactions are recorded in the books, keeping in view the going concern aspect

of the business unit. In going concern aspect it is assumed that the business unit has reasonable

expectation of continuing the business for a profit for an indefinite period of time. This

assumption provides much of the justification for recording fixed assets at original cost and

depreciating them in a systematic manner without reference to their current realizable value.

It is useless to record the fixed assets in the balance sheet at their estimated realizable

values if there is no immediate expectation of selling them. So, they are shown at their book

value (i.e., Cost Depreciation) and not at current realizable value. The market value of the fixed

assets may change with the passage of time, but for accounting purpose it continues to be shown

in the books in historical cost.

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The cost concept of accounting states that depreciation calculated on the basis of historical

cost of old assets is usually lower than the amount calculated at current value/ replacement value.

These results in more profits, which if distributed in full will lead to reduction in capital.

ACCOUNTING STANDARD FOR FIXED ASSETS (AS-10):

AS-10 on Accounting for Fixed Assets has been made mandatory with effect from

01.04.1991. According to the AS-10, Fixed Asset is an asset held with the intention of being

used on continuous basis for the purpose of producing or providing goods or services and is not

held for resale in the normal course of action. Gross book value of fixed asset is its historical

cost or other amount substituted for historical costs in the books of accounts or financial

statements. When the amount of depreciation is deducted from gross book value then it is Net

Book Value.

Cost of Fixed Assets should consist of purchase price including import duties etc.,

and attributable cost of bringing the asset to its working condition for its intended use. Financing

costs relating to borrowed funds attributable to construction or acquisition of fixed assets for the

period up to the acquisition or completion. Expenditure incurred in start-up and commissioning

of the project including test runs.

Revaluation of assets: Fixed assets may be restated in the value with the help of

appraisal under taken by the competent values .Such valuation of assets is called revaluation.

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FIXED ASSETS MANAGEMENT CYCLE

The fixed assets management cycle is the cycle of activities from the acquisition of the asset to

the final disposition of the assets at the end of their useful life. The cycle has 7 steps:

Acquisition: The cycle begins with the acquisition, purchase, gift or otherwise, of an asset an

the determination that the asset is to be capitalized. To be capitalized the asset has to meet the

agencys capitalization limit and have a useful life of one year or more.

Receiving: The asset is formally received and accepted by the agency. Receipt may be verified

by entry into an automated purchasing system or by hard copy document. In the case of donated

fixed assets, receipt can be verified by a letter to the donor.

Payment:Payment is made for the asset according to the terms of the purchase order or

recognition of acceptance of a gift to the donor. The payment includes the acquisition cost,

freight and all other costs to put the asset. Acquisition cost of donated fixed assets is determined

by its fair market value.

Identification: the asset is identified as an asset, tagged or otherwise identified and entered

into the fixed assets management inventory system. Assets are identified with a permanently

attached identification tag, etching or by painting on the identification number.

Inventory: The longest step in the cycle. The asset is used over its useful life. Assets are

inventoried and accounted for during this step until they are no longer needed. The agencys

policies and procedures determine the inventory interval.

Excess:the asset is declared as excess to the users needs. The asset may be transferred to

another user where it will continue to be used, accounted for and inventoried. Assets may be

declared as excess more than once until the asset is no longer needed.

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Surplus: the last step in the fixed assets management cycle. The asset is declared to be surplus

property and to have no further value to the agency. The asset is disposed of by sale or

discarding depending on the residual value. Sale can be by auction, sealed bid, spot sale, or

through a sales store.

FIXED ASSETS MANAGEMENT CYCLE

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NEED AND IMPORTANCE OF THE STUDY:

As fixed assets play an important role in companys objectives. These fixed are not

convertible or not liquidable over a period of time. The owners funds and long term liabilities

are invested in fixed assets. Since, fixed assets play dominant role in the business and the firm

has utilization of fixed assets. So, ratio contributes in analyzing and evaluating the performance

of the business.

If firms fixed assets are idle and not utilized properly it affects the long-term

sustainability of the firm, which may affect liquidity and solvency and profitability positions of

the company. The idle of fixed assets leads to a tremendous loss in financial cost and intangible

cost associate of it. So, this will lead to evaluation of fixed assets performance. Comparing with

similar company and comparison with industry standards.

Fixed assets are the assets which cannot be liquidated into cash within one year.

The huge amounts of funds of the company are invested in these assets. Every year company

invests an additional fund in these assets directly or indirectly. The survival and other objectives

of the company depend on operating performance of management i.e. effective utilization of

these assets.

Firm has evaluated the performance, of fixed assets with proportion of capital

employed on net assets turnover and other parameters which are helpful for evaluating the

performance of fixed assets.

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OBJECTIVES OF THE STUDY:

The following are the objectives of the study

1. The study is conducted to know the amount of capital expenditure made by the

company during study period 2007-08 to2011-12.

2. The study is conducted to evaluate fixed assets performance ofKESORAM.

3. The study is conducted to evaluate the fixed assets turnover ofKESORAM.

4. The study is conducted to evaluate depreciation and method of depreciation adopted by

KESORAM.

5. The study is conducted to know the amount of finance made by long-term liabilities and

owners funds towards fixed assets.

6. The study is conducted to evaluate whether fixed assets are giving adequate returns to

the company

7. Study is conducted to evaluate that if fixed assets are liquidated, what proportion of it

will contribute for the payment of owners fund and long-term liabilities.

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METHODOLOGY:

The data used for the analysis and interpretation is from annual reports of the

company i.e., secondary forms of data. Ratio analysis is used for calculation purpose.

The project is presented using tables, graphs and with their interpretations. No

survey is undertaken or observation study is conducted by evaluating fixed assets performance of

the company.

SOURCES OF DATA:

The data needed for this project is collected from the following sources:

1. The data is adopted purely from secondary sources.

2. The theoretical contents are gathered purely from eminent text books and references.

3. The financial data and information is gathered from annual reports of the company.

PERIOD OF STUDY:

Made a study for the period of 5 years .2007-08 to 2011-12.

Primary data

The Primary data are those informations, which are collected afresh and for the

first time, and thus happen to be original in character.

Secondary Data:

The Secondary data are those which have already been collected by some other

agency and which have already been processed. The sources of Secondary data are Annual

Reports, browsing Internet, through magazines.

1. It includes data gathered from the annual reports ofMadhucon Projects Limited.

2. Articles are collected from official website ofMadhucon Projects Limited.

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SCOPE OF THE STUDY:

The project is covered on fixed assets of KESORAM. Drawn from annual reports of the

company. The subject matter is limited to fixed assets, its analysis and its performance but

not to any other areas of accounting corporate, marketing and financial matters.

LIMITATIONS:

The following are the limitations for the study

1. The study is limited into the date and information provided by the KESORAM and its

annual reports.

2. The report may not provide exact fixed assets status and position ofKESORAM; it may

be varying from time to time and situation to situation.

3. This report is not helpful in investing in KESORAM

4. Either through disinvestments or capital market.

5. The accounting procedure and other accounting principles are limited by the changes

made by the company, may vary fixed assets performance.

