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Accounting Policies of Lumax Auto Technologies Ltd. Company

Mar 31, 2015

A. Change in accounting policy Depreciation on fixed assets Till the year ended 31 March 2014, Schedule XIV to the Companies Act, 1956, prescribed requirements concerning depreciation of fixed assets. From the current year, Schedule XIV has been replaced by Schedule II to the Companies Act, 2013. The applicability of Schedule II has resulted in the following changes related to depreciation of fixed assets. Unless stated otherwise, the impact mentioned for the current year is likely to hold good for future years also. Useful lives/ depreciation rates Till the year ended 31 March 2014, depreciation rates prescribed under Schedule XIV were treated as minimum rates and the Company was not allowed to charge depreciation at lower rates even if such lower rates were justified by the estimated useful life of the asset. Schedule II to the Companies Act 2013 prescribes useful lives for fixed assets which, in many cases, are different from lives prescribed under the erstwhile Schedule XIV. However, Schedule II allows companies to use higher/ lower useful lives and residual values if such useful lives and residual values can be technically supported and justification for difference is disclosed in the financial statements. Considering the applicability of Schedule II, the management has re-estimated useful lives and residual values of all its fixed assets. The management believes that depreciation rates currently used fairly reflect its estimate of the useful lives and residual values of fixed assets, though these rates in certain cases are different from the rates based on useful lives prescribed under Schedule II.The impact of change in accounting policy is disclosed in note 32.Assets for a value not exceeding Rs. 5,000The depreciation on assets for a value not exceeding Rs. 5,000 which were written off in the year of purchase as per erstwhile Companies Act, 1956, are being charged on the basis of their useful lives prescribed in the Schedule II of the Companies Act, 2013.

b. Use of estimatesThe preparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. Changes in estimates are reflected in the financial statements in the period in which changes are made and if material, their effects are disclosed in notes to the financial statements.

c. Tangible fixed assetsFixed assets, except land and buildings acquired before 1 April 2010, are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase.Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurredThe company adjusts exchange differences arising on translation/ settlement of long-term foreign currency monetary items pertaining to the acquisition of a depreciable asset to the cost of the asset and depreciates the same over the remaining life of the asset. In accordance with MCA circular dated 09 August 2012, exchange differences adjusted to the cost of fixed assets are total differences, arising on long-term foreign currency monetary items pertaining to the acquisition of a depreciable asset, for the period. In other words, the company does not differentiate between exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost and other exchange difference.Gains or losses arising from derecognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.

d. Depreciation on tangible fixed assetsDepreciation on leasehold land (other than land on perpetual lease) is provided over the lease period. Depreciation on fixed assets is calculated on a straight-line basis using the rates arrived at based on the useful lives estimated by the management. The Company has used the following rates to provide depreciation on its fixed assets.

Assets Useful Lives estimated by the management (years)

Factory Building 30

Other Building 30 to 60

Computers 3

Office equipments 5

Furniture and fixtures 10

The management has estimated, supported by independent assessment by professionals, the useful life of the following class of asset, which are higher than that indicated in Schedule II.

Assets Useful Lives estimated by the management (years)

Plant and Machineries 21

Moulds 9

The residual value of tangible fixed assets is considered at 2%.

e. Intangible AssetsIntangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred.Intangibles assets are amortized using straight-line method over their estimated useful lives as follows:

Intangible Assets Estimated Useful Life (Years)

Computer Software Over the estimated economic useful lives ranging from 3 to 4 years

Technical Know-how Over the period of Technical Assistance Agreement i.e. 8 years

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.

f. Revenue recognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized:

i) Sale of goods

Revenue from sale of goods is recognized when all the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods. The Company collects sales taxes and value added taxes (VAT) on behalf of the government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year.

ii) Income from services

Revenue in respect of sale of services i.e. labour charged is recognized on an accrual basis in accordance with the terms of the relevant agreements/arrangements.

iii) Interest

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

iv) Dividends

Dividend income is recognized when the Company''s right to receive dividend is established by the reporting date.

g. Impairment of tangible and intangible assetsTheCompany assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) net selling price and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.Impairment losses of continuing operations, including impairment on inventories,

are recognized in the statement of profit and loss, except for previously revalued tangible fixed assets, where the revaluation was taken to revaluation reserve. In this case, the impairment is also recognized in the revaluation reserve up to the amount of any previous revaluation. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset''s or cash-generating unit''s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit and loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.

h. Investments

Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments.Current investments are carried in the financial statements at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties. If an investment is acquired, or partly acquired, by the issue of shares or other securities, the acquisition cost is the fair value of the securities issued. If an investment is acquired in exchange for another asset, the acquisition is determined by reference to the fair value of the asset given up or by reference to the fair value of the investment acquired, whichever is more clearly evident.On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss.

i. Inventories

Inventories are valued as follows:i)

Raw materials, components, stores and spares (including packing materials) are valued at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost of raw materials, components and stores and spares is determined on a moving average basis.

Work-in-progress and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty. Cost is determined on moving weighted average basis.

Traded goods are valued at lower of cost and net realizable value. Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on a weighted average basis.

