a) BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The financial statements are prepared in accordance with the Indian
Generally Accepted Accounting Principles (GAAP) under the historical
cost convention, accrual basis of accounting, on going concern basis.
GAAP comprises mandatory accounting standards issued by the Institute
of Chartered Accountants of India, the provisions of Companies Act,
1956, and guidelines issued by the Securities Exchange Board of India.
Accounting policies have been consistently applied except where a newly
issued accounting standard is initially adopted or a revision to an
existing accounting standard requires a change in the accounting policy
hitherto in use, or a change is necessitated , in the opinion of the
management, in accordance with the nature of business of the Company
and would result in a more appropriate presentation of the financial
statements of the enterprise.
The management evaluates all recently issued or revised accounting
standards on an ongoing basis.
b) USE OF ESTIMATES
The preparation of financial statements in conformity with the
generally accepted accounting principles requires the management of the
Company to make estimates and assumptions that affect the reported
balances of assets and liabilities and disclosures relating to the
contingent liabilities as at the date of the financial statements and
reported amounts of income and expenses during the period. Although
these estimates are based on the managements'' best knowledge of current
events and actions that the Company may undertake in future, the actual
results could differ from those estimates. Any revision to accounting
estimates is recognised prospectively in current and future periods.
c) FIXED ASSETS, INTANGIBLE ASSETS AND WORK IN PROGRESS
Fixed assets, including assets acquired for research and development
are stated at cost less accumulated depreciation, and impairment
losses. Cost comprises purchase price and any attributable cost
incurred in bringing the asset to its working condition for its
Interest on borrowed money allocated to and utilised for fixed assets,
pertaining to the period up to the date of capitalisation is
capitalised. Assets acquired on hire purchase are capitalised at the
gross value and interest thereon is charged to Profit and Loss Account.
Intangible assets are stated at the consideration paid for acquisition
less accumulated amortisation.
Intangible assets are recognised if, a) it is probable that the future
economic benefits that are attributable to the assets will flow to the
Company, and b) the cost of asset can be measured realiably.
Capital work-in-progress comprises cost of fixed assets that are not
yet ready for their intended use at the balance sheet date and the
outstanding advances paid for the acquisition/construction of such
An item of fixed assets is de-recognised upon disposal or when no
future economic benefits are expected from its use or disposal. Any
gain or loss arising on de-recognition of the fixed asset (calculated
as the difference between the net disposal proceeds and the carrying
amount of the asset) is included in the financial statements in the
year the asset is de-recognised.
d) IMPAIRMENT OF ASSETS
As at each Balance Sheet date, the carrying amount of assets is tested
for impairment so as to determine:
a) the provision for impairment loss, if any required; or
b) the reversal, if any, required of impairment loss recognised in
previous periods. Impairment loss is recognised when the carrying
amount of an asset exceeds its recoverable amount.
Recoverable amount is determined:
a) in the case of an individual asset, at the higher of the net selling
price and the value in use.
b) in the case of a cash generating unit (a group of assets that
generates identified independent cash flows) at the higher of the cash
generating units'' net selling price and the value in use.
Value in use is determined as the present value of estimated future
cash flows from the continuing use of an asset and from its disposal at
the end of its useful life.
Investment in subsidiaries and others are stated at cost. Investments
that are intended to be held for more than a year, from the date of
acquisition, are classified as long term investments and are stated at
cost less provision for diminution in the value of such investments.
Diminution in value is provided for where the management is of the
opinion that the diminution is of permanent nature. Investments other
than long term investments being current investments are valued at
lower of cost and fair value, determined on an individual basis.
Investments in units are valued at cost or marked to market values,
whichever is lower.
Loss or gain on sale of investments is computed with reference to their
f) RESEARCH AND DEVELOPMENT
Revenue expenditure on research and development is charged to Profit
and Loss Account in the year in which it is incurred. Capital
expenditure on research and development is treated as additions to
fixed assets and depreciated in accordance with the depreciation policy
set out in paragraph (h).
Raw material, components and stores are valued at cost on first in
first out basis.
Finished goods are valued at lower of cost or net realisable value.
Cost is determined on the basis of first in first out method. Net
realisable value is estimated selling price in the ordinary course of
business less estimated costs necessary to make the sale.
Work in process, other than project and construction related, is valued
at cost and other attributable costs incurred upto the stage of
Cost includes direct material and labour and a proportion of
manufacturing overheads based on normal operating capacities.
