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Accounting Policies of Clutch Auto Ltd. Company

Mar 31, 2015

A) Nature Of Security

i) Term Loan from RIICO

The company has availed project terms loan of Rs. 3800.00 lacs from RIICO i.e. 828.95 lacs against Land and 281.25 lacs swapping of term loan from Axis Bank & balance Rs. 2689.80 lacs for building and Plant & Machinery stands. Disbursed Rs.3513.16 Lacs upto 31.03.2013. Secured by way of equitable mortgage / hypothecation of fixed assets present & future of the company by pari-passu first charge (in terms of Intercreditor and Security Sharing Agreement executed with DEG, Germany on 19.12.2008) & guaranteed by Managing Director and secured by pari-passu second charge on current assets present & future.

ii) External Commercial Borrowing (ECB) from DEG, Germany

The Company has executed ECB Loan Agreements viz Loan Agreement - I dt. 18.12.2007 for US $ 8 Mn. [FC Expenditure] and other Loan Agreement – II dt. 07.07.2008 for US $ 4 Mn. (stands disbursed on 11.02.2009) [Rupee Expenditure] with M/s. Deutsche Infestations- und Entwicklungsgesellschaft mbh, Federal Republic of Germany, for capacity expansion & modernization. The above Loan is secured by first ranking mortgage on the present and future immovable assets and first ranking hypothecation on all present and future movable assets (other than current assets and stocks).

iii) Term Loan from ICICI Bank Ltd.

Secured by hypothecation of specific assets purchased there against and guaranteed by Managing Director. Secured by an exclusive charge by way of hypothecation on all movable properties under the Sponsored Research & Development program of World Bank (SPREAD) under the agreement dated 6th August, 2003.

iv) Working Capital Loans from banks

Secured by hypothecation of stock of finished goods, semi finished goods raw material, consumable stores and book debts of the company. These securities rank pari-passu in favour of various banks viz. State Bank of Travancore, Canara Bank, Central Bank of India, State Bank of India, DBS Bank & Exim Bank. Secured by second charge by way of equitable mortgage of fixed assets and guaranteed by Managing Director.

b) Non fund based limits Assets charged with Bank also cover security for these limits.

II. UNSECURED LOANS

a) Ministry of Science and Technology under the aegis of CSIR, has approved a Project under 'NMITLI' scheme on 30.03.2008 and had sanctioned unsecured soft loan of Rs. 1503.55 lacs @ 3% rate of interest out of which Rs. 1493.35 lacs stands disbursed.

The company has complied with the requirement of accounting standard – 15 on "Employees Benefits" as issued by ICAI, by making a provision for the post-retirement benefits (i.e. Gratuity and leave encashment) taking into consideration the provision of the payment of Gratuity Act, 1972 and the age & other terms and conditions of employment. However, the actuarial valuation for the same has not been done.

III. CURRENT ASSETS, LOANS AND ADVANCES

i) Basis of quantitative particulars given below under item XIV is as under;

1) Production figures have been ascertained on the basis of production report summaries. The opening and closing balances of finished goods are based on stock records and physically verified inventories. Sales quantities have been furnished on the basis of sales invoices.

2) The quantities of different classes of raw materials and components consumed have been derived by posting in a separate ledger, the opening quantities & purchases and deducting there from the closing stock. The quantities for different items have not been ascertained from stock cards. The Company is still to introduce a procedure for correlation of materials consumed with production.

3) Stock of semi - finished, raw material and finished goods includes slow moving and non-moving stock of Rs. 1.0 - lacs (1.85 lacs). In the opinion of the Management, no reduction is considered necessary in the value of the stocks.

4) Semi - finished goods have been ascertained on the basis of physical verification.

5) Finished Goods comprise of varied specifications and include a number of components. In the absence of a scientific system of costing in vogue, value of closing stock is worked out, as in the past, by reducing from the selling price, an appropriate margin towards profit & selling expenses.

