(I) Basis of Accounting:
The Company prepares its accounts on accrual basis, except otherwise
stated, in accordance with the generally accepted accounting
(II) Use of Estimates:
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses and disclosure of contingent
liabilities on the date of the financial statements. Actual results may
differ from those estimates and are given effect to as and when
(III) Revenue Recognition:
a) Revenue from sale of goods and services rendered is recognised upon
passage of titles and rendering of services to the customers. This is
inclusive of excise duty and net of discounts, rebates and sale
b) All other expenses and income to the extent ascertainable with
reasonable certainty, considered payable and receivable respectively
are accounted for on accrual basis.
c) License Fees including Brand Royalty and fees for technical know how
/ recipes and other such fees and charges are recognised as and when
right to such revenues are established in terms of the agreements with
d) Insurance claims are accounted for on actual receipt / acceptance
(IV) Fixed Assets:
Fixed Assets are stated at cost of acquisition inclusive of duties (net
of CENVAT and other credits), incidental expenses, erection /
commissioning expenses and interest etc. upto the date the asset is put
to use. In case of revaluation of fixed assets, the original cost as
written up by the valuer is considered in the accounts and the
differential amount is transferred to Revaluation Reserve.
(V) Foreign Currency Transactions:
Transactions in Foreign Currencies are accounted for at the exchange
rate prevailing as on the date of the transaction. Foreign Currency
monetary assets and liabilities at the year end are translated using
closing rates whereas non monetary assets are translated at the rate on
the date of transaction. The loss or gain thereon and also on the
exchange differences on settlement of the foreign currency transaction
during the year are recognized as income or expenses in the Profit and
a) The classification of plant & machinery into continuous and
non-continuous is carried out as per technical certification and
depreciation thereon is provided for accordingly.
b) Depreciation on fixed assets is provided on Straight Line Method at
the rates and in the manner specified in Schedule XIV of the Companies
c) Depreciation on revalued assets is provided for at the rates
specified in Schedule XIV of the Companies Act, 1956. Additional
depreciation for each year attributable to revalued assets is
transferred from Revaluation Reserve to the Profit & Loss Account.
d) Leasehold land is not amortised over the lives of the respective
lease agreements as these are normally renewed for further long-term
period on expiry of the lease period.
e) Amortisation of Brand.
Cost incurred on acquisition of Brand is amortised over a period of 10
years under the straight line method
f) Depreciation on fixed assets added / disposed, is provided for on
pro-rata basis with reference to the month of addition / disposal.
Long term investments are considered at cost except when there is a
diminution in value thereof other than temporary in nature, in which
case, adequate provision is made against such shortfall.
a) Inventories are valued at lower of cost or net realisable value.
Cost in case of raw materials, stores and spares and loose tools have
been computed on FIFO / Weighted Average basis. In case of
work-in-progress and finished goods, costs, which are determined on
weighted average basis, represents material, direct labour and
appropriate portion of factory overheads.
b) Obsolete / damaged items of inventories are valued at lower of cost
/ estimated realisable value.
Provision for current income tax is made on the taxable income using
the applicable tax rates and tax laws. Deferred tax arising on account
of timing differences and which are capable of reversal in one or more
subsequent periods is recognised using the tax rates and tax laws that
have been enacted or substantively enacted. Deferred tax assets against
carried forward losses and depreciation are not recognised unless there
is virtual certainty with respect to the reversal of the same in future
(X) Research and Development:
Research and Development expenditure of revenue nature are charged to
profit & loss account, while capital expenditure are added to the cost
of fixed assets as and when these are incurred.
(XI) Employee Benefits:
Employee benefits are accrued in the year services are rendered by the
Contribution to the defined contribution schemes such as Provident
Fund, Family Pension Fund , Superannuation Fund etc are recognised as
and when incurred.
Long term employee benefits under defined benefit schemes such as
contribution to gratuity, leave, pension scheme, provident fund ( other
than those covered and contributed under employees provident fund
organization) etc are determined at close of the year at present value
of the amount payable using actuarial valuation techniques.
Actuarial gain and losses are recognised in the year when they arise.
a) Fixed assets are reviewed at each balance sheet date for impairment.
In case events and circumstances indicate any impairment, recoverable
amount of the fixed assets is determined. As impairment loss is
recognised, whenever the carrying amounts of assets either belonging to
Cash Generating Unit (CGU) or otherwise exceeds recoverable amount.
The recoverable amount is the greater of assets net selling price or
its value in use. In assessing the value in use, the estimated future
cash flows from the use of the assets are discounted to their present
value at appropriate rate. An impairment loss is reversed if there has
been change in the recoverable amount and such loss either no longer
exists or has decreased.
A provision is recognised when an enterprise has a present obligation
as a result of past event 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 are not discounted to
its present value and are determined based on management 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
Liabilities which are material and whose future outcome cannot be
ascertained with reasonable certainty are treated as contingent and to
the extent not provided for are disclosed by way of notes on the