a) Change in accounting policy
Presentation and disclosure of financial statements
During the year ended March 31, 2012, the revised Schedule VI notified
under the Companies Act 1956, has become applicable to the Company, for
preparation and presentation of its financial statements. Except
accounting for dividend on investments in subsidiary Companies (see
below), 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
disclosures made in the financial statements. The Company has also
re-classified the previous year figures in accordance with the
requirements applicable in the current year.
Dividend on investment in subsidiary companies
Till the year ended March 31, 2011, the company, in accordance with the
pre-revised Schedule VI requirement, was recognizing dividend declared
by subsidiary companies after the reporting date in the current year''s
statement of profit and loss if such dividend pertained to the period
ending on or before the reporting date. The revised Schedule VI,
applicable for financial years commencing on or after April 1, 2011,
does not contain this requirement. Hence, to comply with AS -9 Revenue
Recognition, the company has changed its accounting policy for
recognition of dividend income from subsidiary companies. In accordance
with the revised policy, the company recognizes dividend as income only
when the right to receive the same is established by the reporting
date. Dividend received during the year Rs. Nil (previous year Rs.
b) Basis of preparation
The financial statements of the company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP). The company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under the Companies (Accounting Standards) Rules, 2006,(as amended) and
the relevant provisions of the Companies Act.1956. The financial
statements have been prepared under the historical cost convention on
an accrual basis except in case of assets for which revaluation is
carried out. The accounting policies adopted in the preparation of
financial statements are consistent with those of previous year, except
for the change in accounting policy explained above.
c) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
d) Tangible fixed Assets
Tangible fixed assets are stated at cost, less accumulated depreciation
and impairment losses, if any, except Land, Building and Plant &
Machinery, which had been revalued on 31.10.1992 by a Government
registered valuer on the basis of the then replacement value. The cost
comprises purchase price, borrowing costs if capitalization criteria
are met and directly attributable cost of bringing the asset to its
working condition for the intended use. Any trade discounts and rebates
are deducted in arriving at the purchase price.
Expenditure directly relating to construction activity is capitalized
(net of income, if any). Indirect expenditure specifically attributable
to construction of a project or to the acquisition of the fixed assets
or bringing it to working condition is capitalised as part of
Construction project or as a part of Fixed assets. Other indirect
expenditure incurred during the construction period which is not
related to construction activity nor is incidental thereto is charged
to Profit & Loss account.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
i. Depreciation on fixed assets (other than lease hold improvements)
is provided using Straight Line Method as per rates prescribed under
Schedule XIV of the Companies Act, 1956. The management of the Company
is of the view that this depreciation rate fairly represents the useful
life of the assets except for the following assets where a higher rate
ii. Fixed assets costing below Rs.5000 are depreciated at the rate of
iii. Depreciation on the revalued portion of fixed assets is adjusted
against the revaluation reserve.
iv. Depreciation on the amount of additions made to fixed assets due
to upgradations / improvements is provided over the remaining useful
life of the asset to which it relates.
v. Depreciation on fixed assets added/disposed off during the year is
provided on pro-rata basis.
vi. Leasehold improvements are amortised over a primary period of
lease or useful life, whichever is lower.
Software costs relating to acquisition of initial software license fee
and installation costs are capitalized in the year of purchase.
Software''s are amortized on a straight-line basis over its useful life,
which is considered to be of a period of three years.
g) Impairment of assets
i) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the asset''s net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value a pre-tax discount rate
that reflects current market assessment of the time value of money and
risks specific to asset.
ii) After impairment, depreciation is provided on the revised carrying
amount of the asset over the remaining useful life.
Where the Company is the lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit & Loss Account on a straight-line basis over the lease
Investments that are readily realizable 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. However, provision for diminution in value is made to recognize a
decline other than temporary in the value of such investments.
Inventories are valued as follows:
Raw materials, Components and stores & spares
Lower of cost and net realizable value. However, materials and other
items held for use in the production of inventories are not written
down below cost if the finished products, in which they will be
incorporated, are expected to be sold at or above cost. Cost of raw
materials, components and stores & spares is determined on a moving
weighted average basis.
Work-in-progress and finished goods
Lower of cost and net realizable value. Cost includes direct materials
and labour and a proportion of manufacturing overheads based on normal
operating capacity. Cost of finished goods includes excise duty. Cost
is determined on moving weighted average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
k) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
Sale of Goods
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership of the goods have been passed to the buyer.
The company collects sales taxes and value added taxes (VAT) on behalf
of the government and, therefore, these are not economic benefits
flowing to the company. Hence, they are excluded from revenue. Excise
duty deducted from revenue (gross) is the amount that is included in
the revenue (gross) and not the entire amount of liability arising
during the year.
Export Benefits constituting import duty benefits under Duty Exemption
Pass Book (DEPB), Duty Draw back and advance license scheme are
accounted for on accrual basis. Export benefits under Duty Exemption
Pass Book (DEPB) & Duty Draw back are considered as other operating
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable. Dividends
Dividend income is recognized when the company''s right to receive
dividend is established by the reporting date.
