1 Basis of Accounting :
The financial statements are prepared under the historical cost
convention on the Accrual Concept of accountancy in accordance with
the accounting principles generally accepted in India and they comply
with the Accounting Standards prescribed in the Companies [ Accounting
Standards ] Rules, 2006 issued by the Central Government to the extent
applicable and with the applicable provisions of the Companies Act,
1956.
2 Use of Estimates :
The preparation of Financial Statements in conformity with the
Accounting Standards generally accepted in India requires, the
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
liabilities as at the date of the financial statements and reported
amounts of revenues and expenses for the year. Actual results could
differ from these estimates. Any revision to accounting estimates is
recognised prospectively in current and future periods.
3 Fixed Assets and Depreciation :
A Fixed Assets are stated at historical cost of acquisition /
construction less accumulated depreciation and impairment loss. Cost [
Net of Input tax credit received / receivable ] includes related
expenditure and pre-operative & project expenses for the period up to
completion of construction / assets are put to use. The loss or gain on
exchange rates on long term foreign currency loans attributable to
fixed assets, effective from April 1, 2007 is adjusted to the cost of
respective fixed assets.
B Depreciation is provided on straight line method as per Section 205
(2) (b) of the Companies Act, 1956 at the rates prescribed in Schedule
XIV thereto.
C Depreciation on impaired assets is calculated on its residual value,
if any, on a systematic basis over its remaining useful life.
D Leasehold land is amortized over the period of the lease.
E Trade Marks, Technical Know-how Fees and other similar rights are
amortised over their estimated economic life of ten years.
F Capitalised costs incurred towards purchase / development of software
are amortised using straight line method over its useful life of four
years as estimated by the management.
G Depreciation on additions / disposals of the fixed assets during the
year is provided on pro-rata basis according to the period during which
assets are put to use.
H Where the actual cost of purchase of an asset is below Rs. 10,000/-,
the depreciation is provided @ 100 %.
4 Impairment of Assets :
The Company, at each balance sheet date, assesses whether there is any
indication of impairment of any asset and / or cash generating unit. If
such indication exists, assets are impaired by comparing carrying
amount of each asset and / or cash generating unit to the recoverable
amount being higher of the net selling price or value in use. Value in
use is determined from the present value of the estimated future cash
flows from the continuing use of the assets.
5 Borrowing Costs :
A Borrowing costs that are directly attributable to the acquisition /
constructions of a qualifying asset are capitalised as part of the
cost of such assets, up to the date, the assets are ready for their
intended use. B Other Borrowing costs are recognised as an expense in
the period in which they are incurred. C Borrowing Costs also include
Exchange differences arising from Foreign Currency borrowings to the
extent that they are regarded
as an adjustment to interest costs.
6 Expenditure during the Construction Period :
The expenditure incidental to the expansion / new projects are
allocated to Fixed Assets in the year of commencement of the commercial
production.
7 Investments :
A Long term and strategic investments are stated at cost, less any
diminution in the value other than temporary. B Current investments,
if any, are stated at lower of cost and fair value determined on
individual investment basis. C Investments in shares of foreign
subsidiary and other Companies are expressed in Indian Currency at the
rates of exchange prevailing at the time when the original investments
were made.
8 Inventories :
A Raw Materials, Stores & Spare Parts, Packing Materials, Finished
Goods and Works-in-Progress are valued at lower of cost and net
realisable value. B Cost [ Net of Input tax credit availed ] of Raw
Materials, Stores & Spare Parts, Packing Materials & Finished Goods is
determined
on Moving Average Method. C Cost of Finished Goods and
Works-in-Progress is determined by taking material cost [ net of Input
tax credit availed ], labour and
relevant appropriate overheads.
9 Revenue Recognition :
A Revenue from Sale of goods is recognised when significant risks and
rewards of ownership of the goods have been passed to the buyer. B
Service income is recognised as per the terms of contracts with the
customers when the related services are performed or the
agreed milestones are achieved and are net of service tax wherever
applicable. C Dividend income is recognised when the unconditional
right to receive the income is established. D Interest income is
recognised on time proportionate method. E Revenue in respect of other
income is recognised when no significant uncertainty as to its
determination or realisation exists.
10 Foreign Currency Transactions :
A The transactions in foreign currencies on revenue accounts are stated
at the rates of exchange prevailing on the dates of transactions. B
The net gain or loss on account of exchange differences either on
settlement or on translation of short term monetary items is recognised
in the Profit and Loss Account. C The net gain or loss on account of
exchange differences either on settlement or on translation of long
term monetary items including long term forward contracts is recognised
under Foreign Currency Monetary Items Translation Difference Account
[ FCMITDA ], except in case of foreign currency loans taken for funding
of fixed assets, where such difference is adjusted to the cost of
respective fixed assets. The FCMITDA is amortised during the tenure of
loans but not beyond March 31, 2011. D Investments in foreign
subsidiaries are recorded in Indian Currency at the rates of exchange
prevailing at the time when the investments were made. E The foreign
currency assets and liabilities including forward contracts are
restated at the prevailing exchange rates at the year end.