Scrap is valued at net realizable value.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.

j. Foreign currency transactions

i) Initial recognition

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

ii) Conversion

Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction.

iii) Exchange differences

Exchange differences arising on long-term foreign currency monetary items related to acquisition of a fixed asset are capitalized and depreciated over the remaining useful life of the asset. TheCompany treats a foreign monetary item as "long-term foreign currency monetary item", if it has a term of 12 months or more at the date of its origination. In accordance with MCA circular dated 09 August 2012, exchange differences for this purpose are total differences arising on long-term foreign currency monetary items for the period. In other words, the Company does not differentiate between exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost and other exchange difference.All other exchange differences are recognized as income or as expenses in the period in which they arise.

k. Provisions

A provision is recognized when the Company has a present obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the

amount of the obligation. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.

l. Leases

Where the Company is lessee

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of leased item, are classified as operating leases. Operating lease payments are recognised as an expense in the statement of profit and loss on a straight line basis over the lease term.

Where the Company is the lessor

Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Assets subject to operating leases are included in fixed assets. Lease income is recognised in the statement of profit and loss on a straight-line basis over the lease term. Costs, including depreciation are recognised as an expense in the statement of profit and loss. Initial direct costs, such as legal costs, brokerage costs, etc. are recognised immediately in the statement of profit and loss.

m. Retirement and other employee benefits

i) Retirement benefit in the form of provident fund is a defined contribution scheme. The company has no obligation, other than the contribution payable to the provident fund. The company recognizes contribution payable to the provident fund scheme as an expenditure, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre payment will lead to, for example, a reduction in future payment or a cash.

ii) The company operates defined benefit plans for its employees, viz., gratuity. The costs of providing benefits under these plans are determined on the basis of actuarial valuation at each year-end. Separate actuarial valuation is carried out for each plan using the projected unit credit method. Actuarial gains and losses for both defined benefit plans are recognized in full in the period in which they occur in the statement of profit and loss.

iii) Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.

iv) The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purpose. Such long term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss, and are not deferred. The Company presents the entire leave as a current liability in the balance sheet, since it does not have an unconditional right to defer its settlement for 12 months after the reporting date.

n. Earnings Per Share

Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the year.For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

o. Income taxes

Tax expense comprises current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, 1961. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.

Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.

Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized for deductible timing differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits. In the situations where the company is entitled to a tax holiday under the Income-tax Act, 1961 enacted in India or tax laws prevailing in the respective tax jurisdictions where it operates, no deferred tax (asset or liability) is recognized in respect of timing differences which reverse during the tax holiday period, to the extent the company''s gross total income is subject to the deduction during the tax holiday period. Deferred tax in respect of timing

differences which reverse after the tax holiday period is recognized in the year in which the timing differences originate. However, the company restricts recognition of deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized. For recognition of deferred taxes, the timing differences which originate first are considered to reverse first.

At each reporting date, the company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.

The carrying amount of deferred tax assets are reviewed at each reporting date. The company writes-down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set-off current tax assets against current tax liabilities and the deferred tax assets and deferred taxes relate to the same taxable entity and the same taxation authority.

Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. The Company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the Company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the Company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-tax Act, 1961, the said asset is created by way of credit to the statement of profit and loss and shown as "MAT Credit Entitlement." The Company reviews the "MAT credit entitlement" asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will pay normal tax during the specified period.

p. Cash and cash equivalents.

Cash and cash equivalents in the Cash Flow Statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.

q. Segment reporting

The company''s operating businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The analysis of geographical segments is based on the areas in which major operating divisions of the company operate.Inter- segment transfersThe company generally accounts for intersegment sales and transfers at cost plus appropriate margins. Allocation of common costsCommon allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs.Unallocated itemsUnallocated items include general corporate income and expense items which are not allocated to any business segment.

r. Contingent liabilities

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.

s. Research and development

Revenue expenditure on research and development is charged to revenue in the year in which it is incurred. Capital expenditure on research and development is added to fixed assets and are depreciated in accordance with policies of the Company.

t. Borrowing costs

Borrowing cost includes interest and amortization of ancillary costs incurred in connection with the arrangement of borrowings.Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur.

u. Government grant and subsidies

Grants and subsidies from the government are recognized when there is reasonable assurance that (i) the company will comply with the conditions attached to them, and (ii) the grant/subsidy will be received.

Government grants of the nature of promoters'' contribution are credited to capital reserve and treated as a part of the shareholders'' funds.


Mar 31, 2013

1.1 Basis of preparation

These financial statements have been prepared in accordance with Generally Accepted Accounting Principles (GAAP) in India under the historical cost convention on accrual basis. These financial statements have been prepared to comply in all material aspects with the Accounting Standards notified under Section 211(3C) of the Companies Act 1956 and Companies (Accounting Standards) Rules, 2006, as amended and the other relevant provisions of the Companies Act, 1956.

All assets and liabilities have been classified as current and non-current.

Company has ascertained its operating cycle as 12 months for the purpose of current and non-current classification of assets and liabilities.

1.2 Use of Estimates

The preparation of financial statements in conformity with Indian GAAP requires the management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of reporting period. Although these estimates are based on management''s best knowledge of current events & actions, uncertainity about these assumptions and estimates could result in the outcome requiring a material adjustment to the carrying amounts of assets or liabilities in future period. These differences between actuals & estimates are recognized in the period in which the resluts are known/materialized.

