1. BASIS OF ACCOUNTING
The financial statements are prepared and presented under the
historical cost convention, in accordance with Generally Accepted
Accounting Principles in India (GAAP), on the accrual basis of
accounting, except as stated herein. GAAP comprises the mandatory
Accounting Standards (AS) covered by the Companies (Accounting
Standards) Rules, 2006 issued by the Central Government, to the extent
applicable, and the provisions of the Companies Act, I956 and these
have been consistently applied.
2. USE OF ESTIMATES
The preparation of the financial statements in conformity with GAAP
requires that the management make estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of
contingent liability as at the date of financial statements and the
reported amounts of revenue and expenses during the reporting period.
Although such estimates are made on a reasonable and prudent basis
taking into account all available information, actual results could
differ from these estimates and such differences are recognised in the
period in which the results are ascertained.
3. REVENUE RECOGNITION
(i) Revenue from sale of goods is recognised as under :
a. In the case of FOR contracts, when the goods are handed over to the
carrier for transmission to the buyer after prior inspection and
acceptance, if stipulated, and in the case of FOR destination
contracts, if there is a reasonable expectation of the goods reaching
destination within the accounting period. Revenue is recognised even if
goods are retained with the Company at the request of the customer.
b. In the case of ex - works contracts, when the specified goods are
unconditionally appropriated to the contract after prior inspection and
acceptance, if required.
c. In the case of contracts for supply of complex equipments / systems
where the normal cycle time of completion / delivery period is more
than 24 months and the value of the equipment / system is more than Rs.
I00 crores, revenue is recognised on the percentage completion
Percentage completion is based on the ratio of actual costs incurred on
the contract upto the reporting date to the estimated total cost of the
Since the outcome of such a contract can be estimated reliably only on
achieving certain progress, revenue is recognised upto 25% progress
only to the extent of costs. After this stage, revenue is recognised on
proportionate basis and a contingency provision equal to 20% of the
surplus of revenue over costs is made while anticipated losses are
recognised in full.
d. If the sale price is pending finalisation, revenue is recognised on
the basis of price expected to be realised. Where break up prices of
sub units sold are not provided for, the same are estimated.
e. Price revisions and claims for price escalations on contracts are
accounted on admittance.
f. Where installation and commissioning is stipulated and price for
the same agreed separately, revenue relating to installation and
commissioning is recognised on conclusion of installation and
commissioning activity. In case of a composite contract, where separate
fee for installation and commissioning is not stipulated and the supply
is effected and installation and commissioning work is pending, the
estimated costs to be incurred on installation and commissioning
activity is provided for and revenue is recognised as per the contract.
g. Sales exclude Sales Tax / Value Added Tax (VAT) and include Excise
(ii) Other income is recognised on accrual.
4. FIXED ASSETS, CAPITAL WORK - IN - PROGRESS AND INTANGIBLE ASSETS
UNDER DEVELOPMENT :
(i) Tangible Assets :
Tangible Fixed Assets are stated at cost less accumulated depreciation
/ amortisation including where the same is acquired in full or in part
with government grant. Cost for this purpose includes all attributable
costs for bringing the asset to its location and condition, cost of
computer software which is an integral part of the related hardware,
and also includes borrowing costs during the acquisition / construction
phase, if it is a qualifying asset requiring substantial period of time
to get ready for intended use. The cost of Fixed Assets acquired from a
place outside India includes the exchange differences if any, arising
in respect of liabilities in foreign currency incurred for acquisition
of the same upto 3I.03.2007.
Capital work - in - progress comprises supply - cum - erection
contracts, the value of capital supplies received at site and accepted,
capital goods in transit and under inspection and the cost of Fixed
Assets that are not yet ready for their intended use as at the balance
(ii) Intangible Assets :
The cost of software (which is not an integral part of the related
hardware) acquired for internal use and resulting in significant future
economic benefits, is recognised as an Intangible Asset in the books of
accounts when the same is ready for use. Intangible Assets that are not
yet ready for their intended use as at the Balance Sheet date are
classified as Intangible Assets under Development.
