a) Basis of Accounting:
The financial statements have been prepared and presented on going
concern basis and on accrual basis of accounting under the historical
cost convention and comply with the accounting standards referred to in
Sub-Section (3C) of Section 211 of the Companies Act, 1956.
b) Fixed assets and depreciation:
i) Fixed assets are stated at cost of acquisition or construction,
including any cost attributable for bringing the asset to its working
condition for its intended use.
ii) The Company provides depreciation on Factory Building, Workshop
Machinery and Assets given on lease, on straight line basis, and on
other fixed assets on the written down value basis. The rates of
depreciation prescribed in Schedule XIV to the Companies Act, 1956 are
considered as the minimum rates. If managements estimate of the useful
life of the fixed asset is shorter than that envisaged in Schedule XIV,
depreciation is provided at a higher rate based on managements
estimate of the useful life. Pursuant to the policy, depreciation on
Assets given on lease is provided on a straight line basis over their
estimated useful life of 4 years.
Goodwill and Designs and Drawings are amortised on a straight line
basis over their estimated useful life of 10 years.
Leasehold land is amortised over the period of the lease of 95 years.
Investments that are readily realisable and intended to be held for not
more than one yearfrom the date on which such investment is made are
classified as current investments. Current investments are carried at
lower of cost and fair value. Cost includes related expenses such as
commission, fees and duties. .
Inventories include stores and spares, raw materials, bought out and
manufacured components, work in progress and manufactured and traded
finished goods. Inventories are valued at cost or net realisable value,
whichever is lower. Cost is arrived at on the weighted average basis
and includes, where appropriate, labour, manufacturing overheads and
e) Foreign currency transactions:
Foreign currency transactions are recorded in the books of the Company
at standard exchange rates fixed on the basis of a review of the actual
exchange rates. The difference between the actual rate of settlement
and the standard rate is charged or credited to the Profit and Loss
The premium or the discount arising at the inception of forward
exchange contracts related to underlying receivables and payables are
amortised as expense or income over the period of the contracts. With
respect to forward exchange contracts, entered into against highly
probable future transactions or firm commitments, mark to market loss,
if any, is recognised as at the Balance sheet date in view of the
principle of prudence enunciated in AS-1.
Foreign currency monetary assets and monetary liabilities outstanding
at year-end are translated at the year end exchange rate and the
unrealised exchange gain or loss is recognised in the Profit and Loss
f) Revenue recognition:
Revenue from sale of products is recognised on transfer of all
significant risks and rewardsof ownership to the buyer.
Income from services is recognised when the services are rendered.
Indent commission income is recognised based on terms of arrangements
Dividend income is recognised when the right to receive dividend is
unconditional at the Balance Sheet date.
Interest is recognised using the time proportion method basis.
Revenues from rental of equipment are recognized on a straight line
basis over the lease period.
Accounting of Construction Contracts: Revenue for fixed price
construction contracts is recognised on percentage of completion
method. The stage of completion is determined with reference to the
costs incurred on the contracts and their estimated total costs
ascertained based on technical and other estimates. Provisions
forforeseeable loss on contracts in progress are made fully. Amounts
due from customers for contract work is the net of the amount of:
a) Cost incurred plus recognised profits; less
b) The sum of recognized losses and progress billings, for all
contracts in progress for which cost incurred plus recognized profits
(less recognized losses) exceed progress billings.
Amounts due to customers for contract work is the net of the amount of:
a) The sum of recognized losses and progress billings; less
b) cost incurred plus recognized profits, for all contracts in progress
for which progress billings exceed costs incurred plus recognized
profits (less recognized losses)
g) Employee benefits:
Post employment benefits (defined benefit/contribution plans)
The employees gratuity scheme is a defined benefit plan. The Company
has taken Group Gratuity Policies with the Life Insurance Corporation
of India (IIC) forfuture payment of gratuities. The present value of
the obligation under such defined benefit plan is determined during the
year based on an actuarial valuation carried out by an independent
actuary using the projected unit credit method. Actuarial gains and
losses and past service costs are recognised immediately in the Profit
and Loss Account.
Contributions to Provident Fund are accrued as per the provisions of
the Employees Provident Funds and Miscellaneous Provisions Act, 1952
and charged to the Profit and Loss Account. The Company pays
contribution to a Government Provident Fund in respect of the Nashik
and Hyderabad units. As regards, the Pune unit, the contributions are
made to a Recognized Fund. The guidance on implementing AS 15,
Employee Benefits (Revised 2005) issued by the Accounting Standards
Board (ASB) states that provident funds set up by the employers,
which requires interest shortfall to be met by the employer, needs to
be treated as defined benefit plan. Pending the issuance of the
guidance note from the Actuarial Society of India, the Companys
actuary has expressed his inability to reliably measure the provident
fund liability. Accordingly, the Company is unable to exhibit the
Contributions to the provident fund and Superannuation Fund which are
defined contribution schemes, are recognised as an . expense in the
Profit and Loss Account in the period in which the contribution is due.
Long term employee benefits
Long term employee benefits comprise compensated absences / leave
encashment. These are measured based on an actuarial valuation carried
out by an independent actuary using the projected unit method during
the year. Actuarial gains and losses and past service costs are
recognised immediately in the Profit and Loss Account.
Tax expense for the year (current tax and deferred tax) is included in
the determination of the net profit for the year.
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognized using the tax rates that have been
enacted or substantially enacted by the Balance Sheet date.
Leases under which the Company assumes substantially all the risks and
rewards of ownership are classified as Finance Lease. Such assets are
capitalised at the fair value of assets or present value of the minimum
lease payments at the inception of the lease whichever is lower.
Lease payments under operating leases are recognized as an expense in
the statement of Profit and Loss. j) Warranty:
Provision for warranty is made based on past experience.
A provision is recognised when there is a present 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 a
reliable estimate can be made. These are reviewed at each Balance Sheet
date and adjusted to reflect the current best estimate.