1) System of Accounting
a) The Company maintains its accounts generally on accrual basis
following the historical costs convention, in compliance with the
historical cost convention, in compliance with the Accounting Standards
specified to be mandatory by the Institute of Chartered Accountants of
India and the relevant provisions of the Companies Act, 1956.
b) The income and expenditure are generally recognised on mercantile
basis except those with significant uncertainties.
c) The historical costs are not adjusted to reflect the impact of
changing value in the purchasing power of money.
d) Accounting policies not specifically referred to otherwise are
consistent and in consonance with the generally accepted accounting
2) Fixed Assets
a) Fixed Assets are stated at cost of acquisition, net off MODVAT
(CENVAT), less accumulated depreciation.
b) The Company follows the practice of capitalising all costs including
financial costs and interest on borrowings for capital expenditure for
the period upto the date on which the plant is ready for commercial
production i.e. production in commercially feasible quantities and in a
commercially practicable manner in accordance with the accounting
treatment recommended by the Institute of Chartered Accountants of
c) All the pre-operative expenditure and trial run expenditure
accumulated as Capital Work-in-Progress are allocated on prorata basis
depending on the prime costs of the assets.
d) Capital work in progress in stated at amount spent upto the date of
Balance Sheet and includes advances for capital expenditure and
pre-operative expenses and costs of financing for expansion projects,
a) Depreciation is provided on straight-line method as per the rates
specified in Schedule XIV to the Companies Act, 1956. It is provided
for the part of the year in respect of assets acquired during the year.
b) Depreciation on increase/decrease in value of fixed assets due to
foreign exchange fluctuation is provided on straight-line method during
the residual life of the assets.
Long term, investments are carried at cost, including related expenses.
Provision, if necessary, is made for decline, other than temporary, in
a) Inventories in general are valued at cost or net realisable value,
whichever is lower.
b) Cost of inventories of raw materials is arrived at on weighted
average method and is net off MODVAT (CENVAT) credit thereon.
c) Cost of Stores, Spares & Consumables is arrived at an specific
identification cost or weighted average cost, whichever is applicable.
d) Finished goods & Semi-finished goods are valued at cost of raw
materials and conversion cost thereof, including the cost incurred in
the normal course of business in bringing the goods upto the present
condition and location. The cost is ascertained on the basis of
absorption costing which takes into account and direct expenses,
depreciation on plant and machineries, interest on export packing
credit but excludes selling and distribution expenses. Excise duty
relating to finished goods has also been included in the cost of such
Sales of product & services are recognised when the products are
dispatched and services rendered and are inclusive of excise duty and
7) Translation of Foreign Currency Items
a) Transactions in foreign currencies are recorded at the exchange rate
prevailing on the date of the transaction.
b) Current assets and current liabilities are translated at the year
c) The difference between the rate prevailing on the date of the
transaction and on the date of settlement and also on translation of
Current Assets Liabilities at the end of the year are recognised s
income or expenditure as the case may be and are adjusted in the Profit
and Loss Account accordingly.
d) Liability on account of Exchange difference in respect of foreign
currency utilised for the purpose of acquiring fixed assets and
outstanding on the balance sheet date, is added to the cost of the
fixed assets. Exchange difference on such loan installments paid
during the year is accounted for as revenue expense.
8) Preliminary & Share Issue Expenses
Preliminary & Share Issue Expenses are amortised over a period often
9) Expenditure during construction period and on expansion projects
In the case of substantial expansion of existing units all pre-operative
expenditure, including interest on borrowings specifically for the
projects or interest on general borrowings of the Company whenever
utilised for such expenditure, incurred up to the date of commencement
of commercial production is capitalised and added pro-rata to the cost
of fixed assets.
10) Retirement Benefits
Provision for retirement benefits are made as follows :
a) Employer's contribution to Provident Fund on actual liability basis.
b) Gratuity liability based on actuarial valuation.
c) Leave Encashment liability on retirement based on actuarial
11) Prior period and extra ordinary items
Income and expenditure pertaining to prior period as well as
extra-ordinary items, where material, are disclosed separately.