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Accounting Policies of Ador Welding Ltd. Company

Mar 31, 2015

Basis of preparation of financial statements:-

These financial statements have been prepared in accordance with the generally accepted accounting principles in India under the historical cost convention on accrual basis. Pursuant to Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014, till the standards of accounting or any addendum thereto are prescribed by the Central Government in consultation and recommendation of the National Financial Reporting Authority, the existing Accounting Standards notified under the Companies Act, 1956 shall continue to apply. Consequently, these financial statements have been prepared to comply in all material aspects with the accounting standards notified under Section 211(3C) [Companies (Accounting Standards) Rules, 2006, as amended] and other relevant provisions of the Companies Act, 2013.

All the assets and liabilities have been classified as current or non-current as per the Company's operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current, non-current classification of assets and liabilities.

Use of Estimates:-

The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Differences between actual results and estimates are recognized in the period in which the results are known.

Recognition of Income and Expenditure:-

1. Sale of goods is recognized on transfer of significant risks and rewards of ownership to the buyer, which is generally on the dispatch of goods by the Company and are recognised net of trade discounts, sales taxes and excise duties.

2. Service income is recognised on transfer of significant risks and rewards of ownership to the buyer and is accounted based on terms of contract entered into with the respective parties.

3. Benefit on account of entitlement to import duty - free materials under Duty Entitlement Passbook Scheme (DEPB) or Duty Drawback are accounted in the year of export as Export Incentives.

4. Other Revenue / Income and Cost / Expenditure are generally accounted on accrual basis as they are earned or incurred.

5. Sale of Services: In contract involving rendering of services, revenue is recognized using the proportionate completion method in line with agreements / arrangements with concerned parties and is net of service tax.

6. Revenue from contracts: Revenue from fixed price contracts is recognized using the percentage of completion method. Percentage of completion is determined as a proportion of the cost incurred up to the reporting date of the total estimated contract costs. Proportionate completion is measured based upon the efforts incurred to date, in relation to the total estimated efforts to complete the contract. The Company monitors estimates of total contract revenue and costs on a regular basis throughout the delivery period. The cumulative impact of any change in estimates of the contract value or cost is reflected in the period in which the changes become known. In the event that a loss is anticipated on a particular contract, provision is made for the estimated loss.

7. Interest: Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

Fixed Assets:-

1. Tangible Assets are stated at acquisition cost, net of accumulated depreciation and accumulated impairment losses, if any.

2. Subsequent expenditures related to an item of fixed asset are added to its book value only if they increase the future benefits from the existing asset beyond its previously assessed standard of performance.

3. Items of fixed assets that have been retired from active use and are held for disposal are stated at the lower of their net book value and net realisable value and are shown separately in the financial statements. Any expected loss is recognised immediately in the Statement of Profit & Loss.

4. Losses arising from the retirement of, and gains or losses arising from disposal of fixed assets, which are carried at cost are recognised in the Statement of Profit & Loss.

5. Depreciation is provided on a pro-rata basis on the straight-line method based on useful life as estimated by the Management and aligned to Schedule II to the Companies Act, 2013 in order to reflect the actual usage of assets. Depreciation on assets acquired under Finance lease is spread over the lease period or useful life, whichever is shorter.

6. Intangible assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortised on a straight line basis over their estimated useful lives. The amortisation period and the amortisation method are reviewed at least at each financial year end. If the expected useful life of the asset is significantly different from previous estimates, the amortisation period is changed accordingly.

7. Software and implementation costs including users license fees of the Enterprise Resource Planning (ERP) system and other application software costs are amortised over a period of three years.

Change in accounting policy:-

8. The Company has revised its policy of providing depreciation on fixed assets effective 01st April, 2014. The depreciation is now provided on Straight Line Method (SLM) based on useful life as estimated by the Management and aligned to Schedule II to the Companies Act, 2013, as against Written Down Value (WDV) method followed earlier. As a result of this change, the effect relating to the period prior to 01st April, 2014, is a net credit of Rs.2,604 lacs (excluding deferred tax) which has been shown as an 'Exceptional Item' in the financial result for the year ended 31st March, 2015. Further, based on the transitional provision of Schedule II to the Companies Act, 2013, an amount of Rs.108 lacs (net of deferred tax) has been adjusted to retained earnings. Had the Company continued with the depreciation under the old WDV method, the depreciation for the year would have been lower by Rs.12 lacs.

Impairment of Assets:-

Assessment is done at each balance sheet date as to whether there is any indication that an asset (tangible and intangible) may be impaired. For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets, is considered as a cash generating unit. If any such indication exists, an estimate of the recoverable amount of the asset / cash generating unit is made. Assets whose carrying value exceeds their recoverable amount are written down to the recoverable amount.