1.3 Inventories

a) Raw materials and components, stores & spares (including packing materials), stock-in-trade goods (including moulds & dies) valued at lower of landed cost (net of taxation credits, if any) and net realizable value , after making provision for obsolescence wherever necessary.

Cost comprises of cost of purchase & other costs incurred in bringing them to their respective present location and condition and is determined on First-in-First-Out (FIFO) basis.

b) Work-in-progress, Finished Goods -

Valued at lower of cost and Net realizable value, after making provision for obsolescence wherever necessary. Cost of work-in-progress & finished goods includes direct material , Labour and proportion of manufacturing overheads.

c) Scrap

At net realizable value*.

1.4 Cash & cash equivalents

In the cash flow statement, cash and cash equivalents include cash in hand, demand deposits with banks, other short-term highly liquid investments with original maturities of three months or less.

Cash flow statement

Cash flow statement has been prepared by following the indirect method set out in the Accounting Standard - 3 of "Cash Flow Statement" issued by the Institute of Chartered Accountants of India.

1.5 Events subsequent to the balance sheet date

Events occuring after the Balance Sheet date, which have a material impact on the financials affairs of the Company, are taken into cognisance while presenting the financial statements of the company.

1.6 Prior period and extraordinary items

Prior period and extraordinary items and changes in accounting policies, having a material impact on the financial affairs of the company are disclosed, wherever required.

1.7 Depreciation & amortization of tangible & intangible assets

Depreciation is provided on a pro-rata basis by the straight-line method as per the rates prescribed under Schedule XIV of the Companies Act, 1956, read with relevant circulars issued by the department of company affairs from time to time.

Depreciation on additions to / disposal from tangible fixed assets made during the year is provided on pro-rata basis from/ upto the date of such additions / disposal, as the case may be. Intangible assets are amortized as follows :

a) Leasehold land : Over the period of lease

b) Specialized software : Over the estimated economic useful life.

c) Technical knowhow : Over a period of technical assistance agreement i.e. 8 years.

1.8 Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured.

Sale of goods

Revenue from operations is recognized when all the significant risks and rewards of the ownership of the goods have been passed to the buyer, usually on delivery of the goods. The company collects Sales Taxes and Value Added Taxes on behalf of the government and , therefore, these are not economic benefits following to the company. Hence , they are excluded from revenue. Excise duty deducted from revenue (Gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year.

Interest

Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head of "other Income" in the statement of profit and loss.

Dividends

Dividend income is recognized when the company''s right to receive dividend is established by the reporting date.

1.9 Tangible assets

Tangible assets are stated at acquisition cost, net of eligible CENVAT , cess , deferred excise duty, VAT setoff and accumulated depreciation. Cost includes purchase cost together with inward freight, duties, taxes & incidental cost of acquisition, installation & eligible borrowing cost. It also includes pre-operative expenses incurred during the construction, trial & stabilization period until the time such assets are put to commercial use.

1.10 Foreign currency transactions

a) Transactions denominated in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction or that approximates the actual rate at the date of the transaction.

b) Monetary items denominated in foreign currencies at the year end are restated at year end rates.

c) Non monetary foreign currency items are carried at cost.

d) Any income or expense on account of exchange difference either on settlement or on translation is recognized in the Statement of Profit and Loss except in case of liabilities, where it relates to acquisition of fixed assets, in that case it is adjusted to the carrying cost of such assets.

1.11 Government grants are recognized only if there is reasonable assurance as to its receipt and that the conditions attached there to shall be complied with.

1.12 Investment

Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments.

On initial recognition, all investments are measured at cost. The cost comprise purchase price and directly attributable acquisition charges such as brokerage, fees and duties. If an investment is acquired, or partialy acquired, by the issue of shares or other securities, the acquisition cost is the fair value of the securities issued. If an investment is acquired in exchange for another assets, the acquisition is determined by reference to the fair value of the asset given up or by reference to the fair value of the investment acquired, whichever is more clearly evident.

1.13 Employee benefits

a) Short term benefits : Short term employee benefits are recognized as an expense at the undiscounted amount in the statement of Profit & Loss of the year in which the related service is rendered. These benefits include salaries, bonus, medical expenses etc.

b) Long term benefits

Defined Contribution Plan : Employees'' benefits in the form of ESIC, provident fund & labour welfare fund are considered as defined contribution plan and the contributions are charged to the statement of Profit & Loss for the year, on accrual basis, when the contributions to the respective funds are due.

Defined Benefit plan : Gratuity Benefits in the form of gratuity are considered as defined benefit obligations and are provided on the basis of an actuarial valuation by using the projected unit credit method as at the date of Balance Sheet.

Leave Encashment : Benefits in the form of leave encashment on account of un-availed leave at the year end are also considered as defined benefit obligations and are provided as per the actuarial valuation according to projected Unit cost method.

Acturial gains / losses , if any, are immediately recognized in the Statement of Profit & Loss.

1.14 Borrowing [finance] cost

Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings. Borrowing costs are directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed out into the Statement of Profit & Loss.

1.15 Segment reporting

The company has identified its primary business segment as dealing & manufacturing of "Automotive components". All activities of the company revolve around the above segment. The entire operations are governed by the same set of risks and returns. Hence it is considered as single primary business segment.

