(a) Basis of accounting and preparation of financial statements
The financial statements are prepared under the historical cost
convention, on the accrual basis of accounting to comply in all
material aspects with the applicable accounting principles in India,
the mandatory Accounting Standards (''AS'') prescribed by the Companies
(Accounting Standard) Rules, 2006, the relevant provisions of the
Companies Act, 1956 (''the Act'') and the guidelines issued by the
Securities and Exchange Board of India (''SEBI'').
(b) Use of estimates
The preparation of the financial statements, in conformity with
generally accepted accounting principles in India, requires that the
Management makes estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent liabilities
as at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could
differ from those estimates. Any revision to accounting estimates is
recognised prospectively in current and future periods.
(c) Fixed assets
Tangible assets are stated at their cost of acquisition or construction
less accumulated depreciation. Cost includes inward freight, duties,
taxes and expenses incidental to acquisition and installation or
construction, net of CENVAT and VAT credit, where applicable.
The cost of the fixed assets not ready for their intended use before
such date, are disclosed as capital work-in- progress.
Intangible assets are stated at cost of acquisition less accumulated
(d) Depreciation and amortisation
Depreciation in respect of all the assets is provided on straight line
method. The rates of depreciation prescribed in Schedule XIV to the Act
are considered as minimum rates. If the Management''s estimate of the
useful life of a fixed asset at the time of the acquisition of the
asset or of the remaining useful life on a subsequent review is shorter
than envisaged in the aforesaid schedule, depreciation is provided at a
higher rate based on the Management''s estimate of the useful life /
remaining useful life.
Vehicles acquired on finance lease are depreciated over a period of 5
With effect from 1 April 2010, the Management has revised the estimated
useful life for computers (part of office equipments) to four years
(from six years used earlier), based on a review of useful life of such
Computer softwares are fully depreciated over a period of six years,
based on the review of useful life of such assets.
Assets costing individually upto Rs. 5,000/- are fully depreciated in the
year of addition.
Leasehold land is amortised over the period of primary lease.
(e) Impairment of assets
The Company assesses at each balance sheet date whether there is any
indication that an asset, including intangible, may be impaired. If any
such indication exists, the Company estimates the recoverable amount of
the asset. If such recoverable amount of the asset or the recoverable
amount of the cash generating unit to which the asset belongs is less
than its carrying amount, the carrying amount is reduced to its
recoverable amount. The reduction is treated as an impairment loss and
is recognised in the statement of profit and loss. If at the balance
sheet date there is an indication that if 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. An impairment loss is reversed
only to the extent that the carrying amount of asset does not exceed
the net book value that would have been determined, if no impairment
loss had been recognised.
Assets acquired under lease where the Company has substantially all the
risks and rewards of ownership are classified as finance lease. Such
leases are capitalised at the inception of lease at lower of the fair
value and present value of minimum lease payments. Assets taken on
finance lease are depreciated over their estimated useful life or the
lease term whichever is lower.
Assets acquired under lease where the significant portion of risks and
rewards of ownership are retained by the lessor are classified as
operating lease. Lease rentals are charged to the statement of profit
and loss on accrual basis.
Inventories are valued at the lower of cost (including prime cost,
excise duty and other overheads incurred in bringing the inventories to
their present location and condition) and estimated net realisable
value, after providing for obsolescence, where appropriate. The
comparison of cost and net realisable value is made on an item-by-item
basis. The net realisable value of materials in process is determined
with reference to the selling prices of related finished goods. Raw
materials, packing materials and other supplies held for use in
production of inventories are not written down below cost except in
cases where material prices have declined, and it is estimated that the
cost of the finished products will exceed their net realisable value.
The provision for inventory obsolescence is assessed regularly based on
estimated usage and shelf life of products.
Raw materials, packing materials and stores and spares are valued at
cost computed on monthly moving weighted average basis. The cost
includes purchase price, inward freight and other incidental expenses
net of CENVAT and VAT credit, where applicable.
Work-in-progress is valued at input material cost plus conversion cost
Finished goods are valued at lower of net realisable value and prime
cost, excise duty and other overheads incurred in bringing the
inventories to their present location and condition.
