1 Accounting Conventions and Basis of Presentation / Accounting
1.1 The financial statements are prepared under the historical cost
convention, in accordance with the Generally Accepted Accounting
Principles (GAAP), the provisions of the Companies Act, 1956 and the
Accounting Standards issued under the Companies (Accounting Standards)
1.2 All income and expenses to the extent considered receivable /
payable with reasonable certainty are accounted for on accrual basis.
2 Use of Estimates
The preparation of financial statements 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 period. The
difference between the actual results and estimates are recognised in
the period in which the results are known / materialised.
3 Cash Flow Statement
Cash Flow Statement has been prepared in accordance with the indirect
method prescribed in Accounting Standard - 3 issued under the Companies
(Accounting Standards) Rules, 2006 and as required by the Securities
and Exchange Board of India.
4 Fixed Assets
4.1 Land is stated at historical cost less amortisation wherever
4.2 Other Fixed assets are stated at historical cost less accumulated
depreciation/ Amortisation and impairment.
4.3 Spares received along with the Plant or Equipment and those
purchased subsequently for specific machinery and having irregular use
4.4 During the period of construction, directly identifiable expenses
are capitalised at the first instance and all other allocable expenses
are capitalised proportionately on the basis of the value of the
4.5 Cost for this purpose includes purchase prices, duties (net of
cenvat), taxes, incidental expenses, erection / commissioning expenses,
technical knowhow fee, professional fee, interest upto the date the
asset is put to use and exchange rate differences arising on long term
foreign currency monetary items in so far as they relate to the
acquisition of depreciable assets etc.
Impairment of cash generating units / assets is ascertained and
considered where the carrying cost exceeds the recoverable amount being
the higher of net realisable amount and value in use.
6 Depreciation / Amortisation
6.1 Depreciation on Fixed Assets (including those taken on lease) is
provided on Straight Line Method, at the rates and in the manner
specified in Schedule XIV to the Companies Act, 1956.
6.2 Cost of leasehold land is amortised over the lease period. Cost of
leasehold lands where the transfer of ownership to the company on
expiry of the lease period is eventually certain are not amortised.
6.3 Depreciation on amounts capitalised on account of foreign exchange
fluctuation is provided prospectively over residual life of the assets.
6.4 Depreciation on spares, having irregular use and purchased
subsequent to the installation of specific machinery is provided
prospectively over residual life of the specific machinery and written
down value of the spare is charged to Profit and Loss Account as and
7 Intangible Assets:
Cost incurred on intangible asset, resulting in future economic
benefits are capitalised as intangible assets and amortised on equated
basis over the estimated useful life of such assets.
8.1 Long term investments are valued at cost. Provision is made for any
diminution, other than temporary in the accounts.
8.2 Current Investments are valued at lower of cost and fair value.
Inventories are valued at lower of cost and net realisable value. Cost
of inventories comprises of purchase cost and other costs incurred in
bringing inventories to their present location and condition. The cost
has been determined as under:
9.1 Raw material - on First in First out (FIFO) basis.
9.2 Finished Products - at Raw material ,Conversion cost and excise
9.3 Stock-in-Process - at Raw material and Proportionate Conversion
9.4 Stores, Spares and other trading Goods - on weighted average cost
10 Revenue Recognition
10.1 Sales are recognised on transfer of custody to customers and
includes all statutory levies except Value Added Tax (VAT) and is net
10.2 Dividend income is recognised when the right to receive the
dividend is established.
10.3 Interest income is recognised on a time proportion basis
10.4 Revenue from sale of scrap are recognised on transfer of custody
10.5 Revenue in respect of Liquidated Damages from contractors/
suppliers is recognised when determined as not payable.
10.6 Excise duty recovery from customer is deducted from Turnover
(gross). Excise duty differential between closing and opening stock of
excisable goods is included under other expenses.
11.1 Claims/Surrenders on/to Petroleum Planning and Analysis Cell,
Government of India are booked on ''in principle acceptance'' thereof
on the basis of available instructions/clarifications subject to final
adjustments, as stipulated.
