1.1 Change in accounting policy
Presentation and disclosure of financial statements
During the year ended 31 March 2012, the revised Schedule VI notified
under the Companies Act 1956, has become applicable to the Company, for
preparation and presentation of its financial statements. The Company
has also reclassified the previous year figures in accordance with the
requirements applicable in the current year.
1.2 Basis of preparation
The accounts have been prepared and presented under the historical cost
convention method on the accrual basis of accounting in accordance with
the accounting principles generally accepted in India and comply with
the Accounting Standards issued by Institute of Chartered Accountants
of India (ICAI) to the extent applicable.
1.3 Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcome
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
1.4 Tangible Fixed Assets:
Fixed Assets are stated at cost less accumulated depreciation Cost is
inclusive of duties & taxes (net of CENVAT / VAT), incidental expenses
and erection / commissioning expenses.
1.5 Depreciation on tangible fixed assets:
Depreciation on fixed assets is provided on straight-line method atthe
rates specified in Schedule XIV of the Companies Act, 1956. The
depreciation on incremental value arising from the revaluation of the
fixed assets is charged to revaluation reserve account.
1.6 Expenditure during construction period:
Expenditure (including finance cost relating to borrowed funds for
construction or acquisition of fixed assets) incurred on projects under
implementation are treated as Preoperative expenses pending allocation
to the assets and are shown under Capital Work in Progress and the
same are apportioned to fixed assets on commencement of commercial
1.7 Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in an
amalgamation in the nature of purchase is their fair value as at the
date of amalgamation. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and the
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
Intangible assets are amortized on a straight line basis over the
estimated useful economic life. The Company uses a rebuttable
presumption that the useful life of an intangible asset will not exceed
ten years from the date when the asset is available for use. If the
persuasive evidence exists to the affect that the useful life of an
intangible asset exceeds ten years, the Company amortizes the
intangible asset over the best estimate of its useful life. Such
intangible assets and intangible assets not yet available for use are
tested for impairment annually, either individually or atthe
cash-generating unit level. All other intangible assets are assessed
for impairment whenever there is an indication that the intangible
asset may be impaired.
The amortization period and the amortization method are reviewed
periodically. If the expected useful life of the asset is significantly
different from previous estimates, the amortization period is changed
accordingly. If there has been a significant change in the expected
pattern of economic benefits from the asset, the amortization method is
changed to reflect the changed pattern. Such changes are accounted for
in accordance with AS 5 Net Profit or Loss for the Period, Prior Period
Items and Changes in Accounting Policies.
Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
Long-term investments and investments in subsidiary companies are
carried at cost. Provision for diminution in value is made whenever
necessary in accordance with the Accounting Standards in force.
1.9 Valuation of Inventories:
a) Inventories are valued at the lower of cost or net realizable value.
b) Inventories of raw material, consumables and stores and spares are
valued at cost as per FIFO method. Cost does not include duties and
taxes that are subsequently recoverable.
c) Cost for the purpose of finished goods and material in process is
computed on the basis of cost of material, labour and other related
d) Goods in transit are stated at costs accrued up to the date of
e) Stocks with consignment agents are stated at costs accrued up to the
date of the Balance sheet.
1.10 Government grants:
Government grants received in the nature of promoter''s contribution and
where no repayment is ordinarily expected are treated as capital
1.11 Foreign Exchange:
Foreign exchange transactions are recorded at the exchange rates
prevailing at the time of transactions or at contracted rates. Current
assets and current liabilities are translated at values prevailing at
the Balance Sheet date. Gains/Losses, if any, arising thereby are
recognized in the respective revenue or expense account.
The foreign exchange variances resulting on account of loans used to
acquire fixed assets are accounted as part of fixed assets.
1.12 Revenue Recognition:
a) Revenue from sales is recognized when significant risk and rewards
in respect of ownership of the products are transferred.
b) Revenue from domestic sales is recognized on dispatch of products
from the factory of the Company and in case of consignment sale, on
further sale made by the agents.
c) Revenue from export sales is recognized on the basis of dates of
Bill of Lading.
1.13 Export Benefits:
Advance licenses are issued to the Company under the Advance License
Scheme [Duty Exemption Entitlement Certificate (DEEC Scheme)] / duty
entitlement credited under the Duty Entitlement Pass Book Scheme (DEPB
Scheme) on the export of the goods manufactured by it. Whenever export
sales are made by the Company, pending receipt of imported duty- paid
raw materials under the DEEC / DEPB Schemes, the cost of domestic raw
materials actually consumed for the purpose of such exports is
compensated and / or matched by accruing the value of the benefit under
the DEEC / DEPB Scheme.
1.14 Research and development expenses:
1.14.1 Research costs not resulting in any tangible property/equipment
are charged to revenue as and when incurred.
1.14.2 Know-how / product development costs incurred on an individual
project are carried forward when its future recoverability can
reasonably be regarded as assured. Any expenditure carried forward is
amortized over the period of expected future benefits from the related
project, not exceeding ten years.
1.14.3 The carrying value of know-how / product development costs are
reviewed for impairment annually when the asset is not yet in use and
otherwise when events or changes in circumstances indicate that the
carrying value may not be recoverable.
1.15 Employee Retirement Benefits:
1.15.1 Defined Contributions Plan: Contributions paid/payable to the
defined contribution plan of Provident Fund for certain employees
covered under the scheme are recognized in the Profit and Loss account
The Company makes contributions to a State operated contribution scheme
for certain employees at a specified percentage of the employees''
salary. The Company has an obligation only to the extent of the defined
1.15.2 Defined Benefit Plan: Gratuity for certain employees is covered
under a scheme of Life Insurance Corporation of India (LIC) and
contributions in respect of such scheme are recognized in the Profit
and Loss account. The liability as at the Balance Sheet date is
provided for based on the actuarial valuation carried out in accordance
with revised Accounting Standard 15 as at the end of the year/period.
1.15.3 Other long term employee benefits: Other long term employee
benefits comprise of leave encashment which is provided on the
actuarial valuation carried out in accordance with revised Accounting
Standard 15 as at the end of the year/period.
1.16 Borrowing costs:
Borrowing costs incurred in relation to the acquisition and
constructions of assets are capitalized as part of the cost of such
assets up to the date when such assets are ready for intended use.
Other borrowing costs are charged as an expense in the year in which
they are incurred.
1.17 Income tax expense:
1.17.1 Current Tax Expense
The Current charge for income tax is calculated in accordance with the
1.17.2 Deferred Tax Expense
Deferred income tax reflects the impact of timing difference between
accounting income and tax income for the year / period. Deferred tax is
measured based on the tax rates and the tax laws enacted at the Balance
Sheet date. Deferred tax asset is recognized only to the extent of
certainty of realization of such asset.
1.18 Measurement of EBITDA
As permitted by the Guidance Note on the Revised Schedule VI to the
Companies Act, 1056, the Company has elected to present earnings before
interest, tax, depreciation and amortization (EBITDA) as a separate
line item on the face of the statement of profit and loss. The Company
measures EBITDA on the basis of profit/ (loss) from continuing
operations. In its measurement, the Company does not include
depreciation and amortization expense, finance costs and tax expense.