A. Method of Accounting
(a) The financial statements are prepared on the historical cost
convention and in accordance with the Generally Accepted Accounting
(b) The Company follows accrual system of accounting in the preparation
of accounts except where otherwise stated.
(c ) The preparation of the financial statements in conformity with
GAAP requires that the management of the Company makes estimates and
assumptions that affect the reported accounts of income and expenses of
the period, reported values of assets and liabilities and disclosures
relating to contingent assets and liabilities as of date of the
financial statements. Examples of such estimates include provision for
doubtful debts, provision for doubtful loans and advances, provisions
for diminution in value of investments, estimated period of utility of
software package, provision for value of obsolete/non moving
inventories etc. Actual results may differ from these estimates.
B Fixed Assets
(a) Fixed Assets are stated at actual cost less accumulated
depreciation and impairment loss. Actual cost is inclusive of freight,
installation cost, duties, taxes and other incidental expenses for
bringing the asset to its working conditions for its intended use but
net of CENVAT.
(b) Capital Work-in-Progress -All expenses incurred for acquiring,
erecting and commissioning of fixed assets including interest on long
term loans utilized for meeting capital expenditure and incidental
expenditure incurred during construction of the projects are shown
under capital work-in-progress and are allocated to the fixed assets on
the completion of the respective projects.
(c) Intangible Assets- (i) Revenue expenditure of specialized R&D
including technical know-how fee incurred for development and
improvement of technology, products and designs etc which will generate
probable future economic benefits are recognised as intangible assets.
(ii) Purchased of computer software used for the purpose of operations
is capitalised, however, any expenses on software support, maintenance,
upgrade etc. payable periodically is charged to the Profit & Loss
(a) Finance Lease or similar arrangements, which effectively transfer
to the Company substantially all the risks and benefits incidental to
ownership of the leased item, are capitalized and disclosed as leased
assets. Finance charges are charged directly against income.
(b) Leases where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased items are classified as
operating leases. Operating lease payments are recognized as an expense
in the profit and loss account or on a basis, which reflect the time
pattern of such payment appropriately.
D Depreciation, Amortisation and Impairment
(a) Depreciation is provided for on Buildings (including buildings
taken on lease) and Plant & Machinery on straight line method and on
other fixed assets on written down value method at the rates prescribed
in the Schedule XIV of the Companies Act, 1956.
(b) Depreciation due to increase or decrease in the liability on
account of exchange fluctuation or on account of rollover charges on
forward exchange contract is provided prospectively over the residual
life of the assets.
(c) On assets acquired on lease (including improvements to the
leasehold premises), depreciation has been provided for on Straight
Line Method at the rates as per Schedule XIV of the Companies Act, 1956
or at the rates worked out on the basis of remaining useful life of the
assets, whichever is higher.
(d) Premium on leasehold land is amortised over the period of lease.
(e) The Technical Know-how fees is written off over a period of six
years from the year of the commencement of commercial production of the
respective projects. Where the production has not commenced and the
benefit of know- how is unlikely to accrue, the fee paid therefore is
fully written off in the year in which it is so determined.
(f) Intangible assets are amortised over a period of five years or life
of the product considered at the end of each financial year whichever
is earlier. Amortisation commences when the asset is available for use.
(g) At the balance sheet date, an impairment loss is recognized
whenever the carrying amount of an asset exceeds its recoverable
(a) The cost of an investment includes incidental expenses like
brokerage, fees and duties incurred prior to acquisition.
(b) Long term investments are shown at cost. Provision for diminution
is made only if, in the opinion of the management such a decline is
other than temporary.
(c ) Investments which are intended to be held for less than one year
are classified as current investments and are carried at lower of cost
and fair value determined on an individual investment basis.
(d) Advance against share application money are classified under the
head Investments. F Inventories
(a) Raw Materials, Materials in transit, Packing Materials, Stores &
Spares and Components.
At cost or net realizable value whichever is lower.
(b) Finished Goods and Work-in-Process At lower of cost and net
Note: Cost of Inventories is ascertained on First in First out (FIFO)
(c) Stock in trade - Quoted At lower of cost and market value
- Unquoted At lower of cost and break-up value
(d) Contract Work in Progress At cost
(e) Loose Tools After write-off at 27.82% p.a.
G Revenue Recognition
(a) Sales & services include sales during trial run and excise duty
recoverable. Liquidated damages are accounted for as and when they are
(b) Revenue in respect of long term turnkey works contracts is
recognised under percentage of completion method subject to such
contracts having progressed to a reasonable extent. Revenue in respect
of other works contracts and services is recognised on completed
(c) Insurance claims are accounted for as and when admitted by the
H Foreign Currency Transactions
(a) Transactions denominated in foreign currency are normally recorded
at the exchange rate prevailing at the time of the transactions.
(b) Monetary items denominated in foreign currency at the year end and
not covered under forward exchange contracts are translated at the year
(c) Any income or expense on account of exchange difference between the
date of transaction and on settlement or on translation is recognised
in the profit and loss account as income or expense.
