i) Basis of Accounting
The financial statements have been prepared under the historical cost
convention in accordance with generally accepted accounting principles
in India, the accounting standards notified under the Companies
Accounting Standards Rules, 2006 and the provisions of the Companies
Act, 1956, as adopted consistently by the Company.
The Company follows the mercantile system of accounting and recognises
items of income and expenditure on accrual basis.
ii) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses for the years presented. Actual results could differ from
iii) Revenue Recognition
Revenue from sale of goods to domestic customers is recognised on
dispatch of goods from the factory and upon the passage of significant
risks and rewards of ownership of the goods to the customers, which
generally coincides with their delivery. Revenue from sale of goods to
overseas customers is recognised on the goods being shipped on board.
Sales are recorded at invoice value, net of sales tax and sales
returns, but including excise duty.
Revenue from export incentives is recognised on an accrual basis and
coincides with recognition of revenue from sale of goods to overseas
Revenue from interest on bank deposits is recognised on the time
proportion method taking into consideration the amount outstanding and
the applicable interest rates.
iv) Fixed Assets
Fixed assets including intangible assets comprising Technical Know-how
are stated at cost, less accumulated depreciation. Cost includes
original cost of acquisition, including incidental expenses related to
such acquisition and installation.
Machinery spares that are used in connection to a specific fixed asset
and whose use is irregular are capitalised along with the respective
Depreciation on all fixed assets (except as noted below) is provided on
the straight line method over the estimated useful life of the assets
at rates specified in Schedule XIV to the Companies Act, 1956.
Leasehold land & Leasehold Improvements are amortised over the period
of the lease.
Depreciation on addition to fixed assets is provided on pro-rata basis
from the date the assets are ace Depreciation on sale/deduction from
fixed assets is provided for upto the date of sale, deduction,
discardrr the case may be.
All assets costing Rs.5,000 or below are depreciated in full by way of
a one-time depreciation charge.
vi) Impairment of Assets
Whenever events indicate that assets may be impaired, the assets are
subject to a test of recoverability ba: estimates of future cash flows
arising from continuing use of such assets and from its ultimate
disposal. A pro for impairment loss is recognised where it is probable
that the carrying value of an asset exceeds the amoun recovered through
use or sale of the asset.
vii) Excise Duty
Excise duty payable on finished goods is accounted for upon manufacture
and transfer of finished goods to Payment of excise duty is deferred
till clearance of goods from the factory premises.
Inventories are valued at lower of cost and net realisable value. Cost
includes all expenses incurred in bringi goods to their present
location and condition. Goods in transit are valued at cost excluding
import dutie basis for determination of cost of various categories of
inventory is as follows:
Raw materials, stores & spares : Weighted Average Method
Components for sales and service of finished goods : Weighted Average
Finished goods Trade : Weighted Average Method
Material cost plus direct labour and an appropriate share of
manufacturing overheads, wherever applicable
Work in progress
Material cost plus direct labour and an appropriate share of
manufacturing overheads, wherever applicable
A provision for obsolescence on finished goods that are
obsolete/dormant is accrued at their book value and on components it is
accrued at 33.33% of their carrying value. The recoverability of all
other inventories is periodically reviewed and an impairment loss is
recognised for the difference between estimated fair value and carrying
ix) Foreign Currency Transactions
Transactions denominated in foreign currencies are recorded at the
monthly average rates.
Monetary items denominated in foreign currencies at the year-end are
translated at the exchange rates prevailing on the date of the Balance
Sheet. Non-monetary items denominated in foreign currencies are carried
Any income or expense on account of exchange difference either on
settlement or on translation is recognised in the Profit and Loss
In respect of forward exchange contracts, the exchange difference
between the forward rate and the exchange rate at the inception of a
forward contract is recognised as income or expense over the life of
the contract. Any income or expense on account of exchange differences
either on settlement of the contract or on translation of the unmatured
contract at the exchange rate prevailing on the date of the Balance
Sheet date is recognised in the Profit and Loss Account.
