a) Basis of accounting:
The financial statements have been prepared in compliance with all
material aspects of the Accounting Standards prescribed in the
Companies (Accounting Standards) Rules, 2006 issued by the Central
Government, to the extent applicable except as disclosed in notes and
in accordance with the relevant provisions of the Companies Act, 1956.
These accounts are prepared on historical cost convention (except
certain fixed assets which are at revalued amounts) and on the
accounting principle of going concern basis.
The Company follows mercantile system of accounting and recognizes
income and expenditure on accrual basis except those with significant
b) Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make
estimates and assumptions that affects the reported amounts of assets
and liabilities and the disclosures of contingent liabilities on the
date of financial statements and reported amounts of revenue and
expenses for that year. Although these estimates are based upon
management's best knowledge of current events and actions, actual
results could differ from these estimates.
c) Fixed assets:
Fixed assets are stated at cost of acquisition (which includes freight,
duties, taxes and incidental expenses) or at revalued amount (wherever
the assets are revalued) less accumulated depreciation.
Computer software, where it is expected to provide future enduring
economic benefits is capitalised. The capitalised cost includes license
fees and cost of implementation / system integration services.
d) Depreciation and amortization:
Depreciation on assets is provided on straight-line method on pro-rata
basis at the rates and in the manner specified in Schedule XIV of the
Companies Act, 1956. The value of leasehold land is amortised over the
period of the lease and sheds and portable units are amortised over a
period of 12.5 years.
Capitalised software costs are amortised on straight line method over
their useful lives as estimated by management.
e) Revenue recognition:
Revenue in respect of sale of goods is recognised when significant risk
and rewards of ownership are transferred to the customers.
In case of divisible contracts, revenue is recognised as the contract
activity progresses based on percentage completion method. In other
cases, revenue is recognised on accrual basis except in case of
Revenue from services is recognised on accrual basis as per terms of
the contractual agreement.
Material and components are valued at lower of cost or net realisable
value. Cost is ascertained on first-in first-out (FIFO) basis.
g) Foreign currency transactions:
Foreign currency transactions are recorded at the exchange rates
prevailing on the date of such transactions. Monetary assets and
liabilities as at the Balance Sheet date are translated at the rates of
exchange prevailing at the date of the Balance Sheet. Gains and losses
arising on account of differences in foreign exchange rates on
settlement / translation of monetary assets and liabilities are
recognised in the statement of profit and loss. Non-monetary foreign
currency items are carried at cost.
h) Retirement benefits:
Provident fund contributions payable are charged to statement of profit
Liability for accumulated leave is provided on the basis of actuarial
valuation as at the year-end.
Liability for gratuity is provided on the basis of actuarial valuation
as at the year end and funded with Life Insurance Corporation of India.
Leases where the lessor effectively retains substantially all the risks
and benefits of the lease term are classified as operating leases.
Lease rentals in respect of properties acquired under operating leases
are charged off to the statement of profit and loss as incurred.
j) Accounting for taxes on income:
Tax expenses comprises of current tax and deferred tax.
Current tax represents tax on profits for the current year as
determined as per the provisions of the Income Tax Act, 1961.
The deferred tax for timing differences between the book and tax
profits for the year are accounted based on tax rates in force and tax
laws that have been enacted or substantively enacted as of the balance
sheet date. Deferred tax assets arising from timing differences, are
recognised to the extent there is reasonable / virtual certainty that
these would be realized in future and are reviewed for the
appropriateness of their respective carrying values at each balance
k) Accounting for provisions and contingent liabilities:
A provision is made when there is a present obligation as a result of a
past event that probably requires an outflow of resources and a
reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to its present value and are determined
based on best estimate required to settle the obligation at the balance
sheet date. A disclosure for a contingent liability is made when there
is a possible obligation or a present obligation that may, but probably
will not, require an outflow of resources. Where 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.
I) 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 management estimates the recoverable amount of the asset.
If such recoverable amount of the asset is less than its carrying
amount, the carrying amount is reduced to its recoverable amount. The
reduction is treated as an impairment loss and recognised in the
statement of profit and loss. If, at the balance sheet date, there is
an indication that a previously assessed impairment loss no longer
exists, the recoverable amount is reassessed and the asset is reflected
at the recoverable amount, subject to a maximum of depreciated
m) Earnings per share:
The basic earnings per share (EPS) is computed by dividing the net
profit or loss after tax for the year available for the equity
shareholders by the weighted average number of equity shares
outstanding during the year. For the purpose of calculating diluted
earnings per share, net profit or loss after tax for the year available
for equity shareholders and the weighted average number of shares
outstanding during the year are adjusted for the effects of all
dilutive potential equity shares.