(i) The financial statements have been prepared in accordance with
Generally Accepted Accounting Principles (GAAP) in India under the
historical cost convention on accrual basis and are in accordance with
the applicable accounting standards issued by Ministry of Corporate
Affairs, Government of India and as prescribed in the Companies
(Accounting Standards) Rules, 2006. These Accounting policies have been
consistently applied, except where a newly issued accounting standard
is initially adopted by the company. Management evaluates the effect of
accounting standards issued on a going basis and ensures that they are
adopted as mandated by Companies Act, 1956.
(ii) As required & mandated by relevant guidelines prescribed under
Companies Act, 1956, Company has prepared its financials as per Revised
Schedule VI. 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 realization in cash and cash
equivalents, the Company has considered a period of twelve months for
the purposes of classification of assets and liabilities as current and
(iii) VALUATION OF INVENTORIES
(a) Finished goods have been valued at lower of cost or net realizable
value. In the case of finished goods, cost is determined by taking
material, labour and related factory overheads including depreciation,
excise duty and fixed production overheads arrived at by the cost sheet
of the last month of the financial year. Fixed overheads are allocated
for inclusion in the cost of conversion on the basis of normal levels
of production capacity or actual production whichever is higher.
(b) Raw materials, stores and spares have been valued at cost by using
weighted average basis.
(c) Goods in process have been valued at raw material cost incurred up
to the stage of production plus conversion cost apportioned on the
basis of raw material cost of goods in process.
(d) Loose tools and stock in transit have been valued at cost.
(e) As per past practice, no value is placed on stock of scrap since
its estimated net realizable/usable value is not accurately
(a) Depreciation on fixed assets is provided on the straight-line
method in accordance with Schedule XIV to the Companies Act, 1956.
However, as per rehabilitation scheme approved by Board tor Industrial
and Financial Reconstruction (BIFR), in respect of plant & machinery
(including electrical installation, factory equipment, storage & water
system), the estimated useful life of assets has, with retrospective
effect, been considered as 30 years. However, the rate of depreciation
on plant & machinery are lower than rates prescribed in Schedule XIV.
The rate of depreciation as per Straight Line Method is being used is
3.333% as against rate of 4.75% mentioned in Schedule XIV of Companies
On indigenous vehicles/cycles, depreciation is provided on the written
down value method as per rates prescribed and in accordance with the
Income Tax Act, 1961.
(b) In the case of purchase/sale depreciation is charged for the full
month in which purchase/sale is made.
(c) 100% depreciation is charged in the year of purchase on assets
equal to or less than Rs. 5,000.
(v) FOREIGN CURRENCY TRANSLATION
Foreign exchange transactions are recorded at the rate of exchange
prevailing on the date of transaction (i.e. bill of entry).
Accordingly, exchange differences arising on foreign exchange
transactions settled during the period are recognized in the statement
of profit and loss of the period.
Monetary current assets and monetary current liabilities that are
denominated in foreign currency are translated at the exchange rate
prevalent at the date of the balance sheet. The resulting difference is
also recorded in the Statement of profit & loss.
(vi) ACCOUNTING FOR FIXED ASSETS
(a) Fixed assets are stated at their original cost including incidental
expenses related to acquisition and installation less accumulated
depreciation. The costs of assets under installation or under
construction as at the balance sheet date are shown as capital work in
process. There has been no revaluation of fixed assets carried out
during the year.
(b) Leasehold land is written off over the period of lease.
(vii) REVENUE RECOGNITION
(a) Sales are recognized when significant risks and rewards of goods
are transferred to the customers and is stated net of returns, trade
discounts, rebates and sales tax but includes excise duties.
(b) Dividend Income is recognized when the right to receive is
(c) Interest revenue is recognized on a time proportion basis taking
into account the amount outstanding and the rate applicable.
(viii) EMPLOYEE BENEFITS
(a) Short Term Employee Benefits
All employee benefits falling due within twelve months of rendering the
service are classified as short term employee benefits. The benefits
like salaries, wages, short term compensated absences etc. and the ex-
pected cost of bonus, ex-gratia are recognized in the period in which
the employee renders the related service.
(b) Post-Employment Benefits
(i) Defined Contribution Plans
Defined Contribution Plans are provident fund scheme, officers''
superannuation scheme, employees state insurance and government pension
fund scheme for eligible employees. The company''s contribution to the
Defined Contribution Plans is recognized in the Statement of profit &
loss in the financial year to which they relate.
(ii) Defined Benefit Plans
The employee''s gratuity fund scheme managed by LIC is the Company''s
defined benefit plans. Wherever applicable, the present value of the
obligation under such defined benefit plans are determined based on
actuarial valuation using the Projected 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.
