a) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires management to make estimates and assumptions that affect the
reported amount of assets, liabilities, revenues and expenses and
disclosure of contingent liabilities on the date of the financial
statements. The estimates and assumptions used in the accompanying
financial statements are based upon management''s evaluation of the
relevant facts and circumstances as on the date of financial statements
which in management''s opinion are prudent and reasonable. Actual
results may differ from the estimates used in preparing the
accompanying financial statements. Any revision to accounting estimates
is recognised prospectively in current and future periods.
b) Fixed Assets/Intangible Assets
Fixed assets are stated at acquisition cost less accumulated
depreciation. Cost includes freight, duties, taxes and incidental
expenses related to acquisition and installation incurred upto the date
of commissioning of assets.
Intangible assets are recognized if it is probable that the future
economic benefits that are attributable to the assets will flow to the
Company and cost of the assets can be measured reliably.
Cost incurred on fixed assets which are not ready for their intended
use as on Balance Sheet date is disclosed under capital
Depreciation on fixed assets, except Press Tools, is provided on
Straight Line Method as per the rates laid down in Schedule XIV to the
Companies Act, 1956.
For Press Tools, the Company has provided depreciation on the basis of
estimated life of tools i.e., at 15% on Straight Line Method.
Leasehold Land is amortised overthe residual period of the lease.
Assets costing less than or equal to Rs.5,000 are depreciated at the
rate of 100 percent in the period of acquisition on prorate basis of
period of acquisition.
d) Impairment of Assets
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 recognised 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 Company has measured its ''value in use1 on
the basis of cash flows of next five years projections, estimation
based on current prices.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life. A previously
recognised impairment loss is increased or reversed depending on
changes in circumstances. However the carrying value after reversal is
not increased beyond the carrying value that would have prevailed by
charging usual depreciation if there was no impairment.
The Company has adopted the policy of valuing the inventories inline
with the Accounting Standard 2 (''AS- 2'') Valuation of Inventory.
f) 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
The revenue in respect of sale of products is recognised on despatch of
the material to the customer. Sales are stated net of trade discount,
duties and sales tax.
* Interest Income
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
g) Foreign Currency Transactions
* Initial recognition
Foreign currency transactions are recorded in the reporting currency
which is Indian Rupee, by applying to the foreign currency amount the
exchange rate between the reporting currency and the foreign currency
at the date of the transaction.
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
Exchange differences arising on long-term foreign currency monetary
items related to acquisition of a fixed asset are capitalized and
depreciated over the remaining useful life of the asset. For this
purpose, the Company treats a foreign monetary item as a longterm
foreign currency monetary item, if it has a term of 12 months or more
at the date of the origination.
Exchange differences arising on other long-term foreign currency
monetary items are accumulated in the Foreign Currency Monetary Item
Translation Difference Account and amortized over the remaining life
of the concerned monetary item.
All other exchange differences are recognised as income or as expenses
in the period in which they arise.
h) Retirement and Other Employee Benefits
* Short term employee benefit
All employee benefits payable wholly within twelve months of rendering
the service are classified as short- term employee benefits. These
benefits include short term compensated absences such as paid annual
leave. The undiscounted amount of short-term employee benefits expected
to be paid in exchange for the services rendered by employees is
recognized as an expense during the period. Benefits such as salaries
and wages, etc. and the expected cost of the bonus / ex-gratia are
recognised in the period in which the employee renders the related
* Post employment employee benefits Defined Contribution schemes
Contributions to the Provident Fund, Family pension fund and Employee''s
State Insurance Fund are charged to the Statement of Profit and Loss of
the year when the contributions to the respective funds are due.
Defined benefits plans
The Company''s gratuity benefit scheme is a defined benefit plan. The
Company''s net obligation in respect of the gratuity benefit scheme is
calculated by estimating the amount of future benefit that employees
have earned in return for their service in the current and prior
periods; that benefit is discounted to determine its present value, and
the fair value of any plan assets is deducted. -
The present value of the obligation under such defined benefit plan is
determined based on actuarial valuation, carried out by an independent
actuary at each Balance Sheet date, using the Projected Unit Credit
Method, which recognizes each period of service as giving rise to an
additional unit of employee benefit entitlement and measures each unit
separately to build up the final obligation.
The obligation is measured at the present value of the estimated future
cash flows. The discount rates used for determining the present value
of the obligation under defined benefit plan are based on the market
yields on Government Securities as at the Balance Sheet date.
Actuarial gains and losses are recognised immediately in the Statement
of Profit and Loss.
The Company makes annual contribution to Life Insurance Corporation of
India for the gratuity plan in respect of employees covered as per
provisions of Gratuity Act.
Other long term employee benefits
Liabilities towards compensated absences to employees are accrued on
the basis of valuations, as at the Balance Sheet date, carried out by
an independent actuary using Projected Unit Credit Method. Actuarial
gains and losses comprise experience adjustments and the effects of
changes in actuarial assumptions and are recognised immediately in the
Statement of Profit and Loss.
Some employees of the Company are entitled to superannuation, a defined
contribution plan which is administrated through Life Insurance
Corporation of India (LIC). Superannuation benefits are recognised in
the Profit & Loss account.
Assets taken under leases, where the lessor effectively retains
substantially all the risks and benefits of ownership of the leased
term, are classified as operating leases. Operating lease payments are
recognized as an expense in the Statement of Profit and Loss on a
straight-line basis over the lease term.
j) Borrowing Cost
Borrowing costs, including exchange differences arising from foreign
currency borrowings to the extent that they are regarded as an
adjustment to interest costs, directly attributable to acquisition or
construction of those fixed assets which necessarily take a substantial
period of time to get ready for their intended use are capitalised.
Other borrowing costs are recognised as an expense.
Income-tax expense comprises current tax, deferred tax charge or
Provision for current tax is made for the tax liability payable on
taxable income after considering tax allowances, deductions and
exemptions determined in accordance with the prevailing tax laws.
Deferred tax liability or asset is recognized for timing differences
between the profits/losses offered for income tax and profits/losses as
per the financial statements. Deferred tax assets and liabilities are
measured using the tax rates and tax laws that have been enacted or
substantively enacted at the Balance Sheet date.
Deferred tax asset is recognized only to the extent there is reasonable
certainty that the assets can be realized in future; however, where
there is unabsorbed depreciation or carried forward loss under taxation
laws, deferred tax asset is recognized only if there is a virtual
certainty of realization of such asset. Deferred tax asset is reviewed
as at each Balance Sheet date and written down or written up to reflect
the amount that is reasonably/virtually certain to be realized. ''
I) Expenditure on Tools, Dies, Jigs and Fixtures
In respect of tools, dies, etc, which has been fully depreciated in the
books of accounts, but found by the Company that the same are having
usage value and accordingly the expenditure incurred in reconditioning
of such tools & dies are capitalised.
m) Provisions and Contingencies
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
their present values and are determined based on 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
Contingent liabilities are disclosed in respect of possible obligations
that have arisen from past events and the existence of which will be
confirmed only by the occurrence or non-occurrence of future events not
wholly within the control of the Company.
When there is an obligation in respect of which the likelihood of
outflow of resources is remote, no provision ordisclosure is made.