1.1 Basis of preparation of financial statements
These financial statements have been prepared on the accrual basis of
accounting, under the historical cost convention, in accordance with
the Companies Act, 1956, the applicable accounting standards notified
by The Companies Accounting Standard Rules, 2006 and the Guidance note
issued by the Institute of Chartered Accountants of India.
1.2 Use of estimates
The presentation of financial statements requires estimates and
assumptions to be made that 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 reported period. Differences
between the actual result and estimates are recognised in the period in
which the results are known/ determined.
1.3 Fixed Assets
Fixed Assets are stated at their original cost including incidental
expenses related to acquisition and installation, less accumulated
depreciation. Cost comprises of the purchase price and any other
attributable cost of bringing the assets to its working condition for
its intended use.
At the balance sheet date, an assessment is done to determine whether
there is any indication of impairment in the carrying amount of
Company''s fixed assets. If any such indication exists, the asset''s
recoverable amount is estimated. An impairment loss is recognised
whenever the carrying amount of an asset exceeds its recoverable
After recognition of impairment loss, the depreciation charge for the
assets is adjusted in future periods to allocate the asset''s revised
carrying amount, less its residual value (if any), on straight line
basis over its remaining useful life.
1.4 Borrowing Costs
Borrowing Costs that are directly attributable to acquisition of
qualifying assets are capitalized for the period until the asset is
ready for intended use. A qualifying asset is an asset that necessarily
takes substantial period of time to get ready for its intended use,
Other borrowing costs are recognised as an expense in the period in
which they are incurred.
(i) Depreciation on Fixed Assets is provided on Straight Line Method at
rates and in the manner specified in Schedule XIV of the Companies Act,
(ii) Depreciation on additions/deletion is provided on pro rata basis.
(iii) Intangible assets are amortised over a period of five years.
(iv) Lease hold land is amortised over the period of lease.
(i) Raw Materials, Stock-in-process, Finished Goods are valued at lower
of cost or net realizable value. Cost of stock-in-process and finished
goods include materials, labour, manufacturing overhead and other cost
incurred in bringing the inventories to their present location. Excise
duty on goods manufactured by the company and remaining in inventory is
included as a part of valuation of finished goods.
(ii) Stock of stores, spares, consumable and packing materials are
valued at cost.
1.7 Revenue Recognition
(i) Revenue in respect of sale of products and services are recognised
upon despatch of products and the services rendered to the customers.
Sales are stated at contractual realisable values, net of excise duty,
value added tax and trade discount. Export Sales are shown on C.I.F.
Basis, whenever contract is of C.I.F
(ii) Export Incentives are accounted for on accrual basis.
1.8 Foreign Currency Transactions
(i) Foreign currency transactions and forward exchange contracts used
to hedge foreign currency transactions are initially recognised at the
spot rate on the date of the transaction/contract.
(ii) Monetary assets and liabilities relating to foreign currency
transactions and forward exchange contracts remaining unsettled at the
end of the year are translated at year end rates.
The difference in translation and realised gains and losses on foreign
exchange transactions, are recognised in the Profit and Loss Account.
Further in respect of transaction covered by forward exchange contract,
the difference between the contract rate and the spot rate on the date
of the transaction is charged to the Profit and Loss account over the
period of the contract.
1.9 Retirement Benefits
Gratuity and Leave Encashment liability is accounted for on accrual
basis computed as per actuarial valuation made at the end of each
financial year in accordance with AS-15 (Revised).
1.10 Excise/Custom Duty and Service Tax
Excise duty has been accounted on the basis of both payments made in
respect of goods cleared from factory premises and also provision made
for manufactured goods lying unsold at year end in factory premises.
1.11 Research and Development Expenditure
Revenue Expenditure in respect of Research and Development is charged
to the Profit and Loss Account and Capital Expenditure is added to the
cost of Fixed Assets in the year in which it is incurred.
1.12 Stores and Spares
Stores, spares and consumables, except L.D.O. and Diesel are charged to
profit and loss account as and when they are procured and stock of such
items as at the end of the year is accounted at cost.
(i) Current year tax is provided based on taxable income computed in
accordance with the provisions of the Income-tax Act, 1961.
(ii) Deferred tax is recognized, subject to the consideration of
prudence, on timing differences, being the difference between taxable
incomes and accounting income that originate in one period and are
capable of reversal in one or more subsequent period. Deferred tax
assets are recognized on unabsorbed depreciation and carry forward of
losses based on virtual certainty that sufficient future taxable income
will be available against which such deferred tax assets can be
1.14 Provisions and Contingencies
A provision is recognised when the Company has 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
present value and are determined based on best estimate required to
settle the obligation at the Balance Sheet date. These are reviewed at
each Balance Sheet date and adjustment to reflect the current best
estimates. Contingent assets and liabilities are not recognised.
1.15 Provisions and Prepayment of Expenses
Provisions and Prepayment of expenses up to Rs. 5,000/- in each case are
charged to revenue.