Recoverable amount is higher of an asset's or cash generating unit's net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Assessment is also done at each balance sheet date as to whether there is any indication that an impairment loss recognised for an asset in prior accounting periods may no longer exist or may have decreased.

Leases:-

As a lessee:

Leases in which a significant portion of the risks and rewards of ownership are retained by the Lessor are classified as operating leases. Payments made under operating leases are charged to the Statement of Profit & Loss on a straight-line basis over the period of the lease.

The Company leases certain tangible assets and such leases where the Company has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments.

Each lease payment is apportioned between the finance charge and the reduction of the outstanding liability. The outstanding liability is included in other short / long-term borrowings. The finance charge is charged to the Statement of Profit & Loss over the lease period, so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

As a Lessor:

The Company has leased certain tangible assets and such leases where the Company has substantially retained all the risks and rewards of ownership are classified as operating leases. Lease income on such operating leases are recognised in the Statement of Profit & Loss on a straight line basis over the lease term, which is representative of the time pattern in which benefit derived from the use of the leased asset is diminished. Initial direct costs are recognised as an expense in the Statement of Profit & Loss in the period in which they are incurred.

Investments:-

Investments that are readily realisable and are intended to be held for not more than one year from the date, on which such investments are made, are classified as current investments. All other investments are classified as long term investments. Current investments are carried at cost or fair value, whichever is lower. Long-term investments are carried at cost. However, provision for diminution is made to recognise a decline, other than temporary, in the value of the investments, such reduction being determined and made for each investment individually.

Inventories:-

Inventories are stated at lower of cost and net realisable value. Cost is determined using the 'average cost' method. The cost of finished goods and work-in-progress comprises raw materials, packing materials, direct labour, other direct costs and related production overheads. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

Foreign Currency Translation:-

Initial Recognition: On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount, the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

Subsequent Recognition: As at the reporting date, 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 the transaction. All non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.

All monetary assets and liabilities in foreign currency are restated at the end of the accounting period.

Exchange differences on restatement of all other monetary items are recognised in the Statement of Profit & Loss.

Translation of foreign operations:-

Foreign operations are classified as either 'integral' or 'non-integral' operation. 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 expense. The financial statements of an integral foreign operation are translated using the principles and procedures as if the transactions of the foreign operation are those of the Company itself.

Forward Exchange Contracts:-

The premium or discount arising at the inception of forward exchange contracts entered into to hedge an existing asset / liability, is amortised as expense or income over the life of the contract. Exchange differences on such a contract are recognised in the Statement of Profit & Loss in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such a forward exchange contract is recognised as income or as expense for the period.

Forward exchange contracts outstanding as at the year end on account of firm commitment / highly probable forecast transactions are marked to market and the losses, if any, are recognised in the Statement of Profit & Loss and gains are ignored in accordance with the Announcement of Institute of Chartered Accountants of India on 'Accounting for Derivatives' issued in March 2008.

Research and Development:-

1. Revenue expenditure on Research & Development (including overheads) are charged out as expense through the natural heads of account, in the year in which they are incurred.

2. Expenditure of a capital nature on Research & Development is debited to Fixed Assets and depreciation is provided on such assets as are depreciable.

Employee Benefits:-

Provident Fund: Contribution towards Provident Fund for certain employees is made to the regulatory authorities, where the Company has no further obligations. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made on a monthly basis.

In respect of certain employees, Provident Fund contributions are made to Ador Welding Employees Provident Fund Trust administered by the Company. The Company's liability is actuarially determined (using the Projected Unit Credit method) at the end of the year. Actuarial losses / gains are recognised in the Statement of Profit & Loss in the year in which they arise.

The contributions made to the trust are recognised as plan assets. The defined benefit obligation recognised in the Balance Sheet represents the present value of the defined benefit obligation, as reduced by the fair value of plan assets.

Superannuation Fund: Contribution towards Superannuation Fund for certain employees is made to the Ador Welding Employees Superannuation Fund Trust administered by the Company. The benefit is classified as Defined Contribution scheme, as the Company does not carry any further obligation, apart from the contribution made on a monthly basis, which is charged to Statement of Profit & Loss.

Employees State Insurance Scheme: The Company makes contribution to state plans namely Employees State Insurance Scheme and has no further obligation beyond making the payment to them.

Gratuity: The Company provides for gratuity, a defined benefit plan (the 'Gratuity Plan') covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee's salary and the tenure of employment. The Company's liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses/ gains are recognised in the Statement of Profit and Loss in the year in which they arise.

Compensated Absences: Accumulated compensated absences, which are expected to be availed or encashed within 12 months from the end of the year are treated as short term employee benefits. The obligation towards the same is measured at the expected cost of accumulating compensated absences, as the additional amount expected to be paid as a result of the unused entitlement as at the year end.