6) In the opinion of the Board and to the best of their knowledge and belief, Value of realization of current assets, loans and advances in the ordinary course of business would not be less than the amount at which they are stated in the balance sheet. Balance of personal accounts are subject to confirmation for the respective parties.

7) The Balances of Sundry Creditors and Sundry Debtors are subject to confirmation.

8) Materials which were re-shipped to India related to consignment supplied to CAPSI USA for Navistar Inc, USA left unattended due to non-payment of duty and other 'charges. There are also losses due to discernment of OIB Bank USA. The Company Could not arrange funds from Banks as per Restructuring package to lift these Materials which subsequently got auctioned or damaged. The Company has suffered huge Losses to the extent of Rs. 26.54 Crore on this account.

9) Company has incurred huge expenditure in developing frictionless Clutches with the help of leading Technology institutions of the Country under the aegis of CSIR. But due to shifting of existing R & D facility and still construction and other allied works at Bhiwadi and it is not possible for the Company to re-establish or replicate the old set-up of Research and product development facilities at Biwadi so easily seeing the current financial health of the Company as hiring of Competent professionals, retrieval of data for research Work and to start each activity pursuant to research & development will be a onerous task. The Company at present is not in a position to harness these benefits which might otherwise have been beneficial for the Company in long run. As such keeping the Current capitalized value of Research & Development expenditure in the form of intangible assets does not make any sense and need to be suitably written off . The total amount comes to Rs. 16.58 Crore

10)The Company has been able to deposit current deducted Provident Fund Dues/ESI with respect to employees of the Company.


Mar 31, 2014

I. SECURED LOANS

a) Nature Of Security

i) Term Loan from RIICO

The company has availed project terms loan of Rs 3800 00 lacs from RIICO I e 828 95 lacs against l and 281 25 lacs swapping of term loan from Axis 3ank & balance Rs. 2689.60 lacs fur building and Plan! S Machinery stands. Disbursed Rs.3513.16 Lacs upto 31.03.2013. Secured by way of equitable mortgage / hypothecation of all the fixed assets present 8 nature of the company by pari-passu first charge (in terms of Inter creditor and Security Sharing Agreement executed with DEG. Germany on 19.12.2008).

ii) External Commercial Borrowing (ECB) from DEG, Germany

The Company has executed ECB Loan Agreements viz Loan Agreement -1 date. 18.12.2007 for LS S 8 Month.(FC Expenditure] and other Loan Agreement- II date. 07.07.2006 for US$4 Mn. (stands soured on 11.02.2009) [Rupee Expenditure] with M/s. Deutsche Infestations- und Entwicklungsgosoflschaft mbh. Federal Republic of Germany, for capacity expansion & modernization. The above Loan is secured by first ranking mortgage on all the present and future immovable assets and first ranking hypothecation on all present and future movable assets (other than current assets and stocks).

iii) Term Loans from Technology Development Board I ICICI Bank Ltd.

Secured by Hypothecation of specific assets purchased there against and guaranteed by Managing Director. Secured by an exclusive charge by way of hypothecation on all movable properties under the Sponsored Research & Development program of World Bank (SPREAD) under the agreement dated 6thAugjst. 20C3.

iv) Term Loans from Religare Finvest Ltd.

The Company has been sanctioned loan of Rs. 350. lacs (Out of which Rs. 50 Lacs is Unsecured) from Religare Finvest Limited for purchase of Plant & Machinery out of which only Rs. 276.57 lacs was disbursed. This loan is secured by hypothecation of specific assets purchased out of the loan only.

v) Working Capital Loans from banks

Secured by hypothecation of stock of finished goods, semi fin shed goods raw material, consumable stores and book debts of the company. These securities rank pari-passu in favor of various banks viz. State Bank of Travancore, Canara Bank, Central Bank of India. State Bank of India. DBS Bank & Exim Bank. Further. secured by second charge by way of equitable mortgage affixed assets Situated at Faridabad.

