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Accounting Policies of Akzo Nobel India Ltd. Company

Mar 31, 2015

Basis of preparation of financial statements

The financial statements have been prepared under the historical cost convention on a going concern basis, on the accrual basis of accounting in accordance with the Generally Accepted Accounting Principles (GAAP) in India. Indian GAAP comprises mandatory accounting standards as specified under the section 133 of the Companies Act, 2013 read with Rule 7 of Companies (Accounts) Rules, 2014 and other accounting pronouncements of the Institute of Chartered Accountants of India. Accounting policies set out below have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

Current & non-current classification

All assets and liabilities are classified into current and non-current.

Assets

An asset is classified as current when it satisfies any of the following criteria:

- it is expected to be realised in, or is intended for sale or consumption in, the company's normal operating cycle;

- it is held primarily for the purpose of being traded;

- it is expected to be realised within 12 months after the reporting date; or

- it is cash or cash equivalent unless it is restricted from

being exchanged or used to settle a liability for at least 12 months after the reporting date.

Current assets include the current portion of non-current financial assets. All other assets are classified as non-current.

Liabilities

A liability is classified as current when it satisfies any of the following criteria:

- it is expected to be settled in the company's normal operating cycle;

- it is held primarily for the purpose of being traded;

- it is due to be settled within 12 months after the reporting date; or

- the company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in it settlement by the issue of equity instruments do not affect its classification.

Current liabilities include current portion of non-current financial liabilities. All other liabilities are classified as non-current.

Use of estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles in India (GAAP) require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements and the results of operations during the year. Differences between actual results and estimates are recognised in the year in which the results are known or materialised and, if material, their effects are disclosed in notes to financial statements. Examples of such estimates are estimated useful life of assets, provision for doubtful debts, income taxes, future obligations under employee retirement benefit plans, classification of assets/liabilities as current or non-current, etc. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

Fixed assets / Depreciation

Tangible fixed assets are carried at the cost of acquisition or construction, less accumulated depreciation and impairment loss, if any. The cost of fixed assets comprises of its purchase price, including import duties and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition for its intended use. Expenses directly attributable to new manufacturing facility during its construction period are capitalized. Know-how related to plans, designs and drawings of buildings or plant and machinery is capitalized under relevant tangible asset heads. Profit or Loss on disposal of tangible assets is recognised in the statement of Profit and Loss.

Capital work-in-progress and capital advances

Capital Work-in-progress excluding capital advances includes fixed assets under construction and not ready for intended use as on Balance Sheet date.

Depreciation on fixed assets other than leasehold improvements has been provided pro-rata to the period of use, on the straight line method, using rates determined based on management's assessment of useful economic lives of the asset. Depreciation is provided at the rates equal to or higher than those prescribed in Part C of Schedule II to the Companies Act, 2013.

Asset Category Estimated useful life (in years) to Financial Statements for the year ended 31 March 2015

(Amounts in Rupees million, unless stated otherwise)

During the current year, pursuant to the Companies Act, 2013 being effective from 1 April 2014, the Company has revised depreciation rates of fixed assets as per the useful life specified in Part 'C' of Schedule II of the Act, read with notification dated 29 August 2014 of the Ministry of Corporate Affairs, on the original cost/acquisition of assets or other amounts substituted for cost, except for the following classes of fixed assets which are depreciated as under:

a. Plant and Machinery under operating lease: 6 years

b. Furniture and fixtures (at stores): 3 years

The above useful lives have been arrived at, based on the technical assessment of the management, and are currently reflective of the estimated useful lives of the fixed assets (also refer note 3.8 of the financial statements).

Leasehold improvements are amortised over the lower of useful life or the period of lease including the optional period, if any, available to the Company, where it is reasonably certain at the inception of lease that such option would be exercised by the Company.

Revenue recognition

Revenue from sale of goods is recognised when significant risks and rewards of ownership are transferred to customers. Sales are stated inclusive of excise duty and net of rebates, returns, trade discounts and sales tax/VAT.

Service income is recognised on accrual basis as per the contractual terms with the customers, net of service tax.

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

Dividend or other income from mutual fund investments is recognised on declaration of dividend or on redemption, as the case may be. Profit on sale of investments is recorded on transfer of title from the Company and is determined as the difference between the redemption price and carrying value of the investment.

Investments

Investments are classified into current and long-term investments. Investments that are readily realizable and intended to be held for not more than a year from the date of acquisition are classified as current investments. All other investments are classified as long-term investments. However, that part of long term investments expected to be realized within twelve months from Balance Sheet date is also presented under "Current Assets" under "Current portion of long term investments" in consonance with the current / non-current classification of revised Schedule III to the Companies Act, 2013.

Current investments are stated at the lower of cost and fair value. The comparison of cost and fair value is done separately in respect of each category of investments. Long-term investments are stated at cost. A provision for diminution in the value of long-term investments is made only if such a decline is other than temporary in the opinion of the management. On disposal of an investment, the difference between its carrying amount and net disposal proceeds is recognized in the statement of Profit and Loss.

Current investments are carried at the lower of cost and fair value.

Long term investments (including their current maturities) are stated at cost less amount written off, where there is a diminution in value, other than temporary.

Current assets

(a) Inventories

Stores and spare parts are valued at the lower of cost and net realisable value, computed on a weighted average basis.

Raw materials, packing materials and work-in-process are carried at cost, computed on a weighted average basis, after providing for obsolescence. In case there is a decline in replacement cost of such materials and the net realisable value of finished products in

which they will be used is expected to be below cost, the value of such materials and work-in- process is appropriately written down.

Finished products are valued at the lower of cost (computed on weighted average basis) and net realisable value.

Cost includes an appropriate portion of manufacturing and other overheads, where applicable. Excise duty on finished products is included in the value of finished products inventory.

(b) All other items of current assets are stated at cost after adequate provisions for any diminution in the carrying value.

