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Accounting Policies of Majestic Auto Ltd. Company

Mar 31, 2014

A. ACCOUNTING CONVENTIONS

The financial statements are prepared under the historical cost convention, on the accrual basis of accounting in accordance with the Generally Accepted Accounting Principles (GAAP) in India and comply with the accounting standards as notified under the Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant presentational requirements of the Companies Act, 1956.

B. BASIS OF PREPARATION

The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting, unless stated otherwise and comply with the mandatory Accounting Standards (''AS'') prescribed under the Companies Act, 1956 read with the General Circular 08/2014 dated April 04, 2014 issued by the Ministry of Corporate Affairs, and other accounting principles generally accepted in India. The accounting policies adopted in the preparation of financial statements are consistent with those of the previous year.

C. FIXED ASSETS INCLUDING INTANGIBLE ASSETS AND DEPRECIATION/AMORTIZATION

a) Fixed assets including intangible assets are stated at cost net of cenvat, less accumulated depreciation and/ or impairment loss, if any. Intangible assets comprise purchased softwares/licenses. All costs till commencement of commercial production attributable to the fixed assets and intangible assets are capitalized.

b) Depreciation on fixed assets including intangible assets has been provided on straight-line method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.

c) The cost of Leasehold land is amortized over the period of lease.

d) In respect of assets added / disposed off during the year, depreciation is charged on a pro-rata basis with reference to the month of addition/disposal.

e) Assets costing up to Rs. 5,000 are fully depreciated in the year of purchase.

f) Intangible assets are recognised if it is probable that the future economic benefits that are attributable to the asset will flow to the Company and the cost of the asset can be measured reliably. These assets are valued at cost which comprises its purchase price and any directly attributable expenditure.

D. INVESTMENTS

Investments are classified into current and long term investments. Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long term investments. Current investments (excluding current maturities of long term investments) are stated at the lower of cost and fair value. Long term investments are carried at cost. Provision for diminution in value of long term investments is made only if such decline is not temporary.

E. INVENTORIES

a) Finished goods are valued at lower of cost or net realizable value. Cost is considered at material cost on movement moving weighted average basis plus appropriate overheads.

b) Work in progress is valued at material cost on movement moving weighted average basis plus appropriate overheads.

c) Scrap is valued at net realizable value.

d) Goods in transit are valued at cost.

e) Other inventories are valued at cost on moment moving weighted average basis.

f) The liability of excise duty on finished goods and scrap lying in the factory at year end is estimated on the basis of sales price of goods and excise rates prevailing on the said date, while determining the cost of closing stock of finished goods and scrap.

F. EMPLOYEE BENEFITS

Superannuation, Provident and Gratuity Funds are accounted for on accrual basis with corresponding payments to recognized scheme/fund. Short term employees'' benefits are recognized as an expense at the undiscounted amount in the Statement of profit and loss for the year in which the related services rendered. The liability for gratuity (in the nature of a defined benefit obligation) is provided on the basis of actuarial valuation (PUC method) conducted by Life Insurance Company of India (LIC), since the gratuity scheme of the company is covered under a group gratuity cum life assurance cash accumulation policy of the LIC. Actuarial gains or loss arising from such valuation are charged to revenue in the year in which they arise.

G REVENUE RECOGNITION

Revenue from sale of products/job-work is recognized on dispatch of goods from factory premises and is recognized on accrual basis except for export sales, which are booked on the basis of date of custom clearance.

Gross sales as reflected in the financial statements are inclusive of excise duty and net of rebate / trade discounts and returns.

Interest income is recognized on an accrual basis on time proportion method, taking into account the amount outstanding and the rate applicable.

Dividend income is recognized when the right to receive payment is established by the balance sheet date. Exports benefits are recognized on an accrual basis at the anticipated realizable value, based on past experience.

H. RESEARCH AND DEVELOPMENT

Revenue expenditure on research and development is charged against the profit of the year in which it is incurred. Capital expenditure on research and development is shown as an addition to fixed assets and depreciation is provided on the same basis as for other fixed assets.

I. FOREIGN EXCHANGE TRANSACTIONS

The Company accounts for effects of difference in foreign exchange rates in accordance with Accounting Standard 11 notified by the Companies (Accounting Standards) Rules, 2006.

a) Transactions in foreign currencies are accounted for at the exchange rate prevailing at the date of transaction/ negotiations.

b) Monetary foreign currencies items outstanding at the year end are restated into rupees at the rate of exchange prevailing on the Balance Sheet date.