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INDUSTRY PROFILE

In the most general sense of the word, a cement is a binder, a substance which sets

and hardens independently, and can bind other materials together. The word "cement"

traces to the Romans, who used the term "opus caementicium" to describe masonry whichresembled concrete and was made from crushed rock with burnt lime as binder. The

volcanic ash and pulverized brick additives which were added to the burnt lime to obtain a

hydraulic binder were later referred to as cementum, cimentum, cment and cement.

Cements used in construction are characterized as hydraulic ornon-hydraulic.

The most important use of cement is the production of mortarandconcretethe bonding

of natural or artificial aggregates to form a strong building material which is durable in the

face of normal environmental effects.

Concrete should not be confused with cement because the term cementrefers only to the

dry powder substance used to bind the aggregate materials of concrete. Upon the addition

of water and/or additives the cement mixture is referred to as concrete, especially if

aggregates have been added.

It is uncertain where it was first discovered that a combination ofhydrated non-hydraulic

lime and a pozzolan produces a hydraulic mixture (see also: Pozzolanic reaction), but

concrete made from such mixtures was first used on a large scale by Roman

engineers.They used both natural pozzolans (trass orpumice) and artificial pozzolans

(ground brick or pottery) in these concretes. Many excellent examples of structures made

from these concretes are still standing, notably the huge monolithic dome of the Pantheon

in Rome and the massive Baths of Caracalla. The vast system of Roman aqueducts also

made extensive use of hydraulic cement. The use of structural concrete disappeared in

medieval Europe, although weak pozzolanic concretes continued to be used as a core fill in

stone walls and columns.

Modern cement

Modern hydraulic cements began to be developed from the start of the Industrial

Revolution (around 1800), driven by three main needs:

Hydraulic renders for finishing brick buildings in wet climates

Hydraulic mortars for masonry construction of harbor works etc, in contact with sea water.

Development of strong concretes.

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In Britainparticularly, good quality building stone became ever more expensive during a

period of rapid growth, and it became a common practice to construct prestige buildings

from the new industrial bricks, and to finish them with a stucco to imitate stone. Hydraulic

limes were favored for this, but the need for a fast set time encouraged the development of

new cements. Most famous was Parker's "Roman cement." This was developed by James

Parkerin the 1780s, and finally patented in 1796. It was, in fact, nothing like any material

used by the Romans, but was a "Natural cement" made by burning septaria - nodules that

are found in certain clay deposits, and that contain both clay minerals and calcium

carbonate. The burnt nodules were ground to a fine powder. This product, made into a

mortar with sand, set in 515 minutes. The success of "Roman Cement" led other

manufacturers to develop rival products by burning artificial mixtures of clay and chalk.

John Smeaton made an important contribution to the development of cements when he was

planning the construction of the third Eddystone Lighthouse (1755-9) in the English

Channel. He needed a hydraulic mortar that would set and develop some strength in the

twelve hour period between successive high tides. He performed an exhaustive market

research on the available hydraulic limes, visiting their production sites, and noted that the

"hydraulicity" of the lime was directly related to the clay content of the limestone from

which it was made. Smeaton was a civil engineer by profession, and took the idea no

further. Apparently unaware of Smeaton's work, the same principle was identified by Louis

Vicat in the first decade of the nineteenth century. Vicat went on to devise a method of

combining chalk and clay into an intimate mixture, and, burning this, produced an

"artificial cement" in 1817. James Frost,orking in Britain, produced what he called "British

cement" in a similar manner around the same time, but did not obtain a patent until 1822. In

1824, Joseph Aspdin patented a similar material, which he called Portland cement, because

the render made from it was in color similar to the prestigious Portland stone.

All the above products could not compete with lime/pozzolan concretes because of fast-

setting (giving insufficient time for placement) and low early strengths (requiring a delay of

many weeks before formwork could be removed). Hydraulic limes, "natural" cements and

"artificial" cements all rely upon theirbelite content for strength development. Belite

develops strength slowly. Because they were burned at temperatures below 1250 C, they

contained no alite, which is responsible for early strength in modern cements. The first

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cement to consistently contain alite was made by Joseph Aspdin's son William in the early

1840s. This was what we call today "modern" Portland cement. Because of the air of

mystery with which William Aspdin surrounded his product, others (e.g. Vicat and I C

Johnson) have claimed precedence in this invention, but recent analysis of both his concrete

and raw cement have shown that William Aspdin's product made at Northfleet, Kentwas a

true alite-based cement. However, Aspdin's methods were "rule-of-thumb": Vicat is

responsible for establishing the chemical basis of these cements, and Johnson established

the importance of sintering the mix in the kiln.

William Aspdin's innovation was counter-intuitive for manufacturers of "artificial

cements", because they required more lime in the mix (a problem for his father), because

they required a much higher kiln temperature (and therefore more fuel) and because the

resulting clinkerwas very hard and rapidly wore down the millstones which were the only

available grinding technology of the time. Manufacturing costs were therefore considerably

higher, but the product set reasonably slowly and developed strength quickly, thus opening

up a market for use in concrete. The use of concrete in construction grew rapidly from 1850

onwards, and was soon the dominant use for cements. Thus Portland cement began its

predominant role. it is made from water and sand

Types of modern cement

Portland cement

Cement is made by heating limestone (calcium carbonate), with small quantities of other

materials (such as clay) to 1450C in a kiln, in a process known as calcination, whereby a

molecule ofcarbon dioxide is liberated from the calcium carbonate to form calcium oxide,

or lime, which is then blended with the other materials that have been included in the mix .

The resulting hard substance, called 'clinker', is then ground with a small amount of

gypsum into a powder to make 'Ordinary Portland Cement', the most commonly used type

of cement (often referred to as OPC).

Portland cement is a basic ingredient of concrete, mortar and most non-speciality grout.

The most common use for Portland cement is in the production of concrete. Concrete is a

composite material consisting of aggregate (gravel and sand), cement, and water. As a

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construction material, concrete can be cast in almost any shape desired, and once hardened,

can become a structural (load bearing) element. Portland cement may be gray or white.

Portland cement blends

These are often available as inter-ground mixtures from cement manufacturers, but similar

formulations are often also mixed from the ground components at the concrete mixing

plant.

Portland blastfurnace cement contains up to 70%ground granulated blast furnace slag,

with the rest Portland clinker and a little gypsum. All compositions produce high ultimate

strength, but as slag content is increased, early strength is reduced, while sulfate resistance

increases and heat evolution diminishes. Used as an economic alternative to Portland

sulfate-resisting and low-heat cements.

Portland flyash cement contains up to 30% fly ash. The fly ash is pozzolanic, so that

ultimate strength is maintained. Because fly ash addition allows a lower concrete water

content, early strength can also be maintained. Where good quality cheap fly ash is

available, this can be an economic alternative to ordinary Portland cement.

Portland pozzolan cement includes fly ash cement, since fly ash is a pozzolan, but also

includes cements made from other natural or artificial pozzolans. In countries where

volcanic ashes are available (e.g. Italy, Chile, Mexico, the Philippines) these cements are

often the most common form in use.

