(i) The Financial Statements are prepared on historical cost convention
on accrual basis of accounting and comply with the Accounting Standards
as notified under the Companies (Accounting Standards) Rules, 2006 of
the Companies Act, 1956.
The preparation of the Financial Statements requires the Management to
make estimates and assumptions considered in the reported amounts of
assets and liabilities (including the contingent liabilities) and the
reported income and expenses during the period. The Management believes
that the estimates used in preparation of the Financial Statements are
prudent and reasonable. Future results could differ and the differences
between the actual results and the estimates are recognised in the
periods in which the results are known / materialise.
(ii) REVENUE RECOGNITION
(a) Sales exclude sales tax, value added tax and works contract tax but
include excise duty. Commission earned on consignment sales is
accounted for as part of revenue from operations.
(b) Revenue from sale of goods is recognised when the substantial risks
and rewards of ownership are transferred to the buyer under the terms
of contract. Service revenue is recognised on rendering of services.
(c) Revenue from long-term contracts, where the outcome can be
estimated reliably, is recognised under the percentage of completion
method by reference to the stage of completion of the contract
activity. The stage of completion is measured by calculating the
proportion that costs incurred to date bear to the estimated total
costs of a contract. When the current estimate of total costs and
revenue is a loss, provision is made for the entire loss on the
contract irrespective of the amount of work done. Contract revenue
earned in excess of billing has been reflected under Other Current
Assets and billing in excess of contract revenue has been reflected
under Other Current Liabilities in the balance sheet.
(d) Long-term annual maintenance contracts
The revenue from maintenance contracts is recognised on accrual basis
and advance received in respect of future period is accounted for as
Unexpired Service Revenue.
In case of Mining Equipment, the revenue from such contracts is
recognised in proportion to the cost actually incurred during the year
in terms of the total estimated cost for such contracts, as repairs and
maintenance of such machineries depends on its utilisation and wear and
tear which varies from year to year. The excess of billings over cost
is deferred and accounted for as Unexpired Service Revenue.
(e) Other income
Interest income is accounted on accrual basis. Dividend income is
accounted for when the right to receive it is established.
(iii) JOINT VENTURES
The accounts of the Company reflect its share of the Assets,
Liabilities, Income and Expenditure of the Joint Venture Operations
which are accounted on the basis of the audited accounts of the Joint
Ventures on line-by-line basis with similar items in the Company''s
accounts to the extent of the participating interest of the Company as
per the Joint Venture Agreements.
(iv) TANGIBLE FIXED ASSETS
Tangible fixed assets are stated at cost less accumulated depreciation
The cost of an tangible fixed asset comprises its purchase price,
including any import duties and other taxes (other than those
subsequently recoverable from the taxing authorities), and any directly
attributable expenditure on making the asset ready for its intended use
and net of any trade discounts and rebates.
Own manufactured goods are capitalised at cost excluding interest but
including excise duty net of CENVAT, octroi duty and receiving /
installation charges. Interest on borrowed money allocated to and
utilised for qualifying fixed assets pertaining to the period upto the
date of capitalisation is added to the cost of the assets.
Interest on borrowed money allocated to and utilised for qualifying
fixed assets pertaining to the period upto the date of capitalisation
is added to the cost of the assets.
(v) INTANGIBLE ASSETS
Intangible assets are carried at cost less accumulated amortisation and
impairment losses, if any. The cost of an intangible asset comprises
its purchase price, including any import duties and other taxes (other
than those subsequently recoverable from the taxing authorities), and
any directly attributable expenditure on making the asset ready for its
intended use and net of any trade discounts and rebates. Subsequent
expenditure on an intangible asset after its purchase / completion is
recognised as an expense when incurred, unless it is probable that such
expenditure will enable the asset to generate future economic benefits
in excess of its originally assessed standards of performance and such
expenditure can be measured and attributed to the asset reliably, in
which case such expenditure is added to the cost of the asset.
(vi) IMPAIRMENT OF ASSETS
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment of assets. If any indication of
such impairment exists, the recoverable amount of such assets is
estimated and impairment is recognised if the carrying amount of these
assets exceeds their recoverable amount. The recoverable amount is the
greater of the net selling price and their value in use. Value in use
is arrived at by discounting the future cash flows to their present
value based on an appropriate discount factor. When there is indication
that an impairment loss recognised for an asset in prior accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognised.
