a) Basis of preparation of financial statements
The financial statements have been prepared under the historical cost
convention in accordance with the generally accepted accounting
principles as adopted consistently by the Company and the provisions of
the Companies Act, 1956. Accounting policies not specifically referred
to otherwise are consistent with generally accepted accounting
b) Use of Estimates
The presentation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of financial statements and the reported amount
of revenues and expenses during the reporting period. Difference
between the actual results and the estimates are recognized in the
period in which the results are known/materialized.
c) Fixed Assets:
Fixed assets are stated at historical cost including directly
attributable costs of bringing the assets to their working condition
and are net of credit under the CENVAT/VAT scheme where applicable.
Fixed assets under construction is categorised as capital
work-in-progress. Pre-operative expenditure during construction/trial
run of new project net of sales during trial runs and income earned by
way of interest for temporary parking of funds earmarked for
construction of an asset, are separated from normal revenue heads and
allocated to the appropriate assets head under construction and shown
as capital work-in-progress and allocated on an appropriate basis to
fixed assets on commissioning.
Depreciation on Fixed Assets is provided on the straight line method in
accordance with the rates prescribed in Schedule XIV of the Companies
Act, 1956 on pro-rata basis.
Operating Leases: Rental are expensed with reference to lease terms and
The Company has taken commercial/residential premises under cancelable
operating leases. The lease agreements are usually renewable by mutual
consent on mutually agreeable terms.
The expenses in respect of operating leases are accounted for in Other
Expenses under Note-22 of the Balance Sheet.
f) Revenue Recognition:
Sales of products are recognized when the products are shipped and are
stated inclusive of excise duty but net of sales tax, trade discounts
and sales returns.
Revenue is recognized when no significant uncertainties exist in
relation to the amount of eventual receipt.
The Company generally follows mercantile system of accounting and all
income and expenditure items having a material bearing on the financial
statements are recognized on accrual basis.
g) Foreign Currency Transactions:
(i) Foreign currency transactions are recorded at the exchange rate
prevailing on the date of the transaction.
(ii) Gains/losses arising out of fluctuation in the exchange rates are
recognized in the period in which they arise.
(iii) Moneterary assets and liabilities denominated in foreign currency
are translated at the relevant rates of exchange prevailing at the year
end resultant gain or loss is recognised in the Statement of Profit &
Loss, except in the case of gain where significant uncertainties exist
in relation to the actual realisation.
(iv) Premium/discount on forward exchange contracts (including
options), which are not intended for trading or speculation purposes,
are amortized over the period of the contract. There are no outstanding
forward exchange contracts (including options) as at the Balance Sheet
(v) Any profit or loss arising on cancellation or settlement of forward
exchange contracts (including options) is recognized as income or
expense of the year.
h) Excise Duty
Excise Duty is accounted for as and when paid on the clearance of the
goods from the factory.
i) Employees'' Retirement and Other Benefits
Company''s contribution to provident and other funds is accounted for on
accrual basis and charged to Profit and Loss Account. Provident Fund is
accrued on monthly basis and is deposited with the Statutory Provident
Fund. The Company''s contribution is charged to the Profit and Loss
Provision for unutilised leave benefits is made on accrual basis.
Liability for leave encashment benefit is accounted for on the
assumption that such benefit are payable to all employees at the end of
Gratuity liability is provided for on the basis of Acturial Valuation.
Acturial gains and losses are recognized in full in the Profit and Loss
Account for the period in which they occur.
j) Borrowing Costs
Borrowing Costs that are attributable to the acquisition or
construction of qualifying assets prior to commencement of commercial
production are capitalized as a 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.
k) Miscellaneous Expenditure (to the extent not written off of
Mines Development Expenses shall be amortized over a period of five
years from the year of the commencement of commercial production.
l) Events occurring after Balance Sheet date:
Significant events occurring after the Balance Sheet date have been
considered in the preparation of financial statements.
m) Taxes on Income
Provision for Current tax has been determined as per provisions of the
Income Ta x Act, 1961. Deferred tax is recognized, subject to the
consideration of prudence, on timing differences, being the difference
between taxable income and accounting income that originate in one
period and are capable of reversal in one or more subsequent periods.
Minimum Alternate Ta x (MAT) credit is recognised as an assets only
when and to the extent there is convincing evidence that the Company
will play normal Income Ta x during the specified period. In the year
in which MAT credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in guidance note issued
by the Institute of Chartered Accountants of India, the said asset is
created by way of a credit to the statement of profit and loss and
shown as MAT Credit entitlement. The Company reviews the same at each
Balance Sheet date and writes down the carrying amount of MAT credit
entitlement to the extent it is not reasonable certain that the Company
will pay normal income tax during the specified period.
n) Impairment of Fixed Assets
At the end of each year, the Company determines whether a provision
should be made for impairment loss on fixed assets by considering the
indications that an impairment loss may have occurred in accordance
with Accounting Standard 28 on Impairment of Assets issued by the
Institute of Chartered Accountants of India. An impairment loss is
charged to the Profit and Loss Account in the year in which, an asset
is identified as impaired, when the carrying value of the asset exceeds
its recoverable value. The impairment loss recognized in prior
accounting periods is reversed, if there has been a change in the
estimate of recoverable amount.
o) Contingent Liabilities and Provisions
The Company makes a provision when there is a present obligation as a
result of a past event where the outflow of economic resources is
probable and a reliable estimate of the amount of the obligation can be