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Accounting Policies of KSB Pumps Ltd. Company

Dec 31, 2014

1.1 Fixed assets and depreciation/amortisation:

(a) Fixed assets are stated at cost of acquisition or construction less depreciation/amortisation. Cost comprises the purchase price and other attributable costs on making the asset ready for its intended use.

(b) Depreciation/amortization on fixed assets:

i) Depreciation on tangible fixed assets is provided at the rates and in the manner laid down in Schedule XIV to the Companies Act, 1956 on the written down value (WDV) method in respect of buildings, furniture and fixtures and vehicles and on the straight line method (SLM) in respect of other assets. However, the rate of depreciation in respect of the following assets is higher :

Jigs & fixtures - 33% (SLM)

Furniture & fxtures - 37% (WDV)

Office equipments - 10% (SLM)

Electrical installations - 10% (SLM)

Vehicles - 60% (WDV)

Leasehold land are amortised over the period of the lease. ii) Intangible assets are amortised on the straight line method at the following rates :

Rights, techniques, Process and Know-how - 14.29%, 20%

Software - 33%

2.2 Investments

Long-term Investments are valued at cost of acquisition and related expenses. Provision is made for other than temporary diminution, if any, in the value of such investments.

2.3 Inventories

Inventories are stated at the lower of cost and net realisable value. In determining the cost of raw materials, components, stores, spares and loose tools the weighted average method is used. Costs of work-in-progress and manufactured fnished products include material costs, labour and factory overheads on the basis of full absorption costing.

2.4 Trade receivables and advances

Specifc debts and advances identified as irrecoverable or doubtful are written-off or provided for, respectively.

2.5 Foreign currency transactions and translations

Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of the transaction. Realised gains and losses as also exchange differences arising on translation at year end exchange rates of monetary assets and liabilities outstanding at the end of the year are recognised in the Statement of Proft and Loss. Premium/Discount in respect of Forward Contracts is accounted for over the period of contract.

2.6 Revenue Recognition

(i) Sales of goods is recognised when all signifcant risks and rewards of ownership have been transferred to the buyers.

(ii) Dividend income from investments is recognised when the owner''s right to receive the payment is established.

(iii) Income from services rendered is accounted for when the work is performed.

2.7 Employee Benefits

Employee benefts includes gratuity, superannuation and provident fund and leave encashment benefts under the approved schemes of the Company.

In respect of defined contribution plans, the contribution payable for the year is charged to the Statement of Profit and Loss.

In respect of defined beneft plans and other long term employee benefits, the employee benefit costs is accounted for based on an actuarial valuation during the year.

2.8 Product Warranty

Cost of product warranties is disclosed under the head:

(i) ''raw materials and components consumed'' as consists of free replacement of spares.

(ii) ''miscellaneous expenses'' which includes provision for warranties.

2.9 Taxes on Income

Tax expense for the year is included in the determination of the net proft for the year. Deferred tax is recognised on all timing differences, subject to consideration of prudence in respect of deferred tax assets. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date.

2.10 Leases

Assets acquired under fnance leases are recognised at the lower of the fair value of the leased assets at inception of the lease and the present value of minimum lease payments. Lease payments are apportioned between the fnance charge and the reduction of the outstanding liability. The fnance charge is allocated to periods during the lease term at a constant periodic rate of interest on the remaining balance of the liability. Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating leases. Lease rentals under operating leases are recognised in the Statement of Proft and Loss on a straight-line basis.

2.11 Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. Other borrowing costs are recognised as an expense in the year in which they are incurred.

2.12 Cash Flow Statement

The Cash Flow statement is prepared by the indirect method and presents cash fows by operating, investing and fnancing activities of the Company.

2.13 Use of Estimates

The preparation of the financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the fnancial statements and the reported amount of revenues and expenses during the reporting year. Difference between the actual result and estimates are recognized in the year in which the results are known/materialized.

