1 Basis of preparation of Financial Statements:
The financial statements are prepared and presented under the
historical cost convention, on the accrual basis of accounting and in
accordance with the provisions of the Companies Act, 1956 (''the Act''),
and the accounting principles generally accepted in India and comply
with the accounting standards (''AS'') prescribed in the Companies
(Accounting Standards) Rules, 2006 issued by the Central Government, in
consultation with the National Advisory Committee on Accounting
Standards (''NACAS'') to the extent applicable.
2 Use of estimates:
The preparation of the financial statements in conformity with
generally accepted accounting principles (''GAAP'') in India requires
management to make estimates and assumptions that affect the reported
amount of assets, liabilities and the disclosure of contingent
liabilities on the date of the financial statements. The estimates and
assumptions used in the accompanying financial statements are based on
management''s evaluation of the relevant facts and circumstances as of
the date of the financial statements. Actual results could differ from
those estimates. Any revision to the accounting estimates is recognised
prospectively in current and future periods.
3 Fixed Assets:
i) Fixed assets are capitalised at acquisition cost (net of duty / tax
credits availed, if any) including directly attributable costs such as
freight, insurance and specific installation charges for bringing the
assets to working condition for use.
ii) Administrative & other general overhead expenses that are
specifically attributable to construction or acquisition of fixed
assets or bringing the fixed assets to working condition are allocated
and capitalised as a part of fixed assets.
iii) The assets acquired under hire-purchase agreement are included in
the fixed assets of the Company, where the terms of the agreement
provide that the assets shall eventually become the property of the
hirer or confer on him an option to purchase the assets.
i) Depreciation on fixed assets is provided on straight-line method at
the rates and in the manner prescribed in Schedule XIV of the Companies
Act, 1956, except for leasehold land which is amortised over the period
of the lease.
ii) Fixed Assets individually costing Rs. 5,000/- or less, are
depreciated fully in the year of purchase.
5 Impairment of Assets:
As at each Balance Sheet date, the carrying amount of assets (other
than inventory) is tested for impairment, so as to determine:
i) the provision for impairment loss, if any.
ii) the reversal of impairment loss recognised in previous periods, if
any. Impairment loss is recognised when the carrying amount of an
asset or a cash generating unit exceeds its recoverable amount.
The recoverable amount of the asset (or where applicable that of the
cash generating unit to which the asset belongs) is determined at the
higher of the Value in use is the present value of estimated future
cash flows expected to arise from the continuing use of an asset and
from its disposal at the end of its useful life.
i) Raw materials, stores, spares and consumable tools, packing
materials, work-in-process and finished goods are valued at lower of
cost or net realisable value.
ii) In case of raw materials, stores, spares, consumable tools and
packing materials, cost represents purchase price and other costs
incurred for bringing the inventories to their present location and
conditions and is determined on weighted average basis. iii) In case
of work-in-process and finished goods, cost represents cost of raw
material, cost of conversion such as direct labour, direct expenses,
etc. and production overheads which are based on normal level of
iv) Finished goods at lower of weighted average cost or net realisable
value, cost includes related overheads and excise duty paid/payable on
7 Employee Benefts:
i) All employee benefits payable wholly within twelve months of
rendering the service are classified as short term employee benefits.
Short term employee benefits at the balance sheet date, are recognised
as an expense as per the Company''s scheme based on expected obligations
on undiscounted basis.
Defined Contribution Plan
a) Provident Fund
The Company contributes to the government administered provident fund.
The fixed contributions to these funds are charged to Profit and Loss
Contributions to the superannuation fund, which is administered by Life
Insurance Corporation of India, are charged to the Profit and Loss
Defined Benefit Plan Leave Encashment:
The employees of the company are entitled to encashment of un-availed
leave. The employees can carry forward a portion of the unutilised
leave and receive cash compensation at retirement or termination of
employment. The Company records an obligation for encashment of
un-availed leave in the period in which the employee renders the
services, based on an actuarial valuation at the balance sheet date,
carried out by an independent actuary. Actuarial gain or loss
recognised in the statement of profit or loss as income or expense.
The Company''s contribution towards gratuity made under Group Gratuity
Scheme with Life Insurance Corporation of India (LIC) is determined
based on the amount recommended by LIC as per Actuarial valuation.
The whole time Directors of the Company are not covered by the gratuity
trust created under Group Gratuity Fund. Provision for their gratuity
liability has been provided for according to the actuarial valuation
carried out by the independent Actuary.
8 Borrowing Costs:
Borrowing costs that are attributable to the acquisition, construction
or Production of a Qualifying asset are capitalised as part of cost of
such Asset till such time as the asset is ready for its intended use or
sale. A Qualifying Asset is an Asset that necessarily requires a
substantial period of time to get ready for its intended use or sale.
All other borrowing costs are recognised as an expense in the period in
which they are incurred.
9 Foreign Currency Transactions:
i) Foreign Currency transactions are recorded on initial recognition in
the reporting currency, using the exchange rate at the date of the
transaction. At each balance sheet date, foreign currency monetary
items are reported using the closing rate.
Non-monetary items which are carried at historical cost denominated in
a foreign currency are reported using the exchange rate at the date of
Exchange differences that arise on settlement of monetary items or on
reporting at each balance sheet date of the company''s monetary items at
the closing rate are:
a) adjusted in the cost of Fixed Assets specifically financed by
borrowing contracted up to 31st March, 2007 and to which the exchange
differences relate, provided the assets are acquired from outside
b) recognised as income or expense in the period in which they arise,
in cases other than (a) above.
10 Research & Development:
a) Revenue expenditure on research and development is charged under the
respective heads of account.
b) Capital expenditure on research and development is included as part
of fixed assets and depreciated on the same basis as other fixed
Long term investments are valued at cost. A provision for diminution in
value is made only if such decline is other than temporary.
12 Deferred Taxation:
Deferred tax is recognised, on timing differences, being the difference
between taxable income and accounting income that originate in one
period and are capable of reversal in one or more subsequent periods.
Deferred tax assets in respect of unabsorbed depreciation and carry
forward of losses are recognised if there is virtual certainty that
there will be sufficient future taxable income available to realise
13 Revenue Recognition:
i) Revenue from Sale of product is recognised on dispatch or
appropriation of goods in accordance with the terms of sale and is
inclusive of excise duty, cess and insurance charges and freight
recoverable from the customers but net of Vat, Sales Tax and Sales
ii) Revenue from services is recognised in accordance with the specific
terms of contract or performance.
14 Accounting for interest in joint ventures:
Interest in jointly controlled entities:
(a) Incorporated jointly controlled entities:
(i) Income on investments in incorporated jointly controlled entities
is recognized when the right to receive the same is established.
(ii) Investment in such joint ventures is carried at cost after
providing for any diminution in value which is other than temporary in