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Accounting Policies of Alkyl Amines Chemicals Ltd. Company

Mar 31, 2015

1.1 BASIS OF PREPARATION:

These financial statements are prepared in accordance with the generally accepted accounting principles in India (Indian GAAP) under the historical cost convention as also on accrual basis. These financial statements have been prepared to comply with the accounting standards prescribed under Section 133 of the Companies Act, 2013 (''the Act'') read with Rule 7 of the Companies (Accounts) Rules, 2014(''the Accounting Standards'') and the relevant provisions of the Act (to the extent notified). In the light of the first proviso to Section 129 (1) of the Act and Schedule III to the Act, the items and terms contained in these financial statements are in accordance with the Accounting Standards.

1.2 USE OF ESTIMATES:

The preparation of the financial statements in conformity with the generally accepted accounting principles requires Management to make estimates and assumptions to be made that affect the reported amounts of revenues and expenses during the reporting period, the reported amounts of assets and liabilities and the disclosures relating to the contingent liabilities on the date of the financial statements. Examples of such estimates include useful lives of Fixed Assets, provision for doubtful debts/advances, deferred tax etc. Actual results could differ from those estimates. Such difference is recognised in the period/s in which the results are known/materialised.

1.3 FIXED ASSETS (TANGIBLE/INTANGIBLE):

i. Land (Freehold) is carried at cost;

ii. Land (Leasehold) is carried at cost less amortisation;

iii. Other Fixed Assets are carried at cost less accumulated depreciation/amortisation and impairment losses, if any.

iv. Cost for the aforesaid purposes comprises of its purchase price and any directly attributable cost of bringing the asset to its working condition for its intended use, net of recoverable duties and interest on borrowings attributable to the acquisition of qualifying Fixed Assets upto the date on which the Asset is ready for its intended use, if any. It also includes exchange difference capitalised, if any, in terms of Para 46/46A of Accounting Standard 11 on "Effects of Changes in Foreign Exchange Rates".

v. Projects under which tangible fixed assets are not yet ready for their intended use are carried at cost, comprising direct cost, related incidental expenses and attributable interest and are disclosed as "Capital Work-in-Progress".

vi. Intangible assets not ready for the intended use on the date of the Balance Sheet are disclosed as "Intangible Assets Under Development".

1.4 DEPRECIATION AND AMORTISATION:

i. Depreciation on tangible Fixed Assets (other than those indicated below) is provided on the straight line method over the useful lives and residual values of assets as prescribed under Part C of Schedule II of Companies Act, 2013.

a. Depreciation on Plant and Machinery other than those not specifically covered under the classification ''Special Plant and Machinery used in manufacturing of Chemicals'' is provided on the straight line method over the useful lives of 20 years as determined by the internal technical evaluation. The Management believes that the useful lives as determined best represent the period over which it expects to use these assets which is the same as the useful life of the Special Plant and Machinery. Hence, the useful lives for such Plant and Machinery is different from the useful lives as prescribed under Part C of Schedule II of Companies Act, 2013.

Exchange Differences capitalised in terms of Para 46/46A of Accounting Standard 11 on "Effects of Changes in Foreign Exchange Rates" are depreciated over the balance life of the assets from the year in which such differences have been capitalised.

b. Leasehold land is being amortised on the straight line method over the period of lease.

ii. Intangible assets are amortised on the straight line method over their estimated useful life as follows:

a. Development of R & D : 5 years. Products/Processes (Internally generated)

b. Patents : 10 years.

c. REACH Registration : 5 years.

iii. Depreciation for assets purchased/sold during the period is proportionately charged.

1.5 INVESTMENTS:

i. Investments, which are long-term, are stated at cost. A provision for diminution, if any, is made to recognise a decline, other than temporary, in the value of investments.

ii. Profit or loss on sale of long-term investments, if any, is calculated by considering the weighted average amount of the total holding of the investment.

1.6 INVENTORIES:

i. Raw materials, packing materials, stores and spares, furnace oil and fuel are valued at cost or net realisable value, whichever is lower. Cost comprises basic cost (net of CENVAT and VAT, if any) and other costs incurred in bringing them to their respective present location and condition.

Cost is determined on a Weighted Average basis.

ii. Work-in-Progress and finished goods are valued at cost or net realisable value, whichever is lower.

Cost includes all direct costs and a proportion of other fixed manufacturing overheads based on normal operating capacity. Excise duty on finished goods awaiting clearance has been provided for and included in cost thereof.

Cost is determined on a Weighted Average basis.

1.7 TAXATION:

i. Current Tax: Provision for current tax is made on the estimated taxable income at the rate applicable to the relevant assessment year.

ii. Deferred Tax : Deferred tax is recognised, subject to consideration of prudence, on timing differences between taxable and accounting income which originates in one period and are capable of reversal in one or more subsequent periods (adjusted for reversals expected during tax holiday period). The tax effect is calculated on accumulated timing differences at the year end based on tax rates and laws enacted or substantially enacted as of the balance sheet date.

In the event of unabsorbed depreciation and carry forward of losses, deferred tax assets are recognised only to the extent that there is virtual certainty that sufficient future taxable income will be available to realise such deferred tax assets. In other situations, deferred tax assets are recognised only to the extent that there is a reasonable certainty that sufficient future taxable income will be available to realise such deferred tax assets.

The Company offsets deferred tax assets and deferred tax liabilities if it has a legally enforceable right and these relate to taxes on income levied by the same governing taxation laws.

1.8 REVENUE RECOGNITION:

i. Sales of Manufactured Goods:

Sales of goods in respect of domestic sales are recognised on despatch of goods to the customer. ''Sales'' include packing charges, excise duty and are net of returns.

Sales of goods in respect of export sales are recognised as and when the shipment of goods takes place.

ii. Recognition of Export Benefits:

Export Benefit Entitlements under the Duty Entitlement Pass Book Scheme and Duty drawback Scheme of the Government of India are recognised in the year in which the Export Sales are accounted for.

Advance License Benefits on Exports are accounted in the year of utilisation of license.

iii. Income from Certified Emission Reductions:

Income from Certified Emission Reduction (CERs) in respect of the project registered with Executive Board established under the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCC) is accounted on the basis of CERs generated from such project when the same are duly certified by UNFCC.

1.9 EMPLOYEE BENEFITS:

i. Defined Contribution Plan:

Contribution as per the Employees'' Provident Funds and Miscellaneous Provisions Act, 1952 towards Provident Fund and Family Pension Fund are provided for as a specific contribution of the Employee costs to fund these benefits as specified under the law. Therefore, any excess payment made will be considered as an advance and shortfall, if any, will be adjusted.

ii. Defined Benefit Plan:

Gratuity- In accordance with applicable Indian laws, the Company provides for gratuity, a defined benefit retirement plan ("Gratuity Plan") covering all employees. The Gratuity Plan provides a lumpsum payment to vested employees, at retirement or termination of employment, an amount based on the respective employee''s last drawn salary and the years of employment with the Company. Liability with regard to Gratuity Plan is accrued based on actuarial valuation at the Balance Sheet date carried out by an independent actuary. Actuarial gain or loss is recognized immediately in the statement of profit and loss as income or expense. The Company has an employee gratuity fund managed by Life Insurance Corporation of India ("LIC"), except for the Managing Director, for which also the necessary provision is made based on an actuarial valuation.