Cash Flow Statement

Cash flows are reported using the indirect method, whereby, profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and items of income or expense associated with the investing or financing cash flows. The cash flows from operating, investing and financing activities of the company are segregated.

Foreign currency transactions

Foreign currency transactions are accounted for at the exchange rate prevailing on the date of the transaction. All monetary foreign currency assets and liabilities are converted at the exchange rates prevailing at the date of the balance sheet. All exchange differences other than in relation to acquisition of fixed assets and other long term foreign currency monetary liabilities are dealt with in the statement of Profit and Loss.

In case of foreign exchange forward contracts taken for underlying transactions, and covered by Accounting Standard 11, "Accounting for the effects of changes in foreign exchange rates", the premium or discount is amortised as income or expense over the life of the contract. The exchange difference

is calculated as the difference between the foreign currency amount of the contract translated at the exchange rate at the reporting date, or the settlement date where the transaction is settled during the reporting period, and the corresponding foreign currency amount translated at the later of the date of inception of the forward exchange contract and the last reporting date. Such exchange differences is recognised in the statement of Profit and Loss in the reporting period in which the exchange rates change.

Any profit or loss arising on the cancellation or renewal of such contracts is recognised as income or expense for the year.

Operating Lease

The assets given under operating lease are shown in the Balance Sheet under fixed assets and depreciated on a basis consistent with the depreciation policy of the Company.

Lease rentals are accounted on accrual basis in accordance with the respective lease agreements.

Lease payments under operating leases are recognised as an expense in the statement of Profit and Loss on a straight line basis over the lease term and disclosed as lease rent equalization reserve in the Balance Sheet.

Employee benefits

a) Short term employee benefits

All employee benefits payable /available within twelve months of rendering the service are classsified as short- term employee benefits. Benefits such as salaries, wages and bonus, etc., are recognised in the statement of Profit and Loss in the period in which the employee renders the related service.

b) Post -employment benefits Defined contribution plans

Defined contribution plans are provident fund scheme, superannuation scheme and part of the pension fund scheme for eligible employees. The Company's contribution to defined contribution plans are recognised in the statement of Profit and Loss in the financial year to which they relate.

The Company makes specified monthly contributions towards employees provident fund to trusts administered by the Company/Regional Provident Fund Commissioner; towards superannuation fund to trusts managed by Life Insurance Corporation of India; and towards pension fund to respective trusts administered by the Company, where established. Where such pension trusts have not been established, the Company makes provision for the liability as on the date of the Balance Sheet. The minimum interest payable by the provident fund trusts to the beneficiaries every year is notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return on investments of the trusts and the notified interest rate basis actual valuation as at the date of the Balance Sheet.

Defined benefit plans

Liability for funded post retirement gratuity, pension and unfunded post retirement medical benefit is accrued on the basis of actuarial valuation as at the date of the Balance Sheet using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured as the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plans, is based on the market yields of Government securities as at the Balance Sheet date, having maturity periods approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the statement of Profit and Loss. In case of funded schemes, differential between fair value of plan assets of the trusts and the present value of obligations, as per the actual valuation, is recognised as an asset or liability based on the assessment of related cash flows.

c) Other long term employee benefits

Entitlements to annual leave and sick leave and long term service awards are recognised when they accrue to employees. All leave entitlements can be

encashed only at the time of retirement/ termination of employment or may be availed during the term of employment, subject to a restriction on the maximum number of accumulation of leave entitlement days. The Company determines the liability for long term employee benefits on the basis of actuarial valuation as at the year end.

Research and development

Revenue expenditure on research and development, including contribution to research associations, is charged to the statement of Profit and Loss. Capital expenditure on tangible assets for research and development is shown as additions to fixed assets.

Earnings per share

The basic and dilutive earnings per share is computed by dividing the net profit attributable to equity shareholders for the year by the weighted average number of equity shares outstanding during the year. Dilutive earnings per share is computed and disclosed after adjusting the effects of all dilutive potential equity shares, if any, except when the results will be anti-dilutive.

Borrowing costs

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as a part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue.

Taxation

Income-tax expense comprises current tax (i.e. the amount of tax for the year determined in accordance with the Income-tax Act, 1961) and deferred tax charge or credit (reflecting the tax effects of timing differences between the accounting income and taxable income for the year). A provision is made for income tax, based on the tax liability computed, after considering tax allowances and exemptions. Provisions are recorded when it is estimated that our liability due to disallowances or other matters is probable. The deferred tax charge

or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantially enacted as of the Balance Sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty of realisation. However, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each Balance Sheet date and written down or written up to reflect the amount that is reasonably/ virtually certain (as the case may be) to be realised.

Minimum Alternative Tax ('MAT') under the provisions of the Income-tax Act, 1961 is recognised as current tax in the statement of Profit and Loss. The credit available under the Income-tax Act, 1961 in respect of MAT paid 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 period for which the MAT credit can be carried forward for set-off against the normal tax liability. MAT credit recognised as an asset is reviewed at each Balance Sheet date and written down to the extent the aforesaid convincing evidence no longer exists.

Provisions and contingent liabilities

The Company recognises a provision when there is a present obligation as a result of a past event and

it is more likely than not that there will be an outflow of resources embodying economic benefits to settle such obligation and the amount of such obligation can be reliably estimated. Where no reliable estimate can be made, disclosure is made as contingent liability. Provisions are not discounted to their present values and are determined based on the management's estimation of the outflow required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect current management estimates.

Contingent liabilites are disclosed in respect of possible obligations that have arisen from past events and the existence of which will be confirmed only by the occurence or non-occurrence of future events, not wholly within the control of the Company.

When there is an obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

Cash and cash equivalents

Cash and cash equivalents comprise cash and deposit with banks with an original maturity of 3 months or less. The Company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.

