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Accounting Policies of Rane (Madras) Ltd. Company

Mar 31, 2015

1.1 Basis of accounting and preparation of financial statements

the financial statements of the company have been prepared in accordance with the Generally Accepted Accounting principles in india (Indian GAAp) to comply with the accounting Standards specified under Section 133 of the companies act, 2013, read with Rule 7 of the companies (accounts) Rules, 2014 and the relevant provisions of the companies act, 2013 ("the 2013 act") / companies act, 1956 ("the 1956 act"), as applicable and accounting Standard 30 on "Financial instruments-Recognition and Measurement" as set out in Note 1.21 below. the financial statements have been prepared on accrual basis under the historical cost convention. the accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.

An 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 iii to the companies Act, 2013. Based on the nature of products and the normal time between the acquisition of the 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-non current classification of its assets and liabilities as current and non-current.

1.2 Use of Estimates

the preparation of the financial statements in conformity with Generally Accepted Accounting Principles in india requires the Management to make estimates and assumptions that affects the reported amounts of assets and liabilities as of the Balance Sheet date, the reported amount of revenue and expenses for the year and disclosure of contingent liabilities as of the Balance Sheet date. the estimates and assumptions used in the financial statements are based upon management's evaluation of relevant facts and circumstances as on the date of the financial statements. Actual results could differ from these estimates and the differences between the actual results and the estimates are recognised in the period in which the results are known / materialised.

1.3 Inventories

inventories are valued at the lower of cost on moving weighted average basis and the net realisable value after providing for obsolescence and other losses, where considered necessary. cost includes all charges in bringing the goods to the point of sale, including octroi and other levies, transit insurance and receiving charges. Work-in-progress and finished goods include appropriate proportion of overheads and, where applicable, excise duty.

1.4 Cash and cash equivalents (for purposes of Cash Flow Statement)

cash comprises cash on hand and demand deposits with banks. cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

1.5 Cash Flow Statement

cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. the cash flows from operating, investing and financing activities of the company are segregated based on the available information.

1.6 Depreciation and amortisation

Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value.

Depreciation on tangible fixed assets has been provided on the straight-line method as per the useful life prescribed in Schedule ii to the companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc.:

cost of Leasehold land is amortised over the period of the lease. Leasehold land development costs are amortised over a period of ten years. assets individually costing Rs.10,000 or less are fully depreciated in the year of addition.

License fees paid for technical assistance are amortised on a straight line basis over the period of the license. Software license fees are amortised on a straight line basis over a period of three years.

Goodwill is amortised over a period of five years.

1.7 Revenue recognition

Sales are recognised, net of returns and trade discounts, on transfer of significant risks and rewards of ownership to the buyer, which generally coincides with the delivery of goods to customers. Sales are recognized on inwarding of goods at customer's end, where applicable as per terms of sale (for domestic) and on the date of bill of lading ( for Exports). Sales include excise duty but exclude sales tax and value added tax.

1.8 Other Income

Interest income is accounted on accrual basis.

1.9 Fixed Assets (Tangible / Intangible)

Fixed Assets are stated at cost of acquisition/construction less accumulated depreciation/amortization, impairment loss, if any, and inclusive of borrowing cost attributable to acquisition of qualifying fixed assets, where applicable, and adjustments for exchange differences referred to in Note 1.10 below. Cost includes inward freight, non-refundable duties/taxes and incidental expenses directly related to acquisition/installation. Machinery spares which can be used only in connection with an item of fixed asset and whose use is expected to be irregular are capitalised and depreciated over the useful life of the principal item of the relevant assets. Subsequent expenditure on fixed assets after its purchase / completion is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance.

Capital work-in-progress:

Projects under which tangible fixed assets are not yet ready for their intended use are carried at cost, comprising direct cost, related incidental expenses and attributable interest.

Advance paid towards the acquisation of fixed assets outstanding at each balance sheet date are disclosed as capital advances under long term loans and advances.