Work in process, project and construction related, at cost till such
time the outcome of the job cannot be ascertained reliably and at
contracted price, thereafter.
Cost includes costs that relate directly to the specific contracts and
other allocable overheads that may be attributable to contract activity
in general, including borrowing costs .
Depreciation on fixed assets is charged on the straight line method at
rates as specified in Schedule XIV of the Companies Act, 1956 on the
original cost. Depreciation on the acquisition/purchase of assets
during the year has been provided on pro-rata basis according to the
period each asset was put to use during the year.
Technology and Brand costs are amortised equally based on an estimated
useful life of 20 years from the date of capitalisation.
In respect of an asset for which impairment loss is recognised the
depreciation is provided on the revised carrying amount of the assets
over its remaining useful life.
i) RECOGNITION OF REVENUE AND EXPENDITURE
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
Sales are stated net of discounts, returns and recoverable taxes.
Revenue from services is recognised on accrual basis in accordance with
the terms of the relevant agreement.
Revenue from construction/project related activity and contracts for
supply/commissioning of power transmission and distribution lines and
equipments is recognized by reference to the aggregate cost incurred
during the period and proportionate margin therein, using the
percentage completion method. Percentage of completion is determined
as a proportion of the cost incurred upto the reporting date to the
estimated total cost of the contracts
Interest income is recognised on time proportion basis, taking into
account the amount outstanding and the applicable rate of interest.
Dividend income is accounted in the year of receipt.
Expenditure incurred on research and development, technology seminar,
training and business development is inclusive of direct expenses and
j) EMPLOYEE BENEFITS
In accordance with the requirements of revised Accounting Standard-15
Employee Benefits, the Company provides for gratuity covering
eligible employees on the basis of actuarial valuation as carried out
by an Actuary using the Projected Unit Credit Method. The liability is
unfunded. Actuarial gains and losses arising from changes in the
actuarial assumptions are charged or credited to the Profit and Loss
Account in the year in which such gains or losses arise.
Leave encashment benefits payable to employees of the Company with
respect to accumulated leave outstanding at the year end are accounted
for on the basis of an actuarial valuation as at the Balance Sheet
date. The liability is unfunded.
Contributions payable by the Company to the concerned government
authorities in respect of provident fund, family pension fund and
employees state insurance are charged to Profit and Loss Account.
Other employee benefits are accounted for on accrual basis.
The accounting treatment followed for taxes on income is to provide for
current tax and deferred tax. Provision for current income tax is made
for the tax liability payable on taxable income ascertained in
accordance with the applicable tax rates and laws.
Deferred tax assets and liabilities are recognised for the future tax
consequences attributable to timing differences between the financial
statements, carrying amounts of existing assets and liabilities and
their respective tax bases and carry forwards of operating loss.
Deferred tax assets and liabilities are measured on the timing
differences applying the tax rates and tax laws that have been enacted
or substantively enacted by the Balance Sheet date. Changes in deferred
tax assets and liabilities between one Balance Sheet date and the next,
are recognised in the Profit and Loss Account in the year of change.
The effect on deferred tax assets and liabilities of a change in tax
rates is recognised in the Profit and Loss Account in the year of
Deferred tax assets are recognized only to the extent there is
reasonable certainty that sufficient future taxable income will be
available against which these assets can be realized in future, whereas
in case of existence of unabsorbed depreciation or carry forward of
losses, deferred tax assets are recognised only if there is virtual
certainty of realisation backed by convincing evidence. Deferred tax
assets are reviewed at each Balance Sheet date.
Advance taxes and provisions for current income tax are presented in
the Balance Sheet after off- setting advance tax paid and income tax
l) EMPLOYEE STOCK OPTIONS
The Company operates two equity-settled, share option plan for
employees eligible under applicable laws. The Company measures the
compensation cost relating to emplyee stock options using the Intrinsic
m) SEGMENT ACCOUNTING AND REPORTING
The accounting principles consistently used in the preparation of the
financial statements are also consistently applied to record income and
expenditure in individual segments. The basis of reporting is as
a) Segment revenue and expenses
Segment revenue and expenses those are directly attributable to the
segment are considered for respective segments. For rest allocation has
been done between segments and where it is not possible to segregate,
the same has been considered as unallocable revenue and expenses.