(ii) The Company has only one class of equity shares, having a par value of Rs 10 per share. Each shareholder is eligible to one vote per share held. The Company declares and pays dividend in Indian Rupees. The dividend proposed, if any, by the Board of Directors is subject to approval of shareholders in the ensuing Annual General Meeting. The repayment of equity share capital in the event of liquidation and buy back of shares is possible subject to prevalent regulations.

In the event of liquidation, normally, the equity shareholders are eligible to receive the remaining assets of the Company, after distribution of all preferential amounts, if any, in proportion to their shareholding.

With effect from 4 June 2012, Imperial Chemical Industries Limited, England ceased to be the holding company on allotment of new shares as per a scheme of amalgamation. The ultimate holding company is Akzo Nobel N.V, Netherlands ('the Promoter Group'), which does not hold any shares directly in the Company.

(iv) Number of equity shares of Rs 10 each bought back in the five years immediately preceding the Balance Sheet date, aggregates to 2,535,195 (2013-14: 5,336,281)

1. Adjustment against revaluation reserve of Rs 0.1 million (2013-14 : ' 0.1 million) in respect of depreciation on revalued assets.

2. Dividend proposed Rs 20 per share (2013-14Rs75 per share)

3. In a prior year, the erstwhile Akzo Nobel Car Refinishes India Private Limited (AN Car)(since amalgamated w.e.f. 1 April 2011 with the Company) had received an interest free advance of Rs 17 million in the nature of share application money from a fellow subsidiary, under an assignment of dues by Akzo Nobel International Chemicals B.V (the non-resident holding company of AN Car). AN Car had not allotted the shares or refunded the amount till 31 March 2011. In the previous year, an application had been made to the Foreign Investment Promotion Board (FIPB) for regularising the above transaction. Further, as directed by FIPB, the Company had referred the matter to the Reserve Bank of India (RBI) wherein the RBI approved the said amount be treated as a capital grant. Accordingly, the amount of Rs 17 million was transferred to the Capital Reserve.

(b) Provisions relating to indirect taxes are in respect of proceedings of various sales tax, excise duty, customs duty and other indirect tax cases, including those relating to divested businesses. Outflows in all these cases, including their timing and certainty, would depend on the developments/outcome in these cases, though, presently classified as short term due to uncertainty involved.

(c) Provisions relating to divested businesses (other than any indirect tax cases relating to such businesses) are in respect of existing / anticipated costs arising from divestment of businesses (Catalyst, Explosives,Rubber Chemicals, Uniqema, Paints Advanced Refinish and Adhesives) and subsidiaries (Quest International India Limited and Polyinks Limited). Outflows in these cases will depend upon settlement of demands/claims.

Consequent on receipt of provisional approval from authorities, the Company during the year, re-assessed the provision with regard to liability on sale of Catalyst business and the net impact of Rs 27 million has been disclosed as an exceptional item in the statement of Profit and Loss. The tax impact of the transfer is being evaluated and will be recognised in the period in which the transfer is consummated.

(d) Others relate to litigation matters in respect of sale of properties, demand for past arrears in respect of electricity, and provision for margin on expected sales returns.

(e) The utilisation of the above provisions would depend on the resolution of the related issues, though classified as long term or short term, based on the management's best estimates and information presently available.

(1) Land and buildings at certain locations were revalued on 1 October 1982 based on a valuation carried out by an independent valuer.

(2) Gross depreciation for the year includes depreciation of Rs 0.1 million (2013-14: Rs 0.1 million) on revalued assets charged against revaluation reserve.

(3) Title in certain immovable properties, taken over pursuant to the Scheme of Amalgamation is to be transferred in the name of the Company.

(4) * During the year, according to Schedule II of the Companies Act, 2013, the Company based on an internal assessment and independent technical evaluation carried out by external valuer, had reassessed the remaining estimated useful life of fixed assets with effect from 1 April 2014. Accordingly, th useful life of certain assets have been changed from the previous estimates.

(5) Pursuant to the Companies Act, 2013 ('the Act') being effective from 1 April 2014, the Company has changed the useful life specified in Part 'C' of Schedule II of the Act. As a result of this change, the depreciation charge for the year ended 31 March 2015 is higher by Rs 30 million. Further, based on the transitional provision provided in Note 7(b) of Schedule II to the Act, an amount of Rs 32 million net of adjustment of related tax impact of Rs 11 million has been debited to the opening balance of Retained earnings in respect of the fixed assets where life has expired as per the said Schedule as on 31 March 2014.

(1) Land and buildings at certain locations were revalued on 1 October 1982 based on a valuation carried out by an independent valuer.

(2) Gross depreciation for the year includes depreciation of Rs 0.1 million (2012-13: Rs 0.1 million) on revalued assets charged against revaluation reserve.

(3) Title in certain immovable properties, taken over pursuant to the Scheme of Amalgamation is to be transferred in the name of the Company.

Foot notes:

1. Investment in shares are fully paid up, except where indicated otherwise.

2. The non-convertible redeemable bonds carry a maturity face value of Rs 30,000 per bond with a zero coupon. The related income based on implicit yield to maturity has been accrued and included in Long term loans and advances. These have been considered as quoted based on their readily available resale prices.

3. Book and market value of investments :

Book value of unquoted investments in absolute value: Rs 55,129 (2013-14: Rs 55,129)

4. Fixed maturity plans of mutual funds wherever considered quoted are so considered based on readily available net asset values.

2. Advances to employees include housing advances given, against which the employees have submitted property title papers or other assets/documents as envisaged under the housing advance scheme.

Foot notes:

1. Fixed deposits held as margin money is against various guarantees issued by banks on behalf of the Company in favour of Government authorities.

