1. Basis of Accounting
a) The financial statements are prepared under the historical cost
convention using the accrual system of accounting in accordance with
the accounting principles generally accepted in India (Indian GAAP) and
the requirements of the Companies Act, 1956, including the mandatory
Accounting Standards as prescribed by the Companies (Accounting
Standards) Rules, 2006.
b) Use of Estimates
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles (GAAP) requires the management of the
Company to make estimates and assumptions that affect the reported
balances of assets and liabilities and disclosures relating to the
contingent liabilities as at the date of the financial statements and
reported amounts of income and expenses during the year. Example of
such estimates include provisions for doubtful debts, employee
retirement benefits plans, provision for income tax, provision for
warranty cost and the useful lives of fixed assets. The difference
between the actual results and estimates are recognized in the period
in which the results are known and materialized.
2. Fixed Assets/Capital Work-in-Progress
a) Fixed Assets are stated at cost, less accumulated depreciation /
amortization and impairment loss, if any. The cost is inclusive of
freight, installation cost, duties, taxes, financing cost and other
incidental expenses related to the acquisition and installation of the
respective assets but does not include tax/duty credits availed.
b) Capital Work-in-Progress is carried at cost, comprising of direct
cost, attributable interest and related incidental expenditure. The
advances given for acquiring of fixed assets are shown under Capital
Depreciation on plant and machinery of Hermetic Division is provided on
Written Down Value (WDV) method at the rates specified in the Schedule
XIV to the Companies Act, 1956, except for moulds and certain items of
plant and machinery which are depreciated @ 20% as against 15.62%
specified for the WDV method in the said Schedule. Depreciation on
plant and machinery other than those stated above and other fixed
assets is provided on Straight Line Method at the rates specified in
Schedule XIV to the Companies Act, 1956.
Intangibles: Intangible Assets are amortized over a period of five
4. Impairment of Assets
The Fixed Assets or a group of assets (cash generating units) are
reviewed for impairment at each Balance Sheet date. In case of any such
indication, the recoverable amount of these assets is determined and if
such recoverable amount of the asset or cash generating unit to which
the asset belongs is less than its carrying amount, the impairment loss
is recognised by writing down such assets to their recoverable amount.
An impairment loss is reversed if there is change in the recoverable
amount and such loss either no longer exists or has decreased.
Quoted Investment are valued at cost or market value whichever is
lower. Unquoted Investments are stated at Cost. The decline in the
value of the Unquoted Investments, other than temporary, is provided
for. Cost is inclusive of brokerage, fees and duties but excludes
Securities Transaction Tax, if any.
Inventories are valued at cost or net realizable value whichever is
lower. Cost of inventories comprises all costs of purchase, conversion
and other costs incurred in bringing the inventories to their present
location and condition. Cost is determined on weighted average basis.
7. Borrowing Costs
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying asset are capitalised as part
of the cost of that asset. Other borrowing costs are recognised as an
expense in the period in which they are incurred.
8. Excise and Customs Duty
Excise Duty in respect of finished goods lying in the factory premises
and Customs Duty on goods lying in customs bonded warehouse are
provided for and included in the valuation of inventory.
9. CENVAT/Value Added Tax
CENVAT/Value Added Tax benefit is accounted for by reducing the
purchase cost of the materials/fixed assets/services.
10. Revenue Recognition
a) Revenue is recognized on transfer of significant risk and reward in
respect of ownership.
b) Sales/Turnover for the year includes sales value of goods, excise
duty, duty drawback and other recoveries such as insurance,
transportation and packing charges but excludes sales tax, value added
tax and recovery of finance and discounting charges.
c) Insurance, Duty Drawback and other claims are accounted for as and
when admitted by the appropriate authorities.
d) Dividend on investments is recognized when the right to receive is
11. Foreign Currency Transactions
Transactions in foreign currencies are recorded at the exchange rate
prevailing on the date of transactions. Foreign Currency Monetary
Assets and Liabilities are translated at the yearend rate. The
difference between the rate prevailing on the date of transaction and
on the date of settlement as also on translation of Monetary Items at
the end of the year is recognized, as the case may be, as income or
expense for the year/period.
12. Employees Benefits
a) Short Term Employees Benefits
Short Term Employees Benefits are recognized as an expense at the
undiscounted amount in the Profit and Loss Account of the year in which
the related services is rendered.
b) Post Employment Benefits
i) Provident Fund - Defined Contribution Plan
The Company contributes monthly at a determined rate. These
contributions are remitted to the Employees'' Provident Fund
Organisation, India for this purpose and is charged to Profit and Loss
Account on accrual basis.
ii) Gratuity - Defined Benefit Plan
The Company provides for gratuity to all the eligible employees. The
benefit is in the form of lump sum payments to vested employees on
retirement, on death while in employment, or termination of employment
for an amount equivalent to 15 days salary payable for each completed
year of service. Vesting occurs on completion of five years of service.
Liability in respect of gratuity is determined using the projected unit
credit method with actuarial valuations as on the Balance Sheet date
and gains/losses are recognised immediately in the Profit and Loss
iii) Leave Encashment
Liability in respect of leave encashment is determined using the
projected unit credit method with actuarial valuations as on the
Balance Sheet date and gains/losses are recognized immediately in the
Profit and Loss Account.
Income tax comprises of current tax and deferred tax. Provision for
current income tax is made on the assessable income/benefits at the
rate applicable to the relevant assessment year. Deferred tax assets
and liabilities are recognized for the future tax consequences of
timing differences, subject to the consideration of prudence. Deferred
tax assets and liabilities are measured using the tax rates enacted or
substantively enacted by the Balance Sheet date. The carrying amount of
deferred tax asset/liability are reviewed at each Balance Sheet date
and recognized and carried forward only to the extent that there is a
reasonable certainty that the asset will be realized in future.
Minimum Alternate Tax (MAT) paid on the book profits, which give rise
to future economic benefits in the form of tax credit against future
income tax liability, is recognized as an asset in the Balance Sheet if
there is convincing evidence that the Company will pay normal tax
within the period specified for utilization of such credit.
14. Research and Development
Revenue Expenditure pertaining to Research and Development is charged
to revenue under the respective heads of account in the period in which
it is incurred. Capital expenditure, if any, on Research and
Development is shown as an addition to Fixed Assets under the
15. Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognized when there is a present obligation as a
result of past events and it is probable that there will be an outflow
of resources in respect of which reliable estimates can be made.
Contingent Liabilities are disclosed by way of Notes to Accounts.
Disputed demands in respect of Central Excise, Customs duty, Income tax
and Sales tax are disclosed as contingent liabilities. Payment in
respect of such demands, if any, is shown as an advance, till the final
outcome of the matter.
Contingent assets are not recognized in the financial statements.
Provision for the estimated liability in respect of warranty on sale of
consumer electronics products is made in the year in which the revenues
are recognized, based on technical evaluation and past experience.
17. Prior period items
Prior period items are included in the respective heads of accounts and
material items are disclosed by way of Notes to Accounts.
18. Other Accounting Policies
These are consistent with the generally accepted accounting principles.