(i) Basis of preparation of financial statements
The financial statements are prepared under the historical cost
convention, on the accrual basis of accounting in accordance with the
Generally Accepted Accounting Principles (GAAP) in India and comply
with the accounting standards prescribed by the Companies (Accounting
Standards) Rules, 2006, to the extent applicable, and the
presentational requirements of the Companies Act, 1956.
(ii) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities on the date of the
financial statements and the results of operations during the year.
Differences between actual results and estimates are.recognised in the
year in which the results are known or materialised. Examples of such
estimates are estimated useful life of asset, provision for doubtful
debts, etc. Any revision to accounting estimates is recognised in
accordance with the requirements of the respective accounting standard.
(iii) Revenue recognition
Revenue from sale of machines is recognised as machines are despatched
to the customers which coincides with the transfer of significant risks
and rewards to the customers. The sales are recorded at invoice value,
net of sales tax and returns but including excise duties.
Revenue from installation of machines is recognised on completion of
installation and acknowledgement by the customer.
Revenue from maintenance services is recognised on an accrual basis as
per the terms of agreements with the customers. Service revenues are
recorded net of tax.
(iv) Fixed assets
Fixed assets are stated at cost, net of Cenvat (wherever claimed), less
accumulated depreciation. Cost includes original cost of acquisition
and any incidental expenses related to such acquisition and
(v) Depreciation and amortisation
Depreciation on fixed assets is provided on the straight-line method
over the estimated useful life of assets at rates, which are equal to
or are higher than the rates specified in Schedule XIV to the Companies
Act, 1956. The depreciation rates used by the Company are as follows:
Depreciation on additions is provided on a pro-rata basis from the
month of acquisition/installation. Depreciation on sale/deduction from
fixed assets is provided for upto the date of sale/adjustment, as the
case may be. Modification or extension to an existing asset, which is
of capital nature and which becomes an integral part thereof is
depreciated prospectively over the remaining useful life of that asset.
Intangible assets are amortised under the Straight Line Method over
their estimate useful life of 3 years.
Assets costing upto Rs. 5,000 per unit are fully depreciated in the
year of purchase.
Inventories are valued at lower of cost and net realisable value. The
bases for determination of cost of various categories of inventory are
Raw materials and components : First in First Out (FIFO) basis
Finished goods : Material cost plus an appropriate
share of labour and
manufacturing overheads, wherever
Stores and spares : First in First Out (FIFO) basis
Loose tools : Loose tools are valued at cost
less appropriate allowance
for usage and obsolescence
Work in process : Material cost plus an
appropriate share of labour and
(vii) Impairment of assets
The carrying amounts of assets are reviewed at each balance sheet date
in accordance with Accounting Standard 28 Impairment of Assets, to
determine whether there is any indication of impairment. If any such
indication exists, the assets recoverable amount is estimated. An
impairment loss is recognised whenever the carrying amount of an asset
or its cash generating unit exceeds its recoverable amount. Impairment
losses are recognised in the profit and loss account. An impairment
loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only
to the extent that the assets carrying amount does not exceed the
carrying amount that would have been determined net of depreciation or
amortisation, if no impairment loss had been recognised.
(viii) Foreign currency transactions
The Company accounts for effects of differences in foreign exchange
rates in accordance with Accounting Standard-11 notified by the
Companies (Accounting Standards) Rules, 2006. Transactions in foreign
currency are translated at the rate of exchange prevailing at the
transaction date. Exchange differences arising on settlement during the
year are recognised in the Profit and Loss Account.
Monetary items, denominated in foreign currency, are restated at the
exchange rate prevailing at the year-end and the overall net gain/ loss
is adjusted to the Profit and Loss Account.
Long term investments are valued at cost. Any decline other than
temporary, in the value of long term investments, is adjusted in the
carrying value of such investments. Premium paid on purchase of long
term bonds is amortised over the period of the bonds.
(x) Investment income
Investment income is recognised on accrual basis at the time when the
right to receive income is established. (xi) Research and development
Revenue expenses incurred on research and development is charged off to
the profit and loss account in the year in which these expenses are
incurred. Capital expenditure incurred on research and development is
included in fixed assets and depreciated at applicable rates. (xii)
All employee benefits payable/available within twelve months of
rendering the service are classified as short- term employee benefits.
Benefits such as salaries, wages and bonus etc., are recognised in the
profit and loss account in the period in which the employee renders the
The Companys superannuation scheme is a defined contribution plan. The
Companys contribution paid/payable under the scheme is recognised as
an expense in the profit and loss account during the period in which
the employee renders the related service.
The Companys gratuity scheme is a defined benefit plan. The present
value of the obligation under such defined benefit plan is determined
based on actuarial valuation carried at the year end using the
Projected Unit Credit Method, which recognises each period of service
as giving rise to additional unit of employee benefit entitlement and
measures each unit separately to build up the final obligation. The
obligation is measured at the present value of the estimated future
cash flows. Actuarial gains and losses are recognised immediately in
the profit and loss account.
The Company contributes to a registered trust to cover its liabilities
towards employees gratuity. Liability with respect to the Gratuity
plan determined as above and any differential between the fund amount
as per the trust and the liabilities as per actuarial valuation is
recognised as an asset or liability.
The Companys provident fund scheme is also a defined benefit plan.
Contributions, including shortfall, if any, to recognised trust under
the Companys provident fund scheme are charged to the profit and loss
account on an accrual basis.
Benefits under the Companys long term compensated absences constitute
other employee benefits. The liability in respect of leave encashment
is provided on the basis of an actuarial valuation done by an
independent actuary at the year end. Actuarial gains and losses are
recognised immediately in the Profit and Loss Account.
Termination benefits are recognized as an expense as and when incurred.
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased asset are classified as
operating leases. Operating lease charges are recognised as an expense
in the Profit and Loss Account on a straight line basis. (xiv) Income
Income tax expense comprises current tax/fringe benefit tax (i.e. the
amount of tax for the period determined in accordance with the
income-tax law) and deferred tax charge or credit (reflecting the tax
effects of timing differences between accounting income and taxable
income for the period). The deferred tax charge or credit and the
corresponding deferred tax liabilities or assets are recognised using
the tax rates that have been enacted or substantively enacted by the
Balance Sheet date. Deferred tax assets are recognised only to the
extent there is reasonable certainty that the assets can be realised in
the future. However, where there is unabsorbed depreciation or carry
forward loss under taxation laws, deferred tax assets are recognised
only if there is a virtual certainty of realisation of such assets.
Deferred tax assets are reviewed as at each Balance Sheet date and
written down or written-up to reflect the amount that is
reasonably/virtually certain (as the case may be) to be realised. (xv)
Provisions and contingencies
The Company recognises a provision when there is a present obligation
as a result of a past event and it is more likely than not that there
will be an outflow of resources embodying economic benefits to settle
such obligation and the amount of such obligation can be reliably
estimated. Provisions are not discounted to its present value, and are
determined based on the managements best estimate of the amount of
obligation required at the year end. These are reviewed at each balance
sheet date and adjusted to reflect current management estimates.
Contingent liabilities are disclosed in respect of possible obligations
that have arisen from past events and the existence of which will be
confirmed only by the occurrence or non occurrence of future events not
wholly within the control of the Company.
When there is a possible obligation or a present obligation where the
likelihood of an outflow of resources is remote, no disclosure or
provision is made.
A provision is made for future warranty costs based on managements
estimates of such future costs.