1. Basis of accounting
The accompanying financial statements have been prepared under the
historical cost convention, in accordance with Indian Generally
Accepted Accounting Principles (GAAP) and the provisions of the
Companies Act, 1956 (The Act).
The Ministry of Corporate Affairs revised Schedule VI to the Act for
financial years commencing on or after 1 April 2011. The balance sheet,
profit and loss account and the comparative financial information for
the previous year have accordingly been prepared and presented with
disclosures as required under the Revised Schedule VI.
2. Use of estimates
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles require estimates and assumptions to be
made that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities on the date of financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates and
differences between actual results and estimates are recognized in the
periods in which the results are known/materialize.
3. Fixed assets and depreciation
Fixed Assets are stated at their cost of acquisition or construction
less accumulated depreciation and impairment losses.
Costs of acquisition comprise all costs incurred to bring the assets to
their location and working condition up to the date the assets are put
to use. Costs of construction are composed of those costs that relate
directly to specific assets and those that are attributable to the
construction activity in general and can be allocated to specific
assets up to the date the asset are put to use.
Depreciation on assets is provided, pro-rata for the period of use, by
the Straight Line Method (SLM) at the SLM rates prescribed in Schedule
XIV to the Act.
Leasehold land is amortized over the period of the lease, except where
the lease is convertible to freehold land under lease agreements at
future dates at no additional cost.
The company capitalizes software where it is reasonably estimated that
the software has an enduring useful life. Software is depreciated over
an estimated useful life of 3 to 5 years.
The carrying values of assets /cash generating units at each balance
sheet date are reviewed for impairment in accordance with Accounting
Standard 28 Impairment of Assets. If any indication of impairment
exists, the recoverable amount of such assets is estimated and
impairment is recognized, if the carrying amount of these assets
exceeds their recoverable amount (i.e. the higher of the asset''s net
selling price and value in use).
Investments are classified as current or long-term in accordance with
Accounting Standard 13 Accounting for Investments.
Current investments are stated at lower of cost and fair value. Any
reduction in the carrying amount and any reversals of such reductions
are charged or credited to the profit and loss account.
Long term investments are stated at cost. Provision for diminution is
made to recognize a decline, other than temporary, in the value of such
5. Revenue recognition
Revenue is recognized when it is earned and no significant uncertainty
exists as to its realization or collection.
Revenue from sale of goods is recognized on delivery of the products,
when all significant contractual obligations have been satisfied, the
property in the goods is transferred for a price, significant risks
and rewards of ownership are transferred to the customers and no
effective ownership is retained. Sales are net of sales tax/value added
tax. Export turnover includes related export benefits. Excise duty
recovered is presented as a reduction from gross turnover.
Inventories are valued at the lower of cost and net realizable value.
Cost of inventories comprise all costs of purchase, costs of conversion
and other costs incurred in bringing the inventories to their present
location and condition. Cost is determined by the weighted average cost
Excise duty related to finished goods stock is included under changes
in inventories of finished goods, work-in-progress and stock-in-trade
(Refer note 22).
7. Borrowing costs
Borrowing costs attributable to the acquisition or construction of
qualifying assets, as defined in Accounting Standard 16 Borrowing
Costs are capitalized as part of the cost of such asset up to the date
when the asset is ready for its intended use. Other borrowing costs are
expensed as incurred.
8. Employee benefits
Employee benefits such as salaries, allowances, non-monetary benefits
and employee benefits under defined contribution plans such as
provident and other funds, which fall due for payment within a period
of twelve months after rendering service, are charged as expense to the
profit and loss account in the period in which the service is
Employee benefits under defined benefit plans, such as gratuity and
compensated absences which fall due for payment after a period of
twelve months from rendering service or after completion of employment,
are measured by the projected unit credit method, on the basis of
actuarial valuations carried out by third party actuaries at each
balance sheet date. The company''s obligations recognized in the balance
sheet represents the present value of obligations as reduced by the
fair value of plan assets, where applicable.
Actuarial gains and losses are recognized immediately in the profit
and loss Account.
9. Foreign currency transactions
Foreign currency transactions are recorded at the exchange rates
prevailing on the date of the transaction.
Monetary foreign currency assets and liabilities (monetary items) are
reported at the exchange rate prevailing on the balance sheet date.
Exchange differences relating to long term monetary items are dealt
with in the following manner:
i. Exchange differences relating to long-term monetary items, arising
during the year, in so far as they relate to the acquisition of a
depreciable capital asset are added to/deducted from the cost of the
asset and depreciated over the balance life of the asset.
ii. In other cases such differences are accumulated in a Foreign
Currency Monetary Item Translation Difference Account and amortized to
the profit and loss account over the balance life of the long-term
monetary item, however that the period of amortization does not extend
beyond 31 March 2020.
All other exchange differences are dealt with in the profit and loss
Non-monetary items such as investments are carried at historical cost
using the exchange rates on the date of the transaction- also refer
10. Derivative financial instruments
The Company enters into derivative financial instruments such as
foreign exchange forward contracts, interest rate swaps and currency
options to manage its exposure to interest rate and foreign exchange
Derivatives are initially recognized at fair value at the date a
derivative contract is entered into and are subsequently re- measured
to their fair value at each balance sheet date.