2. The Company has credit facilities with certain banks against guarantee issued by the ultimate holding company.

3. The Company can utilise these balances only towards settlement of unclaimed dividends.


Mar 31, 2013

Basis of preparation of financial statements

The financial statements are prepared on accrual basis under the historical cost convention, modified to include revaluation of certain assets, in accordance with applicable Accounting Standards ("AS") specified in the Companies (Accounting Standards) Rules, 2006 and presentational requirements 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 activities 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 within a period of twelve months for the purpose of current/non-current classification of its assets and liabilities.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles in India (GAAP) requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements and the results of operations during the year. Differences between actual results and estimates are recognised in the year in which the results are known or materialised. Examples of such estimates are estimated useful life of assets, provision for doubtful debts, classification of assets/liabilities as current or non-current, etc. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

Fixed assets/depreciation

Fixed assets are stated at cost or at revalued amounts less accumulated depreciation. Cost of fixed assets includes all incidental expenses and interest costs on borrowings, attributable to the acquistion of qualifying assets, up to the date of commissioning of such assets.

Depreciation is provided on the straight-line method over the useful life of fixed assets as estimated by the Management. The rates of depreciation prescribed in Schedule XIV to the Companies Act, 1956 are considered as the minimum rates. If the Management''s estimate of the useful life of the asset at the time of acquisition of the asset or of the remaining useful life on a subsequent review, is shorter than that envisaged in the aforesaid schedule, depreciation is provided at a higher rate based on Management''s estimate of the useful life/ remaining useful life. Pursuant to this policy, depreciation on assets at certain locations/types of assets has been provided at the rates based on the following estimated useful lives of fixed assets:

Leasehold land is amortised over the period of the lease. Leasehold improvements are amortised over the remaining period of lease, or the derived useful lives of assets as prescribed in Schedule XIV to the Companies Act, 1956, whichever is shorter.

Additional charge of depreciation on amount added on revaluation is adjusted against revaluation reserve.

Fixed assets individually costing up to Rs 5,000 are fully depreciated in the year of purchase.

The carrying amounts of the Company''s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset''s recoverable amount is estimated as higher of its net selling price and value in use. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the Statement of Profit and Loss. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset''s carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortisation, had no impairment loss been recognised.

Revenue recognition

Revenue from sale of goods is recognised when significant risks and rewards of ownership are transferred to customers. Sales are stated inclusive of excise duty and net of rebates, returns, export benefits, trade discounts and sales tax/VAT.

Service income is recognised on an accrual basis as per the contractual terms with the customers, net of service tax.

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

Dividend or other income from mutual fund investments is recognised on declaration of dividend or on redemption, as the case may be.

Investments

Long term investments (including their current maturities) are stated at cost less amount written off, where there is a diminution in value, other than temporary.

Current investments are stated at lower of cost and fair value.

Current assets

(a) Inventories

Stores and spare parts are valued at the lower of cost and net realisable value, computed on a weighted average basis. Raw materials, packing materials and work-in-process are carried at cost, computed on a weighted average basis, after providing for obsolescence. In case there is a decline in replacement cost of such materials and the net realisable value of finished products in which they will be used is expected to be below cost, the value of such materials and work-in-process is appropriately written down.

Finished products are valued at the lower of cost (computed on weighted average basis) and net realisable value.

Cost includes an appropriate portion of manufacturing and other overheads, where applicable. Excise duty on finished products is included in the value of finished products inventory.

(b) All other items of current assets are stated at cost after adequate provisions for any diminution in the carrying value.

Foreign currency transactions

Foreign currency transactions are accounted for at the exchange rate prevailing on the date of the transaction. All monetary foreign currency assets and liabilities are converted at the exchange rates prevailing at the date of the balance sheet. All exchange differences are dealt with in the profit and loss account.

The Company enters into forward contracts to hedge the foreign currency risk associated with monetary foreign currency liabilities. The premium on the forward contracts is amortised over the period of the contract. Any profit or loss arising on the cancellation or renewal of such forward exchange contract is recognised as income or expense for the period. Exchange differences on such forward contracts are recognised in the Statement of profit and loss in the reporting period in which the exchange rates change.

Operating Lease

The assets given under operating lease are shown in the balance sheet under fixed assets and depreciated on a basis consistent with the depreciation policy of the Company. The net lease income is recognised in the Statement of profit and loss on a straight line basis over the period during which the benefit is derived from the leased assets.

Employee benefits

a) Short term employee benefits

All employee benefits payable/available within twelve months of rendering the service are classsified as short- term employee benefits. Benefits such as salaries, wages and bonus, etc., are recognised in the Statement of profit and loss in the period in which the employee renders the related service.

b) Post-employment benefits

Defined contribution plans

Defined contribution plans are provident fund scheme, superannuation scheme and part of the pension fund scheme for eligible employees. The Company''s contribution to defined contribution plans are recognised in the Statement of profit and loss in the financial year to which they relate.

The Company makes specified monthly contributions towards employees provident fund to trusts administered by the Company/Regional Provident Fund Commissioner; towards superannuation fund to trusts managed by Life Insurance Corporation of India; and towards pension fund to respective trusts administered by the Company, where established. Where such pension trusts have not been established, the Company makes provision for the liability as on the date of the Balance Sheet. The minimum interest payable by the provident fund trusts to the beneficiaries every year is notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return on investments of the trusts and the notified interest rate.

Defined benefit plans

Liability for funded post retirement gratuity, pension and unfunded post retirement medical benefit is accrued on the basis of actuarial valuation as at the date of the balance sheet using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured as the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plans, is based on the market yields of Government securities as at the balance sheet date, having maturity periods approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the Statement of profit and loss. In case of funded schemes, differential between fair value of plan assets of the trusts and the present value of obligations, as per the acturial valuation, is recognised as an asset or liability based on the assessment of related cash flows.

c) Other long term employee benefits

Entitlements to annual leave and sick leave and long term service awards are recognised when they accrue to employees. All leave entitlements can be encashed only at the time of retirement/termination of employment or may be availed during the term of employment, subject to a restriction on the maximum number of accumulation of leave entitlement days. The Company determines the liability for long term employee benefits on the basis of actuarial valuation as at the year end.

