(i) Change in accounting policy
Presentation and disclosure of financial statements
During the year ended 31st March, 2012, the revised Schedule VI
notified under the Companies Act, 1956, has become applicable to the
company, for preparation and presentation of its financial statements.
The adoption of revised Schedule VI does not impact the recognition and
measurement principles followed for preparation of financial
statements. However, it has significant impact on presentation and
disclosures made in the financial statements. The Company has also
reclassified the previous year figures in accordance with the
requirements of revised Schedule VI applicable in the current year.
(ii) Use of Estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
(iii) Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the company and the revenue can be
(a) Revenue from sale of goods and services rendered is recognized upon
passage of title which generally coincides with delivery of materials
and rendering of services to the customers. The Company collects sales
taxes and value added taxes (VAT) on behalf of the government and,
therefore, these are not economic benefits flowing to the Company.
Hence, they are excluded from revenues. Excise duty deducted from
revenue (Gross) is the amount that is included in the revenue (Gross)
and not the entire amount of liability arising during the year.
Sales are net of rebates and discounts.
(b) Dividend Income is recognized when the shareholders'' right to
receive the payment is established by the balance sheet date.
(c) Interest Income is recognized on a time proportion basis taking
into account the amount outstanding and rate applicable.
(iv) Fixed Assets
Fixed Assets are stated at cost or revalued amount, as the case may be,
less accumulated depreciation /amortisation and impairment if any. Cost
comprises the purchase price inclusive of duties (net of CENVAT/VAT),
taxes, incidental expenses and erection/commissioning expenses etc. up
to the date, the asset is ready for its intended use. In case of
revaluation of fixed assets, the original cost as written-up by the
valuer, is considered in the accounts and the differential amount is
transferred to revaluation reserve.
Machinery spares which can be used only in connection with an item of
fixed assets and whose use as per technical assessment is expected to
be irregular, are capitalized and depreciated over the residual life of
the respective assets.
(v) Impairment of Assets
The carrying amounts of assets are reviewed at each balance sheet date
to determine if there is any indication of impairment based on
external/internal factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount which
represents the greater of the net selling price and Value in Use'' of
the assets. In assessing the value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of
money and risks specific to the asset.
(a) The classification of plant and machinery into continuous and
non-continuous process is done as per technical certification and
depreciation thereon is provided accordingly.
(b) Depreciation on fixed assets is provided under Written Down Value
method at the rates prescribed in Schedule XIV of the Companies Act,
1956, or at rates determined based on useful lives of the respective
assets, as estimated by the management, whichever is higher.
(c) Depreciation on revalued assets is provided at the rates specified
under section 205 (2)(b) of the Companies Act, 1956. However, in case
of fixed assets whose life is determined by the valuer to be less than
their useful life under Section 205, depreciation is provided at higher
rate, to ensure the write off of these assets over their useful life.
(d) Depreciation on fixed assets added/disposed of during the year is
provided on pro-rata basis with reference to the date of
(e) Leasehold properties are depreciated over the primary period of
lease or their respective useful lives, whichever is shorter.
(f) Intangible Assets are amortized on a Written Down Value method over
a period of 5 years.
(g) In case of impairment, depreciation is provided on the revised
carrying amount of the assets over its remaining useful life.
(vii) Foreign Currency Transactions
(a) Initial Recognition:
Foreign Currency Transactions are recorded in the reporting currency,
by applying to the foreign currency amount, the exchange rate between
the reporting currency and the foreign currency at the date of the
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction, and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(c) Exchange Differences:
Exchange differences arising on the settlement/conversion of monetary
items are recognized as income or expense in the year in which they
(d) Forward Exchange Contracts not entered for trading or speculation
The premium or discount arising at the inception of forward exchange
contracts is amortized as expense or income over the life of the
respective contracts. Exchange differences on such contracts are
recognized in the statement of profit and loss in the period in which
the exchange rates change. Any profit or loss arising on cancellation
or renewal of forward exchange contracts is recognized as income or
expense for the year.
Investments that are readily realisable and intended to be held for not
more than a year are classified as Current investments. All other
investments are classified as long-term investments. Current
Investments are carried at lower of cost and market value on individual
investment basis. Long Term Investments are considered at cost, unless
there is an other than temporary decline in value, in which case
adequate provision is made for the diminution in the value of
Raw Materials, Stores and Spares are valued at lower of cost and net
realizable value. However, these items are considered to be realizable
at cost if the finished products, in which they will be used, are
expected to be sold at or above cost.
Work in Progress and finished goods are valued at lower of cost and net
realisable value. Cost includes direct materials & labour and a part of
manufacturing overheads based on normal operating capacity. Cost of
finished goods includes excise duty.
Cost of Inventories is computed on Weighted Average/FIFO basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
(x) Government Grants and Subsidies
Grants and subsidies from the government are recognized when there is
reasonable assurance that the grant/subsidy will be received and all
attaching conditions will be complied with.
When the grant or subsidy relates to an expense item, it is recognized
as income over the periods necessary to match them on a systematic
basis to the costs, which it is intended to compensate.
When the grant or subsidy relates to an asset it is deducted from the
gross value of the asset concerned in arriving at the carrying amount
of related asset.
Government grants of the nature of promoter''s contribution are credited
to capital reserve and treated as a part of the shareholders funds.
