a) Basis of Accounting
The financial statements have been prepared to comply in all material
respects with the Notified accounting standards by Companies
(Accounting Standards) Rules, 2006 (as amended) and the relevant
provisions of the Companies Act, 1956. The financial statements have
been prepared in accordance with the generally accepted Accounting
Principles in India under the historical cost convention or an accrual
basis, except in case of assets for which provision for impairment is
made and revaluation is carried out. The accounting policies are
consistent with those used in the previous year.
b) Use of estimates
i he 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 managements
best knowledge of current events and actions, actual results could
differ from these estimates.
c) Fixed Assets
Fixed assets are stated at cost (or revalued amounts, as the case may
be), less accumulated depreciation, amortisation and impairment losses
if any. Cost comprises the purchase price and any attributable cost of
bringing the asset to its working condition for its intended use.
Borrowing costs relating to acquisition of fixed assets which take
substantial period of time to get ready for its intended use are also
included to the extent they relate to the period till such assets are
ready to be put to use.
i. Depreciation on Fixed Assets is provided on Written down
Value/Straight Line method as per Schedule XIV of the Companies Act,
ii. Fixed Assets costing rupees Five thousand or less are fully
depreciated in the year of acquisition.
i. 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 recognized wherever
the carrying amount of an asset exceeds
Its recoverable amount. The recoverable amount is the greater of the
assets net selling price and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value
at the weighted average cost of capital. After impairment, depreciation
is provided on the revised carrying amount of the asset over its
remaining useful life.
ii. Reversal of impairment losses recognised in prior years is recorded
when there is an indication that the impairment losses recognised for
the asset are no longer exist or have decreased.
b) Prior period items
All items of income/expenditure pertaining to prior period, which are
material, are accounted through prior period adjustments and the
others are shown under respective heads of account in the Profit and
c) Contingent Liabilities
The contingent liabilities are indicated by way of a note and will be
provided/ paid on crystalisation.
Investments that are readily realisable 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 of each long term
investment is made to recognize a decline other than temporary in
i. Raw materials, components, stores and spares are valued at lower of
cost and net realizable value. However, raw materials and other items
held for use in the production of inventories are not written down
below the cost if the finished products in which they will be
incorporated are expected to be sold at or above cost. Cost is
determined on FIFO basis.
ii. Goods in transit are valued at Cost
iii. Finished goods, Work in progress, Scrap, by-products and loose
tools are valued at lower of cost and net realizable value.
iv. Cost includes direct materials, labour and a proportion of
manufacturing overheads based on normal operating capacity. Cost is
determined on FIFO basis and Cost of finished goods includes excise
v. Net realisable value is the estimated selling price in the ordinary
course of business, less estimated selling costs.
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
reliably measured. Specifically the following basis is adopted:
i. Sale of Goods:
Revenue is recognized when the significant risks and rewards of
ownership of goods have passed to the buyer, which generally coincides
with delivery. Sales are inclusive of excise duty and value added
tax/sales tax and is net of sales returns and discounts. Revenue from
export sales is recognised on the date of bill of lading.
Revenue on account of price escalations is accounted for on acceptance
of such claims by the buyers.
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
iii. Export Benefits:
Export Entitlements in the form of Duty Drawback and Duty Entitlement
Pass Book (DEPB) Schemes are recognized in the Profit and Loss account
iv. Other Sundry incomes:
Insurance claims, conversion escalations are accounted for on accrual
k) Borrowing Costs
Borrowing costs that are directly attributable to the acquisition,
construction or production of Fixed Assets, which take substantial
period of time to get ready for their intended use, are capitalized.
Other Borrowing costs are recognized as an expense in the year in which
they are incurred.
I) Retirement and Other Employee Benefits
i. Gratuity liability is a defined benefit obligation and is provided
for on the basis of an actuarial valuation on projected unit credit
method made at the end of each financial year.
ii. The 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
iii. Short term compensated absences are provided on an estimated
basis. Long term compensated absences are provided for based on
actuarial valuation on project unit credit method carried by an actuary
as at the end of the year.
iv. Actuarial, gains/losses are immediately taken to profit and loss
account and are not deferred.
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased assets are classified as
Where the Company is the lessee Operating lease payments are recognised
as an expense in the profit and loss account on a straight-line basis
over the lease term.
Where the Company is the lessor Assets subject to operating leases are
included in fixed assets. Lease income is recognized in the profit and
loss account. Costs, including depreciation are recognised as an
expense in the profit and loss account.
n) Taxes on Income
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Indian Income Tax Act 1961
enacted in India. Deferred income taxes reflect 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 recognised 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 realised. If the Company
has carry forward of unabsorbed depreciation and tax losses, deferred
tax assets are recognised only, if there is virtual certainty supported
by convincing evidence that such deferred tax assets can be realised
against future taxable profits.
A provision is recognised when there is 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 its
present value and are determined based on best 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 best
p) Earnings per Share (Basic and Diluted)
Basic earnings per share are 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 year.
q) Cash Flow Statement
Cash flows are reported using indirect method. Cash and cash
equivalents in the cash flow statement comprise cash at bank,
cash/cheques in hand and Fixed Deposits with Banks.