Research and development

Revenue expenditure on research and development, including contribution to research associations, is charged to the Statement of profit and loss. Capital expenditure on tangible assets for research and development is shown as additions to fixed assets.

Earnings per share

The Company reports basic and diluted earnings per equity share in accordance with Accounting Standard 20, Earnings per share, notified by the Companies (Accounting Standards) Rules, 2006. The basic and dilutive earnings per share are computed by dividing the net profit attributable to equity shareholders for the year by the weighted average number of equity shares outstanding during the period/year. Dilutive earnings per share is computed and disclosed after adjusting the effects of all dilutive potential equity shares, if any, except when the results will be anti-dilutive.

Borrowing costs

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as a part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue.

Taxation

Income tax expense comprises current tax and deferred tax charge or credit. Current tax provision is made based on the tax liability computed after considering tax allowances and exemptions under the Income Tax Act, 1961.

The deferred tax charge or credit and the corresponding deferred tax liability and assets are recognised using the tax rates that have been enacted or substantively enacted on the balance sheet date.

Deferred tax assets are recognised only to the extent there is reasonable certainty of realisation in future. In case there are unabsorbed depreciation or carry forward losses, deferred tax assets are recognised only if there is virtual certainty of realisation of such amounts. Deferred tax assets are reviewed at each balance sheet date to reassess their realisability.

The credits arising from Minimum Alternate Tax (MAT) paid are recognised as receivable only if there is convincing evidence that the Company will have sufficient taxable income in future years in order to utilise such credits.

Provisions and contingent liabilities

The Company recognises a provision when there is a present obligation as a result of a past event and it is more likely than not that there will be an outflow of resources embodying economic benefits to settle such obligations and the amount of such obligation can be reliably estimated. Provisions are not discounted to their present values and are determined based on the management''s estimation of the outflow required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect current management estimates.

Contingent liabilites are disclosed in respect of possible obligations that have arisen from past events and the existence of which will be confirmed only by the occurence or non-occurrence of future events, not wholly within the control of the Company.

When there is an obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.


Mar 31, 2012

Basis of preparation of financial statements

The financial statements are prepared on accrual basis under the historical cost convention, modified to include revaluation of certain assets, in accordance with applicable Accounting Standards ("AS") specified in the Companies (Accounting Standards) Rules, 2006 and presentational requirements 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 the Revised Schedule VI to the Companies Act, 1956. Based on the nature of activities 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 twelve months for the purpose of current/non-current classification of its assets and liabilities.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles in India (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements and the results of operations during the year. Differences between actual results and estimates are recognised in the year in which the results are known or materialise. Examples of such estimates are estimated useful life of assets, provision for doubtful debts, etc. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

Fixed assets/depreciation

Fixed assets are stated at cost or at revalued amounts less accumulated depreciation. Cost of fixed assets includes all incidental expenses and interest costs on borrowings, attributable to the acquisition of qualifying assets, up to the date of commissioning of such assets.

Depreciation is provided on the straight-line method over the useful life of fixed assets as estimated by the management. The rates of depreciation prescribed in Schedule XIV to the Companies Act, 1956, are considered as the minimum rates. If the management's estimate of the useful life of the asset at the time of acquisition of the asset, or of the remaining useful life on a subsequent review, is shorter than the envisaged in the aforesaid schedule, depreciation is provided at a higher rate based on the management's estimate of the useful life/remaining useful life. Pursuant to this policy, depreciation on assets at certain locations has been provided at the rates based on the following estimated useful lives of fixed assets:

Leasehold land is amortised over the period of the lease. Leasehold improvements are amortised over the remaining period of lease, or the derived useful lives of assets as prescribed in Schedule XIV to the Companies Act, 1956, whichever is shorter.

Additional charge of depreciation on amount added on revaluation is adjusted against revaluation reserve.

Fixed assets individually costing up to Rs 5,000 are fully depreciated in the year of purchase.

Fixed assets are reviewed for impairment on each Balance Sheet date, in accordance with AS 28 "Impairment of Assets".

Revenue recognition

Revenue from sale of goods is recognised when significant risk and rewards of ownership is transferred to customers.

Service income is recognised on an accrual basis as per the contractual terms with the customers, net of Service Tax.

Sales are stated inclusive of Excise Duty and net of rebates, export benefits, trade discounts and Sales Tax/VAT.

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

Dividend or other income from mutual fund investments is recognised on declaration of dividend or on redemption, as the case may be.

Investments

Long-term investments are stated at cost less amount written off, where there is a diminution in value, other than temporary.

Current investments are stated at lower of cost and fair value.

Current assets

(a) Inventories

Stores and spare parts are valued at lower of cost and net realisable value, computed on a weighted average basis.

Raw materials, packing materials and work-in-process are carried at cost, computed on a weighted average basis, after providing for obsolescence. In case there is a decline in replacement cost of such materials and the net realisable value of finished products in which they will be used is expected to be below cost, the value of such materials and work in process is appropriately written down.

Each item of finished products is valued at lower of cost (computed on weighted average basis) and net realisable value. Cost includes an appropriate portion of manufacturing and other overheads, where applicable. Excise Duty on finished products is included in the value of finished products inventory.

(b) All other items of current assets are stated at cost after adequate provisions for any diminution in the carrying value.

Foreign currency transactions

Foreign currency transactions are accounted for at the exchange rate prevailing on the date of the transaction. All monetary foreign currency assets and liabilities are converted at the exchange rates prevailing at the date of the Balance Sheet. All exchange differences are dealt with in the Profit and Loss Account.

The Company enters into forward contracts to hedge the foreign currency risk associated with monetary foreign currency liabilities. The premium on the forward contracts is amortised over the period of the contract. Any profit or loss arising on the cancellation or renewal of such forward exchange contract is recognised as income or expense for the period. Exchange differences on such forward contracts are recognised in the Statement of Profit and Loss in the reporting period in which the exchange rates change.

