2.1. Basis of Accounting
The financial statements of the company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP). The company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under the Companies (Accounting Standards) Rules, 2006, (as amended)
and the relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on an accrual basis and under the
historical cost convention unless otherwise specified. The accounting
policies adopted in the preparation of financial statements are
consistent with those of previous year unless otherwise specified.
During the year ended 31 March 2012, the revised Schedule VI notified
under the Companies Act 1956, has become applicable to the company, for
preparation and presentation of its financial statements. The adoption
of revised Schedule VI does not impact recognition and measurement
principles followed for preparation of financial statements. However,
it has significant impact on presentation and disclosures made in the
financial statements. The company has also reclassified the previous
year figures in accordance with the requirements applicable in the
2.2. Use of Estimates
Preparation of financial statements in conformity with generally
accepted accounting principles, requires estimates and assumption to be
made, that affect reported amounts of assets and liabilities on the
date of financial statements and reported amount of revenues and
expenses during the reported period. Actual results could differ from
these estimates and differences between the actual results and
estimates are recognized in the period in which results are known/
2.3. Fixed Assets
Tangible assets are stated at cost of acquisition, installation or
construction including other direct expenses, less accumulated
depreciation, and impairment losses, if any. Intangible assets are
recognised only if it is probable that the future economic benefits
that are attributable to the assets will flow to the enterprise and the
cost of the assets can be measured reliably.
2.4. Expenditure during Construction Period
All identifiable revenue expenses including interest incurred in
respect of various projects/expansions are allocated to capital cost of
respective assets on their completion/installation.
Long term investments are stated at cost of acquisition. Provision for
diminution in value, is made only if, in the opinion of management such
a decline is other than temporary. Investments in foreign currency are
stated at cost by converting at exchange rate prevailing at the time of
acquisition / remittance.
2.6.1. Raw materials, packing materials, finished/traded goods are
valued at cost or net realisable value whichever is lower.
2.6.2. Works in process are valued at estimated cost.
2.6.3. Sales promotional items are valued at cost.
2.7. Foreign Currency Transactions
Foreign currency transactions are recorded at the exchange rates
prevailing on the date of the transaction. The net gain or loss on
account of exchange differences arising on settlement of foreign
currency transactions are recognised as income or expenses of the
period in which they arise. Monetary assets and liabilities denominated
in foreign currencies at the balance sheet date are reported using the
rate prevailing as on that date. The resultant exchange differences are
recognised in the statement of profit and loss. In cases where forward
contracts are entered, the relevant foreign currency assets /
liabilities are translated at the forward rate. The resulting exchange
difference, if any, is charged to the revenue.
2.8. Revenue Recognition
Revenue on sales is recognised when risk and rewards of ownership of
products are passed on to customers, which are generally on dispatch of
goods. Incomes from services are recognised when services are rendered.
Sales are net of discounts, sales tax and returns; excise duty
collected on sales is shown by way of deduction from sales. Dividend
income is recognised when right to receive dividend is established and
there is no uncertainty as to its reliability. Revenue in respect of
other income is recognised when a reasonable certainty as to its
Revenue from sale of technology / know how (rights, licences and other
intangibles) are recognised when performance obligation is completed as
per the terms of the agreement.
2.9. Export Benefits
Export benefits available under prevalent schemes are accounted to the
extent considered receivable.
Depreciation is provided on Written Down Value method at the rates
specified in Schedule XIV of the Companies Act, 1956. Premium on
leasehold land is being written off over the period of lease.
Expenditure incurred on ANDA development cost are amortised over
estimated useful life.
2.11. Employee Benefits
2.11.1. Short Term Employee Benefits:
Short term employee benefits expected to be paid in exchange for the
services rendered by employees are recognised undiscounted during the
period employee renders services.
2.11.2. Post Employment Benefits:
Company''s contribution for the period paid / payable to defined
contribution retirement benefit schemes are charged to statement of
profit and loss account. Company''s liability towards defined benefit
plan viz. gratuity is determined using the Projected Unit Credit
Method as per the actuarial valuation carried out at the balance sheet
Defined benefit in the form of compensated absences is provided for
based on actuarial valuation at the year-end in accordance with
2.11.3. Stock Based Compensation:
Employee stock options are accounted as per the accounting treatment
prescribed under Guidance Note on Accounting for Employee Share-based
payments issued by the ICAI read with SEBI (Employee Stock Option
Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 issued by
Securities and Exchange Board of India. The Compensation cost of stock
options granted to employees is measured by the fair value method and
is amortised uniformly over the vesting period.
2.12. Research and Development
Research costs are expensed as incurred. Development expenditure
incurred on an individual project is carried forward when its future
recoverability can reasonably be regarded as assured. Any expenditure
carried forward is amortised over the period of expected future sales
from the related project, not exceeding ten years. The carrying value
of development costs is reviewed for impairment annually when the asset
is not yet in use, and otherwise when events or changes in
circumstances indicate that the carrying value may not be recoverable.
2.13. Excise and Custom Duty
Excise duty in respect of finished goods lying in factory premises and
customs duty on goods lying in custom bonded warehouse are provided for
and included in the valuation of inventory.
2.14. Cenvat, Service Tax and VAT Credit
Cenvat, Service Tax and VAT credit receivable/availed are treated as an
asset with relevant expenses being accounted net of such credit, and
the same is reduced to the extent of their utilisations.
2.15. Income Tax
Current tax is accounted on the basis of Income Tax Act, 1961. Deferred
tax resulting from timing differences between book and tax profits is
accounted for at the current rate of tax, to the extent that the timing
differences are expected to crystallise. MAT Credit Entitlement as per
the provisions of Income Tax Act, 1961 is treated as an asset in
accordance with the Guidance Note on Accounting for Credit Available in
respect of Minimum Alternative Tax under the Income Tax Act, 1961, by
credit to the statement of profit & loss.
2.16. Impairment of Assets
The fixed assets and producing properties are reviewed for impairment
at each balance sheet date. An asset is impaired when the carrying cost
of assets exceeds its recoverable value. An impairment loss is charged
to the statement of profit & loss in the year in which an asset is
identified as impaired. The impairment loss recognized in prior
accounting periods is reversed, if there has been a change in the
estimate or recoverable amount.
2.17. Operating Leases
Assets taken on lease under which all risks and rewards of ownership
are effectively retained by the lessor are classified as operating
lease. Lease payments under operating leases are recognised as expenses
on accrual basis in accordance with the respective lease agreements.
2.18. Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised only when there is present obligation as a
result of past events and when a reliable estimate of the amount of
obligation can be made. Contingent liability is disclosed for (i)
Possible obligations which will be confirmed only by future events not
wholly within the control of the Company or (ii) Present obligations
arising from past events where it is not probable that an outflow of
resources will be required to settle the obligation or a reliable
estimate of amount of the obligation cannot be made. Contingent assets
are not recognised in the financial statements since this may result in
the recognition of income that may never be realised.
2.19. Borrowing Cost
Borrowing cost attributable to acquisition or construction of
qualifying assets is capitalised as cost of such assets. A qualifying
asset is one that necessarily takes substantial period of time to get
ready for its intended use. All other borrowing costs are charged to