(h) Trade receivables and loans and advances
Trade receivables and loans and advances are stated after making
adequate provision for doubtful receivables and loans and advances.
Long-term investments are stated at cost. A provision for diminution is
made to recognise a decline, other than temporary, in the value of
Current investments are stated at lower of cost and fair value for each
(j) Revenue recognition
Revenue from sale of goods and sale of scrap is recognised on transfer
of all significant risks and rewards of ownership to the buyer. The
amount recognised as sale is exclusive of sales tax and net of trade
discounts and sales returns. Sales are presented both gross and net of
Income from royalty is accounted based on contractual agreements.
Dividend income is accounted for in the year in which the right to
receive the same is established.
Interest on investments is booked on a time-proportion basis taking
into account the amounts invested and the rate of interest.
(k) Foreign currency transactions
Transactions in foreign currency are recorded at exchange rates
prevailing on the respective dates of the relevant transactions.
Monetary assets and liabilities denominated in foreign currency are
restated at the exchange rates prevailing at the balance sheet date.
The gains or losses resulting from such transactions are adjusted to
the statement of profit and loss. Non-monetary assets and non-monetary
liabilities denominated in foreign currency and measured at fair value
/ net realisable value are translated at the exchange rate prevalent at
the date when the fair value / net realisable value was determined.
Non-monetary assets and non-monetary liabilities denominated in foreign
currency and measured at historical cost are translated at the exchange
rate prevalent on the date of transaction.
The Company uses foreign exchange forward contracts to cover its
exposure towards movements in foreign exchange rates. The use of
foreign exchange forward contracts reduces the risk of fluctuations in
exchange movements for the Company. The Company does not use the
foreign exchange forward contract for trading or speculative purposes.
Premium or discount arising at the inception of the forward contracts
against the underlying assets is amortised as expense or income over
the life of the contract. Exchange differences on forward contracts are
recognised in the statement of profit and loss in the reporting period
in which the exchange rates change.
(l) Derivative contracts
Based on the principle of prudence as provided in Accounting Standard 1
- Disclosure of Accounting Policies, the Company assesses losses, if
any, by marking to market all its outstanding derivative contracts
[other than those accounted under Accounting Standard 11 - Effects of
Changes in Foreign Exchange Rates (Refer point (k) above)] at the
balance sheet date and provides for such losses. The net gain, if any,
based on the said evaluation is not accounted for in line with the ICAI
notification issued in March 2008 in relation to such transactions.
(m) Taxes on income
Income-tax expense comprises current tax (i.e. amount of tax for the
year determined in accordance with the Income-tax laws) and deferred
tax charge or credit (reflecting the tax effects of timing differences
between accounting income and taxable income for the year). Deferred
tax in respect of timing differences which originate during the tax
holiday period but reverse after the tax holiday period is recognised
in the year in which the timing differences originate. For this purpose
the timing differences, which originate first are considered to reverse
first. 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 where there
is reasonable certainty that the assets can be realised in future;
however, where there is unabsorbed depreciation or carried forward
business loss under taxation laws, deferred tax assets are recognised
only if there is a virtual certainty of realisation of such assets.
Deferred tax assets / liabilities 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.
The Company offsets, the current tax assets and liabilities (on a year
on year basis) and deferred tax assets and liabilities, where it has a
legally enforceable right and where it intends to settle such assets
and liabilities on a net basis.
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. In the year in
which the MAT credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in the guidance note
issued by Institute of Chartered Accountants of India (''ICAI''), the
said asset is created by way of a credit to the statement of profit and
loss. The Company reviews the same at each balance sheet date and
writes down the carrying amount of MAT credit entitlement to the extent
there is no longer convincing evidence to the effect that Company will
pay normal income-tax during the specified period.
(n) Employee benefits
(i) Short-term employee benefits
All employee benefits falling due wholly within twelve months of
rendering the services are classified as short-term employee benefits,
which include benefits like salaries, wages, short-term compensated
absences and performance incentives and are recognised as expenses in
the period in which the employee renders the related service.
