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Accounting Policies of BEML Ltd. Company

Mar 31, 2016

1. Basis of Accounting

The financial statements are prepared and presented under the historical cost convention, in accordance with Generally Accepted Accounting Principles in India (GAAP), on the accrual basis of accounting, except as stated herein. GAAP comprises of the mandatory Accounting Standards (AS) specified under section 133 read with Rule 7 of Companies (Accounts) Rules, 2014 by the Central Government, to the extent applicable, and the provisions of the Companies Act, 2013.

2. Use of Estimates

The preparation of the financial statements in conformity with GAAP requires that the Management make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liability as on the date of financial statements and the reported amounts of revenue and expenses during the reporting period. Although such estimates are made on a reasonable and prudent basis taking into account all available information, actual results could differ from these estimates and such differences are recognised in the period in which the results are ascertained.

3. Fixed Asset

A. Capitalisation

(a) The Fixed Assets are stated at cost.

(b) The cost of the Fixed Asset comprises its purchase price and any attributable cost of bringing the asset to its working condition for its intended use.

(c) Expenditure on land development is capitalised.

(d) Expenditure on reconditioning, rebuilding and major overhaul of an asset are capitalized if technical assessment indicates increase in future benefits from the existing assets beyond its previously assessed standards of performance (increase in capacity or life or efficiency or productivity).

(e) Jigs and fixtures of unit value of Rs.5 lakhs and above are capitalized and those with unit value below Rs.5 lakhs are charged off in the year of incurrence.

B. Depreciation

(a) Depreciation is charged on Straight Line Method basis adopting ''Useful Lives'' as per Schedule-II of the Companies Act, 2013 (or such shorter useful lives which in the opinion of the management are appropriate), calculated from the month following the month of capitalisation. Depreciation on additions or extensions to existing assets is provided so as to co-terminate with the life of the original asset if it becomes integral part of the existing asset or on useful life of the asset if it is capable of independent use.

(b) For Assets whose unit cost does not exceed Rs.5000/- depreciation is provided at the rate of hundred percent in the year of capitalization.

(c) Cost of leasehold land is amortised over the period of lease on pro-rata basis.

(d) Jigs & Fixtures which are capitalized are depreciated over a period of three years.

C. Borrowing Cost

Borrowing Costs that are directly attributable to the acquisition, construction or production of a qualifying fixed asset are capitalised as part of the cost of the asset.

D. Impairment of Assets

The company assesses the impairment of assets at each Balance Sheet date. The loss on account of impairment, if any, is accounted accordingly.

4. Intangible Assets

(a) Software

The cost of software internally generated / purchased for internal use which is not an integral part of the related hardware is recognised as an Intangible Asset and is amortised on straight line method based on technical assessment for a period not exceeding ten years. Software which is an integral part of related hardware is capitalised along with the hardware.

(b) Technical Know-how

Expenditure on Technical Know-how is recognised as an Intangible Asset and amortised on straight line method based on technical assessment for a period not exceeding ten years.

For Sl.No. (a) & (b) above, amortization commences from the month following the month during which the asset is available for use.

5. Inventory Valuation

(i) Raw materials, Components, Stores and Spare parts are valued at lower of Weighted Average Cost and estimated net realizable value.

(ii) Work-in-progress is valued at lower of cost of materials, labour & production overheads based on normative capacity and estimated net realizable value.

(iii) Finished stock is valued at lower of cost and estimated net realizable value.

(iv) Estimated costs are considered wherever actual costs are not available.

(v) The cost is adjusted for decline in value by writing down the value based on specific identification. Necessary provision is made for non-moving items.

(vi) Based on technical assessment, provision is made for revalidation/refurbishment of finished goods.

(vii) Scrap is valued at estimated net realizable value.

6. Advances from customers

Advances from customers include advances / progress payments received as per letters of intent / sale contracts and are net after adjustments for sales accounted under respective contracts.

7. Sales / Other Income

(i) Sales for products viz., equipments, aggregates, attachments, spares and ancillary products is recognised when risks and rewards of ownership pass on to the customer as per contractual terms.

(ii) In the case of contracts for supply of complex equipments/systems where the normal cycle time of completion and delivery period is more than 12 months and the value of the equipment/system is more than Rs.25 crores, revenue is recognised on the ''percentage completion method''. Percentage completion is based on the ratio of actual costs incurred on the contract up to the reporting date to the estimated total cost of the product.

Since the outcome of such a contract can be estimated reliably only on achieving certain progress, revenue is recognised up to 25% progress only to the extent of costs thereafter revenue is recognised on proportionate basis and a contingency provision equal to 20% of the surplus of revenue over costs is made while anticipated losses are recognised in full.

(iii) Where sale prices are not established, sales are recognised provisionally at prices likely to be realised. Difference, if any, is accounted in the year of finalization of price.

(iv) Sales include excise duty wherever applicable but exclude sales tax.

(v) Duty drawback claims on exports are accounted on preferring the claims.

(vi) Claims for escalation are recognised as per escalation formula provided in the contract. If the contract does not provide for escalation, claim for the same is recognized on acceptance by the customer.

(vii) Where the contract provides for installation and commissioning and price for the same is agreed separately, revenue for installation and commissioning is recognised on conclusion of installation and commissioning. Where installation and commissioning fee is not separately stipulated, the revenue for the product is recognised, however, estimated cost as technically assessed for such installation and commissioning to be incurred, is provided for.

8. Employee Benefits

(i) Short term employee benefits are recognised as an expense at the undiscounted amount in the profit and loss account of the year in which the related service is rendered.

(ii) Post employment and other long term employee benefits are recognised as an expense in the profit and loss account for the year in which the employee has rendered services. The expense is recognised at the present value of the amounts payable, determined using actuarial valuation techniques. Actuarial gain and losses in respect of post-employment and other long term benefits are charged to the profit and loss account.

9. Accounting for Foreign Currency Transactions

(i) Transactions in foreign currency are recorded in rupees by applying to the foreign currency amount, the exchange rate prevailing as on the date of transaction.

(ii) The outstanding balances of monetary items relating to foreign currency transactions are stated in rupees by adopting the rate of exchange prevailing on the date of Balance Sheet.

(iii) Exchange rate differences consequent to restatement / settlement are recognised as income / expenditure.

(iv) In the case of forward exchange contracts, the premium or discount arising at the inception of the contract is accounted for over the life of the contract. Exchange differences on such a contract are recognised in the statement of profit or loss in the reporting period in which the exchange rate changes.

10. Contractual Obligations

Warranty liability for contractual obligation in respect of equipments / spares sold to customers is ascertained on the basis of an annual technical assessment.

11. Research & Development

Research expenditure is charged off in the year of incurrence. The expenditure on development of new products is capitalized or where the same is intended for sale, it is inventorised. Amortization of the capitalised expenditure is on straight line method based on technical assessment for a period not exceeding ten years. The amortization commences from the month following the month during which the asset is available for use. Expenditure on fixed assets relating to Research & Development is capitalised.

12. Prior Period Items

Prior period adjustments are those adjustments, which are over Rs.1 lakh in each case, arising out of correction of errors and omissions made in the past years.

13. Under / Over Absorption of Cost

Adjustments for under / over absorption of costs on jobs, is made only if the extent of under / over recovery exceeds one percent of turnover.

14. Taxes on Income

The tax expense comprises of current tax and deferred tax. The provision for current tax is ascertained on the basis of assessable profits computed in accordance with provisions of the Income Tax Act, 1961. The deferred tax is recognised on all timing differences resulting from the recognition of items in the financial statements and in estimating current income tax provision, subject to consideration of prudence in respect of deferred tax assets. The carrying amount of deferred tax asset/ liability is reviewed at each balance sheet date.

15. Leased Assets

Lease rentals recovered on assets given under operating leases are recognised in the Profit & Loss Account. Initial direct costs are expensed on incurrence.

16. Investments

Long-term investments are carried at cost. Permanent decline in the value of such investments is recognised and provided for. Current investments are carried at lower of cost and fair value.