Compensated Absences- The Company provides for the encashment of leave with pay based on policy of the Company in this regard. The employees are entitled to accumulate such leave subject to certain limits, for the future encashment. The Company records an obligation for Leave Encashment in the period in which the employee renders the services that increases this entitlement. The Company measures the expected cost of compensated leave as the additional amount that the Company expects to pay as a result of the unused entitlement that has accumulated at the Balance Sheet date on the basis of an independent actuarial valuation.

1.10 RESEARCH AND DEVELOPMENT COSTS:

i. Revenue expenditure on research, if any, is charged in the Statement of Profit and Loss of the year in which it is incurred.

ii. Development Expenditure :

a. incurred on development of new processes for products which, as per the Management, are completed and are expected to generate future economic benefits, are shown as internally generated intangible assets and is amortised in accordance with policies stated for Amortisation in Note No. 1.4.ii.

b. incurred on development of new processes for products which, as per the Management, are yet to be completed, are reflected as Intangibles Under Development;

c. other development expenses are charged to the Statement of Profit and Loss in the year in which it is incurred.

1.11 FOREIGN CURRENCY TRANSACTIONS:

i. Transactions in foreign currencies are recorded, on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

ii. Monetary items which are denominated in foreign currency are translated at the exchange rates prevailing at the Balance Sheet date and profit/loss on translation thereon is credited/ charged to the Statement of Profit and Loss.

iii. Exchange differences arising on settlement or restatement of foreign currency denominated liabilities relating to the acquisition of fixed asset have been recognised in the Statement of Profit and Loss. However, on the basis of the option available to the Company, exchange differences arising on Long-term Foreign Currency Monetary items at rates different from those at which they were initially recorded in so far as they relate to the acquisition of a depreciable capital asset, has been added or deducted from the cost of such assets (Refer Note 28).

iv. In case of forward contracts, the exchange difference between the forward rate and the exchange rate at the date of transaction is recognised as income or expense over the life of the contract.

v. As required by the Announcement of the Institute of Chartered Accountants of India on positions of derivatives, keeping in view the principle of prudence as per Accounting Standard 1 on "Disclosure of Accounting Policies", outstanding forward contracts at the Balance Sheet date are reflected by marking them to market and accordingly, the resulting mark to market losses are provided in the Statement of Profit and Loss.

1.12 SEGMENT REPORTING POLICIES:

i. Identification of segments

Primary Segment is identified based on the nature of products, the different risks and returns and the internal business reporting system. Secondary Segment is identified based on the geographical location of its customers.

ii. Segment Policies

The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.

1.13 LEASE RENTALS:

Lease rentals are accounted consistent with the payment schedule provided in the lease agreement.

1.14 BORROWING COSTS:

Borrowing costs, attributable to the acquisition/construction of qualifying assets, are capitalised, net of income, if any. Other borrowing costs are charged as an expense in the period in which the same are incurred. Borrowing costs comprise of interest and other cost incurred in connection with borrowing of funds.

1.15 IMPAIRMENT OF ASSETS:

If internaf/external indications suggest that an asset of the Company may be impaired, the recoverable amount of asset/cash generating unit is determined on the date of Balance Sheet and if it is less than its carrying amount, the carrying amount of asset/ cash generating unit is reduced to the said recoverable amount. Subsequently, if there is a change in the indication, since the last impairment was recognised, so that recoverable amount of an asset exceeds its carrying amount, an impairment recognised for an asset in prior accounting period is reversed. The recoverable amount is measured as the higher of the net selling price and value in use of such assets/cash generating unit, which is determined by the present value of the estimated future cash flows.

An impairment of intangible assets is conducted annually or more often if there is an indication of any decrease in value. The impairment loss, if any, is charged to the Statement of Profit and Loss.

1.16 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:

i. The Company recognises as Provisions, the liabilities being present obligations arising from past events, the settlement of which is expected to result in an outflow of resources and which can be measured only by using a substantial degree of estimation.

ii. Contingent Liability is disclosed by way of a note to the financial statements after careful evaluation by the management of the facts and legal aspects of the matters involved.

iii. Contingent Assets are neither recognised nor disclosed.


Mar 31, 2014

1.1 BASIS OF PREPARATION

The accounts have been prepared on the basis of going concern under historical cost convention as also on accrual basis and in accordance with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956, which have been prescribed by the Companies (Accounting Standards) Rules, 2006, (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs) and the relevant provisions of the Companies Act, 1956 / Companies Act, 2013 as applicable.

1.2 USE OF ESTIMATES:

The preparation of the financial statements in conformity with the generally accepted accounting principles requires Management to make estimates and assumptions to be made that affect the reported amounts of revenues and expenses during the reporting period, the reported amounts of assets and liabilities and the disclosures relating to the contingent liabilities on the date of the financial statements. Examples of such estimates include useful lives of Fixed Assets, provision for doubtful debts/advances, deferred tax etc. Actual results could differ from those estimates. Such difference is recognised in the period/s in which the results are known/materialised.

1.3 FIXED ASSETS (TANGIBLE/INTANGIBLE):

i. Land (Freehold) is carried at cost;

ii. Land (Leasehold) is carried at cost less amortisation;

iii. Other Fixed Assets are carried at cost less accumulated depreciation/amortisation and impairment losses, if any.

iv. Cost'' for the aforesaid purposes comprises of its purchase price and any directly attributable cost of bringing the asset to its working condition for its intended use, net of recoverable duties and interest on borrowings attributable to the acquisition of qualifying Fixed Assets upto the date on which the Asset is ready for its intended use, if any. It also includes exchange difference capitalised, if any, in terms of Para 46/46 A of Accounting Standard 11 on "Effects of Changes in Foreign Exchange Rates".

v. Projects under which tangible fixed assets are not yet ready for their intended use are carried at cost, comprising direct cost, related incidental expenses and attributable interest and are disclosed as "Capital Work-in-Progress".

vi. Intangible assets not ready for the intended use on the date of the Balance Sheet are disclosed as "Intangible Assets Under Development".

1.4 DEPRECIATION AND AMORTISATION:

i. Depreciation on assets installed/acquired after April 2, 1987 is provided pro-rata on straight line method at the rates and on the basis specified in Schedule XIV to the Companies Act, 1956, as revised by Notification No.G.S.R.756 (E) dated December 16, 1993 and further revised by Notification No.101 (E) of the Department of Company Affairs on the following basis:

a. In respect of assets installed/acquired prior to April 1, 1993 at the rates computed by allocating the unamortised value of assets existing as on March 31, 1993 as per the books of account, over the remaining part of the specified period which is recomputed by applying to the original cost, the revised rates prescribed in Schedule XIV to the Companies Act, 1956.

b. In respect of assets installed/acquired on/after April 1, 1993 at the rates prescribed in Schedule XIV to the Companies Act, 1956.

ii. Leasehold land is being amortised over the period of lease.

iii. Intangible assets are amortised over their estimated useful life on the straight line method as follows:

a. Development of R & D Products/Processes (Internally generated) : Five years.

b. Patents : Ten years.

c. REACH Registration : Five years.

iv. Exchange Differences capitalised in terms of Para 46/46A of Accounting Standard 11 on "Effects of Changes in Foreign Exchange Rates" are depreciated over the balance life of the assets from the year in which such differences have been capitalised.