The company sells its products in domestic as well as overseas markets. However, the exports of the company have not been identified as separate geographical segment for reporting purpose as it does not fulfill the criteria as laid down in AS - 17 segment reporting issued by the Institute of Chartered Accountants of India. Hence operations have been considered as representing a single geographical segment.

1.16 Lease

Assets taken on lease under which all risks and rewards of the ownership are effectively retained to the lessor are classified as operating lease. Lease payments under Operating Leases are recognized as expenses on Straight Line Basis as per the terms of lease.

1.17 Earning per share

In the earning per share, the Company considers the Net Profit or Loss for the year attributable to the Equity Shareholders.

The number of shares used in computing basic earning per share is the weighted average number of equity shares outstanding during the year.

The number of shares used in computing diluted earning per share is the weighted average number of equity shares outstanding during the year after adjusting for the efects of all dilutive potential equity shares.

1.18 Current & deferred tax

Tax expenses for the period , comprising current tax and deferred tax, are included in the determination of the net profit or loss for the period

Provision for current tax is made by taking into account the admissible deductions/allowances under the provisions of Income Tax Act 1961, as applicable for respective financial year.

Deferred tax is recognized for all the timing differences, subject to the consideration of prudence in respect of deferred tax assets. Defferred tax assets are recognized and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. Deferred tax assets and liabilities are measured by using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. At each Balance Sheet date, the company reassesses unrecognized deferred tax assets, if any.

Current tax assets and current tax liabilities are offset when there is a legal enforceable right to set off the recognized amounts and there is an intention to settle the asset and the liability on a net basis.

Deferred tax assets and deferred tax liabilities are offset when there is a legal enforceable right to set off assets against liabilities representing current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws.

1.19 Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. By following initial recognition, intangible assets are carried at cost less accumulated amortization as per the criteria specified in Accounting Standard (AS) 26 "Intangible Assets" issued by the Institute of Chartered Accountants of India.

1.20 Accounting for interest in Joint Ventures

Interest in joint venture is accounted as follows:

Jointly Controlled Entities - Income on investments in incorporated jointly controlled entities is recognized when the right to receive the same is established. Investment in such joint ventures is carried at cost after providing for any permanent diminution in value.

1.21 Impairment of tangible & intangible assets

An asset is treated as impaired when the carrying cost of such asset exceeds its recoverable value. An impairment loss is charged to the statement of Profit & loss in the year in which the assets are identified as impaired. The impairment loss recognized in the prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

1.22 Provisions and contingent liabilities

Provisions : Provisions, involving substantial degree of estimation in measurement, are recognised if :

a) the Company has a present obligation as a result of a past event and

b) it is probable that there will be an outflow of resources and

c) the amount of the obligation can be reliably estimated.

Provisions are not discounted to its present value and are determined based on the best management estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

Warranty expenses are provided in the year of sales based on technical estimates.

Contingent liabilites : Contingent liabilities are disclosed in case of:

a) a present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation,

b) a present obligation when no reliable estimate is possible; and

c) a possible obligation arising from past events where the probability of outflow of resources is not remote.

Contingent Liabilities are reviewed at each Balance Sheet date.

Contingent Assets are neither recognized nor disclosed.


Mar 31, 2012

1.1 Basis of preparation

These financial statements have been prepared in accordance with the Generally Accepted Accounting Principles in India under the historical cost convention on accrual basis. These financial statements have been prepared to comply in all material aspects with the accounting standards notified under Section 211(3C) [Companies (Accounting Standards) Rules, 2006, as amended] and the other relevant provisions of the Companies Act, 1956.

During the year ended March 31, 2012 the Revised Schedule VI notified under the Companies Act, 1956 has become applicable to the company for preparation & presentation of its Financial Statements. The adoption of Revised Schedule VI does not impact recognition & measurement principles followed for preparation of Financial Statements. However, it has significant impact on presentation & disclosures made in the Financial Statements. The company has also reclassified the previous year figures in accordance with the requirements applicable in the current year.

All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in the Schedule VI to the Companies Act, 1956. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current - noncurrent classification of assets and liabilities.

1.2 Use of Estimates

The preparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of reporting period. Although these estimates are based on management's best knowledge of current events & actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. These differences between actual & estimates are recognized in the period in which the results are known/materials.

1.3 Inventories

a) Raw Materials and components, Stores & Spares (Including Packing Materials), Traded Goods (Including Moulds & Dies) - Valued at lower of Landed cost (net of taxation credits, if any) and Net Realizable value*, after making provision for obsolescence wherever necessary.

Cost comprises of cost of Purchase & other costs incurred in bringing them to their respective present location and condition and is determined on First-in-First-Out (FIFO) basis.

b) Work-in-Progress, Finished Goods -

Valued at lower of cost and Net Realizable value*, after making provision for obsolescence wherever necessary.

Cost of Work-in-progress & Finished Goods includes Direct Material, Labour and proportion of manufacturing overheads.

c) Scrap-

At Net Realizable Value*.

1.4 Cash & Cash Equivalents

In the cash flow statement, cash and cash equivalents includes cash in hand, demand deposits with banks, other short-term highly liquid investments with original maturities of three months or less.

Cash Flow Statement

Cash flow statement has been prepared following the indirect method set out in the Accounting Standard - 3 of "Cash Flow Statement" issued by the Institute of Chartered Accountants of India.