17. Provisions, Contingent Liabilities and Contingent Assets

A provision is recognized when

- A present obligation arises as a result of past events.

- It is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made.

Provisions are determined based on the best estimates required to fulfill the obligations on the Balance Sheet date. Provisions are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.

Contingent Liabilities are not recognized but are disclosed in the notes.

Contingent Assets are neither recognized nor disclosed in the financial statements.

18. Others

(i) Special Tools up to the unit value of Rs.5000 are charged off in the year of incurrence and those above unit value of Rs.5000 are amortized over a period of three years.

(ii) Hand tools are charged to expenses at the time of issue.

(iii) Expenditure on Voluntary Retirement Scheme is expensed in the year of incurrence.


Mar 31, 2015

1. Basis of Accounting

The financial statements are prepared and presented under the historical cost convention, in accordance with Generally Accepted Accounting Principles in India (GAAP), on the accrual basis of accounting, except as stated herein. GAAP comprises of the mandatory Accounting Standards (AS) specified under section 133 read with Rule 7 of Companies (Accounts) Rules, 2014 by the Central Government, to the extent applicable, and the provisions of the Companies Act, 2013.

2. Use of Estimates

The preparation of the financial statements in conformity with GAAP requires that the Management make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liability as on the date of financial statements and the reported amounts of revenue and expenses during the reporting period. Although such estimates are made on a reasonable and prudent basis taking into account all available information, actual results could differ from these estimates and such differences are recognised in the period in which the results are ascertained.

3. Fixed Asset

A. Capitalisation

(a) The Fixed Assets are stated at cost.

(b) The cost of the Fixed Asset comprises its purchase price and any attributable cost of bringing the asset to its working condition for its intended use.

(c) Expenditure on land development is capitalised.

(d) Expenditure on reconditioning, rebuilding and major overhaul of an asset are capitalized if technical assessment indicates increase in future benefits from the existing assets beyond its previously assessed standards of performance (increase in capacity or life or efficiency or productivity).

(e) Jigs and fixtures of unit value of Rs. 5 lakhs and above are capitalized and those with unit value below Rs. 5 lakhs are charged off in the year of incurrence.

B. Depreciation

(a) Depreciation is charged on Straight Line Method basis adopting ''Useful Lives'' as per Schedule-II of the Companies Act, 2013 (or such shorter useful lives which in the opinion of the management are appropriate), calculated from the month following the month of capitalisation. Depreciation on additions or extensions to existing assets is provided so as to co-terminate with the life of the original asset if it becomes integral part of the existing asset or on useful life of the asset if it is capable of independent use.

(b) For Assets whose unit cost does not exceed Rs. 5000/- depreciation is provided at the rate of hundred percent in the year of capitalization.

(c) Cost of leasehold land is amortised over the period of lease on pro-rata basis.

(d) Jigs & Fixtures which are capitalized are depreciated over a period of three years.

C. Borrowing Cost

Borrowing Costs that are directly attributable to the acquisition, construction or production of a qualifying fixed asset are capitalised as part of the cost of the asset.

D. Impairment of Assets

The company assesses the impairment of assets at each Balance sheet date. The loss on account of impairment, if any, is accounted accordingly.

4. Intangible Assets

a) Software

The cost of software internally generated /purchased for internal use which is not an integral part of the related hardware is recognised as an Intangible Asset and is amortised on straight line method based on technical assessment for a period not exceeding ten years. Software which is an integral part of related hardware is capitalised along with the hardware.

b) Technical Know-how

Expenditure on Technical Know-how is recognised as an Intangible Asset and amortised on straight line method based on technical assessment for a period not exceeding ten years.

For Sl.No. (a) & (b) above, amortization commences from the month following the month during which the asset is available for use.

5. Inventory Valuation

(i) Raw materials, Components, Stores and Spare parts are valued at lower of Weighted Average Cost and estimated net realizable value.

(ii) Work-in-progress is valued at lower of cost of materials, labour & production overheads based on normative capacity and estimated net realizable value.

(iii) Finished stock is valued at lower of cost and estimated net realizable value.

(iv) Estimated costs are considered wherever actual costs are not available.

(v) The cost is adjusted for decline in value by writing down the value based on specific identification. Necessary provision is made for non-moving items.

(vi) Based on technical assessment, provision is made for revalidation/refurbishment of finished goods.

(vii) Scrap is valued at estimated net realizable value.

6. Advances from customers

Advances from customers include advances / progress payments received as per letters of intent / sale contracts and are net after adjustments for sales accounted under respective contracts.

7. Sales / Other Income

(i) Sales for products viz., equipment, aggregates, attachments, spares and ancillary products is recognised when risks and rewards of ownership pass on to the customer as per contractual terms.

(ii) In the case of contracts for supply of complex equipment/systems where the normal cycle time of completion and delivery period is more than 12 months and the value of the equipment/system is more than Rs. 25 crores, revenue is recognised on the ''percentage completion method''. Percentage completion is based on the ratio of actual costs incurred on the contract up to the reporting date to the estimated total cost of the product.

Since the outcome of such a contract can be estimated reliably only on achieving certain progress, revenue is recognised up to 25% progress only to the extent of costs, thereafter revenue is recognised on proportionate basis and a contingency provision equal to 20% of the surplus of revenue over costs is made while anticipated losses are recognised in full.

(iii) Where sale prices are not established, sales are recognised provisionally at prices likely to be realised. Difference, if any, is accounted in the year of finalization of price.

(iv) Sales include excise duty wherever applicable but exclude sales tax.

(v) Duty drawback claims on exports are accounted on preferring the claims.

(vi) Claims for escalation are recognised as per escalation formula provided in the contract. If the contract does not provide for escalation, claim for the same is recognized on acceptance by the customer.

(vii) Where the contract provides for installation and commissioning and price for the same is agreed separately, revenue for installation and commissioning is recognised on conclusion of installation and commissioning. Where installation and commissioning fee is not separately stipulated, the revenue for the product is recognised, however, estimated cost as technically assessed for such installation and commissioning to be incurred, is provided for.

8. Employee Benefits

(i) Short term employee benefits are recognised as an expense at the undiscounted amount in the profit and loss account of the year in which the related service is rendered.

(ii) Post employment and other long term employee benefits are recognised as an expense in the profit and loss account for the year in which the employee has rendered services. The expense is recognised at the present value of the amounts payable, determined using actuarial valuation techniques. Actuarial gain and losses in respect of post-employment and other long term benefits are charged to the profit and loss account.

9. Accounting for Foreign Currency Transactions

(i) Transactions in foreign currency are recorded in rupees by applying to the foreign currency amount, the exchange rate prevailing as on the date of transaction.

(ii) The outstanding balances of monetary items relating to foreign currency transactions are stated in rupees by adopting the rate of exchange prevailing on the date of Balance Sheet.

(iii) Exchange rate differences consequent to restatement / settlement are recognised as income / expenditure.

(iv) In the case of forward exchange contracts, the premium or discount arising at the inception of the contract is accounted for over the life of the contract. Exchange differences on such a contract are recognised in the statement of profit or loss in the reporting period in which the exchange rate changes.

10. Contractual Obligations

Warranty liability for contractual obligation in respect of equipment / spares sold to customers is ascertained on the basis of an annual technical assessment.

11. Research & Development

Research expenditure is charged off in the year of incurrence. The expenditure on development of new products is capitalized or where the same is intended for sale, it is inventorised. Amortization of the capitalised expenditure is on straight line method based on technical assessment for a period not exceeding ten years. The amortization commences from the month following the month during which the asset is available for use. Expenditure on fixed assets relating to Research & Development is capitalised.

12. Prior Period Items

Prior period adjustments are those adjustments, which are over Rs. 1 lakh in each case, arising out of correction of errors and omissions made in the past years.

13. Under / Over Absorption of Cost

Adjustments for under / over absorption of costs on jobs, is made only if the extent of under / over recovery exceeds one percent of turnover.

