(a) Basis of Accounting
These financial statements are prepared on accrual basis under the
historical cost convention to comply in all material aspects with all
the applicable accounting principles in India, the applicable
accounting standards notified u/s 211(3C) of the Companies Act, 1956
and the relevant provisions of the Companies Act, 1956 and guidelines
issued by the Securities and Exchange Board of India.
(b) Adoption of Revised Schedule VI of the Companies Act, 1956
For the year ended 31st March, 2012, the revised Schedule VI, notified
under the Companies Act, 1956 has become applicable to the Company for
preparation and presentation of its financial statements. The adoption
of Schedule VI does not impact recognition and measurement principles
followed for preparation of its financial statements. However, it has
significant impact on presentation and disclosures made in the
financial statements. The Company has also reclassified the previous
year figures in accordance with the requirements applicable in the
current year. All assets and liabilities have been classified as
current and non-current as per the criteria set out in the revised
Schedule VI. Based on the nature of products and the time between the
acquisition of assets for processing and their realisation in cash and
cash equivalents, the company has ascertained its operating cycle being
a period within 12 months for the purpose of classification of assets
and liabilities as current and non current.
(c ) Use of Estimates
The preparation of the financial statements in conformity with Indian
Generally Accepted Accounting Principles requires the management to
make estimates and assumptions 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 for doubtful receivables, future
obligations under employee retirement benefit plans, income taxes and
the useful lives of fixed assets and intangible assets.
(d) Fixed Assets
Fixed assets are stated at their original cost less accumulated
depreciation including freight, duties (net of CENVAT), taxes and other
incidental expenses relating to acquisition and installation.
(e) Depreciation / Amortization
Depreciation on all fixed assets situated at manufacturing locations is
provided on the straight line method on a pro-rata basis at the rates
determined on the basis of useful lives of the respective assets.
Management estimates the useful lives for the various fixed assets
situated at manufacturing locations as follows:
The rates derived from the above useful lives are higher than the
minimum rates specified in Schedule XIV to the Companies Act, 1956
Depreciation for all fixed assets at locations other than at
manufacturing locations is provided on the written down value method at
the rates specified in Schedule XIV to the Act.
Leasehold land is amortized over the lease period on a straight line
Capitalised enterprise resource planning software (SAP) is amortised
over a period of five years on straight line basis.
Acquired goodwill is amortized using the straight-line method over a
period of 10 years.
Inventories have been valued at lower of cost and net realizable value.
The cost in respect of raw materials is determined under the specific
identification of cost method.
Cost includes customs duty, wherever paid, and are net of credit under
CENVAT scheme, wherever applicable.
The cost in respect of work-in-progress, finished goods and stores and
spares is determined using the weighted average cost method and
includes direct materials and labour and a proportion of manufacturing
overheads based on normal operating capacity, where applicable.
Waste is valued at estimated net realizable value.
(g) Revenue Recognition
Sale of goods: Revenue on sale of goods is recognized on transfer of
significant risk and rewards of ownership to the buyer and on
reasonable certainty of the ultimate collection. Sales are inclusive of
excise duty and net off sales tax, trade discounts and sales returns.
Interest: Income is recognised on a time proportion basis taking into
account the amount outstanding and the applicable rates. Commission
and insurance claim: Income is recognized when no significant
uncertainty as to measurability or recoverability exists.
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognise a
decline other than temporary in the value of the investments.
(i) Foreign Currency Transactions
Transactions in foreign currency are accounted for at the exchange
rates prevailing on the date of transaction. All monetary items
denominated in foreign currency are translated at year end rates.
Exchange differences arising on such transactions and also exchange
differences arising on the settlement of such transactions are adjusted
in the statement of profit and loss.
In case of forward contracts, the premium or discount on all such
contracts arising at the inception of each contract is recognized /
amortized as income or expenses over the life of the contract. Any
profit or loss arising on the cancellation or renewal of such contracts
is recognized as income or expenses for the period.
In respect of foreign branch, all revenues, expenses, monetary
assets/liabilities and fixed assets are accounted at the exchange rate
prevailing on the date of the transaction. Monetary assets and
liabilities are restated at the year end rates and resultant gains or
losses are recognized in the statement of profit and loss.
(j) Employee Benefits
The company''s contributions to recognized provident funds are charged
to revenue on an accrual basis.
The Company has defined benefit plans namely leave encashment and
gratuity for all employees, the liability for which is determined on
the basis of an actuarial valuation at the end of the year. Gratuity
Fund (for other than Synthetic division) is administered through Life
Insurance Corporation of India. Short term compensated absences are
recognized at the undiscounted amount of benefit for services rendered
during the year.
Termination benefits are recognized as an expenses immediately.
Actuarial gains and losses comprise experience adjustments and the
effects of changes in actuarial assumptions and are recognised
immediately in the statement of profit and loss as income or expenses.
(k) Borrowing Costs
Borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset are capitalised as a
part of the cost of that asset. Other borrowing costs are recognised as
an expenses in the period in which they are incurred. (l) Taxation
Tax expenses for the year, comprising current tax and deferred tax is
included in determining the net profit/(loss) for the year.
A provision is made for the current tax based on tax liability computed
in accordance with relevant tax rates and tax laws. Deferred tax
assets are recognised for all deductible timing differences and carried
forward to the extent it is reasonably / virtually certain that future
taxable profit will be available against which such deferred tax assets
can be realised.
Deferred tax assets and liabilities are measured at the tax rates that
have been enacted or substantively enacted by the balance sheet date.
Assets acquired under long term finance lease are capitalised and
depreciated in accordance with company''s policy for assets situated
at manufacturing and other locations. The associated obligations are
included in other loans under Secured Loans. The company has
taken premises on lease. Lease rental in respect of operating lease
arrangement are charged to statement of profit and loss.
(n) Impairment of Assets
At each balance sheet date, the company assesses whether there is any
indication that an asset may be impaired. If such indication exists,
the company estimates the recoverable amount and where carrying amount
of the asset exceeds such recoverable amount, an impairment loss is
recognized in the statement of profit and loss to the extent the
carrying amount exceeds recoverable amount. Where there is any
indication that an impairment loss recognized for an asset in prior
accounting periods may no longer exist or may have decreased, the
company books a reversal of the impairment loss not exceeding the
carrying amount that would have been determined (net of amortization or
depreciation) had no impairment loss been recognized for the asset in
prior accounting periods.
(o) Government Grants Recognition
Government grants are recognized where:
i) There is reasonable assurance of complying with the conditions
attached to the grant.
ii) Such grant / benefit has been earned and it is reasonably certain
that the ultimate collection will be made.
Presentation in Financial Statement:
i) Government grants relating to specific fixed assets are adjusted
with the value of the fixed assets.
ii) Government grants in the nature of promoters'' contribution, i.e.
which have reference to the total investment in an undertaking or by
way of contribution towards total capital outlay, are credited to
iii) Government grants related to revenue items are either adjusted
with the related expenditure / revenue or shown under Other
Income, in case direct linkage with cost /income is not
(p) Provisions and contingencies
The company creates a provision when there is present obligation as a
result of a past event that probably requires an outflow of resources
and a reliable estimate can be made of the amount of obligation. A
disclosure for a contingent liability is made when there is possible
obligation or a present obligation that probably will not require an
outflow of resources or where a reliable estimate of the obligation
cannot be made.