2.14 Provisions, Contingent Liabilities and Contingent Assets

The Company recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outfow of resources embodying economic benefts will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

No provision is recognised for:

(i) Any possible obligation that arises from past events and the existence of which will be confrmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or

(ii) Any present obligation that arises from past events but is not recognized because- - It is not probable that an outfow of resources embodying economic benefts will be required to settle the obligation; or - A reliable estimate of the amount of obligation cannot be made.

Such obligations are recorded as Contingent Liabilities. These are assessed continually and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

Contingent Assets are not recognized in the fnancial statements since this may result in the recognition of income that may never be realized.

2.15 Earnings per share

Basic earnings per share is computed by dividing the profit attributable to equity shareholders for the year by the weighted average number of Equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit attributable to equity shareholders for the year as adjusted for dividend, interest and other charges to expenses or income (net of taxes) relating to the diluted potential equity shares, by the weighted average number of equity shares outstanding during the year as adjusted for the effects of all diluted potential equity shares except where the results are anti-dilutive.

v) The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. However, no such preferential amount exists currently. The distribution will be in proportion to the number of equity shares held by the shareholders.


Dec 31, 2013

1 Company Overview Products:

The Company is engaged in the business of manufacture of different types of power driven pumps and industrial valves. Castings are mainly produced for captive consumption.

Operations:

The Company has factories at the following places:-

A) Irrigation and Process Pumps Division (I.P.D.) at Pimpri

Manufacturing of submersible pumps, vertical and horizontal pumps, series and non-series pumps, Multistage pumps, chemical process pumps, non clog pumps and water pumps.

B) Power Projects Division (P.P.D.) at Chinchwad

Manufacturing of primary heat transfer pumps, moderator pumps, main boiler feed pumps and multistage condense extraction pumps, re-heater drain pumps and auxiliary boiler feed pumps.

C) Foundry Division at Vambhori

Manufacturing of steel & iron castings including for captive consumption.

D) Coimbatore Unit

Manufacturing of valves (Globe, Gate, Check, Butterfly & Ball valves).

E) Nashik Unit (Sinnar)

Established in 1995, this unit is engaged in the manufacture of high pressure and submersible pumps.

2 Significant accounting policies

2.1 Fixed assets and depreciation/ amortisation:

(a) Fixed assets are stated at cost of acquisition or construction less depreciation/ amortisation. Cost comprises the purchase price and other attributable costs.

(b) Depreciation/amortization on fixed assets:

i) Depreciation on tangible fixed assets is provided at the rates and in the manner laid down in Schedule XIV to the Companies Act, 1956 on the written down value (WDV) method in respect of buildings, furniture and fixtures and vehicles and on the straight line method (SLM) in respect of other assets. However, the rate of depreciation in respect of the following assets is higher :-

Jigs & fixtures - 33% (SLM)

Furniture & fixtures - 37% (WDV)

Office equipments - 10% (SLM)

Electrical installations - 10% (SLM)

Vehicles - 60% (WDV)

Leasehold land and assets taken on lease are amortised over the period of the lease. ii) Intangible assets are amortised on the straight line method at the following rates :

Rights, techniques, Process and Knowhow - 14.29%, 20%

Software - 33%

2.2 Investments

Long-term Investments are valued at cost of acquisition and related expenses. Provision is made for other than temporary diminution, if any, in the value of such investments.

2.3 Inventories

Inventories are stated at the lower of cost and net realisable value. In determining the cost of raw materials, components, stores, spares and loose tools the weighted average method is used. Costs of work-in-progress and manufactured finished products include material costs, labour and factory overheads on the basis of full absorption costing.

2.4 Trade receivables and advances

Specific debts and advances identified as irrecoverable or doubtful are written-off or provided for, respectively.

2.5 Foreign exchange transactions

Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of the transaction. Realised gains and losses as also exchange differences arising on translation at year end exchange rates of current assets and current liabilities outstanding at the end of the year are recognised in the Statement of Profit and Loss. Premium/ Discount in respect of Forward Contracts is accounted for over the period of contract.

2.6 Revenue Recognition

(i) Sale of goods is recognised when all significant risks and rewards of ownership have been transferred to the buyers.

(ii) Dividend income from investments is recognised when the owner''s right to receive the payment is established. (iii) Income from services rendered is accounted for when the work is performed.