Operating lease

The assets given under operating lease are shown in the Balance Sheet under fixed assets and depreciated on a basis consistent with the depreciation policy of the Company. The net lease income is recognised in the Profit and Loss Account on a straight line basis over the period during which the benefit is derived from the leased assets.

Employee benefits

a) Short-term employee benefits

All employee benefits payable/available within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and bonus, etc, are recognised in the Profit and Loss Account in the period in which the employee renders the related service.

b) Post-employment benefits

Defined contribution plans

Defined contribution plans are provident fund scheme, superannuation scheme and part of the pension fund scheme for eligible employees.The Company's contribution to defined contribution plans are recognised in the Profit and Loss Account in the financial year to which they relate.

The Company makes specified monthly contribution towards employee provident fund to trusts administered by the Company/Regional Provident Fund Commissioner; towards superannuation fund to trusts managed by Life Insurance Corporation of India; and towards pension fund to respective trusts administered by the Company, where established. Where such pension trusts have not been established, the Company makes provision for the liability as on date of Balance Sheet. The minimum interest payable by the provident fund trust to the beneficiaries every year is notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return on investments of the trust and the notified interest rate.

Defined benefit plans

Liability for funded post-retirement gratuity, pension and unfunded post-retirement medical benefit is accrued on the basis of actuarial valuation as at the date of the Balance Sheet using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured as the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plans is based on the market yields of Government securities as at the Balance Sheet date, having maturity periods approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the Profit and Loss Account. In case of funded schemes, differential between fair value of plan assets of trusts and the present value of obligation as per acturial valuation is recognised as an asset or liability based on the assessment of related cash flows.

c) Other long-term employee benefits

Entitlements to annual leave and sick leave and long service awards are recognised when they accrue to employees. All leave entitlements can only be encashed at the time of retirement/termination of employment or may be availed during the term of employment, subject to a restriction on the maximum number of accumulation of leave entitlement days. The Company determines the liability for long term employee benefits on the basis of actuarial valuation as at the year end.

Research and development

Revenue expenditure on research and development including contribution to research associations is charged to statement of profit and loss. Capital expenditure on tangible assets for research and development is shown as additions to fixed assets.

Earnings per share

The Company reports basic and diluted earnings per equity share ('EPS') in accordance with Accounting Standard 20, Earnings Per Share, notified by the Companies (Accounting Standards) Rules, 2006. The basic and diluted Earnings Per Share is computed by dividing the net profit attributable to equity shareholders for the year by the weighted average number of equity shares outstanding during the period/year. Diluted Earnings Per Share is computed and disclosed after adjusting the effects of all dilutive potential equity shares, if any, except when the results will be anti-dilutive.

Borrowing costs

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as a part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue.

Taxation

Income Tax expense comprises current tax and deferred tax charge or credit. Current tax provision is made based on the tax liability computed after considering tax allowances and exemptions under the Income Tax Act, 1961.

The deferred tax charge or credit and the corresponding deferred tax liability and assets are recognised using the tax rates that have been enacted or substantively enacted on the balance sheet date.

Deferred tax assets arising from unabsorbed depreciation or carry forward losses are recognised only if there is virtual certainty of realisation of such amounts. Other deferred tax assets are recognised only to the extent there is reasonable certainty of realisation in future. Deferred tax assets are reviewed at each Balance Sheet date to reassess their realisability.

The credits arising from minimum alternate tax (MAT) paid are recognised as receivable only if there is convincing evidence that the Company will have sufficient taxable income in future years in order to utilise such credits.

Provisions and contingent liabilities

The Company recognises a provision when there is a present obligation as a result of a past event and it is more likely than not that there will be an outflow of resources embodying economic benefits to settle such obligations and the amount of such obligation can be reliably estimated. Provisions are not discounted to their present value and are determined based on the management's estimation of the outflow required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect current management estimates.

Contingent liabilites are disclosed in respect of possible obligations that have arisen from past events and the existence of which will be confirmed only by the occurence or non-occurrence of future events not wholly within the control of the Company.

When there is an obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.


Mar 31, 2011

Basis of preparation of financial statements

The financial statements are prepared on accrual basis under the historical cost convention, modified to include revaluation of certain assets, in accordance with applicable Accounting Standards ("AS") specified in the Compa- nies (Accounting Standards) Rules, 2006 and presentational requirements of the Companies Act, 1956.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles in India (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements and the results of operations during the year. Differences between actual results and estimates are recognised in the year in which the results are known or materialised. Examples of such estimates are estimated useful life of assets, provision for doubtful debts, etc. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

Fixed assets / depreciation

Fixed assets are stated at cost or at revalued amounts less accumulated depreciation. Cost of fixed assets includes all incidental expenses and interest costs on borrowings, attributable to the acquistion of qualifying assets, upto the date of commissioning of such assets.

Depreciation for the year is computed on the straight line method, as per the rates derived from useful lives of fixed assets as estimated by the management, or as prescribed in Schedule XIV to the Companies Act, 1956, whichever is higher. Accordingly, plant and machinery under operating lease are being depreciated over six years. Additional charge of depreciation on amount added on revaluation is adjusted against revaluation reserve.

Leasehold land is amortised over the period of the lease. Leasehold improvements are amortised over the remaining period of lease, or the derived useful lives of assets as prescribed in Schedule XIV to the Companies Act, 1956, whichever is shorter.

Fixed assets individually costing upto Rs 5,000 are fully depreciated in the year of purchase.

Fixed assets are reviewed for impairment on each Balance Sheet date, in accordance with AS 28 "Impairment of Assets".

Revenue recognition

- Revenue from sale of products is recognised when the products are despatched to customers, which coincides with the transfer of risks and rewards.

- Sales are stated inclusive of excise duty and net of rebates, trade discounts and sales tax/VAT

- Dividend or other income from mutual fund investments is recognised on declaration of dividend or on redemption, as the case may be.

