a) Fixed Assets
i) Tangible Assets: Fixed Assets are recorded at cost of acquisition /
construction less accumulated depreciation and impairment losses, if
any. Cost comprises of the purchase price and attributable cost of
bringing the assets to its working condition for its intended use, but
excludes CENVAT/Service Tax/ VAT credit availed.
ii) Intangible Assets: Intangible Assets are recognised when it is
probable that the future economic benefits that are attributable to the
asset will flow to the enterprise and the cost of the asset can be
b) Borrowing Cost
Borrowing costs consist of interest and other costs that the Company
incurs in connection with the borrowing of funds and exchange
differences arising from foreign currency borrowing to the extent that
they are regarded as an adjustment to interest costs.
Financing costs relating to borrowed funds attributable to construction
or acquisition of fixed assets for the period up to the completion of
construction or acquisition of fixed assets are included in the cost of
the assets to which they relate.
c) Depreciation & Amortization
Depreciation on tangible fixed assets is provided, on straight line
method on Plant and Machinery and on written down value method on all
other fixed assets, on the basis of the depreciation rates prescribed
in Schedule XIV of the Companies Act, 1956 or based on useful life of
the asset, whichever is higher.
Intangible assets are amortized using the straight-line method over
estimated useful life as under:-
i) Software & Licenses: over a period of six years
ii) Technical know-how : over a period of six years from the date of
Inventories are valued at lower of cost or estimated net realizable
value. Cost of inventories comprises all cost of purchase, cost of
conversion and other costs incurred in bringing the inventories to
their present location and condition.
The cost of inventories is arrived at on the following basis:
Raw Materials and Stores : Weighted Average Cost
Stock-in-Process : Raw Materials at Weighted Average
Cost & absorption of Labour and
Finished Goods : Raw Materials at Weighted Average
Cost & absorption of Labour and
Investments are generally of Long Term nature and are stated at cost
unless there is other than temporary diminution in their value as at
the date of Balance Sheet.
Investments in Overseas Associates / Subsidiary are stated at cost of
f) 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 to the financial statements. Contingent assets are neither
recognized nor disclosed in the financial statements.
g) Revenue recognition
i) Revenue from sale of goods is recognized when the significant risks
and rewards of ownership of goods are transferred to the customer,
which is generally on dispatch of goods. Sales are net of discounts,
VAT/sales tax and returns; excise duties collected.
ii) Income on turnkey contracts (including erection charges) is
accounted for on the basis of billings made on customers against
mutually agreed billing schedules.
Advances received from customers in respect of contracts, which are not
in relation to work performed thereon, are shown as Advance from
Amounts retained by customers until satisfaction of conditions
specified in the contract for release of such amounts are reflected as
Credits are taken for claims in respect of cost escalation and extra
work as and when and to the extent admitted by customers.
iii) Interest revenues are recognized on a time proportion basis taking
into account the amount outstanding and the rate applicable.
iv) Dividend from investments in Shares is accounted for when the right
to receive dividend is established.
v) Export incentives are accounted for as and when the claims thereof
have been admitted by the authorities.
vi) Revenue in respect of other income is recognized when a reasonable
certainty as to its realization exists.
h) Foreign Currency Transactions
Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing at the time of the transaction.
Monetary items denominated in foreign currencies at the yearend are
restated at the yearend rates. In case of items, which are covered by
forward exchange contracts, the difference between the yearend rate
and the rate on the date of contract is recognized as exchange
difference and the premium paid on forward contracts is recognized over
the life of the contract.
Non-monetary foreign currency items are carried at cost.
Any income or expense on account of exchange difference either on
settlement or on translation is recognized in the statement of profit
i) Retirement Benefits
Defined Contribution Plan : The Company''s contributions paid/payable
for the year to Provident Fund and ESIC are charged to the statement of
profit and loss for the year.
Defined Benefit Plan : The Company''s liabilities towards gratuity and
leave encashment are determined using the projected unit credit method
which considers each period of service as giving rise to an additional
unit of benefit entitlement and measures each unit separately to build
up the final obligation. Past services are recognized on a
straight-line basis over the average period until the amended benefits
become vested. Actuarial gain and losses are recognized immediately in
the statement of profit and loss as income or expense. Obligation is
measured at the present value of estimated future cash flows using a
discounted rate that is determined by reference to market yields at the
balance sheet date on Government bonds where the currency and terms of
the Government bonds are consistent with the currency and estimated
terms of the defined benefit obligation.
j) Impairment of Assets
Fixed Assets are reviewed for impairment losses whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is then recognized for the amount by
which the carrying amount of the assets exceeds its recoverable amount,
which is the higher of an asset''s net selling price and value in use.
k) Accounting for Tax
(a) Current Tax is accounted on the basis of estimated taxable income
for the current accounting year and in accordance with the provisions
of Income Tax Act, 1961.
(b) Deferred Tax resulting from timing differences between
accounting and taxable profit for the period is accounted by using tax
rates and laws that have been enacted or substantially enacted as at
the balance sheet date. Deferred tax assets are recognized only to the
extent there is reasonable certainty that the assets can be realized in
future. Net deferred tax liability is arrived at after setting off
deferred tax assets.