1. Basis of Preparation of Financial Statements
The Financial Statements are prepared under historical cost convention,
in accordance with the Generally Accepted Accounting Principles
(GAAP) comprising the mandatory accounting standards issued by the
Institute of Chartered Accountants of India and the provisions of the
Companies Act, 1956 on an accrual basis.
2. Revenue recognition
Revenues are recognised on completion of sale of goods and/or rendering
3. Fixed Assets
Fixed assets are stated at cost and the amount added on account of
foreign exchange fluctuations on foreign currency loans availed to
finance such assets.
Interest and other financing costs payable on funds borrowed for
acquisition of fixed assets are capitalized to the extent they relate
to the period upto which the assets are put to use.
Machinery spares, other than the spares meant for regular maintenance,
are not considered as part of inventory, as per the Accounting Standard
on Valuation of Inventories (AS-2). Such spares are included under
fixed assets and amortised over the unexpired useful life of the
related machinery/equipment. Accordingly Rs. 1,03,93,910 has been
transferred from Stores inventory to fixed assets during the year.
Till last year, depreciation on Fixed Assets was provided in accordance
with the provisions of Schedule XIV of the Companies Act, 1956, on
Straight-line Method in respect of Buildings and Plant & Machinery
while in respect of other assets depreciation was provided on written
down value method. Effective 1st April, 2001, depreciation is charged
on all assets using straight-line method at the rates specified in
Schedule XIV of the Companies Act, 1956.
Due to this change depreciation for the period is lower by Rs.
a. Raw Materials and Stores & Spares are valued at cost on weighted
average basis. Obsolete, defective and unserviceable stocks are
b. Finished goods and work in progress are valued at lower of cost and
net realisable value. Cost for this purpose includes direct materials,
direct labour and appropriate production overheads. Excise duty is
included in the value of Finished Goods Inventory.
c. Scrap is valued at net realisable value.
6. Retirement Benefits to Employees
The Company is contributing to the funds maintained by the Government
towards Provident Fund and Pension Fund to employees. The Company
contributes to Superannuation Fund maintained by Life Insurance
Corporation of India. Gratuity liability and Earned Leave Encashment
benefit are accounted on accrual basis based on the actuarial valuation
and charged to profit and loss account.
7. Foreign Exchange Transactions
Transactions in foreign currencies outstanding at the Balance Sheet
date are accounted at the contracted rate when covered by forward
contracts and at exchange rates prevailing on the Balance Sheet date in
the case of others. Exchange differences are dealt with in the Profit &
Loss Account, except those relating to acquisition of Fixed Assets
which are capitalized.