1.5 INVESTMENTS:

i. Investments, which are long-term, are stated at cost. A provision for diminution, if any, is made to recognise a decline, other than temporary, in the value of investments.

ii. Profit or loss on sale of long-term investments, if any, is calculated by considering the weighted average amount of the total holding of the investment.

1.6 INVENTORIES:

i. Raw materials, packing materials, stores and spares, furnace oil and fuel are valued at cost or net realisable value, whichever is lower. Cost comprises basic cost (net of CENVAT and VAT, if any) and other costs incurred in bringing them to their respective present location and condition.

Cost is determined on a Weighted Average basis.

ii. Work-in-Progress and finished goods are valued at cost or net realisable value, whichever is lower.

Cost includes all direct costs and a proportion of other fixed manufacturing overheads based on normal operating capacity. Excise duty on finished goods awaiting clearance has been provided for and included in cost thereof.

Cost is determined on a Weighted Average basis.

1.7 TAXATION:

i. Current Tax: Provision for current tax is made on the estimated taxable income at the rate applicable to the relevant assessment year.

ii. Deferred Tax : Deferred tax is recognised, subject to consideration of prudence, on timing differences between taxable and accounting income which originates in one period and are capable of reversal in one or more subsequent periods (adjusted for reversals expected during tax holiday period). The tax effect is calculated on accumulated timing differences at the year end based on tax rates and laws enacted or substantially enacted as of the balance sheet date.

In the event of unabsorbed depreciation and carry forward of losses, deferred tax assets are recognised only to the extent that there is virtual certainty that sufficient future taxable income will be available to realise such deferred tax assets. In other situations, deferred tax assets are recognised only to the extent that there is a reasonable certainty that sufficient future taxable income will be available to realise such deferred tax assets.

The Company offsets deferred tax assets and deferred tax liabilities if it has a legally enforceable right and these relate to taxes on income levied by the same governing taxation laws.

1.8 REVENUE RECOGNITION:

i. Sales of Manufactured Goods:

Sales of goods in respect of domestic sales are recognised on despatch of goods to the customer. ''Sales'' include packing charges, excise duty and are net of returns.

Sales of goods in respect of export sales are recognised as and when the shipment of goods takes place.

ii. Recognition of Export Benefits:

Export Benefit Entitlements under the Duty Entitlement Pass Book Scheme and Duty drawback Scheme of the Government of India are recognised in the year in which the Export Sales are accounted for.

Advance License Benefits on Exports are accounted in the year of utilisation of license.

iii. Income from Certified Emission Reductions:

Income from Certified Emission Reduction (CERs) in respect of the project registered with Executive Board established under the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCC) is accounted on the basis of CERs generated from such project when the same are duly certified by UNFCC. However, at the year end, since no CER is duly certified no amount for the same is recognised.

1.9 EMPLOYEE BENEFITS:

i. Defined Contribution Plan:

Contribution as per the Employees'' Provident Funds and Miscellaneous Provisions Act, 1952 towards Provident Fund and Family Pension Fund are provided for as a specific contribution of the Employee costs to fund these benefits as specified under the law. Therefore, any excess payment made will be considered as an advance and shortfall, if any, will be adjusted.

ii. Defined Benefit Plan:

Gratuity- In accordance with applicable Indian laws, the Company provides for gratuity, a defined benefit retirement plan ("Gratuitv Plan") covering all employees. The Gratuity Plan provides a lumpsum payment to vested employees, at retirement or termination of employment, an amount based on the respective employee''s last drawn salary and the years of employment with the Company. Liability with regard to Gratuity Plan is accrued based on actuarial valuation at the Balance Sheet date carried out by an independent actuary. Actuarial gain or loss is recognized immediately in the statement of profit and loss as income or expense. The Company has an employee gratuity fund managed by Life Insurance Corporation of India ("LIC"), except for the Managing Director, for which also the necessary provision is made based on an actuarial valuation.

Compensated Absences- The Company provides for the encashment of leave with pay based on policy of the Company in this regard. The employees are entitled to accumulate such leave subject to certain limits, for the future encashment. The Company records an obligation for Leave Encashment in the period in which the employee renders the services that increases this entitlement. The Company measures the expected cost of compensated leave as the additional amount that the Company expects to pay as a result of the unused entitlement that has accumulated at the Balance Sheet date on the basis of an independent actuarial valuation.

1.10 RESEARCH AND DEVELOPMENT COSTS:

i. Revenue expenditure on research, if any, is charged in the Statement of Profit and Loss of the year in which it is incurred.

ii. Development Expenditure :

a. incurred on development of new processes for products which, as per the Management, are completed and are expected to generate future economic benefits, are shown as internally generated intangible assets and is amortised in accordance with policies stated for Amortisation in Note No. 1.4.iii.

b. incurred on development of new processes for products which, as per the Management, are yet to be completed, are reflected as Intangibles Under Development;

c. other development expenses are charged to the Statement of Profit and Loss in the year in which it is incurred.

1.11 FOREIGN CURRENCY TRANSACTIONS:

i. Transactions in foreign currencies are recorded, on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

ii. Monetary items which are denominated in foreign currency are translated at the exchange rates prevailing at the Balance Sheet date and profit/loss on translation thereon is credited/ charged to the Statement of Profit and Loss.

iii. Exchange differences arising on settlement or restatement of foreign currency denominated liabilities relating to the acquisition of fixed asset have been recognised in the Statement of Profit and Loss. However, on the basis of the option available to the Company, exchange differences arising on Long-term Foreign Currency Monetary items at rates different from those at which they were initially recorded in so far as they relate to the acquisition of a depreciable capital asset, has been added or deducted from the cost of such assets (Refer Note 28).

iv. In case of forward contracts, the exchange difference between the forward rate and the exchange rate at the date of transaction is recognised as income or expense over the life of the contract.

v. As required by the Announcement of the Institute of Chartered Accountants of India on positions of derivatives, keeping in view the principle of prudence as per Accounting Standard 1 on "Disclosure of Accounting Policies", outstanding forward contracts at the Balance Sheet date are reflected by marking them to market and accordingly, the resulting mark to market losses are provided in the Statement of Profit and Loss.

1.12 SEGMENT REPORTING POLICIES:

i. Identification of segments

Primary Segment is identified based on the nature of products, the different risks and returns and the internal business reporting system. Secondary Segment is identified based on the geographical location of its customers.

ii. Segment Policies

The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.