The premium in respect of forward contracts is accounted over the
period of the contract.
11 Derivative Instruments and Hedge Accounting :
The Company is exposed to foreign currency fluctuations on foreign
currency assets, liabilities and forecasted cash flows denominated in
foreign currency. The Company limits the effects of foreign exchange
rates fluctuations by following established risk management policies,
including use of derivatives. The company enters into forward, options
& swap contracts where the counter parties are banks. Accordingly,
losses in respect of all outstanding derivatives, contracts, other than
options & swap contracts, at the year end by marking them to market are
provided. However, out of prudence, the net gain, if any, on all such
outstanding options & swap contracts is not accounted for.
12 Research and Development Cost :
A Expenditure on research and development is charged to the Profit and
Loss Account of the year in which it is incurred. B Capital
expenditure on research and development is given the same treatment as
Fixed Assets.
13 Excise Duty :
Excise Duty is accounted gross of Cenvat benefit availed on inputs,
fixed assets and eligible services.
14 Retirement Benefits :
A Defined Contribution Plans :
The Company contributes on a defined contribution basis to Employees
Provident Fund towards post employment benefits, all of which are
administered by the respective Government authorities, and has no
further obligation beyond making its contribution, which is expensed in
the year to which it pertains.
B Defined Benefit Plans :
The gratuity scheme is administered through the Life Insurance
Corporation of India [ LIC ]. The liability for the defined benefit
plan of Gratuity is determined on the basis of an actuarial valuation
by an independent actuary at the year end, which is calculated using
projected unit credit method.
Actuarial gains and losses which comprise experience adjustment and the
effect of changes in actuarial assumptions are recognised in the Profit
and Loss Account.
C Leave Liability :
The leave encashment scheme is administered through Life Insurance
Corporation of Indias Employees Group Leave Encashment cum Life
Assurance [ Cash Accumulation ] Scheme. The employees of the company
are entitled to leave as per the leave policy of the company. The
liability on account of accumulated leave as on last day of the
accounting year is recognised [ net of the fair value of plan asset as
at the balance sheet date ] at present value of the defined obligation
at the balance sheet date based on the actuarial valuation carried out
by an independent actuary using projected unit credit method.
15 Employee Seperation Costs :
The compensation paid to the employees under Voluntary Retirement
Scheme is expensed in the year of payment.
16 Provision for Bad and Doubtful Debts / Advances :
Provision is made in accounts for bad and doubtful debts / advances
which in the opinion of the management are considered doubtful of
recovery.
17 Taxes on Income :
A Tax expenses comprise of current and deferred tax.
B Current tax is measured at the amount expected to be paid on the
basis of reliefs and deductions available in accordance with the
provisions of the Income Tax Act, 1961.
C Deferred tax reflects the impact of current year timing differences
between accounting and taxable income and reversal of timing
differences of earlier years. Deferred tax is measured based on the tax
rates and laws that have been enacted or substantively enacted as of
the balance sheet date. Deferred tax assets are recognised only to the
extent there is reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be
realised and are reviewed at each balance sheet date.
18 Provision for Product Expiry Claims :
Provision for product expiry claims in respect of products sold during
the year is made based on the managements estimates.
19 Leases :
Leases are classified as operating leases where the lessor effectively
retains substantially all the risks and benefits of the ownership of
the leased assets. Operating lease payments are recognised as expenses
in the Profit and Loss Account as and when paid.
20 Government Grants :
A Government grants are recognised in accordance with the terms of the
respective grant on accrual basis considering the status of compliance
of prescribed conditions and ascertainment that the grant will be
received. B Government grants related to revenue is recognised on a
systematic basis in the Profit and Loss Account over the period during
which the related costs intended to be compensated are incurred. C
Government grants of the nature of incentive provided by the government
without related costs are credited to capital reserve.
21 Provisions, Contingent Liabilities and Contingent Assets :
Provision is recognised when the company has a present obligation as a
result of past events and it is probable that the outflow of resources
will be required to settle the obligation and in respect of which
reliable estimates can be made. A disclosure for contingent liability
is made when there is a possible obligation, that may, but probably
will not require an outflow of resources. When there is a possible
obligation or a present obligation in respect of which the likelihood
of outflow of resources is remote, no provision / disclosure is made.
Contingent assets are not recognised in the financial statements.
Provisions and contingencies are reviewed at each balance sheet date
and adjusted to reflect the correct management estimates.
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