1.1 Basis of Preparation of Financial Statements
The Financial Statements have been prepared under the historical cost
convention and in accordance with the provisions of the Companies Act,
1956. Accounting policies not referred to otherwise are consistent and
are in consonance with the generally accepted accounting principles in
1.2 Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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 reporting period. Difference between the
actual results and estimates are recognised in the period in which the
results are known / materialized.
1.3 Tangible and Intangible Fixed Assets
(i) Tangible fixed assets are stated at cost of acquisition and
subsequent improvements thereto; net of CENVAT / Value Added Tax,
rebates, less accumulated depreciation, and impairment loss, if any.
(ii) All costs, including financing costs and net charge on foreign
exchange contracts till commencement of commercial production, are
capitalised. Cost includes freight, duties, taxes and incidental
expenses related to the acquisition and installation of fixed asset.
(iii) Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated ammortisation and impairment loss,
(iv) Expenses incurred relating to the Project prior to commencement of
commercial production are classified as Project Development Expenditure
and disclosed under Capital Work-in-Progress (net of income earned
during the project development stage).
1.4 Depreciation/ Amortisation
(i) Depreciation on tangible assets is provided on straight line method
at the rates and in the manner prescribed in Schedule XIV to the
Companies Act, 1956.
(ii) Assets costing Rs. 5,000 or less are being fully depreciated in
the year of acquisition.
(iii) Cost of leasehold land is amortized over the period of lease.
(iv) The intangible assets are amortized on straight line method at the
rate and in the manner prescribed in Schedule XIV to the Companies Act
1956, and where such rate is not prescribed over the useful economic l
ife of the respective assets.
1.5 Impairment of Assets
The carrying amounts of the assets are reviewed at each balance sheet
date. An asset is treated as impaired when the carrying cost of the
asset exceeds its recoverable value. An impairment loss is charged when
the asset is identified as impaired.
1.6 Government Grants
Grants received/to be received, if any, against specified fixed asset
is/will be adjusted to the cost of the asset and in case where it is
not against any specific fixed asset, the same is/will be taken as
Capital Reserve. Further, the revenue grants are/will be recognised in
the Profit and Loss Account in accordance with the related scheme and
in the period in which it is/will be admitted.
1.7 Foreign Currency Transactions
(i) Transactions denominated in foreign currencies are normally
recorded at the exchange rates prevailing on the date of the
transaction. All transactions of integral foreign operations are
recorded by applying to the foreign currency amounts on an average
exchange rate between the reporting currency and the foreign currency.
(ii) Monetary items denominated in foreign currencies at the year end
are restated at the year end rates. In case of monetary items which are
covered by forward exchange contracts, the difference between the year
end rate and rate on the date of the contract is recognised as exchange
difference and the premium paid/received on forward contracts is
recognised over the life of the contract.
(iii) Non-monetary foreign currency items are carried at cost.
(iv) Any income or expense on account of exchange difference either on
settlement or on translation is recognised as revenue except in respect
of the project cost, same are recognized as Capital Work in Progress.
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. Provision for diminution in the value of long term investments is
made only if such a decline is other than temporary in nature in the
opinion of the management.
Inventories are valued at weighted average cost or net realizable value
whichever is lower.
1.10 Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are charged to revenue.
1.11 Employee Retirement Benefits
(i) Short term employee benefits are charged off at the undiscounted
amount in the period in which the related service is rendered.
(ii) Post employment and other long term employee benefits are charged
off in the period in which the employee has rendered services. The
amount charged off is recognized at the present value of the amounts
payable determined using actuarial valuation techniques. Actuarial
gains and losses in respect of post employment and other long term
benefits are charged to Profit and Loss Account/Project Development
Expend iture Account.
1.12 Taxes on I ncome
Provision for Income Tax is made on the basis of estimated taxable
income for the period at current rates. Tax expense comprises both
Current Tax and Deferred Tax at the applicable enacted or substantively
enacted rates. Current Tax represents the amount of Income Tax payable/
recoverable in respect of taxable income/ loss for the reporting
period. Deferred Tax represents the effect of timing difference between
taxable income and accounting income for the reporting period that
originates in one year and are capable of reversal in one or more
1.13 Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognised 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 recognised but are disclosed in the
Notes. Contingent Assets are neither recognised nor disclosed in the
1.14 Revenue Recognition
All expenses and income to the extent considered payable and receivable
respectively, unless otherwise stated, are accounted for on an accrual
basis. Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be rel
Revenue from sale of goods is recognized when the significant risks and
rewards of ownership of the goods have passed to the buyer. Sales are
disclosed net of quality claims and rebates.
1.15 Insurance Claims
Insurance claims are accounted as and when admitted / settled.