A. SIGNIFICANT ACCOUNTING POLICIES
1. BASIS OF PREPARATION OF financial STATEMENTS
a) The financial Statements have-Been prepared under the historical
cost convention, in accordance with the generally accepted
accounting principles and the provisions of the Companies Act, 1956 as
adopted consistently by the Company
b) The Company generally follows mercantile system of accounting and
recognises significant items of income and expenditure on accrual
basis, except for income by way of interest on calls in arrears and
expenditure by way of (a) interest on overdue bills and letters of
credit (b) brokerage, commission, claims and incentives to dealers and
agents which are accounted for on cash basis/settlement of accounts as
it is not possible to ascertain with reasonable certainty the quantum
2. FIXED ASSETS AND DEPRECIATION
a) Fixed assets are stated at cost of acquisition/construction less
accumulated depreciation. All costs including finance costs till
commencement of commercial production and adjustments arising from
foreign currency exchange rate variations relating to specific
borrowings attributed to the fixed assets are capitalised. (Refer
Note 4 (d).
b) Assets purchased under Hire Purchase are capitalised alongwith the
hire charges payable upto the date of commissioning of the commercial
production on the plant and Machinery.
c) Depreciation of fixed assets is provided on straight line method at
the rates and in the manner prescribed in Schedule XIV of the Companies
Act, 1956. Depreciation on incremental cost arising on account of
transactions of foreign currency liabilities for acquisition of fixed
assets are amortised prospective over the residual life of the assets.
(Refer Note 4 (d) )
3. FOREIGN EXCHANGE TRANSACTIONS
a) Transactions denominated in foreign currency are normally recorded
at the exchange rate prevailing at the time of the transactions.
Exchange difference arising out of subsequent settlements are dealt in
the Profit and Loss subsequent settlements are dealt in the Profit and
Loss Accounts in the year of settlement. (Refer Note 4(d)
b) Foreign currency transactions remaining unsettled at the end of the
year are translated at year end rates. Gain or loss on transactions of
long term liabilities incurred to acquire fixed assets is treated as an
adjustment t6 the carrying cost of such fixed assets.
4. FOREIGN BRANCH ACCOUNTS: Foreign branch accounts are
incorporated in the financial statements by translation at the year end
rates. (Refer Note 4(d))
Long with term investments are stated at cost.
6. INVENTORIES a) Raw-materials, stores, spares and others are valued
b) Work in progress is valued at estimated cost.
c) Finished goods are valued at lower of coast and net realisable
Sales are recognised inclusive of excise duty but net of returns,
discounts, incentives, rebates and claims. Export sales are recognised
on receipt of Bill of Lading.
8. INTER BRANCH TRANSFERS
Inter branch purchase and sales are squared off while consolidating the
9. EXCISE DUTY
Excise duty is accounted on the basis of payments made in respect of
goods cleared from the factory premises. Excise duty for goods lying in
the warehouse is neither included in the expenses nor in valuation of
inventories of such goods. This accounting practice has not impact on
profit/loss of the Company.
10. EMPLOYEES BENEFITS
Gratuity in respect of eligible employees has been provided for on the
basis of management's estimate.
Leases rentals are expressed with reference to lease terms and other
consideration except for rentals pertaining to the year up to the date
of commissioning of the assets which are capitalised.
12. AMORTISATION OF EXPENSES
Share issue expenses and Deferred revenue expenses (corporate
advertising and sales promotional) are being amortised over a period of
ten years and Market Development Expenses are being amortised over a
period of five years.