Accumulated compensated absences, which are expected to be availed or encashed beyond 12 months from the end of the year are treated as other long term employee benefits. The Company's liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses / gains are recognised in the Statement of Profit & Loss in the year in which they arise.

Termination Benefits: Termination benefits in the nature of voluntary retirement benefits are recognised in the Statement of Profit & Loss as and when incurred.

Current and deferred tax:-

Tax expense for the period, comprising current tax and deferred tax, are included in the determination of the net profit or loss for the period. Current tax is measured at the amount expected to be paid to the tax authorities in accordance with the taxation laws prevailing in the respective jurisdictions.

Deferred tax is recognised for all the timing differences, subject to the consideration of prudence in respect of deferred tax assets. Deferred tax assets are recognised and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. Deferred tax assets arising mainly on account of brought forward losses and unabsorbed depreciation under tax laws, are recognized, only if there is a virtual certainty of its realization, supported by convincing evidence. 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. At each Balance Sheet date, the Company reassesses unrecognised deferred tax assets, if any.

Minimum Alternate Tax (MAT) credit is recognised 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. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period.

Borrowing Costs:-

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially

ready for their intended use or sale. All other borrowing costs are recognised in the Statement of Profit & Loss in the period in which they are incurred.

Provisions and Contingent Liabilities:-

Provisions: Provisions are recognised when there is a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance Sheet date and are not discounted to its present value.

Contingent Liabilities: Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.

Provision for Warranty:-

Warranty costs are provided based on a technical estimate of the costs required to be incurred for repairs, replacement, material cost, servicing on the basis of the past experience of the Company. It is expected that this expenditure will be incurred over the contractual warranty period.

Segment Reporting:-

The accounting policies adopted for segment reporting are in conformity with the accounting policies adopted by the Company. Further, inter-segment revenue has been accounted for, based on the transaction price agreed to between segments, which is primarily market based. 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 Company, as a whole, and are not allocable to segments on a reasonable basis, have been included under 'Unallocated corporate expenses / income'.

Cash and Cash Equivalents:-

In the Cash Flow Statement, cash and cash equivalents include cash in hand, demand deposits with banks, other short-term highly liquid investments with original maturities of three months or less.

Earnings per Share:-

Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Earnings considered in ascertaining the Company's earnings per share is the net profit for the period after deducting preference dividends and any attributable tax thereto for the period. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential Equity shares.

Note 3 b - Rights, preferences and restrictions attached to shares

The Company has only one class of shares referred to as equity shares having a par (face) value of Rs. 10/- per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the Annual General Meeting.

In the event of liquidation of the Company, the equity shareholders will be entitled to receive the remaining assets of the Company, after distribution of all the preferential amounts, in proportion to their shareholding.

@ Dividend proposed to be distributed to equity shareholders is Rs.5/- (Previous year Rs.5/-) per equity share. Note a) Net written down value of fixed assets having Nil remaining useful life as on 01st April,2014, aggregating Rs.108 lacs (net of deferred tax asset aggregating Rs.55 lacs) has been adjusted above on account of change in accounting policy for depreciating fixed assets which is based on transitional provisions as stated in para 7 (b) of Schedule II of the Act.

(i) Working Capital facilities from Banks are secured by pari passu charge by way of hypothecation of Company's stocks, other current assets and other tangible moveable assets of the Company, both present & future and book debts in favour of Bank of Baroda & HDFC Bank Limited. HDFC Bank Limited facilities are further secured by first exclusive charge on the entire plant & machinery and other moveable fixed assets of the Company and on the land & building at the Company's Silvassa unit.

(ii) Guarantees given by banks to third parties amounting to Rs.1,365 lacs; (Previous year Rs.2,145 lacs) on behalf of the Company are secured against securities mentioned in (i) above.

Note: (a) The above loan has been given to the subsidiary entity for the purpose of carrying business operations.

* Includes an amount of Rs. 304 lacs (Previous year Rs. 340 lacs) on account of retention money of Project Engineering Business

The amount of excise duty disclosed as deduction from turnover is the total excise duty for the year except the excise duty related to the difference between the closing stock and opening stock and excise duty paid, but not recovered for free goods, breakages / damages and captive consumption, which has been included under the head 'Other Expenses' as 'Miscellaneous Expenses'.


Mar 31, 2014

Basis of preparation of financial statements:-

These financial statements have been prepared in accordance with the generally accepted accounting principles in India under the historical cost convention on accrual basis. Pursuant to circular 15/2013 dated 13.09.2013 read with circular 08/2014 dated 04,04.2014, till the Standards of Accounting or any addendum thereto are prescribed by Central Government in consultation and recommendation of the National Financial Reporting Authority, the existing Accounting Standards notified under the Companies Act, 1956 shall continue to apply. Consequently, these financial statements have been prepared to comply in all material aspects with the accounting standards notified under Section 211(3C) (Companies (Accounting Standards) Rules, 2006, as amended) and other relevant provisions of the Companies Act, 1956.