1.13 LEASE RENTALS:

Lease rentals are accounted consistent with the payment schedule provided in the lease agreement.

1.14 BORROWING COSTS:

Borrowing costs, attributable to the acquisition/construction of qualifying assets, are capitalised, net of income, if any. Other borrowing costs are charged as an expense in the period in which the same are incurred. Borrowing costs comprise of interest and other cost incurred in connection with borrowing of funds.

1.15 IMPAIRMENT OF ASSETS:

If internal/external indications suggest that an asset of the Company may be impaired, the recoverable amount of asset/cash generating unit is determined on the date of Balance Sheet and if it is less than its carrying amount, the carrying amount of asset/ cash generating unit is reduced to the said recoverable amount. Subsequently, if there is a change in the indication, since the last impairment was recognised, so that recoverable amount of an asset exceeds its carrying amount, an impairment recognised for an asset in prior accounting period is reversed. The recoverable amount is measured as the higher of the net selling price and value in use of such assets/cash generating unit, which is determined by the present value of the estimated future cash flows.

An impairment of intangible assets is conducted annually or more often if there is an indication of any decrease in value. The impairment loss, if any, is charged to the Statement of Profit and Loss.

1.16 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:

i. The Company recognises as Provisions, the liabilities being present obligations arising from past events, the settlement of which is expected to result in an outflow of resources and which can be measured only by using a substantial degree of estimation.

ii. Contingent Liability is disclosed by way of a note to the financial statements after careful evaluation bv the management of the facts and legal aspects of the matters involved.

iii. Contingent Assets are neither recognised nor disclosed.

2.2 Rights, preferences and restrictions

i. The Company has only one class of shares referred (o as equity shares having par value of Rs. 10. Each holder of equity shares is entitled to one vote per share.

ii. The Company declares and pays dividend in Indian rupees.The dividend proposed by the Board of Directors is subject to the approval of the Shareholders in the ensuing Annual General Meeting. The Board of Directors, in their meeting on May 15, 2014, proposed a final dividend of Rs. 8 per equity share. The proposal is subject to the approval of shareholders at the Annual General Meeting. The total dividend appropriation for the year ended March 31, 2014 amounted to Rs. 954.52 lakhs including corporate dividend tax of Rs. 138.6G lakhs.

During the year ended March 31, 2013, the amount of per share dividend recognised as distribution to equity shareholders was Rs. 5. The Dividend appropriation for the year ended March 31, 2013 amounted to Rs. 596.57 lakhs including corporate dividend tax of Rs. 86.66 lakhs.

iii. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

7.1 Cash Credits including Working Capital Demand Loan are secured by hypothecation of stocks of raw materials, semi-finished goods, finished goods, consumable stores and book debts of the Company, both present and future, as mentioned in the joint deed of hypothecation dated December 29, 1989 as amended from time to time, as well as by the second mortgage of the specified immovable properties of the Company.

11.2. The Lease Deed from MIDC in respect of Plot Nos. D-6/2, R-l and R-2 of the value of Rs. 131.13 lakhs (Previous Year Rs. 131.13 lakhs) and from GIDC in respect of Plot Nos. D-2/CH/149-2 of the value of Rs. 1.135.33 lakhs (Previous Year Rs. NIL) is yet to be executed.

11.3. Plant, Machinery and Equipments include Rs. 382.12 lakhs (Previous Year Rs. 382.12 lakhs) being value of machinery installed at third parly premises of |ob Contractor, duly confirmed by them.

11.4. Transfer from Capital Work-in-Progress andd Intangible Assets Under Development represents capitalisation to Fixed Assets. It also includes write off of Capital Work-in-Progress of Rs. 1.48 lakhs (Previous Year Rs. 27.55 lakhs) and Intangible Assets Under Development of Rs. 73.88 lakhs (Previous Year 54.85 lakhs).

11.5. Other Adjustments represent Borrowings Costs of Rs. 157.93 lakhs (Previous Year Rs. 124.38 lakhs) and Exchange Differences of Rs. 142.78 lakhs (Previous Year Rs. 89.B3 lakhs) capitalised in terms of AS - 11. For related disclosures refer Note 28 to the financial statements

11.6. Depreciation for the vear is shown as reduced bv the write back of excess depreciation of prior period Rs. 138.94 lakhs (Previous Year Rs. NIL).


Mar 31, 2012

1.1 BASIS OF PREPARATION:

a. The accounts are prepared on the basis of going concern under historical cost convention as also accrual basis and in accordance with the Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956, which have been prescribed by the Companies (Accounting Standards) Rules, 2006, and the relevant provisions of the Companies Act, 1956.

b. The financial statements for the year ended March 31, 2011 had been prepared as per the then applicable, pre-revised Schedule VI to the Companies Act, 1956. Consequent to the notification of Revised Schedule VI under the Companies Act, 1956, the financial statements for the year ended March 31, 2012 are prepared as per the Revised Schedule VI. Accordingly, the previous year's figures have also been reclassified/regrouped to conform to this year's classification. The adoption of Revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statements.

1.2 USE OF ESTIMATES:

The preparation of the financial statements in conformity with the generally accepted accounting principles requires Management to make estimates and assumptions to be made that affect the reported amounts of revenues and expenses during the reporting period, the reported amounts of assets and liabilities and the disclosures relating to the contingent liabilities on the date of the financial statements. Examples of such estimates include useful lives of Fixed Assets, provision for doubtful debts/advances, deferred tax etc. Actual results could differ from those estimates. Such difference is recognized in the period/s in which the results are known / materialized.

1.3 FIXED ASSETS:

a. Land (Freehold) is valued at cost;

b. Land (Leasehold) is valued at cost less amortization;

c. Other Fixed Assets are valued at cost less accumulated depreciation. 'Cost' for the aforesaid purposes comprises of its purchase price and any attributable cost of bringing the asset to its working condition for its intended use, net of recoverable duties, if any.

1.4 DEPRECIATION:

Depreciation on assets installed/acquired after April 2, 1987 is provided pro-rata on straight line method at the rates and on the basis specified in Schedule XIV to the Companies Act,1956, as revised by Notification No.G.S.R.756 (E) dated December 16, 1993 and further revised by Notification No.101 (E) of the Department of Company Affairs on the following basis:

i. In respect of assets installed/acquired prior to April 1, 1993 at the rates computed by allocating the unamortized value of assets existing as on March 31, 1993 as per the Books of Account, over the remaining part of the specified period which is recomputed by applying to the original cost, the revised rates prescribed in Schedule XIV to the Companies Act, 1956.

ii. In respect of assets installed/acquired on/after April 1, 1993 at the rates prescribed in Schedule XIV to the Companies Act, 1956.

Leasehold land is being amortized over the period of lease.

1.5 INVESTMENTS:

a. Investments, which are long term, are stated at cost. A provision for diminution, if any, is made to recognize a decline, other than temporary, in the value of investments.

b. Profit or loss on sale of long term investments, if any, is calculated by considering the weighted average amount of the total holding of the investment.