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 plan, are based on the market
yields on Government securities as at the balance sheet date, having
maturity periods approximating to the terms of related obligations.
Actuarial gains and losses are recognized immediately in the Statement
of Profit & Loss.
In case of funded plans, the fair value of the plan assets is reduced
from the gross obligation under the defined benefit plans to recognize
the obligation on the net basis.
Gains or losses on the curtailment or settlement of any defined benefit
plan are recognized when the curtailment or settlement occurs. Past
service cost is recognized as expense on a straight-line basis over the
average period until the benefits become vested.
(c) Other Long-term Employee Benefits
The obligations for long term employee benefits such as long term
compensated leave or encashment of leave accrued up to the specified
period only at the time of retirement are recognized in the similar
manner as in the case of defined benefit plans as mentioned in (b) (ii)
above. The provision for leave encashment is accrued and provided for,
based on the actuarial valuation made by an independent Actuary as on
the Balance Sheet date.
(ix) ACCOUNTING FOR INVESTMENT
Investments are classified into current and long term investments.
Investments that are readily realizable 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 stated at the lower of cost and fair value determined
on an individual basis. A provision for decline in value of investments
is made only when the extent of loss is determinable and diminution in
value, in the opinion of the Directors, is permanent.
(x) INTANGIBLE ASSETS
Intangible Assets & related expenditure are recognized as per criteria
specified in Accounting Standard-26 on Intangible Assets issued by
the Institute of Chartered Accountants of India and accounted for as
(a) Intangible Assets are recognized when it is probable that the
future economic benefits that are attributable to the asset will flow
to the enterprise and the cost of the asset can be measured reliably.
(b) The cost of internally generated products is the sum of the
expenditure incurred from the time when the product first met the
recognition criteria for an intangible asset in development stage. The
expenditure incurred during research phase is directly charged to
Statement of Profit & Loss. The cost of product development comprises
its raw material cost, salary & wages, Stores & spares, including any
import duties and other taxes (other than those subsequently
recoverable by the enterprise from the taxing authorities) and any
directly attributable expenditure on making the product ready for its
use. Any trade discounts, rebates and realization from sale of products
during test runs are deducted in arriving at the cost.
(c) Revenue expenditure whenever incurred on research and development
is expensed as incurred.
(d) Acquisition of software is amortized on a straight line basis over
a period of five years starting from the year of capitalization.
(e) Internally developed new products for commercial use : over a
period of 120 months from the month subsequent to the month in which it
got activated for commercial use.
(xi) EXCISE DUTY
Excise duty has been accounted for on the basis of removal of goods as
well as provision made for goods lying as closing stock.
(xii) DEFERRED TAXATION
Deferred tax is the effect of timing differences, being the difference
between taxable income and accounting income that originates in one
period and is capable of reversal in one or more subsequent periods. On
prudent grounds, deferred tax liabilities, when they arise, are
provided without any exceptions but deferred tax assets are calculated
on the accumulated timing differences as at the end of the year and are
based on tax rates and laws in force on the balance sheet date and are
recognized and carried forward only to the extent that there is a
virtual certainty of realization against future taxable income.
(xiii) PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognized but are disclosed in the
notes. Contingent Assets are neither recognized nor disclosed in the
(a) Lease rentals on assets taken on lease prior to April 01,2001 are
charged to the Statement of profit & loss over the period of the lease.
(b) Assets taken on lease under which the lessor effectively retains
all significant risks & rewards of ownership have been classified as
operating lease. Lease payments made under an operating lease are
recognized as expense in the Statement of profit & loss on straight
line basis over the primary term of the lease as mentioned in the lease
(xv) BORROWING COSTS
Borrowing costs that are specifically attributable to the acquisition,
construction or production of a qualifying asset are capitalized as
part of cost of such asset till the asset is ready for its intended
use. A qualifying asset is an asset that necessarily requires a
substantial period of time to get ready for its intended use or sale.
All other borrowing costs are recognized as an expense in the period in
which they are incurred.
(xvi) EARNINGS PER SHARE
In determining earnings per share, the Company considers the net profit
after tax and includes the post-tax effect of any
extraordinary/exceptional item. The number of shares used in computing
basic earnings per share comprises of the weighted average number of
shares outstanding during the period. The number of shares used in
computing diluted earnings per share comprises of the weighted average
shares considered for deriving basic earnings per share, and also the
weighted average number of equity shares that could have been issued on
the conversion of all dilutive potential equity shares.
(xvii)CASH FLOW STATEMENTS
Cash flows are reported using the indirect method, whereby net profit
before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from principle revenue generating, investing
and financing activities of the Company are segregated.