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

d) Any income or expenses on account of exchange rate difference either on settlement or on transaction is recognized in the statement of profit and loss.

e) In respect of forward contracts, forward premium or discount arising at the inception of forward contract is amortized over the life of contract. Exchange differences on such contracts are recognized in the statement of profit and loss in the year in which exchange rates change. Any profit and loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the year.

J. TAXATION

The provision for current income tax liability is ascertained on the basis of assessable profits computed in accordance with the provisions of Income Tax Act, 1961. Deferred tax is recognized, subject to the consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of being reversed in one or more subsequent periods. Minimum Alternative Tax ("MAT") paid in accordance with the tax laws, which gives rise to future economic benefits in the form of adjustment of future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal tax in future. MAT Credit entitlement can be carried forward and utilized for a specific period as prescribed under the law from the year in which the same is availed. Accordingly, it is recognized as an asset in the Balance Sheet when it is probable that the future economic benefit associated with it will flow to the Company and the asset can be measured reliably.

K. GOVERNMENT GRANTS

Government grants are deducted from the value of the concerned asset if the grant is specifically received for the purchase, construction or acquisition of the asset. However, if it is received as a contribution towards the total investment or by way of contribution to its capital outlay and no repayment is ordinarily required to be made; such grants are treated as capital reserves.

L. ACCOUNTING FOR ESTIMATES

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Examples of such estimates include estimation of future obligations under employee retirement benefit plans, estimated useful life of fixed assets, classification of assets / liabilities etc. Actual results could differ from these estimates. Any revision to accounting estimates is recognized in accordance with the requirements of the respective accounting standards.

M. IMPAIRMENT

The carrying amounts of assets are reviewed at each balance sheet date in accordance with Accounting Standard 28, ''Impairment of Assets'', to determine whether there is any indication of impairment. An impairment loss is charged to the statement of profit & loss in the year in which an assets is identified as impaired.

N. ACCOUNTING FOR LEASES

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset are classified as operating leases. Operating lease charges are expensed on a straight line basis with reference to lease terms and other considerations.

O. BORROWING COSTS

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets to the extent that they relate to the period till such assets are ready to be put to use. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs are charged to the Statement of Profit and Loss.

P. SEGMENT REPORTING

a) The Company has disclosed business segment as the primary segment for disclosure. The Company has identified four separate segments i.e. Fine Blanking Components, Mufflers, Spokes and Electricals. The Segments are identified with regard to the dominant source, nature of risks and returns, internal organization and management structure and internal reporting systems.

b) The accounting policies adopted for segment reporting are in line with the accounting policies of the Company.

c) Segment revenues, Results and Capital employed figures include the respective amounts identifiable to each of the segments. Interest and other financial charges/ incomes are reported at corporate level. Also those assets and liabilities which are not identifiable to the individual segments are reported at corporate level.

d) The inter segmental revenue is accounted for on the basis of transfer price agreed to amongst segments as per market trend.

Q. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

A provision is recognized when the company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation in respect of which reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to its present value and are determined based on best 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.

Contingent liabilities are disclosed when there is a possible obligation arising from past events, 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 a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.

A contingent asset is neither recognized nor disclosed in the financial statements.

R. CASH FLOW STATEMENT

The Cash Flow Statement is prepared by the indirect method set out in Accounting Standard-3 on Cash Flow Statements and presents cash flows by operating, investing and financing activities of the Company. The Company considers all highly liquid financial instruments, which are readily convertible into cash, to be cash equivalents.

S. EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.

The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares that have changed the number of equity shares outstanding without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.


Mar 31, 2012

A. ACCOUNTING CONVENTIONS

The financial statements are prepared under the historical cost convention, on the accrual basis of accounting in accordance with the Generally Accepted Accounting Principles (GAAP) in India and comply with the accounting standards as notified under the Companies (Accounting Standards) Rules, 2006 and the relevant presentational requirements of the Companies Act, 1956.

B. BASIS OF PREPARATION

The financial statements have been prepared to comply in all material aspects with applicable accounting principles in India, the applicable Accounting Standards notified under Section 211(3C) of the Companies Act, 1956 and the relevant provisions thereof.

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 Revised Schedule VI to the Companies Act, 1956.