Portland silica fume cement. Addition of silica fume can yield exceptionally high

strengths, and cements containing 5-20% silica fume are occasionally produced. However,

silica fume is more usually added to Portland cement at the concrete mixer.

Masonry cements are used for preparing bricklaying mortarsand stuccos, and must not be

used in concrete. They are usually complex proprietary formulations containing Portland

clinker and a number of other ingredients that may include limestone, hydrated lime, air

entrainers, retarders, waterproofers and coloring agents. They are formulated to yield

workable mortars that allow rapid and consistent masonry work. Subtle variations of

Masonry cement in the US are Plastic Cements and Stucco Cements. These are designed to

produce controlled bond with masonry blocks.

Expansive cements contain, in addition to Portland clinker, expansive clinkers (usually

sulfoaluminate clinkers), and are designed to offset the effects of drying shrinkage that is

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normally encountered with hydraulic cements. This allows large floor slabs (up to 60 m

square) to be prepared without contraction joints.

White blended cements may be made using white clinker and white supplementary

materials such as high-purity metakaolin.

Colored cements are used for decorative purposes. In some standards, the addition of

pigments to produce "colored Portland cement" is allowed. In other standards (e.g. ASTM),

pigments are not allowed constituents of Portland cement, and colored cements are sold as

"blended hydraulic cements".

Very finely ground cements are made from mixtures of cement with sand or with slag or

other pozzolan type minerals which are extremely finely ground together. Such cements

can have the same physical characteristics as normal cement but with 50% less cement

particularly due to their increased surface area for the chemical reaction. Even with

intensive grinding they can use up to 50% less energy to fabricate than ordinary Portland

cements.

Non-Portland hydraulic cements

Pozzolan-lime cements. Mixtures of groundpozzolan and lime are the cements used by

the Romans, and are to be found in Roman structures still standing (e.g. the Pantheon in

Rome). They develop strength slowly, but their ultimate strength can be very high. The

hydration products that produce strength are essentially the same as those produced by

Portland cement.

Slag-lime cements.Ground granulated blast furnace slag is not hydraulic on its own, but is

"activated" by addition of alkalis, most economically using lime. They are similar to

pozzolan lime cements in their properties. Only granulated slag (i.e. water-quenched,

glassy slag) is effective as a cement component.

Supersulfated cements. These contain about 80% ground granulated blast furnace slag,

15% gypsum or anhydrite and a little Portland clinker or lime as an activator. They produce

strength by formation ofettringite, with strength growth similar to a slow Portland cement.

They exhibit good resistance to aggressive agents, including sulfate.

Calcium aluminate cements are hydraulic cements made primarily from limestone and

bauxite. The active ingredients are monocalcium aluminate CaAl2O4 (CaO Al2O3 or CA in

Cement chemist notation, CCN) and mayeniteCa12Al14O33 (12 CaO 7 Al2O3 , or C12A7 in

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CCN). Strength forms by hydration to calcium aluminate hydrates. They are well-adapted

for use in refractory (high-temperature resistant) concretes, e.g. for furnace linings.

Calcium sulfoaluminate cements are made from clinkers that include ye'elimite

(Ca4(AlO2)6SO4 or C4A3 in Cement chemist's notation) as a primary phase. They are usedin expansive cements, in ultra-high early strength cements, and in "low-energy" cements.

Hydration produces ettringite, and specialized physical properties (such as expansion or

rapid reaction) are obtained by adjustment of the availability of calcium and sulfate ions.

Their use as a low-energy alternative to Portland cement has been pioneered in China,

where several million tonnes per year are produced. Energy requirements are lower because

of the lower kiln temperatures required for reaction, and the lower amount of limestone

(which must be endothermically decarbonated) in the mix. In addition, the lower limestone

content and lower fuel consumption leads to a CO2 emission around half that associated

with Portland clinker. However, SO2 emissions are usually significantly higher.

"Natural" Cements correspond to certain cements of the pre-Portland era, produced by

burningargillaceous limestones at moderate temperatures. The level of clay components in

the limestone (around 30-35%) is such that large amounts ofbelite (the low-early strength,

high-late strength mineral in Portland cement) are formed without the formation of

excessive amounts of free lime. As with any natural material, such cements have highly

variable properties.

Geopolymer cements are made from mixtures of water-soluble alkali metal silicates and

aluminosilicate mineral powders such as fly ash and metakaolin.

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COMPANY PROFILE

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Kesoram Cement Industry is one of the leading manufactures of cement in India. It

is a day process cement Plant. The plant capacity is 8.26 lakh tones per annum It is located

at Basanthnagar in Karimnagar district of Andhra Pradesh. Basanthnagar is 8 km away

from the Ramagundram Railway station, linking Madras to New Delhi. The Chairman of

the Company is syt. B.K.Birla,

HISTORY :

The first unit at Basanthnagar with a capacity of 2.1 lakh tones per annum

incorporating humble suspension preheated system was commissioner during the year

1969. The second unit was setup in year 1971 with a capacity of 2.1 lakh tones per annum

went on stream in the year 1978. The coal for this company is being supplied from

Singereni Colleries and the power is obtained from APSEB. The power demand for the

factory is about 21 MW. Kesoram has got 2 DG sets of 4 MW each installed in the year

1987.

Kesoram Cement has setup a 15 KW captor power plant to facilitate for

uninterrupted power supply for manufacturing of cement at 24 th august 1997 per hour 12

mw, actual power is 15 mw.

The Company was incorporated on 18th October, 1919 under the Indian Companies Act,

1913, in the name and style of Kesoram Cotton Mills Ltd. It had a Textile Mill at 42,

Garden Reach Road, Calcutta 700 024. The name of the Company was changed to

Kesoram Industries & Cotton Mills Ltd. on 30th

August, 1961 and the same was further changed to Kesoram Industries Limited on 9th July,

1986. The said Textile Mill at Garden Reach Road was eventually demerged into a separate

company.

The First Plant for manufacturing of rayon yarn was established at Tribeni, District

Hooghly, West Bengal and the same was commissioned in December, 1959 and the second

plant was commissioned in the year 1962 enabling it to manufacture 4,635 metric tons per

annum (mtpa) of rayon yarn. This Unit has 6,500 metric tons per annum (mtpa) capacity as

on 31.3.2009.

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The plant for manufacturing of transparent paper was also set up at the same location at

Tribeni, District Hooghly, West Bengal, in June, 1961. It has the annual capacity to

manufacture 3,600 metric tons per annum (mtpa) of transparent Paper.

The Company diversified into manufacturing of cast iron spun pipes and pipe fittings at

Bansberia, District Hooghly, West Bengal, with a production capacity of 45,000 metric

tons per annum (mtpa) of cast iron spun pipes and pipe fittings in December, 1964.

The Company subsequently diversified into the manufacturing of Cement and in 1969

established its first cement plant under the name 'Kesoram Cement' at Basantnagar, Dist.

