(a) Accounting Convention
These accounts are prepared on the basis of historical cost (except in
the case of revaluation of certain fixed assets in earlier years as
indicated below), applicable Accounting Standards issued by the
Institute of Chartered Accountants of India and relevant provisions of
the Companies Act, 1956.
(b) Basis of Accounting
(i) Income and expenses are recognized on accrual basis except dividend
and interest on investment and separation benefits to employees or as
(ii) Income from sales of land-buildings-development rights under the
sanctioned Scheme as made operative by the Delhi High Court (Note 2,
Schedule 17) is recognized when the same is accrued.
(c) Fixed Assets and Depreciation
(i) Fixed assets are stated at cost except in the case of certain items
of land, buildings, railway sidings and plant and machinery which are
stated on the basis of their revaluations being inclusive of resultant
(ii) Depreciation on fixed asset items are being recognized on straight
line method (single shift basis) in accordance with the rates given in
Schedule XIV to the Companies Act, 1956 as it stood before the 1993
amendments. In respect of assets acquired thereafter, the rates as per
revised Schedule XIV have been adopted.
(iii) Impairment of Assets
The carrying amounts of assets are reviewed at each Balance Sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital. After
impairment, depreciation is provided on the revised carrying amount of
the asset over its remaining useful life.
Long-term investments are stated at cost of acquisition. Provision for
diminution is made to recognise a decline, other than temporary, in the
value of Long-term investments. Current investments are valued at lower
of cost and fair value.
(i) Finished goods are valued at lower of cost and market value and
inclusive of excise duty payable on their subsequent clearance
(ii) Raw materials, stores and spares are valued at cost.
(iii) Work-in-progress is valued at cost (inclusive of appropriate
(f) Transaction in Foreign Currency
Transactions in foreign currency are accounted for at the rates
prevailing at the date of the transaction. Current assets and
liabilities are translated at the ruling rate of exchange at the
Balance Sheet date and the resultant exchange gains or losses are
reflected in the Profit and Loss Account.
(g) Employee Benefits
(i) Provident Fund
The Company contributes to the Metal Box Company of India Provident
Fund for its employees. The Companys contributions are charged to the
Profit and Loss Account every year.
Gratuity is accounted on accrual basis.
(h) Income Tax
The accounting treatment for Income Tax in respect of the Companys
income is based on the Accounting Standard on Accounting for Taxes on
Income (AS -22) issued by the Institute of Chartered Accountants of
India. The provision made for Income Tax in the Accounts comprises
both, the current tax and the deferred tax. The deferred tax assets and
liabilities for the year, arising on account of timing differences, are
recognized in the Profit and Loss Account and the cumulative effect
thereof is reflected in the Balance Sheet. The major components of the
respective balances of deferred tax assets and liabilities are
disclosed in the Accounts.
(i) Provision for Contingencies
The Companys policy is to carry adequate amounts in the Provision for
Contingencies account to cover the amounts outstanding in respect of
doubtful assets and also to meet all other contingencies in the
business to the extent such amounts are as per the sanctioned Scheme as
made operative by the Delhi High Court ( Note 2, Schedule 17).