A) Method of accounting :
i) The Financial Statement are prepared under the historical cost
convention or on the basis of going concern and as per applicable
Indian Accounting Standards. The Company follows the mercantile system
of accounting and recognises income and expenditure on accrual basis
except certain items of income such as insurance claims, overdue
interest from debtors etc., have been considered to the extent the
amount is ascertainable / accepted by the parties. All assets &
Liabilities have been classified as current & non current as per
company''s normal cycle and other criteria set out in Schedule VI of the
Companies Act 1956.
ii) Use of Estimates : The preparation of the financial statement in
conformity with Generally Accepted Accounting Principles (GAAP)
requires the management to make estimates and assumptions that affect
the reported balances of assets and liabilities and disclosures
relating to contingent liabilities as at the date of the financial
statements and reported amounts of income and expenses during the
period. Examples of such estimates include provision of doubtful debts,
future obligations under employees retirement benefit plans, income
taxes and useful lives & impairment of fixed assets and intangible
Accounting estimates could change from period to period. Actual results
could differ from those estimates. Appropriate changes in estimates
are made as the management becomes aware of changes in circumstances
surroundings the estimates. Any revision to accounting estimates is
recognised prospectively in current and future periods.
iii) Inflation : Assets and Liabilities are recorded at historic cost
as a going concern basis. These costs are not adjusted to reflect the
changes in the purchasing power of money.
B) Fixed assets :
Fixed Assets are stated at cost (net of modvat availed) which includes
all expenses for commissioning / putting the assets into use. Financing
cost relating to borrowed funds, adjustment arising consequent to
fluctuation in foreign exchange rate & other expenses attributable to
acquisition of fixed assets are capitalised and included in the gross
book value of fixed assets to which they relate. Impairment loss, if
any, are reduced from the gross block of the assets.
C) Depreciation :
i) Lease hold Land is amortised over the period of lease.
ii) In respect of the assets, for which loss on account of impairment
is accounted, depreciation is provided on Straight Line method at
revised rates so as to allocate the reduced carrying amount of these
assets over their remaining useful life. In respect of other assets,
the depreciation is provided on Straight Line method at the rates
prescribed under Schedule XIV of the Companies (Amendment) Act, 1988.
D) Impairment of assets :
An asset is treated as impaired, if the carrying amount of fixed assets
exceeds the recoverable amount on the reporting date and in such case
the carrying amount is reduced to the recoverable amount. The
recoverable amount is measured as the higher of the net selling price
and the value in use determined by present value of estimated future
E) Investment :
i) Investments are stated at cost inclusive of all expenses incidental
to their acquisition.
ii) Investments in shares of companies registered outside India are
stated at cost by converting the rate of exchange prevalent at the time
of acquisitions thereof.
iii) Appropriate provision has been made in the accounts for diminution
in the value of investments in accordance with AS-13 issued by the
Institute of Chartered Accountants of India.
F) Inventories :
Items of inventories are measured at lower of cost and net realisable
value after providing for obsolescence and deterioration, if any. Cost
of semi finished goods and finished goods comprises of chemical cost
(weighted average) plus overheads wherever applicable and that of
trading finished goods comprises of cost of purchase. Excise duty on
manufactured finished goods lying in the inventory is included as a
part of valuation of finished goods as per Accounting standard - 2
(Revised). Cost Formulae used are ''first in first out'', ''average cost''
or specific identification, as applicable.
G) Recognition of income and expenditure :
i) Sales turnover includes sale value of goods, excise duties and other
recoveries, such as insurance, transport and packing charges excluding
ii) Scrap sale is accounted for on sale basis. No inventory is taken as
the amount is not material.
iii) Revenue is recognised and expenditure is accounted for on their
iv) Income from interest on deposits, loan and interest bearing
securities is recognized on the time proportion basis.
H) Excise duty :
i) Excise duties recovered are included in the sale of products. Excise
duty paid on dispatches is shown separately as an item of manufacturing
ii) The Modvat Credit is accounted by crediting the amount to cost of
purchases on receipt of goods and is used on dispatch by debiting
Excise Duty Account.
I) Employee benefits :
i) Short term employee benefits are recognised as an expense at the
undiscounted amount in the Profit & Loss account in the year in which
the related services are rendered.
ii) Contribution to Provident Fund & Employee Pension Scheme are
accounted on accrual basis.
iii) Provision for gratuity liability is made based on actuarial
valuation as at the balance sheet date which is in accordance with
Accounting Standard No. 15 issued by the Institute of Chartered
Accountants of India.
iv) Company''s liabilities towards compensated absences to employees are
determined on the basis of valuations as at balance sheet date carried
out by an independent actuary using Projected Unit Credit Method.
Actuarial gains & losses comprise experience adjustments and the effect
of changes in actuarial assumptions are recognised immediately in the
profit and loss Account.
J) Foreign currency transactions :
i) Transaction denominated in foreign currency are converted into
Indian rupees at the exchange rate prevailing on the date of
ii) Gains and losses on settlement of the transaction are recognised in
profit and loss account.
iii) Monetary assets or liabilities in foreign currencies at the year
end are restated in Indian currency at the exchange rate prevailing on
the date of balance sheet and the resultant gain or loss is recognised
in profit and loss account,
iv) Investments in shares of foreign subsidiary company is stated in
Indian currency at the rate of exchange prevailing at the time when the
original investments was made.
K) Provisions and contingent liabilities :
Provisions are recognised for liabilities that can be measured only by
using a substantial degree of estimation, if:
a) the Company has a present obligation as a result of a past event
b) a probable outflow of resources is expected to settle the obligation
c) the amount of the obligation can be reliably estimated
Reimbursement expected in respect of expenditure required to settle a
provision is recongnised only when it is virtually certain that the
reimbursement will be received.
Contingent liability is disclosed in case of:
a) a present obligation arising from past events, when it is not
probable that an outflow of resources will be required to settle the
b) a present obligation when no reliable estimate is possible
c) a possible obligation arising from past events where the probability
of outflow of resources is not remote Contingent Assets are neither
recognised, nor disclosed.
Provisions, Contingent Liabilities and Contingent Assets are reviewed
at each balance sheet date.
L) Taxation :
i) Current Taxation : Provision for current tax is made on the basis of
estimated tax liability as per applicable provisions of the Income Tax
Act, 1961. No provision for taxation is made in view of the losses.
ii) Deferred Taxation : Deferred Tax Assets are recognised to the
extent there is reasonable certainty that these assets can be realised
in future. In absence of virtual certainty of sufficient future taxable
income, deferred tax has not been recognised as a matter of prudence.
M) Earnings per share :
The basic and diluted earnings per share is computed by dividing the
net profit/(loss) after tax attributable to equity shareholders for the
year, by the weighted average number of equity shares outstanding
during the year.