1.1 BASIS OF ACCOUNTING
The Financial Statements are prepared as per historical cost convention
and in accordance with the Generally Accepted Accounting Principles in
India, the provisions of the Companies Act 1956 and the applicable
Accounting Standards notified under the Companies (Accounting
Standards) Rules, 2006. All Income and Expenditures having material
bearing on the Financial Statements are recognized on accrual basis.
During the year ended 31st March, 2012 the revised schedule VI notified
under the Companies Act, 1956 has become applicable to the Company for
preparation and presentation of its financial statement. The adoption
of revised schedule VI does not impact recognition and measurement
principles followed for preparation of financial statements. However,
it has significant impact on presentation and disclosure made in the
financial statements. The Company has also reclassified the previous
year''s figures in accordance with the requirement applicable in the
1.2 USE OF ESTIMATES
The presentation of the Financial Statements in conformity with the
Generally Accepted Accounting policies requires, the management to make
estimates and assumptions that affect the reported amount of Assets and
Liabilities, Revenues and Expenses and disclosure of contingent
liabilities. Such estimation and assumptions are based on
management''s evaluation of relevant facts and circumstances as on
date of Financial Statements. Difference between the actual results and
estimates are recognized in the period in which the results are known /
1.3 FIXED ASSETS AND DEPRECIATION
Fixed Assets are recorded at cost of acquisition / construction less
accumulated depreciation and impairment losses, if any. Cost Comprises
of purchase price and any attributable cost of bringing the assets to
its working condition for its intended use, but excluding Cenvat /
Service Tax / VAT credit availed. Where the construction or development
of any such asset requiring a substantial period of time to set up for
its intended use, is funded by borrowings if any, the corresponding
borrowing cost are capitalized up to the date when the asset is ready
for its intended use.
Depreciation has been provided on Plant & Machinery on the
straight-line method at the rates specified in Schedule XIV of the
Companies Act, 1956.
For all other assets depreciation has been provided on written down
value method at the rates specified in Schedule XIV of the Companies
Fixed assets individually costing Rs 5,000 or less are fully depreciated
in the year of purchase/ installation. Depreciation on additions and
disposals during the current reporting period is provided on a pro-rata
Intangible assets are shown at Cost of Acquisition less accumulated
amortization. Intangible assets are amortized on straight line basis
over their individual respective useful life. The management estimates
the useful life of the assets as under:
Investments which are expected to be realizable within twelve months
from the Balance Sheet date are classified as current Investments. All
other Investments are classified as Non-current Investments.
Current Investments are carried at lower of the cost and fair market
value of each investment individually. Non-current investments are
carried at cost less provision for diminution other than temporary, in
value if any as at the Balance sheet date.
Inventories are stated at Cost or Net Realizable Value whichever is
lower after considering credit of VAT and Cenvat. Cost of
Raw-Material, Spares and Components is determined on weighted average
Cost of Work in Progress includes cost of raw material, appropriate
share of labour and manufacturing overheads and valued at lower of cost
or net realizable value.
Finished Goods are valued at lower of Cost including excise duty
payable thereon or Net realizable value.
1.6 REVENUE RECOGNITION
Sales are stated net of rebate and trade discount and exclude Central
Sales Tax, State Value Added Tax. With regard to sale of products,
income is reported when practically all risks and rights connected with
the ownership have been transferred to the buyers. This usually occurs
upon dispatch, after the price has been determined.
All the items of expenses and income are accounted on accrual basis,
except Dividend Income, Insurance claims, Commission and Duty Drawback
received which are accounted on receipt basis.
1.7 OPERATING LEASE
Lease revenue under operating Lease is recognized as income on straight
Lease expenses under operating lease are recognized as expense on
straight line basis.
1.8 EMPLOYEE BENEFITS
(a) Short Term
Short Term employee benefits are recognized as an expense at the
undiscounted amount expected to be paid over the period of services
rendered by the employees to the company.
(b) Long Term
The Company has both defined contribution and defined benefit plans, of
which some have assets in approved funds. These plans are financed by
the Company in the case of defined contribution plans.
(c) Defined Contribution Plans
These are plans in which the Company pays pre-defined amounts to
separate funds and does not have any legal or informal obligation to
pay additional sums. These comprise of contributions to Employees
Provident Fund and Superannuation Fund. The Company''s payments to the
defined contribution plans are reported as expenses during the period
in which the employee performs the services that the payment covers.
(d) Defined Benefit Plans
Expenses for defined benefit gratuity payment plans are calculated as
at the balance sheet date by independent actuaries in the manner that
distributes expenses over the employees working life. These commitments
are valued at the present value of the expected future payments, with
consideration for calculated future salary increases, using a
discounted rate corresponding to the interest rate estimated by the
actuary having regard to the interest rate on Government Bonds with a
remaining term i.e. almost equivalent to the average balance working
period of employees.