The Company designates certain derivatives as either hedges of the fair
value of recognized assets or liabilities (fair value hedges) or hedges
of highly probable forecast transactions or hedges of foreign currency
risk of firm commitments (cash flow hedges). The Company does not
enter into derivative contracts for trading or speculative purposes.
A derivative is presented under Short term loans and advances (Note14
) or Other Current Liabilities (Note 10).
Changes in the fair value of derivatives that are designated and
qualify as fair value hedges are recorded in the profit and loss
account immediately, together with any changes in the fair value of the
hedged item that are attributable to the hedged risk. The change in the
fair value of the hedging instrument and the change in the hedged item
attributable to the hedged risk are recognized in the same line of the
profit and loss account relating to the hedged item.
Changes in the fair value of derivatives that are designated and
qualify as cash flow hedges are deferred in a Hedging Reserve
Account. The gain or loss relating to the ineffective portion is
recognized immediately in profit and loss account. Amounts deferred in
the Hedging Reserve Account are recycled in the profit and loss
account in the periods when the hedged item is recognized in the profit
and loss account, in the same line as the hedged item.
Hedge accounting is discontinued when the Company revokes the hedging
relationship, the hedging instrument expires or is sold, terminated, or
exercised, or no longer qualifies for hedge accounting. In case of
fair value hedges the adjustment to the carrying amount of the hedged
item arising from the hedged risk is amortized to the profit and loss
account from that date. In case of cash flow hedges any cumulative
gain or loss deferred in the Hedging Reserve Account at that time is
retained and is recognized when the forecast transaction is ultimately
recognized in the profit and loss account. When a forecast transaction
is no longer expected to occur, the cumulative gain or loss that was
deferred is recognized immediately in the profit and loss account.
11. Income taxes
Income taxes are accounted for in accordance with Accounting Standard
22 Accounting for Taxes on Income. Taxes comprise both current and
Current tax is measured at the amount expected to be paid/ recovered
from the revenue authorities, using the applicable tax rates and tax
laws. Minimum Alternate Tax (MAT) credit entitlement available under
the provisions of Section 115 JAA of the Income Tax Act, 1961 is
recognized to the extent that the credit will be available for
discharge of future normal tax liability.
The tax effect of the timing differences that result between taxable
income and accounting income and are capable of reversal in one or more
subsequent periods are recorded as a deferred tax asset or a deferred
tax liability. They are measured using the substantively enacted tax
rates and tax laws.
The carrying amount of MAT credit and deferred tax assets at each
balance sheet date is reduced to the extent that it is no longer
reasonably certain that sufficient future taxable income will be
available against which the assets can be realized.
Where certain expenses or credits which are otherwise required to be
charged to the profit and loss account are adjusted directly to
reserves in accordance with a court order or as permitted by law/
accounting standards, the tax benefits or charge, arising from the
admissibility or taxability of such expenses or income for tax purpose
is also recognized in the reserves.
Tax on distributed profits payable in accordance with the provisions
of section 115O of the Income Tax Act, 1961 which is accounted for in
accordance with the Guidance Note on Accounting for Corporate Dividend
Tax is regarded as a tax on distribution of profits and is not
considered in determination of profits for the year.
12. Earnings per share
The Company reports basic and diluted earnings per share (EPS) in
accordance with Accounting Standard 20 Earnings per Share. Basic EPS
is computed by dividing the net profit or loss for the year
attributable to equity shareholders by the weighted average number of
equity shares outstanding during the year. Diluted EPS is computed by
dividing the net profit or loss for the year attributable to equity
shareholders by the weighted average number of equity shares
outstanding during the year as adjusted for the effects of all dilutive
potential equity shares, except where the results are anti- dilutive.
13. Operating leases
Operating lease receipts and payments are recognized as income or
expense in the profit and loss account on a straight-line basis over
the lease term.
14. Cash Flow Statement
The cash flow statement is prepared using the indirect method set
out in Accounting Standard 3 Cash Flow Statements and presents the
cash flows by operating, investing and financing activities of the
Cash and cash equivalents presented in the cash flow statement consist
of cash on hand and unencumbered, highly liquid bank balances.
15. Securities expenses
Expenses on issue of securities are written off to the Securities
Premium Account in accordance with Section 78 of the Act.
Premium payable on redemption of bonds is provided for over the life of
the bonds. The Securities Premium Account is applied in providing for
premium on redemption in accordance with Section 78 of the Act. On
conversion of the bonds to equity the provision for the redemption
premium is reversed.
16. Stock based compensation
The compensation cost of stock options granted to employees is
calculated using the intrinsic value of the stock options. The
compensation expense is amortized uniformly over the vesting period of
17. Contingent liabilities
Contingent liabilities as defined in Accounting Standard 29
Provisions, Contingent Liabilities and Contingent Assets are
disclosed by way of notes to the accounts. Disclosure is not made if
the possibility of an outflow of future economic benefits is remote.
Provision is made if it is probable that an outflow of future economic
benefits will be required to settle the obligation.