A. BASIS OF PREPARATION
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India under the historical
cost convention on accrual basis. These financial statements have been
prepared to comply in all material aspects with the accounting
standards notified under Section 211(3C) [Companies (Accounting
Standards) Rules, 2006, as amended] and the other relevant provisions
of the Companies Act, 1956 (The ''Act'').
All assets and liabilities have been classified as current or
non-current as per the Company''s normal operating cycle and other
criteria set out in the Schedule VI to the Companies Act, 1956. Based
on the nature of products and the time between the acquisition of
assets for processing and their realisation in cash and cash
equivalents, the Company has ascertained its operating cycle as 12
months for the purpose of current/non-current classification of assets
B. CHANGE IN ACCOUNTING POLICY
The Company has exercised the option as set out in paragraph 46A of the
Accounting Standard 11 on ''The Effects of Changes in Foreign Exchange
Rates'' (AS 11), pursuant to the Notification dated 29th December, 2011.
Accordingly, exchange differences arising on restatement of long-term
foreign currency loans obtained for the purpose of acquisition of
depreciable capital assets, which were until now being recognised in
the Profit and Loss Statement, is adjusted in the cost of depreciable
asset, which would be depreciated over the balance life of the
asset.[Refer Note 1(F) below]
Had the Company continued to follow the earlier accounting policy, net
loss on foreign currency transactions / translation would have been
higher by Rs.1,665.98 Lakhs and depreciation on tangible fixed assets
would have been lower by Rs.5.87 Lakhs, with corresponding decrease in
profit before tax for the year by Rs.1,660.11 Lakhs. Also, Net Block
of Tangible Fixed Assets and Capital Work-in-Progress relating to
Graphite and Carbon Segment as at 31st March, 2012 would have been
lower by Rs. 898.93 Lakhs and Rs.761.18 Lakhs respectively.
C. FIXED ASSETS:
(a) Fixed Assets (comprising both tangible and intangible assets) are
stated at cost of acquisition including taxes, duties, freight and
other incidental expenses related to acquisition and installation, and
inclusive of borrowing cost, where applicable, and adjustments for
exchange differences referred to in Note 1(F) below. Pre-operative
expenses for major projects are also capitalised, where appropriate.
Subsequent expenditure related to an item of fixed assets are added to
its book value only if they increase the future benefits from the
existing asset beyond its previously assessed standard of performance.
(b) Depreciation includes amortisation. Depreciation on tangible fixed
assets including those utilised in Research and Development activities,
is provided on straight-line basis in accordance with Schedule XIV to
the Companies Act, 1956. Leasehold Land is amortised on straight-line
basis over the primary lease period. Intangible assets (Computer
Software) are amortised on a straight-line basis over a period of five
(c) Machinery Spares, which are irregular in use and associated with
particular asset, are treated as fixed asset and the cost is amortised
over its utility period.
(d) Impairment Loss, if any, is recognised wherever the carrying amount
of the fixed assets exceeds the recoverable amount (i.e. the higher of
the assets'' net selling price and value in use).
(a) Investments that are readily realisable and are intended to be held
for not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments. Long-term Investments are stated
at cost less write down for any diminution, other than temporary, in
carrying value. Current Investments are stated at lower of cost and
fair value. Fair value is determined on the basis of realisable or
(b) Earnings from Investments, where appropriate, are accrued or taken
into revenue in full on declaration or receipts.
Inventories are valued at lower of cost and net realisable value. The
costs are ascertained under weighted average formula. The cost of
finished goods and work-in-progress comprises raw materials, direct
labour, other direct costs and related production overheads. Net
realisable value is the estimated selling price in the ordinary course
of business, less the estimated costs of completion and the estimated
costs necessary to make the sale.
F. FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are recorded at exchange rates
prevailing on the date of the transaction. Monetary items denominated
in foreign currency are restated at the exchange rate prevailing on the
Balance Sheet date. Foreign currency non-monetary items carried in
terms of historical cost are reported using the exchange rate at the
date of transactions.
With regard to long-term foreign currency monetary items obtained for
the purpose of acquisition of depreciable capital assets, exchange
differences are adjusted in the cost of depreciable asset, which would
be depreciated over the balance life of the asset and in other cases,
such difference is accumulated in a Foreign Currency Monetary Item
Translation Difference Account and amortised over the balance period of
such long term asset/liability.
Exchange differences arising on settlement of transactions and/or
restatements of all other monetary items are recognised in the Profit
and Loss Statement.