(e) Other Employee Benefit
Compensated absences which accrue to employees and which can be carried
to future periods but are expected to be encased or availed in twelve
months immediately following the year end are reported as expenses
during the year in which the employees perform the services that the
benefit covers and the liabilities are reported at the undiscounted
amount of the benefits after deducting amounts already paid.
1.9 EXCISE DUTY
Excise duty payable on production and custom duty payable on imports
are included in the value of finished goods, both in respect of goods
cleared and lying in Bonded warehouse.
1.10 FOREIGN CURRENCY TRANSACTIONS
Foreign Currency transaction are recorded in the reporting currency by
applying to the foreign currency amount the exchange rate between the
reporting currency and the foreign currency at the date of the
Foreign Currency Monetary items are reported using the closing rate.
Non Monetary items which are carried in terms of historical cost
denominated in foreign currency are reported using the exchange rate at
the date of transaction. Exchange differences arising on the
settlement of monetary items or/on reporting a company''s monetary
items at rates different from those at which they were initially
recorded during the year or reported in previous financial statements
are recognized as income or as expense in the year in which they arise.
Monetary assets & liabilities denominated in foreign currency remaining
unsettled at the year-end are translated at closing rates.
The premium or discount arising at inception of forward exchange
contract is amortized as expense or income over the life of the
contract. Exchange difference on such contract is recognized in the
statement of profit and loss.
1.11 RESEARCH AND DEVELOPMENT EXPENSES
All revenue expenditure related to R&D including expenses in relation
to development of product/ processes are charged to Statement of Profit
and loss in the period in which it is incurred.
Capital expenditure on research and development is classified
separately under tangible/intangible assets and depreciated on the same
basis as other fixed assets.
1.12 BORROWING COST
Borrowing costs are recognized in the period to which they relate,
regardless of how the funds have been utilized, except where it relates
to the financing of construction or development of assets requiring a
substantial period of time to prepare for their intended future use.
Interest on borrowings if any is capitalized up to the date when the
asset is ready for its intended use. The amount of interest capitalized
for the period is determined by applying the interest rate applicable
to appropriate borrowings.
1.13 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
A provision is recognized when the Company has a present legal or
constructive 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 reliable estimate can be made. Provisions
(excluding long term benefits) are not discounted to its 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 adjusted to reflect the current best estimates.
Contingent liabilities are not recognized but are disclosed in the
notes to the Financial Statements. A contingent asset is neither
recognized nor disclosed.
Provision for Current Tax is made as per the provisions of the Income
Tax Act, 1961.
Deferred Tax resulting from timing differences that are temporary in
nature between accounting and taxable profit is accounted for, using
the tax rates and laws that have been enacted as on the Balance Sheet
date. The deferred tax asset is recognized and carried forward only to
the extent that there is a reasonable or virtual certainty, as the case
may be, that the asset will be realized in future.
1.15 EARNING PER SHARE
The basic Earnings Per Share is calculated by dividing the Net profit
or loss for the period attributable to Equity Shareholders by the
weighted average number of Equity Shares outstanding during the current
Diluted Earning Per Share is calculated by dividing net profit
attributable to equity Shareholders (after adjustment for diluted
earnings) by average number of weighted equity shares outstanding
during the current reporting period.
1.16 CASH AND CASH EQUIVALENTS
Cash and Cash equivalents comprise cash and balance with banks. The
company considers all highly liquid investments with the remaining
maturity at the date of purchase of three months or less and that are
readily convertible to known amount of cash to be cash equivalent.
1.17 CASH FLOW STATEMENT
The Cash Flow Statement is prepared by the indirect method set
out in Accounting Standard 3 on Cash Flow Statements issued by
ICAI and presents the cash flows by operating, investing and financing
activities of the Company.
1.18 IMPAIRMENT OF ASSETS
The carrying value of assets of the Company''s cash generating units
are reviewed for impairment annually or more often if there is an
indication of decline in value. If any indication of such impairment
exists, the recoverable amounts of those assets are estimated and
impairment loss is recognized, if the carrying amount of those assets
exceeds their recoverable amount. The recoverable amount is the greater
of the net selling price and their value in use. Value in use is
arrived at by discounting the estimated future cash flows to their
present value based on appropriate discount factor.
1.19 PRODUCT WARRANTY EXPENSES
Product warranty expenses are estimated by the management on the basis
of technical evaluation and past experience. Provision is made for
estimated liability in respect of warranty cost in the period of
recognition of revenue.