1.10 Foreign currency transactions and translations

Transactions in foreign currencies entered into by the Company are accounted at the exchange rates prevailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction are restated at the closing exchange rates. Exchange differences arising on actual payments / realisations and year-end restatements of foreign currency monetary items, excluding long term foreign currency monetary items (see below), are dealt with in the Statement of profit and Loss.

Foreign currency monetary items (other than derivative contracts) of the Company, outstanding at the balance sheet date are restated at the year-end rates. Non-monetary items of the Company are carried at historical cost.

Exchange difference on long-term foreign currency monetary items: The exchange differences arising on settlement / restatement of long-term foreign currency monetary items are capitalised as part of the depreciable fixed assets to which the monetary item relates and depreciated over the remaining useful life of such assets. if such monetary items do not relate to acquisition of depreciable fixed assets, the exchange difference is amortised over the maturity period / upto the date of settlement of such monetary items, whichever is earlier, and charged to the Statement of profit and Loss. the unamortised exchange difference is carried under Reserves and surplus as "Foreign currency monetary item translation difference account" net of the tax effect thereon, where applicable.

Accounting for forward contracts

Premium or discount on forward exchange contracts (i.e. the difference between the forward exchange rate and the exchange rate at the date of transaction) is accounted for as income/expense over the life of the contract if such contracts relate to monetary items as at the balance sheet date. profit or loss on cancellation of forward contracts are recognized as income/expense in the Statement of profit and Loss for the year in which they are cancelled.

Refer notes 1.21 and 1.22 for accounting for forward exchange contracts relating to firm commitments and highly probable forecast transactions.

1.11 Export incentives

Export benefits are accounted for in the year of exports based on eligibility and when there is no uncertainty in receiving the same.

1.12 Employee benefits

Employee benefits include provident fund, superannuation fund, employee state insurance scheme, gratuity fund, compensated absences, long service awards and post-employment medical benefits

a. Short term benefits

Short term employee Benefits (i.e.. benefits falling due within one year after the end of the period in which employees render the related service) are recognized as expense in the period in which employee services are rendered as per the company's scheme based on expected obligations on undiscounted basis. these benefits include performance incentive and compensated absences which are expected to occur within twelve months after the end of the period in which the employee renders the related service.

The cost of short-term compensated absences is accounted as under :

(a) in case of accumulated compensated absences, when employees render the services that increase their entitlement of future compensated absences; and

(b) in case of non-accumulating compensated absences, when the absences occur.

b. Post-employment benefits

Post-employment benefits comprise of Provident Fund, Superannuation Fund and Gratuity which are accounted for as follows:

i) Provident Fund

This is a defined contribution plan and contributions are remitted to Provident Fund authorities in accordance with relevant statute and charged to Statement of Profit and Loss in the period in which the related employee services are rendered. The company has no further obligations for future provident Fund benefits other than its monthly contributions.

ii) Superannuation Fund

This is a defined contribution plan. The Company contributes, based on the options exercised by the eligible employees, a sum equivalent to 5%/10%/15% of eligible employees' applicable salary towards superannuation fund administered by the Trustees and managed by Life insurance Corporation of india (LiC). The Company has no further obligations for future superannuation benefits other than its contributions and recognizes such contributions as expense in the period in which the related employee services are rendered.

iii) Gratuity

This is a defined benefit plan. The Company's scheme is administered by the LiC. The liability is determined based on year-end actuarial valuation by an independent actuary using projected unit credit method, with actuarial valuations being carried out at each Balance Sheet date. Actuarial gains and losses are recognised in the Statement of profit and Loss in the period in which they occur. past service cost is recognised immediately to the extent that the benefits are already vested and otherwise is amortised on a straight-line basis over the average period until the benefits become vested. The retirement benefit obligation recognised in the Balance Sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, as reduced by the fair value of scheme assets. any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the schemes.

c. Other Long term employee benefits

compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related service are recognised as a liability at the present value of the defined benefit obligation as at the Balance Sheet date.

d. Termination benefits

termination benefits represent compensation towards voluntary Retirement Scheme which is expensed as incurred. termination benefits falling due for more than twelve months after the Balance Sheet date are accounted using appropriate discount rates.

