a. Accounting Convention
The financial statements are prepared under the historical cost
convention, on accrual basis, in accordance with the generally accepted
accounting principles in India, the applicable Accounting Standards
notified under Section 211(3c) of the Companies Act, 1956 and specified
in the Companies (Accounting Standard) Rules, pronouncements of the
Institute of Chartered Accountants of India and the provisions of the
Companies Act, 1956.
b. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Management to make
estimates and assumptions that affect the reported balances of assets
and liabilities as of the date of the financial statements and reported
amounts of income and expenses during the period. Management believes
that the estimates used in the preparation of financial statements are
prudent and reasonable. Actual results could differ from the estimates.
c. Fixed Assets
Fixed Assets are stated at cost of acquisition or construction, less
accumulated depreciation. Cost includes all expenses related to
acquisition and installation of the concerned assets.
Direct financing cost incurred during the construction period on major
projects is also capitalised.
Fixed assets acquired under finance lease are capitalised at the lower
of their fair value and the present value of the minimum lease
d. Asset Impairment
Management periodically assesses using, external and internal sources,
whether there is an indication that an asset may be impaired. An
impairment occurs where the carrying value of the Asset exceeds its
recoverable amount. Recoverable amount is higher of an asset''s net
selling price and its value in use. 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. An
impairment loss, if any, is recognised in the period in which the
impairment takes place.
e. Operating Leases
Leases of assets under which all the risks and rewards of ownership are
effectively retained by the lessor are classified as operating leases.
Lease payments under operating leases are recognised as an expense on a
straight- line basis over the lease term.
Investments are classified into current and long-term investments. Long
term investments are carried at cost. Cost of acquisition includes all
costs directly incurred on the acquisition of the investment. Provision
for diminution, if any, in the value of long-term investments is made
to recognise a decline, other than of a temporary nature. Current
investments are stated at lower of cost and net realisable value.
Inventories are valued at lower of cost and estimated net realisable
value. Cost is computed on the weighted average basis and is net of
CENVAT. Finished goods and work-in-progress include cost of conversion
and other costs incurred in bringing the inventories to their present
location and condition. Finished goods valuation also includes excise
duty. Provision is made for cost of obsolescence and other anticipated
losses, whenever considered necessary.
h. Provisions and Contingent Liabilities
Provisions are recognised when the Company has a present obligation as
a result of a past event; it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and when a reliable estimate of the amount of the obligation can be
No Provision is recognized for -
A. Any possible obligation that arises from past events and the
existence of which will be confirmed only by the occurrence or
non-occurrence of one or more uncertain future events not wholly within
the control of the Company; or
B. Any present obligation that arises from past events but is not
recognised because -
a) It is not probable that an outflow of resources embodying economic
benefits will be required to settle the obligation; or
b) A reliable estimate of the amount of obligation cannot be made.
Such obligations are recorded as Contingent Liabilities. These are
assessed periodically and only that part of the obligation for which an
outflow of resources embodying economic benefits is probable, is
provided for, except in the extremely rare circumstances where no
reliable estimate can be made.
Contingent Assets are not recognized in the financial statements since
this may result in the recognition of income that may never be
i. Revenue Recognition
- Sales are recognised when goods are supplied and are recorded net of
returns, trade discounts, rebates, sales taxes and excise duties.
- Income from processing operations is recognised on completion of
production / dispatch of the goods, as per the terms of contract.
- Export incentives are accounted on accrual basis and include the
estimated value of export incentives receivable under the Duty
Entitlement Pass Book Scheme.
- Dividend income is recognised when the right to receive the same is
- Interest income is recognised on a time proportion basis.
- Insurance claims and transport and power subsidies from the
Government are accounted on cash basis when received.
- Expenses are accounted for on accrual basis and provision is made for
all known losses and liabilities.
- Revenue expenditure on research and development is charged to the
Statement of Profit and Loss of the year in which it is incurred.
Capital expenditure incurred during the year on research and
development is shown as addition to fixed assets.
k. Borrowing Costs
Borrowing costs that are directly attributable to the acquisition of an
asset that necessarily takes a substantial period of time to get ready
for its intended use are capitalised as part of the cost of that asset
till the date it is put to use. Other borrowing costs are recognised as
an expense in the period in which they are incurred.
l. Foreign Currency Transactions
i) Transactions in foreign currency are recorded at the exchange rates
prevailing on the date of the transaction. Monetary assets and
liabilities denominated in foreign currency remaining unsettled at the
period end are translated at the period end exchange rates. The
difference in translation of monetary assets and liabilities and
realised gains and losses on foreign currency transactions are
recognised in the Statement of Profit and Loss.
ii) Forward exchange contracts, remaining unsettled at the period end,
backed by underlying assets or liabilities are also translated at
period end exchange rates. Premium or discount on forward foreign
exchange contracts is amortised over the period of the contract and
recognised as income or expense for the period. Realised gain or losses
on cancellation of forward exchange contracts are recognised in the
Statement of Profit and Loss of the period in which they are cancelled.
iii) Non-Monetary foreign currency items like investments in foreign
subsidiaries are carried at cost and expressed in Indian currency at
the rate of exchange prevailing at the time of making the original
iv) The Government of India, Ministry of Corporate Affairs has during
the year amended the Companies (Accounting Standards) Rules, 2006, in
respect of Accounting Standard (AS) 11 relating to The Effects of
Changes in Foreign Exchange Rates, wherein enterprises have been given
an option to accumulate exchange differences in a Foreign Currency
Monetary Item Translation Difference Account subject to the conditions
specified in the Notification. Accordingly, the Company has exercised
the option to accumulate the foreign currency gain/losses in the
Foreign Currency Monetary Item Translation Difference Account.
