1. Basis of Accounting
The financial statements are prepared in accordance with generally
accepted accounting principles (GAAP) in India under the historical
cost convention on accrual basis. GAAP comprise mandatory accounting
standards as prescribed by the Companies (Accounting Standards) Rules,
2006 (as amended), the provisions of the Companies Act, 1956 and
guidelines issued by the Securities and Exchange Board of India.
2. Use of Estimates
The preparation of financial statements in conformity with the
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period.
Although these estimates are based on the management''s best knowledge
of the current events and actions, actual results could differ from the
3. Fixed Assets, Intangible Assets and Capital Work in Progress
Fixed assets are stated at cost less accumulated depreciation. Cost
comprises the purchase price and any attributable cost required for
bringing the assets to its working conditions for its intended use.
Capital Work-in-Progress includes advances paid to acquire fixed
assets, and the costs of fixed assets that are not ready for their
intended use at the balance sheet date. Intangible assets are stated at
cost less accumulated amortization. The cost of an intangible asset
comprises the consideration paid for acquisition, including any duties
and taxes and any directly attributable expenditure on making the asset
ready for its intended use.
Depreciation on fixed assets is provided on Straight line method at
the rates specified in schedule XIV to the Companies Act, 1956.
Computer software is grouped under Intangible Assets and is
amortized over its useful life using straight line method in accordance
with the rates prescribed against computers in schedule XIV of the
Companies Act, 1956. Further,
- Cost of leasehold land is amortized over the period of lease.
- Assets each costing Rs. 5,000 or less are depreciated fully in the
year of purchase.
- Depreciation in respect of addition to fixed assets is provided on
pro-rata basis from the date on which such assets are capitalized.
- Depreciation on fixed assets sold, discarded or demolished during
the year is being provided at their respective rates up to the date on
which such assets are disposed off.
Investments that are readily realizable and intended to be held
generally for not more than a year are classifieds current investments.
All other investments are classified as long term investments. Current
investment is carried at lower of cost and fair value determined on an
individual investment basis. Long term investment are carried at cost
less provision recorded to recognize any decline, other than temporary,
in the carrying value of each investment.
6. Valuation of Inventories
- Raw Materials (including goods in transit) are valued at lower of
cost and Net Realizable Value. However, materials and other items held
for use in production of inventories are not written down below cost if
the finished products in which they will be incorporated are expected
to be sold at or above cost.
- Stores and Spares are valued at cost.
- Work in process is valued at cost which includes direct materials
and lab our and a proportion of manufacturing overheads based on normal
- Finished Stocks are valued at lower of cost or net realizable
value. Cost for this purpose includes direct cost and attributable
- Cost is ascertained on the FIFO/Specific Identification basis, as
7. Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue shall be
Sale of goods
Revenue is recognized on transfer of significant risks and rewards of
ownership of the goods (which is generally on the dispatch of goods) to
Job Work Charges
Incomes from job charges are recognized as and when the services are
Interest income is recognized on the time proportion basis taking into
account the amount outstanding and the rate applicable.
8. Impairment of Assets
The carrying amounts of assets are reviewed at each balance sheet date
if there is an indication of impairment based on internal / external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital. Net
selling price is the amount obtainable from sale of the asset in an arm
length transaction between knowledgeable, willing parties, less the
cost of disposal. After impairment the depreciation is provided on the
revised carrying amount of the asset over its remaining useful life.
9. Employee Benefits
a) Employee benefits comprise both defined contribution and defined
b) Provident fund is a defined contribution plan
Each eligible employee and the Company make an equal contribution at a
percentage of the basic salary specified under the Employees Provident
Funds and Miscellaneous Provisions Act, 1952. The Company has no
further obligations under the plan beyond its periodic contributions.
c) Gratuity and Leave Encashment are defined benefit plans:-
The Company''s liability towards gratuity and leave encashment are
charged off to the Profit & Loss Account in the period in which the
employee has rendered services at the present value of the amounts
payable determined using actuarial valuation techniques. The actuarial
method used for measuring the liability is the Projected Unit Credit
d) Actuarial gains and/or losses in respect of post-employment benefits
are charged to profit and loss account or capitalized in case of new
projects taken up by the company.
e) All short term employee benefits are accounted for on undiscounted
basis during the accounting period based on services rendered by
10. Provisions, Contingent Liabilities and Contingent Assets
Provisions 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 to settle the obligation, in respect of which a reliable
estimate is possible. Provisions are not discounted to its present
value and are determined on the basis of the best estimate required to
settle the obligation as on the balance sheet date. These are reviewed
at each balance sheet date and adjusted to reflect the current best
Contingent Liabilities are not recognized in the financial statements
but are disclosed in the notes. Contingent Assets are neither
recognized nor disclosed in the financial statements.
