1.1 Basis of preparation of financial statements
The accounts are prepared under the historical cost convention and are
in accordance with the generally accepted accounting principles in
India and the provisions of the Companies Act, 1956. The significant
accounting policies followed by the Company are stated below:
1.2 Fixed Assets
a) Fixed Assets are stated at cost less accumulated depreciation. Cost
of acquisition or construction is inclusive of freight, duties, taxes,
financial costs and other related expenses up to the date of commission
of the assets.
b) The company is following the straight line method of depreciation in
respect of all assets at the rates specified in Schedule XIV to the
Companies Act, 1956 (as amended). Depreciation is not provided on
assets sold, discarded etc. in the year of sale.
c) Expenditure during construction period :
Expenditure (including financing cost relating to borrowed funds for
construction or acquisition of fixed assets) incurred on projects under
implementation are treated as Pre-operative expenses pending allocation
to the assets and are shown under Capital-work-in-progress.
d) Lease hold land value is not amortized in view of the long term
nature of the lease.
1.3 Revenue Recognition
a) Interest income is recognized on time proportion basis taking into
account the amount outstanding and rate applicable.
b) All other income are accounted for on accrual basis.
All the expenses are accounted for on accrual basis.
1.5 Insurance Claims
Insurance claims are accounted for on the basis of claims
admitted/expected to be admitted and to the extent that there is no
uncertainty in receiving the claims.
1.6 Taxes on Income
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Income Tax Act, 1961.
Deferred tax is recognized, subject to the consideration of prudence in
respect of deferred tax assets, on timing differences, being the
difference between taxable income and accounting income that originate
in one period and are capable of reversal in one or more subsequent
periods. Deferred tax assets are recognized only to the extent there is
reasonable certainty that the assets can be realized in future;
however, when there is a brought forward loss or unabsorbed
depreciation under taxation laws, deferred tax assets are recognized
only if there is virtual certainty of realization of such assets.
1.7 Impairment of Assets
Impairment loss, if any, is recognized to the extent, the carrying
amount of assets exceed their recoverable amount. Recoverable amount
is higher of an asset''s net selling price and its value in use. Value
in use is the present value of estimated future cash flows expected to
arise from the continuing use of an asset and from its disposal at the
end of its useful life.
Impairment losses recognized in prior years are reversed when there is
an indication that the impairment losses recognized no longer exist or
have decreased. Such reversals are recognized as an increase in
carrying amount of assets to the extent that it does not exceed the
carrying amount that would have been determined (net of depreciation)
had no impairment loss been recognized in previous years.
After impairment, depreciation on assets is provided on the revised
carrying amount of the respective asset over its remaining useful life.
1.8 Provisions, Contingent Liabilities and Contingent Assets
Provision is recognized in respect of obligations where, based on the
evidence available, their existence at the Balance Sheet date is
A provision is recognized if, as a result of a past event, the Company
has a present legal obligation that can be estimated reliably, and it
is probable that an outflow of economic benefits will be required to
settle the obligation. Provisions are determined by the best estimate
of the outflow of economic benefits required to settle the obligation
at the reporting date.
Provisions, contingent liabilities and contingent assets are reviewed
at each balance sheet date.
Re-imbursement expected in respect of expenditure to settle a provision
is recognized only when it is virtually certain that the re-imbursement
will be received.
A Contingent Asset is not recognized in the Accounts.
1.9 Earnings Per share
Basic earnings per share is computed by dividing the profit/(loss)
after tax (including the post tax effect of extra ordinary items, if
any) by the weighted average number of equity shares outstanding during
Diluted earnings per share is computed by dividing the profit/(loss)
after tax (including the post tax effect of any extra ordinary items,
if any) by the weighted average number of equity shares considered for
deriving basic earnings per share and also the weighted average number
of equity shares which could be issued on the conversion of all
dilutive potential equity shares.
1.10 Cash flow statement
Cash flows are reported using the indirect method, whereby profit
before tax is adjusted for the effects of transactions of a non-cash
nature, any deferrals or accruals of past or future operating cash
receipts or payments and item of income or expenses associated with
investing or financing flows. The cash flows from operating, investing
and financing activities of the Company are segregated.