a. Change in accounting policy. Presentation and disclosure of
During the year ended 31 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. 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
b. 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.
c. Tangible fixed assets
Fixed assets, except land and buildings are stated at cost, net of
accumulated depreciation and accumulated impairment losses, if any. 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.
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.
Other expense 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.
d. Depreciation on tangible fixed assets
Deprecation on fixed assets is calculated on a WDV method using the
rates specified under the Schedule XIV to the Companies Act, 1956
arrived on the basis of the useful lives estimated by the management.
e. Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
Intangible assets are amortized on a straight line basis over the
estimated useful economic life. All other intangible assets are
assessed for impairment whenever there is an indication that the
intangible asset may be impaired.
The amortization period and the amortization method are reviewed at
least at each financial year end. If the expected useful life of the
asset is significantly different from previous estimates, the
amortization period is changed accordingly. If there has been a
significant change in the expected pattern of economic benefits from
the asset, the amortization method is changed to reflect the changed
pattern. Such changes are accounted for in accordance with AS 5 Net
Profit or Loss for the Period, Prior Period Items and Changes in
Gains or losses arising from derecognizing of an intangible asset 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.
f. Borrowing Cost
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.
g. Impairment of tangible and Intangible assets
Management periodically assesses using, external and internal sources,
whether there is an indication that an asset may be impaired. An
impairment loss is recognized wherever the carrying value of an asset
exceeds its recoverable amount. The recoverable amount is higher of the
asset''s net selling price and value in use i.e. the present value of
future cash flows expected to arise from the continuing use of the
asset and its eventual disposal. An impairment loss for an asset is
reversed if there has been a change in the estimates used to determine
the recoverable amount since the last impairment loss was recognized.
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 the investments.
i. 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
reliably measured. The following specific recognition criteria must
also be met before revenue is recognized.
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,
usually on delivery of the goods.
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 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
Income from services
Revenues from maintenance contracts are recognized pro-rata over the
period of the contract as and when services are rendered. The company
collects service tax on behalf of the government and, therefore it is
not an economic benefit flowing to the company. Hence it is excluded
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head other income In the
statement of profit and loss.
Dividend income is recognized when the company''s right to receive
dividend is established by the reporting date.
j. Taxes on Income
Tax expense comprises 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 enacted in India and tax laws
prevailing in the respective tax jurisdictions where the company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Deferred Income taxes reflect the impact of timing differences between
taxable income and accounting Income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date. Deferred income tax
relating to items recognized directly in equity is recognized in equity
and not in the statement of profit and loss.
Deferred tax liabilities are recognized for taxable timing differences.
Deferred tax assets are recognized for deductible timing differences
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.
At each reporting date, the company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset 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 realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The company writes- down the carrying amount of
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 realized. 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.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the company will pay normal income tax during the
specified period. i.e the period for which MAT credit is allowed to be
carried forward. In the year in which the company recognizes MAT credit
as an asset in accordance with the Guidance Note on Accounting for
Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as MAT Credit Entitlement. The
company reviews the MAT credit entitlement asset at each reporting
date and writes down the asset to the extent the company does not have
convincing evidence that it will pay normal tax during the specified
k. Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the period 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 equity share to the extent
that they are entitled to participate in dividends relative to a fully
paid equity share during the reporting period. The weighted average
number of equity shares outstanding during the period is adjusted for
events such as bonus issue bonus element in a rights issue, share
spilt, and reverse share split consolidation of shares that have
changed the number of equity shares outstanding without a corresponding
change in resources. 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 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
and are reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
reporting date. These estimates are reviewed at each reporting date and
adjusted to reflect the current best estimates. Where the company
expects some or all of a provision to be reimbursed, for example under
an insurance contract, the reimbursement is recognized as a separate
asset but only when the reimbursement is virtually certain. The expense
relating to any provision is presented in the statement of profit and
loss net of any reimbursement.
m. Contingent liabilities
A contingent Iiability 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
n. Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
o. Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit
before tax is adjusted for the effects of transactions of a non cash
nature and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from operating, financing and investing
activities of the company are segregated.
p. Lease Accounting
a) The onetime expense incurred and management fees earned, at the time
of execution of Lease / Hire Purchase Agreements are charged to
revenue, in the year of execution itself, as they are deemed to accrue
b) Hire Purchase Assets are sold at cost and interest is charged to
Hire Purchase Debtors as per the terms of the Hire Purchase Agreement.
c) The Hire Purchase Debtors are accounted for at cost only and the
outstanding balances therein, reflect the cost of the Hire Purchase
Sales, yet to be recovered.
d) The Company writes off lease assets under finance lease, over the
lease period, by providing for Lease Equalization as per Guidance Note
of the ICAI, in respect of accounting for leases.