(a) Basis of preparation of financial statements
These financial statements have been prepared in accordance with
generally accepted accounting principles in India under the historical
cost convention on accrual basis. Pursuant to Circular 15/ 2013 dated
13th September, 2013 read with Circular 08/ 2014 dated 4th April, 2014,
till the standards of Accounting or any addendum thereto are prescribed
by Central Government in consultation and recommendation of the
National Financial Reporting Authority, the existing Accounting
Standards notified under the Companies Act, 1956 (the Act) shall
continue to apply. Consequently, these financial statements have been
prepared to comply in all material aspects with the accounting
standards notified under Section 211(3C) [Companies (Accounting
Standards) Rules, 2006, as amended] and other relevant provisions of
All 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 the Revised Schedule VI to the Companies Act, 1956.
Based on the nature of products and the time between 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
(b) Revenue recognition
The Company recognises sale of goods on transfer of significant risks
and rewards of ownership of the goods to the buyer as per the terms of
contract. Sales are net of excise duty, sales tax and trade discounts,
Income from services rendered is recognised based on agreements/
arrangements with the customers as the service is performed using the
proportionate completion method and is recognised net of service tax,
Interest Income is accounted on time proportion basis taking into
account the amounts invested and the rate of interest. Dividend income
on investments is accounted for when the right to receive the dividend
Income from export incentives such as duty drawback etc. are recognised
on accrual basis to the extent the ultimate realisation is reasonably
Indenting commission is recognised based on the terms of agreement,
when the right to receive the commission is established.
Rental income is recognised on accrual basis.
(c) Excise duty
Excise duty payable on products is accounted for at the time of
despatch of goods from the factories and is accrued for stocks held at
the year end.
Excise Duty related to the difference between the closing stock and
opening stock of finished goods has been recognised separately in Note
28 Other expenses.
(d) Employee benefits
(i) Post employment benefits and other long term employee benefits:
Defined contribution plans :
Company''s contribution to provident fund, superannuation fund, employee
state insurance and other funds are determined under the relevant
schemes and / or statute and charged to the Statement of Profit and
Loss. The Company has no further obligation under such plans.
Defined benefit plans and compensated absences :
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. The liability in respect of
the shortfall of interest earnings of the Fund is determined on the
basis of an actuarial valuation. The Company''s liability towards
gratuity, ex-gratia gratuity and compensated absences are actuarially
determined at each balance sheet date using the projected unit credit
method. Actuarial gains and losses are recognised in the Statement of
Profit and Loss. The classification of the company''s net obligation
into current and non- current is as per the actuarial valuation report.
(ii) Voluntary retirement scheme:
Expenditure incurred on voluntary retirement scheme is charged to the
Statement of Profit and Loss in the year in which it is incurred.
(e) Tangible Assets
(i) All tangible assets are stated at acquisition cost net of
accumulated depreciation and impairment losses, if any.
(ii) Subsequent expenditures related to an item of fixed asset are
added to its book value only if they increase the future benefits from
the existing asset beyond its previously assessed standard of
(iii) Items of tangible assets that have been retired from active use
and are held for disposal are stated at the lower of their net book
value and net realisable value and are shown separately in the
financial statements under Other Current Assets. Any expected loss is
recognised immediately in the Statement of Profit and Loss.
(iv) Losses arising from the retirement of, and gains or losses from
disposal of fixed assets which are carried at cost are recognised in
the Statement of Profit and Loss.
(v) The cost of leasehold land is amortised over the primary period of
(vi) Depreciationis provided on a pro-rata basis on the straight line
method over the estimated useful lives of the assets or at the rates
prescribed under Schedule XIV to the Companies Act, 1956, whichever is
higher, as follows :
Factory Buildings 30 Years
Office Buildings 60 Years
Plant and Equipment 10 to 21 Years
Furniture and Fixtures 5 to 16 Years
Office Equipment 5 to 10 Years
Vehicles 4 Years
(f) Intangible Assets
Intangible assets are stated at acquisition cost, net of accumulated
amortisation and accumulated impairment losses, if any. Intangible
assets are amortised on a straight line basis over their estimated
useful lives, as follows:
Goodwill 10 Years
Trademarks 10 Years
(g) Impairment of assets
The carrying amounts of assets are reviewed at each Balance Sheet date
to assess whether there is any indication of impairment based on
internal / external factors. An impairment loss is recognised wherever
the carrying amount of an asset exceeds its estimated recoverable
amount. The recoverable amount is greater of the asset''s net selling
price and value in use. In assessing the value in use, the estimated
future cash flows are discounted to the present value using the
weighted average cost of capital. Previously recognised impairment loss
is further provided or reversed depending on changes in circumstances.
