1.1 Basis of Accounting
The financial statements are prepared to comply in all material aspects
with all the applicable accounting principles in India, the accounting
standards notified under Section 211(3C) of the Companies Act, 1956 of
India (the Act) and the relevant provisions of the Act.
1.2 Use of Estimates
The preparation of the financial statements in conformity with the
generally accepted accounting principles in India requires, the
Management to make estimates and assumptions considered in the reported
amounts of assets and liabilities (including contingent liabilities)
and the reported income and expenses during the year. The Management
believes that the estimates used in preparation of the financial
statements are prudent and reasonable. Future results could differ from
these estimates and the differences between the actual and the
estimates are recognised in the periods in which the actuals are
1.3 Fixed Assets
Fixed assets are stated at cost less accumulated depreciation. The
Company capitalises all direct costs relating to the acquisition and
installation of fixed assets. Interest on borrowed funds, if any, used
to finance the acquisition of fixed assets, is capitalised up to the
date the assets are ready for commercial use. Under utilised/Idle
assets are recorded at estimated realisable value.
Lease-hold land is being amortised over the period of lease.
Depreciation is provided pro-rata to the period of use on straight-line
method based on the estimated useful lives of the assets, as stated
The use fullives of the assets are based on technical estimates approved
by the Management, and are lower than the implied useful lives arrived
on the basis of the rates prescribed under Schedule XIV to the
Companies Act, 1956 of India. Assets individually costing less than Rs
5,000 are fully depreciated in the year of acquisition.
Goodwill and other Intangible Assets are amortised over the useful life
of the assets, not exceeding 10 years.
At each balance sheet date, the Company reviews the carrying value of
tangible and intangible assets for any possible impairment. An
impairment loss is recognised when the carrying amount of an asset
exceeds its recoverable amount. The recoverable amount is higher of the
asset''s net selling price or estimated future cash flows which are
discounted to their present value based on appropriate discount rates.
For the purpose of assessing impairment, assets are grouped at the
levels for which there are separately identifiable cash flows (cash
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 long term investments.
Long term investments are valued at cost. Current investments are
valued at lower of cost and fair value as on the date of the Balance
Sheet. The Company provides for diminution in value of investments,
other than temporary in nature.
Inventories of raw and packing materials, work-in- progress and
finished goods are valued at lower of cost and net realisable value.
Cost of work-in- progress and finished goods includes materials, labour
and manufacturing overheads and other costs incurred in bringing the
inventories to their present location. Cost is determined using
standard cost method that approximates actual cost. The Company accrues
for customs duty liability in respect of stocks of raw material lying
in bond and excise duty liability in respect of stocks of finished
goods lying at plant and warehouses.
1.6 Revenue Recognition
Sales are recognised upon delivery of goods and are recorded net of
trade discounts, rebates, sales tax/value added tax and inclusive of
excise duty on own manufactured and outsourced products.
Service Income is recognised on cost plus basis for support services
1.7 Provisions and Contingent Liabilities
The Company recognises a provision when there is a present obligation
as a result of a past event that probably requires an outflow of
resources and a reliable estimate can be made of the amount of the
obligation. A disclosure for a contingent liability is made when there
is a possible obligation or a present obligation that may, but probably
will not, require an outflow of resources. Where there is a possible
obligation or a present obligation that the likelihood of outflow of
resources is remote, no provision or disclosure as specified in
Accounting Standard 29 - ''Provisions, Contingent Liabilities and
Contingent Assets'' is made.
Advertising expenses are consistently accrued and recognised in the
year in which the related activities are carried out.
The Company has Defined Contribution Plan for its employees''
retirement benefits such as Provident Fund, Superannuation Fund etc.
and contribution to these plans are charged to the Statement of Profit
and Loss. In respect of certain employees, Provident Fund contributions
are made to a Trust administered by the Company. The interest rates
payable by the Trust to the beneficiaries every year is notified by the
Government. The Company has an obligation to make good the shortfall,
if any, between the return from the investment of the Trust and
interest as per the notified rate. The Company also provides for
retirement/post- retirement benefits in the form of gratuity, pensions
and compensated absences. Such benefits are provided for on the basis
of an independent actuarial valuation done at the year-end using
Projected Unit Credit Method. Actuarial Gains and Losses comprise
experience adjustments and the effect of changes in the actuarial
assumptions and are recognised immediately in the Statement of Profit
and Loss as income or expense.
Expenditure on Voluntary Retirement Scheme is charged to the Statement
of Profit and Loss in the year in which it is incurred.
1.9 Foreign Currency Transactions
Transactions in foreign currencies are recognised at the prevailing
exchange rates on the transaction dates. Realised gains and losses on
settlement of foreign currency transactions are recognised in the
Statement of Profit and Loss. Foreign currency denominated monetary
assets and liabilities at the year end are translated at the year-end
exchange rates, and the resultant exchange difference is recognised in
the Statement of Profit and Loss. Non-monetary foreign currency items
are carried at cost.
Current tax is determined as the amount of tax payable in respect of
taxable income for the year.
Deferred tax is recognised for all the timing differences, subject to
the consideration of prudence in respect of deferred tax assets.
Deferred tax assets and liabilities are measured using the tax rates
and tax laws that have been enacted or substantively enacted by the
Balance Sheet date. Deferred tax assets are recognised and carried
forward only to the extent that there is a reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realised. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognised only if there is virtual certainty supported
by convincing evidence that they can be realised against future taxable