1.6 INVENTORIES:

i. Stores, Spares, Furnace Oil etc.:

At cost or net realizable value, whichever is lower. Cost for this purpose comprises of basic cost (net of CENVAT and VAT, if any) including transportation.

ii. Work-in-process:

At cost or net realizable value, whichever is lower. Cost, for this purpose, includes all direct costs and other related fixed overheads.

iii. Finished Goods:

At cost or net realizable value, whichever is lower. Cost, for this purpose, includes all direct costs, and other related factory overheads. Excise duty on goods awaiting clearance has been provided for.

iv. Raw Materials and Packing Materials:

At cost or net realizable value, whichever is lower on Weighted Average Method basis. Cost, for this purpose, includes basic cost (net of CENVAT and VAT, if any) and all direct expenses.

v. Traded goods:

At landed cost. Cost, for this purpose, includes Direct cost and Incidental expenses or net realizable value, whichever is lower.

vi. Obsolescence of inventory, if any, is determined on material consumption pattern/specific review and is accordingly provided for.

1.7 TAXATION:

i. Current Tax: Provision for current tax is made on the estimated taxable income at the rate applicable to the relevant assessment year.

ii. Deferred Tax: In accordance with the Accounting Standard 22 - "Accounting for Taxes on Income', the deferred tax for the timing differences is measured using the tax rates and tax laws that have been enacted or substantially enacted at the Balance Sheet date. Deferred tax assets arising from the timing differences are recognized only on the consideration of prudence.

1.8 REVENUE RECOGNITION:

i. Sales of Manufactured Goods:

Sales of goods in respect of domestic sales are recognized on dispatch of goods to the customer. 'Sales' include packing charges, excise duty and are net of returns.

Sales of goods in respect of export sales are recognized as and when the shipment of goods takes place.

ii. Sales of traded goods:

Sales of traded goods are recognized on dispatch of goods to the customers and are net of returns.

iii. Commission receivable on sales:

Commission on sales is accounted for on receipt of the necessary credit note /confirmation, on completion of transaction, from the principals.

iv. Recognition of Export Benefits:

Export Benefit Entitlements under the Duty Entitlement Pass Book Scheme and Duty drawback Scheme of the Government of India are recognized in the year in which the Export Sales are accounted for.

Advance License Benefits on Exports are accounted in the year of utilization of license.

v. Recognition of Income on Contract manufacturing:

Income on contract manufacturing is accounted on dispatch to and acceptance of the prescribed goods by the Customer during the year; at the year end, income from Contract manufacturing is accounted on stock of goods in respect of which contract processing is completed.

vi. Income from Certified Emission Reductions:

Income from Certified Emission Reduction (CERs) from the Project and certified by the Management in respect of the project registered with Executive Board established under the Kyoto Protocol to the UNFCC is accounted on the basis of CERs generated from such project only when the same are duly certified. CERs generated up to March 31, 2009 was accounted on a conservative basis though not certified.

1.9 EMPLOYEE BENEFITS:

i. Defined Contribution plan:

Contribution as per the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 towards Provident Fund and Family Pension Fund are provided for and payments in respect thereof are made to the relevant authorities on actual basis.

ii. Defined Benefit Plan:

Gratuity- In accordance with applicable Indian laws, the Company provides for gratuity, a defined benefit retirement plan ("Gratuity Plan") covering all employees. The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, an amount based on the respective employee's last drawn salary and the years of employment with the Company. Liability with regard to Gratuity Plan is accrued based on actual valuation at the Balance Sheet date carried out by an independent actuary. Actuarial gain or loss is recognized immediately in the statement of profit and loss as income or expense. The Company has an employee gratuity fund managed by Life Insurance Corporation of India ("LIC"), except for the Managing Director, for which also the necessary provision is made based on an actuarial valuation.

Compensated Absences- The Company provides for the encashment of leave with pay based on policy of the Company in this regard. The employees are entitled to accumulate such leave subject to certain limits, for the future encashment. The Company records an obligation for Leave Encashment in the period in which the employee renders the services that increases this entitlement. The Company measures the expected cost of compensated leave as the additional amount that the Company expects to pay as a result of the unused entitlement that has accumulated at the Balance Sheet date on the basis of an independent actuarial valuation.

1.10 RESEARCH AND DEVELOPMENT COSTS:

i. Revenue expenditure on research, if any, is charged against the Profit of the year in which it is incurred.

ii. Development Expenditure :

a. incurred on development of new processes for products which, as per the Management, are completed and are expected to generate future economic benefits, are shown as intangible assets;

The same is amortized on a straight-line basis over a period of five years from the time of capitalization as an intangible asset;

b. incurred on development of new processes for products which, as per the Management, are yet to be completed, are reflected as capital work in progress;

c. other development expenses are charged to the Statement of Profit and Loss in the year in which it is incurred.

An impairment of intangible asset is conducted annually or more often if there is an indication of a decrease in value. The impairment loss, if any, is charged to the Statement of Profit and Loss.

1.11 FOREIGN CURRENCY TRANSACTIONS:

i. Transactions in foreign currencies are recorded, on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

ii. Monetary items which are denominated in foreign currency are translated at the exchange rates prevailing at the Balance Sheet date and profit/loss on translation thereon is credited/ charged to the Statement of Profit and Loss.

iii. Pursuant to the adoption of Companies (Accounting Standard) Rules, 2006, with effect from April 1, 2007, exchange differences arising on settlement or restatement of foreign currency denominated liabilities relating to the acquisition of fixed asset have been recognized in the Statement of Profit and Loss. However, on the basis of the option available to the Company, the Company has decided to add or deduct exchange differences arising on Long-term Foreign Currency Monetary items at rates different from those at which they were initially recorded so far as they relate to the acquisition of a depreciable capital asset (Refer Note 28.2).

iv. In case of forward contracts, the exchange difference between the forward rate and the exchange rate at the date of transaction is recognized as income or expense over the life of the contract.

v. As required by the recent Announcement of the Institute of Chartered Accountants of India on positions of derivatives, keeping in view the principle of prudence as per Accounting Standard 1 on "Disclosure of Accounting Policies', outstanding forward contracts at the Balance Sheet date are reflected by marking them to market and accordingly, the resulting mark to market losses are provided in the Statement of Profit and Loss.

1.12 LEASE RENTALS:

Lease rentals are accounted consistent with the payment schedule provided in the lease agreement.

1.13 BORROWING COSTS:

Borrowing costs, attributable to the acquisition/construction of qualifying assets, are capitalised, net of income, if any. Other borrowing costs are charged as an expense in the period in which the same are incurred. Borrowing cost comprises of interest and other cost incurred in connection with borrowing of funds.

1.14 PRIOR-PERIOD ITEMS:

Income and expenditure pertaining to prior period, wherever material, are disclosed separately.

1.15 DEFERRED REVENUE EXPENDITURE:

Termination benefits paid to the employees are written off over a period of five years from the date of payment.

