(i) System of Accounting
(a) The Company follows the mercantile system of accounting and
recognizes income and expenditure on accrual basis.
(b) Financial statements are based on historical cost.
(ii) Fixed Assets
Fixed Assets (tangible and intangible) are stated at cost of
acquisition or construction less accumulated depreciation, amortization
and impairment loss, if any. Cost is inclusive of duties, taxes,
erection/commissioning expenses, incidental expenses and borrowing
cost etc. and where applicable is net of Modvat / Cenvat benefit From
01.10.2003 expenditure on acquisition of Intangible Assets (including
Technical Know How / Engineering Fees treated as Miscellaneous
Expenditure to the extent not written off or adjusted upto 30
09.2003) ane classified as Fixed Assets (in) Borrowing costs
Borrowing costs, attributable to the acquisition / construction of
qualifying fixed assets are capitalized, net of income earned on
temporary investments of borrowings, by applying weighted average
rate for the eligible period. Other borrowing costs are charged to
Profit and Loss Account, Borrowing costs comprise of interest and other
cost incurred in connection with borrowing of funds, iiv) Foreign
Transactions in foreign currency are accounted at exchange rates
prevalent on the date(s) of transactions. Exchange differences arising
on adjustment for year end settlement rates are recognized in the
Profit and Loss Account. In case of forward contract, the difference
between the forward rate and exchange rate on the date of transaction
is recognized as income or expense over the period of the contract.
(v) Research and Development
Research and Development expenditure of revenue nature are charged to
the Profit and Loss Account, while capital expenditure are added to the
cost of fixed assets in the year in which these are incurred and
depreciated in accordance with para 1 (x) below.
(vi) Employee Benefits
Gratuity & Leave Encashment
The Company has provided for the liability for future payment of
Gratuity and for leave encashment on the basis of actuarial valuation.
Long Term Investments are stated at cost and provision for diminution
is made if the decline in value is other than temporary in nature.
Current Investments are stated at lower of cost and fair value.
(a) Revenue from domestic sales is recognised upon dispatch to
(b) Export sales are recognized upon dispatch from the customs port.
(ix) Export Benefits
The Company accounts for Export Benefit Entitlements under the Duty
Entitlement Pass Book Scheme of the Government of India, in the year of
(x) Depreciations, Amortization and Impairment
(a) No amount is being written off on Leasehold land.
(b) Depreciation on vehicles is being provided as calculated under
Written Down Value Method at the rates specified in Schedule XIV to the
Companies Act, 1956.
(c) On other tangible assets, depreciation is being provided
proportionately on Straight Line Method at the rates indicated below :
i) On capital expenditure incurred on leasehold improvements
considering the period of lease; and
ii) On the remaining assets at the rates specified in Schedule XIV to
the Companies Act, 1956.
(dj Intangible Assets are amortized over the estimated useful life of
such assets. Technical Know How is amortized by Straight Line Method at
the rate of 20% per annum over its estimated useful life of five years
(e) An asset is treated as impaired when the carrying cost of asset
exceeds its recoverable value. An impairment loss is charged to the
profit & loss account in the year in which an asset is identified as
Inventories are valued at lower of cost and net realizable value. Cost
of finished goods, work in process and factory'' made components
include costs of conversion and other costs incurred in bringing the
inventories to their present location and condition. Finished goods
lying in the factory premises are valued inclusive of Excise Duty.
Cost for raw materials and components, stores and spare parts, loose
tools is determined on FIFO basis. Cost of materials is arrived at
after adjustment of. where applicable. Cenvat benefit availed or to be
Assets acquired under finance leases are recognized as fixed assets at
the lower of the fair value at inception and the present value of
minimum lease payments. Lease payments are apportioned between the
finance charge and the reduction of the outstanding liabilities. The
finance charge is allocated to periods comprised in the lease term at a
constant periodic rate of interest on the remaining balance of the
(xiii)Product warranty costs are recognized based on Technical
evaluation and past experience..
Income tax expense/ savings comprise current tax and deferred tax
charge or credit. Provision for current tax is made on the estimated
taxable income at the tax rate applicable to the relevant assessment
year. The deferred tax assets are recognised based on the principles of
prudence. Deferred tax asset and deferred tax liabilities are
calculated by applying the rate and tax laws that have been enacted or
substantively enacted by the balance sheet date. Deferred tax assets
are reviewed at each Balance Sheet date.