2.7 Employee Benefits

Employee benefits includes gratuity, superannuation and provident fund and leave encashment benefits under the approved schemes of the Company.

In respect of defined contribution plans, the contribution payable for the year is charged to the Statement of Profit and Loss.

In respect of defined benefit plans and other long term employee benefits, the employee benefit costs is accounted for based on an actuarial valuation as at the balance sheet date.

2.8 Product Warranty

Cost of product warranties is disclosed under the head

(i) ''cost of materials consumed'' as consists of free replacement of spares.

(ii) ''miscellaneous expenses'' which includes provision for warranties.

2.9 Taxes on Income

Tax expense for the year is included in the determination of the net profit for the year. Deferred tax is recognised on all timing differences, subject to consideration of prudence in respect of deferred tax assets.

2.10 Leases

Assets acquired under finance leases are recognised at the lower of the fair value of the leased assets at inception of the lease and the present value of minimum lease payments. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to periods during the lease term at a constant periodic rate of interest on the remaining balance of the liability.

2.11 Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. Other borrowing costs are recognised as an expense in the year in which they are incurred.

2.12 Cash Flow Statement

The Cash Flow statement is prepared by the indirect method set out in Accounting Standard (AS) - 3 on Cash Flow Statements and presents cash flows by operating, investing and financing activities of the Company.

2.13 Use of Estimates

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

2.14 Provisions, Contingent Liabilities and Contingent Assets

As per Accounting Standard 29, Provisions, Contingent Liabilities and Contingent Assets, issued by the

Institute of Chartered Accountants of India, the Company recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

No provision is recognised for:

(i) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or (ii) Any present obligation that arises from past events but is not recognized because

- It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

- A reliable estimate of the amount of obligation cannot be made.

Such obligations are recorded as Contingent Liabilities. These are assessed continually and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made. Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

2.15 Earnings per share

The Company reports basic and diluted earnings per share in accordance with Accounting Standard - 20 on Earnings per Share.

Basic earnings per share is computed by dividing profit for the year after tax by the weighted average number of Equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit for the year after tax by the weighted average number of equity shares outstanding during the year as adjusted for the effects of all diluted potential equity shares except where the results are anti-dilutive.


Dec 31, 2012

1.1 Fixed assets and depreciation/amortisation:

(a) Fixed assets are stated at cost of acquisition or construction less depreciation/amortisation. Cost comprises the purchase price and other attributable costs.

(b) Depreciation/amortisation on fixed assets:

i) Depreciation on tangible fixed assets is provided at the rates and in the manner laid down in Schedule XIV to the Companies Act, 19S6 on the written down value (WDV) method in respect of buildings, furniture and fixtures and vehicles and on the straight line method (SLM) in respect of other assets. However, the rate of depreciation in respect of the following assets is higher: Jigs & fixtures - 33% (SLM)

Furniture & fixtures - 37% (WDV)

Office equipments - 10% (SLM)

Electrical installations - 10% (SLM)

Vehicles - 60% (WDV)

Leasehold land and assets taken on lease are amortised over the period of the lease.

ii) Intangible assets are amortised on the straight line method at the following rates:

Rights, techniques, Process and Know how - 14.29%, 20%

Software - 33%

1.2 Investments

Long-term Investments are valued at cost of acquisition and related expenses. Provision is made for other than temporary diminution, if any, in the value of such investments.

1.3 Inventories

Inventories are stated at the lower of cost and net realisable value. In determining the cost of raw materials, components, stores, spares and loose tools the weighted average method is used. Costs of work-in-progress and manufactured finished products include material costs, labour and factory overheads on the basis of full absorption costing.

1.4 Sundry debtors and advances

Specific debts and advances identified as irrecoverable or doubtful are written-off or provided for, respectively.

1.5 Foreign exchange transactions

Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of the transaction. Realised gains and losses as also exchange differences arising on translation at year end exchange rates of current assets and current liabilities outstanding at the end of the year are recognised in the Statement of Profit and Loss. Premium/Discount in respect of Forward Contracts is accounted for over the period of contract.