1.13 Borrowing costs

Borrowing costs include interest, amortisation of ancillary costs incurred and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. costs in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the Statement of profit and Loss over the tenure of the loan. Borrowing costs allocated to and utilised for qualifying assets, pertaining to the period from commencement of activities relating to construction / development of the qualifying asset upto the date of capitalisation of such asset are added to the cost of the assets. capitalisation of borrowing costs is suspended and charged to the Statement of profit and Loss during extended periods when active development activity on the qualifying assets is interrupted.

Discount on commercial papers ( the difference between the issue price and the redemption value) is apportioned on time basis and recognised as discounting expense.

1.14 Leases

Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating leases. lease rentals under operating leases are recognised in the Statement of profit and Loss on a straight-line basis over the lease term.

1.15 Earnings per share

Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.

1.16 Taxes on income

current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates and the provisions of the income tax Act, 1961 and other applicable tax laws.

Minimum alternate tax (Mat) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the company will pay normal income tax. Accordingly, Mat is recognised as an asset in the Balance Sheet when it is highly probable that future economic benefit associated with it will flow to the company.

Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date. Deferred tax liabilities are recognised for all timing differences. Deferred tax assets are recognised for timing differences of items other than unabsorbed depreciation and carry forward losses only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. However, if there are unabsorbed depreciation and carry forward of losses and items relating to capital losses, deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that there will be sufficient future taxable income available to realise the assets. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each balance sheet date for their realisability.

1.17 Research and development expenses

Revenue expenditure on Research and Development is charged off in the year in which it is incurred. capital expenditure on research and Development is included under Fixed Assets.

1.18 Impairment of assets

The carrying values of assets / cash generating units at each balance sheet date are reviewed for impairment if any indication of impairment exists.

if the carrying amount of the assets exceed the estimated recoverable amount, an impairment is recognised for such excess amount. the impairment loss is recognised as an expense in the Statement of profit and Loss, unless the asset is carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation decrease to the extent a revaluation reserve is available for that asset.

the recoverable amount is the greater of the net selling price and their value in use. value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor.

when there is indication that an impairment loss recognised for an asset (other than a revalued asset) in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of profit and Loss, to the extent the amount was previously charged to the Statement of profit and Loss. in case of revalued assets such reversal is not recognised.

1.19 Provisions and contingencies

provisions are recognised when the company has a present obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. provisions (excluding employee benefits) are not discounted to their present value and are determined based on the 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 in the Notes. contingent assets are not recognised in the financial statements.

1.20 Provision for warranty

the estimated liability for product warranties is recorded when products are sold. these estimates are established using historical information on the nature, frequency and average cost of warranty claims and management estimates regarding possible future incidence based on corrective actions on product failures. the timing of outflows will vary as and when warranty claim will arise - being typically upto two years. As per the terms of the contracts, the company provides post-contract services / warranty support to some of its customers. the company accounts for the post- contract support / provision for warranty on the basis of the information available with the Management duly taking into account the current and past technical estimates.

1.21 Hedge accounting

the company uses derivative financial instruments such as foreign exchange forward contracts, option contracts, currency and interest rate swaps to hedge its exposure in movements in foreign exchange rates and interest rates relating to underlying transaction. these forward, option, currency and interest rate swap contracts are not used for trading/speculation purposes.

the company adopted in an earlier year accounting Standard 30, "Financial instruments: recognition and measurement" issued by the institute of chartered accountants of india to the extent the adoption does not contradict with existing mandatory applicable accounting Standards and other relevant regulatory requirements.

