1.1 Basis of preparation
The financial statements are prepared on accrual basis under the
historical cost convention, modified to include revaluation of certain
assets, in accordance with applicable Accounting Standards (AS)
specified in the Companies (Accounting Standards) Rules, 2006 and
presentational requirements of the Companies Act, 1956.
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 revised 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 being a
period within 12 months for the purposes of classification of assets
and liabilities as current and non-current.
1.2 Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles in India (GAAP) requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent liabilities on
the date of the financial statements and the result of operations
during the year. Differences between actual results and estimates are
recognised in the year in which the results are known or materialised.
examples of such estimates are estimated useful life of assets,
classification of assets/liabilities as current or non-current in
certain circumstances, provision for doubtful receivables and
retirement benefits, etc. Actual results could differ from those
estimates. Any revision to accounting estimates is recognised
prospectively in current and future periods.
1.3 Fixed assets
Fixed Assets are stated at cost or at revalued amounts less accumulated
depreciation. Cost of fixed assets includes all incidental expenses and
interest costs on borrowings, attributable to the acquisition of
qualifying assets, up to the date of commissioning of assets.
Foreign currency exchange differences to the extent covered under AS-11
are capitalised as per the policy stated in note 2.11 below.
1.4 Depreciation / amortisation
- Leasehold land and cost of leasehold improvements are amortised over
the period of lease or their useful lives, whichever is shorter.
- Depreciation on other fixed assets (excluding software) is provided
using the straight line method at the rates based on useful lives of
assets estimated by the management, which is equal to or higher than
the rates prescribed under Schedule XIV to the Companies Act, 1956.
- Fixed assets individually costing up to rupees five thousand are
depreciated at the rate of 100 percent.
- Additional depreciation on account of revaluation of assets is
charged to the Revaluation Reserve account.
- Software are amortised on straight line method over a period of three
The carrying amounts of the Company''s assets are reviewed at each
balance sheet date to determine whether there is any indication of
impairment. If any such indication exists, the asset''s recoverable
amount is estimated as higher of its net selling price and value in
use. An impairment loss is recognised whenever the carrying amount of
an asset or its cash generating unit exceeds its recoverable amount.
Impairment losses are recognised in the Statement of Profit and Loss.
An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss
is reversed only to the extent that the asset''s carrying amount does
not exceed the carrying amount that would have been determined net of
depreciation or amortisation, had no impairment loss been recognised.
1.6 Borrowing costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalised as part of the cost
of such assets to the extent that they relate to the period till such
assets are ready to be put to use. A qualifying asset is one that
necessarily takes substantial period of time to get ready for its
intended use. All other borrowing costs are charged to Statement of
Profit and Loss.
Current investments are carried at the lower of cost and fair value.
Long-term investments are carried at cost less diminution, other than
temporary in value.
- Stores and spare parts are valued at cost or under, computed on
weighted average basis.
- Raw materials, work-in-progress and finished goods are valued at the
lower of cost and net realisable value. Finished goods and
work-in-progress include material cost and appropriate portion of
manufacturing and other overheads. Cost is ascertained on a weighted
1.9 Revenue recognition
i) Sale of goods
Revenue from sale of products is recognised when the products are
dispatched against orders from customers in accordance with the
contract terms, which coincides with the transfer of risks and rewards.
Sales are stated inclusive of excise duty and net of rebates, trade
discounts, sales tax and sales returns.
ii) Sale of power
Sale of power is recognised on the basis of actual quantity of power
sold with reference to the contracted rate.
iii) claims lodged with insurance companies
Claims lodged with the insurance companies are accounted for on an
accrual basis, to the extent these are measurable and ultimate
collection is reasonably certain.
Dividend from investments is recognised when the right to receive
dividend is established.
1.10 Operating leases
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased asset are classified as
operating lease. Operating lease charges are recognised as an expense
in the Statement of Profit and Loss on a straight-line basis over the
1.11 Foreign exchange transactions and forward contracts
Foreign exchange transactions
i) Foreign currency transactions are accounted for at the exchange rate
prevailing on the date of the transaction. All monetary foreign
currency assets and liabilities are converted at the exchange rates
prevailing at the date of the balance sheet. All exchange differences
other than in relation to acquisition of fixed assets and other long
term foreign currency monetary liabilities are dealt with in the
Statement of Profit and Loss.