1.6 Revenue Recognition

(i) Sale of goods is recognised when all significant risks and rewards of ownership have been transferred to the buyers.

(ii) Dividend income from investments is recognised when the owner''s right to receive the payment is established.

(iii) Income from services rendered is accounted for when the work is performed.

1.7 Employee Benefits

Employee benefits includes gratuity, superannuation and provident fund and leave encashment benefits under the approved schemes of the Company. In respect of defined contribution plans, the contribution payable for the year is charged to the Statement of Profit and Loss. In respect of defined benefit plans and other long-term employee benefits, the employee benefit costs is accounted for based on an actuarial valuation as at the Balance Sheet date.

1.8 Product Warranty

Cost of product warranties is disclosed under the head

(i) ‘raw materials and components consumed'' as consists of free replacement of spares.

(ii) ‘miscellaneous expenses'' which includes provision for warranties.

1.9 Taxes on Income

Tax expense for the year is included in the determination of the net profit for the year. Deferred tax is recognised on all timing differences, subject to consideration of prudence in respect of deferred tax assets.

1.10 Leases

Assets acquired under finance leases are recognised at the lower of the fair value of the leased assets at inception of the lease and the present value of minimum lease payments. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to periods during the lease term at a constant periodic rate of interest on the remaining balance of the liability.

1.11 Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. Other borrowing costs are recognised as an expense in the year in which they are incurred.

1.12 Cash Flow Statement

The Cash Flow statement is prepared by the indirect method set out in Accounting Standard (AS) - 3 on Cash Flow Statements and presents cash flows by operating, investing and financing activities of the Company.

1.13 Use of Estimates

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

1.14 Provisions, Contingent Liabilities and Contingent Assets

As per Accounting Standard 29, Provisions, Contingent Liabilities and Contingent Assets, issued by the Institute of Chartered Accountants of India, the Company recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

No provision is recognised for:

(i) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or

(ii) Any present obligation that arises from past events but is not recognized because

- It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

- A reliable estimate of the amount of obligation cannot be made.

Such obligations are recorded as Contingent Liabilities. These are assessed continually and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made. Contingent Assets are not recognised in the financial statements since this may result in the recognition of income that may never be realised.

1.15 Earnings per share

The Company reports basic and diluted earnings per share in accordance with Accounting Standard - 20 on Earnings per Share.

Basic earnings per share is computed by dividing the profit for the year after tax by the weighted average number of Equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit for the year after tax by the weighted average number of equity shares outstanding during the year as adjusted for the effects of all diluted potential equity shares except where the results are anti-dilutive.


Dec 31, 2010

1. Fixed assets and depreciation/amortisation:

(a) Fixed assets are stated at cost of acquisition or construction less depreciation/amortisation. Cost comprises the purchase price and other attributable costs.

(b) Depreciation/amortization on fixed assets:

i) Depreciation on tangible fixed assets is provided at the rates and in the manner laid down in Schedule XIV to the Companies Act, 1956 on the written down value (WDV) method in respect of buildings, furniture and fixtures and vehicles and on the straight line method iSW) in respect of other assets. However, the rate of depreciation in respect of the following assets is higher :-

Jigs & fixtures - 33% (SLM)

Furniture & fixtures - 37% (WDV)

Office equipments - 10% (SLM)

Electrical installations - 10% (SLM)

Vehicles - 60% (WDV)

Leasehold land and assets taken on lease are amortised over the period of the lease.

ii) Intangible assets are amortised on the straight line method at the following rates:

Rights, techniques,

Process and Know-how 14.29 %, 20 %

Software 33%

2. Investments:

Long-term Investments are valued at cost of acquisition and related expenses. Provision is made for other than temporary diminution, if any, in the value of such investments.

3. Inventories:

Inventories are stated at the lower of cost and net realisable value. In determining the cost of raw materials, components, stores, spares and loose tools the weighted average method is used for industrial valves, submersible pumps, industrial pumps, pumps for power projects and castings. Hitherto, the cost of raw materials, components, stores, spares and loose tools for castings were determined using the first-in-first-out (FIFO) method. The impact on valuation of inventories and profit for the year, consequent to the change in the method of valuation, is not material.