1.16 IMPAIRMENT OF ASSETS:

If internal / external indications suggest that an asset of the Company may be impaired, the recoverable amount of asset / cash generating unit is determined on the balance sheet date and if it is less than its carrying amount, the carrying amount of asset / cash generating unit is reduced to the said recoverable amount. Subsequently, if there is a change in the indication, since the last impairment was recognized, so that recoverable amount of an asset exceeds its carrying amount, an impairment recognized for an asset in prior accounting period is reversed. The recoverable amount is measured as the higher of the net selling price and value in use of such assets / cash generating unit, which is determined by the present value of the estimated future cash flows.

1.17 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:

i. The Company recognizes as Provisions, the liabilities being present obligations arising from past events, the settlement of which is expected to result in an outflow of resources and which can be measured only by using a substantial degree of estimation.

ii. Contingent Liability is disclosed by way of a note to the financial statements after careful evaluation by the management of the facts and legal aspects of the matters involved.

iii. Contingent Assets are neither recognized nor disclosed.


Mar 31, 2011

1. ACCOUNTING CONVENTION:

The accounts are prepared on the basis of going concern under historical cost convention as also on accrual basis and in accordance with the Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956, which have been prescribed by the Companies (Accounting Standards) Rules, 2006, and the relevant provisions of the Companies Act, 1956.

2. USE OF ESTIMATES:

The preparation of the financial statements in conformity with the generally accepted accounting principles requires Management to make estimates and assumptions to be made that affect the reported amounts of revenues and expenses during the reporting period, the reported amounts of assets and liabilities and the disclosures relating to the contingent liabilities on the date of the financial statements. Examples of such estimates include useful lives of Fixed Assets, provision for doubtful debts/advances, deferred tax etc. Actual results could differ from those estimates. Such difference is recognised in the period/s in which the results are known / materialised.

3. FIXED ASSETS:

a. Land (Freehold) is valued at cost;

b. Land (Leasehold) is valued at cost less amortisation;

c. Other Fixed Assets are valued at cost less accumulated depreciation. ‘Cost for the aforesaid purposes comprises of its purchase price and any attributable cost of bringing the asset to its working condition for its intended use, net of recoverable duties, if any.

4. DEPRECIATION:

Depreciation on assets installed/acquired after April 2, 1987 is provided pro-rata on straight line method at the rates and on the basis specified in Schedule XIV to the Companies Act,1956, as revised by Notification No.G.S.R.756 (E) dated December 16, 1993 and further revised by Notification No.101 (E) of the Department of Company Affairs on the following basis:

a. In respect of assets installed/acquired prior to April 1, 1993 at the rates computed by allocating the unamortized value of assets existing as on March 31, 1993 as per the Books of Account, over the remaining part of the specified period which is recomputed by applying to the original cost, the revised rates prescribed in Schedule XIV to the Companies Act, 1956.

b. In respect of assets installed/acquired on/after April 1, 1993 at the rates prescribed in Schedule XIV to the Companies Act, 1956.

Leasehold land is being amortized over the period of lease.

5. INVESTMENTS:

a. Investments, which are long term, are stated at cost. A provision for diminution, if any, is made to recognise a decline, other than temporary, in the value of investments.

b. Profit or loss on sale of long term investments, if any, is calculated by considering the weighted average amount of the total holding of the investment.

6. INVENTORIES:

a. Stores, Spares, Furnace Oil etc.:

At cost or net realisable value, whichever is lower. Cost for this purpose comprises of basic cost (net of CENVAT and VAT, if any) including transportation.

b. Work-in-process:

At cost or net realisable value, whichever is lower. Cost, for this purpose, includes all direct costs and other related fixed overheads.

c. Finished Goods:

At cost or net realisable value, whichever is lower. Cost, for this purpose, includes all direct costs, and other related factory overheads. Excise duty on goods awaiting clearance has been provided for.

d. Raw Materials and Packing Materials:

At cost or net realisable value, whichever is lower on Weighted Average Method basis. Cost, for this purpose, includes basic cost (net of CENVAT and VAT, if any) and all direct expenses.

e. Traded goods:

At landed cost. Cost, for this purpose, includes Direct cost and Incidental expenses or net realisable value, whichever is lower.

f. Obsolesence of inventory, if any, is determined on material consumption pattern/specific review and is accordingly provided for.

7. TAXATION:

a. Current Tax: Provision for current tax is made on the estimated taxable income at the rate applicable to the relevant assessment year.

b. Deferred Tax: In accordance with the Accounting Standard 22 - “Accounting for Taxes on Income”, the deferred tax for the timing differences is measured using the tax rates and tax laws that have been enacted or substantially enacted at the Balance Sheet date. Deferred tax assets arising from the timing differences are recognised only on the consideration of prudence.

c. Fringe Benefit Tax: Provision for Fringe Benefit Tax is made in accordance with the provisions of the Income-tax Act, 1961.

8. REVENUE RECOGNITION:

a. Sales of Manufactured Goods:

Sales of goods in respect of domestic sales are recognised on despatch of goods to the customer. ‘Sales include packing charges, excise duty and are net of returns.

Sales of goods in respect of export sales are recognised as and when the shipment of goods takes place.

b. Sales of traded goods:

Sales of traded goods are recognised on despatch of goods to the customers and are net of returns.

c. Commission receivable on sales:

Commission on sales is accounted for on receipt of the necessary credit note /confirmation, on completion of transaction, from the principals.

d. Recognition of Export Benefits:

Export Benefit Entitlements under the Duty Entitlement Pass Book Scheme of the Government of India are recognised in the year in which the Export Sales are accounted for.

Advance License Benefits on Exports are accounted in the year of utilisation of license.

e. Recognition of Income on Contract manufacturing:

Income on contract manufacturing is accounted on despatch to and acceptance of the prescribed goods by the Customer during the year; at the year end, income from Contract manufacturing is accounted on stock of goods in respect of which contract processing is completed.

f. Income from Certified Emission Reductions:

Income from Certified Emission Reduction (CERs) from the Project and certified by the Management in respect of the project registered with Executive Board established under the Kyoto Protocol to the UNFCC is accounted on the basis of CERs generated from such project only when the same are duly certified. CERs generated up to March 31, 2009 was accounted on a conservative basis though not certified.

9. EMPLOYEE BENEFITS:

a. Defined Contribution Plan:

Contribution as per the Employees Provident Funds and Miscellaneous Provisions Act, 1952 towards Provident Fund and Family Pension Fund are provided for and payments in respect thereof are made to the relevant authorities on actual basis.

b. Defined Benefit Plan:

Gratuity- In accordance with applicable Indian laws, the Company provides for gratuity, a defined benefit retirement plan (“Gratuity Plan”) covering all employees. The Gratuity Plan provides a lumpsum payment to vested employees, at retirement or termination of employment, an amount based on the respective employees last drawn salary and the years of employment with the Company. Liability with regard to Gratuity Plan is accrued based on actual valuation at the Balance Sheet date carried out by an independent actuary. Actuarial gain or loss is recognized immediately in the statement of profit and loss as income or expense. The Company has an employee gratuity fund managed by Life Insurance Corporation of India (“LIC”), except for the Managing Director, for which also the necessary provision is made based on an actuarial valuation.