(xi) Retirement and other employee benefits
(a) Retirement benefit in the form of Provident Fund is a defined
contribution scheme and is charged to the Statement of Profit and Loss
of the year when the contributions to the respective funds are due. The
Company has no obligations other than the contribution payable to the
(b) Gratuity Liability, being a defined benefit obligation, is provided
for on the basis of an actuarial valuation on projected unit credit
method made at the end of each financial year.
(c) Short Term compensated absences are provided for based on
estimates. Long Term compensated absences are provided for based on
actuarial valuation which is done as per projected unit credit method
at the end of each financial year.
(d) Actuarial gains/losses are immediately taken to the statement of
profit and loss and are not deferred.
(xii) Earning Per Share
Basic Earning Per Share is calculated by dividing the net profit or
loss for the year attributable to equity shareholders (after deductible
preference dividend and attributable taxes) by the weighted number of
equity shares outstanding during the year.
For the purpose of calculating diluted earning per share, net profit or
loss for the year attributable to equity share holders and the weighted
average number of shares outstanding during the year are adjusted for
the effect of all dilutive potential equity shares.
(xiii)Exclse Duty and Custom Duty
Excise Duty on finished goods stock lying at the factories is accounted
for at the point of manufacture of goods and accordingly, is considered
for valuation of finished goods stock lying in the factories as on the
balance sheet date. Similarly, customs duty on imported material in
transit/lying in bonded warehouse is accounted for at the time of
import/bonding of materials.
Borrowing Costs includes interest, amortization of ancillary costs
incurred in connection with the arrangements of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing Cost directly attributable to the acquisition, construction
of an asset that necessarily takes a substantial period of time to get
ready for its intended use are capitalized as part of the cost of the
respective assets. All other borrowing costs are expensed in the period
Tax expenses comprises of current and deferred tax. Current income tax
is measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act, 1961. Deferred income taxes
reflect the impact of current year timing differences between taxable
income for the year and reversal of timing differences of earlier
The deferred tax for timing differences between the book and tax
profits for the year is accounted for using the tax rates and laws that
have been substantively enacted as of the Balance Sheet date. Deferred
Tax Assets and Deferred Tax Liabilities are offset, if a legally
enforceable right exists to set off current tax assets against current
tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on income levied by same governing
taxation laws. Deferred Tax Assets are recognized only to the extent
that there is reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be
realized. If the Company has carry forward unabsorbed depreciation and
tax losses, deferred tax assets are recognized only to the extent there
is virtual certainty supported by convincing evidence that sufficient
taxable income will be available against which such deferred tax asset
can be realized.
The carrying amounts of deferred tax assets are reviewed at each
Balance Sheet date. The Company writes-down the carrying amount of
deferred tax assets to the extent that it is no longer reasonably
certain or virtually certain, as the case may be, that sufficient
future taxable income will be available against which deferred tax
asset can be realized. Any such write-down is reversed to the extent
that it becomes reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available.
Minimum Alternative Tax (MAT) credit is recognized 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 Minimum Alternative Tax (MAT) credit becomes eligible to be
recognized as an asset in accordance with the recommendation contained
in guidance note issued by the Institute of Chartered Accountants of
India, the said assets is created by way of a credit to the Statement
of Profit and Loss and shown as MAT credit entitlement. The Company
reviews the carrying amount of MAT at each Balance Sheet date and
writes down MAT credit entitlement to the extent there is no longer
convincing evidence to the effect that the Company will pay normal
income-tax during specified period.
a) Identification of segments:
The Company has identified that its business segments are the primary
segments. The Company''s business are organized and managed separately
according to the nature of products/services, with each segment
representing a strategic business unit that offers different
product/services and serves different markets. The analysis of
geographical segments is based on the areas in which major operating
divisions of the company operate.
b) Inter segment transfers:
The Company generally accounts for inter segment sales and transfers at
current market prices.
c) Allocation of Common Costs:
Common allocable costs are allocated to each segment on case to case
basis applying the ratio, appropriate to each relevant case. Revenue
and expenses, which relate to the enterprise as a whole and are not
allocable to segment on a reasonable basis, have been included under
the head Unallocated.
The accounting policies adopted for segment reporting are in line with
those of the Company''s accounting policies.
(xvii) Fixed Assets acquired under Lease
(a) Finance Lease:
Assets acquired under lease agreements which effectively transfer to
the company substantially all the risk and benefits incidental to
ownership of the leased items, are capitalized at the lower of the fair
value and present value of minimum lease payment at the inception of
the lease term and disclosed as leased assets. Lease payments are
apportioned between the finance charges and the reduction of the lease
liability so as to achieve a constant rate of interest on the remaining
balance of their liability. Finance charges are charged directly to the
(b) Operating Lease:
Leases where the lessor effectively retains substantially all the risks
and benefits of the ownership of the leased assets are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit& loss.
(xviii) Derivative Instruments
In accordance with the ICAI announcement derivative contracts, other
than foreign currency forward contracts covered under AS 11, are marked
to market on a portfolio basis, and the net loss, if any, after
considering the offsetting affect of gain on the underlying hedged
item, is charged to the statement of profit and loss. Net gains, are
ignored as a matter of prudence.
(xix) Cash and Cash Equivalents
Cash and Cash Equivalents in the cash flow statement comprise of cash
at bank and in hand and short term investments with an original
maturity of three months or less.
A provision is recognized when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions made in terms of
Accounting Standard 29 are not discounted to their present value and
are determined based on best estimates required to settle the
obligation at the balance sheet date. These are reviewed at each
balance sheet date and adjusted to reflect the current best estimates.
(xxi) Contingent Liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The Company does not
recognize a contingent liability but discloses its existence in the