1.1 BASIS OF PREPARATION OF FINANCIAL STATEMENTS:
The financial accounts are prepared under the historical cost
convention in accordance with the Generally Accepted Accounting
Principles and in accordance with the provisions of the Companies Act,
1956. All income and expenditure, having a material bearing on
financial statements, are recognized on an accrual basis.
1.2 USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
1.3 FIXED ASSETS:
(I) Tangible Assets:
Fixed Assets (other than land which were revalued) are stated at cost
of acquisition inclusive of freight, duties, taxes and incidental
expenses relating to the acquisition, installation, erection and
commissioning less depreciation. A portion of the land owned by the
Company has been revalued. Internally manufactured assets are valued at
(II) Intangible Assets:
Intangible assets are accounted at cost of acquisition less
1.4 ASSETS HELD FOR SALE:
Assets held for sale are stated at cost or estimated net realizable
value, whichever is lower.
Investments unless otherwise stated are considered as long term in
nature and are valued at acquisition cost less provision for
diminution, if any, other than temporary in nature.
(i) Raw materials, stores, spare parts and components are valued at
cost on weighted average basis or net realizable value whichever is
(ii) Work in progress is valued at works cost or net realizable value
whichever is lower.
(iii) Finished goods are valued at works cost or net realizable value
whichever is lower.
Material cost of work in progress have been computed based on the
weighted average/ average price. Material cost of finished goods has
been computed on weighted average basis.
(i) Depreciation is charged on the written down value of assets at the
rates specified in schedule XIV to the Companies Act, 1956 or Income
Tax Act, 1961, whichever is higher on assets as on March 31, 1994
(ii) In respect of other additions after 1st April 1994, depreciation
on straight-line basis at the rates specified in schedule XIV to the
Companies Act 1956 has been charged, except otherwise stated.
(iii) Depreciation on furniture and fixtures above f 5,000/- provided
at the residences of the employees has been charged at the rate of
33.33% on the straight-line method irrespective of the month of
addition. Furniture and fixtures whose cost is f 5,000/- or below are
fully depreciated in the year of addition.
(iv) Depreciation on assets taken on finance lease is charged over the
primary lease period.
(v) Depreciation on software is charged over the period of 36 months.
(vi) Depreciation on technical know-how fees and product development
are written over a period of six years.
(vii) Project specific tools are depreciated over the life of the
(viii) Depreciation on assets (other than Furniture and Fixtures
provided to employees and assets taken on finance lease) bought / sold
during the year is charged at the applicable rates on a monthly basis,
depending upon the month of the financial year in which the assets are
installed / sold. Assets whose individual value less than f.5,000/- is
1.8 REVENUE RECOGNITION:
(i) Sale of goods is recognized on shipment of goods to customers and
excludes recovery towards sales tax.
(ii) Interest income is recognized on time proportion basis.
(iii) Dividend income is recognized, when the right to receive the
dividend is established.
(iv) Rental income is recognized on time proportion basis.
1.9 RESEARCH & DEVELOPMENT EXPENDITURE:
Revenue expenditure in carrying out research and development activity
is charged to the Statement of Profit and Loss in the year in which it
is incurred. Capital expenditure in respect of research and development
activity is capitalized as fixed assets and depreciation provided as
1.10 EMPLOYEE BENEFITS:
(i) Short term Employee Benefits:
Employee benefits payable wholly within twelve months of rendering the
service are classified as short term. Benefits such as salaries,
bonus, leave travel allowance etc. are recognized in the period in
which the employee renders the related service.
(ii) Post Employment Benefits:
a. Defined Contribution Plans:
The Company has contributed to provident, pension & superannuation
funds which are defined contribution plans. The contributions paid/
payable under the scheme is recognized during the year in which
employee renders the related service.
b. Defined Benefit Plans:
Employees'' gratuity and leave encashment are defined benefit plans. The
present value of the obligation under such plan is determined based on
actuarial valuation using the Projected Unit Credit Method which
considers each year of service as giving rise to an additional unit of
benefit entitlement and measures each unit separately to build up the
final obligation. Actuarial gain and losses are recognized immediately
in the statement of profit and loss as income or expense. Obligation is
measured at the present value of estimated future cash flows using a
discounted rate that is determined by reference to market yields as at
the balance sheet date on Government bonds where the currency and terms
of the Government bonds are consistent with the currency and estimated
terms that matches to the defined benefit obligation. Gratuity to
employees is covered under Group Gratuity Life Assurance Scheme of the
Life Insurance Corporation of India.
1.11 FOREIGN CURRENCY TRANSACTIONS:
i) Foreign currency transactions are translated into rupees at the
exchange rate prevailing on the date of the transaction.
(ii) Monetary foreign currency assets and liabilities outstanding as at
the year-end are restated at the exchange rates prevailing as at the
close of the financial year. All exchange differences are accounted for
in the statement of profit and loss.
(iii) Non monetary items denominated in foreign currency, are valued at
the exchange rate prevailing on the date of transaction.
(iv) Branches, which are integral foreign operations are translated as
if the transactions are translated at rates prevailing on the date of
transaction approximates the actual rate at the date of transaction.
Branch monetary assets and liabilities are restated at the year end
(v) The Company has entered into forward exchange contracts, which is
not intended for trading or speculation purposes, to establish the
amount of reporting currency required or available at the settlement
date of a transaction. The premium or discount arising at the inception
of such a forward exchange 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 in the reporting
period in which the exchange rates change. Any profit or loss arising
on cancellation or renewal of such a forward exchange contract is
recognized as income or as expense for the period.
1.12 TAXES ON INCOME:
Provision for current tax for the year is after taking cognizance of
excess / short provision in prior years. Deferred tax assets/liability
is recognized, subject to consideration of prudence, on timing
1.13 BORROWING COSTS:
Interest and other borrowing costs on specific borrowings relatable to
qualifying assets are capitalized up to the date such assets are ready
for use / intended to use. Other interest and borrowing costs are
charged to the Statement of Profit & Loss.
1.14 IMPAIRMENT OF ASSETS:
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. An impairment loss, if any, is charged to profit
and loss account, in the year in which an asset is identified as
1.15 PROVISIONS & CONTINGENT LIABILITIES:
A provision is recognized when the Company has a present obligation as
a result of past event and it is probable that outflow of resources
will be required to settle the obligation, in respect of which reliable
estimate can be made. Provisions (excluding retirement benefits) are
not discounted to its present value and are determined based on best
estimate required to settle the obligation at the balance sheet date.
These are reviewed at each balance sheet date and adjusted to reflect
the current best estimates.
Financial effect of contingent liabilities is disclosed based on
information available upto the date on which financial statements are
approved. However, where a reasonable estimate of financial effect
cannot be made, suitable disclosures are made with regard to this fact
and the existence and nature of the contingent liability.