In the case of forward and option contracts that are designated as effective cash flow hedges, the gain or loss from the effective portion of the hedge is recorded and reported directly in reserves (under the "Hedging Reserve Account", net of applicable deferred income taxes) and are reclassified into the Statement of profit and Loss in the same periods during which the forecasted transaction affects profit or loss. However, the ineffective portion of the cash flow hedges, are recognized in the Statement of profit and Loss as it arises.

1.22 Derivative contracts [other than forward exchange contracts covered under AS 11 (refer Note 1.10 above)]

The company recognizes gains or losses from changes in fair values of forward, option, currency and interest rate swap contracts that are not designated in a hedge relationship through the Statement of profit and Loss in the period in which they arise.

1.23 Insurance claims

Insurance claims are accounted for on the basis of claims admitted / expected to be admitted and to the extent that there is no uncertainty in receiving the claims.

1.24 Service tax input credit

Service tax input credit is accounted for in the books in the period in which the underlying service received is accounted and when there is reasonable certainty in availing / utilising the credits.


Mar 31, 2013

1.1 Basis of accounting and preparation of financial statements

The financial statements have been prepared under historical cost convention in accordance with the Generally Accepted Accounting Principles in India to comply with the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956 (the Act'') and Accounting Standard 30 on ''Financial Instruments: Recognition and Measurement''as set out in Note 1.21 below.

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 normal time between the acquisition of the 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-non current classification of its assets and liabilities as current and non-current.

1.2 Use of Estimates

The preparation of the financial statements in conformity with Generally Accepted Accounting Principles in India requires the Management to make estimates and assumptions that affects the reported amounts of assets and liabilities as of the Balance Sheet date, the reported amount of revenue and expenses for the year and disclosure of contingent liabilities as of the Balance Sheet date. The estimates and assumptions used in the financial statements are based upon Management''s evaluation of relevant facts and circumstances as on the date of the financial statements. Actual results could differ from these estimates and the differences between the actual results and the estimates are recognised in the period in which the results are known / materialised.

1.3 Inventories

Inventories are stated at lower of cost or net realisable value. Cost is determined on moving weighted average basis and includes expenditure incurred in the normal course of business in bringing the inventories to its location and condition, labour and overheads, wherever applicable. Inventories are written down for obsolete/slow moving/non-moving items wherever necessary.

1.4 Cash and cash equivalents (for purposes of Cash Flow Statement)

Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

1.5 Cash Flow Statement

Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.

1.6 Depreciation and Amortisation

Depreciation has been provided under the straight line method at the rates prescribed under Schedule XIV of the Companies Act, 1956 with applicable shift allowance except the following categories of assets which are depreciated over their estimated useful lives indicated below:

Cost of Leasehold land is amortised over the period of the lease. Leasehold land development costs are amortised over a period of ten years. Assets individually costing Rs. 10,000 or less are fully depreciated in the year of addition.

License fees paid for technical assistance are amortised on a straight line basis over the period of the license. Software license fees are amortised on a straight line basis over a period of three years.

1.7 Revenue recognition

Revenue from sales is recognised on transfer of significant risks and rewards of ownership to customers based on the contract with the customers for delivery. Sales include excise duty but are net of sales returns and trade discounts and exclude sales tax / value added tax.

1.8 Other Income

Interest income are recognised on accrual basis.

1.9 Fixed Assets (Tangible / Intangible)

Fixed Assets are stated at cost of acquisition/construction less accumulated depreciation/amortization, impairment loss, if any, and inclusive of borrowing cost attributable to acquisition of qualifying fixed assets, where applicable, and adjustments for exchange differences referred to in Note 1.10 below. Cost includes inward freight, non-refundable duties/taxes and incidental expenses directly related to acquisition/ installation. Machinery spares which can be used only in connection with an item of fixed asset and whose use is expected to be irregular are capitalised and depreciated over the useful life of the principal item of the relevant assets. Subsequent expenditure on fixed assets after its purchase / completion is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance.

Capital work-in-progress:

Projects under which tangible fixed assets are not yet ready for their intended use are carried at cost, comprising direct cost, related incidental expenses and attributable interest.