Karimnagar (Andhra Pradesh) and to take advantage of favourable market conditions, in

1986 another cement plant, known as 'Vasavadatta Cement', was commissioned by it at

Sedam, Dist.

Gulbarga (Karnataka). The cement manufacturing capacities at both the plants were

augmented from time to time according to the market conditions and as on 31.3.2009

Kesoram Cement and Vasavadatta Cement have annual cement manufacturing capacities of

1.5 million metric tons and 4.1 million metric tons respectively.

The Company in March 1992, commissioned a plant at Balasore known as Birla Tyres in

Orissa, for manufacturing of 10 lac MT p.a. automotive tyres and tubes in the first phase in

collaboration with Pirelli Ltd., U.K., a subsidiary company of the world famous Pirelli

Group of Italy - a pioneer in production and development of automotive tyres in the world.

The capacity at the said plant was further augmented during the year by 19 MT per day

aggregating to 271 MT per day production facility. The Greenfield Project of 257 MT per

day capacity in the State of Uttarakhand with a capex of about Rs.760 crores commenced

the commercial production in phases during the financial year 2008-09.The Company as on

31.3.2009 had the manufacturing capacities of 3.71 million tyres, 2.95 million tubes and

1.53 million flaps per annum in the Plants including at Uttarakhand Plant.

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It has small manufacturing capacities of various Chemicals at Kharda in the State of West

Bengal also. It has the annual manufacturing capacities of 12,410 mtpa of Caustic Soda

Lye, 5,045 mtpa of Liquid Chlorine, 6,205 mtpa of Sodium Hypochlorite, 8,200 mtpa of

Hydrochloric Acid, 3,200 mtpa of Ferric Alum, 18,700 mtpa of Sulphuric Acid and

1,620,000 m3pa of purified Hydrogen Gas.

The Company is a well-diversified entity in the fields of Cement, Tyre, Rayon Yarn,

Transparent Paper, Spun Pipes and Heavy Chemicals with two core business segments i.e.

Cement and Tyres.

In Spun Pipes & Foundries, a unit of the Company, work suspended from 2nd May, 2008

still commences till further notice.

The Company as of now is listed on three major Stock Exchanges in India i.e. Bombay

Stock Exchange Ltd., Mumbai, Calcutta Stock Exchange Association Ltd., Kolkata and

National Stock Exchange of India Ltd., Mumbai and at the Societe de la Bourse de

Luxembourg, Luxembourg.

A further expansion upto 1.65 million tons of cement per annum in Vasavadatta Cement at

Sedam in Karnataka as unit IV at the same site is in progress, with a 17.5 MW Captive

Power Plant, involving a capital expenditure of about Rs. 783.50 crores (including the cost

of Captive Power Plant).

The commercial production of cement in the aforesaid unit IV has commenced in June

2009.

The work for the further expansion in the Tyres Section at Uttarakhand for radial tyres

with 100 MT per day capacity and bias tyres with 125 MT per day capacity involving an

estimated aggregate capital outlay of about Rs. 840 crores is under progress. The Board has

further approved a Motor Cycle Tyre Project of 70 MT per day capacity at the same site

involving a capital outlay of Rs.190 crore. The civil construction of both the Projects is in

full swing. The commercial production in both the Projects is likely to start by December

2009/ January 2010.

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Birla Supreme in popular brand of Kesoram cement from its prestigious plant of

Basantnagar in AP which has outstanding track record. In performance and productivity

serving the nation for the last two and half decades. It has proved its distinction by bagging

several national awards. It also has the distinction of achieving optimum capacity

utilization.

Kesoram offers a choice of top quality portioned cement for light, heavy

constructions and allied applications. Quality is built every fact of the operations.

The plant lay out is rational to begin with. The limestone is rich in calcium

carbonate a key factor that influence the quality of final product. The day process

technology uses in the latest computerized monitoring overseas the manufacturing process.

Samples are sent regularly to the bureau of Indian standards. National council of

construction and building material for certification of derived quality norms.

The company has vigorously undertaking different promotional measures for

promoting their product through different media, which includes the use of news papers

magazine, hoarding etc.

Kesoram cement industry distinguished itself among all the cement factories in

Indian by bagging the National Productivity Award consecutively for two years i.e. for the

year 1985-1987. The federation of Andhra Pradesh Chamber & Commerce and Industries

(FAPCCI) also conferred on Kesoram Cement. An award for the best industrial promotion

expansion efforts in the state for the year 1984. Kesoram also bagged FAPCCI awarded for

Best Family Planning Effort in the state for the year 1987-1988.

One among the industrial giants in the country today, serving the nation on the

industrial front. Kesoram industry ltd., has a checked and eventful history dating back to

the twenties when the Industrial House of Birlas acquired it. With only a textile mill under

its banner 1924, it grew from strength to strength and spread its activities to newer fields

like Rayon, Transparent paper, pipes, Refractors, tyres and other products.

Looking to the wide gap between the demand and supply of a vital commodity

cement, which play in important role in National building activity the Government of India

had de-licensed the cement industry in the year 1966 with a review to attract private

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entrepreneur to augment the cement production. Kesoram rose to the occasions and divided

to set up a few cement plants in the country.

Kesoram cement undertaking marketing activities extensively in the state of Andhra

Pradesh, Karnataka, Tamilnadu, Kerala, Maharashtra and Gujarat. In A.P. sales Depts., are

located in different areas like Karimnagar, Warangal, Nizamabad, Vijayawada and Nellore.

In other states it has opened around 10 depots.

The market share of Kesoram Cement in AP is 7.05%. The market share of the

company in various states is shown as under.

STATES MARKET SHARE

Karnataka 4.09%

Tamilnadu 0.94%

Kerala 0.29%

Maharashtra 2.81%

Process and Quality Control :

It has been the endeavor of Kesoram to incorporate the Worlds latest technology in

the plant and today the plant has the most sophisticated.

X-ray analysis :

Fully computerized XRF and XRD X-RAY Analysers keep a constant round the

clock vigil on quality.

Supreme performance :

One of the largest Cement Plants in Andhra Pradesh, the plant in corporate the latest

technology in Cement - making.

It is professionally managed and well established Cement Manufacturing Company

enjoying the confidence of the consumers. Kesoram has outstanding track record in

performance and productivity with quite a few national and state awards to its credit.

BIRLA SUPREME, the 43 Grade Cement, is a widely accepted and popular brand

in the market, commanding a premium.

However to meet the specific demands of the consumer, Kesoram bought out the 53

grade BIRLA SUPREME GOLD, which has special qualities like higher fineness, quick-

setting, high compressive strength and durability.

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Supreme Strength :

Kesoram Cement has huge captive Limestone Deposits, which make it possible to

feed high- grade limestone consistently, Its natural Grey colour is anion- born ingredient

and gives good shade.

Both the products offered by Kesoram, i.e. BIRLA SUPREME-43 Grade and

BIRLA SUPREME-GOLD-53 Grade cement are outstanding with much higher

compressive strength and durability.

The following characteristics show their distinctive qualities.