11. Taxes on Income
Provision for current tax is made in accordance with and at the rates
and in the manner specified under the Income Tax Act, 1961 as amended
from time to time. Income taxes are accrued at the same period in which
the related revenue and expense arise. A provision is made for income
tax based on the tax liability computed after considering tax
allowances and exemptions.
Deferred Tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets and deferred tax liabilities are offset, if a legally
enforceable right exists to set off current tax assets against current
tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on income levied by same governing
taxation laws. Deferred tax assets are recognized only to the extent
that there is reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be
realized. In situations where the Company has unabsorbed depreciation
or carry forward tax losses, all deferred tax assets are recognized
only if there is virtual certainty supported by convincing evidence
that they can be realized against future taxable profits.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes - down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
Where the Company is lessee:
Leases where the less or effectively retains substantially all the risk
and benefits of ownership of the leased term, are classified as
operating leases. Operating lease payments are recognized as expenses
in the profit and loss account on a straight line basis over the lease
Where the Company is less or:
Assets subject to operating leases are included in fixed assets; lease
income is recognized in profit and loss account on a straight line
basis over the lease term. Costs including depreciation are recognized
as an expense in the profit and loss account. Initial direct costs such
as legal cost, brokerage, etc. are recognized immediately in the profit
and loss account.
13. Transaction in Foreign Currencies
a) Initial Recognition:
Foreign Currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
Foreign Currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of the historical cost
denominated in the foreign currency are reported using the exchange
rate at the date of the transaction; non-monetary items which are
carried at a fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rate that existed on
the date the values were determined.
c) Exchange Difference:
The exchange difference arising on the settlement of monetary items or
on reporting unsettled monetary items at the rates different from those
at which they were initially recorded during the year, or reported in
the previous financial statements, are recognized as income or as
expenses in the period in which they arise.
d) Forward Exchange Contracts:
In case of transactions covered by forward exchange contracts, which
are not intended for trading or speculation purposes, the
premium/discount represented by difference between the exchange rate at
the date of the inception of the forward exchange contract and forward
rate specified in the contract is amortized as expense or income over
the life of the contract.
Exchange differences on such contracts are recognized in the statement
of profit and loss account in the period in which they occur.
Any profit or loss arising on cancellation or renewal of forward
exchange contract is recognized as income or as expense for that
e) Non-monetary foreign currency items such as investments are carried
14. Cash and Cash Equivalents
Cash and Cash Equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short term investment with an
original maturity of three month or less.
15. Earnings per Share (EPS)
Basic earnings per share are calculated by dividing the net profit or
loss after tax for the period attributable to the equity shareholders
by the weighted average number of equity shares outstanding during the
period. Partly paid equity shares are treated as a fraction of an
equity share to the extent they that they were entitled to participate
in the dividends relative to a fully paid equity share during the
reporting period. The weighted average numbers of equity shares
outstanding during the period are adjusted for events like bonus issue,
bonus element in a rights issue to the existing shareholders, share
split and reverse share split (consolidation of shares).
For the purpose of calculating diluted earnings per share, net profit
or loss for the period attributable to equity share holders and the
weighted average no. of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
16. Government Grants
Government grants in the nature of the promoters'' contribution are
credited to the capital reserve and treated as a part of the
17. Borrowing Costs:
Interest and other borrowing costs attributable to qualifying assets
are capitalized. Other interest & borrowing costs are charged to
18. Application of Securities Premium Account:
Share and debenture Issue expenses and Premium payable on Redemption of
Debentures, are charged first against available balance in Securities