1.10 Foreign currency transactions and translations

Foreign currency transactions are recorded at the exchange rates prevailing on the date of transaction.

At the year end all monetary assets and liabilities denominated in foreign currency are restated at year end exchange rates.The resultant exchange differences arising from settlement of foreign currency transactions and from year end restatement are recognized in the Statement of Profit and Loss except those arising on reporting of long term foreign currency monetary items relating to acquisition of depreciable fixed assets which are adjusted to the carrying amount of such assets and depreciated over the remaining useful life of such assets.

Premium or discount on forward exchange contracts (i.e. the difference between the forward exchange rate and the exchange rate at the date of transaction) is accounted for as income/expense over the life of the contract if such contracts relate to monetary items as at the Balance Sheet date. Profit or loss on cancellation of forward contracts are recognized as income/expense in the Statement of Profit and Loss for the year in which they are cancelled.

1.11 Export incentives

Export benefits are accounted for in the year of exports based on eligibility and when there is no uncertainty in receiving the same.

1.12 Employee benefits

a. Short term benefits

Short term Employee Benefits (i.e.. benefits falling due within one year after the end of the period in which employees render the related service) are recognized as expense in the period in which employee services are rendered as per the Company''s scheme based on expected obligations on undiscounted basis.These benefits include performance incentive and compensated absences which are expected to occur within twelve months after the end of the period in which the employee renders the related service.

The cost of short-term compensated absences is accounted as under:

(a) in case of accumulated compensated absences, when employees render the services that increase their entitlement of future compensated absences; and

(b) in case of non-accumulating compensated absences, when the absences occur.

b. Post-employment benefits

Post-employment benefits comprise of Provident Fund, Superannuation Fund and Gratuity which are accounted for as follows:

i) Provident Fund

This is a defined contribution plan and contributions are remitted to Provident Fund authorities in accordance with relevant statute and charged to Statement of Profit and Loss in the period in which the related employee services are rendered. The Company has no further obligations for future Provident Fund benefits other than its monthly contributions.

ii) Superannuation Fund

This is a defined contribution plan. The Company contributes, based on the options exercised by the eligible employees, a sum equivalent to 5%/10%/15% of eligible employees'' applicable salary towards superannuation fund administered by the Trustees and managed by Life Insurance Corporation of India (LIC). The Company has no further obligations for future superannuation benefits other than its contributions and recognizes such contributions as expense in the period in which the related employee services are rendered.

iii) Gratuity

This is a defined benefit plan. The Company''s scheme is administered by the LIC. The liability is determined based on year-end actuarial valuation using projected unit credit method, with actuarial valuations being carried out at each Balance Sheet date. Actuarial gains and losses are recognised in the Statement of Profit and Loss in the period in which they occur. Past service cost is recognised immediately to the extent that the benefits are already vested and otherwise is amortised on a straight-line basis over the average period until the benefits become vested. The retirement benefit obligation recognised in the Balance Sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the schemes.

c. Other Long term employee benefits

Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related service are recognised as a liability at the present value of the defined benefit obligation as at the Balance Sheet date.

d. Termination benefits

Termination benefits represent compensation towards Voluntary Retirement Scheme which is expensed as incurred.Termination benefits falling due for more than twelve months after the Balance Sheet date are accounted using appropriate discount rates.

1.13 Borrowing costs

The borrowing costs that are attributable to the acquisition/construction/production of qualifying assets (assets which require substantial period of time to get ready for its intended use) are capitalized as part of the cost of that asset. All other borrowing costs are charged to revenue.

1.14 Leases

Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating leases. Lease rentals under operating leases are recognised in the Statement of Profit and Loss on a straight-line basis.

1.15 Earnings per share

Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.

1.16 Taxes on income

Current tax is provided as the amount of tax payable in respect of taxable income for the year, measured using the applicable tax rules and laws.

Deferred tax is provided on timing differences between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date.

