a. Basis of preparation
The financial statements are prepared under the historical cost
convention and the requirement of the Companies Act, 1956.
b. Use of estimates
The preparation of financial statements requires the management of the
company to make estimates and assumptions that affect the reported
balances of assets and liabilities and disclosures relating to the
contingent liabilities as at the date of financial statements and
reported amounts of income and expenses during the year. Example of
such estimates include provision for doubtful debts, employee benefits,
provision for income taxes, useful lives of depreciable fixed assets
and provisions for im- pairment. .
c. Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation. Costs
include all expenses incurred to bring the assets to its present
location and condition.
Depreciation other than freehold land and capital work-in-progress is
charged so as to write off the cost of assets, on the following basis:
Individual assets costing Rs. 5,000/- or less are fully depreciated in
the year of purchase,
At each batance sheet date, the management reviews the carrying amounts
of its assets to determine whether there is any indication that those
assets were impaired. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of
impairment loss. Recoverable amount is the higher of an asset''s net
selling price and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value at
the weighted average cost of capital.
f. Intangible assets
An intangible is recognised, where it is probable that future economic
benefits attributable to the asset will accrue to the enterprise and
the cost can be measured reliably. Intangible assets are stated at cost
less accumulated amortisation.
g. Research and Development Costs
Research costs are expensed as incurred. Development expenditure
incurred on an individual project is carried forward when its future
recoverability can reasonably be regarded as assured. Any expenditure
carried forward is amortised over the period of expected future sales
from the related project.
Assets leased by the company in its capacity as lessee, where the
company has substantially all the risks and rewards of ownership are
classified as finance lease. Such lease are capitalised at the
inception of the lease at the lower of the fair value or the present
value of minimum lease payments and a liability is created for an
equivalent amount. Each lease rental paid is allocated between the
liability and the interest cost so as to obtain a constant periodic
rate of interest on the outstanding liability for each year.
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor, are recognised as
operating teases. Lease rentals under operating leases are recognised
in the profit & loss account on a straight line basis.
Investments are stated at cost, less provision for other than temporary
diminution in value, j. Inventories
Raw materials, sub-assemblies and components are carried at the lower
of cost and net realisable value. Cost is determined on first in first
out basis. Work-in-progress and finished goods are carried at lower of
cost and net realisable value. Cost includes direct material and labour
and a proportion of manufacturing overheads.
k. Revenue recognition
Revenues from contracts priced on a time and material basis are
recognised when services are rendered and related costs are incurred.
Revenues from turn key contracts, which are generally time bound fixed
priced contracts, are recognised over the life of the contract using
the proportionate completion method, with contract costs determining
the degree of completion.
Revenues from the sale of equipment are recognised upon delivery to the
L. Foreign currency transactions
Income and expenses in foreign currencies during a month are converted
at projected exchange rates for the month. The projected exchange rates
for the month are based on the closing exchange rates of the previous
month. The assets and liabilities as at the end of a month are restated
using the current month''s closing exchange rate and the exchange gain
or loss arising on the restatement is recognised as income or expense
in that month. The projected exchange rate is reviewed for any major
fluctuation during the month.
m. Retirement and other employee benefits (Refer Note:27)
Retirement benefits in the form of Provident Fund are a defined
contribution scheme and the contributions are charged to the Profit and
Loss Account of the year when the contributions to the respective funds
are due. There are no other obligations other than the contribution
payable to the Provident Fund authorities.
Gratuity liability is defined benefit obligations and is provided for
on the basis of an actuarial valuation on projected unit credit method
made at the end of each financial year.
Long term compensated absences are provided for based on actuarial
valuation. The actuarial valuation is done as per projected unit credit
Actuarial gains/losses are immediately taken to profit and loss account
and are not deferred, n. Income Taxes
Tax expense comprises of current and deferred tax. Current income tax
is measured at the amount expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961.
Deferred Tax expense or benefit is recognised on timing differences
being the difference between the taxable income and accounting income
that originate in one period and are capable of reversal in one or more
subsequent periods. Deferred tax assets and liabilities are measured
using the tax rates and tax laws that have been enacted or subsequently
enacted by the balance sheet date.
Minimum alternative tax (MAT) paid in accordance to the tax laws, which
gives rise to future economic benefits in the form of adjustment of
income tax liability, is considered as an asset if there is convincing
evidence that the company will pay normal income tax after the tax
holiday period. Accordingly, MAT is recognised as an asset in the
balance sheet when it is probable that the future economic benefit
associated with it will flow to the company and the asset can be
o. Provisions, Contingent Liabilities and Contingent Assets
A provision is recognised when the company has a present obligation as
a result of past event and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which reliable
estimate can be made. Provisions (excluding retirement benefits) are
not discounted to its present value and are determined based on best
estimate 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 estimates. Contingent liabilities are not recognised
in the financial statements. Contingent asset is neither recognised nor
disclosed in the financial statements.
p. Cash and cash equivalents
The company considers all highly liquid financial instruments, which
are readily convertible into cash and have original maturities of three
months or less from the date of purchase, to be cash equivalents.