G. DERIVATIVE INSTRUMENTS
The Company uses derivative financial instruments such as forward
exchange contracts, currency swaps etc. to hedge its risks associated
with foreign currency fluctuations relating to the underlying
transactions, highly probable forecast transactions and firm
commitments. In respect of Forward Exchange Contracts, covered under AS
11, the premium or discount arising at the inception of such contract
is amortised as expense or income over the life of contract.
Other derivative contracts outstanding at the Balance Sheet date are
marked to market and resulting loss, if any, is provided for in the
Any profit or losses arising on cancellation of instruments are
recognised as income or expenses for the period.
Revenue is recognised on completion of sale of goods and rendering of
services. Sales are inclusive of excise duty less discounts as
applicable. Export entitlements are recognised after completion of
related exports on prudent basis.
I. CONSTRUCTION CONTRACTS
Revenue in respect of construction contracts is recognised on the basis
of percentage of completion method. Stages of completion are
determined based on completion of a physical proportion of the contract
work. Anticipated loss on such contracts is provided for in the period
J. BORROWING COSTS
Borrowing costs, if any, attributable to the acquisition and
construction of qualifying assets are added to the cost up to the date
when such assets are ready for their intended use. Other borrowing
costs are recognised as expense in the period in which these are
K. RESEARCH AND DEVELOPMENT EXPENDITURE (R & D)
Revenue expenditure on R & D is expensed in the period in which it is
incurred. Capital expenditure on R & D is capitalised.
L. EMPLOYEE BENEFITS:
(a) Short-term Employee Benefits
The undiscounted amount of Short-term Employee Benefits expected to be
paid in exchange for the services rendered by employees is recognised
during the period when the employee renders the service.
(b) Post Employment Benefit Plans
Contributions under Defined Contribution Plans payable in keeping with
the related schemes are recognised as expense for the year.
For Defined Benefit Plans, the cost of providing benefits is determined
using the Projected Unit Credit Method, with actuarial valuations being
carried out at each Balance Sheet date. Actuarial gains and losses are
recognised in full in the Profit and Loss Statement for the period in
which they occur. Past service cost is recognised immediately to the
extent that the benefits are already vested, and otherwise is amortised
on a straight-line basis over the average period until the benefits
become vested. The retirement benefit obligation recognised in the
Balance Sheet represents the present value of the defined benefit
obligation as adjusted for unrecognised past service cost, and as
reduced by the fair value of Plan Assets. Any asset resulting from this
calculation is limited to the present value of any economic benefits
available in the form of refunds from the plan or reductions in future
contributions to the plan.
(c) Other Long-term Employee Benefits (unfunded)
The cost of providing Other Long-term Employee Benefits is determined
using Projected Unit Credit Method, with actuarial valuation being
carried out at each Balance Sheet date. Actuarial gains and losses and
past service cost are recognised immediately in the Profit and Loss
Statement for the period in which they occur. Other long-term employee
benefit obligation recognised in the Balance Sheet represents the
present value of related obligation.
M. PROVISIONS AND CONTINGENT LIABILITIES
The Company recognises a provision when there is a present obligation
as a result of a past event that probably requires an outflow of
resources and a reliable estimate can be made of the amount of the
obligation. A disclosure for a contingent liability is made when there
is a possible obligation or a present obligation that probably will not
require an outflow of resources or a present obligation where reliable
estimate of which cannot be made. Where there is a possible obligation
or a present obligation and the likelihood of outflow of resources is
remote, no provision or disclosure for contingent liability is made.
Current tax is provided as the amount of tax payable in respect of
taxable income for the year, measured using the applicable tax rules
Deferred tax is provided on timing differences between taxable income
and accounting income measured using tax rates and tax laws that have
been enacted or substantively enacted by the Balance Sheet date.
Deferred tax assets are recognised only if there is a
virtual/reasonable certainty, as applicable, in keeping with Accounting
Standard 22 on ''Accounting for Taxes on Income'' that there will be
sufficient future taxable income available to realise such assets.
Deferred tax assets are reviewed for the appropriateness of their
respective carrying amount at each Balance Sheet date.
Minimum Alternative Tax credit is recognised as an asset only when and
to the extent there is convincing evidence that the Company will pay
normal income tax during the specified period. Such assets is reviewed
at each Balance Sheet date and the carrying amount of the MAT credit
asset is written down to the extent there is no longer a convincing
evidence to the effect that the Company will pay normal income tax
during the specified period.