1.1 Accounting Convention:
The financial statements are prepared under the Historical Cost
Convention on a Going Concern basis The Company generally follows the
Mercantile System of Accounting and recognises Income and Expenditure
on Accrual basis excepts those with significant uncertainties and is
consistent with generally accepted accounting principles. The
significant accounting policies followed by the Company are stated
1.2 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 reported period. Difference
between the actual results and estimates are recognized in the period
in which the results are known / materialized.
1.3 Tangible fixed assets
Fixed assets are carried at cost less accumulated depreciation and
impairment losses, if any. The cost of fixed assets includes interest
on borrowings attributable to acquisition of qualifying fixed assets up
to the date the asset is ready for its intended use and other
incidental expenses incurred up to that date. Exchange differences
arising on restatement / settlement of long-term foreign currency
borrowings relating to acquisition of depreciable fixed assets are
adjusted to the cost of the respective assets and depreciated over the
remaining useful life of such assets. Machinery spares which can be
used only in connection with an item of fixed asset and whose use is
expected to be irregular are capitalised and depreciated over the
useful life of the principal item of the relevant assets. Subsequent
expenditure relating to fixed assets is capitalised only if such
expenditure results in an increase in the future benefits from such
asset beyond its previously assessed standard of performance.
Fixed assets acquired and put to use for project purpose are
capitalised and depreciation thereon is included in the project cost
till commissioning of the project.
Projects under which assets are not ready for their intended use and
other capital work-in- progress are carried at cost, comprising direct
cost, related incidental expenses and attributable interest.
Depreciation of Fixed Assets is charged on ''Straight Line Method'' as
per Schedule XIV to the Companies Act, 1956.
Leasehold land is amortized over the period of lease
1.5 Impairment of Assets:
An asset is treated as impaired when the carrying cost of assets
exceeds its recoverable value. An impairment loss is charged to the
profit and loss Account in the year in which an asset is identified as
impaired. The impairment loss recognized in prior accounting period is
reversed if there has been a change in the estimate of recoverable
Long-term investments (excluding investment properties), are carried
individually at cost less
provision for diminution, other than temporary, in the value of such
investments. Current investments are carried individually, at the lower
of cost and fair value. Cost of investments include acquisition charges
such as brokerage, fees and duties. Investment properties are carried
individually at cost less accumulated depreciation and impairment, if
any. Investment properties are capitalised and depreciated (where
applicable) in accordance with the policy stated for Tangible Fixed
Assets. Impairment of investment property is determined in accordance
with the policy stated for Impairment of Assets.
Inventories are valued at the lower of cost or estimated net realizable
value. Cost of finished goods includes cost of material; direct labour,
direct expenses and production overheads except depreciation.
1.8 Preliminary and Share Issue Expenses:
Preliminary and Share Issue Expenses are amortised proportionately over
a period of 5 years.
Preoperative expenses have been amortised over a period of 5 years.
1.9 Employee Benefits:
i. Gratuities liabilities are worked out as per own estimates.
ii. The provident fund Rules are not applicable to the Company.
1.10 Taxes on Income:
Provision for Income Tax is determined in accordance with the
provisions of the Income Tax Act, 1961.
Deferred tax Provision
Deferred tax assets and liabilities arising on account of timing
differences, being the difference between the taxable income and the
accounting income that originate in one period and are capable of
reversal in one or more subsequent periods, are recognized using the
tax rates and tax laws that have been enacted.
1.11 Segment Reporting:
The Company operates only in one segment viz. Bulk Drugs Intermediates
and hence there are no other reportable segments as per the Accounting
1.12 Borrowing Cost
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are charged to revenue.
1.13 Financial Derivatives:
Financial derivatives contracts are accounted on the date of their
settlement and realized gain / loss, if any, in respect of settled
contract are recognized in the profit and loss account, along with the
1.14 Foreign Currency Transactions:
Transactions in foreign currencies, to the extent not covered by
forward contracts, are accounted at exchange rates prevailing at the
time of the transactions are affected and expressed at the year-end
exchange rates. Any other exchange differences except relating to Fixed
Assets are dealt with in the Profit and Loss Account. Non-monetary
foreign currency items, if any, are carried at cost.
The export made through merchant exporter, the company is eligible for
export incentive in the form of license, which company utilizes for
import of raw materials, which is accounted for duty exemption. The
unutilized part of the license is sold in the market. Company accounts
such sale under the head other income. The accounting of export
incentive is recognized on accrued basis. The sale of such license and
benefit accrued thereon is accounted in sales.
1.15 Provision, Contingent Liabilities and Contingent Assets:
Provision involving substantial degree of estimation in measurement is
recognized when there is present obligation as result of past events
and it is probable that will be an outflow of resources. Contingent
Liabilities are not recognized but are disclosed in the notes.
1.16 Cash and cash equivalents (for purposes of Cash Flow Statement)
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short-term balances (with an original maturity of three
months or less from the date of acquisition), highly liquid investments
that are readily convertible into known amounts of cash and which are
subject to insignificant risk of changes in value.
1.17 Cash flow statement
Cash flows are reported using the indirect method, whereby profit /
(loss) before extraordi- nary items and tax is adjusted for the effects
of transactions of non-cash nature and any deferrals or accruals of
past or future cash receipts or payments. The cash flows from
operating, investing and financing activities of the Company are
segregated based on the available information.
1.18 Earnings per share
Basic earnings per share is computed by dividing the profit / (loss)
after tax (including the post tax effect of extraordinary items, if
any) by the weighted average number of equity shares outstanding during
the year. Diluted earnings per share is computed by dividing the
profit / (loss) after tax (including the post tax effect of
extraordinary items, if any) as adjusted for dividend, interest and
other charges to expense or income relating to the dilutive potential
equity shares, by the weighted average number of equity shares
considered for deriving basic earnings per share and the weighted
average number of equity shares which could have been issued on the
conversion of all dilutive potential equity shares. Potential equity
shares are deemed to be dilutive only if their conversion to equity
shares would decrease the net profit per share from continuing ordinary
operations. Potential dilutive equity shares are deemed to be converted
as at the beginning of the period, unless they have been issued at a
later date. The dilutive potential equity shares are adjusted for the
proceeds receivable had the shares been actually issued at fair value
(i.e. average market value of the outstanding shares). Dilutive
potential equity shares are determined independently for each period
presented. The number of equity shares and potentially dilutive equity
shares are adjusted for share splits / reverse share splits and bonus
shares, as appropriate.
1.19 Insurance claims
Insurance claims are accounted for on the basis of claims admitted /
expected to be admitted and to the extent that there is no uncertainty
in receiving the claims.
1.20 Service tax input credit
Service tax input credit is accounted for in the books in the period in
which the underlying service received is accounted and when there is no
uncertainty in availing / utilising the credits.