1. Basis of preparation of financial statements - The financial
statements are prepared in accordance with the generally accepted
accounting principles including accounting standards in India under
historical cost convention except in so far as they relate to
revaluation of net assets.
All assets and liabilities have been classified as current or
non-current as per the company''s normal operating cycle and other
criteria set out in the revised schedule VI to the Companies Act, 1956.
Based on the nature of products and the time between the acquisition of
assets for processing and their realization in cash and cash
equivalents, the company has determined its operating cycle as twelve
months for the purpose of current and non-current classification of
assets and liabilities.
2. Use of estimates - The preparation of the financial statements in
conformity with the generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities on the date of the financial
statements, disclosure of contingent liabilities and reported amounts
of revenues and expenses for the year. Estimates are based on
historical experience, where applicable, and other assumptions that
management believes are reasonable under the circumstances. Actual
results could vary from these estimates and any such differences are
dealt with in the period in which the results are known/materialise.
3. Revenue recognition - Revenue from sale of products is recognized
on despatch of goods to customers in accordance with the terms of
sales, Revenue from services is recognized in accordance with the
specific terms of contract on performance. Other operating revenues
comprise of income from ancillary. activities incidental to the
operations of the company and is recognized when the right to receive
the income is established as per the terms of the contract.
4. Foreign currency transactions - Foreign currency transactions
(including booking/cancellation of forward contracts) are recorded at
the rates prevailing on the date of the transaction. Monetary assets
and liabilities in foreign currency, other than those covered by
forward exchange contracts, are translated at year end foreign exchange
rates. Exchange differences arising on settlements are recognized in
the Profit and Loss account. In case of forward exchange contracts,
which are entered into hedge the foreign currency risk of a
receivable/payable recognized in these financial statements, premium a
discount on such contracts are amortised over the life of the contract
and exchange differences arising thereon in the reporting period are
recognised in the Profit and loss account. Forward exchange contracts
which are arranged to hedge the foreign currency risk of a firm
commitment is marked to market at the year end and the resulting
losses, if any, are charged to the Profit and loss account.
5. Employee benefits - (i) Short term employee benefit obligations are
estimated and provided for; (ii) Post employment benefits and other
long term employee benefits - (1) Company''s contribution to provident
fund, labour welfare fund, employees state insurance corporation and
other funds are determined under the relevant schemes and /or statute
and charged to revenue; (2) Company''s liability towards gratuity and
compensated absences are actuarially determined at each balance sheet
date using the projected unit credit method. Actuarial gains and losses
are recognised in revenue.
6. Fixed Assets - All costs relating to acquisition of fixed assets
net of value added tax and terminal excise duty refund under Export
Promotion Capital Goods Scheme, subject to the economic life and the
cost being in excess of certain limits, are capitalised. Expenditure
directly related and incidental to construction are capitalized upto
the date of attainment of commercial production. Interest and other
related costs, including amortised cost of borrowings attributable only
to major projects are capitalized as part of the cost of the respective
assets, in the case of Wind energy converters, cost of land on which
the converters have been erected is capitalised as cost of the said
converters. Cost of structures on leasehold land, where the estimated
useful life is more than ten years, is capitalized.
7. Depreciation/amortization - Fixed assets are depreciated/amortised
in the following manner: (i) assets like (a) structures on lease hold
land, ever their estimated useful life a ten years, whichever is lower,
(b) computer software and trade name, over their estimated useful life
or five years, whichever is lower; (ii) other assets, over their
estimated useful lives or lives derived from the rates specified in
Schedule XIV to the Companies Act, 1956, whichever is lower; (iii)
depreciation/amortization is provided fa the period the asset is put to
use, (iv) Cost of land pertaining to the Wind energy converters is
amortised in the same manner as the cost of the said converters are
depreciated. No depreciation is reckoned in the year of disposal.
8. Impairment of assets - The carrying amount of assets are reviewed
at each balance sheet date if there is any indication of impairment
based on internal/external factors. An impairment loss will be
recognised wherever the carrying amount of an asset exceeds its
estimated ,recoverabie amount. The recoverable amount is the greater of
the asset''s net selling price and value in use. Provision to impairment
will be reviewed periodically and amended depending on changes in
9. Investments - Non-current investments are stated at cost. However,
provision for diminution is made to recognize a decline, other than
temporary, in the value of the investment, if any. Current investments
are valued at lower of cost and fair value.
10. Inventories - The governing principle of valuation of Inventories
(other than process waste) is the lower of cost and net realisable
value. The cost to the said purpose (i) in the case of sates and spare
parts, is the weighted average cost (net of Cenvat credit/Value added
tax, if any), (ii) in the case of cotton in process and manufactured
yarn, is the cost adopting the absorption costing method, and (iii) is
without deduction of the adjustment made for power generated through
Wind energy converters and adjusted against the cost of power purchased
from state electricity board. Process waste is valued at net realizable
value. Provision is made for obsolete, slow moving and damaged items of
inventory, if any.
11. Government grants - Capital grants from government relating to
depreciable assets are treated as deferred income and disclosed as a
capital reserve and amortised over the useful life of the concerned
asset. Cenvat credit relating to capital assets acquired is treated as
capital reserve and amortised over the useful life of the concerned
assets by transfer profit and loss account and considered under
depreciation. Grants/incentives other than those mentioned above are
reckoned in the profit and loss account in the year of eligibility.
12. Amortisation of loan raising expenditure - Major revenue
expenditure incurred by way of/in connection with raising of borrowing
is amortised over the period of the barrowings.
13. Research and development - Revenue expenditure on research and
development is charged to the profit and loss account as incurred.
Capital expenditure on research and development, where the same
represents cost of plant, machinery, equipment and other tangible
assets, if any, is given the same accounting treatment as applicable to
other capital expenditure.
14. Deferred tax - Deferred income tax charge reflects the impact of
the current period timing differences between taxable income and
accounting income, other than differences capable of getting reversed
during the lax holiday period, subject to consideration of prudence.
Where there are unabsabed depreciation a carry forward losses, deferred
tax assets are recognised only to the extent there is virtual certainty
of realisation of such assets. Other deferred tax assets are recognised
only to the extent there is reasonable certainly of realisation in
future. Deferred tax assets/liabilities are reviewed as at each balance
sheet date based on developments during the period and available case
laws to reassess realisation/ liabilities.
15. Provisions and contingencies - To recognise a provision when (i)
the company has a present obligation as. a result of a past event; (ii)
it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation; and (iii) a reliable
estimate can be made of the amount of the obligation. A disclosure of a
contingent liability is made when there is a possible obligation that
may, but probably will not, require outflow of resources. Where there
is possible obligation a a present obligation where the likelihood of
outflow of resources is remote, no provision a disclosure is made.