14. Taxes on Income

The tax expense comprises of current tax and deferred tax. The provision for current tax is ascertained on the basis of assessable profits computed in accordance with provisions of the Income Tax Act, 1961. The deferred tax is recognised on all timing differences resulting from the recognition of items in the financial statements and in estimating current income tax provision, subject to consideration of prudence in respect of deferred tax assets. The carrying amount of deferred tax asset/ liability is reviewed at each balance sheet date.

15. Leased Assets

Lease rentals recovered on assets given under operating leases are recognised in the Profit & Loss Account. Initial direct costs are expensed on incurrence.

16. Investments

Long-term investments are carried at cost. Permanent decline in the value of such investments is recognised and provided for. Current investments are carried at lower of cost and fair value.

17. Provisions, Contingent Liabilities and Contingent Assets

A provision is recognized when

- A present obligation arises as a result of past events.

- It is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made.

Provisions are determined based on the best estimates required to fulfill the obligations on the balance sheet date. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

Contingent Liabilities are not recognized but are disclosed in the notes.

Contingent Assets are neither recognized nor disclosed in the financial statements.

18. Others

(i) Special Tools up to the unit value of Rs. 5000 are charged off in the year of incurrence and those above unit value of Rs. 5000 are amortized over a period of three years.

(ii) Hand tools are charged to expenses at the time of issue.

(iii) Expenditure on Voluntary Retirement Scheme is expensed in the year of incurrence.


Mar 31, 2014

1. Basis of Accounting

The financial statements are prepared and presented under the historical cost convention, in accordance with Generally Accepted Accounting Principles in India (GAAP), on the accrual basis of accounting, except as stated herein. GAAP comprises of the mandatory Accounting Standards (AS) covered by the Companies (Accounting Standard) Rules 2006 issued by the Central Government, to the extent applicable, and the provisions of the Companies Act, 1956 and these have been consistently applied.

2. Use of Estimates

The preparation of the financial statements in conformity with GAAP requires that the Management make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liability as on the date of financial statements and the reported amounts of revenue and expenses during the reporting period. Although such estimates are made on a reasonable and prudent basis taking into account all available information, actual results could differ from these estimates and such differences are recognised in the period in which the results are ascertained.

3. Fixed Asset

A. Capitalisation

(a) The Fixed Assets are stated at cost.

(b) The cost of the Fixed Asset comprises its purchase price and any attributable cost of bringing the asset to its working condition for its intended use.

(c) Expenditure on land development is capitalised.

(d) Expenditure on reconditioning, rebuilding and major overhaul of an asset are capitalized if technical assessment indicates increase in future benefits from the existing assets beyond its previously assessed standards of performance (increase in capacity or life or efficiency or productivity).

(e) Jigs and fixtures of unit value of Rs. 5 lakhs and above are capitalized and those with unit value below Rs. 5 lakhs are charged off in the year of incurrence.

B. Depreciation

(a) Depreciation is charged on Straight Line Method basis at rates as per Schedule XIV of the Companies Act, 1956 (or such higher rates which in the opinion of the management are appropriate), calculated from the month following the month of capitalisation. Depreciation on additions or extensions to existing assets is provided so as to co- terminate with the life of the original asset if it becomes integral part of the existing asset or on useful life of the asset if it is capable of independent use.

(b) For Assets whose unit cost does not exceed Rs. 5000/- depreciation is provided at the rate of hundred percent in the year of capitalization.

(c) Cost of leasehold land is amortised over the period of lease on pro-rata basis.

(d) Jigs & Fixtures which are capitalized are depreciated over a period of three years.

C. Borrowing Cost

Borrowing Costs that are directly attributable to the acquisition, construction or production of a qualifying fixed asset are capitalised as part of the cost of the asset.

D. Impairment of Assets

The company assesses the impairment of assets at each Balance sheet date. The loss on account of impairment, if any, is accounted accordingly.

4. Intangible Assets

(a) Software

The cost of software internally generated /purchased for internal use which is not an integral part of the related hardware is recognised as an Intangible Asset and is amortised on straight line method based on technical assessment for a period not exceeding ten years. Software which is an integral part of related hardware is capitalised along with the hardware.

(b) Technical Know-how

Expenditure on Technical Know-how is recognised as an Intangible Asset and amortised on straight line method based on technical assessment for a period not exceeding ten years.

For Sl.No. (a) & (b) above, amortization commences from the month following the month during which the asset is available for use.

5. Inventory Valuation

(i) Raw materials, Components, Stores and Spare parts are valued at lower of Weighted Average Cost and estimated net realizable value.

(ii) Work-in-progress is valued at lower of cost of materials, labour and production overheads based on normative capacity and estimated net realizable value.

(iii)Finished stock is valued at lower of cost and estimated net realizable value.

(iv) Estimated costs are considered wherever actual costs are not available.

(v) The cost is adjusted for decline in value by writing down the value based on specific identification. Necessary provision is made for non-moving items.

(vi)Based on technical assessment, provision is made for revalidation / refurbishment of finished goods.

(vii)Scrap is valued at estimated net realizable value.

6. Advances from customers

Advances from customers include advances / progress payments received as per letters of intent / sale contracts and are net after adjustments for sales accounted under respective contracts.

7. Sales / Other Income

(i) Sales for products viz., equipments, aggregates, attachments, spares and ancillary products is recognised when risks and rewards of ownership pass on to the customer as per contractual terms.

(ii) In the case of contracts for supply of complex equipments / systems where the normal cycle time of completion and delivery period is more than 12 months and the value of the equipment / system is more than Rs. 25 crores, revenue is recognised on the ''percentage completion method''. Percentage completion is based on the ratio of actual costs incurred on the contract up to the reporting date to the estimated total cost of the product.

Since the outcome of such a contract can be estimated reliably only on achieving certain progress, revenue is recognised up to 25% progress only to the extent of costs thereafter revenue is recognised on proportionate basis and a contingency provision equal to 20% of the surplus of revenue over costs is made while anticipated losses are recognised in full.

(iii) Where sale prices are not established, sales are recognised provisionally at prices likely to be realised. Difference, if any, is accounted in the year of finalization of price.

(iv) Sales include excise duty wherever applicable but exclude sales tax.

(v) Duty drawback claims on exports are accounted on preferring the claims.

(vi) Claims for escalation are recognised as per escalation formula provided in the contract. If the contract does not provide for escalation, claim for the same is recognized on acceptance by the customer.

(vii)Where the contract provides for installation and commissioning and price for the same is agreed separately, revenue for installation and commissioning is recognised on conclusion of installation and commissioning. Where installation and commissioning fee is not separately stipulated, the revenue for the product is recognised, however, estimated cost as technically assessed for such installation and commissioning to be incurred, is provided for.

8. Employee Benefits

(i) Short term employee benefits are recognised as an expense at the undiscounted amount in the profit and loss account of the year in which the related service is rendered.

(ii) Post employment and other long term employee benefits are recognised as an expense in the profit and loss account for the year in which the employee has rendered services. The expense is recognised at the present value of the amounts payable, determined using actuarial valuation techniques. Actuarial gain and losses in respect of post- employment and other long term benefits are charged to the profit and loss account.

9. Accounting for Foreign Currency Transactions

(i) Transactions in foreign currency are recorded in rupees by applying to the foreign currency amount, the exchange rate prevailing as on the date of transaction.

(ii) The outstanding balances of monetary items relating to foreign currency transactions are stated in rupees by adopting the rate of exchange prevailing on the date of Balance Sheet.

(iii) Exchange rate differences consequent to restatement / settlement are recognised as income / expenditure.

(iv) In the case of forward exchange contracts, the premium or discount arising at the inception of the contract is accounted for over the life of the contract. Exchange differences on such a contract are recognised in the statement of profit or loss in the reporting period in which the exchange rate changes.

10. Contractual Obligations

Warranty liability for contractual obligation in respect of equipments / spares sold to customers is ascertained on the basis of an annual technical assessment.

