1.1 Accounting Convention
The financial statements are prepared under the historical cost
convention, on the accrual basis of accounting, in accordance with the
generally accepted accounting principles in India, the Accounting
Standards presecribed in the Companies (Accounting Standard) Rules,
2006 and the relevant provisions of the Companies Act, 1956.
1.2 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.
1.3 Fixed Assets
Fixed Assets are stated at cost or as revalued as the case may be, less
accumulated depreciation. Cost includes expenses related to acquisition
and any directly attributable cost of bringing the assets to it''s
intended working condition.
Fixed Assets acquired under fnance lease are capitalised at the lower
of their face value and present value of the minimum lease payments.
1.4 Intangible Assets
Intangible assets are stated at cost of acquisition less accumulated
amortisation. The cost of acquisition of trade marks is amortised
equally over a period of ten years. Computer software is amortised over
a period of six years on the straight line method.
1.5 Impairment of Assets
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.
1.6 Borrowing Costs
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
Investments are classifed into long-term and current investments. Long
term investments are carried at cost. Provision for diminution, if
any, in the value of each long term investment is made to recognise a
decline, other than of a temporary nature. The fair value of a long
term investment is ascertained with reference to its market value, the
investee''s assets and results and the expected cash fows from the
Current investments are stated at lower of cost and fair value.
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 include cost of conversion and other costs
incurred in bringing the inventories to their present location and
condition. Provision is made for the cost of obsolescence and other
anticipated losses, wherever considered necessary.
1.9 Provisions and Contingent Liabilities
Provisions are recognised in the accounts in respect of present
probable obligations, the amount of which can be reliably estimated.
Contingent Liabilities are disclosed in respect of possible obligations
that arise from past events but their existence is confrmed by the
occurrence or non occurrence of one or more uncertain future events not
wholly within the control of the Company.
1.10 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 Profit and
(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 Profit and Loss Account 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 Profit and Loss Account.
1.11 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 receivable under the Duty Entitlement Pass Book
Scheme and Duty Drawback Scheme are accounted on accrual basis.
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.
1.12 Research and Development Expenditure
Revenue expenditure on Research & Development is charged to the Profit
and Loss Account of the year in which it is incurred. Capital
expenditure incurred during the year on Research & Development is
included under additions to fxed assets.
Leasehold land and Leasehold improvements are amortised equally over
the lease period.
Depreciation is provided on 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.
Depreciation on assets acquired during the year is provided for the
full accounting year and no depreciation is charged on the assets
sold/discarded during the year, except in case of major additions and
deductions exceeding rupees one crore in which case, proportionate
depreciation is provided.
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 Profit and Loss Account.
1.14 Employee benefits
Liability is provided for the retirement benefits of provident fund,
gratuity, leave encashment and pension benefit in respect of all
eligible employees of the Company.
(i) Defned Contribution Plan
Employee benefits in the form of Provident Fund and Family Pension which
are paid to EPFO are considered as defned contribution plans and the
contributions are charged to the Profit and Loss Account of the year
when the contributions to the respective funds are due.
(ii) Defned benefit Plan
Retirement benefits in the form of Provident Fund which are paid to PF
Trust, Gratuity and Pension plan for eligible employees are considered
as defned benefit 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 benefits
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 gain/losses comprising of experience adjustments and the
effects of changes in acturial assumptions are immediately recognized
in the Profit and Loss Account.
1.15 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 improvement made in EVA
over the previous year when compared with expected improvements.
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 Profit and loss account. Futures contracts not settled
as on the Balance Sheet date are marked to market and losses, if any,
are recognized in the Profit and Loss account, whereas, the unrealized
Profit is ignored. Gains or losses on the commoditity futures contracts
is recorded in the Profit and Loss account under cost of materials
1.17 Taxes on Income
Tax expense comprises both current and deferred tax. Current tax is the
amount of tax payable on the assessable income for the year determined
in accordance with the provisions of the Income tax Act, 1961.
Deferred tax is recognized on timing differences, being the differences
between the taxable income and accounting income that originate in one
period and are capable of reversal in one or more subsequent periods.
Deferred tax assets on unabsorbed tax losses and tax depreciation are
recognized only when there is virtual certainty of their realisation
and on other items when there is reasonable certainty that suffcient
future taxable income will be available against which such deferred tax
assets can be realised. The tax effect is calculated on the accumulated
timing differences at the year end based on the tax rate and laws
enacted or substantially enacted on the balance sheet date.
1.18 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 fxed assets, debtors 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 /