i Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported balances of assets and
liabilities and the disclosure relating to contingent liabilities as at
the date of financial statements and reported amounts of income and
expenses during the period. Although these estimates are based upon
management''s best knowledge of current events and actions, actual
results could differ from those estimates. Any revision to accounting
estimates is recognised in the current and future periods.
ii Revenue recognition Sale of goods
Revenue from sale of goods is recognised when significant risks and
rewards in respect of ownership of the goods are transferred to the
customer and is stated inclusive of excise duty and net of trade
discounts, sales return and sales tax wherever applicable.
1. Interest income is recognised on a time proportion basis at the
2. Export incentives are recognised on actual realisation basis.
3. Dividend income is recognised when the right to receive the income
iii Export benefit / incentives
Benefit under the advance license scheme and duty free replenishment
certificate are accounted for at the time of purchase of imported raw
material or sale of the license.
iv Fixed assets
Tangible assets are stated at cost of acquisition less accumulated
depreciation and impairment losses, if any. Cost comprises the purchase
price (net of cenvat credit availed) and any attributable cost of
bringing the asset to its working condition for its intended use.
expenditure on account of restoration / modification / alteration in
plant and machinery / building, which increases the future benefit from
the existing asset beyond its previously assessed standard of
performance / estimated useful life, is capitalised.
intangible assets are recognised if and only if it is probable that the
future economic benefits that are attributable to the assets will flow
to the Company.
v Depreciation and amortisation
Depreciation on fixed assets has been provided on straight line method
at the rates and in the manner prescribed under schedule XiV
(schedule) to the Companies Act, 1956, except the following:
i) On assets acquired and put to use on or before 1 July 1987 in the
Glass Division, Sanathnagar, Andhra Pradesh of the Company and on
vehicles acquired till date in all the divisions of the Company,
depreciation is provided on written down value method at the rates and
in the manner prescribed in the schedule;
ii) On furnaces (included in plant and machinery) having a cost of Rs.
12,054.82 lacs (previous year Rs. 11,604.27 lacs) used in the glass
divisions, depreciation is provided on straight line method, as
technically assessed from time to time, based on expected useful lives
of the furnaces. The rate presently being 16.21% per annum which is the
rate as prescribed in the schedule;
iii) Leasehold improvements are amortised over the period of the lease
or estimated useful life of the leasehold improvements, whichever is
iv) Pre-operative expenditure including borrowing cost (net of revenue,
where applicable) and foreign exchange differences on specific project
loans incurred during the construction / trial run of the project is
allocated on an appropriate basis to fixed assets upon commissioning.
i) Technical knowhow is being amortised over a period of ten years; and
ii) Computer software (included in Computers in Note 13) are amortised
over a period of six years The depreciation and amortisation rates are
indicative of the expected useful lives of the assets.
vi Borrowing cost
Borrowing costs that are attributable to the acquisition and / or
construction of qualifying assets are capitalised as part of the cost
of such assets, in accordance with Accounting Standard 16 Borrowing
Costs as notified by Companies (Accounting Standard) Rules, 2006. A
qualifying asset is one that necessarily takes a substantial period of
time to get ready for its intended use. Capitalisation of borrowing
costs is suspended in the period during which the active development is
delayed due to, other than temporary interruption. All other borrowing
costs are charged to the statement of profit and loss as incurred.
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments.
Current investments are valued at the lower of cost and fair value.
Long-term investments are stated at cost.
Provision is made for diminution in the value of long-term investments
to recognise a decline, if any, other than temporary in nature.
Profit / loss on sale of investments are computed with reference to
their cost determined on first in first out basis
a) Inventories are valued as follows:
Raw materials including components, packing materials, stores and
spares and goods in transit - At lower of cost and net realisable
value. However, materials and other items held for use in the
production of inventories are not written down below cost if the
finished products in which they will be incorporated are expected to be
sold at or above cost.
Work- in-process - At cost up to estimated stage of completion.
Finished goods and goods purchased for resale - At lower of cost and
net realisable value.
b) Cost of inventories is ascertained on the following basis:
Raw materials, stores and spare parts and packing materials - On
weighted average basis.
Finished goods purchased for resale - On weighted average basis.
Cost of manufactured finished goods and stock in process comprises of
material, labour and other related production overheads including
ix Foreign currency transactions
Foreign currency transactions are recorded at the exchange rates
prevailing on the date of transaction. Differences arising out of
foreign currency transactions settled during the year are recognised in
the statement of profit and loss.
Monetary items outstanding at the balance sheet date and denominated in
foreign currencies are restated at the exchange rates prevailing at the
balance sheet date. Differences arising on such restatement are
recognised in the statement of profit and loss except to the extent
permitted by the transitional provisions contained in the Companies
(Accounting Standards) Amendment Rules, 2009 in respect of long term
foreign currency monetary items, in which case the cost of fixed assets
are adjusted by the translation differences and amortised over the
remaining useful life of the related asset.