b) Non fund based limits

Assets charged with Bank also cover security for these limits.

c) During the year under report. Company's Rank account were restructured and additional Working Capital loan of Rs.16.10 Crore was sanctioned by State Bank of Travancore. State Bank of India arid Canara Bank. DBS bank. Central Bank of India and Exim Bank didn't participate in the Restructuring process as finalised by State Bank of Travancore, lead Bark and State Bank of Indio 2nd Lead Bank. Additional Central Security was also offered by the Promoters to secure these Limits made available to the Company pursuant to The Sanction of the Restructuring scheme. But due to non-disbursement of the due amount, banks disbursed Rs. 2.34 Crore to the Company by the Bankers. Company couldn't execute the orders in time resulting in more losses/defaults in payments.

II. UNSECURED LOANS

a) Ministry of Science and Technology under the aegis of CSIR, has approved a Project under 'NMITLI' scheme on 30.03.2008 and had sanctioned unsecured soft loan of Rs. 1503.55 lacs @ 3% rate of interest out of which Rs. 1493.35 lacs stands disbursed.

b) I end ng from LTO Mutual Fund amounting to Rs 21 90 Crores. secured by way of issuance of 217 No.s Unsecured Redeemable Non- Convert able debentures of Rs. 10 Lacs each. This was pronounced surplus on objective. being attained front internal accruals and other sources. In order to save the interest cost to profitability, lending was assigned, who took over the said debt and indemnified repayment along with interest accruing.

III. RE-LOCATION PROGRAMME

The company has acquired _ease Hold Industrial Plot measuring 50,300 sq.mt from Rajasthan State industrial Development & Investment Corporation Ltd. (RIICO), Jaipur vide Plot No. 3P2 - 173 & 174, at Industrial Area Kahrani (Bhiwadi Extn.) Dist. Alwar (Rajasthan) for relocation of its existing manufacturing unit. The Plant has been made operational from November. 2012.


Mar 31, 2013

(I). ACCOUNTING CONCEPTS:

The amount are prepared on historical cost; corner, en a going concern basis in accordance with the general y accepted accounting principles and accenting standards applicable in India, and conform to the statutory requirements and other relevant provision often Indian Companies Act, 1956. read with The Companies (Accounting Standard) Rules, 2006, except where otherwise stated.

(I I), FIXE D AS S ETS AN D DEPRE CIATIO N

a} Fixed Assets are stated at their original cost {net of MOD VAT where applicable) including fright, nixies, customs and other incidental expenses relating to acquisition and installation. Interest and other finance charges paid on loans turn the acquisition of fixed assets are apportioned to the cost of fixed assets till they are "ready fur use.

b) Expenditure incurred during the period of consumption is carried forward as capital work-in-progress, and on completion the mats are nil neater! to the respective fixed assets.

c) For New Projects, all dent expenses and direct overheads (excluding services provided by employee''s regular payroll} are capitalized.

d) Depreciation has been provided on straight-line method at the rates and in the manner specified under Schedule XIV of that Companies Act. 1356. except for the following:

i) On assets added up to 30th June 1987 on the basis of rates derived from income tax rules at the time of acquisition

ii) On assets added after 30th June, that at the rates given (tor double shifts) in Schedule XIV to the Timpanist Act:,

1356. It is calculated on prorate basis on additions during that year. iii). Assets costing up to Rs.5000 are fully depreciated in the year of purchase.

iv). Intangible assets are written off over a period of 10 years.

(III). VALUATION OF INVENTORIES

Inventories are valued at cost: except for finished goods and scrap. Finished goods are valued at lower of cost or net realizable value and scraps are valued at etiolated realizable value. Raw materials and consumables are valued by excluding recoverable taxes and duties. Cost is determined using we shed average method. Cost of in house manufactured Raw material is taken at standard rate.