11.2 Insurance Claims
11.2.1 In case of total loss of asset, on intimation to the insurer,
either the carrying cost of the asset or insurance value (subject to
deductible excess) whichever is lower is treated as claims recoverable
from insurance company. In case insurance claim is less than the
carrying cost of the asset, the difference is charged to Profit and
11.2.2 In case of partial or other losses, expenditure incurred /
payments made to put such assets back into use, to meet the third party
or other liabilities (Less deductible excess) if any, are accounted for
as claims receivable from insurance company. Insurance Policy
Deductible Excess are expensed in the year the corresponding
expenditure is incurred
11.2.3 As and when claims are finally received from the insurance
company, the difference, if any, between the claim receivable from
insurance company and claims received is adjusted to Profit and Loss
11.3 All other claims and provisions are booked on the merits of each
12 Foreign Currency Transactions
12.1 Foreign Currency Transactions are accounted for at the exchange
rates prevailing on the date of the transactions.
12.2 The foreign currency assets liabilities of monetary items are
translated using the exchange rates prevailing on the reporting date.
12.3 The exchange differences on translation of foreign currency
transactions on the reporting date are recognised as income or expense
and adjusted to the profit and loss account except exchange differences
arising on reporting of long term foreign currency monetary items in so
far as they relate to the acquisition of depreciable capital assets are
added to /or deducted from cost of the assets.
12.4 The mark to market losses (net) in respect of un-expired forward
contracts entered into to hedge the risk of changes in foreign currency
exchange rates on future export sales against the existing contract are
recognised in the profit and loss account.
13 Employee Benefits
13.1 All short term employee benefits are recognised at their
undiscounted amount in the accounting period in which they are
incurred. Employee Benefits under defined contribution plans comprising
provident fund and superannuation fund are recognised on the
undiscounted obligations of the company to contribute to the plan. The
same is paid to Provident Fund Trust authorities and to Life Insurance
Corporation of India respectively, which are expensed during the year
13.2 Employee benefits under defined benefit plans comprising of
Gratuity, leave encashment, long service emblem, post retirement
medical benefits and other long term retirement benefits are recognised
based on the present value of defined benefit obligation, which is
computed on the basis of actuarial valuation using the Projected Unit
Credit Method. Actuarial liability in excess of respective plan assets
in respect of gratuity is recognised during the year.
13.3 Actuarial gains and losses are recognised in the Profit and Loss
account as income or expenses.
13.4 Undiscounted amount of short-term liability on account of
un-availed leave is determined and provided for at the year end.
13.5 Provision for Gratuity as per actuarial valuation is funded with a
14.1 Lease rentals in respect of finance lease are segregated into cost
of assets and interest component by applying the implicit rate of
14.2 Assets acquired on lease where a significant portion of the risks
and rewards of ownership are retained by the lessor are classified as
operating leases. Lease rentals are charged to the Profit and Loss
Account on accrual basis.
15 Borrowing Costs
Borrowing costs that are attributable to acquisition, construction or
production of qualifying assets, are capitalised as part of the cost of
such assets. A qualifying asset is an asset that necessarily takes a
substantial period of time to get ready for intended use. All other
borrowing costs are charged to the Profit and Loss Account.
16 Research and Development expenditure
Capital expenditure on Research and Development is capitalised under
the respective fixed assets. Revenue expenditure thereon is charged to
Profit and Loss account.
17 Taxes on Income
17.1 Current tax is determined on the basis of taxable income computed
in accordance with the provisions of the Income Tax Act, 1961.
17.2 Deferred tax is recognised on timing differences between taxable
and accounting income/expenditure that originates in one period and are
capable of reversal in one or more subsequent period(s). Deferred Tax
Asset is recognised on the basis of virtual/reasonable certainty about
its realisability, as applicable.
18 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, if material, are disclosed by way of notes.
Contingent Assets are neither recognised nor disclosed in the financial