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognised in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognised as income or as expense for the
Forward exchange contracts and other currency derivative contacts that
are not in principle forward contracts in accordance with Accounting
Standard 11 ''Effect of change in Foreign Exchange Rates'' that are
entered to hedge the foreign currency risk of highly probable forecast
transactions and firm commitments are marked to market at the balance
sheet date and exchange loss is recognised in the statement of profit
and loss immediately. Any gain is ignored and not recognised in the
financial statements, in accordance with the principles of prudence
enunciated in Accounting Standard 1- Disclosure of Accounting Policies.
x Taxes on income
Tax expense comprises current income tax and deferred income tax.
Current tax is determined as the amount of tax payable in respect of
taxable income for the year, in accordance with the income tax Act,
Deferred income tax 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 recognised only to the extent that there is reasonable / virtual
certainty, depending on the nature of the timing differences, that
sufficient future taxable income will be available against which such
deferred tax assets can be realised.
Minimum Alternate tax (''Mat'') 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. in the year in
which MAT credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in guidance note issued
by the institute of Chartered Accountants of india, the said asset is
created by way of a credit to the statement of profit and loss and
shown as MAT credit entitlement. the Company reviews the same at each
balance sheet date and writes down the carrying amount of MAT credit
entitlement to the extent it is not reasonably certain that the Company
will pay normal income tax during the specified period.
xi Research and development
Research and development expenditure is charged to statement of profit
and loss except capital expenditure, which is added to the cost of
respective fixed assets in the year in which it is incurred.
a) Operating Lease
Lease rentals in respect of assets taken on operating lease are charged
to the statement of profit and loss on a straight- line basis over the
term of the lease.
b) Finance Lease
Assets acquired on finance lease which transfer risk and rewards of
ownership to the Company are capitalised as assets by the Company at
the lower of fair value of the leased property or the present value of
the related lease payments or where applicable, estimated fair value of
such assets. Amortisation of capitalised leased assets is computed on
the straight line method over the useful life of the assets. Lease
rental payable is apportioned between principal and finance charge
using the internal rate of return method. The finance charge is
allocated over the lease term so as to produce a constant periodic rate
of interest on the remaining balance of liability.
xiii Employee benefits
Expenses and liabilities in respect of employee benefits are recorded
in accordance with Accounting Standard 15 Employee Benefits (Revised
2005) Revised AS 15 as notified by Companies (Accounting Standards)
a) Provident fund
the Company makes contributions to two independently constituted trusts
recognised by income tax authorities and regional provident fund. in
terms of the Guidance note on implementing the revised AS - 15, issued
by the Accounting Standard Board of the institute of Chartered
Accountants of india (the ''iCAi''), the provident fund set up by the
Company is treated as a defined benefit plan since the Company has to
meet the interest shortfall, if any. Accordingly, the contribution paid
or payable and the interest shortfall, if any is recognised as an
expense in the period in which services are rendered by the employee.
Gratuity is a post employment defined benefit plan. the liability
recognised in respect of gratuity is the present value of the defined
benefit obligation at the balance sheet date less the fair value of
plan assets, together with adjustments for unrecognised actuarial gains
or losses and past service costs. the defined benefit obligation is
calculated annually by actuaries using the projected unit credit
Actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions are recorded as expense or income in
the statement of profit and loss in the year in which such gains or
c) Compensated absence
Liability in respect of compensated absences becoming due or expected
to be availed within one year from the balance sheet date is recognised
on the basis of undiscounted value of estimated amount required to be
paid or estimated value of benefit expected to be availed by the
employees. Liability in respect of compensated absences becoming due or
expected to be availed more than one year after the balance sheet date
is estimated on the basis of actuarial valuation performed by an
independent Actuary using the projected unit credit method. Actuarial
gains or losses are recognised in the statement of profit and loss in
the year they arise.
d) Other short term benefits
Expenses relating to other short term benefits including performance
bonus is recognised on the basis of amount paid or payable for the
period during which services are rendered by the employee.
xiv Earnings per share
Basic earnings per share is calculated by dividing net profit or loss
for the year attributable to equity shareholders by weighted average
number of equity shares outstanding during the year. the weighted
average number of equity shares outstanding during the year is adjusted
for events of bonus issue, share split and any new equity issue
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
xv Impairment of assets
the Company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. if any such indication
exists, the Company estimates the recoverable amount of the asset. if
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount. the reduction is treated as an impairment loss and is
recognised in the statement of profit and loss. if at the balance sheet
date there is an indication that if a previously assessed impairment
loss no longer exists, the recoverable amount is reassessed and the
asset is reflected at the recoverable amount subject to a maximum of
depreciated historical cost.
xvi Contingent liabilities and provisions
The Company makes a provision when there is a present obligation as a
result of a past event where the outflow of economic resources is
probable and a reliable estimate of the amount of the obligation can be
A disclosure is made for a contingent liability when there is a:
- Possible obligation, the existence of which will be confirmed by the
occurrence / non-occurrence of one or more uncertain events, not fully
with in the control of the Company;
- Present obligation, where it is not probable that an outflow of
resources embodying economic benefits will be required to settle the
- Present obligation, where a reliable estimate cannot be made.