A. Basis of preparation
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India (IGAAP) under the
historical cost convention on accrual basis and comply in all material
aspects with the Accounting Standards notified under Section 211(3C)
and other relevant provisions of the Companies Act, 1956.
B. Use of Estimates
Preparation of financial statements in conformity with IGAAP requires
the management to make judgments, estimates and assumptions that affect
the reported amounts of revenues, expenses, assets and liabilities and
the disclosure of contingent liabilities, at the end of the reporting
period. Although these estimates are based on the management''s best
knowledge of current events and actions, uncertainty about these
assumptions and estimates could result in differences between the
actual results and estimates which are recognized in future periods.
C. Fixed Assets and Depreciation
Tangible fixed assets are stated at cost, less accumulated depreciation
and impairment loss, if any. Cost comprises the purchase price and any
attributable cost of bringing the asset to its working condition for
its intended use.
Borrowing costs attributable to acquisition and construction of
qualifying assets are capitalized as a part of the cost of such assets
up to the date when such assets are ready for its intended use.
Depreciation is provided on straight line basis at the rates and in the
manner prescribed under Schedule XIV of the Companies Act, 1956 except
leasehold improvements which are amortized over the lease period and
employee perquisite related assets which are depreciated over three
Computer software is amortized over six years. Fixed assets,
individually costing less than Rupees Five thousands are fully
depreciated in the year of purchase. Depreciation on the fixed assets
added/ disposed off/ discarded during the period is provided on
pro-rata basis with reference to the month of addition/ disposal/
Current Investments are carried at lower of cost and fair value
computed on individual investment basis. Long-term investments are
stated at cost after deducting provisions made, if any, for other than
temporary diminution in value.
Inventories are valued at lower of cost, computed on weighted average
basis, and net realizable value.
Cost of inventories comprises all costs of purchases and other costs
incurred in bringing the inventories to their present condition and
Materials and other items held for use in the production of inventories
are written down below cost only if the finished products in which they
will be used are expected to be sold below cost.
F. Transactions in foreign currency
Foreign currency transactions are recorded at the exchange rates
prevailing at the date of the transaction.
Monetary foreign currency items at the year end are restated at year
end rates. In case of items which are covered by forward exchange
contracts, the difference between the year end rate and the rate on the
date of the contract is recognized as exchange difference and the
premium paid on forward contracts is recognized over the life of the
contract. All exchange differences, either on settlement or
translation, are recognized in the Statement of Profit and Loss.
G. Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
Sales are recognized when significant risk and rewards of ownership of
the goods have passed to the buyer which coincides with delivery and
are recorded net of trade discounts and VAT.
Interest income is recognized on time proportion basis taking into
account the amount outstanding and the applicable rate.
Dividend income is recognized when right to receive is established.
H. Retirement and other employee benefits
Short term employee benefits are recognized as an expense at the
undiscounted amount in the Statement of Profit and Loss for the period
in which the related service is rendered.
Post employment and other long term employee benefits are recognized as
an expense in the Statement of Profit and Loss for the period in which
the employee has rendered services. The expense is recognized at the
present value of the amounts payable determined using actuarial
valuation techniques. Actuarial gains and losses in respect of post
employment and other long term benefits are charged to Statement of
Profit and Loss.
Provision for current tax is made on the basis of estimated taxable
income for the current accounting period in accordance with the
provisions of the Income Tax Act, 1961. Deferred tax resulting from
timing difference between taxable and accounting income is
accounted for using the tax rates and laws that are enacted or
substantively enacted as at the Balance Sheet date. Deferred tax asset
is recognized and carried forward only to the extent that there is
virtual certainty that the asset will be realized in future.
J. Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized 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 not recognized, but are disclosed in the
notes. Contingent Assets are neither recognized nor disclosed in the
K. 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 asset is treated as impaired when the carrying cost of the
assets exceeds its recoverable value. An impairment loss, if any, is
charged to the Statement of Profit and Loss in the year in which an
asset is identified as impaired. Reversal of impairment losses
recognized in prior years is recorded when there is an indication that
the impairment losses recognized for the assets no longer exist or have
Leases where significant portion of risk and reward of ownership are
retained by the Lessor are classified as operating leases and lease
rental thereof are charged to the Statement of Profit and Loss as per
the terms of agreement which is representative of the time pattern of
the user''s benefit.