i) Method of Accounting
The accounts are prepared under the historical cost convention using
the accrual method of accounting unless otherwise stated hereinafter.
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 recongnised in the period
in which the results are known/ materialized.
iii) Accounting policies not significantly referred to are consistent
with generally accepted accounting principles.
iv) Fixed Assets
Fixed assets are stated at cost except for land, plant & machinery and
buildings which have been shown at revalued amount. Cost is inclusive
of inward freight, duties & taxes and incidental expenses related to
acquisition. In respect of major projects involving construction,
related pre-operational, start- up and trial run expenses form part of
the value of the assets capitalized. As per practice, expenses incurred
on modernization / debottlenecking/ relocation / relining of plant &
equipment are capitalized. Fixed assets, other than leasehold land,
acquired on lease are not treated as assets of the company and lease
rentals are charged off as revenue expenses.
Consideration is given at each balance sheet date to determine whether
there is any indication of impairment of the carrying amount of the
company''s fixed assets. If any indication exists, an asset''s
recoverable amount is estimated. An impairment loss is recognized
whenever the carrying amount of an asset exceeds its recoverable
amount. The recoverable amount is the greater of net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value based on an appropriate
Depreciation is calculated on fixed assets on straight line method in
accordance with Schedule XIV to the Companies Act, 1956, Software
system is amortized over a period of five years.
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
other than temporary in the opinion of the management. Current
investments are stated at lower of cost and quoted / fair value.
Inventories are valued at lower of cost or net realizable value except
Cost is determined using the first-in-first-out (FIFO) basis.
Finished goods and stock in process include cost of conversion and
other costs incurred in bringing the inventories to their present
location and condition. Wastage and rejections are valued at estimated
Obsolete, defective and unserviceable stocks are duly provided for.
viii) Excise and other Duties
Excise duty in respect of finished goods lying in factory premises is
provided and included in the valuation of inventories. CENVAT benefit
is accounted for by reducing the purchase cost of the fixed assets.
ix) Retirement and other employee related benefits
i) Short term Employee Benefits
All employee benefits payable only within twelve months of rendering
the service are classified as short-term employee benefits. Benefits
such as salaries, wages etc. and the expected cost of bonus, exgratia,
and incentives are recognized in the period during in which the
employee renders the related service.
ii) Post employment Benefits
a) Defined Contribution Plans
State Government Provident Fund Scheme is a defined contribution plan.
The contribution paid/payable under the scheme is recognized in the
profit & loss account during the period, in which the employee renders
the related service.
b) Defined Benefit Plans
Gratuity and Leave Encashment are defined benefit plans. The present
value of obligation under such defined benefit plans are determined
based on actuarial valuation under the projected unit credit method
which recognizes each period of service as giving rise to additional
unit of employees benefits entitlement and measures each unit
separately to build up the final obligation. The obligations are
measured at the present value of future cash flows. The discount rates
used for determining the present value having maturity periods
approximated to the returns of related obligations.
x) Foreign Currency Transactions, Derivatives instruments and hedge
Transactions in foreign currency other than those covered by forward
contracts are accounted for at the prevailing conversion rates at the
close of the year and difference arising out of the settlement are
dealt with in the Profit & Loss account. Outstanding export documents
when covered by foreign exchange forward contracts are translated at
contracted rates. Other foreign currency current assets and liabilities
outstanding at the close of the year are valued at the year end
exchange rates. The fluctuations are reflected under the appropriate
The company uses foreign currency forward contracts and currency
options to hedge its risks associated with foreign currency
fluctuations relating to certain firm commitments and forecasted
transactions and not for trading or speculation purpose.
xi) Research and Development
Revenue expenditure on research and development is charged against the
profit of the year in which it is incurred. Capital expenditure on
research & development is shown as an addition to fixed assets.
xii) Earnings per share
Basic earning per share is calculated by dividing the net profit for
the period attributable to equity shareholders by the weighted average
number of equity share outstanding during the year.
Diluted earning per share is calculated by dividing the net profit
attributable to equity shareholders by the weighted average number of
equity share outstanding during the year (adjusted for the effects of
Borrowing costs directly attributable to the acquisition, construction
or production of a qualifying asset are capitalised as part of cost of
that asset. Other borrowing costs are recognized as an expense in the
period in which they are incurred.
xiv) Operating Leases
Operating lease payments are recognized as expense in the profit & loss
account on a straight- line basis over the lease term.
xv) Events occurring after balance date
Events occurring after the balance sheet date have been considered in
the preparation of the financial statements.
xvi) Contingent Liabilities
Contingent liabilities as defined in Accounting Standard-29 are
disclosed by way of notes to accounts. Provision is made if it becomes
probable that an outflow of future economic benefit will be required
for an item previously dealt with as a contingent liability.