a. Basis of Preparation
The Company prepares its accounts under the Historical Cost Convention
modified by revaluation of certain fixed assets. The financial
statements have been prepared to comply in all material respects with
the Accounting Standards notified by the Companies Accounting Standards
Rules, 2006 (as amended) and the relevant provisions of the Companies
Act, 1956. For recognition of Income and expenses, Mercantile System of
Accounting is followed.
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 below.
i) Presentation and disclosure of financial statements
During the year ended 31st March 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
reclassified the previous year figures in accordance with the
requirements applicable in the current year.
ii) Dividend on Investment in subsidiary companies
Till the year ended 31st March 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 1 April 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
b. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon management''s best
knowledge of current events and actions, actual results could differ
from these estimates.
c. Revenue Recognition
Sale of Goods
Revenue from sale of goods including manufactured products is
recognized upon passage of title to the customers, in accordance with
the Sale of Goods Act, 1930.
Customs Duty benefits in the form of advance license entitlements are
recognized on export of goods, and are set off from material costs.
Revenue is recognized on a time proportion basis taking into account
the amount outstanding and the rate applicable.
Revenue is recognized when the shareholders'' right to receive payment
is established by the balance sheet date.
d. Fixed Assets
Fixed Assets are stated at cost (or revalued amounts, as the case may
be) less accumulated depreciation and impairment losses, if any. Cost
comprises of Purchase price inclusive of duties (net of Cenvat), taxes,
incidental expenses, erection/commissioning expenses etc up to the date
the asset is ready for its intended use. In case of revaluation of
fixed assets, the original cost as written up by the valuer, is
considered in the accounts and the differential amount is transferred
to revaluation reserve.
The carrying amounts of assets are reviewed at each balance sheet date
to determine if there is any indication of impairment based on
external/internal factors. An impairment loss is recognised wherever
the carrying amount of an asset exceeds its recoverable amount which
represents the greater of the net selling price of assets and their
''Value in use''. The estimated future cash flows are discounted to
their present value using pre tax discount rates and risks specific to
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 stated at lower of cost or fair value on individual
investment basis. Long Term Investments are considered at cost, unless
there is other than temporary decline in value thereof, in which case
adequate provision is made for diminution in the value of investments.
Investments in foreign companies are carried at exchange rates
prevailing on the date of their acquisition.
f. Depreciation and Amortization
i) The classification of plant & machinery into continuous and
non-continuous process is done as per technical certification and
depreciation thereon is provided accordingly.
ii) a) Depreciation is provided on straight-line method at the rates
and in the manner specified in Schedule
XIV of the Companies Act, 1956, except for the assets shown in (b)
below. Further, in respect of certain assets whose residual economic
life, as determined by the approved valuer, is less than the residual
life as per the books, depreciation is provided at the adjusted higher
rates so that the value thereof is written off over the economic life
determined by the valuer.
b) Based upon their respective useful economic life, depreciation on
the following assets is provided at a rate higher than those specified
in Schedule - XIV of the Companies Act 1956:
c) The Company has estimated the residual value of Plant & Machinery,
moulds and computers to be 2% of the cost as against 5% specified in
Section 205 (2)(c) of the Companies Act, 1956. Accordingly, 98% of the
value of fixed assets is being depreciated in the accounts.
iii) Depreciation includes amount a mortised on a straight-line basis in
respect of leasehold properties over the respective lease period.
iv) Depreciation on fixed assets added/disposed off during the year is
provided on pro-rata basis with reference to the month of
v) In case of impairment, if any, depreciation is provided on the
revised carrying amount of the assets over its remaining useful life.
g. Intangible Assets
i) Research costs are expensed as incurred. Development expenditure
incurred on an individual project is capitalized when its future
recoverability can reasonably be regarded as assured. Any expenditure
capitalized is a mortised over the period of expected future sales from
the related project, not exceeding ten years.
The carrying value of development costs is reviewed for impairment
annually when the asset is not yet in use, and otherwise when events or
changes in circumstances indicate that the carrying value may not be
ii) Acquired computer software and licenses are capitalized on the
basis of costs incurred to bring the specific intangibles to its
intended use. These cost are a mortised on a straight-line basis over
their estimated useful life of five years.
iii) Acquired Goodwill is a mortised on a straight-line basis over a
period of five years. Goodwill is also tested for impairment every
year, if there are any indicators for impairment.
i) Finance lease:
a ) Assets given under a finance lease are recognized as receivables at
an amount equal to the net investment in the lease. Lease rentals are
apportioned between principal and interest as per the IRR method. The
principal amount received reduces the net investment in the lease and
interest is recognized as revenue. Initial direct costs such as legal
charges, brokerage etc are recognized immediately in the Profit & Loss
b) Assets acquired under finance leases, which effectively transfer to
the Company substantially all the risks and benefits incidental to
ownership of the leased items, are capitalized at the lower of the fair
value and present value of the minimum lease payments at the inception
of the lease term and disclosed as leased assets. Lease payments are
apportioned between the finance charges and reduction of the lease
liability so as to achieve a constant rate of interest on the remaining
balance of the liability. Finance charges are charged directly against
c) A leased asset is depreciated on a straight line basis over the
useful life of the asset or the useful life envisaged in Schedule XIV
to the Companies Act, 1956, whichever is lower. However, if there is no
reasonable certainty that the company will obtain the ownership by the
end of the lease term, the capitalized asset is depreciated on a
straight-line basis over the shorter of the estimated useful life of
the asset, the lease term or the useful life envisaged in Schedule XIV
to the Companies Act, 1956.