Investments

- Long term investments are stated at cost less amount written off, where there is a diminution in value, other than temporary.

- Current investments are stated at lower of cost and fair value.

Current assets

(a) Inventories

- Stores and spare parts are valued at lower of cost and net realisable value, computed on a weighted average basis.

- Raw materials, packing materials and work-in-process are carried at cost, computed on a weighted average basis, after providing for obsolescence. In case there is a decline in replacement cost of such materials and the net realisable value of finished products in which they will be used is expected to be below cost, the value of such materials and work in process is appropriately written down.

- Each item of finished products is valued at lower of cost (computed on weighted average basis) and net realisable value. Cost includes an appropriate portion of manufacturing and other overheads, where applicable. Excise duty on finished products is included in the value of finished products inventory.

(b) All other items of current assets are stated at cost after adequate provisions for any diminution in the carrying value.

Foreign currency transactions

- Foreign currency transactions are accounted for at the exchange rate prevailing on the date of the transaction. All monetary foreign currency assets and liabilities are converted at the exchange rates prevailing at the date of the balance sheet. All exchange differences are dealt with in the profit and loss account.

- In case of forward exchange contracts, covered by Accounting Standard 11, the premium is amortised over the period of the contract. Any profit or loss arising on the cancellation or renewal of a forward exchange contract is recognised as income or expense for the year.

- Exchange difference is calculated as the difference between the foreign currency amount of the contract, translated at the exchange rate at the reporting date, or the settlement date where the transaction is settled during the reporting period, and the corresponding foreign currency amount translated at the later of the date of inception of the forward exchange contract and the last reporting date. Such exchange differences are recognised in the profit and loss account in the reporting period in which the exchange rates change.

Lease Transactions

- Operating Lease

The assets given under operating lease are shown in the balance sheet under fixed assets and depreciated on a basis consistent with the depreciation policy of the Company. The net lease income is recognised in the profit and loss account on a straight line basis over the period during which the benefit is derived from the leased assets.

Employee benefits

a) Short term employee benefits

All employee benefits payable /available within twelve months of rendering the service are classsified as short- term employee benefits. Benefits such as salaries, wages and bonus etc., are recognised in the profit and loss account in the period in which the employee renders the related service.

b) Post-employment benefits Defined contribution plans

Defined contribution plans are provident fund scheme and part of the pension fund scheme for eligible employees. The Companys contribution to defined contribution plans are recognised in the profit and loss account in the financial year to which they relate.

The Company makes specified monthly contribution towards employee provident fund and pension fund to respective trusts administered by the Company. The minimum interest payable by the provident fund trust to the beneficiaries every year is notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return on investments of the trust and the notified interest rate.

Defined benefit plans

Liability for funded post retirement gratuity and pension and unfunded post retirement medical benefit is accrued on the basis of actuarial valuation as at the date of the balance sheet. The obligation is measured as the present value of the estimated future cash flows. Actuarial gains and losses are recognised immediately in the profit and loss account. In case of funded schemes, differential between fair value of plan assets of trusts and the present value of obligation as per acturial valuation is recognised as an asset or liability based on the assessment of related cash flows.

c) Other long term employee benefits

Entitlements to annual leave and sick leave are recognised when they accrue to employees. All leave entitlements can only be encashed at the time of retirement/ termination of employment or may be availed during the term of employment, subject to a restriction on the maximum number of accumulation of leave entitlement days. The Company determines the liability for such accumulated leave entitlements on the basis of actuarial valuation as at the year end.

Research and development

Revenue expenditure on research and development including contribution to research associations is charged to profit and loss account. Capital expenditure on tangible assets for research and development is shown as additions to fixed assets.

Taxation

Income tax expense comprises current tax and deferred tax charge or credit. Current tax provision is made based on the tax liability computed after considering tax allowances and exemptions under the Income Tax Act, 1961.

The deferred tax charge or credit and the corresponding deferred tax liability and assets are recognised using the tax rates that have been enacted or substantively enacted on the balance sheet date.

Deferred tax assets arising from unabsorbed depreciation or carry forward losses are recognised only if there is virtual certainty of realisation of such amounts. Other deferred tax assets are recognised only to the extent there is reasonable certainty of realisation in future. Deferred tax assets are reviewed at each balance sheet date to reassess their realisability.

Provisions and contingent liabilities

The Company recognises a provision when there is a present obligation as a result of a past event and it is more likely than not that there will be an outflow of resources embodying economic benefits to settle such obligations and the amount of such obligation can be reliably estimated. Provisions are not discounted to their present value and are determined based on the managements estimation of the outflow required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to refect current management estimates.

Contingent liabilites are disclosed in respect of possible obligations that have arisen from past events and the existence of which will be confirmed only by the occurence or non-occurrence of future events not wholly within the control of the Company.

When there is an obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.


Mar 31, 2010

The financial statements are prepared on accrual basis under the historical cost convention, modified to include revaluation of certain assets, in accordance with applicable Accounting Standards ("AS") specified in the Companies (Accounting Standards) Rules. 2006 and presentational requirements of the Companies Act. 1956.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles in India (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements and the results of operations during the year. Differences between actual results and estimates are recognised in the year in which the results are known or materialised. Examples of such estimates are estimated useful life of assets, provision for doubtful debts, etc. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

Fixed assets / depreciation

Fixed Assets are stated at cost or at revalued amounts less accumulated depreciation. Cost of fixed assets includes all incidental expenses and interest costs on iionowings. attributable to the acquistion of the qualifying assets, upto the date of commissioning of the assets.

Depreciation for the year is computed on the straight line method, as per the rates derived from useful lives of fixed assets as estimated by the management, or as prescribed in Schedule XIV to the Companies Act. 1956, whichever is higher. Accordingly, plant and machinery under operating lease are being depreciated over six years. Additional charge of depreciation on amount added on revaluation is adjusted against revaluation reserve.