All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in Schedule VI to the Companies Act 1956. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle to be 12 months for the purpose of current and non-current classification of assets and liabilities.

Use of Estimates: -

The preparation of financial statements in confirmity with generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Differences between actual results and estimates are recognized in the period in which the results are known.

Recognition of Income and Expenditure:-

1. Sale of goods is recognized on transfer of significant risks and rewards of ownership which is generally on the dispatch of goods by the Company.

2. Benefit on account of entitlement to import duty - free materials under Duty Entitlement Passbook Scheme is accounted in the year of export as Export Incentives.

3. Other Revenue / Income and Cost / Expenditure are generally accounted on accrual as they are earned or incurred.

4. Sale of Services : In contract involving rendering of services, revenue is recognized when the service is performed in line with agreements / arrangements with concerned parties and is net of service tax.

Fixed Assets:-

1, Fixed Assets are accounted by the Company on the basis of historical costs. Gains or Losses arising on disposal are recognized in the Statement of Profit and Loss Account of the relevant financial year.

2. Method of Depreciation / Amortisation:

a) Depreciation on all assets (except Freehold Land and Leased Vehicles) is provided on the written down value method at the rates and in the manner specified in the Schedule XIV to the Companies Act, 1956. Depreciation on assets acquired under finance lease is spread over the lease period or useful life whichever is shorter.

b) Cost of leasehold land is amortised over the period of lease.

c) Depreciation on additions / deletions is charged on pro-rata basis, upto the month of purchase / including the month of sale.

d) Intangible Assets are stated at cost, net of accumulated amortisation. Intangible assets are amortised on a straight line basis over the estimated useful life, as decided by the management.

3. Software and implementation costs including users license fees of the Enterprise Resource Planning (ERP) system and other application software costs are amortised over a period of three years.

Assets taken on Lease: -

For assets taken under operating lease, lease rentals payable are charged to the Statement of Profit and Loss.

Assets acquired under leases where the Company has substantially all the risks and rewards of ownership are classified as Finance Leases. Such assets are capitalized at the inception of the lease at lower of the fair value and the present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Each lease rental paid is allocated between the liability of the interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each period.

Impairment of Assets:-

The carrying amount of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal / external factors. An asset is impaired when the carrying amount of the asset exceeds the recoverable amount. An impairment loss is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired. Impairment losses recognised in prior accounting periods are reversed if there has been any change in the estimate of the recoverable amount.

Investments:-

Long Term Investments are stated at ''Cost''. A provision for diminution is made to recognise a decline, other than temporary in the value of long-term investments. Current Investments are stated at lower of cost and fair value.

Valuation of Inventories:-

Inventories of Raw Materials and Components, Work-in-progress, Finished Goods, Goods for Trade, Stores, Spares and Packing Materials are stated vat cost or net realisable value, whichever is lower''. Goods in Transit are stated ''at cost''. Cost comprises all cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. The excise duty in respect of closing inventory of finished goods is included as part of finished goods.

Cost formula used is Average Cost''. Due allowance is estimated and made for defective and obsolete items, wherever necessary, based on the past experience of the Company.

Foreign Currency Translations:-

All transactions in foreign currency, are recorded at the rates of exchange prevailing on the dates when the relevant transactions take place;

Monetary items in the form of Current Assets and Current Liabilities in foreign currency, outstanding at the close of the year, are converted in Indian Currency at the appropriate rates of exchange prevailing on the date of the Balance Sheet, Resultant gain or loss is accounted during the yean- In respect of Forward Exchange contracts entered into to hedge foreign currency risks, the difference between the forward rate and exchange rate at the inception of the contract is recognized as income or expense over the life of the contract. Further, the exchange differences arising on such contracts are recognised as income or expense along with the exchange differences on the underlying assets / liabilities. Profit or loss on cancellations / renewals of forward contracts is recognised during the year.

Accounting of foreign office / branches / integral operations:-

a. Monetary items in the form of Current Assets and Current Liabilities in foreign currency, outstanding at the close of the year, are converted at the appropriate rates of exchange prevailing on the date of the Balance Sheet.

b. Fixed assets and depreciation thereon are converted at the exchange rates prevailing on the date of acquisition of the respective asset.

a Revenue items, excluding depreciation, are converted at the monthly exchange rates prevailing on the date of the transaction.

Research and Development: -

1, Revenue expenditure on Research & Development (including overheads) are charged out as expense through the natural heads of account in the year in which they are incurred.

2. Expenditure of a capital nature on Research & Development is debited to Fixed Assets and depreciation is provided on such assets as are depreciable.