11. Research & Development

Research expenditure is charged off in the year of incurrence. The expenditure on development of new products is capitalized or where the same is intended for sale, it is inventorised. Amortization of the capitalised expenditure is on straight line method based on technical assessment for a period not exceeding ten years. The amortization commences from the month following the month during which the asset is available for use. Expenditure on fixed assets relating to Research & Development is capitalised.

12. Prior Period Items

Prior period adjustments are those adjustments, which are over Rs. 1 lakh in each case, arising out of correction of errors and omissions made in the past years.

13. Under / Over Absorption of Cost

Adjustments for under / over absorption of costs on jobs, is made only if the extent of under / over recovery exceeds one percent of turnover.

14. Taxes on Income

The tax expense comprises of current tax and deferred tax. The provision for current tax is ascertained on the basis of assessable profits computed in accordance with provisions of the Income Tax Act, 1961. The deferred tax is recognised on all timing differences resulting from the recognition of items in the financial statements and in estimating current income tax provision, subject to consideration of prudence in respect of deferred tax assets. The carrying amount of deferred tax asset / liability is reviewed at each balance sheet date.

15. Leased Assets

Lease rentals recovered on assets given under operating leases are recognised in the Profit & Loss Account. Initial direct costs are expensed on incurrence.

16. Investments

Long-term investments are carried at cost. Permanent decline in the value of such investments is recognised and provided for. Current investments are carried at lower of cost and fair value.

17. Provisions, Contingent Liabilities and Contingent Assets

A provision is recognized when

* A present obligation arises as a result of past events.

* It is probable that an outflow of resources

will be required to settle the obligation in respect of which a reliable estimate can be made.

Provisions are determined based on the best estimates required to fulfill the obligations on the balance sheet date. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

Contingent Liabilities are not recognized but are disclosed in the notes.

Contingent Assets are neither recognized nor disclosed in the financial statements.

18. Others

(i) Special Tools up to the unit value of Rs. 5000 are charged off in the year of incurrence and those above unit value of Rs. 5000 are amortized over a period of three years.

(ii) Hand tools are charged to expenses at the time of issue.

(iii) Expenditure on Voluntary Retirement Scheme is expensed in the year of incurrence.


Mar 31, 2013

1. Basis of Accounting

The financial statements are prepared and presented under the historical cost convention, in accordance with Generally Accepted Accounting Principles in India (GAAP), on the accrual basis of accounting, except as stated herein. GAAP comprises of the mandatory Accounting Standards (AS) covered by the Companies (Accounting Standard) Rules 2006 issued by the Central Government, to the extent applicable, and the provisions of the Companies Act, 1956 and these have been consistently applied.

2. Use of Estimates

The preparation of the financial statements in conformity with GAAP requires that the Management make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liability as on the date of financial statements and the reported amounts of revenue and expenses during the reporting period. Although such estimates are made on a reasonable and prudent basis taking into account all available information, actual results could differ from these estimates and such differences are recognised in the period in which the results are ascertained.

3. Fixed Asset

A. Capitalisation

a. The Fixed Assets are stated at cost.

b. The cost of the Fixed Asset comprises its purchase price and any attributable cost of bringing the asset to its working condition for its intended use.

c. Expenditure on land development is capitalised.

d. Expenditure on reconditioning, rebuilding and major overhaul of an asset is capitalized if technical assessment indicates increase in future benefits from the existing assets beyond its previously assessed standards of performance (increase in capacity or life or efficiency or productivity).

e. Jigs and fixtures of unit value of Rs.5 lakhs and above are capitalized and those with unit value below Rs.5 lakhs are charged off in the year of incurrence.

B. Depreciation

a. Depreciation is charged on Straight Line Method basis at rates as per Schedule XIV of the Companies Act, 1956 (or such higher rates which in the opinion of the management are appropriate), calculated from the month following the month of capitalisation. Depreciation on additions or extensions to existing assets is provided so as to co- terminate with the life of the original asset if it becomes integral part of the existing asset or on useful life of the asset if it is capable of independent use.

b. For Assets whose unit cost does not exceed Rs.5000/- depreciation is provided at the rate of hundred percent in the year of capitalization.

c. Cost of leasehold land is amortised over the period of lease on pro-rata basis.

d. Jigs & Fixtures which are capitalized are depreciated over a period of three years.

C. Borrowing Cost

Borrowing Costs that are directly attributable to the acquisition, construction or production of a qualifying fixed asset are capitalised as part of the cost of the asset.

D. Impairment of Assets

The company assesses the impairment of assets at each Balance sheet date. The loss on account of impairment, if any, is accounted accordingly.

4. Intangible Assets

a) Software

The cost of software internally generated /purchased for internal use which is not an integral part of the related hardware is recognised as an Intangible Asset and is amortised on straight line method based on technical assessment for a period not exceeding ten years. Software which is an integral part of related hardware is capitalised along with the hardware.

b) Technical Know-how

Expenditure on Technical Know-how is recognised as an Intangible Asset and amortised on straight line method based on technical assessment for a period not exceeding ten years.

For Sl.No. (a) & (b) above, amortization commences from the month following the month during which the asset is available for use.

5. Inventory Valuation

i) Raw materials, Components, Stores and Spare parts are valued at lower of Weighted Average Cost and estimated net realizable value.

ii) Work-in-progress is valued at lower of cost of materials, labour & production overheads based on normative capacity and estimated net realizable value.

iii) Finished stock is valued at lower of cost and estimated net realizable value.

iv) Estimated costs are considered wherever actual costs are not available.

v) The cost is adjusted for decline in value by writing down the value based on specific identification. Necessary provision is made for non-moving items.

vi) Based on technical assessment, provision is made for revalidation/ refurbishment of finished goods.

vii)Scrap is valued at estimated net realizable value.

6. Advances from customers

Advances from customers include advances / progress payments received as per letters of intent / sale contracts and are net after adjustments for sales accounted under respective contracts.

7. Sales / Other Income

(i) Sales for products viz., equipments, aggregates,attachments, spares and ancillary products is recognised when risks and rewards of ownership pass on to the customer as per contractual terms.

(ii) In the case of contracts for supply of complex equipments/systems where the normal cycle time of completion and delivery period is more than 12 months and the value of the equipment/system is more than Rs. 25 crores, revenue is recognised on the ''percentage completion method''. Percentage completion is based on the ratio of actual costs incurred on the contract up to the reporting date to the estimated total cost of the product.

Since the outcome of such a contract can be estimated reliably only on achieving certain progress, revenue is recognised up to 25% progress only to the extent of costs thereafter revenue is recognised on proportionate basis and a contingency provision equal to 20% of the surplus of revenue over costs is made while anticipated losses are recognised in full.

(iii)Where sale prices are not established, sales are recognised provisionally at prices likely to be realised. Difference, if any, is accounted in the year of finalization of price.

(iv) Sales include excise duty wherever applicable but exclude sales tax.

(v) Duty drawback claims on exports are accounted on preferring the claims.

(vi) Claims for escalation are recognised as per escalation formula provided in the contract. If the contract does not provide for escalation, claim for the same is recognized on acceptance by the customer.

(vii)Where the contract provides for installation and commissioning and price for the same is agreed separately, revenue for installation and commissioning is recognised on conclusion of installation and commissioning. Where installation and commissioning fee is not separately stipulated, the revenue for the product is recognised, however, estimated cost as technically assessed for such installation and commissioning to be incurred, is provided for.

8. Employee Benefits

i) Short term employee benefits are recognised as an expense at the undiscounted amount in the profit and loss account of the year in which the related service is rendered.

ii) Post employment and other long term employee benefits are recognised as an expense in the profit and loss account for the year in which the employee has rendered services. The expense is recognised at the present value of the amounts payable, determined using actuarial valuation techniques. Actuarial gain and losses in respect of post- employment and other long term benefits are charged to the profit and loss account.