Comprehensive

Strength

Opc 43

grls 8112

1989

Birla

Supreme 43

grade

Opc 43 gr

Is 1226987

Birla

Supreme

Gold 53 gr

3 days mpa Min. 23 31 + Min. 27 38+

7 days mpa Min. 23 42+ Min. 37 48+

28 days mpa Min. 43 50+ Min. 53 60+

D.C. SYSTEM :

Clinker making process is a key step in the overall cement making process. In the case of

BIRLA SUPREME/GOLD, the clinker-making process is totally computer. control. The

Distributed Control System (DCS) constantly monitors the process and ensures operating

efficiency. This eliminates variation and ensures consistency in the quality of Clinker.

SUPREME EXPERTISE:

The Best Technical Team, exclusive to Kesoram, mans the Plant and monitors the

process, to blend the cement in just the required proportions, to make BIRLA

SUPREME/GOLD OF Rock Strength.

18 MILLION TONES OF SOLID FOUNDATION :

Staying at the top for over a Quarter Century, Quarter Century is no less an achievement.

Infact. Kesoram is synonymous with for over 28 years.

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Over the years, Kesoram has dispatched 18 million tones of cement to the nook and corners

of the country and joined hands in strengthening the Nation. No one else in Andhra Pradesh

has this distinction. The prestigious World Bank aided Ramagundam Super Thermal Power

Project of NTPC and Mannair Dam of Pochampad project in AP arc a couple of projects

for which Kesoram Cement was exclusively uses: to cite an example.

CHEMICAL CHARACTERISTICS :

Opc 43 gr

Is 81 132-989

Birla

Supreme

43 grade

Ope 53 gr

Is 12269-

87

Birla

Supreme

Gold 53 gr.

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3. National award for mines safety for 1985-86

4. National award for mines safety for 1986-87

5. National award for energy conservation 1989-90

a) STATE

1. A.P. State productivity award for 1988

2. State award for best industrial management 1988-89.

3. Best industrial productivity award of FAPCCI (federation of A.P. chamber of

commerce and industry), 1991

4. Best management award of the state Govt. 1993

5. FAPCCI award for the workers welfare, 1995-96.

b) I.S.O. 9002All quality systems of Kesoram have been certified under I.S.O. 9002/1.S. 4002, which

proves the worldwide acceptance of the products.

All quality systems in production and marketing of the product have been certified by

B.I.S. under ISO 9002/1S 14002.

The first unit was installed at basanthnagar with a capacity of 2.5 lakhs TPA (tones per

annum) incorporating humble supervision, preheated system, during the year 1969.

The second unit followed suit with added a capacity of 2 lakhs TPA in 1971.

The plant was further expanded to 9 lakhs by adding 2.5 lakhs tones in august 1978, 1.13

lakhs tones in January 1981 and 0.87 lakhs tones in September 1981.

Power:

Singarein collieries make the supply of coal for this industry and the

power was obtained from AP TRANSCO. The power demand for the factory is about

21MW. Kesoram has got 2-diesel generator seats of 4 MW each installed in the year 1987.

Kesoram cement now has a 15MWcaptive power plant to facilities for

uninterrupted power supply for manufacturing of cement.

Performance:

The performance of kersoram cement industry has been

outstanding achieving over cent percent capacity utilization all through despite many odds

like power cuts and which most 40% was wasted due to wagon shortage etc.

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The company being a continuous process industry works round the clock and

has excellent records of performance achieving over 1005 capacity utilization.

Kesoram has always combined technical progress with industrial performance.

The company had glorious track record for the last 27 years in the industry.

Technology:

Kesoram cement uses most modern technology and the computerized

control in the plant. A team of dedicated and well- experienced experts manages the plant.

The quality is maintained much above the bureau of Indian standards.

The raw materials used for manufacturing cement are:

Lime stone

Bauxite

Hematite

Gypsum

Environmental and Social Obligations:

For environmental promotion and to keep up the ecologicalbalancae,this section

has planted over two lakhs trees .on social obligation front ,this section has undertaken

various social welfare programs by adopting ten nearly villages, organizing family welfare

campus, surgical camps, animal health camps blood donation camps, children

immunization camps, seeds, training for farmers etc were arranged.

Welfare and Recreation Facilities:

For the purpose of recreation facilities 2 auditoriums were provided for

playing indoor games, cultural function and activities like drama, music and dance etc.

The industry has provided libraries and reading rooms. About 1000

books are available in the library. All kinds of newspaper, magazines are made available.

Canteen is provided to cater to the needs of the employees for supply of snacks, tea,

coffee and meals etc.

One English medium and one Telugu medium school are provided to meet the

educational requirements.

The company has provided a dispensar with a qualified medical office and

paramedical staff for the benefit of the employees. The employees covered under ESI

scheme have to avail the medical facilities from the ESI hospital.

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Competitions in sports and games are conducted ever year for august 15 th

Independence Day and January 26th, republic day among the employees.

Electricity:

The power consumption per ton of cement has come down to 108 units

against 113 units last year, due to implementation of various energy saving measures. The

performance of captive power plant of this section continues to be satisfactory. Total power

generation during the year was 84 million units last year. This captive power plant is a

major role in keeping power costs with in economic levels.

The management has introduced various HRD programs for training and

development and has taken various other measures for the betterment of employees

efficiency.

The section has installed adequate air pollution control system and

equipment and is ISO14001 such as Environment management system is under

implementation.

Awards:

Kesoram cement bagged many prestigious awards including national awards for

productivity, technology, conservation and several state awards since 1984. The following

are the some of important awards.

AWARDS OF KESORAM CEMENT:

No Year Awards

National/

state

1 1989-90 Management award community

Development

State

2 1991 Energy conservation may day award of the

Govt.

State

3 1991 Pandit Jawaharlal Nehru rolling trophy for

best

State

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4 1993 National productivity effort indira Gandhi

national award

State

5 1994 Best management award State

6 1994-

1995

Best industrial rebellion award State

7 1995 Rural development by chief minister

Environment and mineral conservation

award

State

8 1995 Best industrial rebellion award State

9 1995-

1996

Best effort of an industrial unit to

development rural economy shri.s.r.rungta

award for social

National

10 1996 Awareness for best rural development

efforts

State

11 1999 Best workers welfare best family welfare

award

State

12 2001 First prize for mine environment &pollution

control for the 3rd year in succession

State

13 2002 Vana mithra award from AP Govt State

14 2003 Company has got OHSAS-18001 State

15 2005 Certification from DNV, New Delhi. State

16 2006 Award for pollution control and

environmental protection FAPCCI award

for best rural development in the state

State

Products of the organization:

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Fixed asset

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Fixed asset, also known as a non-current asset or as property, plant, and equipment

(PP&E), is a term used in accounting for assets and property which cannot easily be

converted into cash. This can be compared with current assets such as cash or bank

accounts, which are described as liquid assets. In most cases, only tangible assets are

referred to as fixed.

