a. Basis of preparation of Financial Statements
The financial statements are prepared under the historical cost
convention, on going concern basis, in terms of the Accounting
Standards notified under the Companies (Accounting Standards) Rules,
2006 and in compliance with Section 211 (3C) of the Companies Act,
1956. The Company follows the mercantile system of accounting and
recognizes income and expenditure on accrual basis to the extent
measurable and where there is certainty of ultimate realisation in
respect of incomes. Accounting policies not specifically referred to
otherwise are consistent and in consonance with the generally accepted
accounting principles in India.
The Company has prepared its financial statements in accordance with
Schedule VI as inserted by Notification-S.O. 4471 dated 28.02.2011 (As
amended by Notification No.F.NO.2/6/2008-CL-V, Dated 30.03.2011). The
Schedule does not impact recognition and measurement principle followed
for the preparation of financial statements. However it has
necessitated significant changes in the presentation of and disclosures
in financial statements. The company has reclassified its previous year
figures to confirm to the classification as per the aforesaid schedule.
b. Use of Estimates
The preparation of financial statements requires estimates and
assumptions that affect the reported amounts of income and expenses for
the period, the reported amounts of assets and liabilities and
disclosures relating to contingent liabilities as on the date of
financial statements. Difference between the actual results and
estimates are recognised in the period in which the results are known /
c. Fixed Assets and Depreciation
i) Fixed Assets are stated at cost of acquisition or construction and
include interest on specific borrowings for new projects upto
ii) Leasehold Land is being amortised over the lease period.
iii) Depreciation is provided on straight line method for the fixed
assets at Dalmiapuram, Khambalia, Wankaner and Katni Works and written
down value method for the fixed assets at New Delhi Office at the rates
specified in Schedule XIV to the Companies Act, 1956.
d. Impairment of Assets
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognised wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the asset''s net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital. -
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
Previously recognised impairment losses are reversed to the extent the
recoverable amount exceeds the carrying amount.
e. Intangible Assets
Capital Expenditure on purchase and development of identifiable
non-montary assets without physical substance is recognised as
Intangible Assets in accordance with principles given under AS- 26
Intangible Assets. These are grouped and separately shown under the
schedule of Fixed Assets. These are amortized over their respective
expected useful lives not exceeding 10 years.
f. Valuation of Inventories
(a) Inventories are valued at lower of historical cost or net
realizable value. Cost of inventories comprises of cost of purchase,
cost of conversion and other costs incurred in bringing them to their
respective present location and condition. Materials and other supplies
held for use in the production of inventories are not written down
below cost if the finished products in which they will be incorporated
are expected to be sold at or above cost. However, when there has been
a decline in the price of materials and it is estimated that the cost
of the finished products will exceed net realizable value, the
materials are written down to net realizable value. In such
circumstances, the replacement cost of the material may be the best
available measure of their net realizable value.
(b) Historical cost is determined on the basis of weighted average
Excise duty is included in the valuation of finished goods and
Long Term Investments are stated at cost. Provision for diminution in
the value is made in accordance with AS-13 Accounting for Investments
if the decline/diminution is other than temporary. Current Investments
are stated at lower of cost or market/fair value.
h. Revenue Recognition
(a) Revenue from operations is recognised in respect of export sales on
the basis of shipment of goods to customer and in respect of domestic
sales on dispatch from factory. Quality rebates, claims and other
discounts are disclosed separately.
(b) Domestic Sales includes excise duty. However, excise duty on sales
is reduced from gross turnover for disclosing net turnover.