(vii) DEPRECIATION / AMORTISATION
Depreciation on tangible assets has been provided on the Straight Line
Basis at the rates prescribed in Schedule XIV to the Companies Act,
1956, except Depreciation on furniture and fittings, which has been
provided on the Written Down Value Basis at the rates prescribed in
Schedule XIV to the Companies Act, 1956 and on assets acquired
specifically for a Project which are charged off over the period of the
Intangible assets are amortised on the Straight Line Basis over their
useful life. Manufacturing Rights and Technical Know- how have been
amortised over 72 months and Software is amortised over 60 months.
Premium paid on Leasehold Land is amortised over the period of the
lease, commencing from the date the land is put to use for commercial
(viii) PROVISION FOR TRADE GUARANTEES / WARRANTIES
The estimated liability for product warranties is recorded when
products are sold / project is completed. These estimates are
established using historical information on the nature, frequency and
average cost of warranty claims and management estimates regarding
possible future incidence based on corrective actions on product
failures. The timing of outflows will vary as and when warranty claims
arise - being typically upto five years.
As per the terms of the contracts, the Company provides post-contract
services / warranty support to some of its customers. The Company
accounts for the post-contract support / provision for warranty on the
basis of the information available with the Management duly taking into
account the current and past technical estimates.
(ix) PROVISIONS AND CONTINGENCIES
A provision is recognised when the Company has a present legal or
constructive obligation as a result of past events and it is probable
that an outflow of resources will be required to settle the obligation
in respect of which a reliable estimate can be made. Provisions
(excluding retirement benefits) are not discounted to their present
value and are determined based on best estimate required to settle the
obligation at the Balance Sheet date. These are reviewed at each
Balance Sheet date and adjusted to reflect the current best estimates.
Contingent liabilities are disclosed in Notes to Accounts.
Long-term investments (excluding investment properties), are carried
individually at cost less provision for diminution, other than
temporary, in the value of such investments. Current investments are
carried individually, at the lower of cost and fair value.
Cost of investments includes acquisition charges such as brokerage,
fees and duties.
Investment properties are carried individually at cost less accumulated
depreciation and impairment, if any. Investment properties are
capitalised and depreciated (where applicable) in accordance with the
policy stated for Tangible Fixed Assets. Impairment of investment
property is determined in accordance with the policy stated for
Impairment of Assets.
Inventories including Work-in-Progress (other than Construction
Contracts) are valued at cost or net realisable value, whichever is
lower, cost being worked out on weighted average basis. Cost includes
all charges for bringing the goods to their present location and
condition, including octroi and other levies, transit insurance and
(xii) TAXES ON INCOME
Current Tax is the tax payable on the taxable income for the year as
determined in accordance with the provisions of the I ncome Tax Act,
Deferred Tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
Deferred Tax Assets in respect of unabsorbed depreciation and carry
forward of losses are recognised if there is virtual certainty that
there will be sufficient future taxable income available to realise
such losses. Other Deferred Tax Assets are recognised if there is
reasonable certainty that there will be sufficient future taxable
income to realise such assets. Deferred tax assets are reviewed at
each Balance Sheet date for their realisability.
(xiii) FOREIGN EXCHANGE TRANSACTIONS / TRANSLATIONS
(a) The foreign branches of the Company have been classified as
integral foreign operations. Revenue transactions (other than
depreciation) of the foreign branches are incorporated in the Company''s
Financial Statements at the average exchange rate during the year,
fixed assets are incorporated at the spot rate of the date of
acquisition and monetary assets and liabilities are translated at the
rates of exchange prevailing on the date of the Balance Sheet.
Depreciation is translated at the average rate.
(b) Monetary assets and liabilities relating to foreign currency
transactions remaining unsettled at the end of the year are translated
at the year-end rate and the difference in translation and realised
gains and losses on foreign exchange transactions are recognised in the
Statement of Profit and Loss. In respect of transactions covered by
foreign exchange contracts, the difference between the contract rate
and the spot rate on the date of the transaction is charged to the
Statement of Profit and Loss over the period of the contract.
(c) Foreign operations are classified as either ''integral'' or
''non-integral'' operations. Exchange differences arising on a monetary
item that, in substance, forms part of an enterprise''s net investment
in a non-integral foreign operation are accumulated in the Foreign
Currency Translation Reserve until the disposal of the net investment,
at which time they are recognised as income or as expenses.
