A. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
a) The financial statements are prepared on the historical cost
convention on accrual basis and in accordance with the generally
accepted accounting principles and the provisions of the Companies Act,
1956 and the applicable accounting standards.
b) Financial statements for the year ended 31st March, 2012 have been
prepared based on revised Schedule VI of the Companies'' Act, 1956.
The adoption of revised Schedule VI does not impact recognition and
measurement principles of individual items within this Financial
Statements. However, it has significant impact on presentation and
disclosures made in the Financial Statements. The company has
accordingly reclassified the previous year''s figures to meet the
requirements applicable for the current year.
c) Losses in the last financial year have further eroded net worth of
the company. The losses have arisen primarily due to extremely volatile
and sharp foreign exchange movements and unabated rise in borrowing
costs during the year. Despite the perceptible slowdown, the company,
with its focus on process innovation, development of value added
products and new applications continue to improve the operating
performance matrix and return on capital. The modified draft
rehabilitation proposal submitted by the company is in advanced
consideration by the Lenders. Availability of additional long term
finances to fund the business plan and the planned capital expenditure
along with the initiatives on operations will enable the company to
further enrich product mix, enlarge customer base and strengthen the
revenue streams which in turn, the management believe, would help in
managing the business risks successfully despite the current uncertain
The financial statements have been prepared on going concern basis and
no adjustment is required to the carrying amount of the assets and
B. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles 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 revenue and
expenses during the reporting period. Differences between the actual
results and estimates are recognized in the period in which the results
are known / materialized.
C. FIXED ASSETS
Fixed Assets are stated at cost (net of cenvat credit availed) less
accumulated depreciation. The cost of fixed asset includes cost of
acquisition, taxes, duties, freight, incidental expenses related to
acquisition, construction and installation, allocated pre-operative
expenditure and borrowing cost during the preoperational period.
The depreciation on fixed assets is provided on straight line method at
the rates prescribed in schedule XIV to the Companies Act, 1956.
Premium on leasehold land is not amortized as the lease is for long
E. IMPAIRMENT OF ASSETS
If the carrying amount of fixed assets exceeds the recoverable amount
on the reporting date, the carrying amount is reduced to the
recoverable amount. The recoverable amount is measured as the higher of
the net selling price and the value in use determined by the present
value of estimated future cash flows.
Long Term Investments are stated at cost less provision for diminution
in the value which is other than temporary. Current Investments are
carried at lower of the cost and fair value.
G. FOREIGN CURRENCY TRANSACTIONS / TRANSLATION
a) Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing on the date of transaction. Any fluctuation on
account of realisation/payment is accounted as an exchange fluctuation.
Foreign Currency transactions remaining unsettled at the end of the
year are converted at the year end rates. Exchange differences are
dealt within the Statement of Profit and Loss.
b) Forward contracts are entered into to hedge the foreign currency
risk of the underlying transaction. The premium or discount on all such
contracts arising at the inception of each contract is amortised as
income or expense over the life of the contract. Exchange differences
on forward contracts are recognised as income or expense in the
Statement of Profit and Loss of the year / period. Any profit or loss
arising on the cancellation and renewal of forward contract are
recognised as income or expense for the year / period.
H. REVENUE RECOGNITION
Sales are recognized when risks and rewards of ownership are passed on
to the customers. Export sales are accounted for on the basis of date
of bill of lading. Sales are inclusive of excise duty and net of sales
tax and sales during trial run. Exports benefits are accounted on
Raw Materials are valued at lower of cost or net realisable value. Cost
is determined on weighted average basis.
Stores and Spares are valued at cost determined on weighted average
basis or net realizable value, except for those which have a longer
usable life, which are valued on the basis of their remaining useful
Semi Finished and Finished Goods are valued at lower of cost or net
realisable value. Cost includes raw material, labour, manufacturing
expenses, allocable overheads and depreciation. Scrap is valued at net
J. EMPLOYEE BENEFITS
a) Defined Benefit and Other Long Term Benefit plan :
Post employment and other long term employee benefits are recognized as
an expense in the statement of profit and loss for the year in which
the employee has rendered services. The expense is recognized at the
present value of the amount payable determined using actuarial
valuation techniques. Actuarial gains and losses in respect of post
employment and other long term benefits are charged to the Statement of
Profit and Loss.
b) Short Term Employee Benefits:
Short-term employee benefits are recognized as an expense at the
undiscounted amount in the statement of profit and loss of the year in
which the related service is rendered.
K. PROVISIONS, CONTIGENT LIABILITIES AND CONTINGENT ASSETS
A provision is made based on a reliable estimate when it is probable
that an outflow of resources embodying economic benefits will be
required to settle an obligation. Contingent liabilities, if material,
are disclosed in the notes. Contingent assets are not recognized or
disclosed in the financial statements.
L. BORROWING COSTS
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for its intended use. All other
borrowing costs are recognized as an expense in the period in which
they are incurred.