Moreover, a fixed/non-current asset can also be defined as an asset not directly sold to a

firm's consumers/end-users. As an example, a baking firm's current assets would be its

inventory (in this case, flour, yeast, etc.), the value of sales owed to the firm via credit (i.e.

debtors or accounts receivable), cash held in the bank, etc. Its non-current assets would be

the oven used to bake bread, motor vehicles used to transport deliveries, cash registers used

to handle cash payments, etc. Each aforementioned non-current asset is not sold directly toconsumers.

These are items of value which the organization has bought and will use for an extended

period of time; fixed assets normally include items such as land and buildings, motor

vehicles, furniture, office equipment, computers, fixtures and fittings, and plant and

machinery. These often receive favorable tax treatment (depreciation allowance) over

short-term assets. According toInternational Accounting Standard (IAS) 16, Fixed Assets

are assets whose future economic benefit is probable to flow into the entity, whose cost can

be measured reliably.

It is pertinent to note that the cost of a fixed asset is its purchase price, including import

duties and other deductible trade discounts and rebates. In addition, cost attributable to

bringing and installing the asset in its needed location and the initial estimate of

dismantling and removing the item if they are eventually no longer needed on the location.

The primary objective of a business entity is to make profit and increase the wealth of its

owners. In the attainment of this objective it is required that the management will exercise

due care and diligence in applying the basic accounting concept of Matching Concept.

Matching concept is simply matching the expenses of a period against the revenues of the

same period.

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The use of assets in the generation of revenue is usually more than a year- that is long term.

It is therefore obligatory that in order to accurately determine the net income or profit for a

period depreciation is charged on the total value of asset that contributed to the revenue for

the period in consideration and charge against the same revenue of the same period. This is

essential in the prudent reporting of the net revenue for the entity in the period.

Net book value of an asset is basically the difference between the historical cost of that

asset and it associated depreciation. From the foregoing, it is apparent that in order to report

a true and fair position of the financial jurisprudence of an entity it is relatable to record

and report the value of fixed assets at its net book value. Apart from the fact that it is

enshrined in Standard Accounting Statement (SAS) 3 and IAS 16 that value of asset should

be carried at the net book value, it is the best way of consciously presenting the value ofassets to the owners of the business and potential investor.

Depreciating a Fixed Asset

Depreciation is, simply put, the expense generated by the use of an asset. It is the wear and

tear of an asset or diminution in the historical value owing to usage. Further to this; it is the

cost of the asset less any salvage value over its estimated useful life. It is an expense

because it is matched against the revenue generated through the use of the same asset.

Depreciation is usually spread over the economic useful life of an asset because it is

regarded as the cost of an asset absorbed over its useful life. Invariably the depreciation

expense is charged against the revenue generated through the use of the asset. The method

of depreciation to be adopted is best left for the management to decide in consideration to

the peculiarity of the business, prevailing economic condition of the assets and existing

accounting guideline and principles as implied in the organizational policies.

It is worth noting that not all fixed assets depreciate in value year-over-year. Land and

buildings, for example, may often increase in value depending on local real-estate

conditions.

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A long-term tangible piece of property that a firm owns and uses in the production of its

income and is not expected to be consumed or converted into cash any sooner than at least

one year's time.

Fixed assets are sometimes collectively referred to as "plant".

Balance sheet - accounting for fixed assets

Introduction

An important distinction is made in accounting between "current assets" and " "fixed

assets".

Current assets are those that form part of the circulating capital of a business. They are

replaced frequently or converted into cash during the course of trading. The most common

current assets are stocks, trade debtors, and cash.

Compare current assets with fixed assets. A fixed asset is an asset of a business intended

for continuing use, rather than a short-term, temporary asset such as stocks.

Fixed assets must be classified in a company's balance sheet as intangible, tangible, or

investments. Examples of intangible assets include goodwill, patents, and trademarks.

Examples of tangible fixed assets include land and buildings, plant and machinery, fixtures

and fittings, motor vehicles and IT equipment.

How should the changing value of a fixed asset be reflected in a company's accounts?

The benefits that a business obtains from a fixed asset extend over several years. For

example, a company may use the same piece of production machinery for many years,

whereas a company-owned motor car used by a salesman probably has a shorter useful life.

By accepting that the life of a fixed asset is limited, the accounts of a business need to

recognise the benefits of the fixed asset as it is "consumed" over several years.

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This consumption of a fixed asset is referred to as depreciation.

Definition of depreciation

Financial Reporting Standard 15 (covering the accounting for tangible fixed assets) definesdepreciation as follows:

"the wearing out, using up, or other reduction in the useful economic life of a tangible

fixed asset whether arising from use, effluxion of time or obsolescence through either

changes in technology or demand for goods and services produced by the asset.'

A portion of the benefits of the fixed asset will be used up or consumed in each accounting

period of its life in order to generate revenue. To calculate profit for a period, it isnecessary to match expenses with the revenues they help earn.

In determining the expenses for a period, it is therefore important to include an amount to

represent the consumption of fixed assets during that period (that is, depreciation).

In essence, depreciation involves allocating the cost of the fixed asset (less any residual

value) over its useful life. To calculate the depreciation charge for an accounting period, the

following factors are relevant:

- the cost of the fixed asset;

- the (estimated) useful life of the asset;

- the (estimated) residual value of the asset.

What is the relevant cost of a fixed asset?

The cost of a fixed asset includes all amounts incurred to acquire the asset and any amounts

that can be directly attributable to bringing the asset into working condition.

Directly attributable costs may include:

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- Delivery costs

- Costs associated with acquiring the asset such as stamp duty and import duties

- Costs of preparing the site for installation of the asset

- Professional fees, such as legal fees and architects' fees

Note that general overhead costs or administration costs would not be included as part of

the total

costs of a fixed asset (e.g. the costs of the factory building in which the asset is kept, or the

cost of the maintenance team who keep the asset in good working condition)

The cost of subsequent expenditure on a fixed asset will be added to the cost of the asset

provided that this expenditure enhances the benefits of the fixed asset or restores any

benefits consumed.

This means that major improvements or a major overhaul may be capitalised and included

as part of the cost of the asset in the accounts.

However, the costs of repairs or overhauls that are carried out simply to maintain existing

performance will be treated as expenses of the accounting period in which the work is

done, and charged in full as an expense in that period.

What is the Useful Life of a fixed asset?

An asset may be seen as having a physical life and an economic life.

Most fixed assets suffer physical deterioration through usage and the passage of time.

Although care and maintenance may succeed in extending the physical life of an asset,

typically it will, eventually, reach a condition where the benefits have been exhausted.

However, a business may not wish to keep an asset until the end of its physical life. There

may be a point when it becomes uneconomic to continue to use the asset even though there

is still some physical life left.

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The economic life of the asset will be determined by such factors as technological progress

and changes in demand. For purposes of calculating depreciation, it is the estimated

economic life rather than the potential physical life of the fixed asset that is used.

What about the Residual Value of a fixed asset?

At the end of the useful life of a fixed asset the business will dispose of it and any amounts

received from the disposal will represent its residual value. This, again, may be difficult to

estimate in practice. However, an estimate has to be made. If it is unlikely to be a

significant amount, a residual value of zero will be assumed.