(d) Forward contracts
Premium / discount on forward exchange contracts, which are not
intended for trading or speculation purposes, are amortised over the
period of the contracts if such contracts relate to monetary items as
at the Balance Sheet date.
(xiv) ACCOUNTING FOR VOLUNTARY RETIREMENT SCHEME
(a) The cost of Voluntary Retirement Scheme/Retrenchment Compensation,
including ex-gratia and additional gratuity liability arising there
from, is charged to the Statement of Profit and Loss in the month of
separation of employees.
(b) The Present Value of future payments to employees opting for Early
Separation Scheme (ESS) and the additional gratuity liability arising
there from are charged to the Statement of Profit and Loss in the month
of separation of employees.
(a) Finance Leases
Fixed assets acquired under finance leases are recognised at the lower
of the fair value of the leased assets at inception and the present
value of minimum lease payments. Lease payments are apportioned between
the finance charge and the reduction of the outstanding liability. The
finance charge is allocated to periods during the leased term at a
constant periodic rate of interest on the remaining balance of the
(b) Operating Leases
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognised as
operating leases. Operating lease expenses / income are recognised in
the Statement of Profit and Loss on Straight Line Basis, representative
of the time pattern of the user''s benefit.
(xvi) EMPLOYEE BENEFITS
(a) Defined Contribution Plans
Contribution to Superannuation Fund, a defined contribution scheme, is
made at pre-determined rates to the Superannuation Fund Trust and is
charged to the Statement of Profit and Loss. There are no other
obligations other than the contribution payable to the Superannuation
The eligible employees of the Company are entitled to receive benefits
under provident fund schemes which are in substance, defined
contribution plans, in which both employees and the Company make
monthly contributions at a specified percentage of the covered
employees'' salary (currently 12% of employees'' salary). The
contributions are paid to the provident funds and pension fund set up
as irrevocable trusts by the Company or to respective Regional
Provident Fund Commissioner and the Central Provident Fund under the
State Pension scheme. The Company is generally liable for annual
contributions and any shortfall in the fund assets based on the
government specified minimum rates of return or pension and recognises
such contributions and shortfall, if any, as an expense in the year
(b) Defined Benefit Plans
The Company''s liabilities towards gratuity and post retirement medical
benefit schemes are determined using the projected unit credit method
which considers each period of service as giving rise to an additional
unit of benefit entitlement and measures each unit separately to build
up the final obligation. Actuarial gains and losses based on valuation
done by the independent actuary carried out annually are recognised
immediately in the Statement of Profit and Loss as income or expense.
Obligation is measured at the present value of the estimated future
cash flows using a discounted rate that is determined by reference to
market yields at the Balance Sheet date on Government bonds where the
currency and terms of the Government bonds are consistent with the
currency and estimated terms of the defined benefit obligation.
(c) Compensated Absences
Compensated absences which accrue to employees and which are expected
to be availed within twelve months immediately following the year end
are reported as expenses during the year in which the employees
performs the services that the benefit covers and the liabilities are
reported at the undiscounted amount of the benefit, and where the
availment or encashment is otherwise not expected to wholly occur
within the next twelve months, the liability on account of the benefit
is actuarially determined using the projected unit credit method.
(xvii) SEGMENT REPORTING
The accounting policies used in the preparation of the financial
statements of the Company are also applied for Segment Reporting.
Revenue and expenses have been identified to segments on the basis of
their relationship to the operating activities of the segment. Revenue
and expenses, which relate to the enterprise as a whole and are not
allocable to segments on a reasonable basis, have been included under
(xviii) CASH AND CASH EQUIVALENTS (FOR PURPOSES OF CASH FLOW STATEMENT)
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short-term balances (with an original maturity of three
months or less from the date of acquisition), highly liquid investments
that are readily convertible into known amounts of cash and which are
subject to insignificant risk of changes in value.
(xix) CASH FLOW STATEMENT
Cash flows are reported using the indirect method, whereby
profit/(loss) before extraordinary items and tax is adjusted for the
effects of transactions of non-cash nature and any deferrals or
accruals of past or future cash receipts or payments. The cash flows
from operating, investing and financing activities of the Company are
segregated based on the available information.