C. FIXED ASSETS INCLUDING INTANGIBLE ASSETS AND DEPRECIATION / AMORTISATION

a) Fixed assets including intangible assets are stated at cost net of cenvat, less accumulated depreciation and / or impairment loss, if any. All costs till commencement of commercial production attributable to the fixed assets and intangible assets are capitalized.

b) Depreciation on fixed assets including intangible assets has been provided on straight-line method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.

c) The cost of Leasehold land is amortized over the period of lease.

d) In respect of assets added / disposed off during the year, depreciation is charged on a pro-rata basis with reference to the month of addition/disposal.

e) Assets costing up to Rs. 5,000 are fully depreciated in the year of purchase.

f) Intangible assets are recognised if it is probable that the future economic benefits that are attributable to the asset will flow to the Company and the cost of the asset can be measured reliably. These assets are valued at cost which comprises its purchase price and any directly attributable expenditure.

D. INVESTMENTS

Investments are classified into current and long term investments. Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long term investments. Current investments (excluding current maturities of long term investments) are stated at the lower of cost and fair value. Long term investments are carried at cost. Provision for diminution in value of long term investments is made only if such decline is not temporary.

E. INVENTORIES

a) Finished goods are valued at lower of cost or net realizable value. Cost is considered at material cost on moment moving weighted average basis plus appropriate overheads.

b) Work in progress is valued at material cost on moment moving weighted average basis plus appropriate overheads.

c) Scrap is valued at net realizable value.

d) Other inventories are valued at cost on moment moving weighted average basis.

e) The liability of excise duty on finished goods and scrap lying in the factory at year end is estimated on the basis of sales price of goods and excise rates prevailing on the said date, while determining the cost of closing stock of finished goods and scrap.

F. EMPLOYEE BENEFITS

Superannuation, Provident and Gratuity Funds are accounted for on accrual basis with corresponding payments to recognized scheme/fund. Short term employees' benefits are recognized as an expense at the undiscounted amount in the Statement of profit and loss for the year in which the related services rendered. The liability for gratuity (in the nature of a defined benefit obligation) is provided on the basis of actuarial valuation (PUC method) conducted by Life Insurance Company of India (LIC), since the gratuity scheme of the company is covered under a group gratuity cum life assurance cash accumulation policy of the LIC.

G. REVENUE RECOGNITION

Revenue from sale of products/job-work is recognized on dispatch of goods from factory premises and is recognized on accrual basis except for export sales, which are booked on the basis of date of custom clearance. Gross sales as reflected in the financial statements are inclusive of excise duty and net of rebate / trade discounts and returns.

Interest income is recognized on an accrual basis on time proportion method, taking into account the amount outstanding and the rate applicable.

Dividend income is recognized when the right to receive payment is established by the balance sheet date. Exports benefits are recognized on an accrual basis at the anticipated realizable value, based on past experience.

H. RESEARCH AND DEVELOPMENT

Revenue expenditure on research and development is charged against the profit of the year in which it is incurred. Capital expenditure on research and development is shown as an addition to fixed assets and depreciation is provided on the same basis as for other fixed assets.

I. FOREIGN EXCHANGE TRANSACTIONS

The Company accounts for effects of difference in foreign exchange rates in accordance with Accounting Standard 11 notified by the Companies (Accounting Standards) Rules, 2006.

a) Transactions in foreign currencies are accounted for at the exchange rate prevailing at the date of transaction/ negotiations.

b) Monetary foreign currencies items outstanding at the year end are restated into rupees at the rate of exchange prevailing on the Balance Sheet date.

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

d) Any income or expenses on account of exchange rate difference either on settlement or on transaction is recognized in the statement of profit and loss.

e) In respect of forward contracts, forward premium or discount arising at the inception of forward contract is amortized over the life of contract. Exchange differences on such contracts are recognized in the statement of profit and loss in the year in which exchange rates change. Any profit and loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the year.

J. TAXATION

The provision for current income tax liability is ascertained on the basis of assessable profits computed in accordance with the provisions of Income Tax Act, 1961. Deferred tax is recognized, subject to the consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of being reversed in one or more subsequent periods.

Minimum Alternative Tax ("MAT") paid in accordance with the tax laws, which gives rise to future economic benefits in the form of adjustment of future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal tax in future. MAT Credit entitlement can be carried forward and utilized for a specific period as prescribed under the law from the year in which the same is availed. Accordingly, it is recognized as an asset in the Balance Sheet when it is probable that the future economic benefit associated with it will flow to the Company and the asset can be measured reliably.

