1. Basis of Accounting:
The financial statements are prepared in accordance with Indian
Generally Accepted Accounting Principles (GAAP) under the
historical cost convention (except for certain revalued fixed assets)
on the accounting principles of a going concern and the Company follows
mercantile system of accounting and recognizes income and expenditure
on accrual basis except those with significant uncertainties. GAAP
comprises mandatory accounting standards issued by th6 Institute of
Chartered Accountants of India (ICAI), the provisions of the
Companies Act, 1956 and guidelines issued by the Securities and
Exchange Board of India. Accounting policies have been consistently
applied except where a newly issued accounting standard is initially
adopted or a revision to an existing accounting standard requires a
change in accounting policy hitherto in use.
2. Revenue Recognition:
Sale is recognised on the basis of date of dispatch / Bill of lading
and as and when significant risks and rewards of ownership are
transferred to the customers.
Sales include excise duty and freight, wherever applicable. Claims and
Rebates are excluded therefrom.
3. Use of estimates:
The presentation of financial statements in conformity with Generally
Accepted Accounting Principles (GAAP),requires the management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, and the disclosure of contingent liabilities on the
date of financial statements. Actual results may differ from these
estimates. Any revision to accounting estimates is recognised
4. Fixed Assets:
a) Buildings, Plant and Machinery and Electrical Installations acquired
up to 31st March, 1993 were revalued on 1st April, 1993 and are stated
at updated book value less depreciation. Other assets are stated at
cost less accumulated depreciation.
b) Expenditure during construction period is included under Capital
Work-in-Progress and the same is allocated to the respective Fixed
Assets on the completion of its construction.
5. Depreciation / Amortisation and Impairment loss:
a) Depreciation (including on revalued assets) is provided on Straight
Line Method at the rates and in the manner prescribed in Schedule XIV
to the Companies Act, 1956. Depreciation on the amounts ''capitalised
during the year on account of foreign exchange fluctuation is provided
prospectively over'' the residual life of the assets.
b) Leasehold premium is being amortised over the remaining period of
lease after the commencement of production.
c) The Company assesses at each Balance Sheet date whether there is any
indication that any asset may be impaired. If any such indication
exists, the carrying value of such assets is reduced to its recoverable
amount and the impairment loss is charged to Profit & Loss Account. If
at the Balance Sheet date there is any indication that a previously
assessed impairment loss no longer exists, then such loss is reversed
and the asset is restated to that effect.
Long-Term Investments are carried at cost and provision is made to
recognize any decline, other than temporary, in the value of such
7. Valuation of Inventories:
a) Inventories are valued at the lower of the cost and net realisable
b) Cost of raw materials is determined on specific identification
c) Cost of stores, spares, packing materials and fuel is determined on
weighted average basis.
d) Finished goods and work-in-progress include conversion and other
costs incurred in bringing the inventories to their present location
8. Employee benefits:
Employee Benefits in the form of Provident Fund is a defined
contribution scheme 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 to the respective trusts.
Gratuity liability under the Payment of Gratuity Act, 1972 is a defined
benefit obligation and is provided for on the basis of the actuarial
valuation made at the end of each financial year.
Short term compensated absences are provided for based on estimates.
Long term compensated absences are provided for based on actuarial
Actuarial gains/losses are immediately taken to profit and loss account
and are not deferred.
9. Transaction of Foreign Currency Items:
Transaction in Foreign Currency is recorded at the rate of exchange in
force at the date of transaction. Foreign Currency assets and
liabilities are stated at the rate of exchange prevailing at the year
end and resultant gains / losses are recognised in the Profit and Loss
Account. Premium / Discount in respect of forward foreign exchange
contracts is recognised over the life of the contracts.
10. Government Grants:
Capital grants relating to specific assets are reduced from the gross
value of the Fixed Assets and Capital grants for Project Capital
Subsidy are credited to Capital Reserve. Other revenue grants are
credited to Profit & Loss account or deducted from the related
11. Borrowing Costs:
Interest and other costs in connection with the borrowing of the funds
to the extent related/attributed to the acquisition/construction of
qualifying fixed assets are capitalised up to the date when such assets
are ready for its intended use and other borrowing costs are charged to
Profit & Loss Account.
Provision for current tax is made on the basis of the estimated taxable
income for the current accounting year in accordance with the Income
Tax Act, 1961.
The deferred tax for timing differences between the book and tax
profits for the year is accounted for using the tax rates and laws that
have been enacted or substantively enacted as of the balance sheet
date. Deferred tax assets arising from timing differences are
recognised to the extent there is reasonable/virtual certainty that
these would be realised in future and are reviewed for the
appropriateness of their respective carrying values at each balance
13. Provisions, Contingent Liabilities and Contingent Assets:
A provision is made based on a reliable estimate when it is probable
that an outflow of resources embodying economic benefits will be
required to settle an obligation.
Contingent Liabilities in respect of show cause notices received are
considered only when they are converted into demands. Contingent
Liabilities under various fiscal laws include those in respect of which
the Company/ Department is in appeal. Contingent liabilities are
disclosed by way of notes to accounts.
Contingent assets are not recognised or disclosed in the financial