The cost of a fixed asset less its estimated residual value represents the total amount to be

depreciated over its estimated useful life.

Fixed Asset Controls

This section contains two dozen controls that can be applied to the acquisition, valuation,

and disposal of fixed assets. Of this group, 13 are considered primary controls and are

included in the flowchart in figure System of Fixed Asset Controls. The remaining 11

controls either do not fit into the various fixed asset transaction flows or are considered

secondary controls that can bolster the primary controls as needed.

In essence, the system of controls for an asset acquisition requires that initial funding

approval come from the annual budget, as well as additional approval through a formal

capital investment form just prior to the actual acquisition. There should also be a post

installation analysis of how actual project results compared to the estimates shown in the

original capital investment form. The key controls used once an asset is installed are to tag

it, assign specific responsibility for it, and ensure that any asset transfers are approved by

the shipping and receiving managers. Finally, asset disposition controls call for regular

disposition reviews to ensure that dispositions occur while assets still retain some resale

value, a formal disposition approval process, and proper tracking of any resulting receipts.

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System of Fixed Asset Controls

The controls noted in the flowchart are described at greater length next, in sequence from

the top of the flowchart to the bottom for each of the three types of fixed asset transactions.

Obtain funding approval through the annual budgeting process. The annual

budgeting process is an intensive review of overall company operations as well as

of how capital expenditures are needed to fulfill the companys strategic direction.

As such, capital expenditure requests should be included in the annual budget,

thereby ensuring that they will be analyzed in some detail. Expenditure requests

included in the approved budget still should be subjected to some additional

approval at the point of actual expenditure, to ensure that they are still needed.

However, expenditure requests not included in the approved budget should be

subjected to a considerably higher level of analysis and approval, to ensure that

there is a justifiable need for them.

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Require a signed capital investment approval form prior to purchase. Given the

significant amount of funds usually needed to acquire a fixed asset, there always

should be a formal approval process before a purchase order is issued. An example

is shown in figure below. Depending on the size of the acquisition, a number of

approval signatures may be required, extending up to the company president or

even the chair of the board of directors.

Use prenumbered acquisition and disposal forms. If the company uses a manual

system for fixed asset acquisitions and disposals, then it should acquire a set of

prenumbered acquisition and disposal forms. By doing so, it can keep track of form

numbers to ensure that none is lost prior to completion. This is also a good way to

ensure that employees do not attempt to submit multiple acquisition authorization

forms for the same asset, allowing them to order duplicate assets and make off with

the extra items. For this to be a fully functional control, someone must be assigned

the task of storing the forms in a secure location and monitoring which form

numbers have been released for use.

Require return on investment calculation prior to approval. Given the considerable

size of some fixed asset investments, a reasonable control is to calculate the

estimated return on investment to see if the investment exceeds the corporate hurdle

rate. The return calculation can involve a variety of approaches, such as the paybackperiod, net present value, or internal rate of return. All three calculations are

included in the capital investment proposal form shown in figure below.

Conduct a postcompletion project analysis. Managers have been known to make

overly optimistic projections in order to make favorable cases for asset acquisitions.

This issue can be mitigated by conducting regular reviews of the results of asset

acquisitions in comparison to initial predictions and then tracing these findings back

to the initiating managers. This approach can also be used at various milestones

during the construction of an asset to ensure that costs incurred match original

projections.

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Compare fixed asset serial numbers to the existing serial number database. There is

a possibility that employees are acquiring assets, selling them to the company, then

stealing the assets and selling them to the company again. To spot this behavior,

always enter the serial number of each acquired asset in the fixed asset master file,

and then run a report comparing serial numbers for all assets to see if there are

duplicate serial numbers on record.

Independently review fixed asset master file additions. A number of downstream

errors can arise when fixed asset information is entered incorrectly in the fixed asset

master file. For example, an incorrect asset description can result in an incorrect

asset classification, which in turn may result in an incorrect depreciation

calculation. Similarly, an incorrect asset location code can result in the subsequent

inability to locate the physical asset, which in turn may result in an improper asset

disposal transaction. Further, an incorrect acquisition price may result in an

incorrect depreciation calculation. To mitigate the risk of all these errors, have a

second person review all new entries to the fixed asset master file for accuracy.

Affix an identification plate to all fixed assets. If a company acquires assets that are

not easily differentiated, then it is useful to affix an identification plate to each one

to assist in later audits. The identification plate can be a metal tag if durability is an

issue, or can be a laminated bar code tag for easy scanning, or even a radiofrequency (RFID) tag. The person responsible for tagging should record the tag

number and asset location in the fixed asset master file.

Assign responsibility for assets. There is a significant risk that assets will not be

tracked carefully through the company once they are acquired. To avoid this,

formally assign responsibility for each asset to the department manager whose staff

uses the asset, and send all managers a quarterly notification of what assets are

under their control. Even better, persuade the human resources manager to include

asset control as a line item in the formal performance review for all managers.

Use a formal transfer document to shift asset locations . If the preceding control is

implemented that assigns responsibility for specific assets to department managers,

then the transfer of an asset to a different department calls for the formal approval

of the sending and receiving department managers. Otherwise, managers can claim

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that assets are being shifted without their approval, so they have no responsibility

for the assets.

Conduct regular asset disposition reviews. Fixed assets decline in value over time,

so it is essential to conduct a regular review to determine if any assets should be

disposed of before they lose their resale value. This review should be conducted at

least annually, and should include representatives from the accounting, purchasing,

and user departments. An alternative approach is to create capacity utilization

metrics (which is most easily obtained for production equipment) and report on uti-

lization levels as part of the standard monthly management reporting package; this

tends to result in more immediate decisions to eliminate unused equipment.

Require a signed capital asset disposition form prior to disposition. There is a riskthat employees could sell off assets at below-market rates or disposition assets for

which an alternative in-house use had been planned. Also, if assets are informally

disposed of, the accounting staff probably will not be notified and so will continue

to depreciate an asset no longer owned by the company, rather than writing it off.

To avoid these problems, require the completion of a signed capital asset dispo-

sition form, such as the one shown in figure below.

Verify that cash receipts from asset sales are handled properly. Employees may sell

a companys assets, pocket the proceeds, and report to the company that the asset

actually was scrapped. This control issue can be reduced by requiring that a bill of

sale or receipt from a scrapping company accompany the file for every asset that

has been disposed of.

The preceding controls were primary ones required as part of the basic fixed asset

transaction flows. In addition, the next ancillary controls either are general controls that

operate outside of any specific transaction or are designed to provide additional riskmitigation.

Segregate responsibilities related to fixed assets. If the person purchasing an asset

also receives it, there is a considerable risk that the person will alter the purchasing

documents to eliminate evidence of the receipt and then steal the asset. The same

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concern applies to several aspects of fixed assets transactions. A control over this

situation is to segregate these types of responsibilities:

o Fixed asset acquisition

o Fixed asset transaction recording

o Custody of the fixed asset

o Fixed asset disposal

o Reconciliation of physical assets to accounting records

Restrict access to the fixed asset master file. The fixed asset master file contains all

baseline information about an asset and is the source document for depreciation

calculations as well as asset location information. If people were to gain illicit

access to this file, they could make modifications to change depreciation

calculations (thereby changing financial results) as well as modify locations

(possibly resulting in theft of the assets). To avoid these problems, always use

password controls to restrict access to the fixed asset master file.