(iii) Impairment of Assets :
The Company assesses the impairment of assets with reference to each
Cash Generating Unit (CGU) at each Balance Sheet date if events or
changes in circumstances, based on internal and external factors,
indicate that the carrying value may not be recoverable in full. The
loss on account of impairment, which is the difference between the
carrying amount and recoverable amount, is accounted accordingly.
Recoverable amount of a CGU is its Net Selling Price or Value in Use
whichever is higher. The Value in Use is arrived at on the basis of
estimated future cash flows discounted at Company''s pre - tax
Reversal of impairment provision is made when there is an increase in
the estimated service potential of an asset, either from use or sale,
on reassessment after the date when impairment loss for that asset was
5. DEPRECIATION / AMORTISATION
Tangible depreciable Fixed Assets are generally depreciated on straight
- l ine method at the rates (or higher rates as disclosed) and in the
manner prescribed in Schedule XIV to the Companies Act, I956. Special
instruments are amortised over related production. Intangible Assets
are amortised over a period of three years on straight-line method.
Prorata depreciation / amortisation is charged from / upto the date on
which the assets are ready to be put to use / are deleted or discarded.
Leasehold land is amortised over the period of lease.
6. BORROWING COSTS
Borrowing costs that are specifically attributable to qualifying assets
as defined in Accounting Standard AS 16 are added to the cost of such
assets until use or sale and the balance expensed in the year in which
the same is incurred.
7. RESEARCH & DEVELOPMENT EXPENDITURE
i) Research and Development expenditure (other than on specific
development - cum - sales contracts and R & D projects initiated at
customer''s request), is charged off as expenditure when incurred. R &
D expenditure on development - cum - sale contracts and on R & D
projects initiated at customer''s request are treated at par with
other sales contracts.
ii) Where R & D projects are initiated at customer''s request, and
such projects do not fructify into a customer order, the total
expenditure booked in respect of such projects is charged off in the
year the project is closed.
iii) R & D expenditure on Fixed Assets is capitalised.
8. GOVERNMENT GRANTS
All Grants from Government are initially recognised as Deferred Income.
The amount lying in Deferred Income on account of acquisition of Fixed
Assets is transferred to the credit of Statement of Profit and Loss in
proportion to the depreciation charged on the respective assets to the
extent attributable to Government Grants utilised for the acquisition.
The amount lying in Deferred Income on account of Revenue Expenses is
transferred to the credit of Statement of Profit and Loss to the extent
of expenditure incurred in the ratio of the funding to the total
sanctioned cost, limited to the grant received.
Grants in the nature of promoter''s contribution are credited to
(i) Investments are categorised as Trade Investments or Other
Investments. Trade investments are the investments made to enhance the
Company''s business interests.
(ii) Investments are further classified either as long - term or
current based on the Management''s intention at the time of purchase.
Long term investments are valued at acquisition cost. Any diminution in
the value other than of temporary nature is provided for. Current
investments are carried at lower of cost or fair value.
10. INVENTORY VALUATION
All inventories of the Company other than disposable scrap are valued
at lower of cost or net realisable value. Disposable scrap is valued
at estimated net realisable value. Cost of materials is ascertained by
using the weighted average cost formula. Cost of work in progress and
finished goods include Materials, Direct Labour and appropriate
overheads. Finished goods at factories include applicable excise duty.
Adequate provision is made for inventory which are more than five years
old which may not be required for further use.
11. TRADE RECEIVABLES AND OTHER RECEIVABLES
(i) Full provision is made for all Trade Receivables and Other
Receivables considered doubtful of recovery having regard to the
a. Time barred dues from the government / government departments /
government companies are generally not treated as doubtful.
b. Where dues are disputed in legal proceedings, provision is made if
any decision is given against the Company even if the same is taken up
on appeal to higher authorities / courts.
(ii) Provision for bad and doubtful debts is generally made for debts
outstanding for more than three years, excepting those which are
contractually not due as per the terms of the contract or those which
are considered realisable based on a case to case review.
12. INCOME TAX
Tax expense comprising current tax after considering deferred tax as
determined under the prevailing tax laws are recognised in the
Statement of Profit and Loss for the period.