(IV). EXCISE DUTY

Excise Duty in respect of goods manufactured by the Company is accounted on accrual bas s.

(V). EMPLOYEE BENEFITS

In the financial year ended March 31st 200E, the Company has adopted Accounting Standard 15 (Revised 2QD5) issued by Institute of Chartered Accountants of India (ICAI) en ''Accounting for Retirement Benefits in Financial Statements of Employers1. Accordingly the Company has provided for liability on accent of all following employees benefits available to the employees in accordance with the applicable rules, regulations, laws are employee benefit policy of the Company, a). The company as. Merest of a Provident Fund Scheme under the Employees Provident Fund and Miscellaneous Provisions Act.

1952. This is a defined contribution scheme and that contributions are charged to the Profit &. Loss Account of that year when that contributions to the government funds are due. b). Gratuity liability is defend benefit Date ligations and Provided for on the Das is at an actuarial valuation as per projected unit credit:

method, made at the end of each financial year. The difference between the actuarial valuation of the gratuity liability of the employees at the year end and the balance of provisioning made is provided for as liability in the books.

c). Employees are entitled for leave encashment which are provided for on the basis of actuarial valuations.

(VI). MISCELLANEOUS EXPENDITURE

Product development and (raining expenditure/Brand development father miscellaneous expenditure are amortized over a period of six years'' five years respectively.

(VII) REVENUE RECOGNITION

Sales arc accounted for inclusive of excise duty and exclusive of sales tax.

b. In respect of exports made under Duty Entitlement Pass Book Scheme (DEPBI, the benefit is accounted for on receipt basis.

this is subject to realization to export dues, tiling and acceptance of claims auditor transfer of license tar consideration. c) Doubtful debts & doubtful advance are recoverable or the settlement of pending warranties aid settlement clothe-issues in the coming years.

(VIII).BORROWING COST

Borrowing Costa that are directly attributable to the acquisition, construction or production of qualifying assets are capsized till the month h which the asset is ready to use as part of the cost of that asset Interest on working capital is chafed to revenue accoun.1,

(IX).LEASES

Lands RS to Moral assents whom the Company assumes substantially all the honest and risks crowners are classified as finance leases. Finance leases are capitalized at to fiesta mated present value of the underlying lease payees. Each lease payment is allocated between the liability and finance charges so as to achieve a. constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance chairman; arc included in payables. The interest clement of the finance charge in charged to the Profit and Loss Account over the lease period.

Loan rental s in respect of assets taken on "Operating Lease" are charged to the Profit and Loss Account on straight fine basis over tie lease term,

(X). WARRANTY

Provision for warranty is mass on trend determined by that Company, as parochial evaluation.

(XI). RESEARCH AND DEVELOPMENT

Revenue expenditure R&C is taxed after as expenses in the year in which it is incurred under the respective rapture heads on account. Expenditure results in creation on capital assets were taken to fixed assets and depreciation has ceer provided on such attest over ties estimated useful as determined by the management. Capital expenditure on scientific research product under development is taker as management (including Patents. Trade Marks, Brands Developments, Specialized software, Technical know-how. etc) sublevel to amortization in future.

(XII). FOREIGN CURRENCY TRANSACTIONS

Transactions dominated in foreign currency arc recorded at the exchange rates prevailing on the dale of ".therefore. Exchange difference arising on foreign exchange ''transactions settled during .he you''re recognized in the Profit and Loss Account of the year that exchange referent- of related to acquisition affixed assets, fame a country outside India are adjusted in the carrying amount of the related fixed assets.

Monetary assets and liabilities in foreign currency art: liaised al the year end at the destiny exchange late and the lealer exchange differences arc recognized in the Profit and 0SS Account. Non monetary foreign agency items arc carried at cost on the- :rarefaction date. The premium or discount on forward exchange contracts is amortized as income or expense ever the life of the cortical.

