(i) Accounting Convention
These financial statements have been prepared under the historical cost
convention, on the accrual basis of accounting and in accordance with
the Generally Accepted Accounting Principles (''GAAP'') in India and
comply with the accounting standards prescribed by the Companies
(Accounting Standards) Rules, 2006 and in accordance with the
provisions of the Companies Act, 1956, as adopted consistently by the
(ii) Use of Estimates
The preparation of financial statements requires the management of the
Company to make estimates and assumptions that affect the reported
balances of assets and liabilities and disclosures relating to the
contingent liabilities as at the date of the financial statements and
reported amounts of income and expenses during the period. Example of
such estimates include provisions for doubtful debts, employee
retirement benefit plans, provision for income taxes, accounting for
contract costs expected to be incurred to complete construction and the
useful lives of fixed assets.
(iii) Fixed Assets and Depreciation / Amortization
Fixed assets are stated at cost less accumulated
depreciation/amortization. Cost includes purchase price and all other
attributable costs of bringing the assets to working condition for
Depreciation on assets is charged proportionately from the month of
acquisition/ installation on a straight line basis on rates prescribed
by Schedule XIV of the Companies Act, 1956 other than for the following
assets, where higher rates are used based on the useful life of the
assets as determined by the Company:
Furniture and fixtures, office equipment
(except data processing equipment) 10%
Pallets used for autoclaving
(included in plant and equipment) 20%
Leasehold land and leasehold improvements are amortized over the term
of the lease.
Technical know-how is amortized over the term of the agreement.
Computer software is amortized over a period of 3 years.
Assets acquired under finance lease are recognized at the lower of the
fair value of the leased assets at inception and the present value of
minimum lease payments and are depreciated over the lease term or
useful life, whichever is shorter. Lease payments are apportioned
between the finance charges and the reduction of the outstanding
liability. The finance charge is allocated to periods during the lease
term at a constant periodic rate of interest on the remaining balance
of the liability.
(iv) Revenue Recognition
Revenue from sale of products is recognized on dispatch of goods to
customers which coincides with the transfer of risk and rewards
associated with the ownership of goods. Sales are net of rebates and
sales taxes, wherever applicable.
Revenue from erection business on fixed price contracts is recognized
in accordance with the percentage of completion method based on the
Long term investments are stated at cost less provision for other than
temporary diminution in the carrying value of each investment. Current
investments are carried forward at lower of cost or fair value.
Inventories are valued at cost or net realizable value after providing
for obsolescence and other losses whichever is lower and includes all
applicable costs incurred in bringing goods to their present location
and condition. The basis for determining cost for various categories of
inventories is as follows:
Stores and spare parts - Weighted average
Raw materials - Weighted average
Materials in transit - At cost
Work in progress and
Finished goods - Material cost plus appropriate
share of lab our, manufacturing
and other overheads.
Stock in trade - Weighted average
(vii) Research and Development Costs
Research and development costs of revenue nature are charged to the
Statement of Profit and Loss when incurred. Expenditure of capital
nature is capitalized and depreciated in accordance with the rates set
out in paragraph 1 (iii) above.
(viii) Employee Benefits (See also Note 2.27)
a. Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be
paid in exchange of services rendered by employees is recognized during
the period when the employee renders the services. These benefits
include compensated absences and performance incentives.
b. Post-employment benefit plans
The Company has various schemes of retirement benefits namely provident
fund, superannuation schemes and gratuity, which are administered by
trustees of independently constituted trusts recognized by the
The Company''s contributions towards provident fund are deposited in a
trust formed by the Company under the Employees Provident Fund and
Miscellaneous Provisions Act, 1952. Contributions to superannuation
fund are deposited in a separate trust. These trusts are recognized by
the Income Tax authorities. The contributions to the trusts are managed
by the trustees of the respective trusts.
The Company''s superannuation scheme and the employee''s provident fund
scheme are defined contribution schemes. The Company''s contribution
paid/ payable under these schemes are recognized as expenses in the
Statement of Profit and Loss during the period in which the employee
renders the related service. The Provident Fund scheme additionally
requires the Company to guarantee payment of interest at rates notified
by the Central Government from time to time, for which shortfall as at
the Balance Sheet date, if any, is provided for.
The Company''s gratuity scheme is a defined benefit scheme. For defined
benefit schemes, the cost of providing benefits is determined using
projected unit credit method, with actuarial valuation being carried
out at each balance sheet date. Actuarial gains and losses are
recognized in full in the profit & loss account for the period in which
they occur. Past service cost is recognized to the extent the benefits
are already vested, and otherwise is amortized on a straight-line
method over the average period until the benefits become vested.
The retirement benefit obligation recognized in the balance sheet
represents the present value of the defined benefit obligations as
adjusted for unrecognized past service cost, and as reduced by the fair
value of scheme assets. Any asset resulting from this calculation is
limited to past service cost, plus the present value of available
refunds and reductions in future contributions to the scheme.