Certain items of income and expenditure are not considered in tax
returns and financial statements in the same period. The net tax effect
calculated at the current enacted tax rates of this timing difference
is reported as deferred income tax asset / liability. The effect on
deferred tax assets and liabilities due to change in such assets /
liabilities as at the end of the accounting period as compared to the
beginning of the period and due to a change in tax rates are recognised
in the Statement of Profit and Loss for the period.
13. PROVISION FOR WARRANTIES
Provision for expenditure on account of performance guarantee &
replacement / repair of goods sold is made on the basis of trend based
14. FOREIGN CURRENCY TRANSACTIONS
Foreign exchange transactions including that of integral foreign
branches are recorded using the exchange rates prevailing on the dates
of the respective transactions. Monetary assets and liabilities
denominated in foreign currencies as at the balance sheet date are
translated at period-end rates. The resultant exchange difference
arising from settlement of transactions during the period and
translations at the period end, except those upto 3I.03.2007 relating
to acquisition of Fixed Assets from a place outside India, is
recognised in the Statement of Profit and Loss. Exchange differences
relating to the acquisition of Fixed Assets were adjusted in the
carrying cost of the Fixed Assets till 3I.03.2007.
Premium or discount arising at the inception of the forward exchange
contract is amortised as income / expenditure over the life of the
The exchange rate differences on the amount of forward exchange
contracts between the rate on the last reporting date / the rate at the
time of entering into a contract during the period and the rate on the
settlement date are recognised in the Statement of Profit and Loss in
the reporting period in which the exchange rates change. The exchange
differences arising from the rates prevailing at the time of entering
into the contract and the reporting date are also accrued and adjusted
in the Statement of Profit and Loss.
Any profit or loss arising on cancellation or renewal of a forward
exchange contract is recognised as income or as expense in the period
when the cancellation or renewal occurs.
15. EMPLOYEE BENEFITS
(i) All employee benefits payable wholly within twelve months of
rendering the related services are classified as short term employee
benefits and they mainly include (a) Wages & Salaries; (b) Short-term
compensated absences; (c) Profit-sharing, incentives and bonuses and
(d) Non-monetary benefits such as medical care, subsidised transport,
canteen facilities etc., which are valued on undiscounted basis and
recognised during the period in which the related services are
Incremental liability for payment of long term compensated absences
such as Annual and Sick Leave is determined as the difference between
present value of the obligation determined annually on actuarial basis
using Projected Unit Credit method and the carrying value of the
provision contained in the balance sheet and provided for.
(ii) Defined contribution to Employee Pension Scheme is made on monthly
accrual basis at the applicable rates.
(iii) Incremental liability for payment of Gratuity and Employee
Provident fund to employees is determined as the difference between
present value of the obligation determined annually on actuarial basis
using Projected Unit Credit Method and the Fair Value of Plan Assets
funded in an approved trust set up for the purpose for which monthly
contributions are made in the case of provident fund and lump sum
contributions in the case of gratuity.
(iv) Incremental liability under BEL Retired Employees Contributory
Health Scheme (BERECHS) is determined annually on actuarial basis using
Projected Unit Credit Method and provided for.
(v) Actuarial liability for the year is determined with reference to
employees at the end of January of each year.
(vi) Payments of voluntary retirement benefits are charged off to
revenue on incurrence.
16. PRIOR PERIOD ADJUSTMENTS AND EXTRAORDINARY ITEMS
Prior period adjustments and extraordinary items having material impact
on the financial affairs of the Company are disclosed.
17. TECHNICAL KNOW - HOW
Revenue Expenditure incurred on technical know-how is charged off to
Statement of Profit and Loss on incurrence.
18. PROVISIONS AND CONTINGENT LIABILITIES
Provisions for losses and contingencies arising as a result of a past
event where the Management considers it probable that a liability may
be incurred, are made on the basis of the best reliable estimate of the
expenditure required to settle the present obligation on the Balance
Sheet date, and are not discounted to its present value. Provisions
are reviewed at each Balance Sheet date and adjusted to reflect the
current best estimate. Significant variations thereof are disclosed.
Contingent liabilities to the extent the Management is aware, are
disclosed by way of notes to the accounts.
19. CASH FLOW STATEMENT
Cash Flow Statement has been prepared in accordance with the indirect
method prescribed in Accounting Standard - 3 on Cash Flow Statements.