a) Basis of Preparation of Financial Statement
i) The financial statements have been prepared under the historical
cost convention using the accrual basis of accounting and comply with
all the mandatory Accounting Standards as specified in the Companies
(Accounting Standard) Rules, 2006 (as amended) and relevant provisions
of the Companies Act, 1956, as adopted consistently by the Company.
ii) Use of Estimates
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent liabilities on the
date of the financial statements. Actual results could differ from
those estimates. Any revision to accounting estimates is recognised in
the period in which such revision are made.
i) Inventories are valued at lower of cost or Net Realisable Value.
ii) Cost of inventories have been computed to include all costs of
purchases, cost of conversion and other costs incurred in bringing the
inventories to their present location and condition.
iii) The basis of determining cost for various categories of
inventories are as follows:
Raw material : Weighted Average Cost
Traded / Finished goods : Weighted Average Cost Stores and Spares :
Weighted Average Cost
c) Cash Flow Statement
i) Cash & Cash Equivalents (for purpose of cash flow statement)
Cash comprises cash on hand and demand deposit with banks. Cash
equivalents are short-term balances (with an original maturity of three
months or less from the date of acquisition), highly liquid investments
that are readily convertible into known amounts of cash and which are
subject to insignificant risk of changes in value.
ii) Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit /
(loss) before extraordinary items and tax is adjusted for the effects
of transactions of non-cash nature and any deferrals or accruals of
past or future cash receipts or payments.
d) Prior Period and Exceptional Items
i) All identifiable items of Income and Expenditure pertaining to prior
period are accounted through Prior Period items.
ii) Exceptional items are generally non-recurring items of income and
expense within profit or loss from ordinary activities, which are of
such size, nature or incidence that their disclosure is relevant to
explain the performance of the Company for the year.
i) Depreciation on Fixed Assets is provided on straight-line method at
rates and in the manner specified in Schedule XIV to the Companies Act,
1956 read with the relevant circulars issued by the Ministry of
ii) Depreciation in respect of tangible assets for power generation
project is provided on straight line method considering the rates
provided in Appendix III of the Regulation issued by the Central
Electricity Regulatory Commission (CERC) dated 19th January, 2009 or
rates prescribed under schedule XIV of the Companies Act, 1956
whichever is higher. The following categories of the assets have higher
rates as per aforesaid CERC Regulation as compared to the rates
mentioned in Schedule XIV to the Companies Act, 1956.
Land (Leasehold) : 3.34%
Building : 3.34%
Plant & Machinery : 5.28%
iii) Depreciation on Leasehold improvements is provided per estimated
useful life amortised over the balance of the lease period.
iv) Individual assets costing less than Rs. 5,000/- are fully depreciated
in the year of purchase.
v) Intangible Assets in the form of Software which are an integral part
of Computer Systems are amortised at the same rate as that of Computer
f) Revenue Recognition
i) Sales of goods are recognised on shipment or dispatch to customer
and net of value added tax and return.
ii) Dividend income from investments and interest income from mutual
funds is recognised when the Company''s right to receive payment is
iii) Income from services rendered is accounted for when the work is
iv) Interest income is recognised on time proportion basis taking into
account the amount outstanding and the rate applicable.
v) Profit/Loss on sale of investments are recognised on the contract
vi) Export benefits under various scheme announced by the Central
Government under Exim policies are accounted for on accrual basis to
the extent considered receivable, depending on the certainty of
g) Fixed Assets
i) Fixed assets are stated at cost of acquisition or construction. They
are stated at historical cost less accumulated depreciation and
impairment losses, if any. Cost comprises the purchase price and any
attributable cost of bringing the asset to its working condition for
its intended use. Borrowing cost relating to acquisition / construction
of fixed assets which take substantial period of time to get ready for
its intended use are also included to the extent they relate to the
period till such assets are ready to be put to use.
ii) Expenditure on account of modification/alteration in plant and
machinery, which increases the future benefit from the existing asset
beyond its previous assessed standard of performance, is capitalized.
iii) Any capital expenditure in respect of assets, the ownership of
which would not vest with the Company, is charged off to revenue in the
year of incurrence.
iv) In line with Notification No. G.S.R. 225(E) dated March, 2009
(further amended by notification no. G.S.R. 378 (E) dated 11.05.2011)
issued by the Ministry of Corporate Affairs, Government of India, the
Company has opted for adjusting the exchange difference, arising on
long term foreign currency monetary items relating to acquisition of
depreciable capital assets to the cost of capital and, to depreciate
over the balance useful life of the assets.
v) Expenditure related to and incurred during implementation of capital
projects is included under Capital Work in Progress or Project
Development Expenditure as the case may be. The same is allocated to
the respective fixed assets on completion of construction/errection of
the capital project / fixed assets.
h) Foreign Currency Transactions
i) Initial Recognition
Transactions denominated in foreign currencies are recorded at the
exchange rates prevailing on the date of the transaction.
At the year-end, monetary items denominated in foreign currencies,
other than those covered by forward contracts, are converted into rupee
equivalents at the year end exchange rates.
iii) Exchange Differences
All exchange differences arising on settlement and conversion of
foreign currency transaction are included in the Statement of Profit
iv) Forward Exchange Contracts
The Company uses foreign currency forward contracts to hedge its risks
associated with foreign currency fluctuations relating to certain firm
commitments and forecasted transactions.
The use of such foreign currency forward contracts is governed by the
Company''s policies approved by the management, which provide
principles on use of such financial derivatives consistent with the
Company''s risk management strategy. The Company does not use
derivative financial instruments for speculative purposes.
