1.1 Basis of preparation of financial statements
The financial statements have been prepared and presented under the
historical cost convention in accordance with generally accepted
accounting principles (GAAP) in India, the relevant provisions of The
Companies Act, 1956 and the applicable Accounting Standards issued by
the Institute of Chartered Accountants of India unless otherwise stated
During the year ended March 31, 2012 the revised schedule notified
under companies act 1956 has become applicable to the company for
preparation and presentation of the financial statement. The adoption
of revised schedule -VI does not impact recognition and measurement
principles followed for preparation of the financial statement. The
company has also reclassified the previous year figure in accordance
with requirement applicable in the current year.
1.2 Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make
estimates and assumptions that affect the reporting amounts of assets
and liabilities and the disclosure of contingent liabilities as at the
date of financial statements and reported amounts of revenues and
expenses during reporting period. Actual results could differ from
these estimates. Any revision to accounting estimates is recognised
prospectively in current and future periods
1.3 Fixed Assets
1.3.1 Own Fixed Assets
Fixed assets are stated at cost of acquisition which includes all
related expenses (net of Cenvat and sales- tax set-off) less
accumulated depreciation. All related expenses other than carrying
cost, include finance cost till commencement of commercial production
and exchange loss on the external commercial borrowing.
The company has adopted the companies (Accounting Standards) amendment
rules,2009 relating to accounting Standard -11 notified by the
government of India as on 31 st March, 2009 (as amend by notification
on 29th Dec,2011) which allowed foreign exchange on long term monetary
item to be capitalized to the extent they relate to acquisition of the
1.3.2 Lease Fixed Assets
Operating Lease:- Rental are expensed with reference to lease term and
1.3.3 Intangible Fixed Assets
Intangible Assets (Patent, Trademark) are stated at cost of acquisition
net of cenvat and sales tax less accumulated depreciation.
Depreciation on fixed assets except Leasehold Lands have been provided
on straight line method at the rates and manner as provided in Schedule
XIV of the Companies Act, 1956. Amount paid on Leasehold land has been
spread over to remaining period of lease and has been written off
1.5 Impairment of Assets
In pursuance to Accounting Standard -28 issued by the Institute of
Chartered Accountants of India, the company has assessed no impairment
of assets as on 31st March, 2012, hence no provision has been made in
the books of accounts.
Long term investments are stated at cost and short term investments are
stated at lower of cost or market value. Provision for diminution in
the value of Long Term Investment is made only if such a decline is
other than temporary.
1.7 Retirement Benefits
Annual Contribution towards the gratuity liability is funded with the
Life Insurance Corporation of India in accordance with their gratuity
scheme. The liability in respect of Leave encashment payable to
employees at the year end is provided for.
Items of inventories are valued on the basis given below:
- Raw materials
I. At factory landed cost: FIFO basis
ii. In transit: Cost
- - Finished goods
I. Lying atfactory: Lowerofcoston FIFO basis or net realizable value.
ii. Lying at branches: Lower of landed cost at respective branch on
FIFO basis or net realizable value.
- Traded goods: At cost on FIFO basis.
- Work-in-Process: At cost of such goods arrived at on FIFO basis.
- Scraps (reusable): At cost of such goods arrived at on FIFO basis.
- Scrap (Other): Lower of cost ornet realizable value.
- Stores, Spares and Packing Materials: At cost of such goods arrived
at on FI FO basis.
Cost of Inventories comprises of the cost of purchases, cost of
conversion and other cost including manufacturing overhead incurred in
bringing them to their respective present location and condition.
1.9 Revenue Recognition
Revenue from operation includes Sales of goods adjusted forthe Excise
duty, value added tax, central Sales Tax and discounts if any as per
approved by the management.
Dividend income is recognised when right to receive is established.
Interest income is recognised on time proportion basis into accounts
the amount outstanding and rate applicable
1.10 Purchase of raw materials, stores, spares and packing materials
Purchase is net of discount, VAT, excise duty, but includes custom
duty, clearing & forwarding charges, commission on purchases, cartage
inwards, interest on LC & transit insurance.
1.11 Excise Duty
Excise duty represents finished goods dispatched through Personal
Ledger Account (PLA) and out of Cenvat on capital goods Account
(RG23C-Part II) but net of unutilized amount in raw material cenvat
Account (RG23A-Part II).
1.12 Provision for Current tax and Deferred tax
Income taxes comprise of current tax, deferred tax charges and short
excess provision of the last year. Provision for current tax is made
after taking into consideration benefit admissible under the provision
of income tax act, 1961. Deferred tax resulting from the timing
difference between taxable and accounting income is accounted for
using the tax rate and laws that are enacted or substantively enacted
as on the balance sheet date
1.13 Provisions, Contingent Liabilities and Contingent Assets
A provision is recognized when the Company has a present obligation as
a result of past event and is probable that on out flow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made based on technical evaluation and past
experience. These are reviewed at each balance sheet date and adjusted
to reflect the current management estimates. Contingent Liabilities are
not recognised but are disclosed in the notes. Contingent Assets are
neither recognised nor disclosed in the financial statements.
1.14 Foreign currency Transaction
The Company has elected to account for exchange differences arising on
reporting of long term foreign currency monetary item in accordance
with Companies (accounting Standards) amendment Rules ,2009 pertaining
to accounting standards 11 (AS-11) notified by government of India on
31st march 2009 (as amended on 29th December,2011). Accordingly, the
effect of exchange difference on foreign currency loan of the company
is accounted by addition or deduction to the cost of the assets so far
it relates to depreciable capital assets.