I. BASIS OF ACCOUNTING:
The financial statements have been prepared on an accrual basis and
under the historical cost convention and in compliance, in all material
aspects, with the applicable accounting principles in India, the
applicable accounting standards notified under Section 211 (3) (c) and
the other relevant provisions of the Companies Act, 1956.
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 Schedule VI to the Companies Act, 1956. Based on
the nature of products and the time between the acquisition of assets
for processing and their realisation in cash and cash equivalents, the
Company has ascertained its operating cycle as 12 months for the
purpose of current / non-current classification of assets and
II. USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires estimates and assumptions to be
made that affect the reported amounts of assets and liabilities on the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Differences between actual
results and estimates are recognised in the period in which the results
III. REVENUE RECOGNITION:
a) Revenue/Income and Cost/Expenditure are generally accounted for on
accrual as they are earned or incurred, except in case of significant
b) Export Benefits are recognised in the year of export.
c) Sale of goods is recognised on transfer of significant risks and
rewards of ownership which is generally on the despatch of goods.
Export sales are accounted for on the basis of the dates of ''On board
bill of lading''.
IV. FIXED ASSETS AND DEPRECIATION / AMORTISATION:
A) FIXED ASSETS:
Fixed assets are carried at cost of acquisition or construction or at
revalued amounts, less accumulated depreciation and amortisation.
B) DEPRECIATION / AMORTISATION:
a) LEASEHOLD LAND :
Cost of leasehold land is amortised over the lease period.
b) OTHER FIXED ASSETS:
i) Depreciation on all assets is provided on the straight line method
in accordance with the provisions of Section 205 (2) (b) of the
Companies Act, 1956.
ii) Improvements to leased premises are amortised over the period of
the lease / charged off on premature termination of lease.
iii) Depreciation on other assets, except to the extent stated in (a)
and [(b) (ii) and (iii)] above, has been provided on the straight line
method over their useful lives or determined on the basis of rates
prescribed in Schedule XIV to the Companies Act, 1956.
iv) Depreciation on additions to fixed assets or on sale/disposal of
fixed assets is calculated pro-rata from the month of such addition, or
upto the month of such sale/disposal, as the case may be.
v) Cost of software capitalised is amortised over a period of five
Investments are classified into current and long-term investments.
Current Investments are stated at lower of cost and fair value.
Long-term investments are stated at cost. A provision for diminution is
made to recognise a decline, other than temporary, in the value of
VI. FOREIGN CURRENCY TRANSLATIONS:
All transactions in foreign currency are recorded at the rates of
exchange prevailing on the dates when the relevant transactions take
Monetary assets and liabilities in foreign currency, outstanding at the
close of the year, are converted into Indian currency at the
appropriate rates of exchange prevailing on the date of the Balance
Sheet. The resultant gain or loss, except to the extent it relates to
long term monetary items, is charged to the Statement of Profit and
Loss. Such gain or loss relating to long term monetary items for
financing acquisition of depreciable capital assets, is adjusted to the
acquisition cost of such asset and depreciated over its remaining
In respect of forward exchange contracts entered into to hedge foreign
currency risks of existing assets and liabilities, the difference
between the forward rate and exchange rate at the inception of the
contract is recognised as income or expense over the life of the
contract. Further, the exchange differences arising on such contracts
are recognised as income or expense along with the exchange differences
on the underlying assets / liabilities. Profit or loss on cancellations
/ renewals of forward contracts is recognised during the year.
VII. INVENTORY VALUATION:
a) Raw materials, work-in-progress, finished goods, goods for trade and
stores, spares, etc. are valued at Cost or Net Realisable value,
whichever is lower.
b) Goods in transit are valued at cost to date.
c) ''Cost'' comprises all costs of purchase, costs of conversion and
other costs incurred in bringing the inventory to the present location
and condition. The cost formulae used is either ''first in first out'',
or ''specific identification'', or the ''average cost'', as applicable.
d) Due allowances are made for obsolete inventory based on technical
estimates made by the Company.
e) Inter-divisional transfers are valued, either at works/factory costs
of the transferor unit/division, plus transport and other charges.