Compensated Absences- The Company provides for the encashment of leave with pay based on policy of the Company in this regard. The employees are entitled to accumulate such leave subject to certain limits, for the future encashment. The Company records an obligation for Leave Encashment in the period in which the employee renders the services that increases this entitlement. The Company measures the expected cost of compensated leave as the additional amount that the Company expects to pay as a result of the unused entitlement that has accumulated at the Balance Sheet date on the basis of an independent actuarial valuation.

10. RESEARCH AND DEVELOPMENT COSTS:

a. Revenue expenditure on research, if any, is charged against the Profit of the year in which it is incurred.

b. Development Expenditure :

i. incurred on development of new processes for products which, as per the Management, are completed and are expected to generate future economic benefits, are shown as intangible assets;

The same is amortised on a straight-line basis over a period of five years from the time of capitalisation as an intangible asset;

ii. incurred on development of new processes for products which, as per the Management, are yet to be completed, are reflected as capital work in progress;

iii. other development expenses are charged to the Profit and Loss Account in the year in which it is incurred.

An impairment of intangible asset is conducted annually or more often if there is an indication of a decrease in value. The impairment loss, if any, is charged to the Profit and Loss Account.

11. FOREIGN CURRENCY TRANSACTIONS:

a. Transactions in foreign currencies are recorded, on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

b. Monetary items which are denominated in foreign currency are translated at the exchange rates prevailing at the Balance Sheet date and profit/loss on translation thereon is credited/ charged to the Profit and Loss Account.

c. Pursuant to the adoption of Companies (Accounting Standard) Rules, 2006, with effect from April 1, 2007, exchange differences arising on settlement or restatement of foreign currency denominated liabilities relating to the acquisition of fixed asset are recognised in the Profit and Loss Account.

d. In case of forward contracts, the exchange difference between the forward rate and the exchange rate at the date of transaction is recognised as income or expense over the life of the contract.

e. As required by the recent Announcement of the Institute of Chartered Accountants of India on positions of derivatives, keeping in view the principle of prudence as per Accounting Standard 1 on “Disclosure of Accounting Policies”, outstanding forward contracts at the Balance Sheet date are reflected by marking them to market and accordingly, the resulting mark to market losses are provided in the Profit and Loss Account.

12. LEASE RENTALS:

Lease rentals are accounted consistent with the payment schedule provided in the lease agreement.

13. BORROWING COSTS:

Borrowing costs, attributable to the acquisition/construction of qualifying assets, are capitalised, net of income, if any. Other borrowing costs are charged as an expense in the period in which the same are incurred. Borrowing cost comprises of interest and other cost incurred in connection with borrowing of funds.

14. PRIOR-PERIOD ITEMS:

Income and expenditure pertaining to prior period, wherever material, are disclosed separately.

15. DEFERRED REVENUE EXPENDITURE:

Termination benefits paid to the employees are written off over a period of five years from the date of payment.

16. IMPAIRMENT OF ASSETS:

If internal / external indications suggest that an asset of the Company may be impaired, the recoverable amount of asset / cash generating unit is determined on the balance sheet date and if it is less than its carrying amount, the carrying amount of asset / cash generating unit is reduced to the said recoverable amount. Subsequently, if there is a change in the indication, since the last impairment was recognized, so that recoverable amount of an asset exceeds its carrying amount, an impairment recognized for an asset in prior accounting period is reversed. The recoverable amount is measured as the higher of the net selling price and value in use of such assets / cash generating unit, which is determined by the present value of the estimated future cash flows.

17. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:

a. The Company recognizes as Provisions, the liabilities being present obligations arising from past events, the settlement of which is expected to result in an outflow of resources and which can be measured only by using a substantial degree of estimation.

b. Contingent Liability is disclosed by way of a note to the financial statements after careful evaluation by the management of the facts and legal aspects of the matters involved.

c. Contingent Assets are neither recognized nor disclosed.


Mar 31, 2010

1. ACCOUNTING CONVENTION:

The accounts are prepared on the basis of going concern under historical cost convention as also accrual basis and in accordance with the Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956, which have been prescribed by the Companies (Accounting Standards) Rules, 2006, and the relevant provisions of the Companies Act, 1956.

2. USE OF ESTIMATES:

The preparation of the financial statements in conformity with the generally accepted accounting principles requires Management to make estimates and assumptions to be made that affect the reported amounts of revenues and expenses during the reporting period, the reported amounts of assets and liabilities and the disclosures relating to the contingent liabilities on the date of the financial statements. Examples of such estimates include useful lives of Fixed Assets, provision for doubtful debts/advances, deferred tax etc. Actual results could differ from those estimates. Such difference is recognised in the period/s in which the results are known / materialised.

3. FIXED ASSETS:

a. Land (Freehold) is valued at cost;

b. Land (Leasehold) is valued at cost less amortisation;

c. Other Fixed Assets are valued at cost less accumulated depreciation. Cost for the aforesaid purposes comprises of its purchase price and any attributable cost of bringing the asset to its working condition for its intended use, net of recoverable duties, if any.

4. DEPRECIATION:

Depreciation on assets installed/acquired after April 2, 1987 is provided pro-rata on straight line method at the rates and on the basis specified in Schedule XIV to the Companies Act,1956, as revised by Notification No.G.S.R.756 (E) dated December 16, 1993 and further revised by Notification No.101 (E) of the Department of Company Affairs on the following basis:

a. In respect of assets installed/acquired prior to April 1, 1993 at the rates computed by allocating the unamortized value of assets existing as on March 31. 1993 as per the Books of Account, over the remaining part of the specified period which is recomputed by applying to the original cost, the revised rates prescribed in Schedule XIV to the Companies Act, 1956.

b. In respect of assets installed/acquired on/after April 1, 1993 at the rates prescribed in Schedule XIV to the Companies Act, 1956.

Leasehold land is being amortized over the period of lease.

5. INVESTMENTS:

a. Investments, which are long term, are stated at cost. A provision for diminution, if any, is made to recognise a decline, other than temporary, in the value of investments.

b. Profit or loss on sale of long term investments, if any, is calculated by considering the weighted average amount of the total holding of the investment.

6. INVENTORIES:

a. Stores, Spares, Furnace Oil etc.:

As cost on net realisable value, whichever is lower. Cost for this purpose comprises of basic cost (net of CENVAT and VAT, if any) including transportation.

b. Work-in-process:

At cost or net realisable value, whichever is lower. Cost, for this purpose, includes all direct costs and other related fixed overheads.

c. Finished Goods:

At cost or net realisable value, whichever is lower. Cost, for this purpose, includes all direct costs, and other related factory overheads. Excise duty on goods awaiting clearance has been provided for

d. Raw Materials and Packing Materials:

At cost or net realisable value, whichever is lower on Weighted Average Method basis. Cost, for this purpose, includes basic cost (net of CENVAT and VAT, if any) and all direct expenses.

e. Traded goods:

At landed cost. Cost, for this purpose, includes Direct cost and Incidental expenses or net realisable value, whichever is lower.

f. Obsolesence of inventory, if any, is determined on material consumption pattern/specific review and is accordingly provided for.

