(i) Basis of Accounting
The financial statements have been prepared and presented under the
historical cost (except for free hold land) convention on accrual basis
of accounting in accordance with the accounting principles generally
accepted in India and in compliance with provisions of the Companies
Act, 1956 and comply with the mandatory Accounting Standards (AS)
specified in the Companies (Accounting Standard) Rules, 2006,
prescribed by the Central Government.
The accounting policies have been consistently applied by the company.
(ii) Revenue Recognition
a. Revenue from sale of goods is recognized when significant risk and
rewards in respect of ownership of product is transferred to the
customers, which is generally on dispatch of goods.
b. Domestic sales include excise duty and are net of sales returns,
trade discounts and sales tax.
c. Export Sales are accounted on the basis of dates of Bill of Lading.
d. Revenue from services is recognized as and when services are
rendered as per terms of contract.
e. Income from investments / other income is recognized on accrual
(iii) Inventories are valued as under
a. Raw materials, Components, Stores & Spares, Loose Tools. At moving
weighted average cost or net realizable value which ever is lower.
b. Finished Goods: At lower of cost or net realizable value inclusive
of excise duty thereon.
c. Work-in-Progress: At lower of estimated cost and net realizable
d. Goods in Transit and under clearance: At lower of actual cost till
date (inclusive of customs duty payable thereon) or net realizable
e. Stock of Scrap: At estimated net realizable value.
Long term investments are valued at cost less provision for diminution
in value, other than temporary, if any.
(v) Employee Benefits
1. Short Term Employee Benefits
All employee benefits falling due wholly within twelve months of
rendering service are classified as short term benefits. The benefits
like salaries, wages etc. and the expected cost of bonus, ex-gratia,
are recognized in the period in which the employee renders the related
2. Post Employment Benefits
a. Defined Contribution Plan: Defined contribution plan consists of
Government Provident Fund Scheme and Employee State Insurance scheme.
Company''s contribution paid/payable during the year under these
schemes are charged to Profit and Loss Account. There are no other
obligations other than the contribution made by the company.
b. Defined Benefit Plan: The employees'' gratuity schemes and long
term compensated absences are the defined benefit plans. Company''s
liabilities towards gratuity and leave encashment are determined using
the projected unit credit method which considers each period of service
as giving rise to an additional unit of benefit entitlement and
measures each unit separately to build up the final obligation.
Actuarial gain and losses are recognized immediately in the statement
of Profit and Loss account as income or expense. Obligation is measured
at the present value of estimated future cash flow using a discount
rate that is determined by the reference to market yields at the
Balance Sheet date on Government bonds.
(vi) Fixed Assets
a. Tangibles: Fixed assets (except free hold land) are stated at cost
of acquisition or construction including installation cost,
attributable interest and financial cost till such time assets are
ready for its intended use, and foreign exchange fluctuation on long
term borrowings related to fixed assets, less accumulated depreciation,
impairment losses and specific grants received if any. Free hold land
is stated at revalued amount.
b. Intangibles: Product Development Expenditure and License /
Technical know-how fees :
Product Development expenditure of capital nature are added to fixed
assets. Expenditure on license and technical know-how fees and other
related expenditure towards technological improvement of the products
and/or components for captive use are treated as intangible assets.
Expenditure of these nature are initially recognized as tangible
assets under development and eventually transferred to fixed assets
block as appropriate on the commencement of the commercial production
after the viability of the product is proven.
(vii) Depreciation and amortization
a. Depreciation on fixed assets except free hold land is calculated on
straight line basis at the rates specified in accordance with the
Schedule XIV of the Companies Act, 1956.
b. Depreciation on fixed assets sold or scrapped during the year is
provided up to the month in which such fixed assets are sold or
scrapped. Depreciation on additions to fixed assets is calculated on
pro-rata basis from the month of addition.
c. Product Development expenditure and License/Technical know-how fees
are amortized over a period of 10 years from the accounting year in
which the commercial production of such improved product commences.
(viii) Impairment of Assets
In accordance with Accounting Standard 28 (AS 28) on Impairment of
Assets, where there is an indication of impairment of the Company''s
assets, the carrying amounts of the Company''s assets are reviewed at
each balance sheet date to determine whether there is any impairment
based on internal/external factors. An impairment loss, if any, is
recognized in the Profit & Loss account, wherever the carrying amount
of an asset exceeds its estimated recoverable amount. The recoverable
amount of the assets is estimated at the higher of its net selling
price and its value in use. In assessing the value in use, the
estimated future cash flows are discounted to the present value at the
weighted average cost of capital. After impairment, depreciation is
provided on the revised carrying amount of the assets over its
remaining useful life. Previously recognized impairment loss is further
provided or reversed depending on changes in circumstances.
(ix) Foreign Currency Transactions
a. Foreign Currency transactions are recorded on the basis of exchange
rates prevailing on the date of their occurrence.
b. Foreign currency monetary assets and liabilities as on the Balance
Sheet date are revalued in the accounts on the basis of exchange rates
prevailing at the close of the year and exchange difference arising
there-from is charged / credited to the Profit & Loss Account except
for the exchange difference arising on long term borrowings related to
fixed assets, which are capitalized.
Leases are classified as finance or operating leases depending upon the
terms of the lease agreements. Assets held under finance leases are
recognized as assets of the Company on the date of acquisition and
depreciated over their estimated useful lives.
Initial direct costs under the finance lease are included as part of
the amount recognized as asset under the finance lease.
Rentals payable under operating leases are treated as expenses as and
when they are incurred.
(xi) Customs Duty
Customs duty is accounted for as and when paid/provided.
(xii) Borrowing Cost
As per Accounting Standard 16 on Borrowing Costs borrowing costs
that are :
(a) directly attributable to the acquisition, construction, production
of a qualifying asset are capitalized as a part of cost of such asset
till the time the asset is ready for its intended use and (b) not
directly attributable to qualifying assets are determined by applying a
weighted average rate and are capitalized as a part of the cost of such
qualifying asset till the time the asset is ready for its intended use.
Remaining borrowing costs are recognized as an expense in the period in
which they are incurred.
(xiii) Contingencies and Provisions
A provision is recognized when the Company has a present obligation as
a result of past event. It is probable that an outflow of resources
embodying economic benefit will be required to settle the obligation in
respect of which a reliable estimate can be made. Provisions are not
discounted to its present value and are determined based on the best
estimate of the expenditure required to settle the obligation at the
balance sheet date. These are reviewed at each Balance Sheet date and
adjusted to reflect the current best estimate.
A contingent liability is disclosed, unless the possibility of an
outflow of resources embodying the economic benefit is remote.
Tax expense comprises of current tax and deferred tax charge or credit.
Current tax is measured at the amount expected to be paid to the tax
authorities in accordance with the Indian Income Tax Act. The deferred
tax charge or credit is recognized using prevailing enacted or
substantively enacted tax rate. Where there is unabsorbed depreciation
or carry forward losses, deferred tax assets are recognized only if
there is virtual certainty of realization of such assets. Other
deferred tax assets are recognized only to the extent there is
reasonable certainty of realization in future. Deferred tax
assets/liabilities are reviewed as at each balance sheet date based on
developments during the period and available case law to re-assess
(xv) Measurement of EBITDA
The Company has opted to present earning before interest, tax,
depreciation and amortization (EBITDA) as a separate line item on the
face of the statement of Profit & Loss.