In respect of transactions covered by forward exchange contracts, the
difference between the year end rate and the exchange rate at the date
of contract is recognised as exchange difference and the premium paid
on forward contracts is recognised over the life of the contracts. i)
i) Investments that are readily realisable and intended to be held for
not more than a year are classified as current investments. All other
investments are classified as long term investments.
ii) Long-term investments are stated at cost. Provision for diminution
in the value of long-term investments is made only if such a decline is
other than temporary in the opinion of the management
iii) Current investments are carried at the lower of cost and
quoted/fair value, computed category wise.
iv) Investments in Equity Shares of foreign subsidiaries are expressed
in Indian Currency at the rates of exchange prevailing at the time when
the investment was made.
j) Employee Retirement Benefits
i) Defined Benefit Plan
Gratuity with respect to defined benefit schemes are accrued based on
actuarial valuations, carried out by an independent actuary as at the
balance sheet date. These contributions are covered through Group
Gratuity Scheme with Life Insurance Corporation of India and are
charged against revenue.
ii) Defined Contribution plans
Company''s contribution to Provident Fund, Superannuation Fund,
Employees'' State Insurance Fund are determined under the relevant
schemes and/or statute, charged to the Statement of Profit & Loss when
iii) Provision is made for leave encashment based on actuarial
valuation, carried out by an independent actuary as at the balance
iv) Termination benefits, if any, are recognised as an expense as and
k) Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are charged to Statement of Profit and Loss.
I) Segment Accounting
Based on guiding principles given in Accounting Standard on Segment
Reporting- AS 17 as specified in the Companies (Accounting Standard)
Rules, 2006 (as amended), single financial report contains both
Standalone Financial Statement and Consolidated Financial Statement of
the Company. Hence, the required segment information has been appended
in the Consolidated Financial Statements (CFS).
m) Related Party Transactions
Disclosure of transactions with Related Parties, as required by
Accounting Standard 18 Related Party Disclosures as specified in the
Companies (Accounting Standard) Rules 2006 (as amended), has been set
out in a separate statement annexed to this note. Related parties as
defined under clause 3 of the Accounting Standard 18 have been
identified on the basis of representations made by the management and
information available with the Company.
Lease arrangement where risk and rewards incidental to ownership of an
asset substantially vest with the Lessor are recognised as Operating
Leases. The Company''s significant leasing arrangements are in respect
of operating leases for immovable property which includes residential
premises, office, godowns, etc. The aggregate lease rental payable is
charged as rent including lease rentals.
0) Earning Per Share
The Company reports basic and diluted Earnings Per Share (EPS) in
accordance with the Accounting Standard 20 as specified in the
Companies (Accounting Standard) Rules, 2006 (as amended). The Basic
EPS has been computed by dividing the income available to Equity
Shareholders by the weighted average number of Equity Shares
outstanding during the accounting year. The Diluted EPS has been
computed using the weighted average number of Equity Shares and
dilutive potential equity shares outstanding at the end of the year.
p) Taxes on Income
1) Deferred Taxation
In accordance with the Accounting Standard 22 - Accounting for Taxes on
Income, as specified in the Companies (Accounting Standard) Rules, 2006
(as amended), the deferred tax for timing differences between the book
and tax profits for the year is accounted for by using the tax rates
and laws that have been enacted or substantively enacted as of the
Balance Sheet Date.
Deferred tax assets arising from timing differences are recognised to
the extent there is virtual certainty that the assets can be realized
Net outstanding balance in Deferred Tax account is recognised as
deferred tax liability/asset. The deferred tax account is used solely
for reversing timing difference as and when crystallized
ii) Current Taxation
Provision for taxation including wealth tax has been made in accordance
with the direct tax laws prevailing for the relevant assessment years.
The current tax charge for the Company includes Minimum Alternative Tax
(MAT) determined under section 115JB of the Income Tax Act, 1961.
q) Impairment of Fixed Assets
The carrying amount of assets, other than inventories, is reviewed at
each balance sheet date to determine whether there is any indication of
impairment. If any such indication exists, the assets recoverable
amount is estimated.
The impairment loss is recognised whenever the carrying amount of an
asset or its cash generation unit exceeds its recoverable amount. The
recoverable amount is the greater of the asset''s net selling price
and value in the uses which is determined based on the estimated future
cash flow discounted to their present values. All impairment losses are
recognised in the Statement of Profit and Loss.
An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount and is recognised in
the Statement of Profit and Loss.
r) Provision, Contingent Liabilities and Contingent Assets
Provision involving substantial degree of estimation in measurements
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognised but are disclosed in the
notes. Contingent assets are neither recognised nor disclosed in the
Expenses are net of taxes recoverable, where applicable.
t) Derivative Instruments
As per the Institute of Chartered Accountants of India (''ICAI'')
Announcement, accounting for derivative contracts, derivative contract
other than those covered under AS - 11, as specified in the Companies
(Accounting Standard) Rules, 2006 (as amended), The effects of Changes
in the Foreign exchange rates, are marked to market on a portfolio
basis, and the net loss after considering the offsetting effect on the
underlying hedge item is charged to the income statement. Net gains are
u) Accounting for Claims
i) Claims received are accounted at the time of lodgement depending on
the certainty of receipt and claims payable are accounted at the time
ii) Claims raised by Government authorities regarding taxes and duties,
which are disputed by the Company, are accounted based on legality of
each claim. Adjustments, if any, are made in the year in which disputes
are finally settled.
v) Proposed Dividend
Dividend proposed by the Directors is provided for in the books of
account pending approval by the members at the ensuing Annual General
w) Doubtful Debts/Advances
Provision is made in the accounts for Debts/Advances which in the
opinion of the management are considered doubtful of recovery.
x) Service Tax Input Credit
Service tax input credit is accounted for in the books in the period in
which the underlying service received is accounted and when there is no
uncertainty in availing / utilising the credits.