1. Basis of Preparation of Accounts
The Financial Statements have been prepared to comply in all material
aspects with all the applicable accounting principles in India, the
applicable accounting standards notified u/s 211(3C) of the Companies
Act, 1956 and the relevant provisions of the Companies Act, 1956.
2. Fixed Assets and Depreciation
a) Fixed Assets are carried at cost of acquisition or construction or
at manufacturing cost (in case of own manufactured assets) less
accumulated depreciation. All costs relating to the acquisition and
installation of fixed assets are capitalized and include borrowing
costs relating to funds attributable to construction or acquisition of
underlying assets up to the date of asset is ready for its intended
Expenditure that relate directly to the specific asset and attributable
to the construction activity incurred during the period of construction
is charged to capital work-in-progress and on completion the costs are
allocated to the respective Fixed Assets.
b) Depreciation is charged for assets other than plant & machinery from
the beginning of the month in which the asset is ready for use. Plant
and machinery is depreciated from the date the asset is ready for use.
Depreciation has been provided on the straight-line method on a
pro-rata basis at the rates specified in Schedule XIV of the Companies
Act, 1956, except in case of computers, office equipments, vehicles,
furniture & fittings and certain plant & machinery items where
depreciation rates higher than the rates specified in Schedule XIV of
the Companies Act, 1956 have been used and are as mentioned below.
Furniture & Fittings 19.00
Plant & Machinery (Material
handling equipments) 19.00
Office Equipments 23.75
Mechanical & Testing Equipments 23.75
Imported Machinery 11.31
Leasehold Land is being amortised
over the lease period.
Assets costing less than or equal to Rs.5,000 are depreciated at the
rate of 100% in the year of purchase.
The Company reviews the useful lives of the fixed assets periodically
and accordingly charges the unamortised balance of the asset over the
residual life of the asset.
Long term investments are carried at cost less permanent diminution of
value. Short term investments are carried at lower of cost or market
value. Dividends arising out of investments are being accounted on
Inventories are valued at cost or net realisable value whichever is
lower. Cost is determined on First in First out (FIFO) basis. Cost of
finished goods and work in progress are inclusive of material cost,
appropriate overheads and excise duty, where applicable.
5. Foreign Currency Transactions
a) Foreign currency transactions are recorded at the exchange rates
prevailing at the date of transaction. Exchange differences arising on
settlement of transactions, are recognised as income or expense in the
year in which they arise.
b) At the balance sheet date, all assets and liabilities denominated in
foreign currency are reported at the exchange rates prevailing at the
balance sheet date.
c) In case of forward foreign exchange contracts where an underlying
asset or liability exists at the balance sheet date, the difference
between the forward rate and the exchange rate at the inception of the
contract is recognised as income or expense over the life of the
d) In case of forward foreign exchange contracts taken for highly
probable /forecast transactions, the net loss, if any, calculated on
Mark to Market principle as at the balance sheet date is recorded.
e) Profit or loss arising on cancellation or renewal of a forward
contract is recognised as income or expense in the year in which such
cancellation or renewal is made.
6. Revenue Recognition
Sales are recognised on transfer of risk and rewards to customers and
are accounted for inclusive of excise duty and are net of sales tax.
a) Current tax Charge
The Provision for taxation is based on assessable profits of the
company as determined under the Income Tax Act, 1961.
The Company also provides for such disallowances made on completion of
assessments pending appeals, as considered appropriate depending on the
merits of each case.
b) Fringe Benefit Tax:
Provision for Fringe Benefit tax has been made as per the provisions of
the Income Tax Act,1961.
c) Deferred Tax
The tax expense/credit on account of deferred tax is charged or
credited to the profit and loss account for the year. The Company
provides for deferred tax using the liability method, based on the tax
effect of timing differences resulting from the recognition of items in
the financial statements and in estimating its current income tax
provision. Deferred tax charge or credit is recognised using the tax
rates that have been enacted or substantially enacted by the balance
Deferred tax assets arising from temporary differences are recognised
only if there is reasonable certainty of realisation of such assets.
Provision for warranty is made on the basis of technical evaluation by
the management and provided for in the year of sale.
9. Employee Benefits
The Company has Defined Contribution plans for post employment
benefits namely Provident Fund and Superannuation Fund which are
recognised by the income tax authorities. These funds are administered
through trust and the Companys contributions thereto are charged to
revenue every year. The Companys contribution to State plans namely
Employee State Insurance Fund and Employee Pension Scheme 1995 are
charged to revenue every year.
The Company has Defined Benefit plans namely leave
encashment/compensated absence, Gratuity and interest on Provident Fund
for employees, for which the liability is determined on the basis of an
actuarial valuation at the end of the year. The Gratuity Fund is
recognised by the income tax authorities and is administered through a
trust. Gains and losses arising out of actuarial valuations are
recognised immediately in the Profit and Loss Account as income or
Lease rental in respect of assets taken on Cancelable Operating Lease
are recognised on a straight-line basis over the period of lease.
11. Research & Development expenses
Revenue expenditure on research and development is charged off in the
year in which it is incurred. Capital expenditure on research and
development is shown as addition to fixed assets and depreciated
12. Impairment of Assets
At each balance sheet date, the Company assesses whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount. If the carrying
amount of the asset exceeds its recoverable amount, an impairment loss
is recognised in the profit and loss account to the extent the carrying
amount exceeds the recoverable amount.
13. Provisions and Contingencies
The Company creates a provision when there is a present obligation as a
result of a past event that probably requires an outflow of resources
and a reliable estimate can be made of the amount of the obligation. A
disclosure of contingent liability is made when there is a possible
obligation or a present obligation that will probably not require
outflow of resources or where a reliable estimate of the obligation
cannot be made.