(c) Inter-divisional sales is reduced from gross turnover in deriving
i. Other Income
a) Claims receivable
The quantum of accruals in respect of claims receivable such as from
Railways, Insurance, Electricity, Customs Excise and the like are
accounted for on receipt basis.
b) Income from Investment
Income from Investment is accounted for on accrual basis when the right
to receive income is established.
j. Foreign Currency Conversion/Transaction
Foreign currency transactions are recorded on initial recognition at
the rate prevailing on the date of transaction. Where export bills are
negotiated with the bank, the export sales are recorded at the rate on
the date of negotiation as the said rate approximates the actual rate
on the date of the transaction. Exchange differences arising on
settlement of monetary items or on reporting such monetary items of the
Company at rates different from those at which they were initially
recorded during the year or reported in previous financial statements,
are recognised as income or as expense in the year in which they arise.
The premium or discount arising at the inception of forward exchange
contract is amortised as an expense or income over the life of the
k. Employee Benefits
(i) Defined Contribution Plan:
Employee benefits in the form of the Company''s contribution to
provident fund, pension scheme, superannuation fund and ESI are
considered as defined contribution plan and charged to statement of
profit and loss account of the year when the contribution to the
respective funds are due.
(ii) Defined Benefit Plan:
Retirement benefits in the form of gratuity and leave encashment are
considered as defined benefit obligations and are provided for on the
basis of an actuarial valuation as at the date of the balance sheet
using the projected unit credit method which considers each period of
service as giving rise to an additional unit of benefit entitlement and
measures each unit separately to build up the final obligation. Past
services are recognised on a straight line basis over the average
period until the amended benefits become vested. Obligation is measured
at the present value of estimated future cash flows using a discounted
rate that is determined by reference to market yields at the balance
sheet date on Government bonds where the currency and terms of the
Government bonds are consistent with the currency and estimated terms
of the defined benefit obligation.
(iii) The expenditure on voluntary retirement schemes is charged to
statement of profit and loss account in the year in which it is
I. Segment Reporting
Segmental accounting policies are in line with the accounting policies
of the company. However, the following specific accounting policies
have been followed for segment reporting:
(a) Segment revenue includes sales and other income directly
identifiable with/allocable to the segment including inter-segment
(b) Expenses that are directly identifiable with/allocable to segments
are considered for determining the segment results. The
expenses/incomes, not allocable to any segments, are included under
(c) Segment assets and liabilities include those directly identifiable
with the respective segments. Unallocable assets and liabilities
represent the assets and liabilities not allocable to any segment.
m. Taxes on Income
(a) Provision for Current Tax is made in accordance with the provisions
of Income Tax Act, 1961.
(b) In accordance with the Accounting Standard AS-22 ''Accounting for
Taxes on Income'', Deferred Tax Liability/Asset arising from timing
differences between book and income tax profits is accounted for at the
tax rates which are enacted or substantively enacted at the Balance
Sheet date to the extent these differences are expected to crystallize
in later years. However, Deferred Tax Assets are recognised only if
there is a reasonable/virtual certainty of realisation thereof.
n. Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised in respect of obligations where, based on the
evidence available, their existence at the Balance Sheet date is
considered probable. Contingent liabilities are shown by way of Notes
to Accounts in respect of obligations where, based on the evidence
available, their existence at the Balance Sheet date is considered not
probable. Contingent assets nether recognised in the Accounts nor
disclosed in the notes to accounts.
Where the Company is lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognised as an expense
in the statement of Profit and Loss account on a straight-line basis
over the lease term.
Where the Company is the lessor
Assets subject to operating leases are included in fixed assets. Lease
income is recognised in statement of Profit and Loss Account on a
straight-line basis over the lease term. Costs, including depreciation
are recognised as an expense in the statement of Profit and Loss
Account. Initial direct costs such as legal costs, brokerage costs,
etc. are recognised immediately in statement of Profit and Loss
p. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction
or production of an assets that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalised as a
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur. Borrowing costs consist of interest
and other costs that an entity incurs in connection with the borrowing
q. Cash and Cash Equivalents
Cash and cash equivalents in the cash flow statement comprise cash at
bank and cash/cheques in hand and short term deposits with Banks less
short term advances from Banks.
r. Government Grants and Subsidies
Government grants of the nature of promoters'' contribution are
credited to capital reserve and treated as a part of the