(a) Basis of preparation of Financial Statements
The accounts have been prepared under the historical cost convention
and in accordance with the provisions of the Companies Act'' 1956 and
Accounting Standards notified vide Companies (Accounting Standards)
Rules'' 2006. Accounting policies unless specifically stated to be
otherwise'' are conistent and in consonance with generally accounting
(b) Use of Estimates
The preparation of financial statements require the management to make
estimates and assumption that affect the reported amount of assets and
liabilities and disclosures relating to contingent liabilities and
assets as at the balance sheet date and the reported amounts of income
and expenses during the year. Difference between the actual results and
the estimates are recognised in the year in which the results become
(c) Fixed Assets and Depreciation
a) Fixed assets are stated at cost of acquisition/construction. Cost
includes borrowing cost and pre-operative expenses as allocated to the
b) Capital Word-in-progress includes Marchinery to be installed''
Construction and Erection Materials'' Advances etc.
a) Depreciation has been provided for as per Schedule XIV of the
Companies Act'' 1956'' on written down value method and in respect of
plant and Marchinery acquired on or after 1.4.76'' on straight-line
method. Certain plants have been considered as continuous process on
b) Marchinery Spares which can be used only in connection with an item
of fixed asset and whose use is expected to be irregular are amortised
over the useful life of the respective fixed assets and the amount
amortised is included under stores and spares consumed.
(e) Impairment of Fixed Assets
Fixed Assets are reviewed at each balance sheet date for impairment. In
case events and circumstances indicate any impairment'' recoverable
amount of fixed assets is determined. An impairment loss is recognised''
whenever the carrying amounts of assets 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 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. Impairment loss/reversal thereof is adjusted to the
carrying value of the respective assets.
Long-term investments are stated at cost less provisions'' if any'' for
diminution in the values thereof'' other than temporary.
i) Inventories are valued at cost or estimated net realisable value''
whichever is lower. The value of inventories other than raw materials
is determined on weighted average basis. The value of raw materials is
determined by first in first out method. Cost of raw materials includes
expenses incurred for procuring the same. Cost in respect of finished
goods'' stock in process and wrapper represents manufacturing cost and
does not include interest'' selling and distribution and certain
ii) Customs duty on materials in bond and excise duty on finished goods
lying in the factory as at the year-end is considered as cost for
valuation of stocks.
(h) Revenues and Other Income
i) Revenue is being recognised on accrual basis.
ii) All expenses'' claims'' Interest on overdue debts/demands and other
incomes to the extent ascertainable and considered payable or
receivable as the case may be'' have been accounted for.
Sales are recognised on passing of the property in the goods as per the
terms of the sales'' irrespective of actual delivery. Sales include
excise duty and incidental charges but rebates'' discounts and Sales
Tax/Value Add Tax (VAT) are excluded there from.
(j) Foreign Currency Transactions
Transactions in foreign currencies are accounted for at the exchange
rate prevailing on the date of the transaction. Foreign currency
monetary assets and liabilities at the year end are translated using
closing exchange rates. The loss or gain thereon and also on the
exchange differences on settlement of foreign currency transactions
during the year are recognised as income or expenses and are adjusted
to the profit and loss account under respective heads of accounts.
Exchange differences arising with respect to forward contracts other
than those entered into'' to hedge foreign currency risk on unexecuted
firm commitments or of highly probable forecast transactions are
recognized in the year in which they arise and the difference between
the forwards rate and exchange rate at the date of transaction is
recognized as income / expense over the life of the contract.
Keeping in view the announcement of Institute of Chartered Accountants
of India dated March 29''2008 regarding accounting for derivatives'' mark
to market losses on all other derivatives contracts (other than forward
contracts dealt as above) outstanding as at the year end'' are
recognized in the accounts.
(k) Employee Benefits
Employee benefits are accrued in the year services are rendered by the
employees. Contribution to defined contribution schemes such as
Provident Fund etc. are recognized as and when incurred. Long term
employee benefits under defined benefit scheme such as contribution to
gratuity'' leave etc.are determined at close of the year at present
value of the amount payable using actuarial valuation techniques.
Actual gains and losses are recognised in the year when they arise.
(I) Income Taxes
Provision for tax is made for both current and deferred taxes. Current
tax is provided on the taxable income using the applicable tax rates
and tax laws. Deferred tax assets and liabilities arising on account of
timing differences'' which are capable of reversal in subsequent years
are recognised using tax rates and tax laws'' which have been enacted or
substantively enacted. Deferred tax assets other than in respect of
carried forward losses or unabsorbed depreciation are recognised only
to the extent that there is a reasonable certainty that sufficient
future taxable income will be available against which such deferred tax
assets will be realized. In case of carry forward of unabsorbed
depreciation and tax losses'' deferred tax assets are recognized only if
there is virtual certainty that such deferred tax assets can be
realized against future taxable profits.
(m) Provision'' Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent liabilities are disclosed by way of notes to accounts.
Contingent assets are neither recognised nor disclosed in the financial
(n) Borrowing Cost
Borrowing costs'' that are attributable to the acquistion or
construction of qualifying asset'' are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for use. All other borrowing
costs are charged to revenue.