9. Accounting for Foreign Currency Transactions

i) Transactions in foreign currency are recorded in rupees by applying to the foreign currency amount, the exchange rate prevailing as on the date of transaction.

ii) The outstanding balances of monetary items relating to foreign currency transactions are stated in rupees by adopting the rate of exchange prevailing on the date of Balance Sheet.

iii) Exchange rate differences consequent to restatement / settlement are recognised as income / expenditure.

iv) In the case of forward exchange contracts, the premium or discount arising at the inception of the contract is accounted for over the life of the contract. Exchange differences on such a contract are recognised in the statement of profit or loss in the reporting period in which the exchange rate changes.

10. Contractual Obligations

Warranty liability for contractual obligation in respect of equipments / spares sold to customers is ascertained on the basis of an annual technical assessment.

11. Research & Development

Research expenditure is charged off in the year of incurrence. The expenditure on development of new products is capitalized or where the same is intended for sale, it is inventorised. Amortization of the capitalised expenditure is on straight line method based on technical assessment for a period not exceeding ten years. The amortization commences from the month following the month during which the asset is available for use. Expenditure on fixed assets relating to Research & Development is capitalised.

12. Prior Period Items

Prior period adjustments are those adjustments, which are over Rs.1 lakh in each case, arising out of correction of errors and omissions made in the past years.

13. Under / Over Absorption of Cost

Adjustments for under / over absorption of costs on jobs, is made only if the extent of under / over recovery exceeds one percent of turnover.

14. Taxes on Income

The tax expense comprises of current tax and deferred tax. The provision for current tax is ascertained on the basis of assessable profits computed in accordance with provisions of the Income Tax Act, 1961. The deferred tax is recognised on all timing differences resulting from the recognition of items in the financial statements and in estimating current income tax provision, subject to consideration of prudence in respect of deferred tax assets. The carrying amount of deferred tax asset / liability is reviewed at each balance sheet date.

15. Leased Assets

Lease rentals recovered on assets given under operating leases are recognised in the Profit & Loss Account. Initial direct costs are expensed on incurrence.

16. Investments

Long-term investments are carried at cost. Permanent decline in the value of such investments is recognised and provided for. Current investments are carried at lower of cost and fair value.

17. Provisions, Contingent Liabilities and Contingent Assets

A provision is recognized when

- A present obligation arises as a result of past events.

- It is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made.

Provisions are determined based on the best estimates required to fulfill the obligations on the balance sheet date. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

Contingent Liabilities are not recognized but are disclosed in the notes.

Contingent Assets are neither recognized nor disclosed in the financial statements.

18. Others

(i) Special Tools up to the unit value of Rs.5000 are charged off in the year of incurrence and those above unit value of Rs.5000 are amortized over a period of three years.

(ii)Hand tools are charged to expenses at the time of issue.

(iii)Expenditure on Voluntary Retirement Scheme is expensed in the year of incurrence.


Mar 31, 2012

1. Basis of Accounting

The financial statements are prepared and presented under the historical cost convention, in accordance with Generally Accepted Accounting Principles in India (GAAP), on the accrual basis of accounting, except as stated herein. GAAP comprises of the mandatory Accounting Standards (AS) covered by the Companies (Accounting Standard) Rules 2006 issued by the Central Government, to the extent applicable, and the provisions of the Companies Act, 1956 and these have been consistently applied.

2. Use of Estimates

The preparation of the financial statements in conformity with GAAP requires that the Management make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liability as on the date of financial statements and the reported amounts of revenue and expenses during the reporting period. Although such estimates are made on a reasonable and prudent basis taking into account all available information, actual results could differ from these estimates and such differences are recognised in the period in which the results are ascertained.

3. Fixed Asset

A. Capitalisation

a. The Fixed Assets are stated at cost.

b. The cost of the Fixed Asset comprises its purchase price and any attributable cost of bringing the asset to its working condition for its intended use.

c. Expenditure on land development is capitalised .

d. Cost of leasehold land is amortised over the period of lease on pro-rata basis.

e. Expenditure on reconditioning, rebuilding and major overhaul of an asset are capitalized if technical assessment indicates increase in future benefits from the existing assets beyond its previously assessed standards of performance (increase in capacity or life or efficiency or productivity).

B. Depreciation

Depreciation is charged on Straight Line Method basis at rates as per Schedule XIV of the Companies Act, 1956 (or such higher rates which in the opinion of the management are appropriate), calculated from the month following the month of capitalisation. Depreciation on additions or extensions to existing assets is provided so as to co-terminate with the life of the original asset if it becomes integral part of the existing asset or on useful life of the asset if it is capable of independent use.

C. Borrowing Cost

Borrowing Costs that are directly attributable to the acquisition, construction or production of a qualifying fixed asset are capitalised as part of the cost of the asset.

D. Impairment of Assets

The company assesses the impairment of assets at each Balance sheet date. The loss on account of impairment, if any, is accounted accordingly.

4. Intangible Assets:

a) Software

The cost of software internally generated / purchased for internal use which is not an integral part of the related hardware is recognised as an Intangible Asset and is amortised on straight line method based on technical assessment for a period not exceeding ten years. Software which is an integral part of related hardware is capitalised along with the hardware.

b) Technical Know-how

Expenditure on Technical Know-how is recognised as an Intangible Asset and amortised on straight line method based on technical assessment for a period not exceeding ten years.

For Sl.No. (a) & (b) above, amortization commences from the month following the month during which the asset is available for use.

5. Inventory Valuation :

i) Raw materials, Components, Stores and Spare parts are valued at lower of Weighted Average Cost and estimated net realizable value.

ii) Work-in-progress is valued at lower of cost of materials, labour & production overheads based on normative capacity and estimated net realizable value.

iii) Finished stock is valued at lower of cost and estimated net realizable value.

iv) Estimated costs are considered wherever actual costs are not available.

v) The cost is adjusted for decline in value by writing down the value based on specific identification. Necessary provision is made for non-moving items.

vi) Based on technical assessment, provision is made for revalidation/refurbishment of finished goods.

vii) Scrap is valued at estimated net realizable value.

6. Advances from customers :

Advances from customers include advances / progress payments received as per letters of intent / sale contracts and are net after adjustments for sales accounted under respective contracts.

7. Sales / Other Income :

(i) Sales for products viz., equipments, aggregates, attachments and ancillary / dealership products is recognised when these are unconditionally appropriated to the valid sales contract or under dealership agreements.

(ii) In the case of contracts for supply of complex equipments/systems where the normal cycle time of completion and delivery period is more than 12 months and the value of the equipment/system is more than Rs. 25 crores, revenue is recognised on the 'percentage completion method'. Percentage completion is based on the ratio of actual costs incurred on the contract up to the reporting date to the estimated total cost of the product.

Since the outcome of such a contract can be estimated reliably only on achieving certain progress, revenue is recognised up to 25% progress only to the extent of costs thereafter revenue is recognised on proportionate basis and a contingency provision equal to 20% of the surplus of revenue over costs is made while anticipated losses are recognised in full.

(iii) Sale of spares is recognised on dispatches / customer acceptance against valid sales contracts.

(iv) Where sale prices are not established, sales are recognised provisionally at prices likely to be realised. Difference, if any, is accounted in the year of finalization of price.

(v) Sales include excise duty wherever applicable but exclude sales tax.

(vi) Duty drawback claims on exports are accounted on preferring the claims.

(vii)Claims for escalation are recognised on acceptance by the customer, unless the contract so provides.

(viii) Where the contract provides for installation and commissioning and price for the same is agreed separately, revenue for installation and commissioning is recognised on conclusion of installation and commissioning. Where installation and commissioning fee is not separately stipulated, the revenue for the product is recognised, however, estimated cost as technically assessed for such installation and commissioning to be incurred is provided for.

(ix) Revenue in respect of contract involving consortium is recognised and disclosed at full value in compliance with the terms of consortium agreement and cost of items supplied by the other members of the consortium is deducted there from.