Retirement and Other Employee Related Benefits:-

a. Short term employee benefits:- All employee benefits payable within twelve months of rendering the service are recognised in the period in which the employee renders the related service.

b. Post Employment / Retirement Benefits:- Defined Contribution Plans such as Government Pension Fund , Gratuity Fund, Superannuation Fund, etc. are charged to the Statement of Profit and Loss as incurred.

c. Defined Benefit Obligation Plans:- The present value of the obligation under such plans is determined based on an actuarial valuation, using the Projected Unit Credit Method, carried out (approximately) at the close of the year. Actuarial gains and losses arising on such valuation are recognised immediately in the Statement of Profit and Loss. In the case of gratuity, which is funded, the fair value of the plan assets is reduced from the gross obligation under the defined benefit plans, to recognise the obligation on net basis.

In respect of certain employees, the monthly contribution for Provident Fund is made to a Trust administered by the Company. The interest payable by the Trust is notified by the Government. The Company has an obligation to make good the shortfall, if any.

The present value of obligation under Interest Rate Guarantee on Exempt Provident Funds is determined based on an actuarial valuation, using the Projected Unit Credit Method, carried out at the close of the year.

d. Compensated Absences - Accumulated compensated absences, which are expected to be availed or encashea within 12 months from the end of the year are treated as short-term employee benefits. Accumulated compensated absences, which are expected to be availed or encashed beyond 12 months from the end of the year are treated as other long-term employee benefits. The Company''s liability is actuarially determined (using the Projected Unit Credit Method) at the end of each year.

Actuarial losses / gains comprise experience adjustments and the effects of changes in actuarial assumptions are recognised in the Statement of Profit and Loss in the year in which they arise

e. Termination Benefits are charged to the Statement of Profit and Loss in the year in which they are incurred.

Taxation:-

Income tax expense comprises Current Tax and Deferred Tax charge or credit. Provision- for current tax is made on the basis of the assessable income at the tax rate applicable to the relevant assessment year. The deferred tax asset and deferred tax liability is calculated by applying tax rate and laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets arising mainly on account of brought forward losses and unabsorbed depreciation under tax laws, are recognized, only if there is a virtual certainty of its realization, supported by convincing evidence. Deferred tax assets on account of other timing differences are recognized only to the extent there is a reasonable certainty of its realization. At each Balance Sheet date, the carrying amount of deferred tax assets are reviewed to reassure realization.

Borrowing Costs:-

Interests and other borrowing costs attributable to qualifying assets are capitalised. Other interests and borrowing costs are charged to revenue.

Provisions, Contingent Liabilities and Contingent Assets:-

Provisions involving a substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognised but are disclosed in the financial statements. Contingent Assets are neither recognised nor disclosed in the financial statements.

Provision for Warranty:-

Warranty costs are provided based on a technical estimate of the costs required to be incurred for repairs, replacement, material cost, servicing on the basis of the past experience of the Company. It is expected that this expenditure will be incurred over the contractual warranty period.

Revenue from contracts: -

Revenue from fixed price contracts is recognized using the percentage of completion method. Percentage of completion is determined as a proportion of the cost incurred up to the reporting date of the total estimated contract costs. Proportionate completion is measured based upon the efforts incurred to date in relation to the total estimated efforts to complete the contract. The Company monitors estimates of total contract revenue and costs on a routine basis throughout the delivery period. The cumulative impact of any change in estimates of the contract value or cost is reflected in the period in which the changes become known. In the event that a loss is anticipated on a particular contract, provision is made for the estimated loss.

Note 3b- Rights, preferences and restrictions attached to shares

The Company has only one class of shares referred to as equity shares having a par (face) value of . Rs. 10/- per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the Annual General Meeting, except in case of interim dividend.

In the event of liquidation of the Company, the eauity shareholders will be entitled to receive the remaining assets of the Company, after distribution of all the preferential amounts, in proportion to their shareholding.


Mar 31, 2013

I) Basis of preparation of financial statements :-

The financial statements have been prepared under the historical cost convention and in compliance, in all material aspects, with the applicable accounting principles in India, the applicable Accounting Standards notified under Section 211 (3C) and the other relevant provisions of the Companies Act, 1956,

All the assets and liabilities have been classified as current or non current as per the Company''s normal operating cycle and other criteria set out in the Schedule VI to the Companies Act, 1956. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalent, the Company has ascertained its operating cycle to be 12 months for the purpose of current-non current classification of assets and liabilities.

II) Use of Estimates :-

The preparation of financial statements, in confirmity with generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, Differences between actual results and estimates are recognised in the period in which the results are known.

III) Recognition of Income and Expenditure :-

1. Sale of goods is recognized on transfer of significant risks and rewards of ownership which is generally on the dispatch of goods by the Company.

2. Benefit on account of entitlement to import duty - free materials under Duty Entitlement Passbook Scheme is accounted in the year of export as Export Incentives.