K. GOVERNMENT GRANTS

Government grants are deducted from the value of the concerned asset if the grant is specifically received for the purchase, construction or acquisition of the asset. However, if it is received as a contribution towards the total investment or by way of contribution to its capital outlay and no repayment is ordinarily required to be made; such grants are treated as capital reserves.

L. ACCOUNTING FOR ESTIMATES

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Examples of such estimates include estimation of future obligations under employee retirement benefit plans, estimated useful life of fixed assets, classification of assets / liabilities etc. Actual results could differ from these estimates. Any revision to accounting estimates is recognized in accordance with the requirements of the respective accounting standards.

M. IMPAIRMENT

The carrying amounts of assets are reviewed at each balance sheet date in accordance with Accounting Standard 28, 'Impairment of Assets', to determine whether there is any indication of impairment. An impairment loss is recognized when the carrying amount of fixed assets exceeds its recoverable amount. The recoverable amount of an asset is lower of net selling price and its value in use.

N. ACCOUNTING FOR LEASES

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset are classified as operating leases. Operating lease charges are recognised as an expense in the Statement of Profit and Loss on a straight line basis.

O. BORROWING COSTS

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets to the extent that they relate to the period till such assets are ready to be put to use. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs are charged to the Statement of Profit and Loss.

P. SEGMENT REPORTING

a) The Company has disclosed business segment as the primary segment for disclosure. The Company has identified four separate segments i.e. Fine Blanking Components, Mufflers, Spokes and Electricals. The Segments are identified with regard to the dominant source, nature of risks and returns, internal organization and management structure and internal reporting systems.

b) The accounting policies adopted for segment reporting are in line with the accounting policies of the Company.

c) Segment revenues, Results and Capital employed figures include the respective amounts identifiable to each of the segments. Interest and other financial charges/ incomes are reported at corporate level. Also those assets and liabilities which are not identifiable to the individual segments are reported at corporate level.

d) The inter segmental revenue is accounted for on the basis of transfer price agreed to amongst segments as per market trend.

Q. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

A provision is recognised when the company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation in respect of which reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to its present value and are determined based on best 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.

Contingent liabilities are disclosed when there is a possible obligation arising from past events, 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 a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.

A contingent asset is neither recognised nor disclosed in the financial statements.

R. CASH FLOW STATEMENT

The Cash Flow Statement is prepared by the indirect method set out in Accounting Standard-3 on Cash Flow Statements and presents cash flows by operating, investing and financing activities of the Company. The Company considers all highly liquid financial instruments, which are readily convertible into cash, to be cash equivalents.

S. EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.

The weighted average number of equity shares outstanding during the period and for allperiods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares that have changed the number of equity shares outstanding without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.


Mar 31, 2011

I) ACCOUNTING CONVENTIONS

The financial statements are prepared under the historical cost convention on accrual basis and in accordance with the Accounting Standards issued under the Companies (Accounting Standards) Rules, 2006 and the relevant presentational requirements of the Companies Act, 1956.

II) ACCOUNTING FOR ESTIMATES

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

III) FIXED ASSETS INCLUDING INTANGIBLE ASSETS AND DEPRECIATION/AMORTISATION

a) Fixed assets including intangible assets are stated at cost net of cenvat, less accumulated depreciation and / or impairment loss, if any. Intangible assets comprise purchased computer software/licenses. All costs till commencement of commercial production attributable to the fixed assets and intangible assets are capitalized.

b) Depreciation on fixed assets including intangible assets has been provided on straight-line method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.

c) The cost of Leasehold land is amortized over the period of lease.

IV) INVESTMENTS

Long term investments are stated at cost. Provision for diminution in value of long term investments is made only if such decline is not temporary in the opinion of the management.

V) INVENTORIES

a) Finished goods are valued at lower of cost or net realizable value. Cost is considered at material cost on moment moving weighted average basis plus appropriate overheads.

b) Work in progress is valued at material cost on moment moving weighted average basis plus appropriate overheads.

c) Scrap is valued at net realizable value.

d) Other inventories are valued at cost on moment moving weighted average basis.

e) The liability of excise duty on finished goods and scrap lying in the factory at year end is estimated on the basis of sales price of goods and excise rates prevailing on the said date, while determining the cost of closing stock of finished goods and scrap.