(d) In case of forward exchange contracts, the premium or discount
arising at the inception of such contracts, is amortised as income or
expense over the life of the contract, further exchange difference on
such contracts i.e. difference between the exchange rate at the
reporting /settlement date and the exchange rate on the date of
inception of contract/the last reporting date, is recognized as income/
expense for the period except where the foreign currency liabilities
have been incurred in connection with fixed assets acquired up to
March, 2004 and subsequent thereto in case of fixed assets acquired
from a country outside India, where the exchange differences are
adjusted in the carrying amount of concerned fixed assets..
I Provisioning/Write off of Doubtful Debts
The sundry debtors which are outstanding for more than three years from
their respective due dates are written off to profit and loss account.
The debtors which are outstanding for more than two years but less than
three years are provided for at 100% whereas debtors outstanding for
more than one year but less than two years are provided for at 30% of
the amount outstanding. No write off or provisions are made for
specific cases where management is of the view that the amounts are
recoverable even if falling under the ageing as mentioned above.
J Borrowing Costs
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying asset are capitalized as part
of cost of such asset. Other borrowing costs are recognized as an
expense in the period in which they are incurred.
K Excise and Customs Duty
Excise duty payable on production is accounted for on accrual basis.
Provision is made in the books of account for customs duty on imported
items on arrival and lying in bonded warehouse and awaiting clearance.
L CENVAT Credit
The CENVAT credit available on purchase of raw materials, other
eligible inputs and capital goods is adjusted against excise duty
payable on clearance of goods produced. The unadjusted CENVAT credit is
shown under the head Loans and advances.
M Employees Benefits
(Effective April 1, 2007, the Company has adopted the Revised
Accounting Standard - 15(Revised-2005) ''Employee Benefits''). The
relevant policies are:
Short Term Employee Benefits
Short term employee benefits are recognised in the period during which
the services have been rendered.
Long Term Employee Benefits
a) Defined Contribution plan
( i ) Provident Fund and employees'' state insurance schemes
All employees of the Company are entitled to receive benefits under the
Provident Fund, which is a defined contribution plan. Both the
employee and the employer make monthly contributions to the plan at a
predetermined rate (presently 12%) of the employees'' basic salary.
These contributions are made to the fund administered and managed by
the Government of India. In addition, some employees of the Company are
covered under the employees'' state insurance schemes, which are also
defined contribution schemes recognized and administered by the
Government of India.
The Company''s contributions to both these schemes are expensed in the
Profit and Loss Account. The Company has no further obligations under
these plans beyond its monthly contributions.
( ii ) Gratuity
The Company provides for gratuity obligations through a defined benefit
retirement plan (the ''Gratuity Plan'') covering all employees. The
Gratuity Plan provides a lump sum payment to vested employees at
retirement or termination of employment based on the respective
employee salary and years of employment with the Company. The Company
provides for the Gratuity Plan based on actuarial valuations in
accordance with Accounting Standard 15 (revised), Employee
Benefits The Company makes annual contributions to the HDFC Standard
Life Insurance Company Ltd for the Gratuity Plan in respect of
employees. The present value of obligation under gratuity is
determined based on actuarial valuation using Project Unit Credit
Method, which recognizes each period of service as giving rise to
additional unit of employee benefit entitlement and measures each unit
separately to build up the final obligation.
b) Other long term benefit Leave Encashment
The Company has provided for the liability at period end on account of
unavailed earned leave as per the actuarial valuation as per the
Projected Unit Credit Method.
c) Actuarial gains and losses are recognized as and when incurred.
N Preliminary, Securities issue expenses and Redemption premium on
bonds and debentures are adjusted against securities premium account.
O Research & Development Costs
Revenue expenditure on research phase is charged to Profit & Loss
Account in the year in which it is incurred. Capital Expenditure is
added to the cost of fixed assets.
P Taxes on Income
Tax expense comprises of current and deferred tax. Current income tax
is measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act. Deferred income taxes
reflects the impact of current year timing differences between taxable
income and accounting income for the year and reversal of timing
differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognized only to the extent that there is a reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. Unrecognized
deferred tax assets of earlier years are re-assessed and recognized to
the extent it has become reasonably certain that future taxable income
will be available against which such deferred tax assets can be
Q Segment Reporting
Segments are identified in line with the Accounting Standard on Segment
Reporting (AS-17) taking into account the organization structure as
well as the differential risk and returns of the segments. The
unallocable items include income and expenses items which are not
directly identifiable to any segment and therefore not allocated to any
R Earnings Per Share
In determining earnings per share, the Company considers the net profit
after tax and includes the post-tax effect of any extra ordinary items.
The number of shares used in computing basic earnings per share is the
weighted average number of shares outstanding during the period.
S Provision, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is provable that there will be a out flow of resources.
Contingent liabilities are not recognized but are disclosed in the
notes. Contingent assets are neither recognized nor disclosed in the