1.01 System of Accounting:
(a) In compliance with the accounting standards referred to in Section
211(3C) and the other relevant provisions of the Companies Act, 1956 to
the extent applicable, the Company follows the accrual system of
accounting in general and the historical cost convention in accordance
with the Generally Accepted Accounting Principles [GAAP],
(b) The preparation of accounting statements in conformity with GAAP
requires the management to make assumption and estimates that affect
the reported amounts of assets and liabilities and disclosure of
contingent liabilities as at the date of the financial statement and
the amounts of income and expenses during the period reported under the
financial statements. Any revision to the accounting estimates are
recognised prospectively when revised.
(c) All the assets and liabilities have been classified as current or
non-current as per the Company''s normal operating cycle and other
criteria set out in the Schedule VI to the Companies Act, 1956.
1.02 Revenue Recognition
(a) Revenue from sale of products are recognised on transfer of all
significant risk and rewards of ownership of the product on to the
customers, which is generally on despatch of goods.
(b) Revenue from Construction Contracts is recognised based on the
stage of completion determined with reference to the costs incurred on
contracts and the estimated total costs. When it is estimated that the
total contract cost will exceed total contract revenue, expected loss
is recognised as an expense immediately. Total contract cost is
determined based on the technical and other assessment of cost to be
(c) Sales are stated exclusive of Value Added Tax/Sales Tax, Returns
and Discounts for the year.
(d) Service income is recognised, net of service tax, when the related
services are provided.
(e) Dividend income is recognised on establishment of the right to
receive the same.
(f) Interest income is recognised on the time proportion basis.
(g) Insurance and other claims are accounted as and when
unconditionally admitted by the appropriate authorities.
(h) Eligible export incentives are recognised in the year of export.
1.03 Fixed Assets and Depreciation:
Fixed assets are stated at historical cost net of Cenvat, other setoffs
and accumulated depreciation.
Depreciation is provided on straight line basis at the rates and in the
manner prescribed in Schedule XIV to the Companies'' Act, 1956.
Leasehold land is stated at historical cost less amounts written off
proportionate to expired lease period.
Spares of the nature of capital spares/insurance spares are added to
the cost of the assets. The total cost of such spares is depreciated
over a period not exceeding the useful life of the fixed asset to which
1.04 Intangible Assets:
(a) Expenditure on technical know-how is amortised over the lower of
the contract period and the period as per Accounting Standard (AS) 26 -
(b) Expenditure on application software is amortised over a period of
Long term investments are carried at cost of acquisition. Provision for
diminution in value of investments is made to recognise a decline,
other than temporary, in the value of Long term investments. Current
investments are carried at lower of cost and fair value.
Inventories include raw materials and components, packing materials,
stores, spare parts, work-in-progress and manufactured and traded
Cost of inventories comprises of all costs of purchase, costs of
conversion and other costs incurred in bringing the inventories to
their present location and condition.
Raw materials and components, packing materials, stores, spare parts
and traded finished goods are valued at the lower of cost and net
realisable value. Cost is determined on the basis of weighted average
Work-in-progress and manufactured finished goods are valued at the
lower of cost and net realisable value.
Materials in transit and materials in bonded warehouse are valued at
Excise duty is included in the value of finished goods inventory and
Custom duty is provided on the materials lying in bonded warehouse.
1.07 Foreign Currency Transactions:
(i) Foreign currency transactions are accounted for at the exchange
rates prevailing at the date of the transaction. Gains and losses
resulting from the settlement of such transactions and from the
translation of monetary assets and liabilities denominated in foreign
currencies are recognised in the Statement of Profit and Loss.
(ii) In case of transactions covered by forward exchange contracts,
which are not intended for trading or speculation purposes, premium on
discounts are amortised as expense or income over the life of the
forward contract. Exchange difference on such forward contracts are
recognised in the Statement of Profit and Loss in the year in which
exchange rate changes. Profit or Loss arising on cancellation or
renewal of such forward contracts are recognised as income or expense
for that year.
1.08 Employee Benefits:
A. Short Term Employee Benefits are recognised as an expense at the
undiscounted amount in the Statement of Profit and Loss of the year in
which the related service is rendered.
B. Retirement Benefits:
(a) Retirement benefits in the form of Provident Fund/Family Pension
Fund and Superannuation Fund, which are Defined Contribution Plans, are
accounted on accrual basis and charged to the Statement of Profit and
Loss of the year.
(b) Retirement benefits in the form of Gratuity which is a defined
benefit plan and the long term employee benefit in the form of Leave
Encashment, are determined and accrued on the basis of an independent
actuarial valuation applying the Projected Unit Credit Method.
(c) The actuarial gains/losses arising during the year are recognised
in the Statement of Profit and Loss of the year.
1.09 Borrowing Costs:
Borrowing costs that are attributable to the acquisition, construction
or production of qualifying assets are capitalised as part of the cost
of such assets. All other borrowing costs are recognised as an expense
in the period in which they are incurred.
Current Tax is determined at the amount of tax payable at the
applicable tax rate in respect of the estimated taxable income for the
Deferred Tax is determined using the tax rates and tax laws that have
been enacted or substantively enacted by the Balance Sheet date.
Deferred Tax Assets are recognised and carried forward only if there is
reasonable certainty of its realisation. However in case of carried
forward losses and unabsorbed depreciation under the Income Tax Act,
1961, the Deferred Tax Asset is recognised if and only if there is a
virtual certainty backed by convincing evidence of its realisation.
Such assets are reviewed at each Balance Sheet date to reassess its
Minimum Alternative Tax (MAT) Credit is recognised as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period. Such asset is
reviewed at each Balance Sheet date and the carrying amount of the MAT
credit/asset is written down to the extent there is no longer a
convincing evidence to the effect that the Company will pay normal tax
during the specified period.
For premises/vehicles, taken/given on lease, lease rentals
payable/receivable are charged/credited to the revenue.
1.12 Impairment of Assets:
(a) The carrying amount of assets, other than inventories is reviewed
at each balance sheet date to assess whether there is any indication of
impairment in respect of such asset or group of assets (cash generating
unit). If such indication exists, the recoverable amount of such asset
or group of assets is estimated.
(b) If such recoverable amount of the asset or the group of assets is
less than its carrying amount, an impairment loss is reckoned by
reducing the carrying amount to its recoverable amount. If there is an
indication at the balance sheet date that a previously assessed
impairment loss no longer exists, the recoverable amount is reassessed
and the asset is reflected at the recoverable amount, subject to a
maximum of depreciable historical cost.
1.13 Provisions, Contingent Liabilities and Contingent Assets:
The Company recognises a provision when there is a present obligation
as a result of a past event on which it is probable that there will be
outflow of resources to settle the obligation in respect of which
reliable estimates can be made.