3. Other Revenue / Income and Cost / Expenditure are generally accounted on accrual, as they are earned or incurred.

IV) Fixed Assets :-

1. Fixed Assets are accounted by the Company on the basis of historical costs. Gains or Losses arising on disposal are recognised in the statement of Profit and Loss Account of the relevant financial year.

2. Method of Depreciation / Amortisation:

a) Depreciation on all assets (except Freehold Land and Leased Vehicles) is provided on the written down value method at the rates and in the manner specified in the Schedule XIV to the Companies Act, 1956. Depreciation on assets acquired under finance lease is spread over the lease period or useful life, whichever is shorter.

b) Cost of leasehold land is amortised over the period of lease.

c) Depreciation on additions / deletions is charged on pro-rata basis, upto the month of purchase / including the month of sale,

V) Investments :-

Long Term Investments are stated at ''Cost''. A provision for dimunition is made to recognise a decline, other than temporary in the value of long term investments. Current Investments are stated at lower of cost and fair value.

VI) Valuation of Inventories :-

Inventories of Raw Materials and Components, Work in progress, Finished Goods, Goods for Trade, Stores, Spares and Packing Materials are stated ''at cost or net realisable value, whichever is lower''. Goods in Transit are stated ''at cost''. Cost comprises all cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. The excise duty in respect of closing inventory of finished goods is included as part of finished goods,

Cost formula used is ''Average Cost1. Due allowance is estimated and made for defective and obsolete items, wherever necessary, based on the past experience of the Company.

VII) Foreign Currency Translations :-

All transactions in foreign currency, are recorded at the rates of exchange prevailing on the dates when the relevant transactions take place;

Monetary items in the form of Current Assets and Current Liabilities in foreign currency, outstanding at the close of the year, are converted in Indian Currency at the appropriate rates of exchange prevailing on the date of the Balance Sheet. Resultant gain or loss is accounted during the year;

In respect of Forward Exchange contracts entered into to hedge foreign currency risks, the difference between the forward rate and exchange rate at the inception of the contract is recognized as income or expense over the life of the contract. Further, the exchange differences arising on such contracts are recognised as income or expense along with the exchange differences on the underlying assets / liabilities. Profit or loss on cancellations / renewals of forward contracts is recognised during the year.

Accounting of foreign branches / integral operations:-

a. Monetary items in the form of Current Assets and Current Liabilities in foreign currency, outstanding at the close of the year, are converted at the appropriate rates of exchange prevailing on the date of the Balance Sheet,

b. Fixed assets and depreciation thereon, are converted at the exchange rates prevailing on the date of acquisition of the respective asset.

c. Revenue items, excluding depreciation, are converted at the monthly exchange rates prevailing on the date of the transaction.

VIII) Research and Development :-

1. Revenue expenditure on Research and Development (including overheads) are charged out as expense through the natural heads of account in the year in which they are incurred,

2. Expenditure of a capital nature on Research and Development is debited to Fixed Assets and depreciation is provided on such assets, as are depreciable.

IX) Retirement and Other Employee Related Benefits :-

a. Short term employee benefits - All employee benefits payable within twelve months of rendering the service are recognised in the period in which the employee renders the related service.

b. Post Employment / Retirement Benefits - Defined Contribution Plans such as Government Pension Fund etc., are charged to the Profit and Loss Account as incurred.

c. Defined Benefit Obligation Plans - The present value of the obligation under such plans, is determined based on an actuarial valuation, using the Projected Unit Credit Method, carried out (approximately) at the close of the year. Actuarial gains and losses arising on such valuation are recognised immediately in the Profit and Loss Account, In the case of giatuity, which is funded, the fair value of the plan assets is reduced from the gross obligation under the defined benefit plans, to recognise the obligation on net basis,

In respect of certain employees, the monthly contribution for Provident Fund is made to a Trust administered by the Company. The interest payable by the Trust is notified by the Government, The Company has an obligation to make good the shortfall, if any.

The present value of obligation under Interest Rate Guarantee on Exempt Provident Funds, is determined based on an actuarial valuation, using the Projected Unit Credit Method, carried out at the close of the year.

d. Other Long Term Employee Benefits are recognised in the same manner as Defined Benefit Plans.

e. Termination Benefits are charged to the Profit and Loss Account in the year in which they are incurred.

X) Assets taken on Lease :-

For assets taken under operating lease, lease rentals payable are charged to the Profit and Loss Account.

Assets acquired under leases where the Company has substantially all the risks and rewards of ownership are classified as Finance Leases. Such assets are capitalized at the inception of the lease at the lower of the fair value and the present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Each lease rental paid is allocated between the liability of the interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each period,

XI) Taxation :-

Income tax expense comprises Current Tax and Deferred Tax charge or credit. Provision for current tax is made on the basis of the assessable income at the tax rate applicable to the relevant assessment year. The deferred tax asset and deferred tax liability is calculated by applying tax rate and laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets arising mainly on account of brought forward losses and unabsorbed depreciation under tax laws, are recognized, only if there is a virtual certainty of its realization, supported by convincing evidence. Deferred tax assets on account of other timing differences are recognized only to the extent there is a reasonable certainty of its realization. At each Balance Sheet date, the carrying amount of deferred tax assets are reviewed to reassure realization.