Costs of work-in-progress and manufactured finished products include material costs, labour and factory overheads on the basis of full absorption costing.

4. Sundry debtors and advances:

Specific debts and advances identified as irrecoverable or doubtful are written-off or provided for, respectively.

5. Foreign exchange transactions :

Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of the transaction. Realised gains and losses as also exchange differences arising on translation at year end exchange rates of current assets and current liabilities outstanding at the end of the year are recognised in the Profit and Loss account. Premium/Discount in respect of Forward Contracts is accounted for over the period of contract.

6. Revenue Recognition :

(i) Sales of goods is recognised on shipment or despatch to customers.

(ii) Dividend income from investments is recognised when the owners right to receive the payment is established. Dividend from the subsidiary company declared after the year end is, as per the law, accounted during the year.

(iii) Income from services rendered is accounted for when the work is performed.

7. Employee Benefits:

Employee benefits includes gratuity, superannuation and provident fund and leave encashment benefits under the approved schemes of the Company.

In respect of defined contribution plans, the contribution payable for the year is charged to the Profit and Loss Account.

In respect of defined benefit plans and other long term employee benefits, the employee benefit costs is accounted for based on an actuarial valuation as at the Balance Sheet date.

8. Product Warranty :

Cost of product warranties is disclosed under the head

(i) raw materials and components consumed as consists of free replacement of spares.

(ii) general charges which includes provision for warranties.

9. Taxes on Income :

Tax expense for the year is included in the determination of the net profit for the year.

Deferred tax is recognised on all timing differences, subject to consideration of prudence in respect of deferred tax assets.

10. Leases:

Assets acquired under finance leases are recognised at the lower of the fair value of the leased assets at inception of the lease and the present value of minimum lease payments. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to periods during the lease term at a constant periodic rate of interest on the remaining balance of the liability.

11. Borrowing Costs :

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. Other borrowing costs are recognised as an expense in the year in which they are incurred.

12. Cash Flow Statement:

The Cash Flow statement is prepared by the indirect method set out in Accounting Standard (AS) - 3 on Cash Flow Statements and presents cash flows by operating, investing and financing activities of the Company.

13. Use of Estimates:

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

14. Provisions. Contingent Liabilities and Contingent Assets:

As per Accounting Standard 29, Provisions, Contingent Liabilities and Contingent Assets, the Company recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

No provision is recognised for:

(i) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company; or

(ii) Any present obligation that arises from past events but is not recognized because-

- It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

- A reliable estimate of the amount of obligation cannot be made.

Such obligations are recorded as Contingent Liabilities. These are assessed continually and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

15. Earnings per share

The company reports basic and diluted earnings per share in accordance with Accounting Standard - 20 on Earnings per Share.

Basic earnings per share is computed by dividing the net profit or loss for the year by the weighted average number of Equity shares outstanding during the year. Diluted earnings per share is computed by dividing the net profit or loss for the year by the weighted average number of equity shares outstanding during the year as adjusted for the effects of all diluted potential equity shares except where the results are anti-dilutive.


Dec 31, 2009

1. Fixed assets and depreciation/amortisation:

(a) Fixed assets are stated at cost of acquisition or construction less depreciation/amortisation. Cost comprises the purchase price and other attributable costs.

(b) Depreciation/amortisation on fixed assets:

i) Depreciation on tangible fixed assets is provided at the rates and in the manner laid down in Schedule XIV to the Companies Act, 1956 on the written down value (WDV) method in respect of buildings, furniture and fixtures and vehicles and on the straight line method (SLM) in respect of other assets. However, the rate of depreciation in respect of the following assets is higher :-

Jigs & fixtures - 33% (SLM)

Furniture & fixtures* - 37% (WDV)

Office equipments* -10% (SLM)

Electrical installations* - 10% (SLM)

Vehicles - 60% (WDV)

* Hitherto Furniture & Fixtures were depreciated at the rate of 18,10%, Office equipment at the rate of 475 % and Electrical installations at the rate of 4.75%. The impact on the profit for the year consequent to this change is Rs.32,965,000.