ii) In accordance with Accounting Standard 11, Accounting for the
effects of changes in foreign exchange rates, exchange differences
arising in respect of long term foreign currency monetary items: O used
for acquisition of depreciable capital asset, are added to or deducted
from the cost of asset and are depreciated over the balance life of
- used for the purpose other than the acquisition of depreciable
capital asset, are accumulated in Foreign Currency Monetary Item
Translation Difference Account (FCMITDA) and amortised over the balance
period of such liability.
iii) In case of foreign exchange forward contracts taken for underlying
transactions, and covered by Accounting Standard 11, Accounting for
the effects of changes in foreign exchange rates, the premium or
discount is amortised as income or expense over the life of the
contract. The exchange difference is calculated as the difference
between the foreign currency amount of the contract translated at the
exchange rate at the reporting date, or the settlement date where the
transaction is settled during the reporting period, and the
corresponding foreign currency amount translated at the later of the
date of inception of the forward exchange contract and the last
reporting date. Such exchange differences are for the year ended 31
March 2012 recognised in the Statement of Profit and Loss in the
reporting period in which the exchange rates change.
Any profit or loss arising on the cancellation or renewal of such
contracts is recognised as income or expense for the year.
iv) Forward exchange contracts taken for highly probable/forecast
transactions, which are not covered by Accounting Standard 11, are
marked to market in accordance with the principles under AS 30
Financial Instruments: Recognition and Measurement. The Company
records the gain or loss on effective hedges in the Hedging Reserve
until the transactions are complete. On completion, the gain or loss
is transferred to the Statement of Profit and Loss of the period in
which such transaction is concluded. To designate a forward contract or
option as an effective hedge, management objectively evaluates and
evidences with appropriate supporting documents at the inception of
each contract whether the contract is effective in achieving offsetting
cash flows attributable to the hedged risk. In the absence of a
designation as effective hedge, a gain or loss is recognised in the
Statement of Profit and Loss.
1.12 employee benefits
a) Short-term employee benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short- term employee benefits. Benefits
such as salaries, wages and bonus, etc., are recognised in the
Statement of Profit and Loss in the period in which the employee
renders the related service.
b) Post employment benefit
Defined contribution plan
The Company deposits the contributions for provident fund to the
appropriate government authorities and these contributions are
recognised in the Statement of Profit and Loss in the financial year to
which they relate.
Defined benefit plan
The Company''s gratuity scheme is a defined benefit plan. The present
value of the obligation under such defined benefit plan is determined
based on actuarial valuation carried out by an independent actuary,
using the Projected unit Credit Method, which recognises 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. The obligation is measured at the present value of the
estimated future cash flows. The discount rates used for determining
the present value of the obligation under defined benefit plans, is
based on the market yields on Government securities as at the balance
sheet date. Actuarial gains and losses are recognised immediately in
the Statement of Profit and Loss.
c) Other long-term employee benefits
entitlements to annual leave are recognised when they accrue to
employees. Leave entitlements can be availed while in service or
en-cashed at the time of retirement/ termination of employment, subject
to a restriction on the maximum number of accumulation. The Company
determines the liability for such accumulated leave entitlements on the
basis of actuarial valuation carried out by an independent actuary at
the year end.
Income tax expense comprises current tax, deferred tax charge or
credit. Current tax provision is made based on the tax liability
computed after considering tax allowances and exemptions under the
Income tax Act, 1961. The deferred tax charge or credit and the
corresponding deferred tax liability and assets are recognised using
the tax rates that have been enacted or substantively enacted on the
balance sheet date.
Deferred tax assets are recognised only to the extent where there is
reasonable certainty that the assets can be realised in future;
however, where there is unabsorbed depreciation or carried forward
business loss under taxation laws, deferred tax assets are recognised
only if there is a virtual certainty of realisation of such assets.
Deferred tax assets are reviewed at each balance sheet date to reassess
The credits arising from Minimum Alternate Tax paid are recognised as
receivable only if there is reasonable certainty that the Company will
have sufficient taxable income in future years to utilise such credits.
1.14 earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year.
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.
1.15 Provisions and contingent liabilities
The Company recognises a provision when there is a present obligation
as a result of a past event and it is more likely than not that there
will be a outflow of resources embodying economic benefits to settle
such obligations and the amount of such obligation can be reliably
estimated. Provisions are not discounted to their present value and are
determined based on the management''s estimation of the outflow required
to settle the obligation at the balance sheet date. These are reviewed
at each balance sheet date and adjusted to reflect current management
Contingent liabilities are disclosed in respect of possible obligations
that have arisen from past events and the existence of which will be
confirmed only by the occurrence or non-occurrence of future events,
not wholly within the control of the Company.
When there is an obligation in respect of which the likelihood of
outflow of resources is remote, no provision or disclosure is made.