XII) Impairment of Assets :-

The carrying amount of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal / external factors. An asset is impaired when the carrying amount of the asset exceeds the recoverable amount. An impairment loss is charged to the Profit and Loss Account in the year in which an asset is identified as impaired, Impairment losses recognised in prior accounting periods are reversed if there has been any change in the estimate of the recoverable amount,

XIII) Borrowing Costs :-

Interests and other borrowing costs attributable to qualifying assets are capitalised. Other interests and borrowing costs are charged to revenue.

XIV) Provisions, Contingent Liabilities and Contingent Assets :-

Provisions involving a substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources, Contingent Liabilities are not recognised but are disclosed in the financial statements. Contingent Assets are neither recognised nor disclosed in the financial statements.

XV) Provision for Warranty :-

Warranty costs are provided based on a technical estimate of the costs required to be incurred for repairs, replacement, material cost, servicing on the basis of the past experience of the Company. It is expected that this expenditure will be incurred over the contractual warranty period.

XVI) Revenue from contracts :-

Revenue from fixed price contracts is recognized using the percentage of completion method, Percentage of completion is determined as a proportion of the cost incurred up to the reporting date of the total estimated contract costs, Proportionate completion is measured based upon the efforts incurred to date in relation to the total estimated efforts to complete the contract. The Company monitors estimates of total contract revenue and costs on a routine basis throughout the delivery period. The cumulative impact of any change in estimates of the contract value or cost is reflected in the period in which the changes become known. In the event that a loss is anticipated on a particular contract, provision is made for the estimated loss.


Mar 31, 2012

I) Basis of preparation of financial statements:-

The financial statements have been prepared under the historical cost convention and in compliance, in all material aspects, with the applicable accounting principles in India, the applicable accounting standards notified under Section 211 (3C) and the other relevant provisions of the Companies Act, 1956.

All the assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in the Schedule VI to the Companies Act, 1956. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalent, the Company has ascertained its operating cycle to be less than 12 months.

II) Use of Estimates:-

The preparation of financial statements in confirmity with generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Differences between actual results and estimates are recognised in the period in which the results are known.

III) Recognition of Income and Expenditure:-

1. Sale of goods is recognized on transfer of significant risks and rewards of ownership which is generally on the dispatch of goods by the Company.

2. Benefit on account of entitlement to import duty - free materials under Duty Entitlement Passbook Scheme is accounted in the year of export as Export Incentives.

3. Other Revenue / Income and Cost / Expenditure are generally accounted on accrual as they are earned or incurred.

IV) Fixed Assets:-

1. Fixed Assets are accounted by the Company on the basis of historical costs. Gains or Losses arising on disposal are recognised in the statement of Profit and Loss Account of the relevant financial year.

2. Method of Depreciation / Amortisation:

a) Depreciation on all assets (except Freehold Land and Leased Vehicles) is provided on the written down value method at the rates and in the manner specified in the Schedule XIV to the Companies Act, 1956. Depreciation on assets acquired under finance lease is spread over the lease period or useful life whichever is shorter.

b) Cost of leasehold land is amortised over the period of lease.

c) Depreciation on additions / deletions is charged on pro-rata basis, upto the month of purchase / including the month of sale.

V) Investments:-

Long Term Investments are stated at 'Cost'. A provision for dimunition is made to recognise a decline, other than temporary in the value of long-term investments. Current Investments are stated at lower of cost or fair value.

VI) Valuation of Inventories:-

Inventories of Raw Materials and Components, Work-in-progress, Finished Goods, Goods for Trade, Stores, Spares and Packing Materials are stated 'at cost or net realisable value, whichever is lower'. Goods in Transit are stated 'at cost'. Cost comprises all cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. The excise duty in respect of closing inventory of finished goods is included as part of finished goods.

Cost formula used is 'Average Cost'. Due allowance is estimated and made for defective and obsolete items, wherever necessary, based on the past experience of the Company.

VII) Foreign Currency Translations:-

All transactions in foreign currency, are recorded at the rates of exchange prevailing on the dates when the relevant transactions take place;

Monetary items in the form of Current Assets and Current Liabilities in foreign currency, outstanding at the close of the year, are converted in Indian Currency at the appropriate rates of exchange prevailing on the date of the Balance Sheet. Resultant gain or loss is accounted during the year;

In respect of Forward Exchange contracts, entered into, to hedge foreign currency risks, the difference between the forward rate and exchange rate at the inception of the contract is recognized as income or expense over the life of the contract. Further, the exchange differences arising on such contracts are recognised as income or expense along with the exchange differences on the underlying assets / liabilities. Profit or loss on cancellations / renewals of forward contracts is recognised during the year.