(XIII). ACCOUNTING FOR TAXES

a), Provision for current tax is recognized based on tie tax payable for the year under the Income Tax Act. 1951.

b}. Deferred tax on timing differences between taxable income and accounting income is accounted for. using the tax rates add the tax laws enacted or substantially enacted as on the balance sheet data. Deferred tax assets, other than on unabsorbed tax depreciation and Un absolved tax losses, are recognized only to the extent that there is a reasonable certainty of their realization.

Deferred tax assets on unabsorbed tax depreciation and unabsorbed tax. losses are recognized only to the extent that there is virtual certainty of their realization supported by convincing evidence. c). Minimum Alternate Tax is paid in accordance with the tax laws, which give rise to future economic benefits in the form of a distrust of future nice lax Inability, is considered as an asset when''ll is probable that that future economic benefit associated with it will flow to tie company and the asset can be measured reliably.

(XIV). PROVISIONS

The company makes a provision where there is a present obligator as a result of a past event where the outflow of economic resources is probable and a reliable estimate of the amount of obligation can be made,

(XV). EARNING PER SHARE

Basic earnings per share is calculated by dividing :he net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period, or the purpose o'' calculating diluted earnings per share the ne: profit or loss for the period attributable to equity shareholders and weighted average number of equity shares nil. [standing during the period are adjusted for the effect of all d outlive potential equity shares. [XVI). SEGMENT REPORTING

Tic accounting policy adoptee for Significant-. Reporting is in line with the accounting policy of the Company with the two lowing additional policy for Segment Re porting -

Revenue and expenses have been identified to segments on the basis of their relationship to the pointing activates of the segment. Revenue and expenses, which relate to the enterprise as a whole and are no: allocable to the segments on a reasonable basis, have been included under "Unallocated Expenses. Inter Segment transfers arc at cost.


Mar 31, 2012

(I). ACCOUNTING CONCEPTS:

The accounts are prepared on historical cost convention, on a going concern basis in accordance with the generally accepted accounting principles and accounting standards applicable in India, and conform to the statutory requirements and other relevant provision of the Indian Companies Act, 1956, read with The Companies (Accounting Standard) Rules, 2006, except where otherwise stated.

(II). FIXED ASSETS AND DEPRECIATION

a) Fixed Assets are stated at their original cost (net of MODVAT where applicable) including freight, duties, customs and other incidental expenses relating to acquisition and installation. Interest and other finance charges paid on loans for the acquisition of fixed assets are apportioned to the cost of fixed assets till they are ready for use.

b) Expenditure incurred during the period of construction is carried forward as capital work-in-progress, and on completion the costs are allocated to the respective fixed assets.

c) For New Projects, all direct expenses and direct overheads (excluding services provided by employee's regular payroll) are capitalized.

d) Depreciation has been provided on straight-line method at the rates and in the manner specified under Schedule XIV of the Companies Act, 1956, except for the following:

i) On assets added up to 30th June 1987 on the basis of rates derived from income tax rules at the time of acquisition

ii) On assets added after 30th June, 1987 at the rates given (for double shifts) in Schedule XIV of the Companies Act, 1956. It is calculated on prorata basis on additions during the year.

iii). Assets costing up to Rs.5000 are fully depreciated in the year of purchase.

iv). Intangible assets are written off over a period of 10 years.

(III). VALUATION OF INVENTORIES

Inventories are valued at cost except for finished goods and scrap. Finished goods are valued at lower of cost or net realizable value and scraps are valued at estimated realizable value. Raw materials and consumables are valued by excluding recoverable taxes and duties. Cost is determined using weighted average method. Cost of in house manufactured Raw material is taken at standard rate.

(IV). EXCISE DUTY

Excise Duty in respect of goods manufactured by the Company is accounted on accrual basis.

