1) Accounting Conventions:
These accounts are prepared under historical cost convention, with
revenues recognized and expenses accounted on their accrual including
provisions / adjustments for committed obligations and amounts
determined as receivable or payable during the year as a going concern
and in accordance with the accounting standards referred to in section
211(3C) of the Companies Act, 1956.
2) Fixed Assets:
All fixed assets, except Land, are stated at cost net of Modvat less
accumulated Depreciation. Land is valued at cost. Fixed Assets include
all expenditure of capital nature, pre operation expenses including
interest and financial cost of borrowing during the period of
3) Depreciation :
Depreciation is provided on straight Line Method at the rate prescribed
in Schedule XIV to the Companies Act, 1956 and rounded off to nearest
15 days. For the purpose of charging deprecation on Plant & Machinery
falling in the category of Continuous Process Plant the company has
identified such plants on the basis of technical opinion obtained and
depreciation has been provided at special rates prescribed in Schedule
XIV to the Companies Act, 1956.
4) Income Recognition:
The company recognizes sales on the basis of actual delivery of goods.
Sales are recorded at invoice values net of trade discounts. The
purchases are recorded at the invoice value. All expenses and income to
the extent considered payable and receivable respectively are accounted
for on accrual basis except encashment of leave salary and interest on
income tax refunds, which are accounted on cash basis.
Raw materials are stated at cost or net realisable value, whichever is
lower. Cost includes expenses for procuring the same and is computed on
first in first out basis.
Stocks of finished goods have been valued at cost or net realisable
value, whichever is lower. The cost includes manufacturing expenses and
Stock of by-products and waste have been valued at net realisable
Packing material, stores and spares are stated at cost or net
realisable value, whichever is lower. Cost is computed on first in
first out basis.
Work in process is valued at proportionate value of finished goods upto
the stage of completion of the work in progress.
Current investments are valued at cost or market value which ever is
less. Long term investments are stated at cost, and where applicable
provision is made for erosion in its valuation.
7) Foreign Currency Transactions :
Transactions in foreign currencies are recorded at the exchange rate
prevailing at the time of the transaction. Foreign Currency Assets and
Liabilities are stated at the exchange rates prevailing at the date of
Balance Sheet and at forward contract rates, wherever so covered.
Exchange difference relating to Fixed Assets is adjusted to the cost of
Fixed Assets. Any other exchange difference is dealt in the Profit and
Loss Account. Premium in respect of forward contract is recognized over
the life of the contract. Any income or expense on account of exchange
difference on settlement is recognized in the Profit and Loss Account.
8) Borrowing Costs:
The company capitalizes interest and foreign exchange rate difference
on credit acquired for the construction of plant and installation of
machinery as part of the cost of assets. The capitalization of interest
and foreign exchange rate differences discontinued when the plant
construction and machinery installation are completed and are ready for
their intended use.
9) Retirement Benefits :
The gratuity liabilities is funded through a scheme administered by the
Life Insurance Corporation of India, on the basis of LIC''s demand (on
the basis of actuarial valuation of liabilities) which specifies the
contribution to be made by the company, the same is charged to Profit
and Loss account. However, the actuarial valuation is for the period
from 1st June to 31 May of each year and consistently accounted for
same period on payment basis. The liabilities in respect of unutilized
leave due to employees is accounted for as and when become payable.
10) Research and Development Expenditure :
All revenue expenditure on research and development are charged to the
Profit and Loss Account. Fixed Assets used for research and
development are capitalized.
11) Taxes on Income;
The company provides for income tax on estimated taxable income and
based on expected outcome of assessments appeals, in accordance with
the provisions of the Income Tax Act, 1961 and rules framed there
Consequent to the issuance of the Accounting Standard 22 -'' Accounting
for Taxes on Income'' by the Institute of Chartered Accountants of India
which states that deferred tax should be recognized based on timing
differences between the account-ting income and the estimated taxable
income for the year and quantify the same using the tax rates and laws
enacted or substantively enacted as at the balance sheet date. Deferred
tax assets are recognized and carried forward to the extent there is
virtual certainty that sufficient future taxable income will be
available against which deferred tax assets can be realized.