1.1 Basis of accounting and preparation of financial statements
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
the Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on accrual basis under the historical
cost convention and prepares its accounts on a going concern basis. The
accounting policies adopted in the preparation of the financial
statements are consistent with those followed in the previous year.
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 realisation in cash and cs-.h
equivalents, the Company has ascertained its operating cycle as 12
months for the purpose of current - non current classification of
assets and liabilities.
1.2 Use of estimates
In the preparation of the financial statements, the management of the
Company makes estimates and assumptions in conformity with the
applicable accounting principles in India that affect the reported
balances of assets and liabilities and disclosures relating to
contingent assets and liabilities as at the date of the financial
statements and reported amounts of income and expenses during the
period. Examples of such estimates include provisions foi doubtful
debts, future obligations under employee retirement benefit plans,
income taxes, and the useful lives of fixed assets and intangible
1.3 Tangible fixed assets
Fixed assets are stated at cost. Cost comprises cost of acquisition,
freight, duties levies and directly attributable cost of bringing the
assets to their working condition up to the date, the asset is ready
for its intended use.
Consumables and other assets in such nature as computers parts,
individually costing Rs. 5,000 or less are not capitalized, except when
they are part of a large capital investment program.
1.4 Capital work-in-progress
Projects under which assets are not ready for their intended use and
other capital work-in-progress are carried at cost, comprising direct
cost and related incidental expenses.
1.5 Intangible assets
The company recognizes intangible assets in accordance with Accounting
Standard i.e. AS 26 issued by the Institute of Chartered Accountants of
India on intangible assets less accumulated amortisation and impairment
1.6 Impairment of assets
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment. If any indication of impairment
exists, the recoverable amount of such assets is estimated and
impairment is recognised, if the carrying amount of these assets
exceeds their recoverable amount. The recoverable amount is the greater
of the net selling price and their value in use. Value in use is
arrived at by discounting the future cash flows to their present value
based on an appropriate discount factor. When there is indication that
an impairment loss recognised for an asset in earlier accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognised in the Statement of Profit and Loss.
Inventories are valued at the lower of cost (on FIFO / weighted average
basis) and the net realisable value after providing for obsolescence
and other losses, where considered necessary. Cost includes all charges
in bringing the goods to the point of sale, including Octroi and other
levies, transit insurance and receiving charges.
Work-in-progress and finished goods include appropriate proportion of
overheads and, where applicable, excise duty
1.8 Revenue Recognition:
Income from sales of goods is recognised upon passage of risks and
rewards of ownerships to goods, which generally coincide with delivery
of goods to customers.
Interest income from deposit is accounted on accrual bases and
considered as operating income Dividend Income is accounted when the
right to receive the payment is established.
Long-term investments are carried individually at cost less provision
for diminution, other than temporary, in the value of such investments.
Current investments are carried individually, at the lower of cost and
fair value. Cost of investments include acquisition charges such as
brokerage, fees and duties.
1.10 Employee benefits
Employee benefits include provident fund, gratuity fund and compensated
Annual leave benefits / leave encashment to employees and retirement
benefits in form of gratuity are charged to Statement of Profit and
Loss based on undiscounted amount (actual bases) rather than actuarial
Defined contribution plans
The Company''s contribution to provident fund are considered as defined
contribution plans and are charged as an expense as they fall due based
on the amount of contribution required to be made.
Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees are recognised
during the year when the employees render the service. These benefits
include performance incentive and compensated absences which are
expected to occur within twelve months after the end of the period in
which the employee renders the related service. The cost of such
compensated absences is accounted as under:
(a) in case of accumulated compensated absences, when employees render
the services that increase their entitlement of future compensated
(b) in case of non-accumulating compensated absences, when the absences
Long-term employee benefits
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related service are recognised as a liability at the present value of
the defined benefit obligation as at the Balance Sheet date less the
fair value of the plan assets out of which the obligations are expected
to be settled. Long Service Awards are recognised as a liability at
the present value of the defined benefit obligation as at the Balance
1.11 Research and development expenses
Revenue expenditure pertaining to research is charged to the Statement
of Profit and Loss. Development costs of products are also charged to
the Statement of Profit and Loss unless a product''s technological
feasibility has been established, in which case such expenditure is
capitalised. The amount capitalised comprises expenditure that can be
directly attributed or allocated on a reasonable and consistent basis
to creating, producing and making the asset ready for its intended use.
Fixed assets utilised for research and development are capitalised and
depreciated in accordance with the policies stated for Tangible Fixed
Assets and Intangible Assets.
1.12 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. and based on expected outcome of the assessment.
Deferred tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantially enacted as at the reporting date.
Deferred tax liabilities are recognised for all timing differences.
Deferred tax assets in respect of unabsorbed depreciation and carry
forward of losses are recognised only if there is virtual certainty
that there will be sufficient future taxable income available to
realise such assets. Deferred tax assets are recognised for timing
differences of other items only to the extent that reasonable certainty
exists that sufficient future taxable income will be available against
which these can be realised.
Deferred tax assets and liabilities are offset if such items relate to
taxes on income levied by the same governing tax laws and the Company
has a legally enforceable right for such set off. Deferred tax assets
are reviewed ot each Balance Sheet date for their reliability.
Current and deferred tax relating to items directly recognised in
equity are recognised in equity and not in the Statement of Profit and
1.13 Provisions and contingencies
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the 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 disclosed in the Notes.
However, all known, material contingent liabilities are disclosed by
way of separate notes.
1.14 Prior Expenditure/Income
Expenditure / Income relating to prior year are disclosed separately,
1.15 Earnings Per Share
The earnings considered in ascertaining the Company''s basic EPS
comprise the net profit/ (loss) after tax. The number of shares used in
computing basic EPS is the weighted average number of shares
outstanding during the year.
The net profit/ (loss) after tax and the weighted average number of
shares outstanding during the year are adjusted for all the effects of
dilutive potential equity shares for calculating the diluted EPS.