Leasehold land and assets taken on lease are amortised over the period of the lease.

ii) Intangible assets are amortised on the straight line method at the following rates:

Rights, techniques,

Process and Know how- 14,29 %, 20 %

Software- 33%

2. Investments;

Long-term Investments are valued at cost of acquisition and related expenses. Provision is made for other than temporary diminution, if any, in the value of such investments.

3. Inventories:

Inventories are stated at the lower of cost and net realisable value. In determining the cost of raw materials, components, stores, spares and loose tools the weighted average method is used for industrial valves, submersible pumps, industrial pumps and pumps for power projects and first-in-first-out (FIFO) method is used for castings. Hitherto, the cost of raw materials, components, stores, spares and loose tools for industrial valves and submersible pumps were determined using the first-in- first-out (FIFO) method. The impact on valuation of inventories and profit for the year, consequent to the change in the method of valuation, is not material.

Costs of work-in-progress and manufactured finished products include material costs, labour and factory overheads on the basis of full absorption costing.

4. Sundry debtors and advances:

Specific debts and advances identified as irrecoverable or doubtful are written-off or provided for, respectively.

5. Foreign exchange transactions:

Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of the transaction. Realised gains and losses as also exchange differences arising on translation at year end exchange rates of current assets and current liabilities outstanding at the end of the year are recognised in the Profit and Loss account. Premium/Discount in respect of Forward Contracts is accounted for over the period of contract.

6. Revenue Recognition:

(i) Sale of goods is recognised on shipment or despatch to customers.

(ii) Dividend income from investments is recognised when the owners right to receive the payment is established. Dividend from the subsidiary company declared after the year end is, as per the law, accounted during the year,

(iii) Income from services rendered is accounted for when the work is performed.

7. Employee Benefits:

Employee benefits includes gratuity, superannuation and provident fund and leave encashment benefits under the approved schemes of the Company.

In respect of defined contribution plans, the contribution payable for the year is charged to the Profit and Loss Account.

In respect of defined benefit plans and other long term employee benefits, the employee benefit costs is accounted for based on an actuarial valuation as at the Balance sheet date.

8. Product Warranty:

Cost of product warranties is disclosed under the head

(i) raw materials and components consumed as consists of free replacement of spares.

(ii) general charges which includes provision for warranties.

9. Taxes on Income:

Tax expense for the year is included in the determination of the net profit for the year.

Deferred tax is recognised on all timing differences, subject to consideration of prudence in respect of deferred tax assets.

10. Leases:

Assets acquired under finance leases are recognised at the lower of the fair value of the leased assets at inception of the lease and the present value of minimum lease payments. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to periods during the lease term at a constant periodic rate of interest on the remaining balance of the liability.

11. Borrowing Costs:

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. Other borrowing costs are recognised as an expense in the year in which they are incurred.

12. Cash Flow Statement:

The Cash Flow statement is prepared by the indirect method set out in Accounting Standard (AS) - 3 on Cash Flow Statements and presents cash flows by operating, investing and financing activities of the Company.

13. Use of Estimates:

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

14. Provisions, Contingent Liabilities and Contingent Assets:

As per Accounting standard 29, Provisions, Contingent Liabilities and Contingent Assets, issued by the Institute of Chartered Accountants of India, the Company recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

No provision is recognised for:

(i) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company: or

(ii) Any present obligation that arises from past events but is not recognized because-

It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation: or

A reliable estimate of the amount of obligation cannot be made.

Such obligations are recorded as Contingent Liabilities. These are assessed continually and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

15. Earnings per share:

The company reports basic and diluted earnings per share in accordance with Accounting Standard - 20 on Earnings per Share.

Basic earnings per share is computed by dividing the net profit or loss for the year by the weighted average number of Equity shares outstanding during the year. Diluted earnings per share is computed by dividing the net profit or loss for the year by the weighted average number of equity shares outstanding during the year as adjusted for the effects of all diluted potential equity shares except where the results are anti-dilutive.

 
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