1.1 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
notifed under Section 211(3c) of the Companies Act, 1956 and specifed
in the Companies (Accounting Standard) Rules read with the General
Circular No. 15/2013 dated September 12, 2013 issued by the Ministry of
Corporate Affairs in respect of Section 133 of the Companies Act, 2013,
pronouncements of the Institute of Chartered Accountants of India, and
the provisions of the Companies Act, 1956 and the applicable sections
of the Companies Act, 2013.
2.2 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.
2.3 Fixed Assets
Fixed Assets are stated at cost of acquisition or construction, less
accumulated depreciation and impairment, if any. Cost includes expenses
related to acquisition and any directly attributable cost of bringing
the assets to it''s intended working condition and excludes any duties /
taxes recoverable. Subsequent expenditure incurred on existing fixed
assets is expensed out except where such expenditure increases the
future economic benefts from the existing assets.
Borrowing costs that are directly attributable to the acquisition /
construction of the qualifying asset are capitalised as a part of the
cost of such asset, upto the date of acquisition / completion of
Fixed assets acquired under finance lease are capitalised at the lower
of their fair value and the present value of the minimum lease
2.4 Asset Impairment
The Company reviews the carrying amounts of tangible and intangible
assets for any possible impairment at each balance sheet date. An
impairment loss is recognized when the carrying amount of an asset
exceeds its recoverable amount. Impairment loss, if any, is recognised
in the period in which impairment takes place.
2.5 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 recognized as an expense on a
straight line basis over the lease term.
Investments are classified into current and non-current investments.
Investments intended to be held for a period less than twelve months or
those maturing within twelve months from the balance sheet date are
classified as ''Current Investments''. Current Investments are stated at
lower of cost and fair value.
Investments other than Current Investments are classified as
''Non-current Investments''. Non-Current Investments are carried at cost
of acquisition which includes all costs directly incurred on the
acquisition of the investment. Provision for diminution, if any, in
the value of each Non-Current investments is made to recognize a
decline, other than of a temporary nature. The fair value of a
Non-Current investment is ascertained with reference to its market
value, the investee''s assets and results and the expected cash flows
from the investment.
Inventories are valued at lower of cost and net realisable value. Cost
is computed on weighted average basis and is net of cenvat. Finished
goods and work in progress includes cost of conversion and other costs
incurred in bringing the inventories to their present location and
condition. Finished goods valuation also includes excise duty, wherever
applicable. Provision is made for the cost of obsolescence and other
anticipated losses, wherever considered necessary.
2.8 Provisions and Contingent Liabilities
Provisions are recognized when the Company has a present obligation as
a result of a past event; it is probable that an outflow of resources
embodying economic benefts 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 :
(i) Any possible obligation that arises from past events and the
existence of which will be confrmed only by the occurrence or
non-occurrence of one or more uncertain future events not wholly within
the control of the Company; or
(ii) Any present obligation that arises from past events but is not
recognized because :
(a) It is not probable that an outflow of resources embodying economic
benefts 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.
Contingent Assets are not recognized in the financial statements since
this may result in the recognition of income that may never be
2.9 Revenue Recognition
Sales are recognised when goods are supplied and signifcant risks and
rewards of ownership in the goods are transferred to the buyer. Sales
are recorded net of returns, trade discounts, rebates, sales taxes and
Income from processing operations is recognised on completion of
production / dispatch of the goods, as per the terms of contract.
Dividend income is recognised when the right to receive the same is
Interest income is recognised on a time proportion basis.
Income on assets given on operating lease is recognised on a straight
line basis over the lease term.
2.10 Research and Development Expenditure
Revenue expenditure on Research & 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 & Development
is included under additions to fixed assets.
2.11 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.
2.12 Foreign Exchange Transactions
(i) Transactions in foreign currency are recorded at exchange rates
prevailing on the day of the transaction. Monetary assets and
liabilities denominated in foreign currency, remaining unsettled at the
period end are translated at closing 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 other than those entered into to hedge
foreign currency risk of frm commitments or highly probable forecast
transactions are translated at period end exchange rates. Premium or
discount on such forward exchange contracts is amortised as income or
expense over the life of the contract.
(iii) 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.
(iv) Exchange differences in respect of other unexpired foreign
currency derivative contracts, which have been entered into to hedge
foreign currency risks are marked to market and losses, if any, are
recognised in the Statement of Profit and Loss.
(v) Exchange differences arising on reporting of long term foreign
currency monetary items at rates different from those at which they
were initially recorded during the year in so far as they relate to the
acquisition of a depreciable capital asset, are added to or deducted
from the cost of the asset and are depreciated over the balance life of
the asset, and in other cases, are accumulated in a Foreign Currency
Monetary Item Translation Difference Account and amortised over the
balance period of such long term asset or liability, by recognising as
income or expense in each such period.
The company uses forward exchange contracts to hedge it''s foreign
exchange exposures and commodity futures contracts to hedge the
exposure to oil price risks. Gains or losses on settled contracts is
recognized in the Statement of Profit and Loss. Futures contracts not
settled as on the Balance Sheet date are marked to market and losses,
if any, are recognized in the Statement of Profit and Loss, whereas, the
unrealized Profit is ignored. Gains or losses on the commodity futures
contracts is recorded in the Statement of Profit and Loss under cost of
2.14 Employee Benefts
(i) Short-Term Employee Benefts
All employee benefts payable wholly within twelve months of rendering
the service are classified as short term employee benefts. Benefts such
as salaries, performance incentives, etc., are recognized 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.