Contractual obligations in respect of warranties and free replacements
of frames and sunglasses are accrued at the rate of 1 % of cost of
sales to cover future costs.
xi) Customs Duty
Customs duty (including countervailing duty) payable on stocks and
equipments lying with customs or in bonded warehouses and in transit
is accounted for on clearance of the goods.
xii) Retirement Benefits
In accordance with the provisions of the Employees Provident Funds and
Miscellaneous Provisions Act, 1952, eligible employees of the Company
are entitled to receive benefits with respect to provident fund, a
defined contribution plan in which both the Company and the employee
contribute monthly at a determined rate (currently 12% of employees
basic salary). Companys contribution to Provident Fund is charged to
the Profit & Loss Account.
Benefits payable to eligible employees of the Company with respect to
gratuity, a defined benefit plan is accounted for on the basis of an
actuarial valuation as at the balance sheet date. In accordance with
the Payment of Gratuity Act, 1972, the plan provides for lump sum
payments to vested employees on retirement, death while in service or
on termination of employment in an amount equivalent to 15 days basic
salary for each completed year of service. Vesting occurs upon
completion of five years of service. The present value of such
obligation is determined by the projected unit credit method and
adjusted for past service cost and fair value of plan assets as at the
balance sheet date through which the obligations are to be settled. The
resultant actuarial gain or loss on change in present value of the
defined benefit obligation or change in return of the plan assets is
recognised as an income or expense in the Profit and Loss Account. The
expected return on plan assets is based on the assumed rate of return
of such assets.
Benefits payable to eligible employees of the Company under the
superannuation plan, a defined contribution plan is accounted for on
the basis of premium paid to the trust RayBan Sun Optics India Limited
Managerial Superannuation Scheme which pays to Life Insurance
Corporation of India calculated on the basis of a specified percentage
of salary paid to the employees.
Leave encashment benefits payable to employees while in service, on
retirement, death while in service or on termination of employment with
respect to accumulated leaves outstanding at the year end are accounted
for on the basis of an actuarial valuation as at the balance sheet
xiii) Earnings per Share
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year.
For calculating diluted earnings per share, the net profit or loss for
the year attributable to equity shareholders and the weighted average
number of shares outstanding during the year are adjusted for the
effects of all dilutive potential equity shares.
xiv) Income Taxes
Income taxes consist of current taxes and changes in deferred tax
liabilities and assets.
Income taxes are accounted for on the basis of estimated taxes payable
and adjusted for timing differences between the taxable income and
accounting income as reported in the financial statements. Timing
differences between the taxable income and the accounting income as at
December 31, 2009 that reverse in one or more subsequent years are
recognised if they result in taxable amounts. Deferred tax assets or
liabilities are established at the enacted tax rates. Changes in the
enacted rates are recognised in the period of enactment.
Deferred tax assets are recognised only if there is a reasonable
certainty that they will be realised and are reviewed for the
appropriateness of their respective carrying values at each balance
xv) Provision for Doubtful Debts
A provision for doubtful debts is accrued in case of trade receivables
at the rate of 10% on the total outstanding balances that are overdue
in excess of 90 days and are greater than or equal to 25% of their
total outstanding balances, (classified as Customers under control).
A provision for doubtful debts is accrued at the rate of 100% on the
outstanding balance of trade receivables which continue under the above
category for three months and with whom the Company has not reached any
arrangement for payment of overdue amounts.
Lease rentals in respect of assets that are in the nature of operating
leases are expensed with reference to lease terms.
xvii) Provisions and contingencies
The Company creates a provision when there is present obligation as a
result of a past event that probably requires an outflow of resources
and a reliable estimate can be made of the amount of the obligation. A
disclosure for a contingent liability is made when there is possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. When there is a possible obligation or
a present obligation in respect of which the likelihood of outflow of
resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to
reflect the current best estimate. If it is no longer probable that the
outflow of resources would be required to settle the obligation, the
provision is reversed.
Contingent assets are not recognised in the financial statements.
However, contingent assets are assessed continually and if it is
virtually certain that an economic benefit will arise, the asset and
the related income are recognized in the period in which the change
xviii) Material Events
Material events occurring after the Balance Sheet date are taken into