8. Employee Benefits:

i) Short term employee benefits are recognised as an expense at the undiscounted amount in the profit and loss account of the year in which the related service is rendered.

ii) Post employment and other long term employee benefits are recognised as an expense in the profit and loss account for the year in which the employee has rendered services. The expense is recognised at the present value of the amounts payable, determined using actuarial valuation techniques. Actuarial gain and losses in respect of post employment and other long term benefits are charged to the profit and loss account.

9. Accounting for Foreign Currency Transactions :

i) Transactions in foreign currency are recorded in rupees by applying to the foreign currency amount the exchange rate at the time of the transaction.

ii) The outstanding balances of monetary items relating to foreign currency transactions are stated in rupees by adopting the rate of exchange prevailing on the date of Balance Sheet.

iii) Exchange rate differences consequent to restatement / settlement are recognised as income / expenditure.

iv) In the case of forward exchange contracts, the premium or discount arising at the inception of the contract is accounted for over the life of the contract. Exchange differences on such a contract are recognised in the statement of profit or loss in the reporting period in which the exchange rate changes.

10. Contractual Obligations :

Warranty liability for contractual obligation in respect of equipments sold to customers is ascertained on the basis of an annual technical assessment.

11. Research & Development:

Research expenditure is charged off in the year of incurrence. The expenditure on development of new products is capitalised or where the same is intended for sale, it is inventorised. Amortization of the capitalised expenditure is on straight line method based on technical assessment for a period not exceeding ten years. The amortization commences from the month following the month during which the asset is available for use.

Expenditure on fixed assets relating to Research & Development is capitalised.

12. Prior Period Items :

Prior period adjustments are those adjustments, which are over Rs. 1 lakh in each case, arising out of correction of errors and omissions made in the past years.

13. Under / Over Absorption of Cost :

Adjustments for under / over absorption of costs on jobs, is made only if the extent of under / over recovery exceeds one percent of turnover.

14. Taxes on Income

The tax expense comprises of current tax and deferred tax. The provision for current tax is ascertained on the basis of assessable profits computed in accordance with provisions of the Income Tax Act, 1961. The deferred tax is recognised on all timing differences resulting from the recognition of items in the financial statements and in estimating current income tax provision, subject to consideration of prudence in respect of deferred tax assets. The carrying amount of deferred tax asset/ liability is reviewed at each balance sheet date.

15. Leased Assets :

Lease rentals recovered on assets given under operating leases are recognised in the Profit & Loss Account. Initial direct costs are expensed on incurrence.

16. Investments

Long-term investments are carried at cost. Permanent decline in the value of such investments is recognised and provided for. Current investments are carried at lower of cost and fair value.

17. Others:

i) The cost of special tools and jigs is amortised over production based on technical assessment. The value is net as per books.

ii) Hand tools are charged to expenses at the time of issue.

iii) Expenditure on Voluntary Retirement Scheme is expensed in the year of incurrence.


Mar 31, 2011

1. Fixed Assets:

Capitalization and Depreciation:

i) The values of Fixed Assets are at cost. Expenditure on Land Development is capitalised. Cost of leasehold land is amortized over the period of lease on pro-rata basis.

ii) Financing cost relating to borrowed funds or deferred credits is capitalised to the extent such costs are attributable to the period up to the completion of construction/acquisition of fixed assets for new projects or substantial expansion.

iii) Expenditure on administration and general overhead attributable to construction or acquisition of fixed assets are not capitalised, as such expenses, besides being not significant, are not relatable to a specific asset.

iv) Depreciation is charged on Straight Line Method basis at rates as per Schedule XIV of the Companies Act, 1956 (or such higher rates which in the opinion of the management is appropriate), calculated from the month following the month of capitalization. Depreciation on additions (physical or value) or extensions to existing assets is provided so as to co-terminate with the life of the original asset or extended useful life based on technical assessment.

v) Expenditure on reconditioning, rebuilding and major overhaul of machinery and equipment are capitalized only if technical assessment indicates increase in the future benefits from the existing assets beyond the previously assessed standards of performance. Ex: an increase in capacity, etc.

2* Intangible Assets;

a) Software

The cost of software internally generated/ purchased for internal use which is not an integral part of the related hardware is recognized as an Intangible Asset and is amortised on straight line method based on technical assessment for a period not exceeding ten years. Software which is an integral part of related hardware is capitalized along with the hardware.

b) Technical Know-how

Expenditure on Technical Know-how is recognized as an Intangible Asset and amortised on straight line method based on technical assessment for a period not exceeding ten years.

For SI. No. a & b above amortization commences when the asset is available for use.

3. Inventory Valuation:

i) Raw materials, Components, Stores and Spare parts are valued at Weighted Average Cost or estimated net realizable value, whichever is lower.

ii) Work-in-progress is valued at actuaf cost of materials, labour and production overheads based on normative capacity or adjusted/ estimated realisable value, whichever is lower.

iii) Finished stock is valued at actual cost or estimated realisable value whichever is lower.

iv) Estimated costs are considered wherever actual costs are not available.

v) The cost is adjusted for decline in value by writing down the value based on specific identification. Further provision for obsolescence is made depending on movement.

vi) Based on technical assessment, provision is made for revalidation/refurbishment of finished goods to reflect the current status thereof.

vii) Scrap is valued at estimated realisable value.

4. Advances from customers:

Advances from customers include advances/ progress payments received as per letters of intent / sale contracts and is net after adjustments for despatches with customers under respective contracts.

5. Sales / Other Income:

i) Sales for products viz., equipments, aggregates, attachments and ancillary/ dealership products is recognized when these are unconditionally appropriated to the valid sales contract or under dealership agreements.

ii) In the case of contracts for supply of complex equipments/systems where the normal cycle time of completion and delivery period is more than 12 months and the value of the equipment/system is more than Rs. 25 crores, revenue is recognized on the 'percentage completion method'. Percentage completion is based on the ratio of actual costs incurred on the contract up to the reporting date to the estimated total cost pf the product.

Since the outcome of such a contract can be estimated reliably only on achieving certain progress, revenue is recognized up to 25% progress only to the extent of costs, thereafter revenue is recognized on proportionate basis and a contingency provision equal to 20% of the surplus of revenue over costs is made while anticipated losses are recognized in full.

iii) Sales for spares is recognized on despatches/ customer acceptance against valid sales contracts.

iv) Where sale prices are not established, sales are recognized provisionally at prices likely to be realized.

v) Sales include excise duty wherever applicable but excludes sales tax and transit insurance and is adjusted for anticipated price reductions from contractual obligations such as de-escalation.

vi) Duty drawback claims on exports are accounted on preferring the claims.

vii) Claims for escalation are recognized on acceptance by the customer.

viii)Where the contract provides for installation and commissioning and price for the same is agreed separately, revenue for installation and commissioning is recognized on conclusion of installation and commissioning. Where installation and commissioning fee is not separately stipulated, the estimated cost as technically assessed for such installation and commissioning to be incurred are provided for. However, the revenue for the product delivered is recognized.

ix) Revenue in respect of contract involving consortium is recognized and disclosed at full value in compliance with the terms of consortium agreement and cost of items supplied by the other members of the consortium is deducted there from.

6. Employee Benefits:

i) Short term employee benefits are recognized as an expense at the undiscounted amount in the profit and loss account of the year in which the related service is rendered.

ii) Post employment and other long term employee benefits are recognized as an expense in the profit and loss account for the year in which the employee has rendered services. The expense is recognized at the present value of the amounts payable, determined using actuarial valuation techniques. Actuarial gain and losses in respect of post employment and other long term benefits are charged to the profit and loss account.

7. Accounting for Foreign Currency Transactions:

i) Transactions in foreign currency are recorded in rupees by applying to the foreign currency amount the exchange rate existing at the time of the transaction.

ii) The outstanding balances of monetary items relating to foreign currency transactions are stated in rupees by adopting the rate of exchange prevailing at the date of Balance Sheet. Exchange differences consequent to reinstatement are credited/charged to revenue.

iii) The gain or loss in the conversion and/or settlement of liabilities incurred for acquisition of fixed assets.is either-credited or charged to revenue during the period such gain or loss arise.

iv) Differences upon settlement of transactions, other than those covered by (iii) above are

- credited/charged to revenue.

v) In the case of forward exchange contracts, the premium or discount arising at the inception of the contract is accounted for over the life of the

- contract. Exchange differences on such a contract are recognized in the statement of profit or loss in the reporting period in which the exchange rate changes.