VI) RETIREMENT BENEFITS

Superannuation, Provident and Gratuity Funds are accounted for on accrual basis with corresponding payments to recognized scheme/fund. Short term employees benefits are recognized as an expense at the undiscounted amount in the profit and loss account for the year in which the related services rendered. The liability for gratuity (in the nature of a defined benefit obligation) is provided on the basis of actuarial valuation conducted by Life Insurance Company of India (LIC), since the gratuity scheme of the company is covered under a group gratuity cum life assurance cash accumulation policy of the LIC.

VII) REVENUE RECOGNITION

Sales and Job Charges are accounted for on the basis of date of dispatch except for export sales which are booked on the basis of date of custom clearance.

VIII) DIVIDEND

The dividend income is accounted for when the right to receive the payment is established.

IX) GOVERNMENT GRANTS

Government grant of the nature of promoters' contribution is credited to capital reserve at the time of receipt.

X) FOREIGN EXCHANGE TRANSACTIONS

a) Transactions in foreign currencies are accounted for at the exchange rate prevailing at the date of transaction/ negotiations.

b) Monetary foreign currencies items outstanding at the year end are restated into rupees at the rate of exchange prevailing on the Balance Sheet date.

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

d) Any income or expenses on account of exchange difference either on settlement or on transaction is recognized in the profit and loss account.

e) In respect of forward contracts, forward premium or discount arising at the inception of forward contract is amortized over the life of contract. Exchange differences on such contracts are recognized in the profit and loss account in the year in which exchange rates change. Any profit and loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the year.

XI) BORROWING COSTS

Borrowing Costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of cost of such assets. Qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. Other borrowing costs are charged to revenue.

XII) TAXATION

The provision for current income tax liability is ascertained on the basis of assessable profits computed in accordance with the provisions of Income Tax Act, 1961. Deferred tax is recognized, subject to the consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of being reversed in one or more subsequent periods.

XIII) CONTINGENCIES

Contingent liabilities arising from claims, litigation, assessments, fines, penalties etc. are provided when it is probable that the contingency will result in the loss and reasonable estimate of the amount of the resulting loss can be made. Liabilities which are material and whose future outcome can not be ascertained with reasonable certainty are treated as contingent liabilities and disclosed by way of notes to account.

XIV) ACCOUNTING FOR LEASES

Lease payments under operating lease have been charged to profit and loss account as expense on straight line basis over the lease term.

XV) SEGMENT REPORTING

a) The Company has disclosed business segment as the primary segment for disclosure. The Company has identified four separate segments i.e. Fine Blanking Components, Mufflers, Spokes and Electricals. The Segments are identified with regard to the dominant source, nature of risks and returns, internal organization and management structure and internal reporting systems.

b) The accounting policies adopted for segment reporting are in line with the accounting policies of the Company.

c) Segment revenues, Results and Capital employed figures include the respective amounts identifiable to each of the segments. Interest and other financial charges/ incomes are reported at corporate level. Alsothose assets and liabilities which are not identifiable to the individual segments are reported at corporate level.

d) The inter segmental revenue is accounted for on the basis of transfer price agreed to amongst segments as per market trend.

XVI) IMPAIRMENT LOSS

An impairment loss is recognized when the carrying amount of fixed assets exceeds its recoverable amount. The recoverable amount of an asset is lower of net selling price and its value in use.

XVII) CASH FLOW STATEMENT

The Cash Flow Statement is prepared by the indirect method set out in Accounting Standard-3 on Cash Flow Statements and presents cash flows by operating, investing and financing activities of the Company. The Company considers all highly liquid financial instruments, which are readily convertible into cash, to be cash equivalents


Mar 31, 2010

I) ACCOUNTING CONVENTIONS

The financial statements are prepared under the historical cost convention on accrual basis and in accordance with the Accounting Standards issued under the Companies (Accounting Standards) Rules, 2006 and the relevant presentational requirements of the Companies Act, 1956.

II) ACCOUNTING FOR ESTIMATES

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

III) FIXED ASSETS AND DEPRECIATION

a) Fixed assets including intangible assets are stated at cost net of cenvat, less accumulated depreciation and/or impairment loss, if any. All costs till commencement of commercial production are capitalized.

b) Depreciation on fixed assets including intangible assets has been provided on straight-line method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956.

IV) INVESTMENTS

Long term investments are stated at cost. Provision for diminution in value of long term investments is made only if such decline is not temporary in the opinion of the management.

