1.1 BASIS OF PREPARATION OF FINANCIAL STATEMENTS:
The financial statements of the Company have been prepared under
historical cost convention, in accordance with the Generally Accepted
Accounting Principles (GAAP) applicable in India and the provisions of
the Companies Act, 1956. The preparation of financial statements in
conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent liabilities as at date of the financial
statements, and the reported amounts of revenue and expenses during the
reported period. Actual results could differ from those estimates.
1.2 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.
1.3 ASSETS HELD FOR SALE::
Assets held for sale are stated at the 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.
1. Raw materials, stores, spare parts and components are valued on
first in first out basis/ weighted average at net landed cost or net
realizable value whichever is lower.
2. Work in progress is valued at works cost or net realizable value
whichever is lower.
3. Finished goods are valued at works cost or net realizable value
whichever is lower.
Material cost of work in progress and finished goods have been computed
based on the weighted average/ average price/ latest estimated purchase
price. At certain units, cost of finished goods has been computed by
subtracting an estimated percentage from selling price to cover
margins, further cost to be incurred to make the sale and excluded
a) 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 31st March 1994.
b) 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.
c) Depreciation on furniture and fixtures above Rs 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 quarter of addition.
Furniture and fixtures whose cost is Rs 5,000/- or below are fully
depreciated in the year of addition.
d) Depreciation on assets taken on finance lease is charged over the
primary lease period.
e) Depreciation on software is provided at 33.33% per annum.
f) Depreciation on technical know-how fees and product development are
written over a period of six years.
g) Project specific tools are depreciated over the life of the project.
h) 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 Rs 5,000/- is
1.7 RESEARCH AND DEVELOPMENT EXPENDITURE:
Revenue expenditure in carrying out research and development activity
is charged to the Statement of Profit and Loss of 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
1.8 REVENUE RECOGNITION:
a) Sale of goods is recognized on shipment to customers and excludes
recovery towards sales tax.
b) Interest income is recognized on time proportion basis.
c) Dividend income is recognized, when the right to receive the
dividend is established.
1.9 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 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 of the defined benefit obligation. Gratuity to employees is
covered under Group Gratuity Life Assurance Scheme of the Life
Insurance Corporation of India.
1.10 FOREIGN CURRENCY TRANSACTIONS:
a) Foreign currency transactions are translated into rupees at the
exchange rate prevailing on the date of the transaction.
b) 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 profit and loss account.
c) Non monetary items denominated in foreign currency, are valued at
the exchange rate prevailing on the date of transaction.
d) Branches, which are integral foreign operations are translated as if
the transactions of those foreign operations were the transactions of
the Company itself.
e) 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 should
be recognized as income or as expense for the period.
1.11 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
1.12 BORROWING COSTS:
Interest and other borrowing costs on specific borrowings relatable to
qualifying assets are capitalised 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.
1.13 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
1.14 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.