8. Contractual Obligations:

Warranty liability for contractual obligation in respect of equipments sold to customers is ascertained on the basis of an annual technical assessment. '

9. Research & Development:

i) Research & Development expenditure is charged off in the year of incurrence except in the case of development of new products. The expenditure on development of new products is carried under inventory as these are meant for sale: Expenditure on fixed assets relating to Research & Development is capitalized.

ii) Expenditure on the development of new products is treated in line with Accounting Policy No. 3(ii) and 3(iii) depending upon the stage of completion.

10. Prior Period Items:

Prior period adjustments are those adjustments, which are over Rs. 1 lakh in each case, arising out of correction of errors and omissions made in the past years.

11. Under / Over Absorption of Cost:

Adjustments for under/over absorption of costs on jobs, is made only if the extent of under/ over recovery exceeds one percent of turnover.

12. Taxes on Income:

Deferred Tax is recognized, subject to the consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

13. Leased Assets:

Assets given under operating leases are capitalized and depreciation charged at applicable rates. Lease rentals recovered are recognized in the profit and loss account. Direct costs are expensed on incurrence.

14. Others:

i) The cost of special tools and jigs is amortised over production based on technical assessment. The value is net as per books.

ii) Hand tools are charged to expenses at the time ofissue.

iii) Expenditure on Voluntary Retirement Scheme is expensed in the year of incurrence.

iv) Investments: Long-term investments are carried at cost. Permanent decline in the value of such investments is recognized and provided for. Current investments are carried at lower of cost and quoted /fair value.

Notes annexed to and forming part of Financial Statements for the year ended 31st March 2011












Mar 31, 2010

1. Fixed Assets:

Capitalization and Depreciation:

i) The values of Fixed Assets are at cost. Expenditure on Land Development is capitalised. Cost of leasehold land is amortized over the period of lease on pro-rata basis.

ii) Financing cost relating to borrowed funds or deferred credits is capitalised to the extent such costs are attributable to the period up to the completion of construction / acquisition of fixed assets for new projects or substantial expansion.

iii) Expenditure on administration and general overhead attributable to construction or acquisition of fixed assets are not capitalised, as such expenses, besides being not significant, are not relatable to a specific asset.

iv) Depreciation is charged on Straight Line Method basis at rates as per Schedule XIV of the Companies Act, 1956 (or such higher rates which in the opinion of the management is appropriate), calculated from the month following the month of capitalization. Depreciation on additions (physical or value) or extensions to existing assets is provided so as to co-terminate with the life of the original asset or extended useful life based on technical assessment.

v) Expenditure on reconditioning, rebuilding and major overhaul of machinery and equipment are capitalized only if technical assessment indicates increase in the future benefits from the existing assets beyond the previously assessed standards of performance. Ex: an increase in capacity, etc.

2. Inventory Valuation:

i) Raw materials, Components, Stores and Spare parts are valued at Weighted Average Cost or estimated net realizable value, whichever is lower.

ii) Work-in-progress is valued at actual cost of materials, labour and production overheads based on normative capacity or adjusted / estimated realisable value, whichever is lower.

iii) Finished stock is valued at actual cost or estimated realisable value whichever is lower.

iv) Estimated costs are considered wherever actual costs are not available.

v) The cost is adjusted for decline in value by writing down the value based on specific identification. Further, provision for obsolescence is made depending on movement.

vi) Based on technical assessment, provision is made for revalidation/refurbishment of finished goods to reflect the current status thereof.

vii) Scrap is valued at estimated realisable value.

3. Advances from customers:

Advances from customers include advances / progress payments received as per letters of intent / sale contracts and is net after adjustments for despatches with customers under respective contracts.

4. Sales / Other Income:

i) Sales for products viz., equipments, aggregates, attachments and ancillary / dealership products is recognized when these are unconditionally appropriated to the valid sales contract or under dealership agreements.

ii) In the case of contracts for supply of complex equipments/systems where the normal cycle time of completion and delivery period is more than 12 months and the value of the equipment/system is more than Rs.25 crores, revenue is recognized on the percentage completion method. Percentage completion is based on the ratio of actual costs incurred on the contract up to the reporting date to the estimated total cost of the product.

Since the outcome of such a contract can be estimated reliably only on achieving certain progress, revenue is recognized up to 25% progress only to the extent of costs thereafter revenue is recognized on proportionate basis and a contingency provision equal to 20% of the surplus of revenue over costs is made while anticipated losses are recognized in full.

iii) Sales for spares is recognized on despatches / customer acceptance against valid sales contracts.

iv) Where sale prices are not established, sales are recognized provisionally at prices likely to be realized.

v) Sales include excise duty wherever applicable but excludes sales tax and transit insurance and is adjusted for anticipated price reductions from contractual obligations such as de- escalation.

vi) Duty drawback claims on exports are accounted on preferring the claims.

vii) Claims for escalation are recognized on acceptance by the customer.

viii)Where the contract provides for installation and commissioning and price for the same is agreed separately, revenue for installation and commissioning is recognized on conclusion of installation and commissioning. Where installation and commissioning fee is not separately stipulated, the estimated cost as technically assessed for such installation and commissioning to be incurred are provided for. However, the revenue for the product delivered is recognized.

ix) Revenue in respect of contract involving consortium is recognized and disclosed at full value in compliance with the terms of consortium agreement and cost of items supplied by the other members of the consortium is deducted there from.

5. Employee Benefits;

i) Short term employee benefits are recognized as an expense at the undiscounted amount in the

profit and loss account of the year in which the related service is rendered.

ii) Post employment and other long term employee benefits are recognized as an expense in the profit and loss account for the year in which the employee has rendered services. The expense is recognized at the present value of the amounts payable, determined using actuarial valuation techniques. Actuarial gain and losses in respect of post employment and other long term benefits are charged to the profit and loss account.

6. Accounting for Foreign Currency Transactions:

i) Transactions in foreign currency are recorded in rupees by applying to the foreign currency amount the exchange rate existing at the time of the transaction.

ii) The outstanding balances of monetary items relating to foreign currency transactions are stated in rupees by adopting the rate of exchange prevailing at the date of Balance Sheet. Exchange differences consequent to reinstatement are credited / charged to revenue.

iii) The gain or loss in the conversion and / or settlement of liabilities incurred for acquisition of fixed assets is either credited or charged to revenue during the period such gain or loss arise.

iv) Differences upon settlement of transactions, other than those covered by (iii) above are credited / charged to revenue.

v) In the case of forward exchange contracts, the premium or discount arising at the inception of the contract is accounted for over the life of the contract. Exchange differences on such a contract are recognized in the statement of profit or loss in the reporting period in which the exchange rate changes.

7. Contractual Obligations:

Warranty liability for contractual obligation in respect of equipments sold to customers is ascertained on the basis of an annual technical assessment.

8. Research & Development:

i) Research & Development expenditure is charged off in the year of incurrence except in the case of development of new products. The expenditure on development of new products is carried under inventory as these are meant for sale. Expenditure on fixed assets relating to Research & Development is capitalized.

ii) Expenditure on the development of new products is treated in line with Accounting Policy No. 2(ii) and 2(iii) depending upon the stage of completion.

9. Prior Period Items:

Prior period adjustments are those adjustments, which are over Rs. 1 lakh in each ease, arising out of correction of errors and omissions made in the past years.

10. Under / Over Absorption of Cost:

Adjustments for under / over absorption of costs on jobs, is made only if the extent of under/over recovery exceeds one percent of turnover.