(ii) Post-employment benefits
Contributions to defined contribution schemes such as Provident Fund,
Pension Fund, etc., are recognised as expenses in the period in which
the employee renders the related service. In respect of certain
employees, Provident Fund contributions are made to a Trust
administered by the Company. The interest rate payable to the members
of the Trust shall not be lower than the statutory rate of interest
declared by the Central Government under the Employees'' Provident Funds
and Miscellaneous Provisions Act, 1952 and shortfall, if any, shall be
made good by the Company. In respect of contributions made to
government administered Provident Fund, the Company has no further
obligations beyond its monthly contributions. The Company also provides
for post-employment defined benefit in the form of gratuity and medical
benefits. The cost of providing benefit is determined using the
projected unit credit method, with actuarial valuation being carried
out at each balance sheet date.
The Britannia Industries Limited Covenanted Staff Pension Fund Trust
(''BILCSPF'') and Britannia Industries Limited Officers'' Pension Fund
Trust (''BILOPF'') were established by the Company to administer pension
schemes for its employees. These trusts are managed by the Trustees.
The Pension Scheme is applicable to all the managers and officers of
the Company who have been employed up to the date of 15 September 2005
and any manager or officer employed after that date, if he has opted
for the membership of the Scheme. The Company makes a contribution of
15% of salary in respect of the members, each month to the trusts. On
retirement, subject to the vesting conditions as per the rules of the
trust, the member becomes eligible for pension, which is paid from
annuity purchased in the name of the member by the trusts.
(iii) Other long-term employee benefits
All employee benefits (other than post-employment benefits and
termination benefits) which do not fall due wholly within twelve months
after the end of the period in which the employees render the related
services are determined based on actuarial valuation carried out at
each balance sheet date. Provision for long-term compensated absences
is based on actuarial valuation carried out as at 1st January every
(iv) Voluntary retirement scheme benefits
Voluntary retirement scheme benefits are recognised as an expense in
the year they are incurred.
(o) Employee share based payments
The Company measures compensation cost relating to employee stock
options using the intrinsic value method. Compensation expense, if
any, is amortised over the vesting period of the option on a straight
(p) Provisions and contingent liabilities
A provision is recognised when the Company has a present obligation as
a result of past events, for which it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made. Provisions are reviewed
regularly and are adjusted where necessary to reflect the current best
estimate of the obligation. When the Company expects a provision to be
reimbursed, the reimbursement is recognised as a separate asset only
when reimbursement is virtually certain.
A disclosure for contingent liabilities is made where there is a
possible obligation or a present obligation that may probably not
require an outflow of resources. When there is a possible or a present
obligation where the likelihood of outflow of resources is remote, no
provision or disclosure is made.
Provision for onerous contracts, i.e. contracts where the expected
unavoidable cost of meeting the obligations under the contract exceed
the economic benefits expected to be received under it, are recognised
when it is probable that an outflow of resources embodying economic
benefits will be required to settle a present obligation as a result of
an obligating event based on a reliable estimate of such obligation.
(q) Earnings per share
Basic Earnings Per Share (''EPS'') is computed by dividing the net profit
attributable to the equity shareholders by the weighted average number
of equity shares outstanding during the year. Diluted earnings per
share is computed by dividing the net profit after tax by the weighted
average number of equity shares considered for deriving basic earnings
per share and also the weighted average number of equity shares that
could have been issued upon conversion of all dilutive potential equity
shares. Dilutive potential equity shares are deemed converted as of the
beginning of the year, unless issued at a later date. In computing
diluted earnings per share, only potential equity shares that are
dilutive and that either reduces earnings per share or increases loss
per share are included. The number of shares and potentially dilutive
equity shares are adjusted retrospectively for all periods presented
for the share splits.
(r) Cash flow statement
Cash flows are reported using indirect method, whereby net profits
before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from regular revenue generating, investing and
financing activities of the Company are segregated.
(s) Borrowing costs
Borrowing costs directly attributable to acquisition or construction of
those fixed assets which necessarily take a substantial period of time
to get ready for their intended use are capitalised. Other borrowing
costs are accounted as an expense in the statement of profit and loss.