Inventories are valued at the lower of cost and net realisable value.
Cost is computed on a weighted average basis. The net realisable value
is the estimated selling price in the ordinary course of business less
the estimated costs of completion and estimated costs necessary to make
the sale. Finished goods and work-in-progress include all costs of
purchases, conversion costs and other costs incurred in bringing the
inventories to their present location and condition.
(i) Trade receivables / Loans and advances
Trade receivables and loans and advances are stated after making
adequate provision for doubtful debts / advances.
( j) Investments
Investments that are readily realisable and are intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as non-current investments.
Non-current investments are stated at cost less provision for
diminution in value, other than temporary. Current investments are
stated at the lower of cost and fair value.
(k) Operating Leases
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. The company is both a lessee and a lessor under such
arrangements. Payments and receipts under such leases are charged or
credited to the Statement of Profit and Loss on a systematic basis over
the primary period of the lease.
(l) Foreign currency translations
(i) Foreign currency transactions are accounted at the rate prevailing
on the date of the transaction. Monetary items denominated in foreign
currency outstanding as at year end are translated at the exchange rate
prevailing on the last day of the accounting year. In respect of items
covered by forward contracts, the premium or discount arising at the
inception of such a forward exchange contract is amortised as expense
or income over the life of the contract. Any profit or loss arising on
cancellation of such a forward exchange contract is recognised as
income or expense for the period.
(ii) 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 transaction.
(iii) Gain or loss arising out of settlement of such transactions or
from translation/conversion is taken credit for or charged to the
Statement of Profit and Loss.
(m) Income Tax
Income-tax expense comprises current tax and deferred tax charge or
credit. The current tax is determined as the amount of tax payable in
respect of the estimated taxable income for the year. The deferred tax
charge or credit is recognised using prevailing enacted or
substantively enacted tax rates at the Balance Sheet date. Where there
is unabsorbed depreciation or carry forward losses, deferred tax assets
are recognised only if there is virtual certainty of realization. Other
deferred tax assets are recognised only to the extent there is
reasonable certainty of realisation in future. The carrying amount of
deferred tax assets/liabilities are reviewed at each Balance Sheet date
for any write-down or reversal, as considered appropriate.
(n) Provisions and Contingent Liabilities
Provisions are recognised when there is a present obligation as a
result of a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and there is a reliable estimate of the amount of the obligation.
Provisions are measured at the best estimate of the expenditure
required to settle the present obligation at the balance sheet date and
are not discounted to its present value. These are reviewed at each
year end date and adjusted to reflect the best current estimate.
Contingent liabilities are disclosed when there is a possible
obligation arising from past events, the existence of which will be
confirmed only by the occurrence or non occurrence of one or more
uncertain future events not wholly within the control of the company or
a present obligation that arises from past events where it is either
not probable that an outflow of resources will be required to settle
the obligation or a reliable estimate of the amount cannot be made.
(o) Cash and cash equivalents
In the cash flow statement, cash and cash equivalents include cash in
hand, term deposits with banks and other short-term highly liquid
investments with original maturities of three months or less.
(p) Earnings per share
Basic earnings per share is calculated by dividing the net profit for
the period attributable to equity shareholders by the weighted average
number of equity shares outstanding during the period. The weighted
average number of equity shares outstanding during the period and for
all periods presented is adjusted for events, such as bonus shares,
other than the conversion of potential equity shares, that have changed
the number of equity shares outstanding, without a corresponding change
in resources. For the purpose of calculating diluted earnings per
share, the net profit for the period attributable to equity
shareholders and the weighted average number of shares outstanding
during the period is adjusted for the effects of all dilutive potential
(q) Use of estimates
The presentation of the financial statements in conformity with the
generally accepted accounting principles requires that the management
makes certain estimates and assumptions. These estimates and
assumptions affect the reported amount of assets and liabilities on the
date of the financial statements and the reported amount of revenues
and expenses during the reporting period. Difference between the actual
results and estimates if any, is recognised in the period in which the
results are known / materialised.