The Company has a scheme of Performance Linked Variable Remuneration
(PLVR) which rewards its employees based on Economic Value Added (EVA).
The PLVR amount is related to actual improvement made in EVA over the
previous year when compared with expected improvements.
(ii) Post Employment Benefts
(a) Defined Contribution Plans
Payments made to a Defined contribution plan such as Provident Fund and
Family Pension maintained with Regional Provident Fund Office are
charged as an expense in the Statement of Profit and Loss as they fall
(b) Defined Beneft Plans
The 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 beneft
entitlement and measures each unit separately to build up the fnal
obligation. Past services are recognized on a straight line basis over
the average period until the amended benefts become vested. Actuarial
gain and losses are recognized 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 beneft obligations.
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 Beneft 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 Company.
Pension plan for eligible employees are considered as Defined beneft
obligations and are provided for on the basis of an actuarial
valuation, using the projected unit credit method, as at the date of
the Balance Sheet.
(iii) Other Long-Term Employee Benefts
Long-term Compensated Absences and Long Service Awards are provided for
on the basis of an actuarial valuation, using the projected unit credit
method, as at the date of the Balance Sheet. Actuarial gains / losses
comprising of experience adjustments and the effects of changes in
actuarial assumptions are immediately recognized in the Statement of
Profit and Loss.
2.15 Consolidation of Employee Stock Option Plan Trust
For the purpose of administration of Employee Stock Option Plan of the
Group, the Company has established GIL ESOP Trust. In accordance with
the opinion issued by the Expert Advisory Committee of the ICAI on
Consolidation of the ESOP Trust in the standalone financial statements,
the Company has included the financial statements of the ESOP trust for
preparation of the standalone financial statements to portray the
picture as if the Company itself is administering the ESOP Scheme.
Consequently, the operations of the ESOP Trust, in so far as the ESOP
is concerned and the assets and liabilities of the Trust have been
included in the financial statements of the Company. The loans to the
ESOP Trust in the books of the Company are eliminated against the loans
from the Company as appearing in the books of the Trust and investments
in the equity shares of the Company held by the Trust have been reduced
from Share Capital to the extent of the face value of the shares and
the balance has been adjusted in ESOP Trust Adjustments under
Reserves and Surplus. Balances arising from transactions between the
Company and the Trust have been appropriately eliminated. The opening
excess of expenditure over income of the Trust has been adjusted in
ESOP Trust Adjustments under Reserves and Surplus.
2.16 Depreciation and Amortisation Tangible Assets
(i) Leasehold land and Leasehold improvements are amortised equally
over the lease period.
(ii) Depreciation is provided, pro rata to the period of use, under the
Straight Line Method at the rates specifed in Schedule XIV to the
Companies Act, 1956 except for computer hardware which is depreciated
over its estimated useful life of 4 years.
(iii) Assets costing less than Rs. 5,000 are depreciated at 100% in the
year of acquisition.
(iv) Depreciation on the revalued component is provided on the straight
line method based on the balance useful life of the assets as certifed
by the valuers. Such depreciation is withdrawn from Revaluation Reserve
and credited to the Statement of Profit and Loss.
Intangible assets are amortised on straight line basis as given below :
(i) Trade marks are amortised equally over a period of ten years. (ii)
Computer software is amortised over a period of six years.
2.17 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 timing differences which originate and
reverse during the tax holiday period are not recognized. Deferred tax
assets / liabilities in respect of timing differences that originate
during the tax holiday period but reverse after the tax holiday period
are recognized. Deferred tax assets on unabsorbed tax losses and tax
depreciation are recognised only to the extent that there is virtual
certainty supported by convincing evidence 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.
Minimum Alternate Tax (MAT) paid in a year is charged to the Statement
of Profit and Loss as current tax. The Company recognizes MAT credit
available as an asset only to the extent there is reasonable
possibility that the Company will pay normal income tax during the
specifed period for which MAT Credit is allowed to be carried forward.
The Company recognizes MAT Credit as an asset by way of credit to the
statement of Profit and Loss and is disclosed as MAT Credit
Entitlement. under Long Term Loans and Advances.
2.18 Cash and Cash Equivalents
In the Cash Flow Statement, Cash and Cash Equivalents includes cash in
hand, bank balances and term deposits with bank having maturity term of
less than three months.
2.19 Earnings Per Share
Basic Earnings per share is calculated by dividing the net Profit for
the period attributable to the equity shareholders by the weighted
average number of equity shares outstanding during the period. For the
purpose of calculating diluted earnings per share, the net Profit for
the period attributable to the equity shareholders and the weighted
average number of equity shares outstanding during the period is
adjusted for the effects of all dilutive potential equity shares.
2.20 Segment Reporting
The Accounting Policies adopted for segment reporting are in line with
the Accounting Policies of the Company. Segment assets include all
operating assets used by the business segments and consist principally
of fixed assets, trade receivables and inventories. Segment liabilities
include the operating liabilities that result from the operating
activities of the business. Segment assets and liabilities that cannot
be allocated between the segments are shown as part of unallocated
corporate assets and liabilities respectively. Income / Expenses
relating to the enterprise as a whole and not allocable on a reasonable
basis to business segments are refected as unallocated corporate income