(V). EMPLOYEE BENEFITS

In the financial year ended March 31st 2008, the Company has adopted Accounting Standard 15 (Revised 2005) issued by Institute of Chartered Accountants of India (ICAI) on 'Accounting for Retirement Benefits in Financial Statements of Employers'. Accordingly the Company has provided for liability on account of all following employees benefits available to the employees in accordance with the applicable rules, regulations, laws and employee benefit policy of the Company.

a). The company is a member of a Provident Fund Scheme under the Employees Provident Fund and Miscellaneous Provisions Act, 1952. This is a defined contribution scheme and the contributions are charged to the Profit & Loss Account of the year when the contributions to the government funds are due.

b). Gratuity liability is defined benefit obligations and provided for on the basis of an actuarial valuation as per projected unit credit method, made at the end of each financial year. The difference between the actuarial valuation of the gratuity liability of the employees at the year end and the balance of provisioning made is provided for as liability in the books.

c). Employees are entitled for leave encashment which are provided for on the basis of actuarial valuations.

(VI). MISCELLANEOUS EXPENDITURE

Product development and training expenditure/Brand development /other miscellaneous expenditure are amortized over a period of six years/five years respectively.

(VII). REVENUE RECOGNITION

a). Sales are accounted for inclusive of excise duty and exclusive of sales tax.

b). In respect of exports made under Duty Entitlement Pass Book Scheme (DEPB), the benefit is accounted for on receipt basis. This is subject to realization of export dues, filing and acceptance of claims and/or transfer of license for consideration.

c) Doubtful debts & doubtful advance are recoverable on the settlement of pending warranties and settlement of other issues in the coming years.

(VIII). BORROWING COST

Borrowing Costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalized till the month in which the asset is ready to use as part of the cost of that asset. Interest on working capital is charged to revenue account.

(IX).LEASES

Leases of fixed assets where the Company assumes substantially all the benefits and risks of ownership are classified as finance leases. Finance leases are capitalized at the estimated present value of the underlying lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in payables. The interest element of the finance charge is charged to the Profit and Loss Account over the lease period.

Lease rentals in respect of assets taken on "Operating Lease" are charged to the Profit and Loss Account on straight line basis over the lease term.

(X). WARRANTY

Provision for warranty is made on trend determined by the Company, as per technical evaluation.

(XI). RESEARCH AND DEVELOPMENT

Revenue expenditure R&D is charged after as expenses in the year in which it is incurred under the respective nature heads on account. Expenditure results in creation on capital assets are taken to fixed assets and depreciation has been provided on such assets over the estimated useful as determined by the management. Capital expenditure on scientific research product under development is taken as intangible assets (including Patents, Trade Marks, Brands Developments, Specialized software, Technical know-how, etc) subject to amortization in future.

(XII). FOREIGN CURRENCY TRANSACTIONS

Transactions denominated in foreign currency are recorded at the exchange rates prevailing on the date of the transaction. Exchange difference arising on foreign exchange transactions settled during the year are recognized in the Profit and Loss Account of the year except that exchange difference related to acquisition of fixed assets from a country outside India are adjusted in the carrying amount of the related fixed assets.

Monetary assets and liabilities in foreign currency are translated at the year end at the closing exchange rate and the resultant exchange differences are recognized in the Profit and Loss Account. Non monetary foreign currency items are carried at cost on the transaction date.

The premium or discount on forward exchange contracts is amortized as income or expense over the life of the contract.

(XIII). ACCOUNTING FOR TAXES

a). Provision for current tax is recognized based on the tax payable for the year under the Income Tax Act, 1961.

b). Deferred tax on timing differences between taxable income and accounting income is accounted for, using the tax rates and the tax laws enacted or substantially enacted as on the balance sheet date. Deferred tax assets, other than on unabsorbed tax depreciation and unabsorbed tax losses, are recognized only to the extent that there is a reasonable certainty of their realization. Deferred tax assets on unabsorbed tax depreciation and unabsorbed tax losses are recognized only to the extent that there is virtual certainty of their realization supported by convincing evidence.

c). Minimum Alternate Tax is paid in accordance with the tax laws, which give rise to future economic benefits in the form of adjustment of future income tax liability, is considered as an asset when it is probable that the future economic benefit associated with it will flow to the company and the asset can be measured reliably.