Segment revenue and expenses do not include interest or dividend
income, profit on sale of investments, interest expense, provision for
contingencies and taxation.
b) Segment assets and liabilities
Assets and liabilities have not been segregated to any of the
reportable segments, as fixed assets are used interchangeably between
segments and it is not practicable to provide meaningful segment
disclosure relating to total assets and liabilities.
n) EARNINGS PER SHARE
In determining earnings per share, the Company considers the net profit
after tax and includes the post tax effect of any extraordinary/
exceptional item. The number of shares used in computing basic earnings
per share is the weighted average number of shares outstanding during
the period. The number of shares used in computing diluted earnings per
share comprises the weighted average shares considered for deriving
basic earnings per share, and also the weighted average number of
equity shares that could have been issued on the conversion of all
dilutive potential equity shares. The diluted potential equity shares
are adjusted for the proceeds available, had the shares been actually
issued at fair value (i.e. the average market value of the outstanding
shares). Dilutive potential equity shares are deemed converted as of
the beginning of the period, unless issued at a later date. The number
of shares and potentially dilutive equity shares are adjusted for any
stock splits and bonus shares issues.
o) FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are recorded at the rates prevailing
on the date of the transaction. Monetary items denominated in foreign
currency are restated at the rate of prevailing on the balance sheet
date except in cases where actual amount has been ascertained by the
time of finalisation of accounts.
Exchange differences arising on the translation or settlement of
monetary items at rates different from those at which they were
initially recorded during the year, or reported in the previous
financial statements, are recorded in exchange fluctuation account and
recognised as income or expense in the year in which they arise.
In translating the financial statements of representative office, the
monetary assets and liabilities are translated at the rate prevailing
on the balance sheet date, non monetary assets and liabilities are
translated at exchange rates prevailing at the date of the transaction
and income and expense items are converted at the respective monthly
average rates. Net gain/loss on foreign currency translation is
recognised in the Profit and Loss Account.
p) CASH FLOW STATEMENT
Cash flows are reported using the indirect method, whereby net profit
before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from regular revenue generating, investing and
financing activities of the Company are segregated.
q) PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
A provision is recognised for a present obligation as result of past
events if it is probable that an outflow of resources will be required
to settle the obligation and in respect of which a reliable estimate
can be made. Provisions are determined based on best estimate of the
amount required to settle the obligation at the Balance Sheet date.
Reimbursements expected in respect of expenditure required to settle a
provision is recognised only when it is virtually certain that the
reimbursement will be received. Contingent liabilities is disclosed in
the notes in case of a present obligation arising from a past event
when it is not probable than an outflow of resources will be required
to settle the obligation. Contingent assets are neither recognised nor
disclosed in the financial statements. Contingent liabilities and
contingent assets are reviewed at each balance sheet date.
r) BORROWING COST
Borrowing costs directly attributable to the acquisition, construction
or production of qualifying assets which are assets that necessarily
take a substantial period of time to get ready for their intended use,
are added to the cost of those assets, until such time as the assets
are substantially ready for their intended use. Where funds are
temporarily invested pending their expenditure on the qualifying
assets, any such investment income, earned on such fund is deducted
from the borrowing cost incurred.
Finance leases which effectively transfer to the company substantial
risks and benefits incidental to ownership of the leased item, are
capitalized and disclosed as leased assets. Lease payments are
apportioned between the finance charges and reduction of the lease
liability so as to achieve a constant rate of interest on the remaining
balance of the liability. Finance charges are charged directly against
Leases where the lessor retains substantially all the risks and
benefits of ownership of the asset are classified as operating leases.
Operating lease payments are recognised as an expense in the income
statement on the straight line basis over the lease term.
t) MINIMUM ALTERNATE TAX (MAT)
MAT credit is recognised as an asset only when and to the extent there
is convincing evidence that the Company will pay income tax higher than
that computed under MAT, during the period that MAT is permitted to be
set off under the Income tax Act, 1961 . In the year, in which the MAT
credit becomes eligible to be recognised as an asset in accordance with
the recommendations contained in the guidance note issued by the
Institute of Chartered Accountants of India (ICAI), the said asset is
created by way of a credit to the Profit and Loss Account and shown as
MAT credit entitlement. The Company reviews the same at each balance
sheet date and writes down the carrying amount of MAT credit
entitlement to the extent there is no longer convincing evidence to the
effect that the Company will pay income tax higher than MAT during the