1. Basis of Preparation of Financial Statements
The financial statements of the Company are prepared under the
historical cost convention in accordance with the applicable accounting
standards issued by the Institute of Chartered Accountants of India and
on an accrual basis, except in case of Interest on Term Loans and
Working Capital Loans due to Banks and financial institutions.
2. Use of Estimates
The preparation 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 reporting period. Difference
between the actual results and estimates are recognised in the period
in which the results are known/ materialised.
3. Fixed Assets and Depreciation
a) Fixed Assets are stated at cost less accumulated depreciation.
b) All costs, including financing cost till the date of commencement of
commercial production, net charges on foreign exchange contracts and
adjustments arising from exchange rate variations relating to
borrowings attributable to fixed assets are capitalized.
c) Fixed assets, whose actual costs cannot be accurately ascertained,
are initially capitalized on the basis of estimated costs and final
adjustments for costs and depreciation, if any, are made
retrospectively on ascertainment of actual costs.
d) Grants – in – aid received from Government against purchase of fixed
assets are apportioned to the respective assets on the basis of landed
e) Machinery spares including insurance spares the use of which is
expected to be irregular is charged off to the Profit & Loss Account as
and when consumed.
f) Depreciation is provided on straight-line method at the rates and in
the manner prescribed in Schedule XIV of the Companies Act, 1956,
except for vehicles for which written down value method has been
adopted. For the purpose of determining the appropriate depreciation
rates plant & machinery falling in the category of continuous process
plant are identified on the basis of technical opinion obtained by the
4. Foreign Currency Transaction
a) Transactions denominated in foreign currencies are normally recorded
at the exchange rate prevailing at the time of transaction.
b) All monetary items denominated in foreign currency are restated at
the exchange rates prevailing as on the date of Balance Sheet and
exchange differences arising thereon are adjusted to Profit & Loss
Account, except those relating to acquisition of fixed assets – which
are adjusted to the cost of the asset.
5. Revenue Recognition
Revenue is recognized only when it can be reliably measured and it is
reasonable to expect ultimate collection.
a) Raw materials, Packing materials, Stores and spare parts are valued
at cost, generally determined on FIFO basis. Work – in – process is
valued at cost and finished goods are valued at lower of cost and net
b) The closing stock of finished goods includes Excise Duty to the
extent of sales effected in India till the date of finalization of
7. Deferred Revenue Expenditure
a) Deferred revenue expenditure is being written off over a period of
b) Catalytic materials having longer useful life are treated as
deferred revenue expenditure and are written off in five years from the
date of charging.
c) Advertisement expenditure incurred at the time of commencement of
the commercial production is written off in five years.
8. Pre - Operative Expenditure
Expenses in respect of formation of the Company and Public Issue
expenses are written off in ten years from the financial year 1997- 98
Gross Sales are inclusive of Excise Duty, Freight and transportation
charges, wherever applicable.
Goods sold in domestic market are treated as sales on delivery to the
carriers. Export sales are treated as sales on endorsement of shipping
bills by Customs Authorities.
Purchases of imported materials are accounted for on the basis of
landed costs and other expenses incurred for bringing the inventories
to their present location and condition. Purchases affected within
India are net of Central Sales Tax since the same is recoverable.
a) Provision for income- tax is made on the basis of the estimated
taxable income for the current accounting period in accordance with the
Income Tax Act, 1961
b) Deferred Tax Assets/Liabilities resulting from timing difference is
accounted for in pursuance to the provision of the Accounting Standard
22 (AS – 22) “Accounting for Taxes on Income” issued by The Institute
of Chartered Accountants of India at the rates prevailing at the year
end and to the extent the timing difference are expected to
12. Retirement Benefits
a) Year-end accrued liabilities on account of gratuity payable to
employees are recognized on the basis of actuarial valuation.
b) Leave encashment benefit are recognized on the basis of actuarial
13. Contingent Liabilities
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 recognised but are disclosed in the
notes. Contingent Assets are neither recognized nor disclosed in the