a) Accounting concept
i) The Company follows the mercantile system of the accounting and
recognises income and expenditure on accrual basis.
ii) Financial statement are based on historical cost convention.
Sales are inclusive of income from services, excise duty, export
incentives and net of trade discount and rebates.
c) Fixed Assets
i) Fixed Assets
Fixed assets are stated at cost of acquisition or construction less
accumulated depreciation(except free hold land). Assets which have
been revalued are stated at values as per approved valuer''s report less
ii) Capital Expenditure
Assets under erection/installation and advances given for capital
expenditure are shown as Capital work in progress. Expenditure
during construction period is shown as Pre-operative expenses to be
capitalised on erection/installation of the assets.
Depreciation on fixed assets is provided on straight line method at the
rates and in the manner specified in Schedule XIV of the Companies
Act,1956. Depreciation on assets added/disposed off during the year has
been provided on pro-rata basis with reference to the date of
e) Borrowing cost
Borrowing costs attributable to the acquisition and construction of
qualifying assets are capitalised as part of the cost of such
asset up to the date when such asset is ready for its intended use. Other
borrowing costs recharged to Profit and Loss Account.
i) Inventories are valued at lower of cost or net realisable value on
FIFO basis except Goods in transit which is stated at cost and value of
stores, spares, consumables and packing materials are arrived at on
Moving Average Price basis.
Cost of inventories generally comprise all cost of purchase, cost of
conversion and other cost incurred in bringing the inventories to their
present location and condition. Finished goods lying in the factory
premises are valued inclusive of excise duty.
ii) Scrap at net realisable value.
iii) Custom Duty.
The liability on account of Custom duty on imported materials in
transit or in bonded warehouse is recognised on clearance of the goods
from the Customs.
Long term investments are stated at cost with an appropriate provision
for permanent diminution in value.
h) Export incentives/Benefits
Export incentives or benefits under the Export Import Policy are
accounted in the year of exports on accrual basis taking into account
certainty of realization and its subsequent utilization.
i) Foreign Currency Transactions
Transaction in Foreign currency are recorded at the rate of exchange
prevailing on the date of transaction. Current assets and Current
liabilities not covered by forward contract are translated at the year
end exchange rate and any gain/loss on account of fluctuation in the
rate of exchange is recognised in profit and loss account. Premium /
Discount in respect of forward foreign exchange contract is recognised
Over the life of the contract.
j) Contingent liabilities not provided for are disclosed by way of
k) Segment Accounting
(1) Segment Accounting Policies:-
Accounting policies followed by the company for segment reporting are:-
(a) Segment revenue includes sales and other income directly
identifiable with/allocable to segment.
(b) Expenses that are directly identifiable with/allocable to segments
are considered for determining the segment results. The expenses,
which relate to the company as a whole and not allocable to segment,
are included under unallowable expenses.
(c) Income which relates to the company as a whole and not allocable to
segment is included under unallowable income.
(d) (i)Segment Assets includes those assets directly identifiable with
respective segments and employed by a segment in its operating
activities, but does not include income tax assets.
(ii)Segment liabilities includes those liabilities directly
identifiable with respective segments and operating liabilities that
results, from operating activities of a segment, but does not include
income tax liabilities and financial liabilities.
(iii)Unallowable corporate assets and liabilities represents the assets
and liabilities that relate to company as a whole and not allocable to
l) Taxes on Income
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Act, 1961. Deferred tax is recognized on timing differences, being the
difference between taxable income & accounting income that originate in
one period and are capable of reversal in one or more subsequent period
and quantified using tax rates and laws enacted or substantively
enacted as on Balance Sheet date. Deferred tax assets are recognized and
carried forward to the extent that there is reasonable certainty that
sufficient future income will be available against which such deferred
tax assets can be realized.
m) Employee Benefits
(a) Post-employment benefit plans
i) Defined Contribution plan- Contributions to provident fund and
Family Pension fund are accrued in accordance with applicable statute
and deposited with appropriate authorities.
ii) Defined Benefit plan
(a)The liability in respect of leave encashment is determined using
actuarial valuation carried out as at Balance Sheet date. Actuarial
gains and losses are recognized in full in Profit and Loss Account for
the year in which they occur.
(b) The Company has opted for scheme with Life Insurance Corporation of
India to cover its liabilities towards employees gratuity. The annual
premium paid to Life Insurance Corporation of India is charged to
Profit and Loss Account. The Company also carried out acturial
valuation of gratuity using Projected Unit Credit Method as required by
Accounting Standard 15 Employee Benefits (Revised 2005) and
difference between fair value of plan assets and liability as per
actuarial valuation as at year end is recognized in Profit and Loss
(b) Short term employee benefits
The undiscounted amount of short term employee benefits expected to be
paid in exchange for services rendered by employees is recognized
during the period when the employees render the services. These
benefits include compensated absence also.
n) Excise duty
The Excise duty in respect of closing inventory of finished goods is
included as part of inventory,
o) Operating Leases
Lease rental are recognised as an expense on straight line basis over
the term of the lease,
p) Impairment of Assets
An asset is treated as impaired when carrying cost of asset exceeds its
recoverable value ,An impairment loss is charged to the profit & loss
account in the year in which an asset is identified as impaired. An
impairment loss recognised in prior accounting period is reversed if
there has been a change in the estimate of recoverable amount, q) Use
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 & liabilities on the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Differences between actual
results and estimates are recognised in the period in which the results
are known/ materialised.