(i) Basis of preparation
The financial statements have been prepared to comply in all material
respects with the notified accounting standards by Companies
(Accounting Standards) Rules, 2006 and the relevant provisions of the
Companies Act, 1956. The financial statements have been prepared under
the historical cost convention on an accrual basis except in case of
assets for which provision for impairment is made and revaluation is
carried out. The accounting policies have been consistently applied by
the Company and are consistent with those used in the previous year.
(ii) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon management''s best
knowledge of current events and actions, actual results could differ
from these estimates.
(a) Fixed assets, depreciation/amortisation and impairment
Fixed assets are stated at cost less accumulated depreciation and
impairment losses, if any. The Company capitalises all costs relating
to the acquisition and installation of fixed assets.
The carrying amounts of fixed assets and intangible assets are reviewed
at each balance sheet date to assess whether they are recorded in
excess of their recoverable amounts and where carrying values exceed
the estimated recoverable amount, assets are written down to the
recoverable amount. The recoverable amount is the greater of the
asset''s net selling price and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value
at the weighted average cost of capital.
Depreciation is provided, using the straight line method, pro-rata to
the period of use of assets, at the rates specified in Schedule XIV to
the Companies Act, 1956 or based on the useful lives of the assets
estimated by the management, whichever is higher. The rates used by the
Company are as follows:
Fixed assets whose aggregate cost is Rs. 5,000 or less are depreciated
fully in the year of acquisition.
Intangible assets are stated at cost less accumulated amortisation and
impairment losses, if any.
The cost relating to Intangible assets, which are acquired, are
capitalized and amortised on a straight line basis upto the period of
ten years, which is based on their estimated useful life.
(b) Foreign currency translations
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount, the exchange rate between
the reporting currency and the foreign currency at the date of
Foreign currency monetary items are reported using closing foreign
exchange rate. Non-monetary items, which are carried in terms of
historical cost denominated in a foreign currency are reported using
the exchange rate at the date of transaction.
Exchange differences arising on the settlement of monetary items or on
reporting company''s monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognized as income or as expenses
in the year in which they arise.
Premium or discount arising at the inception of forward exchange
contracts is amortized as expense or income over the life of the
contract. Exchange differences on such contracts are recognized in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognized as income or as expense for the
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are stated at
cost. Provision is made to recognise a diminution, other than
temporary, in the value of investments.
All inventories are valued at moving weighted average price other than
finished goods, which are valued on quarterly moving average price.
Finished goods and Work in Progress is computed based on respective
moving weighted average price of procured materials and appropriate
share of labour and other manufacturing overheads.
Inventories are valued at cost or net realizable value, whichever is
lower. Cost also includes all charges incurred for bringing the
inventories to their present location and condition. Excise and customs
duty accrued on production or import of goods, as applicable, is
included in the valuation of finished goods.
Inventories of stores and spare parts are valued at cost.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and to make the
(e) Employee benefits
Employee benefits in the form of Provident Fund, Family Pension Fund
and Superannuation Schemes, which are defined contribution schemes, are
charged to the Statement of Profit and Loss of the period when the
contributions to the respective funds accrue. There are no other
obligations other than the contribution payable to the respective
Gratuity liability, which is a defined benefit scheme is provided for
on the basis of an actuarial valuation made using Projected Unit Credit
Method at the end of each financial year.
Short term compensated absences are provided for based on estimates.
Long term compensated absences are provided for based on actuarial
valuation made using Projected Unit Credit Method at the end of each
Actuarial gains and losses are immediately taken to the Statement of
Profit and Loss and are not deferred.
(f) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
Sale of Goods
Revenue is recognized when the significant risks and rewards of
ownership of the goods have passed to the buyer, which coincides with
dispatch of goods to customers. Revenues are recorded at invoice value,
net of excise duty, sales tax, returns and trade discounts.
Sale of Services
Revenues from services are recognised on completion of rendering of
Out licensing fees
Out licensing fees is recognized in accordance with the terms of the
relevant agreement(s) as generally accepted and agreed with the
Benefit on account of entitlement to import duty free materials under
the Duty Entitlement Pass Book Schemes is recognized in the year
Revenue is recognized on an accrual basis in accordance with the terms
of the relevant agreement.
Revenue is recognized on a time proportion basis taking into account
the amount outstanding and the rate applicable.
(g) Research and development
Research costs are expensed as incurred. Development expenditure
incurred on an individual project is carried forward when its future
recoverability can reasonably be regarded as assured. Any expenditure
carried forward is amortised over the period of expected future sales
from the related project, not exceeding ten years.
The carrying value of development costs is reviewed for impairment
annually when the asset is not yet in use, and otherwise when events or
changes in circumstances indicate that the carrying value may not be
Tax expense comprises of current and deferred tax.
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the provisions of Income Tax Act,
1961 as applicable to the financial year. Deferred income taxes
reflects the impact of current year timing differences between taxable
income and accounting income for the year and reversal of timing
differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent it has timing differences
the reversal of which will result in sufficient income. In situations
where the Company has unabsorbed depreciation or carry forward tax
losses, all deferred tax assets are recognised only if there is virtual
certainty supported by convincing evidence that they can be realised
against future taxable profits.
Minimum Alternative Tax (MAT) credit is recognized as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period. MAT credit
becomes eligible to be recognized as an asset in accordance with the
recommendations contained in the Guidance Note issued by the Institute
Accountants of India, the said asset is created by way of credit to the
profit and loss account and shown as MAT credit entitlement. The
Company reviews the same at each balance sheet date and writes down the
carrying amount of MAT credit entitlement to the extent there is no
longer convincing evidence to the effect that Company will pay normal
income tax during the specified period.
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased term are classified as
operating lease. Operating lease payments are recognized as an expense
in the Statement of Profit and Loss on a straight-line basis over the
(j) Financing/Borrowing cost
Financing/Borrowing costs attributable to acquisition and/or
construction of qualifying assets are capitalised as a part of the cost
of such assets, up to the date such assets are ready for their intended
use. Other financing/borrowing costs are charged to Statement of Profit
and Loss. Initial direct costs are recognised immediately as an
Expenses incurred in connection with raising of funds are amortised
over the tenure of the borrowing.
(k) Employees Stock Option Cost
The Company measures compensation cost relating to employee stock
options using the intrinsic value method. Compensation expense, if
any, is written off over the vesting period of the option on a straight
A provision is recognised when an enterprise has a present obligation
as a result of past event, 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 are not discounted to its
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
(m) Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders (after deducting
preference dividends and attributable taxes) by the weighted average
number of equity shares outstanding during the year. The weighted
average number of equity shares outstanding during the year is adjusted
for events of bonus issue to existing shareholders and share split.
For the purpose of calculating diluted earnings per share, the net
profit for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares from
the exercise of options on unissued share capital. The number of equity
shares is the aggregate of the weighted average number of equity shares
and the weighted average number of equity shares, which would be issued
on the conversion of all the dilutive potential equity shares into
equity shares. Options on unissued equity share capital are deemed to
have been converted into equity shares.
(n) Derivative Financial Instruments
The Company uses derivative financial instruments such as option
contracts and interest rate swaps to hedge its risk associated with
foreign currency fluctuations and interest rates.
As per the Institute of Chartered Accountants of India (ICAI)
Announcement, accounting for derivative contracts, other than those
covered under AS-11, are marked to market on a portfolio basis, and the
net loss is charged to the income statement. Net gains are ignored.