Benefits comprising compensated absences constitute other employee
benefits. The liability for compensated absences is provided on the
basis of an actuarial valuation done by an independent actuary at the
year end. Actuarial gains and losses are recognized immediately in the
Statement of Profit and Loss.
(ix) Borrowing Costs
Borrowing costs that are attributable to the acquisition, construction
or production 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.
(x) Foreign Exchange Transactions
Transactions in foreign currencies are recorded at the exchange rate
prevailing on the date of the transaction. Monetary items denominated
in foreign currency and outstanding at the balance sheet date are
translated at the exchange rate ruling on that date. Exchange
differences arising on foreign currency transactions are recorded as
income or expense in the period in which they arise.
In respect of forward contracts taken by the Company, the difference
between the forward rate and the exchange rate at the date of the
transaction is recognized as expense over the life of the forward
The Company enters into derivative contracts in the nature of interest
rate swaps and forward contracts with an intention to hedge its
existing assets and liabilities, firm commitments and highly probable
transactions. Derivative contracts which are closely linked to the
existing assets and liabilities are accounted as per the policy stated
for Foreign Exchange Transactions.
All other derivative contracts are marked-to-market and losses are
recognized in the Statement of Profit and Loss. Gains arising on the
same are not recognized, until realized, on grounds of prudence.
The Company had opted for accounting the exchange rate differences
arising on reporting of Long term foreign currency monetary items in
line with the Companies (Accounting Standard) Amendments Rules, 2009 on
Accounting Standard ''AS11 - The Effects of Change in Foreign Exchange
Rates'' (See also Note 2.36).
(xi) Taxation (See also Note 2.28)
Income tax comprises current tax and deferred tax. Deferred tax assets
and liabilities are recognized for the future tax consequences of
timing differences, subject to the consideration of prudence. Deferred
tax assets and liabilities are measured using the tax rates enacted or
substantively enacted at the balance sheet date.
(xii) Earnings Per Share (See also Note 2.37)
The Company reports basic and diluted earnings per equity share in
accordance with Accounting Standard ''AS20 - Earning Per Share''.
Basic earnings per equity share has been computed by dividing net
profit after tax by the weighted average number of equity shares
outstanding for the year. Diluted earnings per equity share is computed
using the weighted average number of equity shares and dilutive
potential equity shares outstanding during the year except where the
result would be anti-dilutive.
(xiii) Impairment of Assets
At each balance sheet date, the Company reviews the carrying amount of
its assets to determine whether there is any indication that those
assets suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the
extent of impairment loss. Recoverable amount is the higher of an
assets net selling price and value in use. In assessing value in use
the estimated future cash flows expected from the continuing use of the
asset and from its disposal are discounted to their present value using
a discount rate that reflects the current market assessments of time
value of money and the risks specific to the asset.
Reversal of impairment loss is recognized as income in the Statement of
Profit and Loss.
(xiv) Contingencies/ Provisions
A provision is recognized when the Company has a present obligation as
a result of past event; it is probable that an outflow of resources
embodying economic benefits 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
estimate of the expenditure required to settle the obligation at the
balance sheet date. These are reviewed at each balance sheet date and
adjusted to reflect the current best estimate. A contingent liability
is disclosed, unless the possibility of an outflow of resources
embodying the economic benefit is remote.
(xv) Employee Stock Option Scheme (See also Note 2.45)
Stock options granted to the employees under the stock options schemes
are accounted as per the accounting treatment prescribed by the
Employee Stock Option and Employees Stock Purchase Scheme Guidelines,
1999 issued by Securities and Exchange Board of India. Accordingly, the
excess of average market value of the shares over the preceding two
weeks of the date of grant of options over the exercise price of the
options is recognized as deferred employee compensation and is charged
to the Statement of Profit and Loss on straight line basis over the
vesting period of the options.
(xvi) Leases (See also Note 2.35)
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased asset are classified as
operating leases. Operating lease charges are recognized as an expense
in the Statement of Profit and Loss on a straight - line basis over the
Leases under which the Company assumes substantially all the risks and
rewards of ownership are classified as finance leases. The lower of
fair value of asset and present minimum lease rentals is capitalized as
fixed assets with corresponding amount shown as lease liability. The
principal component in the lease rentals is adjusted against the lease
liability and interest component is charged to Statement of Profit and
(xvii) Export Incentives
Export benefits are accounted for in the year of exports based on
eligibility and there is no uncertainty in receiving the same.
(xviii)Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit /
(loss) before extraordinary items and tax is adjusted for the effects
of transactions of non-cash nature and any deferrals or accruals of
past or future cash receipts or payments. The cash flows from
operating, investing and financing activities of the Company are
segregated based on the available information.