I Basis of Accounting
These financial statements are prepared under historical cost
convention on an accrual basis in accordance with the Generally
Accepted Accounting Principles in India and the Accounting Standards
(AS) as notified under Companies (Accounting Standards) Rules, 2006.
II Use of estimates
The presentation of financial statements in conformity with the
generally accepted accounting principles requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Difference
between the actual result and estimates are recognised in the period in
which the results are known / materialised.
III Fixed Assets and Depreciation / Amortisation
Fixed Assets including intangible assets are stated at historical cost
(net of cenvat credit) less accumulated depreciation/ amortisation
thereon and impairment losses, if any. Depreciation on tangible assets
is provided on Straight Line Method at the rates specified in Schedule
XIV to The Companies Act, 1956. Assets costing Rs. 5,000/- or less are
depreciated at hundred percent rate on prorata basis in the year of
purchase. Intangible assets consisting of trademarks, designs,
technical knowhow, non- compete fees and other intangible assets are
amortised on Straight Line Method from the date they are available for
use, over the useful lives of the assets (10/20 years), as estimated by
the Management considering the terms of agreement. Leasehold land is
amortised over the period of lease.
Lease rental for assets taken on operating lease are charged to the
Profit And Loss Account in accordance with Accounting Standard 19 on
V Revenue Recognition
Sales of products are recognised when risk and rewards of ownership of
the products are passed on to the customers, which is generally on
despatch of goods. Export sales are recognised on the basis of Bill of
lading / Airway bill. Sales includes delayed payment charges and are
stated net of returns and Vat / Sales Tax, if any.
Investments are classified into Current and Long Term Investments.
Current Investments are valued at lower of cost and fair value. Long
Term Investments are stated at cost less provision, if any, for other
than temporary diminution in their value.
Inventories consisting of raw and packing materials, stores and spares,
work in progress and finished goods are stated at lower of cost (Raw
and Packing Material - Specific Identificaiton Method; Stores and
Spares - FIFO basis; Work in Progress and Finished Goods - Weighted
Average Method) and net realisable value.
VIII Research and Development
The research and development cost is accounted in accordance with
Accounting Standard - 26 ‘Intangible Assets''. All related revenue
expenditure incurred on original and planned investigation undertaken
with the prospect of gaining new scientific or technical knowledge and
understanding up to the time when it is possible to demonstrate
probable future economic benefits, is recognised as research expenses
and charged off to the profit and loss account, as incurred. All
subsequent expenditure incurred for product development on the
application of research findings or other knowledge upon demonstration
of probability of future economic benefits, prior to the commencement
of production, to the extent identifiable and possible to segregate are
accumulated and carried forward as development expenditure under
Capital Work in Progress, to be capitalised as an intangible asset on
completion of the project. In case a project does not proceed as per
expectations / plans, the same is abandoned and the amount classified
as development expenditure under Capital Work in Progress is charged
off to the profit and loss account.
IX Foreign Currency Transactions
Transactions denominated in foreign currencies are recorded at the
exchange rate that approximates the actual rate prevailing at the date
of the transaction. Monetary items denominated in foreign currency at
the year end are translated at year end rates.
In respect of monetary items, which are covered by forward exchange
contracts, the difference between the year end rate and the rate on the
date of the contract is recognised as exchange difference and the
premium on such forward contracts is recognised over the life of the
forward contract. The exchange differences arising on settlement /
translation are recognised in the Profit and Loss Account.
X Derivative Accounting:
Forward Contracts in the nature of highly probable forcasted
transactions / firm commitments entered into for hedging the risk of
foreign currency exposure are accounted for on the principles of
prudence as enunciated in Accounting Standard 1 (AS-1) “Disclosure of
Accounting Policies”. Pursuant to this, losses, if any, on Mark to
Market basis, are recognised in the Profit and Loss Account and gains
are not recognised on prudent basis.
XI Taxes on Income
Provision for taxation comprises of Current Tax and Deferred Tax.
Current Tax provision has been made on the basis of reliefs and
deductions available under the Income Tax Act, 1961. Deferred tax
resulting from “timing differences” between taxable and accounting
income is accounted for using the tax rates and laws that are enacted
or substantively enacted as on the balance sheet date. The deferred tax
asset is recognised and carried forward only to the extent that there
is a reasonable certainty that the assets can be realised in future.
However, where there is unabsorbed depreciation or carry forward losses
under taxation laws, deferred tax assets are recognized only if there
is virtual certainty of realisation of such assets. Deferred tax assets
are reviewed as at each Balance sheet date.
XII Employee Benefits
(a) The Company''s contribution in respect of provident fund is charged
to Profit and Loss Account each year.
(b) With respect to gratuity liability, Company contributes to Life
Insurance Corporation of India (LIC) under LIC''s Group Gratuity policy.
Gratuity liability as determined on actuarial basis by the independent
valuer is charged to Profit and Loss Account.
(c) Liability for accumulated compensated absences of employees is
ascertained for on actuarial valuation basis and provided for as per
the Company rules.
XIII Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalised. Other borrowing
costs are recognised as an expense in the period in which they are
XIV Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised only when there is a present obligation as a
result of past events and when a reliable estimate of the amount of the
obligation can be made. Contingent liability is disclosed for (i)
Possible obligations which will be confirmed only by future events not
wholly within the control of the Company or (ii) Present obligations
arising from past events where it is not probable that an outflow of
resources will be required to settle the obligation or a reliable
estimate of the amount of the obligation can not be made. Contingent
Assets are not recognised in the financial statements since this may
result in the recognition of income that may never be realised.
XV Government Grants / Subsidy
Government grants, if any, are accounted when there is reasonable
assurance that the enterprise will comply with the conditions attached
to them and it is reasonably certain that the ultimate collection will
be made. Capital Subsidy in nature of Government Grants related to
specific fixed assets is accounted for where collection is reasonably
certain and the same is shown as a deduction from the gross value of
the asset concerned in arriving at its book value and accordingly the
depreciation is provided on the reduced book value.
XVI Impairment of Assets
The Company assesses at each Balance Sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount. The reduction is treated as an impairment loss and is
recognised in the Profit and Loss Account. If at the Balance Sheet date
there is an indication that if a previously assessed impairment loss no
longer exists, the recoverable amount is reassessed and the asset is
reflected at the lower of recoverable amount and the carrying amount
that would have been determined had no impairment loss being