A. ACCOUNTING CONVENTION
i) Basis of Preparations of Financial Statements:
The financial statements have been prepared and presented under the
historical cost convention on accrual and going concern basis of
accounting in accordance with the accounting principles generally
accepted in India (GAAP) and comply with the Accounting Standards
issued by the Institute of Chartered Accountants of India and with the
relevant provisions of the Companies Act, 1956.
II) 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. Difference
between the actual results and estimates are recognised in the period
in which the results are known/materialised.
i) Sales are inclusive of Excise duty charged to customers and net of
discount and rebates allowed.
ii) Revenue is recognised based on the nature of activity when
consideration can be reasonably measured and there exists reasonable
certainty of its recovery:
- Sale: Revenue from sale of goods is recognised when the substantial
risks and rewards of ownership is transferred to the buyer under the
terms of contract.
- Interest: Interest is recognised on a time proportion basis taking into
account the amount outstanding and the rate applicable.
- Other Income: Revenue in respect of other income is recognised when no
significant uncertainty as to measurability or collectability exists.
- Services: Income from services is recognised when the services are
Dividend: Dividend Income is recognised when the right to receive
dividend is established.
C. FIXED ASSETS
Fixed assets are stated at cost of acquisition or construction, net of
cenvat credit and depreciation / amortization. Cost includes any cost
attributable for bringing the asset to its working condition for its
intended use. Capital work-in- progress includes cost of assets not
ready for their intended use and includes advances paid to acquire
Depreciation on fixed assets is provided on straight line method at the
rates provided by Schedule XIV to the Companies Act, 1956.
Depreciation on additions / disposal of fixed assets during the year is
provided on pro-rata basis according to the period during which the
assets are put to use.
Inventories include raw materials, bought out components,
work-in-progress and manufactured finished goods.
i) Finished products produced by the company are valued at lower of
cost and net realizable value. Cost includes direct materials, labour,
a proportion of manufacturing overheads and Excise duty has been
charged on finished goods.
ii) Work in Progress is valued at cost of direct materials, labour and
other manufacturing overheads up to estimated stage of process.
iii) Raw materials and stores and spares are valued at lower of cost
and net realisable value. However, materials and other items held for
use in the production of inventories are not written down below cost if
the finished products in which they will be incorporated are expected
to be sold at or above cost.
The cost is determined using First In First Out ( FIFO ) method.
F. RESEARCH & DEVELOPMENT
Revenue expenditure pertaining to Research & Development is charged to
revenue under respective heads of accounts in the year in which they
are incurred. Capital Expenditure on Research & Development is shown as
an addition to Fixed Assets.
G. EMPLOYEE BENEFITS
i) Short-term employee benefits are recognised as an expense at the
undiscounted amount in the profit and loss account of the year in which
the related service is rendered.
ii) Post employment and other long term employee benefits are
recognised as an expense in the profit and loss account for the year in
which the employee has rendered services. The expense is recognised at
the present value of the amounts payable determined using actuarial
valuation techniques. Actuarial gains and losses in respect of post
employmentand other long term benefits are charged to the profit and
Long term investments are stated at cost. Provision for diminution in
the value of long term investments is made only if such a decline is
otherthan temporary in nature.
Investments that readily realizable and intended to be held for not
more than one year from the date on which such investment is made are
classified as current investment. Current Investments are stated at
lower of cost or fair value, which is determined for each individual
I. TRANSACTIONS IN FOREIGN CURRENCIES
i) Initial Recognition: Transactions denominated in foreign currencies
are recorded at the exchange rates prevailing on the date of the
ii) Conversion: At the year end, monetary items denominated in foreign
currencies other than those covered by forward contracts are converted
into rupee equivalents at the year-end exchange rates.
iii) Forward Exchange Contracts: In respect of transactions covered by
forward exchange contracts, the difference between the forward rate and
the exchange rate at the date of the transaction is recognised as
income or expense over the period of the contract.
iv) Exchange Differences: All exchange differences arising on
settlement/Conversion of foreign Currency transactions are recognised
in the Profit and Loss Account.
J. IMPAIRMENT OF ASSETS
The company assesses at each Balance Sheet date whether there is any
indication that any asset may be impaired. If any such indications
exist, the carrying value of such assets is reduced to its estimated
recoverable amount and the amount of such impairment loss is charged to
Profit and Loss Account. If at the Balance Sheet date there is an
indication that previously assessed impairment losses no longer exist,
than such loss is reversed and the asset is restated to that effect.
Intangible asset is stated at cost of acquisition less accumulated
amortization. Technical know how is amortized over the period of six
L. BORROWING COST
Borrowing cost attributable to the acquisition, construction or
production of a qualifying asset is capitalized as a part bf the cost
of that asset. Borrowing cost which are not attributable to the
qualifying assets, are recognised as an expense in the period in which
they are incurred.
Tax expense comprises of current and deferred tax. Current income tax
is measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act. Deferred income taxes
reflect the impact of the current year timing differences between
taxable income and accounting income for the year and reversal of
timing differences of earlier years.
Deferred income tax is measured based on the income tax rate and the
tax laws enacted or substantively enacted at the Balance Sheet date.
Deferred tax assets are recognised only to the extent that there is
reasonable certainty that sufficient future taxable income will be
available against which such deferred tax assets are recognised only if
there is virtual certainty supported by convincing evidence that such
deferred tax assets can be realized against future taxable profits.
At each balance sheet date the Company re-assesses unrecognised
deferred tax assets, if any. It recognizes unrecognised deferred tax
assets to the extent that it has become reasonably certain or virtually
certain, as the case may be, that sufficient future taxable income will
be available against which such deferred tax assets can be realized.
Lease Payments under Operating Leases are recognised as an expense in
the statement of profit and loss on a straight line basis over the
O. EARNINGS PER SHARE
The Company reports basic and diluted Earnings per Share (EPS) in
accordance with Accounting Standard 20 - Earnings per Share. Basic EPS
is computed by dividing the net profit or loss for the year by the
weighted average number of equity shares outstanding during the year.
P. EXPENDITURE DURING CONSTRUCTION PERIOD
Expenditure during construction period is included under capital
work-in- progress and the same is allocated to the respective fixed
assets on completion of construction.
Q. PROVISION, 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 recognised but are disclosed in the notes.
Contingent assets are neither recognised nor disclosed in the financial