Deferred Tax Note Example

Sample / Template of Deferred Tax Note to accounts disclosure in word / .doc Format

February 20, 2014

ROCKET SALES LTD.

1. Book depreciation of the Company which is presently Rs. 510 lacs per annum is likely to come down, as 95% of the original costs of assets shall be written down.  Yearwise likely amount of book depreciation is given in Annexure “A”.

2.  a) The Company has, for the last four years, put added impetus on mining so as to ensure reduction in the cost of Pallets & CLO in future  years.  The yearwise mining done from the year 2009 onwards is given in Annexure “B”.   The CLO & Fines will be available in about five years from the date of Mining Facilities installment.


b)  The immediate impact of such mining activity is that the cost of Pallets which was Rs. --------/-  per MT in the year 2012-13 has come down to Rs.  -----/- per MT from April ’13 to January ’14 (10 months).   These rates are likely to be around Rs. ----/-  per MT, as the Company is presently buying Pallets at these rates and also in view of the fact that the New Mining Facility Installment done by the Company will be available in next two years’ time.

3. The Company has set up Scarp Plant which has been stabilised during the current year.  Monthwise production and sales of Scarp are given in Annexure “C”.  Though the full benefits of internal consumption for Scrap consumed have accrued during the current year, the benefits on account of sale in the market have not  fully accrued, as the Plant started giving consistent production from the month of September ’13 only.  This is reflected from the fact that the sale of Scrap from October ’13 to January ’14 has been showing improving trend.  Additional sales of scrap are likely to be generated from the year 2014-15 onwards, as is evident from the sales during the last four months.

4. The Company has repaid all its term loans.  Therefore, interest burden of the Company will definitely come down.   Interest liability in the year 2012-13 stood at Rs. ------- lacs which has come down to Rs. --- lacs from April ’13 to January ’14 (10 months).    With the available cash flow, the Company proposes to re-pay the ICD’s taken from the Promoters.  This will further reduce the interest burden of the Company.

5. Bank of India has agreed for an OTS proposal whereby their total liability of Rs. ------ lacs will be settled by making one-time payment of Rs. ----- lacs.    This will give one time gain of about Rs. ---- lacs.   This will also reduce interest burden of the Company for future years.

6. SBI, the Lead Bank, has recommended its proposal to the higher authority for conversion of 80% of their CC limits into FCNR(B).  This will definitely reduce the cost of interest of the Company.  Once the share of SBI is converted into FCNR(B), the Company will approach to other banks for conversion of their share into FCNR(B).

7. Trend of sales of the Company for the last four years in terms of quantum and value are given in Annexure “D”.    Production and sale of Hot Rolled Coils, & Galvanized HRC, a value added product, has shown significant improvement during the current year.

8. The Company’s plant has shown improved productivity during the first 10 months of the current accounting year.  This has resulted into lower cost of production, as compared to immediately preceding year.  A comparative statement of cost of production for the purpose of stock valuation for last two years as well as during the current year is given in Annexure  “E”.

9. Yearwise unabsorbed losses and unabsorbed depreciation are given in Annexure  “F”.

10. Accumulated losses as per books of the Company as on 31^st December ’13 stood at Rs. --------- as against a paid-up capital of Rs. ------- lacs and Rs. ---- lacs as capital reserve.   Company’s net-worth is expected to be positive as on 31^st March ’14 and the Company is likely to be de-registered as a sick company after the close of the current accounting year.

11. There was a long pending dispute with the Govt. of Maharashtra regarding rate of royalty and weighment norms.  The Hon’ble Supreme Court has given its judgement in favour of the Company upholding Company’s contention and thereby Govt. of Maharashtra is bound to supply Pallets as per the original terms and conditions.  The Company is in the process of submitting claim to the Govt. of Maharashtra.