1.5 Events Subsequent to the Balance Sheet Date

Events occurring after the Balance Sheet date, which have a material impact on the financials affairs of the Company, are taken into cognizance while presenting the Financial Statements of the Company.

1.6 Prior Period and Extraordinary Items

Prior period and extraordinary items and changes in accounting policies, having a material impact on the financial affairs of the Company are disclosed, wherever required.

1.7 Depreciation & Amortization of Tangible & Intangible Assets:

Depreciation is provided on a pro-rata basis on the straight-line method as per the rates prescribed under Schedule XIV of the Companies Act, 1956, read with relevant circulars issued by the department of Company Affairs from time to time.

Depreciation on additions to / deletions from Tangible fixed assets made during the year is provided on pro-rata basis from / upto the date of such additions / deletions, as the case may be.

Intangible Assets are Amortized as follows:

a) Leasehold land : Over the period of lease

b) Specialized software : Over the Estimated Economic useful life.

c) Technical Knowhow : Over a period of Technical assistance agreement i.e. 8 years.

1.8 Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured.

Sale of goods

Revenue from sale of goods is recognized when all the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods. The company collects sales taxes and value added taxes (VAT) on behalf of the government and, therefore, these are not economic benefits flowing to the company. Hence, they are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year.

Revenue from Logistics activity is recognized on the basis of contract entered into by the company on accrual basis.

Interest

Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head "other income" in the statement of profit and loss.

Dividends

Dividend income is recognized when the company's right to receive dividend is established by the reporting date.

1.9 Tangible Assets

Tangible Assets are stated at acquisition cost, net of eligible CENVAT, cess, deferred excise duty, VAT setoff and accumulated depreciation. Cost includes purchase cost together with inward freight, duties, taxes & incidental cost of acquisition, installation & eligible borrowing cost. It also includes pre-operative expenses incurred during the construction, trial & stabilization period until the time such assets are put to commercial use.

1.10 Foreign Currency Transactions

(a) Transactions denominated in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction or that approximates the actual rate at the date of the transaction.

(b) Monetary items denominated in foreign currencies at the year end are restated at year end rates.

(c) Non monetary foreign currency items are carried at cost.

(d) Any income or expense on account of exchange difference either on settlement or on translation is recognized in the Profit and Loss account except in case of liabilities, where they relate to acquisition of fixed assets, in which case they are adjusted to the carrying cost of such assets.

1.11 Government Grants

Government grants are recognized only if there is reasonable assurance as to its receipt and that the conditions attached there to shall be complied with.

1.12 Investments

Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties. If an investment is acquired, or partly acquired, by the issue of shares or other securities, the acquisition cost is the fair value of the securities issued. If an investment is acquired in exchange for another asset, the acquisition is determined by reference to the fair value of the asset given up or by reference to the fair value of the investment acquired, whichever is more clearly evident.

1.13 Employee Benefits

a) Short Term Benefits: Short term Employee Benefits are recognized as an expense at the undiscounted amount in the Profit & Loss Account of the year in which the related service is rendered. These benefits include Salaries, Bonus, medical care expenses etc.

b) Long Term Benefits:

Defined Contribution plan: Employees' benefits in the form of ESIC, Provident Fund & Lab our Welfare Fund are considered as defined contribution plan and the contributions are charged to the Profit & Loss Account of the year, on accrual basis, when the contributions to the respective funds are due.

Defined Benefit Plan: Gratuity: Benefits in the form of Gratuity are considered as defined benefit obligations and are provided for on the basis of an actuarial valuation, using the Projected Unit Credit Method as at the date of Balance Sheet.

Leave Encashment: Benefits in the form of Leave Encashment on account of un-availed leave at the yearend are also considered as defined benefit obligations and are provided as per the actuarial valuation according to Projected Unit Cost Method.

Actuarial Gains /Losses, if any, are immediately recognized in the Profit & Loss Account

1.14 Borrowing Costs

Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings.

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed out to the Statement of Profit & Loss

1.15 Segment Reporting

The Company Operates in two primary Business segment viz

a) "Manufacturing of Automotive Parts";

b) "Trading of Automotive Parts"

1.16 Lease

Assets taken on lease under which all risks and rewards of ownership are effectively retained by the less or are classified as operating lease. Lease payments under Operating Leases are recognized as expenses on straight Line Basis as per the terms of lease.

1.17 Earnings Per Share

In considering the Earning Per Share, the Company considers the Net Profit or Loss for the year attributable to the Equity Shareholders.

The number of shares used in computing Basic Earnings per share is the Weighted Average number of Equity Shares outstanding during the year.

The number of shares used in computing Diluted Earnings per share is the Weighted Average number of Equity Shares outstanding during the year after adjusting for the effects of all dilutive potential Equity Shares.

1.18 Current & Deferred Tax

Tax expense for the period, comprising current tax and deferred tax, are included in the determination of the net profit or loss for the period.

Provision for Current Tax is made by taking into account the admissible deductions/allowances under the provisions of Income Tax Act 1961, as applicable for respective Financial Year.

Deferred tax is recognized for all the timing differences, subject to the consideration of prudence in respect of deferred tax assets. Deferred tax assets are recognized and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. At each Balance Sheet date, the company reassesses unrecognized deferred tax assets, if any.

Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle the asset and the liability on a net basis.

Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities representing current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws.

1.19 Intangible Assets

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization as per the criteria specified in Accounting Standard (AS) 26 "Intangible Assets" issued by the Institute of Chartered Accountants of India.

1.20 Accounting for Interests in Joint Ventures

Interest in Joint Venture is accounted as follows:

Jointly Controlled Entities - Income on investments in incorporated Jointly Controlled Entities is recognized when the right to receive the same is established. Investment in such Joint Ventures is carried at cost after providing for any permanent diminution in value.

1.21 Impairment of Tangible & Intangible Assets

An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. An Impairment Loss is charged to the Profit & Loss Account in the year in which the asset is identified as impaired. The impairment loss recognized in the prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

1.22 Provisions for Contingent Liabilities

Provisions: Provisions, involving substantial degree of estimation in measurement, are recognized if :

a) the Company has a present obligation as a result of a past event and

b) it is probable that there will be an outflow of resources and

c) the amount of the obligation can be reliably estimated.

Provisions are not discounted to its present value and are determined based on best Management estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.

Warranty expenses are provided for in the year of Sales based on technical estimates.

Contingent liabilities: Contingent liabilities are disclosed in case of:

a) a present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation,

b) a present obligation when no reliable estimate is possible; and

c) a possible obligation arising from past events where the probability of outflow of resources is not remote.

Contingent Liabilities are reviewed at each Balance Sheet date.

Contingent Assets: Contingent Assets are neither recognized nor disclosed.


Mar 31, 2011

I) Basis of Preparation of Financial Statements:

The financial statements have been prepared to comply in all material respects in accordance with the notified Accounting Standards issued under Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956.

The financial statements have been prepared under the historical cost convention in accordance with generally accepted Accounting Principles.

The company generally follows mercantile system of accounting and recognizes significant items of income and expenditure on accrual basis. The Accounting policies have been consistently applied by the company and are in consistent with those applied in the previous year.

ii) Use of Estimates:

The preparation of Financial Statements in conformity of Generally Accepted Accounting Principles requires Management to make estimates and assumptions that affect the reported amounts of Assets and Liabilities and disclosure of Contingent Liabilities at the date of the Financial Statements and the results of operations during the reporting period. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from these estimates. These difference/s between actual and estimates are recognized in the period in which the results are known/materialized.

iii) Inventories:

a) Raw Materials and components; Valued at lower of Landed cost (net of taxation credits, if any) and Net

b) Stores & Spares Realisable value*, after making provision for obsolescence wherever (Including Packing Materials); necessary.

c) Traded Goods (Including Moulds & Dies) Cost comprises of cost of Purchase & other costs incurred in bringing them to their respective present location and condition and is determined on First-in-First-Out (FIFO) basis.

a) Work-in-Progress; Valued at lower of cost and Net Realisable value*, after making provision b) Finished Goods for obsolescence wherever necessary.

Cost of Work-in-progress & Finished Goods includes Direct Material, Labour and proportion of manufacturing overheads.

Scrap At Net Realisable Value*.

*Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and to make the sale.

iv) Cash Flow Statement:

Cash flow statement has been prepared following the indirect method set out in the Accounting Standard - 3 on "Cash Flow Statement" issued by the Institute of Chartered Accountants of India.

v) Events Subsequent to the Balance Sheet Date:

Events occurring after the Balance Sheet date, which have a material impact on the financials affairs of the Company, are taken into cognisance while presenting the Financial Statements of the Company.

vi) Prior Period and Extraordinary Items:

Prior period and extraordinary items and changes in accounting policies, having a material impact on the financial affairs of the Company are disclosed, wherever required.

vii) Depreciation & Amortisation:

Depreciation on, Tangible Fixed Assets, has been provided on Straight Line Method in accordance with and at the rates prescribed in schedule XIV to the Companies Act, 1956, read with the relevant circulars issued by the department of Company Affairs issued from time to time.

Depreciation on additions to / deletion from Tangible Fixed Assets made during the year is provided on a pro-rata basis from / upto the date of such additions/deletions, as the case may be.

Intangible Assets are Amortised as follows:

a) Leasehold land : Over the period of lease

b) Specialised software : Over the Estimated Economic useful life.

c) Technical Knowhow : Over a period of Technical assistance agreement i.e. 8 years.

viii) Revenue Recognition:

Revenue is recognized only when it can be reliably measured and it is reasonable to expect ultimate collection.

a) Sale of goods -

Sale of Goods consist of sale of Automotive Parts.

Revenue is recognised when significant risks and rewards of ownership of the goods are transferred to the buyer. It includes Excise Duty but excludes trade discount and Sales Tax.

b) Interest income is recognized on time proportion basis taking into account the amount outstanding and rate applicable.

c) Revenue from Logistics activity is recognized on the basis of contract entered into by the company on accrual basis.

d) Dividend from investments in shares is recognized when the company, in which they are held, declares a dividend and right to receive the same is established.

ix) Fixed Assets :

Tangible Assets: Fixed Assets are stated at Cost Net of eligible CENVAT, Cess, Deferred Excise Duty and VAT set-off less accumulated depreciation. Cost includes purchase cost together with inward freight, duties, taxes and incidental cost of acquisition and installation and eligible borrowing costs and also includes pre-operative expenses incurred during the construction, trial and stabilization period, up to the period such assets are put to commercial use.