Intangible assets comprising Patents. Trademarks and Knowhow. arising from acquisition of businesses are amortised on a straight line method in line with AS 26 "Intangible assets".

Leasehold land is amortised over the period of the lease. Leasehold improvements are amortised over the remaining period of lease, or the derived useful lives of assets as prescribed in Schedule XIV to the Companies Act, 1956, whichever is shorter.

Fixed assets individually costing upto Rs 5,000 are fully depreciated in the year of purchase.

Fixed assets are reviewed for impairment on each Balance Sheet date, in accordance with AS 28 "Impairment of Assets".

Revenue recognition

- Revenue from sale of products is recognised when the products are despatched against orders from customers in accordance with the contract terms, which coincides with the transfer of risks and rewards.

- Sales are stated inclusive of excise duty and net of rebates, trade discounts and sales tax/VAT.

- Dividend or other income from mutual fund investments is recognised on declaration of dividend or on redemption. as the case may be.

Income from sale of properties

Income from the sale of properties is accounted on transfer of the risk and benefits in the property to the purchaser. Investments

- Long term investments are stated at cost less amount writen off, where there is a diminution in value, other than temporary.

- Cut rent investments are stated at lower of cost and fair value.

Current assets

(a) Inventories

- Stores and spare parts are valued at cost or under, computed on a weighted average basis.

- Raw materials, packing materials and work-in-process are carried at cost, computed on a weighted average basis, after providing for obsolescence. In case there is a decline in replacement cost of such materials and the net realisable value of finished products in which they will be used is expected to be below cost, the value of such materials and work in process is appropriately written down.

- Each item of finished products is valued at lower of cost (computed on weighted average basis) and net realisable value. Cost includes an appropriate portion of manufacturing and other overheads, where applicable. Excise duty on finished products is included in the value of finished products inventory.

(b) All other items of current assets are stated at cost after adequate provisions for any diminution in the carrying value.

Foreign currency transactions

- Foreign currency transactions are accounted for at the exchange rate prevailing on the date of the transaction. All monetary foreign currency assets and liabilities are converted at the exchange rates prevailing at the date of the balance sheet. All exchange differences are dealt with in the profit and loss account.

- In case of forward exchange contracts, covered by Accounting Standard 11, the premium is amortised over the period of the contract. Any profit or loss arising on the cancellation or renewal of a forward exchange contract is recognised as income or expense for the year.

- Exchange difference is calculated as the difference between the foreign currency amount of the contract translated at the exchange rate at the reporting date, or the settlement date where the transaction is settled during the reporting period and the corresponding foreign currency amount translated at the later of the date of inception of the forward exchange contract and the last reporting date. Such exchange differences are recognised in the profit and loss account in the reporting period in which the exchange rates change.

Lease Transactions

- Operating Lease

The assets given under operating lease are shown in the balance sheet under fixed assets and depreciated on a basis consistent with the depreciation policy of the Company. The net lease income is recognised in the profit and loss account on a straight line basis over the period during which the benefit is derived from the leased assets.

Employee benefits

a) Short term employee benefits

All employee benefits payable /available within twelve months of rendering the service are classsified as short-term employee benefits. Benefits such as salaries, wages and bonus etc., are recognised in the profit and loss account in the period in which the employee renders the related service.

b) Post-employment benefits

Defined contribution plans

Defined contribution plans are provident fund scheme and part of the pension fund scheme for eligible employees.The Companys contribution to defined contribution plans are recognised in the profit and loss account in the financial year to which they relate.

The Company makes specified monthly contribution towards employee provident fund and pension fund to the respective trusts administered by the Company. The minimum interest payable by the provident fund trust to the beneficiaries every year is notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return on investments of the trust and the notified interest rate.

Defined benefit plans

Liability for funded post retirement gratuity and pension and unfunded post retirement medical benefit is accrued on the basis of actuarial valuation as at the date of the balance sheet. The obligation is measured as the present value of the estimated future cash flows. Actuarial gains and losses are recognised immediately in the profit and loss account. In case of funded schemes, differential between fair value of plan assets of the trusts and the present value of obligation as per actuarial valuation is recognised as an asset or liability based on the assessment of related cash flows.

c) Other long term employee benefits

Entitlements to annual leave and sick leave are recognised when they accrue to employees. All leave entitlements can only be encashed at the time of retirement/ termination of employment or may be availed during the term of employment, subject to a restriction on the maximum number of accumulation of leave entitlement days. The Company determines the liability for such accumulated leave entitlements on the basis of actuarial valuation as at the year end.

Research and development

Revenue expenditure on research and development including contribution to research associations is charged to profit and loss account. Capital expenditure on tangible assets for research and development is shown as additions to fixed assets.

Taxation

Income tax expense comprises current tax, fringe benefit tax and deferred tax charge or credit. Current tax provision is made based on the tax liability computed after considering tax allowances and exemptions under the Income Tax Act, 1961.

The deferred tax charge or credit and the corresponding deferred tax liability and assets are recognised using the tax rates that have been enacted or substantially enacted on the balance sheet date.

Deferred tax assets arising from unabsorbed depreciation or carry forward losses are recognised only if there is virtual certainty of realisation of such amounts. Other deferred tax assets are recognised only to the extent there is reasonable certainty of realisation in future. Deferred tax assets are reviewed at each balance sheet date to reassess their realisability.

Provisions and Contingent Liabilities

The Company recognises a provision when there is a present obligation as a result of a past event and it is more likely than not that there will be an outflow of resources embodying economic benefits to settle such obligations and the amount of such obligation can be reliably estimated. Provisions are not discounted to their present value and are determined based on the managements estimation of the outflow required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect current management estimates.

Contingent liabilites are disclosed in respect of possible obligations that have arisen from past events and the existence of which will be confirmed only by the occurence or non-occurrence of future events not wholly within the control of the Company.

When there is an obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

 
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