11. Taxes on Income:

Deferred Tax is recognized, subject to the consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

12. Leased Assets:

Assets given under operating leases are capitalized and depreciation charged at applicable rates. Lease rentals recovered are recognized in the profit and loss account. Direct costs are expensed on incurrence.

13. Others:

i) The cost of special tools and jigs is amortised over production based on technical assessment. The value is net as per books.

ii) Hand tools are charged to expenses at the time ofissue.

iii) Expenditure incurred on purchase of Technical Know-how fee is amortised over a period of six years on technical assessment.

iv) Expenditure on Voluntary Retirement Scheme is expensed in the year of incurrence.

v) Investments: Long-term investments are carried at cost. Permanent decline in the value of such investments is recognized and provided for. Current investments are carried at lower of cost and quoted /fair value.

A. DISCLOSURE UNDER MANDATORY ACCOUNTING STANDARDS

1. Accounting Standard 1 (Disclosure of Accounting Policies)

In view of the requirement under AS 15 (Revised 2005) not to carry forward the deferred expenditure relating to Voluntary Retirement Scheme to accounting periods commencing on or after lsl April, 2010 and the consequential change in Accounting policy 13(iv) on Voluntary Retirement Schemes, the balance amount of Rs. 750.32 Lakhs outstanding as on 1st April 2009 has been charged to Profit and Loss Account of the year.

4. Accounting Standard 15 (Employee Benefits)

(a) Leave Salary

This is an unfunded defined benefit plan categorized under other long term employee benefits in terms of Revised Accounting Standard 15. The defined benefit obligation of compensated absence has been actuarially valued and liability provided accordingly.

(b) Gratuity

The employees gratuity fund scheme managed by a Trust is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method.

The estimates of rate of escalation in salary considered in actuarial valuation takes into account inflation, seniority, promotion and other relevant factors. The above information is certified by the actuary.

Consequent upon amendment to Payment of Gratuity Act enhancing the ceiling for payment of Gratuity from Rs.3.50 Lakhs to Rs. 10 Lakhs, the additional liability till 31st March 2009 amounting to Rs. 5166.34 Lakhs (Net of Deferred Tax Rs. 2660.26 Lakhs) has been adjusted against the opening balance of reserves and the incremental liability for the year ended 31st March 2010 amounting to Rs. 1165.36 Lakhs has been charged to Profit and Loss Account for the year.

(b) Segmental Capital Employed

Fixed assets used in Companys business or liabilities have not been identified to any of the reportable segments, as the fixed assets are used interchangeably between segments. The Company believes that it is currently not practicable to provide segment disclosures relating to total assets and liabilities since a meaningful segregation of the available data is onerous.

(c) Secondary Reporting

Since, more than 90% of total sales is within India, geographical reporting is considered not applicable.

7. Accounting Standard 19 (Leases)

i) Office premises taken on lease

The Companys significant leasing arrangements are in respect of operating leases in respect of some of its office premises. These lease arrangements, which are not cancellable, are generally for 5 years and are usually renewable by mutual consent. The aggregate lease rentals paid are disclosed under Rent in Schedule 21.

9. Accounting Standard 21 (Consolidated Financial Statements)

a) Consolidated accounts of the company with its subsidiary, Vignyan Industries Limited are attached.

b) Beml Brasil Participacoes Ltda (the name has been changed to BEML Brasil Industrial Ltda,) an Associate, is formed under the requirements of the governing laws of Brasil as per which the entity is not a company as defined in Companies Act, 1956, and is not having equity share capital but having Quota to which BEML has subscribed as per the requirements of Brazilian Laws to conduct business as an extended arm of BEML in Brazil and hence treated as long term Investments under Accounting Standard 13, carried at cost under Accounting Policy 13(v). The Overseas entity has not prepared its Financial statements as on 31.03.2010. As such consolidation requirements if and to the extent applicable under AS21 and AS 23 could not be complied with.

Software acquired for internal use is not recognised as an asset since the recognition criteria prescribed in Paragraph 20 and 21 of AS26 are not met and hence treated as Revenue expenditure as in the earlier years.

12. Accounting standard 27 (Financial Reporting of Interests in Joint Ventures)

The Joint Venture Company BEML Midwest Ltd., has not prepared its Financial statements as on 31.03.2010. As such disclosure requirements under AS-27 could not be complied with.

13. Accounting Standard 28 (Impairment of assets)

No Provision was considered necessary for impairment of assets as the realizable value of assets assessed by chartered engineer is more than the carrying cost of these assets.

(b) Counter guarantees given to banks for guarantees issued on behalf of the company is Rs. 53780.70 lakhs. (Pr. Year Rs. 27522.14 lakhs)

(c) Claims against the Company not acknowledged as debts (net of provisions, to the extent ascertainable):

i. Disputed statutory demands (Customs Duty, Central Excise, Service Tax)

Rs. 7252.05 lakhs (Pr. Year Rs. 10115.89 Lakhs) ii. Other claims is Rs. 2237.06 Lakhs (Pr. Year Rs. 2170.49 Lakhs)

(d) Guarantee issued to bankers on behalf of BEML Midwest Ltd (Joint Venture company) Rs. 1915.00 Lakhs (Pr. Year Rs. 1915.00 Lakhs)

(e) Guarantees issued to bankers on behalf of Vignyan Industries Limited (subsidiary company) Rs. 750 Lakhs (Pr.Yr Rs .750 Lakhs)

(f) A sum of Rs. 1034.95 lakhs representing VAT applicable on Rail Coaches etc. under Sch.3 of Karnataka Value Added Tax Act, 2005 with effect from 1.4.2005 is not recognised as a liability in terms of Accounting Standard 29, since it is expected not to result in an outflow of resources from the company being subject to reimbursement by Railway Board.

NOTES:

(1) The company does not expect any re-imbursement in respect of above Contingent Liabilities except (f).

(2) The cash flow in respect of matters referred to in (a) above is generally expected to occur within 2 years.

(3) The cash flow in respect of matters referred to in (b), (d) and (e) above is generally expected to occur within 3 years.

(4) It is not practicable to estimate the timing of cash flows, if any, in respect of matters referred to in (c) and (f) above pending resolutions of the arbitration / appellate proceedings/Claims reimbursement by Railway Board.

2. The information under MSMED Act, has been disclosed to the extent such vendors have been identified based on the certificates produced by them.

3. Depreciation rate adopted by the company in respect of following assets is significantly higher than the statutory minimum rates prescribed under the Companies Act, 1956.

4. The Company has been exempted by the Company Law Board vide letter dt.09.02.2010 from disclosure requirement relating to Licensed capacity, Installed capacity, Actual production and Quantitative details as required by Part II of Schedule VI to the Companies Act, 1956.

C. GENERAL

1. ERP system:

(i) Change in costing methodology consequent to introduction of ERP

With the introduction of ERP system, stage level production orders are opened vis-a-vis batch work orders under the Legacy system.

The valuation of such stage level production orders are done on standard cost basis. There is a provision to review the cost and revise the same to bring it as close as possible to actual cost. Thus the closing stock of work-in-progress and finished goods though valued at standard cost are adjusted (including cost redistribution) to nearly the actual cost and the difference, if any, is not material.

Variances arising on account of difference between Standard Cost and the actual cost, on account of change in the nature of inputs from bought-out to internally manufactured or vice versa, timing difference between standard cost and actual occurrence during the financial period and fluctuations in the material prices and the exchange rate, is adjusted in the Cost of Production in order not to carry forward the period variances to subsequent financial period.

(ii) Provision towards Obsolescence is made as per provisioning norms consistently followed and is based on ageing of inventory as per ERP.

(iii) Physically verified and reconciled inventory balances have been up-loaded in ERP at the time of migration to ERP. Physical verification has been done on a perpetual basis while reconciliation of the physical balance with ERP balance could not be on-line. No significant

discrepancies have been noticed on subsequent reconciliation of physical balances as per stock verification with ERP balances, considering the delay in recording of transactions, to the extent identified.

(iv) Balances with Government Departments are subject to reconciliation and consequential adjustments, if any.

 
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