1. Fixed assets and depreciation/amortisation:
(a) Fixed assets are stated at cost of acquisition or construction less
depreciation/amortisation. Cost comprises the purchase price and other
(b) Depreciation/amortization on fixed assets:
i) Depreciation on tangible fixed assets is provided at the rates and
in the manner laid down in Schedule XIV to the Companies Act, 1956 on
the written down value (WDV) method in respect of buildings, furniture
and fixtures and vehicles and on the straight line method (SIM) in
respect of other assets. However, the rate of depreciation in respect
of the following assets is higher :-
Jigs & fixtures - 33% (SIM)
Furniture & fixtures - 37% (WDV)
Office equipments - 10% (SLM)
Electrical installations - 10% (SLM)
Vehicles - 60% (WDV)
Leasehold land and assets taken on lease are amortised over the period
of the lease.
ii) Intangible assets are amortised on the straight line method at the
Process and Know-how 14.29 %, 20 %
Long-term Investments are valued at cost of acquisition and related
expenses. Provision is made for other than temporary diminution, if
any, in the value of such investments.
Inventories are stated at the lower of cost and net realisable value.
In determining the cost of raw materials, components, stores, spares
and loose tools the weighted average method is used.
Costs of work-in-progress and manufactured finished products include
material costs, labour and factory overheads on the basis of full
4. Sundry debtors and advances:
Specific debts and advances identified as irrecoverable or doubtful are
written-off or provided for, respectively.
5. Foreign exchange transactions :
Transactions in foreign currencies are recorded at the exchange rates
prevailing on the date of the transaction. Realised gains and losses
as also exchange differences arising on translation at year end
exchange rates of current assets and current liabilities outstanding at
the end of the year are recognised in the Profit and Loss account.
Premium/Discount in respect of Forward Contracts is accounted for over
the period of contract.
6. Revenue Recognition :
(i) Sales of goods is recognised on shipment or despatch to customers.
(ii) Dividend income from investments is recognised when the owner''s
right to receive the payment is established. Dividend from the
subsidiary company declared after the year end is, as per the law,
accounted during the year.
(iii) Income from services rendered is accounted for when the work is
7. Employee Benefits:
Employee benefits include gratuity, superannuation and provident fund
and leave encashment benefits under the approved schemes of the
In respect of defined contribution plans, the contribution payable for
the year is charged to the Profit and Loss Account.
In respect of defined benefit plans and other long term employee
benefits, the employee benefit costs is accounted for based on an
actuarial valuation as at the Balance Sheet date.
8. Product Warranty :
Cost of product warranties is disclosed under the head
(i) ''raw materials and components consumed'' as consists of free
replacement of spares.
(ii) ''general charges'' which includes provision for warranties.
9. Taxes on Income :
Tax expense for the year is included in the determination of the net
profit for the year.
Deferred tax is recognised on all timing differences, subject to
consideration of prudence in respect of deferred tax assets.
10. Leases :
Assets acquired under finance leases are recognised at the lower of the
fair value of the leased assets at inception of the lease and the
present value of minimum lease payments. Lease payments are apportioned
between the finance charge and the reduction of the outstanding
liability. The finance charge is allocated to periods during the lease
term at a constant periodic rate of interest on the remaining balance
of the liability.
11. Borrowing Costs :
Borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset are capitalised as
part of the cost of that asset. Other borrowing costs are recognised
as an expense in the year in which they are incurred.
12. Cash Flow Statement:
The Cash Flow statement is prepared by the indirect method set out in
Accounting Standard (AS) - 3 on Cash Flow Statements and presents cash
flows by operating, investing and financing activities of the Company
13. Use of Estimates:
The preparation of the financial statements in conformity with the
generally accepted accounting principles requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting year. Difference
between the actual result and estimates are recognized in the year in
which the results are known/ materialized.
14. Provisions, Contingent liabilities and Contingent Assets:
As per Accounting Standard 29, Provisions, Contingent liabilities and
Contingent Assets, the Company recognizes provisions only when it has a
present obligation as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required to
settle the obligation and when a reliable estimate of the amount of the
obligation can be made.
No provision is recognised for:
(i) Any possible obligation that arises from past events and the
existence of which will be confirmed only by the occurrence or
non-occurrence of one or more uncertain future events not wholly within
the control of the Company: or
(ii) Any present obligation that arises from past events but is not
- It is not probable that an outflow of resources embodying economic
benefits will be required to settle the obligation: or
- A reliable estimate of the amount of obligation cannot be made.
Such obligations are recorded as Contingent Liabilities. These are
assessed continually and only that part of the obligation for which an
outflow of resources embodying economic benefits is probable, is
provided for, except in the extremely rare circumstances where no
reliable estimate can be made.
Contingent Assets are not recognized in the financial statements since
this may result in the recognition of income that may never be
15. Earnings per share
The company reports basic and diluted earnings per share in accordance
with Accounting Standard - 20 on Earnings per Share.
Basic earnings per share is computed by dividing the net profit or loss
for the year by the weighted average number of Equity shares
outstanding during the year. Diluted earnings per share is computed by
dividing the net profit or loss for the year by the weighted average
number of equity shares outstanding during the year as adjusted for the
effects of all diluted potential equity shares except where the results