a) Basis of Accounting:
The financial statements are prepared under the historical cost
convention, in accordance with generally accepted accounting principles
and the provisions of the Companies Act, 1956 as adopted consistently
by the Company.
Accounting policies not specifically referred to otherwise are
consistent with generally accepted accounting principles and
followed by the Company.
b) Revenue Recognition:
Revenue from the sale of goods is recognized at the point of
despatch of finished goods to the customers. All expenses & revenue are
accounted for on accrual basis , except lease hold land acquired in
earlier years consideration of which is to be paid in installments in
accordance with past practice and leave travel assistant to employees
are accounted on payment basis.
c) Fixed Assets and Depreciation:
Fixed assets are stated at cost of acquisition or construction and
installation less accumulated depreciation. Depreciation on Fixed
Assets (other than leasehold land, which is not amortized) is provided
at the rates and in the manner provided by Schedule XIV to the
Companies Act, 1956 under the straight line method in case of Building
and Plant & Machinery and under the written down value method in other
d) Foreign Exchange Transactions:
Foreign currency transactions are accounted at exchange rates
prevailing on the date the transaction takes place. All exchange
differences in respect of foreign currency transactions are dealt with
in the Profit & Loss Account (except those relating to .acquisition of
Fixed Assets which are adjusted in the cost of the assets). All foreign
currency assets and liabilities, if any, as at the Balance Sheet date
are restated at the applicable exchange rates prevailing at that date.
Long Term investments are valued at cost and provision for diminution
in value of such investment is made, if considered permanent in nature
by the management.
Raw material and stores (including components and spares) are valued at
cost (Weighted Average) Work in process and finished goods are valued
at cost, which includes cost of production and overheads and is lower
than the net realizable value.
g) Excise Duty .
Excise duty is accounted for when paid on the clearance of goods from
bonded premises but is accounted for on accrual basis. Accordingly
provision for excise duty is made in the accounts for goods
manufactured and lying in the bounded warehouse with in the factory.
Sales comprise of goods (net, of returns and discount) and services,
scrap, waste and includes excise duty.
i) Employees Retirement Benefits
Contributions made towards provident fund (under the Employees
Provident Fund and Miscellaneous Provisions Act, 1952) and
superannuation fund (administeredwith the Life Insurance Corporation
of India Ltd.) are charged to the Profit and Loss Account.
Gratuity contribution are charged to the Profit & Loss Account on the
basis of actuarial valuation carried out by the Life Insurance
Corporation of India Limited in terms of their scheme as at February
28th of each accounting year.
Provision is made in the Accounts for value of unutilized leave due to
employees at the end of each year.
j) Research and Development Expenses
Expenditure related to capital items are debited to fixed assets and
depreciated at applicable rates and revenue expenditure charged to the
Profit and Loss Account.
k) Goodwill .
The Goodwill is being amortized over a period of five years commencing
from the year immediately following the year of its acquisition.
1) Miscellaneous Expenditure
Preliminary expenses Share/ Debenture issue expenses and cost of
development of new samples are written off to the Profit and Loss
Account in six equal installments.
Technical Know how fee and Total Quality Management expenditure
incurred relating to ISO 9001/ QS 9000 certification is written off to
the Profit and Loss Account in six equal installments.
Write off of differential amount of technical know how fee on
conversion of related foreign currency liability is made in the Profit
and Loss Account in six equal annual installments. Technical know-how
relating to the construction of plant is added to the value of the
The Company also treats the expenditure incurred on deputation of
foreign technicians by its collaborators as deferred revenue
expenditure. Such expenditure is written off in the Profit and Loss
Account in six equal installments.
Share issue expenses, relating to capital issue are charged to Profit
and Loss Account, in accordance with the above policy commencing in the
year of subscription of the issue.
The amount of deferred revenue expenditure recognized on account of
Present Value of Interest differential due to resetting of interest
rates in terms of restructuring package approved by Financial
Institutions shall be written off and charged to profit and loss
account to the extent of 6.25% p.a., as the same shall be amortized
over a period of 16 years i.e. the total number of years stipulated by
the institutions for payment of Present Value of Interest differential.
m) Expansion Project Expenses
All items of direct expenditure in relation to the expansion project
being implemented by the Company are treated as preoperative
expenditure pending capitalization. Such expenditure are capitalized to
various assets in the year of the commencement of the production of
expansion project depreciation on assets put to use for expansion as
also on capitalized assets is charged in the year of commencement of
n) Deferred Tax .
Income tax expense comprises of current tax provisions and the net
change in deferred tax account.
Current tax is computed as per the provisions of Income Tax Act,
1961. Net outstanding balance in current tax account is recognized as
current tax liability / asset.
In accordance with Accounting Standard 22- Accounting of Taxes on
Income, issued by The Institute of Chartered Accountants of India, the
deferred tax for timing difference between the book and tax profits for
the year is accounted for using the tax rates and laws that have been
enacted or substantively enacted as of the Balance Sheet date.
Deferred Tax assets arising from timing difference as recognized to the
extent there is reasonable virtual certainty that the differences,
being the difference between taxable income and accounting income that
originate in one period and are capable of reversal in one or more
Net outstanding balance in Deferred tax account is recognized as
deferred tax liability / asset. The deferred tax account is used solely
for reversing timing difference as and when crystallized.
o) Borrowing Cost
Borrowing cost attributable to acquisition, construction or production
of qualifying assets (assets which requires substantial period of time
to get ready for its intended use) are capitalized as part of the cost
of such assets. All other borrowing costs are charged to revenue.
The carrying amounts of assets, other than inventories is reviewed at
each Balance sheet date to determine whether there is any indication of
impairment. If any such indication exits, the recoverable amount of the
asset is estimated.
An impairment loss is recognized whenever the carrying amount of an
asset or its cash generating units exceeds its recoverable amount. The
recoverable amount is the greater of the assets net selling price and
the value in use which is determined based on the estimated future cash
flow discounted to their present values. All impairment losses are
recognized in compliance with AS-28 .
An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount and recognized in
compliance with AS-28.