Restrict facility access. If the company owns fixed assets that can be easily moved

and have a significant resale value, there is a risk that they will be stolen. If so,

consider restricting access to the building during nonwork hours and hire a security

staff to patrol the perimeter or at least the exits.

Install an alarm system to detect RFID-tagged assets. If the company has especially

valuable fixed assets that can be moved, then consider affixing a RFID tag to each

one and then installing a transceiver near every building exit that will trigger an

alarm if the RFID tag passes by the transceiver.

Reconcile fixed asset additions with capital expenditure authorizations. A good

detective control to ensure that all acquisitions have been authorized properly is to

periodically reconcile all fixed asset additions to the file of approved capital

expenditure authorizations. Any acquisitions for which there is no authorization

paperwork are then flagged for additional review, typically including reporting of

the control breach to management.

Increase the capitalization limit. A key problem with fixed asset tracking is that it

involves a considerable amount of additional paperwork as well as ongoing

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depreciation calculations, which may so overwhelm the accounting staff that they

are struggling to keep up with the paperwork rather than focusing on proper control

of the assets themselves. This recommended control may seem counterintuitive, but

increasing the capitalization limit reduces the number of assets designated as fixed

assets, thereby allowing the accounting staff to focus its attention on the proper

approval, tracking, and disposition of a smaller number of large-dollar assets. Thus,

oversight of smaller assets is abandoned in favor of greater inspection of large-

dollar asset transactions.

Conduct a periodic fixed asset audit. The internal audit staff should schedule a

periodic audit of fixed assets, reconciling the on-hand inventory to the accounting

records. Given the considerable quantity of fixed assets that many companiesmaintain, it is acceptable to focus on the 20 percent of fixed assets that typically

account for 80 percent of the invested cost of all fixed assets. An example of a

report suitable for a fixed asset audit is shown in figure below.

Verify the fair value assumptions on dissimilar asset exchanges. Accounting rules

allow one to record a gain or loss on the exchange of dissimilar assets. Since this

calculation is based on the fair value of the assets involved (which is not stated in

the accounting records), the possibility exists for someone to artificially create an

asset fair value that will result in a gain or loss. This situation can be avoided by

having an outside appraiser review the fair value assumptions used in this type of

transaction.

Test for asset impairment. There are a variety of circumstances under which the net

book value of an asset should be reduced to its fair value, which can result in

significant reductions in the recorded value of an asset. This test requires a

significant knowledge of the types of markets in which a company operates, theregulations to which it is subject, and the need for its products within those markets.

Consequently, only a knowledgeable person who is at least at the level of a

controller should be relied on to detect the presence of assets whose values are

likely to have been impaired.

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Verify that correct depreciation calculations are being made . Though there is no

potential loss of assets if incorrect depreciation calculations are being made, it can

result in an embarrassing adjustment to a companys financial statements at some

point in the future. This control should include a comparison of capitalized items to

the official corporate capitalization limit to ensure that items are not being

inappropriately capitalized and depreciated. The control should also include a

review of the asset categories in which each individual asset has been recorded, to

ensure that an asset has not been misclassified and therefore incorrectly depreciated.

Verify that all changes in asset retirement obligation assumptions are authorized. A

company can artificially increase its short-term profitability by altering the assumed

amount of future cash flows associated with its asset retirement obligations. Since

downward revisions to these assumptions will be reflected in the current periods

income statement as a gain, any changes to these assumptions should be approved

prior to implementation.

MANAGEMENT OF FIXED ASSETS:

The selection of various fixed assets required for creating the desired production

facilities and the decision regarding the determination of level of fixed assets in the capital

structure is an important decision for the company to take for the smooth running of business.

The decisions relating to fixed assets involve huge funds for long period of time and are

generally of irreversible nature affecting the long profitability of the business. Thus, management

of fixed asset is of vital importance to any organization.

The process of Fixed Assets Management involves:

1. Selection of most worthy projects from the different alternatives of fixed assets.

2. Arranging the requisite funds/capital for the same.

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The first important consideration is to acquire only that amount of fixed assets, which

will be just sufficient to ensure smooth and efficient running of the business. In some cases it

may be economical to buy certain assets in a lot size. Another important consideration to be kept

in mind is possible increase in the demand of the firms product needs the expansion of activities.

Hence a firm should have that amount of fixed assets, which could adjust to increase demand.

Another aspect of fixed assets management is that a firm must ensure buffer stocks

of certain essential equipments to ensure uninterrupted production in the events of emergencies.

Sometimes, there may some breakdown in some equipments or services affecting the entire

production. It is always better to have some alternative arrangements to deal with such situations

but at the same time the cost of carrying such buffer stock should also be evaluated. Efforts

should also be made to minimize the level of buffer stock of fixed assets so that there will be

maximum utilization during that period.

Fixed assets management is an accounting process that seeks to track Fixed assets for the

purposes of financial accounting, preventive Maintenance, and theft deterrence. Many

organizations face a significant challenge to track the location, quantity, condition,

maintenance and depreciation status of their fixed assets. A popular approach to tracking

fixed assets utilizes serial numbered Asset Tags, often with bar codes for easy and accurate

reading. Periodically, the owner of the assets can take inventory with a mobile Barcode

reader and then produce a report. Off-the-shelf software packages for fixed asset

management are marketed to businesses small and large. Some Enterprise Resource Planning

Systems are available with fixed assets modules.

Investment management is the professional management of various securities (shares,

bonds etc) and other assets (e.g. real estate), to meet specified investment goals for the

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benefit of the investors. Investors may be institutions (insurance companies, pension funds,

corporations etc.) or private investors (both directly via investment contracts and more

commonly via collective investment schemes eg. mutual funds) . The term asset

management is often used to refer to the investment management of collective

investments, whilst the more generic fund management may refer to all forms of

institutional investment as well as investment management for private investors.

Investment managers who specialize in advisory ordiscretionary management on behalf of

(normally wealthy) private investors may often refer to their services as wealth

management or portfolio management often within the context of so-called "private

banking".

The provision of 'investment management services' includes elements of financial

analysis, asset selection, stock selection, plan implementation and ongoing monitoring of

investments. Investment management is a large and important global industry in its own

right responsible for caretaking of trillions of dollars, euros, pounds and yen. Coming

under the remit offinancial services many of the world's largest companies are at least in

part investment managers and employ millions of staff and create billions in revenue.

Fund manager (or investment advisor in the U.S.) refers to both a firm that provides

investment management services and an individual(s) who directs 'fund management'

decisions

COMPONENTIAL ANALYSIS:

The componential analysis of the fixed assets of kesoram includes net blocks, capital

(work in progress) and construction stores and advances. The data relating to different

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fixed asset management kesoram 2012.doc

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