7. TAXATION:

a. Current Tax: Provision for current tax is made on the estimated taxable income at the rate applicable to the relevant assessment year.

b. Deferred Tax: In accordance with the Accounting Standard 22 - "Accounting for Taxes on Income", the deferred tax for the timing differences is measured using the tax rates and tax laws that have been enacted or substantially enacted at the Balance Sheet date. Deferred tax assets arising from the timing differences are recognised only on the consideration of prudence.

c. Fringe Benefit Tax: Provision for Fringe Benefit Tax is made in accordance with the provisions of the Income-tax Act, 1961.

8. REVENUE RECOGNITION:

a. Sales of Manufactured Goods:

Sales of goods in respect of domestic sales are recognised on despatch of goods to the customer. Sales include packing charges, excise duty and are net of returns.

Sales of goods in respect of export sales are recognised as and when the shipment of goods takes place.

b. Sales of traded Goods:

Sales of traded goods are recognised on despatch of goods to the customers and are net of returns.

c. Commission receivable on sales:

Commission on sales is accounted for on receipt of the necessary credit note /confirmation, on completion of transaction, from the principals.

d. Recognition of Export Benefits:

Export Benefit Entitlements under the Duty Entitlement Pass Book Scheme of the Government of India are recognised in the year in which the Export sales are accounted for.

Advance License Benefits on Exports are accounted in the year of utilisation of license.

e. Recognition of Income on Contract manufacturing:

Income on contract manufacturing is accounted on despatch to and acceptance of the prescribed goods by the Customer during the year; at the year end, income from Contract manufacturing is accounted on stock of goods in respect of which contract processing is completed.

f. Income from Certified Emission Reductions:

Income from Certified Emission Reduction (CERs) from the Project and certified by the Management in respect of the project registered with Executive Board established under the Kyoto Protocol to the UNFCC is accounted in the basis of CERs generated from such project on a conservative estimate.

9. EMPLOYEE BENEFITS:

a. Defined Contribution Plan:

Contribution as per the Employees Provident Funds and Miscellaneous Provisions Act, 1952 towards Provident Fund and Family Pension Fund are provided for and payments in respect thereof are made to the relevant authorities on actual basis.

b. Defined Benefit Plan:

Gratuity- In accordance with applicable Indian laws, the Company provides for gratuity, a defined benefit retirement plan ("Gratuity Plan") covering all employees. The Gratuity Plan provides a lumpsum payment to vested employees, at retirement or termination of employment, an amount based on the respective employees last drawn salary and the years of employment with the Company. Liability with regard to Gratuity Plan is accrued based on actual valuation at the Balance Sheet date carried out by an independent actuary. Actuarial gain or loss is recognized immediately in the statement of profit and loss as income or expense. The Company has an employee gratuity fund managed by Life Insurance Corporation of India ("LIC"), except for the Managing Director, for which also the necessary provision is made based on an actuarial valuation.

Compensated Absences- The Company provides for the encashment of leave with pay based on policy of the Company in this regard. The employees are entitled to accumulate such leave subject to certain limits, for the future encashment. The Company records an obligation for Leave Encashment in the period in which the employee renders the services that increases this entitlement. The Company measures the expected cost of compensated leave as the additional amount that the Company expects to pay as a result of the unused entitlement that has accumulated at the Balance Sheet date on the basis of an independent actuarial valuation.

10. RESEARCH AND DEVELOPMENT COSTS:

a. Revenue expenditure on research, if any, is charged against the Profit of the year In which it is incurred.

b. Development Expenditure :

i. incurred on development of new processes for products which, as per the Management, are completed and are expected to generate future economic benefits, are shown as intangible assets;

The same is amortised on a straight-line basis over a period of five years from the time of capitalisation as an intangible asset;

ii. incurred on development of new processes for products which, as per the Management, are yet to be completed, are reflected as capital work in progress;

iii. other development expenses are charged to the Profit and Loss Account in the year in which it is incurred.

An impairment of intangible asset is conducted annually or more often if there is an indication of a decrease in value. The impairment loss, if any, is charged to the Profit and Loss Account.

11. FOREIGN CURRENCY TRANSACTIONS:

a. Transactions in foreign currencies are recorded, on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

b. Monetary items which are denominated in foreign currency are translated at the exchange rates prevailing at the Balance Sheet date and profit/loss on translation thereon is credited/ charged to the Profit and Loss Account.

c. Pursuant to the adoption of Companies (Accounting Standard) Rules, 2006, with effect from April 1, 2007, exchange differences arising on settlement or restatement of foreign currency denominated liabilities relating to the acquisition of fixed asset are recognised in the Profit and Loss Account.

d. In case of forward contracts, the exchange difference between the forward rate and the exchange rate at the date of transaction is recognised as income or expense over the life of the contract.

e. As required by the recent Announcement of the Institute of Chartered Accountants of India on positions of derivatives, keeping in view the principle of prudence as per Accounting Standard 1 on "Disclosure of Accounting Policies", outstanding forward contracts at the Balance Sheet date are reflected by marking them to market and accordingly, the resulting mark to market losses are provided in the Profit and Loss Account.

12. LEASE RENTALS:

Lease rentals are accounted consistent with the payment schedule provided in the lease agreement.

13. BORROWING COSTS:

Borrowing costs, attributable to the acquisition/construction of qualifying assets, are capitalised, net of income, if any. Other borrowing costs are charged as an expense in the period in which the same are incurred. Borrowing cost comprises of interest and other cost incurred in connection with borrowing of funds.

14. PRIOR-PERIOD ITEMS:

Income and expenditure pertaining to prior period, wherever material, are disclosed separately.

15. DEFERRED REVENUE EXPENDITURE:

Termination benefits paid to the employees are written off over a period of five years from the date of payment.

16. IMPAIRMENT OF ASSETS:

If internal / external indications suggest that an asset of the Company may be impaired, the recoverable amount of asset / cash generating unit is determined on the balance sheet date and if it is less than its carrying amount, the carrying amount of asset / cash generating unit is reduced to the said recoverable amount. Subsequently, if there is a change in the indication, since the last impairment-was recognized, so that recoverable amount of an asset exceeds its carrying amount, an impairment recognized for an asset in prior accounting period is reversed. The recoverable amount is measured as the higher of the net selling price and value in use of such assets / cash generating unit, which is determined by the present value of the estimated future cash flows.

17. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:

a. The Company recognizes as Provisions, the liabilities being present obligations arising from past events, the settlement of which is expected to result in an outflow of resources and which can be measured only by using a substantial degree of estimation.

b. Contingent Liability is disclosed by way of a note to the financial statements after careful evaluation by the. management of the facts and legal aspects of the matters involved.

c. Contingent Assets are neither recognized nor disclosed.