(XIV). PROVISIONS

The company makes a provision where there is a present obligation as a result of a past event where the outflow of economic resources is probable and a reliable estimate of the amount of obligation can be made.

(XV). EARNING PER SHARE

Basic earning per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and weighted average number of equity shares outstanding during the period are adjusted for the effect of all dilutive potential equity shares.

(XVI). SEGMENT REPORTING

The accounting policy adopted for Segment Reporting is in line with the accounting policy of the Company with the following additional policy for Segment Reporting:-

Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the enterprise as a whole and are not allocable to the segments on a reasonable basis, have been included under "Unallocated Expenses. Inter Segment transfers are at cost.


Mar 31, 2010

1. ACCOUNTING CONCEPTS:

The accounts are prepared on historical cost convention, on a going concern basis in accordance with the generally accepted accounting principles and accounting standards applicable in India, and conform to the statutory requirements and other relevant provision of the Indian Companies Act, 1956, read with The Companies (Accounting Standard) Rules, 2006, except where otherwise stated.

2. FIXED ASSETS AND DEPRECIATION

a) Fixed Assets are stated at their original cost (net of MODVAT where applicable) including freight, duties, customs and other incidental expenses relating to acquisition and installation. Interest and other finance charges paid on loans for the acquisition of fixed assets are apportioned to the cost of fixed assets till they are ready for use.

b) Expenditure incurred during the period of construction is carried forward as capital work-in-progress, and on completion the costs are allocated to the respective fixed assets.

c) Foreign exchange fluctuation on payment/restatement of long term liabilities related to fixed assets are charged to the profit and loss Account.

d) Depreciation has been provided on straight-line method at the rates and in the manner specified under Schedule XIV of the Companies Act, 1956, except for the following:

i) Oil assets added up to 30th June 1987 on the basis of rates derived from income tax rules at the time of acquisition

ii) On assets added after 30th June, 1987 at the rates given (for double shifts) in Schedule XIV of the Companies Act, 1956. It is calculated on pro-rata basis on additions during the year.

iii) Assets costing up to Rs.5000 are fully depreciated in the year of purchase.

iv) Intangible assets are written off over a period of 10 years.

3. VALUATION OF INVENTORIES

Inventories are valued at cost except for finished goods and scrap. Finished goods are valued at lower of cost or net realizable value and scraps are valued at estimated realizable value. Raw materials and consumables are valued by excluding recoverable taxes and duties. Cost is determined using weighted average method. Cost of in house manufactured Raw material is taken at standard rate.

4. EXCISE DUTY

Excise Duty in respect of goods manufactured by the Company is accounted on accrual basis.

5. EMPLOYEE BENEFITS

In the financial year ended March 31st 2008, the Company has adopted Accounting Standard 15 (Revised 2005) issued by Institute of Chartered Accountants of India (ICAI) on Accounting for Retirement Benefits in Financial Statements of Employers. Accordingly the Company has provided for liability on account of all following employees benefits available to the employees in accordance with the applicable rules, regulations, laws and employee benefit policy of the Company.

a). The company is a member of a Provident Fund Scheme under the Employees Provident Fund and Miscellaneous Provisions Act, 1952. This is a defined contribution scheme and the contributions are charged to the Profit & Loss Account of the year when the contributions to the government funds are due.

b). Gratuity liability is defined benefit obligations and provided for on the basis of an actuarial valuation as per projected unit credit method, made at the end of each financial year. The difference between the actuarial valuation of the gratuity liability of the employees at the year end and the balance of provisioning made is provided for as liability in the books.

c). Employees are entitled for leave encashment which are provided for on the basis of actuarial valuations.