ii) Operating leases:
a) Assets acquired under Operating Leases represent assets where the
less or effectively retains substantially all the risks and benefits of
their ownership. Operating lease payments are recognized as an expense
in the Profit and Loss Account on a straight-line basis over the lease
b) Assets given under operating leases are included in fixed assets.
Lease income is recognized in the Profit and Loss Account on a
straight-line basis over the lease term. Costs, including depreciation
are recognized as an expense in the Profit and Loss Account.
i. Foreign Currency Transactions
i) Initial Recognition
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.
iii) Exchange Differences
Exchange differences arising on the settlement / conversion of monetary
items, are recognized as income or expenses in the year in which they
iv) Forward Exchange Contracts
The premium or discount arising at the inception of forward exchange
contracts is amortized as expense or income over the life of the
contract. Exchange differences on such contracts are recognized 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 recognized as income or as expense for the
i) Raw materials, components, stores and spares are valued at 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 is determined on a weighted
ii) Work-in-progress and finished goods are valued at 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 a weighted average basis. Net realizable value is the
estimated selling price in the ordinary course of business, less
estimated costs of completion to make the sale.
k. Borrowing Costs
Borrowing costs attributable to the acquisition and/or construction of
qualifying assets are capitalized as a part of the cost of such assets,
up to the date when such assets are ready for their intended use. Other
borrowing costs are charged to Profit and Loss Account.
l. Expenditure on new projects and substantial expansion
Expenditure directly relating to construction activity are capitalized.
Expenditure which is not directly attributable to the construction
activity incurred during the construction period are capitalized as
part of the indirect construction cost. Other indirect expenditure
(including borrowing costs) incurred during the construction period
which are not related to the construction activity nor are incidental
thereto, are charged to the Profit and Loss Account. Income earned
during construction period, if any, is deducted from the total of the
All direct capital expenditure on expansion are capitalized. As regards
indirect expenditure on expansion, only that portion is capitalized
which represents the marginal increase in such expenditure involved as
a result of capital expansion. Both direct and indirect expenditure are
capitalized only if they increase the value of the asset beyond its
original standard of performance.
m. Excise Duty
Excise Duty is accounted for at the point of manufacture of goods and
accordingly, is considered for valuation of finished goods stock lying
in the factories as on the balance sheet date.
n. Retirement and other employee benefits
i) Retirement Benefit 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 contribution to the respective funds
are due. There are no obligations other than the contribution payable
to the respective trusts.
ii) Gratuity and Post Retirement Medical Benefit liability are defined
benefit obligations and are provided for on the basis of an actuarial
valuation made at the end of each financial year.
iii) Long term compensated absences are provided for based on an
actuarial valuation made at the end of each financial year.
iv) Payments made under the Voluntary Retirement Scheme are charged to
the Profit and Loss account.
v) Pension liability is split into a defined benefit portion and a
defined contribution portion as indicated in note no. 31. The
contributions towards defined contribution are charged to the Profit
and Loss account of the year when the contribution becomes due. The
Defined benefit portion is provided for on the basis of an actuarial
valuation made at the end of each financial year.
vi) Actuarial gains/losses are immediately taken to profit and loss
account and are not deferred.
vii) The current and non current bifurcation is done as per Actuarial
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 Indian Income Tax Act. 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 recognized 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 realized. In situations
where the company has unabsorbed depreciation or carry forward tax
losses, all deferred tax assets are recognized only if there is virtual
certainty supported by convincing evidence that they can be realized
against future taxable profits.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The company writes down the carrying amount of the deferred
tax assets 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
realized. Any such write-down is reversed to the extent that it becomes
reasonable certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
p. Earning per share
Earnings per share is calculated by dividing the net profit or loss for
the year attributable to equity shareholders by the weighted average
number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period 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.
A provision is recognized 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 made in terms of
Accounting Standard-29, are not discounted to its present value and are
determined based on the 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
Provision for product related warranty/guarantee costs is based on the
claims received up to the year end as well as the management estimates
of further liability to be incurred in this regard during the warranty
period, computed on the basis of past trend on such claims.
r. Segment reporting
Based on the synergies, risks and returns associated with business
operations and in terms of Accounting Standard - 17, the Company is
predominantly engaged in a single reportable segment of Storage
Batteries and allied products during the year. The analysis of
geographical segments is based on the areas in which customers of the
Company are located.
s. Contingent Liabilities
No provision is made for liabilities, which are contingent in nature,
but if material, these are disclosed by way of notes.
t. Cash and cash equivalents
Cash and cash equivalents for the purpose of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.