Policy for Insurance Claims
Claims receivable on account of insurance are accounted for to the
extent the Company is reasonably certain of their ultimate collection.
l) Foreign currency transactions
Foreign currency transactions 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 a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
Exchange differences arising on the settlement of monetary items not
covered above, or on reporting such monetary items of company at rates
different from those at which they were initially recorded during the
year, or reported in previous financial statements, are recognized as
other income or as expenses in the year in which they arise.
Forward Exchange Contracts not intended for trading or speculation
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognised in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognised as income or as expense for the
m) Retirement and other employee benefits
i. Retirement benefits in the form of Superannuation Fund (being
funded to LIC) are funded defined contribution schemes and the
contributions are charged to the Profit and Loss Account of the year
when the contributions to the respective funds are due. There are no
other obligations other than the contribution payable.
ii. Gratuity liability is defined benefit obligation and is provided
for on the basis of an actuarial valuation on projected unit credit
method made at the end of each financial year.
iii. Retirement benefits in the form of Provident Fund (where
contributed to the Regional Provident Fund Commissioner) and employee
state insurance are defined contribution scheme and the contributions
are charged to the statement of profit and loss of the year when the
contributions to the fund are due. There are no other obligations other
than the contribution payable to the respective authorities.
Retirement benefit in the form of provident Fund (Where administered by
trust created and managed by Company) is a defined benefit obligation
of the company and the contributions are charged to statement of profit
& loss of the year when the contribution to the respective funds are
due. Shortfall in the funds, if any, is adequately provided for by the
iv. Short term compensated absences are provided for based on
estimates. Long term compensated absences are provided for based on
actuarial valuation. The actuarial valuation is done as per projected
unit credit method.
v. Actuarial gains/losses are immediately taken to Profit and Loss
account and are not deferred. n) Income Taxes
Tax expense comprises of current and deferred tax. Current income tax
is measured at the amount expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961. Deferred income taxes
reflects the impact of current year timing differences between taxable
income and accounting income for the year and reversal of timing
differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. If the company
has unabsorbed depreciation and carry forward of tax losses, all
deferred tax assets are recognised only if there is virtual certainty
supported by convincing evidence that such deferred tax assets can be
realised against future taxable profits.
At each balance sheet date the Company re-assesses unrecognized
deferred tax assets. It recognises unrecognized deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
MAT credit is recognised as an asset only when and to the extent there
is convincing evidence that the company will pay normal income tax
during the specified period. In the year in which the Minimum
Alternative tax (MAT) credit becomes eligible to be recognized as an
asset in accordance with the recommendations contained in guidance note
issued by the Institute of Chartered Accountants of India, the said
asset is created by way of a credit to the profit and loss account and
shown as MAT Credit Entitlement. The Company reviews the same at each
balance sheet date and writes down the carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the
effect that Company will pay normal Income Tax during the specified
o) Borrowing Costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition,construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs
are expensed in the period they occur.
A provision is recognised when an enterprise has a present 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 a reliable estimate can be made. Provisions are not discounted to
its present value and are determined based on best management 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
management estimates. Provision for expenditure relating to voluntary
retirement is made when the employee accepts the offer of early
q) Segment Reporting Policies Identification of segments:
The Company''s operating businesses are organized and managed separately
according to the nature of products, with each segment representing a
strategic business unit that offers different products and serves
different markets. The identified segments are Manufacturing & Sale of
Polyester film and Engineering plastics.
The analysis of geographical segments is based on the geographical
location of the customers.
The geographical segments considered for disclosure are as follows:
- Sales within India include sales to customers located within India.
- Sales outside India include sales to customers located outside
Inter Segment Transfers:
Inter Segment transfers of goods, as marketable products produced by
separate segments of the Company for captive consumption, are not
accounted for in the books of account of the Company. For the purpose
of segment disclosures, however, inter segment transfers have been
taken at cost.
Allocation of common costs:
Common allocable costs are allocated to each segment in proportion to
the turnover of the segment, except where a more logical allocation is
Corporate income and expense are considered as a part of un-allocable
income & expense, which are not identifiable to any business segment.
The company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the company as a whole.
r) Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank
and in hand and short-term investments with an original maturity of
three months or less.
s) Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The company does not
recognize a contingent liability but discloses its existence in the
t) Earnings Per Share
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders (after deducting
preference dividends and attributable taxes) by the weighted average
number of equity shares outstanding during the period. Partly paid
equity shares are treated as a fraction of an equity share to the
extent that they were entitled to participate in dividends relative to
a fully paid equity share during the reporting period. The weighted
average numbers of equity shares outstanding during the period are
adjusted for events of bonus issue; bonus element in a rights issue to
existing shareholders; share split; and reverse share split
(consolidation of shares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
u) Measurement of EBITDA
As permitted by the guidance note on revised schedule VI to the
Companies Act, 1956, the company has elected to present earnings before
interest, tax, depreciation and amortization (EBITDA) as a separate
line item on the face of the statement of profit & loss. The company
measures EBITDA on the basis of profit / (loss) from continuing
operations. In its measurement, the company does not include
depreciation and amortization expenses, finance cost and tax expenses.