1) System of Accounting
i) The Company follows the mercantile system of accounting and
recognizes income and expenditure on an accrual basis except in case of
ii) Financial Statements are prepared under the historical cost
iii) Estimates and assumptions used in the preparation of the financial
statements are based upon Management''s evaluation of the relevant facts
and circumstances as of the date of the Financial Statements, which may
differ from the actual results at a subsequent date.
2) Revenue Recognition
Sales are accounted for on dispatch from the point of sale.
a) The Company recognizes income on accrual basis.
b) Interest is accrued over the period of investment and net of
amortization of premium/discount with respect to fixed income
securities, thereby recognizing the implicit yield to maturity, with
reference to coupon dates. However, income is accrued only where
interest is serviced regularly and is not in arrears, as per the
guidelines framed by the management.
c) Dividends are accounted for when the right to receive the same is
d) Profit/loss on sale of investment are recognized on the contract
3) Fixed Assets and Depreciation
i) Fixed Assets
Fixed Assets except freehold land are carried at cost of acquisition or
construction or at manufacturing cost in the case of self-manufactured
assets, less accumulated depreciation and amortization. Borrowing Cost
attributable to acquisition and installation of fixed assets is
capitalized and included in the cost of fixed assets as appropriate.
ii) Depreciation and Amortization
a) On Leasehold land
Premium on leasehold land is amortized over the period of lease.
b) On other Fixed Assets
Depreciation on all assets is provided on Straight Line basis in
accordance with the provisions of Section 205(2)(b) of the Companies
Act, 1956, in the manner and at the rates specified in Schedule XIV to
the said Act.
1. Depreciation on additions is being provided on pro-rata basis from
the month of such additions.
2. Depreciation on assets sold, discarded or demolished during the
year is being provided at the rates up to the previous month in which
such assets are sold, discarded or demolished.
4) Impairment of Assets
If the carrying amount of the fixed assets exceeds the recoverable
amount on the reporting date, the carrying amount is reduced to the
recoverable amount. The recoverable amount is measured at the higher of
the net selling price and value in use, determined by the present value
of estimated future cash flows.
i) Investments other than fixed income securities are valued at cost of
ii) Fixed income securities are carried at cost, less amortization of
premium paid / discount received, as the case may be, and provision for
diminution as considered necessary.
iii) Investments made by the Company are of a long-term nature, hence
diminutions in value of quoted investments are generally not considered
to be of a permanent nature. However, current investments, representing
fixed income securities with a maturity less than 1 year and investment
not intended to be held for a period more than 1 year, are stated at
lower of cost or fair value.
6) Current Assets
a) Inventories are valued at the lower of cost, computed on a weighted
average basis, and estimated net realizable value. Finished Stocks and
Work-in-Process include costs of conversion and other costs incurred in
bringing the inventories to their present location and condition.
Finished stocks lying in the factory includes provision for excise duty
liability. Finished stocks in transit are valued inclusive of excise
duty and insurance and those lying at the depots are valued inclusive
of excise duty, insurance and inward freight.
b) Cost for the purposes of valuation of raw-material, bought out parts
and stores and tools is inclusive of duties and taxes, freight inward,
octroi and inward insurance and is net of credit under the Cenvat/VAT
c) Costs of conversion for the purposes of valuation of finished stock
and work-in-process include fixed and variable production overheads
incurred in converting materials into finished goods.
d) Machinery spares and maintenance materials are charged out as
expenses in the year of purchase.
ii) Sundry Debtors
Sundry Debtors & Loans and Advances are stated, after making adequate
provision for doubtful debts, if any.
Necessary provisions are made for present obligations that arise out of
events prior to the balance sheet date entailing future outflow of
economic resources. Such provisions reflect best estimate based on
8) Employee Benefits
i) Privilege Leave Entitlements
Privilege leave entitlements are recognized as a liability, in the
calendar year of rendering of service, as per the rules of the company.
As accumulated leave can be availed and/or encased at any time during
the tenure of employment, the liability is recognized at the higher of
the actual accumulated obligation or actuarially determined value.
Payment for present liability of future payment of gratuity is being
made to approved Gratuity Fund, which covers the same under Cash
Accumulation Policy of the Life Insurance Corporation of India.
However, any deficits in Plan Assets managed by LIC as compared to the
actuarial liability is recognized as a liability.
Contribution to Superannuation Fund is being made as per the Scheme of
the Company under Cash Accumulation Policy of the Life Insurance
Corporation of India.
iv) Provident Fund
Provident Fund Contributions are made to Company''s Provident Fund
v) Employees Pension Scheme
Contribution to Employees Pension Scheme 1995 is made to Government
Provident Fund Authority.
9) Foreign Exchange Transactions
Transactions in Foreign currency are recorded in the financial
statements based on the Exchange rate existing at the time of the
i) Provision for Taxation is made for the current accounting period
(reporting period) on the basis of the taxable profits computed in
accordance with the Income-Tax Act, 1961.
ii) Deferred Tax resulting from timing difference between Book Profits
and Taxable Profits are accounted for to the extent deferred tax
liabilities are expected to crystallize with reasonable certainty and
in case of deferred tax assets with virtual certainty that there would
be adequate future taxable income against which such deferred tax
assets can be realized. Deferred Tax provisions are reviewed for the
appropriateness of their respective carrying values at each balance
11) Provisions and Contingent Liabilities
The Company creates a provision when there is present obligation as a
result of a past event that probably requires an outflow of resources
and a reliable estimate can be made of the amount of the obligation. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. When there is a possible obligation or
a present obligation in respect of which the likelihood of outflow of
resources is remote, no provision or disclosure is made.