a. Method of Accounting
The Financial Statements are prepared as per historical cost convention
and in accordance with the Generally Accepted Accounting Principles in
India, the provisions of the Companies Act, 1956, and the applicable
Accounting Standards notified under the Companies (Accounting
Standards) Rules, 2006. All Income and Expenditures having material
bearing on the Financial Statements are recognized on accrual basis.
b. Use of Estimates
The presentation of the Financial Statements in conformity with the
Generally Accepted Accounting policies requires, the management to make
estimates and assumptions that affect the reported amount of Assets and
Liabilities, Revenues and Expenses and disclosure of contingent
liabilities. Such estimation and assumptions are based on management''s
evaluation of relevant facts and circumstances as on date of Financial
Statements. Difference between the actual results and estimates are
recognized in the period in which the results are known / materialized.
c. Revenue Recognition
Sales are stated inclusive of rebate and trade discount and excluding
Central Sales Tax, State Value Added Tax. With regard to sale of
products, income is reported when practically all risks and rights
connected with the ownership have been transferred to the buyers. This
usually occurs upon dispatch, after the price has been determined.
Export Benefits are accounted on accrual basis.
d. Fixed Assets
Tangible Fixed Assets acquired by the Company are reported at
acquisition value, with deductions for accumulated depreciation [other
than freehold land where no depreciation is charged] and impairment
losses, if any. The acquisition value includes the purchase price
(excluding refundable taxes), and expenses directly attributable to
assets to bring it to the factory and in the working condition for its
intended use. Where the construction or development of any such asset
requiring a substantial period of time to set up for its intended use,
is funded by borrowings if any, the corresponding borrowing cost are
capitalized up to the date when the asset is ready for its intended
Capital work in progress is stated at Cost.
Pre-operative expenditure & trial run expenditure on the Project is
capitalized amongst the various heads of fixed assets on the
commencement of commercial production of respective project.
i) Depreciation on Fixed Assets is provided on Straight Line Basis in
accordance with the provisions of Section 205(2)(b) of the Companies
Act, 1956 in the manner and at the rates specified in Schedule XIV to
the said Act.
ii) Depreciation on additions to Assets during the year is being
provided on pro-rata basis with reference to month of
acquisition/installation as required by Schedule XIV to the Companies
iii) Depreciation on assets sold, scrapped or demolished during the
year is provided at their respective rates up to the date on which such
assets are sold, scrapped or demolished, as required by Schedule XIV of
the Companies Act, 1956.
iv) No depreciation has been provided in respect of Capital Work in
f. Excise Duty
Excise Duties recovered are included in the sale of products. Excise
duties in respect of Finished Goods lying in stock are shown separately
as an item of Other Manufacturing Expenses and included in the
valuation of finished goods.
g. Cash Flow Statement
The Cash Flow Statement is prepared by the indirect method set out in
Accounting Standard 3 on Cash Flow Statements and presents the cash
flows by operating, investing and financing activities of the Company.
Cash and Cash equivalents presented in the Cash Flow Statement consist
of cash on hand and demand deposits with banks
h. Foreign Currency Transactions
Transactions in the foreign currency which are covered by forward
contracts are accounted for at the contracted rate; the difference
between the forward rate and the exchange rate at the date of
transaction is recognized in the profit & loss account over the life of
the contract. Transactions in the foreign currency other than those
covered by forward contract rates are translated to the reporting
currency based on the exchange rate on the date of the transaction.
Exchange differences arising on settlement thereof during the year are
recognized as income or expenses in the Profit and Loss Account.
Cash and bank balances, receivables and liabilities (monetary items) in
foreign currencies as at the yearend are translated at closing-date
rates, and unrealized translation differences are included in the
Profit and Loss Account
Investments are classified as Long Term & Current Investments. Long
Term Investments are valued at cost less provision for diminution other
than temporary, in value, if any. Current Investments are valued at
cost or fair value whichever is lower.
j. Valuation of Inventories
i) Raw materials are valued at cost or net realizable value whichever
ii) Work in progress has been valued at cost of materials and labour
charges together with relevant factory overheads.
iii) Finished Goods are valued at cost or net realizable value
whichever is lower. (Inclusive Excise Duty).
iv) Stores & Fuel are valued at cost or net realizable value whichever
k. Employee Benefit
(i) Short Term
Short Term employee benefits are recognized as an expense at the
undiscounted amount expected to be paid over the period of services
rendered by the employees to the company.
(ii) Long Term
The Company has both defined contribution and defined benefit plans.
