1 Basis of Accounting
The financial statements are prepared under historical cost
convention,on accrual basis,in accordance with the provisions of
Companies Act,1956 and the accounting principles generally accepted in
India and comply with the Accounting Standards prescribed in the
Companies (Accounting Standards) Rules,2006.
2 Use of Estimates:
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles in India requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent liabilities on the date of
financial statements and the reported amounts of revenues and expenses
during the reporting year. Actual results could differ from these
estimates. Any revision to accounting estimates is recognised
prospectively in current and future periods.
Inventories are valued after providing for obsolescenses as under :
Stock of Raw materials are valued at lower of cost or Net realisable
value ,which includes duties and taxes ( Except
those subsequently recoverable).
Stock of Packing materials & Stores and spares are valued at cost
,which includes duties and taxes ( Except those subsequently
Stock of Finished products including traded goods and Semi finished
goods are valued at lower of cost or net realisable value.
However Raw materials & Semi finished goods held for use in the
production of inventories are not written down below cost if the
finished products in which they will be incorporated are expected to be
sold at or above cost.
Cost includes material cost, labour, direct expenses, related
production overheads and applicable taxes. Cost is determined on
weighted average basis.
4 Fixed Assets and Depreciation/Amortisation
Fixed Assets are recorded at cost including any directly attributable
expenses incurred (net of recoverable taxes) to bring the assets to
working condition for their intended use. Advances paid towards the
acquisition of fixed assets outstanding at each balance sheet date and
the cost of fixed assets not ready for their intended use before such
date are disclosed under capital work-in-progress
Depreciation is provided on Straight- Line Method on Buildings and
Plant & Machinery except mentioned below and on Written Down Value
Method on other fixed assets at rates specified in schedule XIV of
Companies Act, 1956. Higher rates are considered based on useful lives
of the assets determined by management as under;
Depreciation methods, useful lives and residual values are reviewed at
each reporting date. Leasehold Land is amortised over the period of
lease. Intangible assets are amortised on straight line basis over the
useful lives of the assets not exceeding 10 years. Assets costing
individually upto Rs. 5,000 are written off to revenue. Assets costing
between Rs. 5,000 and Rs. 15,000 are depreciated fully in the year of
purchase except when value of individual assets purchased in aggregate
exceeds Rs. 100,000.
5 Research and Development Expenses
Revenue expenditure incurred on research and development is expensed as
incurred. Capital expenditure on research and development is
capitalised as fixed assets and depreciated in accordance with the
depreciation policy of the Company.
6 Revenue Recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
Revenue from sales of goods is recognised when significant risks and
rewards of ownership are transferred to the customers. Sales are net of
sales tax, claims for date expired goods & breakage but inclusive of
excise duty and rate differences , if any.
Revenue from Product development charges is recognised as and when
services are rendered and related costs are incurred in accordance with
the terms of the specific contracts. Benefits on account of entitlement
to import of goods free of duty under the Duty Entitlement Pass Book
under Duty Exemption Scheme and benefits on account of export
promotion schemes is accounted when the right to receive is reasonably
certain. Interest income is recognised on a time proportion basis
taking into account the amount outstanding and the rate applicable.
Dividend income from investment is recognised when the right to receive
payment is established.
7 Foreign Currency Transactions
The transactions in foreign currencies are accounted for at the
exchange rate prevailing on the date of transaction. The exchange
difference arising on actual settlement of foreign exchange transaction
are recognized in the Profit and Loss Account of the year. Monetory
assets and liabilities in foreign exchange, which are outstanding as at
the year end, are translated at the year end at the closing rate and
the resultant exchange differences are recognised in the Profit and
Investments in foreign subsidiaries are recorded in Indian currency at
the rate of exchange prevailing at the time when the original
investments were made.
The premium or discounts arising at the inception of forward exchange
contract is amortised as expense or income over the life of contract.
Exchange differences on such contracts are recognised as gain / loss in
the Profit and Loss account of the period.
Investments that are readily realisable and intended to be held for not
more than 12 months are classified as current investments. All other
investments are classified as long-term investment. Current investments
are carried at the lower of cost and fair value. Long-term investments
are carried at cost less diminution in value, if any. Provisions are
recognized for any decline, other than temporary, in the carrying value
of long term investment as determined by management.
