1.1 PRESENTATION AND DISCLOSURE OF FINANCIAL STATEMENTS
During the year ended September 30,2012, the Revised Schedule VI
notified under the Companies Act, 1956, has become applicable to the
company, for preparation and presentation of its financial statements.
The adoption of Revised Schedule VI does not impact recognition and
measurement principles followed for preparation of financial
statements. However, it has significant impact on the presentation and
disclosures made in the financial statements. The Company has
reclassified/regrouped, wherever applicable the previous year figures
in accordance with the requirements applicable in the current year.
1.2 METHOD OF ACCOUNTING
The Company maintains its accounts under the historical cost convention
on an accrual basis and complies in all material respects with
generally accepted accounting principles in India.The Company has
prepared these financial statements to comply in all material respects
with Accounting Standards notified under the Companies (Accounting
Standards) Rules, 2006 (as amended) and relevant provisions of the
Companies Act, 1956.
1.3 USE OF ESTIMATES
The presentation of thefinancial statements in conformity with the
generally accepted accounting principles requires the management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities, revenues and expenses and disclosure of
contingent liabilities. Such estimates and assumptions are based on
management''s evaluation of relevant facts and circumstances as on the
date of financial statements. The actual outcome may diverge from these
1.4 REVENUE RECOGNITION
Income is recognized on accrual basis, except where mentioned
otherwise, in particular:
(a) Domestic sales of manufactured items are recognized on dispatch and
are stated net of returns;
(b) Export sales are recognized on date of bill of lading/airway bill
and initially recorded at the relevant exchange rates prevailing on the
date of transaction;
(c) Income on items delivered directly by suppliers/sub-contractors to
the client is recognized on dispatch and receipt of suppliers''/
(d) Income from project site activities is recognized on acceptance by
the client on the basis of the work performed;
(e) Income on account of price variation is recognized on acceptance of
the claim by the client and on certainty of its realization;
(f) Revenue from long term projects of Special Products Division
involving dispatch, commissioning and erection is recognized on the
basis of milestone specified in the contracts after matching costs and
revenue at each stage; and
(g) Dividend is accrued in the year in which it is declared whereby the
right to receive is established.
1.5 TANGIBLE FIXED ASSETS
Fixed Assets are stated at cost, net of tax/duty credits availed less
depreciation/amortization to date and impairment, if any, except in the
case of certain items of land, buildings, plant and machinery and
roads, water works, drainage, which are stated on the basis of the
revalued cost less depreciation/amortization to date and impairment, if
1.6 INTANGIBLE ASSETS
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, Intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any.
(a) The depreciation is computed on the Straight-Line Method on certain
Buildings and Plant & Machinery of Heavy Engineering Division and
Foundry Division and all the fixed assets of Tiwac Division in the
manner prescribed in Schedule XIV to the Companies Act, 1956.
The depreciation on all other fixed assets is computed on the Written
Down Value method in the manner prescribed in Schedule XIV to the
Companies Act, 1956.
In respect of branches, which are an integral part of foreign
operations, depreciation is provided in the manner prescribed by local
laws so as to write off the assets over their useful life.
(b) Intangible assets are amortized on a Straight Line basis over the
estimated useful economic life and in case of: (i) Patents are
amortized on the basis of life of Patents as specified in the Patent
(ii) Technical Know-how is amortized on Straight Line Basis in six
equal installments; and
(iii) Computer Software, included in intangible assets, is amortized
over a period of three years.
(c) Depreciation on additions to/deletions from the fixed assets during
the year is calculated on pro-rata basis from the date of
1.8 CAPITAL WORK-IN-PROGRESS
Projects under commissioning and other Capital Work-in-Progress are
carried at cost, comprising direct cost and related incidental
1.9 IMPAIRMENT OF ASSETS
Impairment is ascertained at each balance sheet date in respect of Cash
Generating Units. An impairment loss is recognized whenever the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the net selling price and value in
use. In assessing value in use, the estimated future cash flows are
discounted to their present value based on an appropriate discount
Investments of long term nature are stated at cost less provision for
diminution in value, if such decline is other than temporary. Current
investments are stated at lower of cost or fair value.
1.11 EMPLOYEE BENEFITS
(a) Short term employee benefits are those which are payable within
twelve months of rendering service and are recognized as expense in the
period in which the employee renders the related service.
(b) Contributions to the Provident Fund and Superannuation Fund, ESIC
and Labour Welfare Fund which are defined contribution schemes are
recognized as an expense in the Statement of Profit and Loss in the
period in which the contribution is due.
(c) Gratuity liability is a defined benefit obligation and is provided
for on the basis of actuarial valuation using the projected unit credit
method at the end of each financial year. Actuarial gains and losses
are recognized immediately in the Statement of Profit and Loss.
(d) Long term compensated absences including leave encashment are
provided for on the basis of actuarial valuation. Accumulated leave,
which is expected to be utilized within next twelve months, is treated
as short term employee benefit. The Company measures the expected cost
of such absences as the additional amount that it expects to pay as a
result of the unused entitlement that has accumulated at the reporting
1.12 TAXES ON INCOME
Tax expenses comprise current and deferred tax.
Tax on income for the current period is determined on the basis of
taxable income and tax credits computed in accordance with the
provisions of the Income Tax Act, 1961 .The tax rates and tax laws used
to compute amount are those that are enacted or substantively enacted.
Deferred tax is recognized on timing differences between the accounting
income and taxable income that originate in one period and are capable
of reversal in one or more subsequent periods and is quantified using
the tax rates and tax laws enacted or substantively enacted as on the
balance sheet date.