V) INVENTORIES

a) Finished goods are valued at lower of cost or net realizable value. Cost is considered at material cost on monthly moving weighted average basis plus appropriate overheads.

b) Work in progress is valued at material cost on monthly moving weighted average basis plus appropriate overheads.

c) Scrap is valued at net realisable value.

d) Other inventories are valued at cost on monthly moving weighted average basis.

e) The liability of excise duty on finished goods and scrap lying in the factory at year end is estimated on the basis of sales price of goods and excise rates prevailing on the said date, while determining the cost of closing stock of finished goods and scrap.

VI) RETIREMENT BENEFITS

Superannuation, Provident and Gratuity Funds are accounted for on accrual basis with corresponding payments to recognized scheme/fund. Short term employees benefits are recognized as an expense at the undiscounted amount in the profit and loss account for the year in which the related services rendered. The liability for gratuity (in the nature of a defined benefit obligation) is provided on the basis of acturial valuation conducted by Life Insurance Company of India (LIC), since the gratuity scheme of the company is covered under a group gratuity cum life assurance cash accumulation policy of the LIC.

VII) REVENUE RECOGNITION

Sales are accounted for on the basis of date of dispatch except for export sales which are booked on the basis of date of custom clearance.

VIII) DIVIDEND

The dividend income is accounted for when the right to receive the payment is established.

IX) GOVERNMENTGRANTS

Government grant of the nature of promoters contribution is credited to capital reserve at the time of receipt.

X) FOREIGN EXCHANGE TRANSACTIONS

a) Transactions in foreign currencies are accounted for at the exchange rate prevailing at the date of transaction/ negotiations.

b) Monetary foreign currencies items outstanding at the year end are restated into rupees at the rate of exchange prevailing on the Balance Sheet date.

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

d) Any income or expenses on account of exchange difference either on settlement or on transaction is recognized in the profit and loss account, except in cases where they relate to fixed assets in which they are adjusted in the carrying cost of such assets.

e) In respect of forward contracts, forward premium or discount arising at the inception of forward contract is amortized over the life of contract. Exchange differences on such contracts are recognized in the profit and loss account in the year in which exchange rates change. Any profit and loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the year.

XI) BORROWING COSTS

Borrowing Costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of cost of such assets. Qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. Other borrowing costs are charged to revenue.

XII) TAXATION

The provision for current income tax liability is ascertained on the basis of assessable profits computed in accordance with the provisions of Income Tax Act, 1961. Deferred tax is recognized, subject to the consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of being reversed in one or more subsequent periods.

The provision for Fringe Benefit Tax is ascertained on the basis of Fringe Benefits assessable value as per the provisions of the Income Tax Act, 1961 (upto year ending 31.03.2009).

XIII) CONTINGENCIES

Contingent liabilities arising from claims, litigation, assessments, fines, penalties etc. are provided when it is probable that the contingency will result in the loss and reasonable estimate of the amount of the resulting loss can be made. Liabilities which are material and whose future outcome can not be ascertained with reasonable certainty are treated as contingent liabilities and disclosed by way of notes to account.

XIV) ACCOUNTING FOR LEASES

Lease payments under operating lease have been charged to profit and loss account as expense on straight line basis over the lease term.

XV) SEGMENT REPORTING

a) The Company has disclosed business segment as the primary segment for disclosure. The Company has identified four separate segments i.e. Fine Blanking Components, Mufflers, Spokes and Electricals. The Segments are identified with regard to the dominant source, nature of risks and returns, internal organization and management structure and internal reporting systems.

b) The accounting policies adopted for segment reporting are in line with the accounting policies of the Company.

c) Segment revenues, Results and Capital employed figures include the respective amounts identifiable to each of the segments. Interest and other financial charges/ incomes are reported at corporate level. Also those assets and liabilities which are not identifiable to the individual segments are reported at corporate level.

d) The inter segmental revenue is accounted for on the basis of transfer price agreed to amongst segments as per market trend.

XVI) IMPAIRMENT LOSS

An impairment loss is recognized when the carrying amount of fixed assets exceeds its recoverable amount. The recoverable amount of an asset is lower of net selling price and its value in use.

XVII) CASH FLOW STATEMENT

The Cash Flow Statement is prepared by the indirect method set out in Accounting Standard - 3 on Cash Flow Statements and presents cash flows by operating, investing and financing activities of the Company. The Company considers all highly liquid financial instruments, with are readily convertible into cash, to be cash equivalents.

 
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