9 Borrowing costs
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying assets are capitalised as part
of the cost of such assets. A qualifying assets is one that necessarily
takes substantial period of time to get ready for intended use. All
other borrowing costs are charged to revenue.
10 Employee Benefits
Short Term Employee Benefits
Short term employee benefits are recognised in the Profit and Loss
Account as an expense at their undiscounted amount.
Long Term Employee Benefits
(a) Defined Contribution Plans
Employee benefits in the form of employees provident fund scheme,
employee state insurance scheme, employee pension scheme and
superannuation are recognised in the Profit and Loss Account on accrual
(b) Defined Benefit Plan
Defined Benefit Plans in form of Gratuity and Compensated Absenses are
provided on the basis of actuarial valuations, as at the balance sheet
date, carried out by an independent actuary using Projected Unit Credit
Method. Actuarial gain or loss is charged in Profit & Loss A/c for the
Compensation paid to employees under Voluntary Retirement Scheme is
recognised as an expense when incurred.
Leases where the lessor effectively retains substanially all the risks
and benefits of ownership of leased assets are classified as operating
leases. Lease rentals for asset taken on operating lease are charged to
profit & loss account as incurred.
12 Earnings per share
The basic earning per share (EPS) is calculated by dividing the
Profit/(Loss) after Tax by the weighted average number of Equity Shares
outstanding. The diluted EPS is calculated after adjusting the weighted
average number of Equity shares to give effect to the potential equity
shares on the stock options outstanding.
13 Impairment of Assets
The Management periodically assesses, using external and internal
sources, whether there is an indication that an asset may be impaired.
If any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of impairment loss.
Recoverable amount is the higher of an assets net selling price and
value in use. In assessing value in use, the estimated future cash
flows expected from the continuing use of the asset and from its
disposal are discounted to their present value using a pre-tax discount
rate that reflects the current market assessments of time value of
money and the risks specific to the asset. Net selling price is the
amount obtainable from the sale of an asset in an arms length
transaction between knowledgeable, willing parties, less the cost of
disposal. Reversal of impairment loss is recognised immediately as
income in the profit and loss account.
14 Provisions, Contingent liabilities and Contingent assets
Provision is recognised when the Company has a present obligation as a
result of past events and it is probable that outflow of resources will
be required to settle the obligation, in respect of which a reliable
estimates can be made. A disclosure for contingent liability is made
when there is a possible obligation or a present obligation that may,
but probably will not, require an out flow of resources. When there is
a possible obligation or a present obligation in respect of which the
likelihood of outflow of resources is remote, no provision or
disclosure is made. Contingent assets are not recognised in the
financial statements. Provisions and contingencies are reviewed at each
balance sheet date and adjusted to reflect the correct management
15 Employees Stock Compensation Costs
Measurement and disclosure of the employee share-based payment plans is
done in accordance with SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
Accounting for Employee Share-based Payments, issued by the Institute
of Chartered Accountants of India. The Company measures compensation
cost as excess of the fair value of the Companys stock on the stock
option grant date over the exercise price. Compensation expense, if
any, is amortised over the vesting period of the option on a straight
Current tax is measured at an amount payable for the period in
accordance with the Income Tax Act, 1961.
Deferred tax expense or benefit is recognised on timing differences
being the difference between taxable incomes and accounting income that
originate in one period and are capable of reversal in one or more
subsequent periods. Deferred tax assets and liabilities are measured
using the tax rates and tax laws that have been enacted or
substantively enacted by the balance sheet date. Deferred tax assets in
respect of unabsorbed depreciation and carry forward of losses are
recognised only to the extent that there is virtual certainty that
sufficient taxable income will be available to realise these assets.
All other deferred tax assets are recognised only to the extent that
there is reasonable certainty that sufficient future taxable income
will be available to realise these assets. At each Balance Sheet date,
the carrying value amount of defered tax assets are reviewed to
The levy of Fringe Benefit Tax(FBT) is not applicable as the Finance
(No.2) Act, 2009 has abolished FBT with effect from Financial Year
17 Provision for Doubtful Debts
A percentage based provision is made for debtors outstanding for more
than one year based on ageing analysis thereof and a specific provision
is made in cases where the collection of debt is uncertain.