Deferred tax assets (representing unabsorbed depreciation and carried
forward losses) are recognized to the extent that there is a virtual
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized.
1.13 BORROWING COSTS
Borrowing costs attributable to acquisition, construction or production
of qualifying assets are capitalized as part of such asset till the
time the asset is ready for its intended use or sale. All other
borrowing costs are recognized as an expense in the Statement of Profit
and Loss in the period in which they are incurred.
Inventories are valued after providing for obsolescence, if any, as
(a) Raw materials, Components, Stores and Spares at lower of cost or
net realizable value. The cost includes freight inward, direct
expenses, duties and taxes other than those subsequently recoverable.
In case of Heavy Engineering Division, it is arrived at on FIFO
Methodand other divisions on Weighted Average Method.
(b) Dies,Jigs,Tools, Mould Boxes and Patterns at lower of cost or net
realizable value, arrived at after providing for suitable diminution/
(c) Goods in transit at cost incurred till balance sheet date.
(d) Work in Progress at lower of cost or net realizable value. The cost
includes direct material, direct labour, and appropriate overheads
booked on normal level of activity. The expenditure on uncompleted
contracts is amortized over the period of contract on the basis of
(e) Finished Goods at lower of cost or net realizable value. Cost
includes related overheads and wherever applicable excise duty.
1.15 FOREIGN CURRENCYTRANSLATION
(a) Initial recognition
Foreign currency transactions are reported in the reporting currency by
applying to the foreign currency amount the exchange rate between
reporting currency and the foreign currency at the date of transaction.
Foreign currency monetary items are re-instated using the exchange rate
prevailing at the reporting date. Non monetary items which are measured
in terms of historical costs denominated in a foreign currency are
reported using the exchange rate at the date of transaction. Non
monetary items which are measured at fair value or other similar
valuation denominated in a foreign currency, are translated using the
exchange rate at the date when such value was determined.
The financial statements of foreign branches of the Company which are
integral to the operations are translated as if the transactions of the
foreign operations have been those of the Company itself.
(c) Exchange differences
(i) Change in accounting policy relating to long term foreign currency
The Company has opted to avail the choice provided under Paragraph 46A
of AS-11; The Effects of Changes in Foreign Exchange Rates, inserted
vide Notification dated December 29,2011. Consequently, the following
exchange differences on long term foreign currency monetary items,
which were until now being recognized in the Statement of Profit and
Loss are now being dealt with in the following manner:
- Foreign exchange difference on account of a depreciable asset is
adjusted in the cost of the depreciable asset, which would be
depreciated over the balance life of the asset;
- In other cases, the foreign exchange difference is accumulated in a
Foreign Currency Monetary Item Translation Difference Account and
amortized over the balance period of such long term asset/liability.
(ii) All other exchange differences are recognized as income or as
expense in the period to which they relate.
(d) Premium or discount on forward exchange contracts is recognized in
the Statement of Profit and Loss over the period of contract.
1.16 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
Provisions are recognized for liabilities that can be measured only by
using a substantial degree of estimation, if: (a) the Company has a
present obligation as a result of past event- lb) a probable outflow of
resources is expected to settle the obligation; and (c) the amount of
the obligation can be reliably estimated
Contingent Assets are neither recognized nor disclosed.
Contingent Liabilities are not recognized, but are disclosed in Notes
Provisions, Contingent Liabilities and Contingent Assets are reviewed
at each balance sheet date.
Assets acquired under leases where the significant portion of the risks
and rewards of ownership are retained by the lessor are classified as
operating leases and lease rentals are charged to the Statement of
Profit and Loss on accrual basis.
Assets leased out under operating lease are capitalized. Rental Income
is recognized on accrual basis over the lease term.
1.18 SEGMENT REPORTING (REFER NOTE 34)
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company. Segment revenue, segment
expenses, segment assets and segment liabilities have been identified
to segments on the basis of their relationship to the operating
activities of the segment. Revenue expenses, assets and liabilities
which relate to the company as a whole and are not allocable to
segments on reasonable basis have been included under unallocated
Information given is in accordance with the requirements of Accounting
Standard 17 on Segment Reporting issued by the Institute of Chartered
Accountants of India.
The Company has identified business segments as the primary and
geographic segment as secondary segment. Segment have been identified
after taking into account the nature of the products, differential risk
and returns, the organizational structure and internal reporting
The Company''s Primary business segments are organized on product lines
(i) Heavy Engineering (also known as Industrial Machinery Division) -
engaged in engineering, fabrication and manufacturing of Machinery for
Sugar Plants, Cement Plants, Boilers & Power Plants, Industrial &
Marine Gears, Mineral Processing & EPC, Petro Chemicals and Space,
Defense and Nuclear Power Business;
(ii) Foundry & Machine Shop - Manufacturing of Grey & Ductile Iron
Castings required by various industries and machining of components;
(iii) Others - Non Reportable Segment, includes units manufacturing
Precision Instruments such as pressure and temperature gauges and
1.19 EARNINGS PER SHARE
The Company reports basic and diluted earnings per share in accordance
with Accounting Standard 20, Earning Per Share issued by the
Institute of Chartered Accountants of India. Basic earnings per share
are computed by dividing the net profit after tax by the weighted
average number of equity shares outstanding during the year.
Diluted earnings per share reflect the potential dilution that could
occur if securities or other contracts to issue equity shares were
exercised or converted during the year. Diluted earnings per share are
computed using the weighted average number of equity shares and
potential dilutive equity shares outstanding at the year end.