a. Accounting Convention
The Financial Statements are prepared to comply in all material aspects
with all the applicable Accounting Standards notified by the Companies
(Accounting Standards) Rules, 2006 and the relevant provisions of the
Companies Act, 1956.
c. Foreign Currency Translation
Transactions in Foreign Exchange are accounted for at the exchange
rates prevailing on the date of the transaction. The exchange
differences arising out of the settlements, including those on
liabilities relating to fixed assets are dealt with in the Profit and
Loss Account. Monetary assets and liabilities are restated at the year
end rates and the resultant gains or losses are recognized in the
Profit and Loss account.
Long term Investments are stated at cost less provision, if any, for
diminution other than temporary dimunition in the value of such
investments. Current investments are valued at lower of cost and net
Inventories are valued at lower of cost and net realizable value,
except for ghee, a by-product, which is valued at net realizable value.
Cost is determined on the basis of the weighted average method. It
includes all the appropriate allocable overheads and excise duty
wherever applicable. Provision for inventory obsolescence is made based
on the best estimates of management.
f. Research and Development
The revenue expenditure is charged against the profits for the year in
which it is incurred. Capital expenditure is accounted in the same way
as fixed assets.
g. Employee Benefits
The Company has a Defined Contribution plan for post employment benefit
namely Superannuation Fund which is recognized by the income tax
authorities. This fund is administered through trustees and the
Companys contribution thereto is charged to revenue every year.
The Companys contributions to State plans namely Employees State
Insurance Fund and Employees Pension Scheme 1995 are charged to
revenue every year.
The Company has Defined Benefit plans namely leave encashment
/compensated absences for workers, Gratuity and Provident Fund for all
employees and post-employment medical assistance scheme for certain
employees, the liability for which is determined on the basis of an
actuarial valuation at the end of the year. The Gratuity Fund and
Provident Fund are recognized by the income tax authorities and are
administered through trustees. The post-employment medical assistance
scheme is an insured benefit plan wherein the Company annually pays
insurance premium to NIC (National Insurance Company) and the liability
for future premiums in respect of the underlying benefits is determined
on the basis of an actuarial valuation at the year end. The Company
provides for compensated absences for management, executive and staff
(Short term defined benefit) during the year on an arithmetical basis.
Actuarial gains and losses comprise experience adjustments and the
effects of changes in actuarial assumptions and are recognised
immediately in the Profit and Loss Account as income or expense.
Termination benefits are recognised as an expense immediately.
h. Revenue Recognition
Sales comprise of value of sale of goods (net of returns/estimated
returns) excluding sales tax and trade discounts but including excise
duty. Sales are recognized when the title of the goods is passed to the
customer. Insurance and other Claims are recognized on an accrual
basis. Dividend income is accounted for in the year in which the right
to receive the same is established. Interest on Investments is
recognized on a time proportion basis taking into account the amounts
invested and the fixed rate of interest. Also, Refer Note 22(c).
Tax expense/(saving) is the aggregate of current year tax and deferred
tax charged/(credited) to the Profit and Loss Account for the year.
a) Current Tax
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. Provision for taxation for the Companys financial year ended
December 31, 2010 has been determined based on the results for 3 months
ended March 31, 2010 (Assessment Year 2010-2011) and for the 9 months
ended December 31, 2010 (Assessment Year 2011-2012). The ultimate
liability for the Assessment Year 2011-2012, however, will be
determined on the total income of the Company for the year ending on
March 31, 2011.
b) Deferred Tax
Deferred tax assets & liabilities resulting from timing differences
between book profits and tax profits are accounted for under the
liability method and measured at substantially enacted rates of tax at
the Balance Sheet date to the extent that there is reasonable/virtual
certainty that sufficient future taxable income will be available
against which such deferred tax asset/virtual liability can be
c) Fringe Benefits Tax
Provision for Fringe Benefits Tax is made in respect of employee
benefits and other specified expenses as determined under the Income
Tax Act, 1961.
j. Borrowing Costs
The interest on working capital management is charged against the
profits for the year in which it is incurred. Interest on borrowings
for capital assets is capitalized till the date of commencement of
commercial use of the asset.
Lease rentals in respect of operating leases are charged to the Profit
and Loss Account on a straight line basis over the term of the lease.
l. Provisions and Contingent Liabilities
A provision is recognized when there is a present obligation as a
result of past events for which it is probable that an outflow of
resources will be required to settle the obligation and in respect of
which a reliable estimate can be made. These are reviewed at each
balance sheet date and adjusted to reflect the current best estimates.
Contingent liabilities are disclosed after an evaluation of the facts
and legal aspects of the matters involved.