1. Basis of Presentation:
The financial statements have been prepared and presented under the
historical cost convention and in accordance with the provision of
Companies Act , 1956 and accounting standards contained in the
Companies ( Accounting Standards ) Rules , 2006.
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 activities and the time between the acquisition
of assets for processing and their realisation in cash and cash
equivalents, the Company has determined its operating cycle as twelve
months for the purpose of current - non current classification of
assets and liabilities.
2. Use of Estimates
The preparation of the financial statements are in conformity with the
GAAP which requires that the management makes estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure
of contingent liabilities as at the date of the financial statements,
and the reported amounts of revenue and expenses during the reported
year. Actual results could differ from those estimates. Difference
between the actual results and estimates are recognized in the period
in which the results are known / materialized.
3. Fixed Assets:
Fixed Assets comprising those acquired at the time of setting up of
initial operations are at cost to the Company inclusive of direct and
appropriate allocated expenses upto the date of commercial production.
All subsequent acquisitions are capitalized at actual acquisition cost.
4. Depreciation :
Effective from 1995-96 the company adopted DISA group Depreciation
policies and rates as per straight-line method. Consequently the
assets acquired during the period 1995-96 to 2001-02 not exceeding CHF
5000, (currently equivalent to about Rs.2,35,000/-) were depreciated
fully at the time of acquisition.
Effective from 01.04.2002 the Company has changed its Accounting policy
to charge off individual assets costing less than Rs. 10,000 to revenue
at the time of acquisition. The depreciation rates adopted for other
assets are not less than the rates specified in Schedule XIV of the
Companies Act, 1956.
Depreciation rates adopted is 3.34% p.a in respect of Buildings, 15 %
p.a in respect of Plant & Machinery, Patterns, tools, jigs and
Fixtures, Office Equipment, Furniture & Fittings, 20 % p.a in respect
of vehicles and 25 % p.a in respect of Computers and 25 % p.a in
respect of Computer software. (Also refer Sl. No. 13 below)
Raw materials, Components and Work-in-Progress are valued at lower of
cost and net realizable value. Cost which was generally ascertained on
Weighted average basis is now ascertained on FIFO basis.Scrap generated
is not valued as it is not of significant value. Scrap is brought into
books only when identified and sold.
6. Revenue Recognition:
Revenue is recognized on accrual basis except for interest collected on
overdues from customers which is accounted on receipt basis.
7. Foreign Currency Transactions:
Transactions in foreign Currencies are recognized at exchange rate
prevailing on the date of the transaction. All monetary Assets and
liabilities denominated in foreign currency as at the Balance Sheet
date are translated at the year end exchange rates.
The company uses forward exchange contract to hedge its exposure to
movements in foreign exchange rates. The premium or discount arising at
the inception of such a forward exchange contract are amortised as
expense or income over the life of the contract. Exchange differences
on such contracts are recognized in the profit and loss statement in
the reporting period in which the exchange rates change. Any profit or
loss arising on cancellation or renewal of such contracts is recognized
as income or expense of the period.
8. Impairment of assets
At each Balance sheet date, the Company assesses whether there is any
indication that an asset may be impaired. If any such indication
exists, the company estimates the recoverable amount. If the carrying
amount of the asset exceeds its recoverable amount an impairment loss
is recognized in the Profit and Loss Account to the extent carrying
amount exceeds the recoverable amount.
9. Accounting for Government grants
Government grants received are credited directly to Capital reserves
under the Capital approach.
10. Employee Benefits
(a) Short Term Employee Benefits
All employee benefits falling due wholly within twelve months of
rendering the service are classified as short term employee benefits.
The benefits like salaries, wages, bonus etc. are recognised in the
period in which the employee renders the related service.
(b) Post - Employment Benefits
i. Defined Contribution Plans: The Company''s Provident Fund Scheme,
Super Annuation Fund and Employees'' State Insurance are defined
contribution plans. The contribution paid/payable under the schemes is
recognised during the period in which the employee renders the related
ii. Defined Benefit Plans: The Company has taken a Group Gratuity
Policy and Group Leave Encashment Scheme with LIC of India. These
constitute the Defined Benefit Plans of the company.
The Present Value of the Obligation under such defined benefit plans is
determined based on the actuarial valuation using the Projected Unit
Credit Method. The Objective of this method is to spread the cost of
each employee''s benefits over the period that the employee works for
the company. The allocation of cost of benefits to each year of service
is achieved indirectly by allocating projected benefits to years of
service. The cost allocated to each year of service is then the value
of the projected benefit allocated to that year.
The discount rates used for determining the present value of the
obligation under defined benefit plans, is based on the market yields
on Government securities as at the balance sheet date, having maturity
periods approximating to the terms of related obligations.
Actuarial gains and losses are recognised immediately in the Statement
of Profit & Loss.
In case of funded plans, the fair value of the plan assets is reduced
from the gross obligation under the defined benefit plans to recognise
the obligation on the net basis.
11. Provision for Current Tax and Deferred Income Tax
Provision for current tax is made after taking into consideration
benefits admissible under the provisions of the Income Tax Act,1961.
Deferred Tax resulting from timing difference between book and taxable
profit is accounted for using the tax rates and laws that are enacted
or substantially enacted as on the balance sheet date. The deferred tax
asset is recognized and carried forward only to the extent there is a
reasonable certainty that the asset will be realized in future.
12. Provisions, Contingent Liabilities and Contingent Assets:
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognized but are disclosed in the
notes. Contingent Assets are neither recognized nor disclosed in the
13. Intangible assets
Software which are not integral part of the hardware are classified as
Intangibles and are amortized over its estimated useful life. However
standard utility software packages are expensed at the time of
14. Borrowing costs
Borrowing costs that are attributable to the acquisition and or
construction of qualifying assets are capitalized as part of the cost
of such assets , in accordance with Accounting Standard - AS 16. A
qualifying asset is one that necessarily takes a substantial period of
time to be ready for its intended use.
15. Operating Lease:
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Payments under such leases are charged to Statement of Profit