These plans are financed by the Company in the case of defined
(iii) Defined Contribution Plans
These are plans in which the Company pays pre-defined amounts to
separate funds and does not have any legal or informal obligation to
pay additional sums. These comprise of contributions to Employees
Provident Fund. The Company''s payments to the defined contribution
plans are reported as expenses during the period in which the employees
perform the services that the payment covers.
(iv) Defined Benefit Plans
Expenses for defined benefit gratuity payment plans are calculated as
at the balance sheet date by independent actuaries in the manner that
distributes expenses over the employees working life. These commitments
are valued at the present value of the expected future payments, with
consideration for calculated future salary increases, using a
discounted rate corresponding to the interest rate estimated by the
actuary having regard to the interest rate on Government Bonds with a
remaining term i.e. almost equivalent to the average balance working
period of employees.
(v) Other Employee Benefit
Compensated absences which accrue to employees and which can be carried
to future periods but are expected to be encashed or availed in twelve
months immediately following the year end are reported as expenses
during the year in which the employees perform the services that the
benefit covers and the liabilities are reported at the undiscounted
amount of the benefits after deducting amounts already paid.
l. Earning per Share
Basic earning per share is calculated by dividing the net profit after
tax for the year attributable to Equity Shareholders of the Company by
the weighted average number of Equity Shares in issue during the year.
Diluted earning per Share is calculated by dividing net profit
attributable to equity Shareholders (after adjustment for diluted
earnings) by average number of weighted equity shares outstanding
during the year.
Income –tax expense comprises of current tax, and deferred tax charge
or credit. Provision for current tax is made on the basis of the
assessable income at the tax rate applicable to the relevant assessment
year. The deferred tax asset and deferred tax liability is calculated
by applying tax rate and tax laws that have been enacted or
substantively enacted by the balance sheet date. Deferred tax assets
arising mainly on account of brought forward business losses, capital
losses and unabsorbed depreciation under tax laws, are recognized, only
if there is a virtual certainly of its realization, supported by
convincing evidence. Deferred tax assets on account of other timing
differences are recognized only to the extent there is a reasonable
certainty of its realization. At each balance sheet date, the carrying
amount of deferred tax assets is reviewed to reassure realization.
The carrying value of assets of the Company''s cash generating units are
reviewed for impairment annually or more often if there is an
indication of decline in value based on internal/external factors. If
any indication of such impairment exists, the recoverable amounts of
those assets are estimated and impairment loss is recognized, if the
carrying amount of those assets exceeds their recoverable amount. The
recoverable amount is the greater of the net selling price and their
value in use. Value in use is arrived at by discounting the estimated
future cash flows to their present value based on appropriate discount
o. Provisions & Contingencies
A provision is recognized when the Company has a present legal or
constructive obligation as a result of past event and it is probable
that an outflow of resources will be required to settle the obligation,
in respect of which reliable estimate can be made. Provisions
(excluding long term benefits) are not discounted to its present value
and are determined based on best estimate required to settle the
obligation at the balance sheet date. These are reviewed at each
balance sheet date and adjusted to reflect the current best estimates.
Contingent liabilities are not recognized but are disclosed in the
notes to the Financial Statements. A contingent asset is neither
recognized nor disclosed.
p. Borrowing Cost
Borrowing costs are recognized in the period to which they relate,
regardless of how the funds have been utilized, except where it relates
to the financing of construction or development of assets requiring a
substantial period of time to prepare for their intended future use.
Interest on borrowings if any is capitalized up to the date when the
asset is ready for its intended use. The amount of interest capitalized
for the period is determined by applying the interest rate applicable
to appropriate borrowings
q. Research & Development Expenditure
Research & Development Expenditure is charged to revenue. Capital
expenditure on research and development is reported as fixed assets
under the relevant head. Depreciation on research and development fixed
assets are not classified as research and development expenses and
instead included under depreciation expenses.
Lease Transactions entered into on or after April 1, 2001.
(1) Assets acquired under lease where the Company has substantially all
the risks and rewards incidental to ownership are classified as finance
leases. Such assets are capitalized at the inception of the Lease at
the lower of the fair value or the present value of minimum lease
payments and a liability is created for an equivalent amount. Each
lease rental paid is allocated between the liability and the interest
cost, so as to obtain a constant periodic rate of interest on the
outstanding liability for each period.
(2) Assets acquired on lease where a significant portion of risk and
rewards incidental to ownership is retained by the leaser are
classified as operating lease. Lease rental are charged to the profit
and loss account on accrual basis.
s. Proposed Dividend & Corporate Dividend Tax
Dividend proposed by the Board of Directors along with corporate
dividend tax is provided in the books of accounts. Approval in the
General Meeting is pending for the same.