a. Basis of Preparation
The financial statements have been prepared to comply in all material
respects with the mandatory Accounting Standards issued by the
Institute of Chartered Accountants of India and the relevant provisions
of the Companies Act, 1956 (''the Act''). The financial statements have
been prepared under the historical cost convention on an accrual basis.
The Company follows the mercantile system of accounting and recognises
income and expenditure on accrual basis.
b. Revenue Recognition
i. Revenue from domestic sales is recognized on accrual basis. Sales
and Finished Goods are accounted inclusive of excise duty, cess but
excluding sales tax and trade discounts. Revenue from export sales is
recognized on the basis of the shipping bills for exports.
ii. Export incentives are accounted on accrual basis.
iii. Interests on deposits are accounted on time proportion basis
taking into account the amount outstanding and the rates applicable.
iv. Dividend income is recognized only when a right to receive payment
v. Claims are accounted for when there is a reasonable certainty with
regard to their ultimate collection.
vi. Other incomes are recognized on accrual basis.
c. Fixed Assets
i. Fixed Assets are stated at cost inclusive of duties (net of CENVAT
credit to the extent applicable), taxes, incidental expenses,
erection/commissioning expenses and interest and all other costs
allocated up to the date of commencement of commercial production.
ii. Gains or losses arising from retirement or disposal of fixed
assets are recognised in the Profit & Loss account.
Depreciation is provided on Fixed Assets under the straight line method
at the rates and in the manner prescribed in Schedule XIV of the
Companies Act, 1956 and the notification issued there under, except
that depreciation has been provided at 100 % on assets costing
individually Rs. 5,000/- or less irrespective of whether or not the
aggregate cost of such assets constitutes more than 10 % of the total
cost of the assets under the particular grouping. Depreciation on
addition to fixed assets during the year is charged on pro rata basis
with reference to the month of addition.
Furniture & fixtures includes the cost of Rs.38.05 lakhs towards
interior decoration and civil work for leased premises and depreciation
rate adopted in respect of these assets are at the rate of 10% under
straight line method.
e. Impairment of Assets
An asset is treated as impaired when the carrying cost of assets
exceeds its recoverable value. An impairment loss is charged to the
Profit and Loss Account in the year in which an asset is identified as
impaired. The impairment loss recognized in prior accounting period is
reversed, if there is a change in the estimate of recoverable amount.
During the year the Company tested impairment of fixed assets as per
the Accounting Standard 28 Impairment of Assets to identify
impairment loss, if any. The realizable amount calculated as per net
selling price for all the cash generating units was higher than the
carrying values of such units. Accordingly, no impairment was required
to be recognized during the year.
Long Term Investments are stated at cost of acquisition and income from
investments not carrying fixed return is accounted at the time of
receipt. Gains or losses on disposal of investments are recognized in
the Profit & Loss Account. The decline in value of Long term
investments other than temporary, wherever applicable, is given effect
to as per Accounting Standard 13 (AS 13).
The inventory has been valued as under:
i. Raw materials, Stores and spares are valued at the lower of cost
and net realisable value. Cost includes cost of raw materials,
transportation charges, and Store/Warehouse charges. The cost is
determined on weighted average basis and excludes claimable levies and
ii. Work in progress is valued at the lower of cost and net realisable
value proportionate to the stage of progress. The cost includes direct
material, labour and appropriate portion of overheads.
iii. Finished goods are valued at lower of cost and net realisable
value. The cost includes direct material; appropriate portion of
overheads and includes excise duty and Cess.
iv. By-products are valued at net realizable value.
h. Retirement benefits to employees
i Retirement benefit in the form of provident fund is charged to the
Profit and Loss account on accrual basis.
ii Provision for Gratuity and Leave encashment is made on the basis of
actuarial valuation at the end of the year in line with AS-15
(Revised). Gratuity is an unfunded liability.
iii Superannuation for the Executives is contributed by way of
subscription to the fund with the LIC of India and the same is charged
to profit and loss account on accrual basis.
i. Accounting for Grants
The Company has fulfilled the obligations under the terms of the USAID
Grant. In line with the generally accepted accounting principles, a
sum of Rs.11.25 Lakhs is being apportioned out of the grant to the
Profit and Loss Account.
j. Foreign Currency Transactions
Exchange differences arising on reporting of foreign currency monetary
items at rates different from those at which they are initially
recorded during the period, or reported in previous financial
statements, in so far as they relate to the acquisition of a
depreciable capital asset, are added to or deducted from the cost of
the asset and are depreciated over the balance life of the asset.
Exchange differences arising on the settlement of the monetary items
not covered above, or on reporting such monetary items of Company at
rates different from those at which they are initially recorded during
the year or reported in previous financial statements, are recognized
as income or as expenses in the year in which they arise.
In relation to the forward contracts entered into to hedge the foreign
currency risk of the underlying monetary assets / liabilities, the
exchange difference is calculated as the difference between the foreign
currency amount of the contract translated at the exchange rate at the
reporting date, or the settlement date where the transaction is settled
during the reporting period, and the corresponding foreign currency
amount translated at the later of the date of inception of the forward
exchange contract and the last reporting date. Such exchange
differences are recognised in the profit and loss account in the
reporting period in which the exchange rates change.
The premium or discount on all such contracts arising at the inception
of each contract is amortised as income or expense over the life of the
contract. Any profit or loss arising on the cancellation or renewal of
forward contracts is recognized as income or as expense for the period.
k. Borrowing Costs
Borrowing costs that are attributable to the acquisition of or
construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial time to get ready for its intended use. All other borrowing
costs are charged to revenue.
l. Provisions, Contingent Liabilities and Contingent Assets
A provision is recognized when there is 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 are not discounted to its present value and are determined
based on Management estimate of amounts required to settle the
obligation at the balance sheet date. These are reviewed at each
balance sheet date and adjusted to reflect the current Management
Contingent liabilities are not recognized in the financial statements.
Contingent asset is neither recognized nor disclosed in the financial
Tax expense comprises current and deferred tax. Provision for current
income tax is made on the assessable income at the tax rate applicable
to the relevant assessment year. Deferred income taxes are recognized
for the future tax consequences attributable to timing differences
between the financial statement determination of income and their
recognition for tax purposes.
The effect of a change in tax rates on deferred tax assets and
liabilities is recognised in the income statement using the tax rates
and tax laws that have been enacted or substantively enacted at the
balance sheet date. Deferred tax assets are recognised 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 realised. If the company has unabsorbed depreciation or carry
forward tax losses, deferred tax assets are recognised only if there is
virtual certainty supported by convincing evidence that such deferred
tax assets can be realised against future taxable profits.
Minimum Alternative Tax (''MAT'') credit is recognised, 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 recommendations contained
in guidance Note issued by the Institute of Chartered Accountants of
India, the said asset is created by way of a credit to the profit and
loss account and shown as MAT Credit Entitlement.
n. Earnings per Share (EPS)
The earnings considered in ascertaining the company''s earnings per
share comprise the net profit after tax. The number of shares used in
computing basic earnings per share is the weighted average number of
shares outstanding during the year. The number of shares used in
computing diluted earnings per share comprises the weighted average
number of shares considered for deriving basic earnings per share and
also the weighted average number of shares, if any, which would have
been issued on the conversion of all dilutive potential equity shares.