Accounting of foreign branches / integral operations:-

a. Monetary items in the form of Current Assets and Current Liabilities in foreign currency, outstanding at the close of the year, are converted at the appropriate rates of exchange, prevailing on the date of the Balance Sheet.

b. Fixed assets and depreciation thereon, are converted at the exchange rates, prevailing on the date of acquisition of the respective asset.

c. Revenue items, excluding depreciation, are converted at the monthly exchange rates prevailing on the date of the transaction

VIII) Research and Development:-

1. Revenue expenditure on Research and Development (including overheads) are charged out as expense through the natural heads of account in the year in which they are incurred.

2. Expenditure of a capital nature on Research and Development is debited to Fixed Assets and depreciation is provided on such assets, as are depreciable.

IX) Retirement and Other Employee Related Benefits:-

a. Short term employee benefits - All employee benefits payable within twelve months of rendering the service are recognised in the period in which the employee renders the related service

b. Post Employment / Retirement Benefits - Defined Contribution Plans such as Government Pension Fund etc., are charged to the Profit and Loss Account, as incurred.

c. Defined Benefit Obligation Plans - The present value of the obligation under such plans, is determined based on an actuarial valuation, using the Projected Unit Credit Method, carried out (approximately) at the close of the year. Actuarial gains and losses arising on such valuation are recognised immediately in the Profit and Loss Account. In the case of gratuity, which is funded, the fair value of the plan assets is reduced from the gross obligation under the defined benefit plans, to recognise the obligation on net basis.

In respect of certain employees, the monthly contribution for provident fund is made to a Trust administered by the Company. The interest payable by the Trust is notified by the Government. The Company has an obligation to make good the shortfall, if any.

The present value of obligation under Interest Rate Guarantee on Exempt Provident Funds, is determined based on an actuarial valuation, using the Projected Accrued Benefit Method, carried out at the close of the year.

d. Other Long Term Employee Benefits are recognised in the same manner as Defined Benefit Plans.

e. Termination Benefits are charged to the Profit and Loss Account in the year in which they are incurred.

X) Assets taken on Lease:-

For assets taken under operating lease, lease rentals payable are charged to Profit and Loss Account.

Assets acquired under leases where the Company has substantially all the risks and rewards of ownership are classified as Finance Leases. Such assets are capitalized at the inception of the lease at the lower of the fair value and the present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Each lease rental paid is allocated between the liability of the interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each period.

XI) Taxation:-

Income tax expense comprises Current Tax and Deferred Tax charge or credit. Provision for current tax is made on the basis of the assessable income at the tax rate applicable to the relevant assessment year. The deferred tax asset and deferred tax liability is calculated by applying tax rate and laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets arising mainly on account of brought forward losses and unabsorbed depreciation under tax laws, are recognized, only if there is a virtual certainty of its realization, supported by convincing evidence. Deferred tax assets on account of other timing differences are recognized only to the extent there is a reasonable certainty of its realization. At each Balance Sheet date, the carrying amount of deferred tax assets are reviewed to reassure realization.

XII) Impairment of Assets:-

The carrying amount of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal / external factors. An asset is impaired when the carrying amount of the asset exceeds the recoverable amount. An impairment loss is charged to the Profit and Loss Account in the year in which an asset is identified as impaired. Impairment losses recognised in prior accounting periods are reversed if there has been any change in the estimate of the recoverable amount.

XIII) Borrowing Costs:-

Interests and other borrowing costs attributable to qualifying assets are capitalised. Other interests and borrowing costs are charged to revenue.

XIV) Provisions, Contingent Liabilities and Contingent Assets:-

Provisions involving a substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognised but are disclosed in the financial statements. Contingent Assets are neither recognised nor disclosed in the financial statements.

XV) Provision for Warranty:-

Warranty costs are provided based on a technical estimate of the costs required to be incurred for repairs, replacement, material cost, servicing on the basis of the past experience of the Company. It is expected that this expenditure will be incurred over the contractual warranty period.

XVI) Revenue from contracts:-

Revenue from fixed price contracts is recognized using the percentage of completion method. Percentage of completion is determined as a proportion of the cost incurred up to the reporting date of the total estimated contract costs. Proportionate completion is measured based upon the efforts incurred to date in relation to the total estimated efforts to complete the contract. The Company monitors estimates of total contract revenue and costs on a routine basis throughout the delivery period. The cumulative impact of any change in estimates of the contract value or cost is reflected in the period in which the changes become known. In the event that a loss is anticipated on a particular contract, provision is made for the estimated loss.

 
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