1. Basis of Accounting :
The financial statements are prepared in accordance with relevant
accounting standards under the historical cost convention on accrual
basis and as a going concern with revenues considered and expenses
accounted for wherever possible on their accrual. The accounting
policies are consistent with those used in the previous year.
2. Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of
financial statements and the results of operations during the reporting
year. Although these estimates are based on management''s best knowledge
of current events and actions, actual result could differ from these
3. Fixed Assets :
a. Fixed assets are stated at cost less accumulated depreciation and
impairment losses, if any. The cost comprises the purchase price and
any attributable cost of bringing assets to its working condition for
its intended use. Borrowing cost relating to acquisition of fixed
assets which takes substantial period of time to get ready for its
intended use are also included to the extent they relate to the period
till such assets are ready to be put to use.
b. Expenditure during the construction period (including financing
cost relating to borrowed funds for construction or acquisition of
fixed assets) incurred on projects under implementation are treated as
pre-operative Expenses, pending allocation to the assets and are
included under Capital Work in Progress. These expenses are
apportioned to fixed assets on commencement of commercial production.
4. Depreciation :
Depreciation on fixed assets is provided on the basis of straight line
method at the rates prescribed in Schedule-XIV of the Companies Act,
1956 on pro rata basis. The management of the Company is of the view
that these depreciation rates fairly represent the useful life of
assets. The leasehold land is amortized on straighline basis over the
initial period of lease.
5. Inventories :
Raw materials, finished goods, semi finished goods, trading goods and
stores and spares are stated at cost or net realisable value whichever
is lower. Fent, rags and rejections are stated at net realisable value.
The cost of inventories is computed on FIFO basis.
Investments of the Company are long-term. The same are valued at the
cost of acquisition. Decline in the value of permanent nature is
provided as per accounting standard AS 13. Dividend of investments is
accounted for as and when received.
7. Revenue Recognition :
Revenue is recoginised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The Company recognise sales of goods on transfering
property of undelying goods to customers. Sales include all charges and
duties collected. Export benefits in respect of exports made have been
accounted on accrual basis.
8. Excise/Custom Duty :
The liability for excise and custom duty in respect of material lying
in the factory/bonded premises is accounted for as and when they are
9. Foreign Currency Transactions :
a. Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing on the date of of the transaction or that
approximates the actual rate at the date of the transaction.
Monetary items denominated in foreign currencies at the year end are
restated at year end rates. In case of items which are covered by
forward exchange contracts, the difference between the year end rate
and rate on the date of the contract is recognised as
b. exchange difference and the premium paid on forward contracts is
recognised over the life of the contract.
c. Non Monetary foreign currency items are carried at cost.
d. Any income or expense on account of exchange difference either on
settlement or on translation is recognised in Profit & Loss except in
case of long term liabilities, where they relate to acquisition of
fixed assets, in which case they are adjusted to the carrying cost of
10. Borrowing Costs:
Borrowing costs directly attributable to the acquisition or
construction of fixed assets are capitalised as part of the cost of the
assets upto the date the asset is put to use. Other borrowing costs are
charged to the Profit & Loss Account in the year in which they are
11. Research and Development:
Revenue expendutire, including overheads on Research and Development is
charged out as an expense through the natural heads of account in the
year in which incurred. Expenditure which results in the dreation of
capital assets is taken as Fixed Assets and depreciation is provided on
such assets as are depreciable.
12. Government Grants:
Grants received against specific fixed assets are adjusted to the cost
of the assets and those in the nature of promoter''s contribution are
credited to Capital Reserve. Revenue Grants are recognised in the
Profit and Loss Account in accordance with the related scheme and in
the period in which these are accured.
13. Retirement Benefits:
The liability for gratuity has been provided on the basis of actuarial
valuation carried out by by an independent actuary as at Balance Sheet
date. In respect of Provident Fund contributions paid regularly to the
government and is charged to revenue. The provision for leave
encashment is made for accumulated leaves that employees can encash in
14. Taxes on Income:
Provision for current tax is made based on the tax liability computed
after considering tax allowances and deductions. Deferred tax resulting
from timing difference between taxable income and accounting income is
accounted for using the tax rates and laws that have been enacted or
substantively enacted as on the balance sheet date. The deferred tax
asset is recognised and carried forward only to the extent that there
is a reasonable certainty that the asset will be realised in future.
15. Earning Per Share:
The earning considered in ascertaining the company''s earning per share
comprises the net profit after tax (and includes the post tax effect of
any extraordinary items). The number of shares used in computing basic
earning per share is the weighted average number of shares outstanding
during the year.
16. Impairment of Assets:
The carrying amount of assets is reviewed at each balance sheet date to
determine whether there is any indication of impairment. If any such
indication exist, the recoverable amount of the assets is estimated. An
impairment loss is recognised whenever the carrying amount of an asset
or its cash generating units exceeds its recoverable amount. An
impairment loss is reversed if there has been a change in the estimates
used to determine the recoverable amount and recognised in compliance
17. Provisions, Contingent Liabilities and Contingent Assets:
Provisions involving substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognised but are disclosed in the
notes. Contingent assets are neither recognised nor disclosed in the
18. Inter Divisional Transactions:
Inter divisional transactions are eliminated as contra items. Any
unrealised profits on unsold stocks on account of inter divisional
transactions is eliminated while valuing the inventoy.