Intangible Assets: Intangible assets are valued at cost less Accumulated Amortisation as per the criteria specified in Accounting Standard (AS) 26 "Intangible Assets" issued by the Institute of Chartered Accountants of India.

x) Translation of Foreign Currency items:

a) Transactions in foreign currencies are generally recorded at the exchange rates prevailing on the date of the transaction.

b) Gains or Losses arising out of fluctuation in exchange rates on settlement are recognized in the Profit and Loss Account.

c) Foreign Currency Monetary Assets and Liabilities are reinstated at the exchanged rates prevailing at the year end and overall Net Gain / Loss is adjusted in the Profit and Loss Account.

xi) Investments:

a) Investments that are readily realizable and intended to be held for less than one year are classified as Current Investment and are carried at lower of cost or market value.

b) All other investments are classified as Long Term Investments and are carried at cost. However, provision for diminution in value is made to recognize a decline, other than temporary, in the value of such investment.

xii) Employees' Benefits:

a) Short Term Benefits: Short term Employee Benefits are recognized as an expense at the undiscounted amount in the Profit & Loss Account of the year in which the related service is rendered. These benefits include Salaries, Bonus, medical care expenses etc.

b) Long Term Benefits:

- Defined Contribution plan: Employees' benefits in the form of ESIC, Provident Fund & Labour Welfare Fund are considered as defined contribution plan and the contributions are charged to the Profit & Loss Account of the year, on accrual basis, when the contributions to the respective funds are due.

- Defined Benefit Plan: Gratuity: Benefits in the form of Gratuity are considered as defined benefit obligations and are provided for on the basis of an actuarial valuation, using the Projected Unit Credit Method as at the date of Balance Sheet.

- Leave Encashment: Benefits in the form of Leave Encashment on account of un-availed leave at the year end are also considered as defined benefit obligations and is provided as per the actuarial valuation according to Projected Unit Cost Method.

- Actuarial Gains /Losses, if any, are immediately recognized in the Profit & Loss Account.

xiii) Borrowing Costs:

Borrowing Costs that are attributable to the acquisition or construction of qualifying fixed assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale. All other borrowing costs are recognized as expense in the year in which they are incurred.

xiv) Segment Reporting

The Company Operates in two primary Business segments viz

a) "Manufacturing of Automotive Parts";

b) "Trading of Automotive Parts"

xv) Leases:

Assets taken on lease under which all risks and rewards of ownership are effectively retained by the lessor are classified as operating lease. Lease payments under Operating Leases are recognized as expenses on straight Line Basis as per the terms of lease.

xvi) Earnings Per Share:

In considering the Earnings Per Share, the Company considers the Net Profit or Loss for the year attributable to the Equity Shareholders'.

The number of shares used in computing Basic Earnings per share is the Weighted Average number of Equity Shares outstanding during the year.

The number of shares used in computing Diluted Earnings per share is the Weighted Average number of Equity Shares outstanding during the year after adjusting for the effects of all dilutive potential Equity Shares.

xvii) Taxes on Income:

Income Tax expenses for the year comprise of Current Tax and Deferred Tax.

a) Provision for Current Tax is made taking into account the admissible deductions/allowances under the provisions of Income Tax Act 1961, as applicable for respective Financial Year.

b) Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred Tax is recognized, on the timing differences, being the difference between accounting income and taxable income, which originates in one period and are capable of reversal in one or more subsequent accounting period/s in accordance with provisions of Accounting Standard 22 on "Accounting for Taxes on Income", issued by the Institute of Chartered Accountants of India. Deferred Tax Asset in respect of brought forward losses is recognized only if there is virtual certainty that there will be sufficient future taxable income against which such asset can be realized. The carrying amount of Deferred Tax is reviewed at each Balance Sheet date.

xviii) Accounting for Interests in Joint Ventures:

Interest in Joint Venture is accounted as follows:

Type of Joint Venture Accounting treatment

Jointly Controlled Entities a) Income on investments in incorporated Jointly Controlled Entities is recognised when the right to receive the same is established.

b) Investment in such Joint Ventures is carried at cost after providing for any permanent diminution in value.

xix) Impairment of Assets:

An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. An Impairment Loss is charged to the Profit & Loss Account in the year in which the asset is identified as impaired. The impairment loss recognized in the prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

xx) Provisions and Contingent Liabilities, Contingent Assets:

Provisions: Provisions, involving substantial degree of estimation in measurement, are recognised if :

a) the Company has a present obligation as a result of a past event and

b) it is probable that there will be an outflow of resources and

c) the amount of the obligation can be reliably estimated.

Provisions are not discounted to its present value and are determined based on best Management estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.

Warranty expenses are provided for in the year of Sales based on technical estimates.

Contingent liabilities: Contingent liabilities are disclosed in case of:

a) a present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation,

b) a present obligation when no reliable estimate is possible; and

c) a possible obligation arising from past events where the probability of outflow of resources is not remote.

Contingent Liabilities are reviewed at each Balance Sheet date.

Contingent Assets: Contingent Assets are neither recognized nor disclosed.