6. MISCELLANEOUS EXPENDITURE

Product development and training expenditure/Brand development /other miscellaneous expenditure are amortized over a period of six years/five years respectively.

7. REVENUE RECOGNITION

a). Sales are accounted for inclusive of excise duty and exclusive of sales tax.

b). In respect of exports made under Duty Entitlement Pass Book Scheme (DEPB), the benefit is accounted for on receipt basis. This is subject to realization of export dues, filing and acceptance of claims and/or transfer of license for consideration.

c). Doubtful debts & doubtful advance are recoverable on the settlement of pending warranties and settlement of other issues in the coming years.

8. BORROWING COST

Borrowing Costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalized till the month in which the asset is ready to use as part of the cost of that asset. Interest on working capital is charged to revenue account.

9. LEASES

Leases of fixed assets where the Company assumes substantially all the benefits and risks of ownership are classified as finance leases. Finance leases are capitalized at the estimated present value of the underlying lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in payables. The interest element of the finance charge is charged to the Profit and Loss Account over the lease period.

Lease rentals in respect of assets taken on "Operating Lease" are charged to the Profit and Loss Account on straight line basis over the lease term.

10. WARRANTY

Provision for warranty is made on trend determined by the Company, as per technical evaluation.

11. RESEARCH AND DEVELOPMENT

Revenue expenditure R&D is charged after as expenses in the year in which it is incurred under the respective nature heads on account. Expenditure results in creation on capital assets are taken to fixed assets and depreciation has been provided on such assets over the estimated useful as determined by the management. Capital expenditure on scientific research product under development is taken as intangible assets ( including Patents, Trade Marks, Brands Developments, Specialized software, Technical know- how, etc) subject to amortization in future.

12. FOREIGN CURRENCY TRANSACTIONS

Transactions denominated in foreign currency are recorded at the exchange rates prevailing on the date of the transaction. Exchange difference arising on foreign exchange transactions settled during the year are recognized in the Profit and Loss Account of the year except that exchange difference related to acquisition of fixed assets from a country outside India are adjusted in the carrying amount of the related fixed assets.

Monetary assets and liabilities in foreign currency are translated at the year end at the closing exchange rate and the resultant exchange differences are recognized in the Profit and Loss Account. Non monetary foreign currency items are carried at cost on the transaction date.

The premium or discount on forward exchange contracts is amortized as income or expense over the life of the contract.

13. ACCOUNTING FOR TAXES

a). Provision for current tax is recognized based on the tax payable for the year under the Income Tax Act, 1961.

b). Deferred tax on timing differences between taxable income and accounting income is accounted for, using the tax rates and the tax laws enacted or substantially enacted as on the balance sheet date. Deferred tax assets, other than on unabsorbed tax depreciation and unabsorbed tax losses, are recognized only to the extent that there is a reasonable certainty of their realization. Deferred tax assets on unabsorbed tax depreciation and unabsorbed tax losses are recognized only to the extent that there is virtual certainty of their realization supported by convincing evidence.

c). Minimum Alternate Tax is paid in accordance with the tax laws, which give rise to future economic benefits in the form of adjustment of future income tax liability, is considered as an asset when it is probable that the future economic benefit associated with it will flow to the company and the asset can be measured reliably.

14. PROVISIONS

The company makes a provision where there is a present obligation as a result of a past event where the outflow of economic resources is probable and a reliable estimate of the amount of obligation can be made.

15. EARNING PER SHARE

Basic earning per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.

16. SEGMENT REPORTING

The accounting policy adopted for Segment Reporting is in line with the accounting policy of the Company with the following additional policy for Segment Reporting:-

Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the enterprise as a whole and are not allocable to the segments on a reasonable basis, have been included under "Unallocated Expenses. Inter Segment transfers are at cost.

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