VIII. 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) Post employment benefits
i. Defined contribution plans:
The Company''s contribution to the superannuation scheme, state governed
provident fund scheme, etc. are recognised during the year in which
the related service is rendered
ii. Defined benefit plans:
The present value of the obligation is determined based on an actuarial
valuation, using the Projected Unit Credit Method. Actuarial gains and
losses arising on such valuation are recognised immediately in the
Statement of Profit and Loss. The fair value of the plan assets of the
Trust administered by the Company, is reduced from the gross obligation
under the defined benefit plan, to recognise the obligation on a net
- Provident Fund
For certain employees, monthly contributions are made to a Trust
administered by the Company. The interest rate payable by the Trust to
the beneficiaries is notified by the Government. The Company has an
obligation to make good the shortfall, if any, between the return on
investments of the Trust and the notified interest rate.
c) Long term compensated absences are provided for on the basis of an
d) Termination Benefits
Termination benefits are recognised as and when incurred.
IX. GOVERNMENT GRANTS:
Grants received against specific fixed assets are adjusted to the cost
of the assets. Revenue grants are recognised in the Statement of Profit
and Loss in accordance with the related scheme and in the period in
which these are accrued.
X. RESEARCH AND DEVELOPMENT :
Revenue expenditure, including overheads on Research and Development,
is charged as an expense through the natural heads of account in the
year in which incurred. Expenditure which results in the creation of
capital assets is capitalised and depreciation is provided on such
assets as applicable.
XI. EXPENDITURE DURING CONSTRUCTION AND EXPENDITURE ON NEW PROJECTS:
In case of new projects and in case of substantial
modernisation/expansion at existing units of the Company, expenditure
incurred prior to commencement of commercial production is capitalised.
XII. BORROWING COSTS:
Interest and other borrowing costs attributable to qualifying assets,
are capitalised. Front end fees are amortised over the period of the
related borrowing but not exceeding the period of five years. Other
interest and borrowing costs are charged to revenue.
XIII. PREMISES TAKEN ON LEASE:
For premises taken on lease, lease rentals payable are charged to
Income-tax expense comprises Current tax and deferred tax charge or
credit. Provision for current tax is made on the assessable income at
the tax rate applicable to the relevant assessment year. The deferred
tax asset and deferred tax liability is calculated by applying tax rate
and tax laws that have been enacted or substantively enacted by the
Balance Sheet date. Deferred tax assets arising mainly on account of
brought forward losses and unabsorbed depreciation under tax laws, are
recognised only if there is a virtual certainty of their realisation,
supported by convincing evidence. Deferred tax Assets on account of
other timing differences are recognised, only to the extent there is a
reasonable certainty of its realisation. At each Balance Sheet date,
the carrying amount of deferred tax assets is reviewed to obtain
reassurance as to realisation. Minimum Alternative Tax credit is
recognised as an asset only when and to the extent there is convincing
evidence that the Company will pay normal tax during the specified
XV. IMPAIRMENT OF ASSETS :
The carrying amounts of assets are reviewed at each Balance Sheet date.
If there is any indication of impairment based on internal / external
factors, i.e. when the carrying amount of the asset exceeds the
recoverable amount, an impairment loss is charged to the Profit and
Loss Account in the year in which an asset is identified as impaired.
An impairment loss recognised in prior accounting periods is reversed
or reduced if there has been a favourable change in the estimate of the
XVI. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS :
Provisions involving a substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Provision is not discounted to its present value and is determined
based on the last estimate required to settle an obligation at the year
end. These are reviewed every year end and adjusted to reflect the best
current estimate. Contingent liabilities are not recognised but are
disclosed in the financial statements. Contingent assets are neither
recognised nor disclosed in the financial statements.
XVII. APPLICATION OF SECURITIES PREMIUM ACCOUNT :
Share issue expenses are charged first against the available balance in
the securities premium account.