Mar 31, 2010

A) Basis of Preparation of Financial Statements:

The financial statements have been prepared under the historical cost convention in accordance with the generally accepted accounting principles and the provisions of the Companies Act, 1956 as adopted consistently by the Company. The Company generally follows mercantile system of accounting and recognizes significant items of income and expenditure on accrual basis.

B) Fixed Assets :

Fixed Assets are stated at Cost Net of CENVAT, Cess, Deferred Excise Duty and VAT set-off less accumulated depreciation. Cost includes purchase cost together with inward freight, duties, taxes and incidental cost of acquisition and installation and eligible borrowing costs and also includes pre-operative expenses incurred during the construction, trial and stabilization period, up to the period such assets are put to commercial use.

C) Depreciation:

Depreciation on Fixed Assets is provided on Straight Line Method at the rates as provided under schedule XIV to the Companies Act, 1956.

D) Intangible Assets and Amortisation:

Intangible assets are recognised as per the criteria specified in Accounting Standard (AS) 26 “Intangible Assets” issued by the Institute of Chartered Accountants of India and are amortised as follows:

(a) Leasehold Land: over the period of lease

(b) Specialised Software: Over the Estimated Economic useful life.

(c) Technical Knowhow: Over a period of Technical assistance agreement i.e. 8 years.

E) Investments:

a) Current Investments are valued at cost or market price whichever is lower.

b) Long Term Investments are valued at cost less permanent diminution, if any.

F) Inventories:

a) Raw Materials including components, consumables & packing material are valued at cost after making provision for obsolescence wherever necessary. Cost is determined on First-in-First-Out (FIFO) basis.

b) Work in Progress is valued at estimated Cost.

c) Goods purchased for resale & other finished goods are valued at lower of the cost or net realizable value.

d) Scrap is valued at estimated realizable value.

G) Revenue Recognition:

a) Sale of goods is recorded when supply of goods takes place in accordance with the terms of Sale. It includes Excise Duty but excludes trade discount and Sales Tax.

b) Interest income is recognized on accrual basis.

c) Revenue from Logistics activity is recognized on the basis of contract entered into by the company on accrual basis.

d) Dividend is recorded when the right to receive payment is established by the company.

H) Employees Retirement Benefits:

a) The Companys contribution to Provident Fund is charged to Profit & Loss Account.

b) The Companys contribution to Gratuity Fund of Life Insurance Corporation of India is provided on the basis of scheme subscribed by the Company and the same is charged to Profit & Loss Account.

c) The Company provides for the leave with pay subject to certain rules. The employees are entitled to accumulate leave for future encashment subject to certain limits. The liability is provided based on the number of days of unutilised leave at balance sheet date on the basis of an independent actuarial valuation.

I) Borrowing Costs:

Borrowing Costs that are attributable to the acquisition or construction of qualifying fixed assets are capitalized as part of the cost of assets. All other borrowing costs are recognized as expense in the year in which they are incurred.

J) Cash Flow Statement :

Cash Flow Statement has been prepared following the indirect method set out in the Accounting Standard - 3 on “Cash Flow Statement” issued by the Institute of Chartered Accountants of India.

K) Taxes On Income:

a) Income Tax expenses forthe period comprise of Current Tax and Deferred Tax.

b) Current Tax is the amount of tax payable on the taxable income for the year determined in accordance with the provisions of the Income Tax Act, 1961.

c) Deferred Tax is recognized, on the timing differences, being the difference between accounting income and taxable income, which originates in one period and are capable of reversal in one or more subsequent accounting periods in accordance with provisions of Accounting Standard 22 on "Accounting for Taxes on Income", issued by the Institute of Chartered Accountants of India. Deferred Tax Asset in respect of brought forward losses is recognized only if there is virtual certainty that there will be sufficient future taxable income against which such asset can be realized.

L) Translation of Foreign Currency items

a) Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of the transaction. Exchange difference arising on settlement of transactions and translation of monetary items are recognised as income or expense in the year in which they arise.

b) Monetary items denominated in foreign currency are reported using the closing exchange rate on each Balance Sheet date.

M) Segment Reporting

The Company has considered Business Segment as the primary segment for disclosure. Further, since the company is engaged in the manufacturing of "Automotive Parts", in the opinion of the Management, the Company operates in one primary segment only.

N) Accounting for Interests in Joint Ventures: Interest in Joint Venture is accounted as follows:

Type of Joint Venture Accounting treatment

Jointly Controlled Entities a) Income on investments in incorporated Jointly

Controlled Entities is recognised when the right to receive the same is established, b) Investment in such Joint Ventures is carried at cost after providing for any permanent diminution in value.

O) Provisions and Contingent Liabilities:

Provisions are recognised for liabilities that can be measured only by using a substantial degree of estimation, if

a) The Company has a present obligation as a result of a past event,

b) A probable outflow of resources is expected to settle the obligation; and

c) The amount of the obligation can be reliably estimated.

Contingent liability is disclosed in case of

a) A present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation,

b) A present obligation when no reliable estimate is possible; and

c) A possible obligation arising from past events where the probability of outflow of resources is not remote.

Based on the favourable decisions in similar cases/legal opinions taken by the Company, the company believes that it has good cases in respect of the items listed under (iii) above and hence no provision there against is considered necessary.

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