(a) Accounting Concept
The company generally follows the mercantile system of accounting and
recognises revenue on accrual basis, except sale of scrap and
insignificant items/amounts, which are accounted for on cash basis. The
accounts are prepared and presented as a going concern concept in
accordance with Generally Accepted Accounting Principles (GAAP) in
India under historical cost convention and comply in all material
aspects with the Accounting Standards (AS) and the relevant provisions
prescribed in the Companies Act, 1956. The accounting policies not
referred to otherwise are consistent with generally accepted accounting
(b) Use of Estimates
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of the financial statements and reported amount
of revenues and expenses during the reporting period. Although these
estimates are based on the management''s best knowledge of current
events and actions, the actual outcome may be different from the
estimates. Difference between actual results and estimates are
recognised in the period in which the results are known or materialise.
(c) Fixed Assets
Fixed Assets (Tangible and Intangible) are stated at cost of
acquisition inclusive of inward freight, duties, taxes and incidental
expenses related to acquisition and installation. In respect of major
projects involving construction, related pre-operative expenses,
including finance cost on borrowed funds attributable to acquisition of
fixed assets for the period upto the date of commencement of commercial
production is capitalised. In case of revaluation, acquisition cost is
replaced with revalued figures.
(d) Impairment of Assets
Loss / gain on impairment of assets is recognised in accounts after
reviewing net selling price / value in use and net carrying amount of
individual assets ( if independently generating cash flow) and cash
generating units at each Balance Sheet date.
(e) Classification of Assets and Liabilities as Current and Non-Current
All assets and liabilities are classified as current or non-current as
per the Company''s normal operating cycle and other criteria set out in
Schedule VI to the Companies Act, 1956. Based on the nature of products
and the time between acquisition of assets for processing and their
realisation in cash and cash equivalents, 12 months has been considered
by the company for the purpose of current - non-current classification
of assets and liabilities.
Investments are classified as current and non-current. Current
investments are those investments which are readily realisable, and are
intended to be held for not more than one year from the date of
investment. All other investments are classified as long- term
Current investments are stated at lower of cost and fair value
Long term investments are stated at cost less permanent diminution in
value of such investments.
Depreciation on fixed assets is provided under straight line method at
the rates and in the manner prescribed under the Companies Act,1956.
Assets acquired / disposed off during the year are depreciated with
reference to the month of addition / disposal. Assets under
construction / installation are not depreciated. Assets used during
construction of the project are depreciated and such depreciation forms
part of the pre-operative cost. Annual depreciation on written up value
due to revaluation of assets is charged to revaluation reserve account
proportionately to the extent of balance held in the account.
(h) Retirement Benefits
The company is not covered by Employee''s Provident Fund Act and there
is no scheme of Provident fund in vogue. Liability for gratuity is
provided on actual basis, computed on the tenure of the service of the
eligible employees as at the end of the year, in terms of paragraph 52
of Accounting Standard - 15 ( Revised) issued by The Institute of
Chartered Accountants of India, in view of few numbers of employees
eligible for gratuity at present.
Raw materials are valued at lower of yearly weighted average cost
(including related acquisition cost) or market prices. Cost of
interdivisional transfer of goods has been taken as per policy
enumerated in paragraph (l) below. Stock of such material, and
consequential finished goods at balance sheet date, are valued taking
the said transfer price and any unrealised profit on such transaction
is eliminated while valuing the stock.
Rejects, Middling, Slurry are valued at estimated realisable value.
Other finished goods are valued at lower of weighted average cost or
market / estimated realisable value. Cost includes material cost,
labour and appropriate systematic allocation of fixed and variable
production overheads on actual basis, based on estimated production
facilities used by different divisions.
Stock in transit, spares and stores etc. are valued at actual cost of
purchase including related expenses. Scrap, being not material in
amount, is not accounted for.
(j) Proposed Dividend
Dividend as proposed by the directors is provided in the books of
account, pending approval at the Annual General Meeting.
(k) Foreign Exchange Transactions
Foreign exchange transactions are accounted for at the exchange rates
prevailing on the date of transaction. Monatory items denominated in
foreign currency are restated at the exchange rate prevailing at the
Balance sheet date. In case of transactions covered by forward
contract, they are restated at that rate and premium, if any, is
allocated over the tenure of credit.
(l) Inter-Division transfer
Inter-divisional transfer of goods as independent marketable products
of separate divisions for captive consumption are assigned value at
lower of cost of production (wherever feasible) and estimated net
realizable value. This accounting treatment has no impact on the profit
of the company. Such transactions are neither included in turnover nor
in consumption of materials, except for valuation purposes.
Sales are inclusive of all taxes, except VAT & CST, less returns. In
respect of service tax the same is not included in turnover if
collected over and above the agreed charges.
Purchases are accounted for net of MODVAT / CENVAT/VAT/ Set off of
taxes as applicable.
(o) Borrowing Costs
Borrowing costs that are attributable to the acquisition, construction
or production of a qualifying asset are capitalised. Other borrowing
costs are expensed out.
(p) MODVAT / CENVAT/VAT/Set off of taxes
Any set off / credit of taxes is adjusted against purchase cost of that
item / goods if relates to current year. Adjustment of prior year is
accounted for in profit & loss account separately.
(q) Contingent Liabilities & Commitments
Contingent liabilities and commitments are not provided for and are
disclosed in notes attached to the accounts.
(r) Taxes on Income
Current income tax is determined in accordance with the provisions of
the Income Tax Act, 1961, as the amount of tax payable to the taxation
authorities in respect of taxable income for the year.
Deferred tax is accounted for under the liability method, subject to
the consideration of prudence for deferred tax assets, at the current
rate of tax, on timing differences being the difference between taxable
income and accounting income that originate in one period and are
capable of reversal in one or more subsequent periods.
Deferred tax assets and liabilities are offset if they are governed by
same taxing laws.