The Company uses forward exchange contracts to hedge its foreign
exchange exposures and commodity futures contracts to hedge the
exposure to oil price risks. Gains or losses on settled contracts are
recognised in the Statement of Profit and Loss. Gains or losses on the
commodity futures contracts are recorded in the Statement of Profit and
Loss under Cost of Materials Consumed.
n. Employee Benefits
i) Short-term Employee benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short-term employee benefits. Benefits
such as salaries, performance incentives, etc., are recognised as an
expense at the undiscounted amount in the Statement of Profit and Loss
of the year in which the employee renders the related service.
ii) Post Employment Benefits
a) Defined Contribution Plans
Payments made to a defined contribution plan such as Provident Fund
maintained with Regional Provident Fund Office and Superannuation Fund
are charged as an expense in the Statement of Profit and Loss as they
Upto the previous year all provident fund contributions, whether made
to the Regional Provident Fund Office or to the Provident Fund Trust
administered by the Company were considered as Defined Contribution
b) Defined Benefit Plans Gratuity Fund
Company''s liability towards gratuity to past employees is determined
using the projected unit credit method which considers each period of
service as giving rise to an additional unit of benefit entitlement and
measures each unit separately to build up the final obligation. Past
services are recognised on a straight line basis over the average
period until the amended benefits become vested. Actuarial gain and
losses are recognised immediately in the Statement of Profit and Loss
as income or expense. Obligation is measured at the present value of
estimated future cash flows using a discounted rate that is determined
by reference to market yields at the Balance Sheet date on Government
Securities where the currency and terms of the Government Securities
are consistent with the currency and estimate terms of the defined
Provident Fund Contributions other than those made to the Regional
Provident Fund Office of the Government which are made to the Trust
administered by the Company are considered as Defined Benefit Plans.
The interest rate payable to the members of the Trust shall not be
lower than the statutory rate of interest declared by the Central
Government under the Employees Provident Funds and Miscellaneous
Provisions Act, 1952 and shortfall, if any, shall be made good by the
c) Other Long Term Employee Benefits
Other Long Term Employee Benefits viz., leave encashment and long
service bonus are recognised as an expense in the Statement of Profit
and Loss as and when it accrues. The Company determines the liability
using the Projected Unit Credit Method, with the actuarial valuation
carried out as at the Balance Sheet date. Actuarial gains and losses in
respect of such benefits are charged to the Statement of Profit and
o. Incentive Plans
The Company has a scheme of Performance Linked Variable Remuneration
(PLVR) which rewards its employees based on Economic Value Addition
(EVA). The PLVR amount is related to actual improvements made in EVA
over the previous year when compared with expected improvements.
Up to March 31, 2009, the EVA awards would flow through a notional bank
whereby only the prescribed portion of the bank is distributed each
year and the balance is carried forward. The amount distributed out of
the notional bank is charged to Statement of Profit and Loss. The
notional bank was held at risk and charged to EVA of future years and
was payable at that time, if future performance so warranted. The
notional bank balance accumulated till March 31, 2009, as at the
beginning of the current year is being paid @ 33% every year on the
reducing balance. The entire EVA award for the year has been charged
to the Statement of Profit and Loss.
p. Depreciation and Amortisation
i) Leasehold land is amortised equally over the lease period.
ii) Leasehold Improvements are depreciated over the shorter of the
unexpired period of the lease and the estimated useful life of the
iii) Depreciation is provided, pro rata to the period of use, under the
Straight Line Method at the rates specified in Schedule XIV to the
Companies Act, 1956, except:
a) In case of computer hardware which is depreciated over 4 years.
b) SAP licenses acquired pursuant to the Scheme of the Amalgamation of
the erstwhile Godrej Household Products Limited (GHPL) with the Company
are amortised over a period of 4 years and Trademarks acquired are
amortised equally over the best estimate of their useful life not
exceeding a period of 10 years, except in the case of Goodknight and
Hit brands where the brands are amortised equally over a period of 20
c) Goodwill is amortised over a period of 5 years.
d) Tools, dies and moulds acquired are depreciated over a period of
e) Technical Knowhow is depreciated over a period of 10 years.
f) In accordance with the Court order approving the Scheme of
Amalgamation of the erstwhile GHPL with the Company, an amount
equivalent to the amortisation of the Goodknight and Hit brands at the
end of each financial year is directly debited to the balance in the
General Reserve Account.
iv) Assets costing less than Rs. 5,000 are depreciated at 100% in the
year of acquisition.
q. Taxes on Income
Current tax is the amount of tax payable on the taxable income for the
year determined in accordance with the provisions of the Income-tax
Deferred tax subject to consideration of prudence,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 asset /
liabilities in respect of on timing differences which originate and
reverse during the tax holiday period are not recognised. Deferred tax
asset / liabilities in respect of timing differences that originate
during the tax holiday period but reverse after the tax holiday period
are recognised. Deferred tax assets on unabsorbed tax losses and tax
depreciation are recognised only when there is a virtual certainty of
their realisation and on other items when there is reasonable certainty
of realisation. The tax effect is calculated on the accumulated timing
differences at the year end based on the tax rates and laws enacted or
substantially enacted on the balance sheet date.
r. Segment Reporting
The Company is considered to be a single segment company - engaged in
the manufacture of Personal and Household Care products. Consequently,
the Company has in its primary segment only one reportable business
segment. As per AS-17 ''Segment Reporting'' if a single financial report
contains both consolidated financial statements and the separate
financial statement of the parent, segment information need be
presented only on the basis of the consolidated financial statements.
Accordingly, information required to be presented under AS-17 Segment
Reporting has been given in the consolidated financial statements.