a) Accounting convention :
These financial statements have been prepared under the historical cost
convention except revaluation of certain plots of land, on the accrual
basis of accounting and in accordance with the Generally Accepted
Accounting Principles (''GAAP'') in India and comply with the
accounting standards prescribed by the Companies (Accounting Standards)
Rules, 2006 (as amended) and in accordance with the provisions of the
Companies Act, 1956, as adopted consistently by the Company,
b) Use of Estimates:
The preparation of financial statements requires the management of the
Company to make estimates and assumptions that affect the reported
balances of assets and liabilities and disclosures relating to the
contingent liabilities as at the date of the financial statements and
reported amounts of income and expenses during the year. Example of
such estimates include provisions for doubtful debts, future
obligations under employee retirement benefit plans, provision for
income taxes and the useful lives of fixed assets. Contingencies are
recorded when it is probable that a liability will be incurred and the
amount can be reasonably estimated. Actual results could differ from
such estimates. The differences between the actual results and
estimates are recognized in the year in which the results are known/
materialized. Any revision to accounting estimate is recognized
prospectively in current and future period,
c) Fixed assets :
Fixed assets, other than certain plots of land, which have been
revalued, are stated at cost of acquisition/ construction less
accumulated depreciation. The cost includes all pre-operative expenses
and the financing cost of borrowed funds relating to the construction
period in the cases of new projects and expansion of existing
factories. Certain lands, which are revalued, are stated at revalued
figures on the basis of valuation reports of approved values.
At each Balance Sheet date, the Company reviews the carrying amounts of
its fixed assets to determine whether there is any indication that
those assets suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to
determine the extent of impairment loss. Recoverable amount is the
higher of an assets net selling price and value in use. In assessing
value in use, the estimated future cash flows expected from the
continuing use of the asset and from its disposal are discounted to
their present value using a pre-discount rate that reflects the current
market assessments of time value of money and the risks specific to the
e) Depreciation and amortization :
(i) The Company follows straight-line method of depreciation in respect
of buildings / plant and machinery and ail assets of IT Division and
written down value method in respect of other assets.
(ii) The rates of depreciation charged on all fixed assets are in
accordance with the rates specified in Schedule XIV to the Companies
Act, 1956, except (excluding those relating to IT Division) in the
following cases :
a) Vehicles, office and other equipment - 33.33%
(Other than computers)
b) Assets acquired upto June 30, 1986
- Plant and machinery - Rates prescribed under the Income-tax Rules,
1962, at the time of acquisition of such assets.
- Factory buildings - 3.39%
- Other buildings - 1.64%
iii) On assets sold, discarded, etc., during the period/year,
depreciation is not provided up to the date of sale/discard.
iv) Depreciation has been calculated on a pro-rata basis in respect of
acquisition/installation of all assets of, the IT Division and on plant
and machinery in other cases. Depreciation on remaining assets is
provided for full year / period irrespective of the date of
v) Leasehold improvements are amortized over the balance of the primary
vi) The intellectual property rights are amortized on a straight-line
basis, based on management estimates of useful life varying from 1 to 5
* commencing from the month in which the asset is available to the
Company for use.
vii) Computer software are amortized over a period of 5 years.
Long-term investments are valued at cost unless there is a permanent
fall in the value thereof.
i) Stores, spares and components are valued at cost or under.
ii) Raw materials, process stocks, finished goods and stock in trade
are valued at lower of cost and net realizable value.
iii) Land (for development) on conversion into inventory from fixed
assets is valued at the lower of its historical cost and net realizable
value, and includes appropriate share of land development expenses and
finance cost of borrowed funds relatable thereto.
Cost of inventories, other than land (for development), is ascertained
on the weighted average basis. Further, in respect of the manufactured
inventories, i.e., process stocks and finished goods, appropriate share
of manufacturing expenses are included on absorption costing basis.
Work in process relating to software contracts includes salary and
other directly identifiable expenses incurred on fixed price contracts,
till the completion of specified deliverables, and are valued at cost
or net realizable value, whichever is lower.
h) Revenue recognition :
i) Sale of goods is recognized at the point of dispatch of finished
goods to customers which coincides with the transfer of risk and reward
of ownership. Sales are inclusive of excise duty and exclusive of
ii) Revenue from software development contracts is recognized on the
basis of milestone achieved, as provided in the contract.
iii) Revenue on maintenance contracts is recognized on pro-rata basis
linked with the period of contract.
iv) Services income is recognized on accrual basis, as provided in the
v) In respect of Land Development Project, sale of rights on outright
basis is recognized in the year of such sale.
vi) Interest income is recognized using the time proportion method.
i) Excise Duty:
Excise duty on sales is being deducted from gross sales and any
increase/ decrease in excise duty on finished goods is being shown
separately in the statement of profit and loss.
j) Research and development expenditure :
The revenue expenditure on research and development is expensed out in
the year in which it is incurred. Expenditure, which results in
creation of capital assets, is treated as similar to expenditure on
other fixed assets.
k) Employees'' Benefits :
i) Short term employee benefits are charged off at the undiscounted
amount in the year in which the related service is rendered.
ii) Post employment and other long term employee benefits are charged
off in the year in which the employee has rendered services. The amount
charged off is recognized at the present value of the amounts payable
determined using actuarial valuation techniques. Actuarial gain and
losses in respect of post employment and other long term benefits are
charged to statement of profit and loss.
1) Taxes on Income :
Income-tax liability is ascertained on the basis of assessable profits
computed in accordance with the provisions of the Income tax Act, 1961.
Deferred tax is recognized, on timing difference, being the difference
between taxable income and accounting income that originate in one
period and are capable of reversal in one or subsequent periods.
Deferred tax assets in respect of unabsorbed depreciation and carry
forward of losses are recognized if there is virtual certainty that
there will be sufficient future taxable income available to realize
m) Foreign exchange transactions :
i) Transactions in foreign currency are recorded at the exchange rates
prevailing on the date of the transaction.
Monetary items denominated in foreign currency are reported using the
closing exchange rates on the date of the balance sheet.
The exchange differences arising on settlement of monetary items or on
reporting these items at the rates different from the rates at which
these were initially recorded / reported in previous financial
statements, are recognized as income / expense in the period in which
they arise, except for exchange differences arising during construction
period on restatement of foreign currency liabilities incurred in
celadon to the project which are adjusted in cost of fixed assets.
In case of forward exchange contracts, the premium or discount, arising
at the inception of such contracts, is amortized as income or expense
over the life of the contract and the exchange difference on such
contracts, i.e., difference between the exchange rate at the reporting
/ settlement date and the exchange rate on the date of inception of
contract / the last reporting date, is recognized as income / expense
for the period except for exchange differences arising during
construction period on restatement of foreign currency liabilities
incurred in relation to the project which are adjusted in cost of fixed
assets. Derivatives not covered in AS -11 are marked to market at
balance sheet date and resulting loss, if any, is recognized in the
statement of profit and loss in view of the principle of prudence.
ii) In respect of financial statements of integral foreign operations
of foreign branches, fixed assets are recorded at cost, based on the
exchange rate prevailing on the date of transactions. Current assets
and current liabilities are reported using the exchange rates on the
date of the balance sheet. Incomes and expenses are translated at the
average of monthly closing rates of exchange. The resultant exchange
gains / losses are recognized in the statement of profit and loss.