Deferred tax liabilities are recognised for all timing differences. Deferred tax assets are recognised only if there is a virtual/reasonable certainty, as applicable, in keeping with Accounting Standard 22 on ''Accounting for Taxes on Income'' that there will be sufficient future taxable income available to realise such assets. Deferred tax assets are reviewed for the appropriateness of their respective carrying amount at each Balance Sheet date.

1.17 Research and development expenses

Revenue expenditure on Research and Development is charged off in the year in which it is incurred. Capital expenditure on Research and Development is included under Fixed Assets.

1.18 Impairment of assets

The carrying amounts of fixed assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of fixed assets of the Company (being a single cash generating unit) exceeds the recoverable amount (i.e. higher of net selling price and value in use). In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. After impairment, depreciation is provided on the revised carrying amount of the assets over their remaining useful lives.

1.19 Provisions and contingencies

Provisions are recognised when the Company has a present obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the 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 in the Notes. Contingent assets are not recognised in the financial statements.

1.20 Provision for warranty

Product warranty provisions cover the estimated liability to repair or replace products still under warranty on the Balance Sheet date and is determined by applying historical experience levels of repairs and replacements developed by using the percentage (of aggregate warranty claims on aggregate eligible sales of past three years) applied on aggregate of current year and previous year''s eligible sales. Product warranty liability is generally extended for a period of one to two years from the date of sale.

1.21 Derivative contracts [other than forward exchange contracts covered under AS 11 (refer Note 1.10 above)]

The Company uses derivative financial instruments such as foreign exchange forward contracts, option contracts, currency and interest rate swaps to hedge its exposure in movements in foreign exchange rates and interest rates relating to underlying transaction.These forward, option, currency and interest rate swap contracts are not used for trading/speculation purposes.

The Company adopted in an earlier year Accounting Standard 30,"Financial Instruments: Recognition and Measurement" issued by The Institute of Chartered Accountants of India to the extent the adoption does not contradict with existing mandatory applicable Accounting Standards and other relevant regulatory requirements.

In the case of forward and option contracts that are designated as effective cash flow hedges, the gain or loss from the effective portion of the hedge is recorded and reported directly in reserves (under the "Hedging Reserve Account", net of applicable deferred income taxes) and are reclassified into the Statement of Profit and Loss in the same periods during which the forecasted transaction affects profit or loss. However, the ineffective portion of the cash flow hedges, are recognized in the Statement of Profit and Loss as it arises.


Mar 31, 2012

1.1 Basis of preparation of Financial Statements

The Financial Statements are prepared under historical cost convention in accordance with the generally accepted accounting principles in India and comply, in all material respects, with the applicable accounting standards notified under Section 211 (3C) [Companies (Accounting standard) Rules, 2006, as amended] and other relevant provisions of the Companies Act, 1956 (the 'Act') and Accounting Standard 30 on 'Financial Instruments: Recognition and Measurement' as set out in Note 1.12 below.

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 accounting principles generally accepted in India requires the management to make estimates and assumptions that affect the reported amount of assets and liabilities as of the Balance Sheet date, reported amount of revenues and expenses for the year and disclosure of contingent liabilities as of the Balance Sheet date. The estimates and assumptions used in these financial statements are based upon management's evaluation of relevant facts and circumstances as of the date of the financial statements. Actual results could differ from these estimates.

1.3 Fixed Assets

Fixed Assets are stated at cost of acquisition/construction less accumulated depreciation/amortization, impairment loss, if any, and inclusive of borrowing cost, where applicable, and adjustments for exchange difference referred to in Note 1.8 below. Cost includes inward freight, non-refundable duties/taxes and incidental expenses directly related to acquisition/installation. License fee towards Software's/Technical assistance are capitalized when it is expected to provide future enduring economic benefits. Capital work-in-progress includes cost of assets not ready for their intended use.

Cost of Leasehold land is amortized over the period of lease.

Leasehold land Development Costs are amortized over a period often years.

Assets individually costing Rs. 10,000 or less are fully depreciated in the year of addition.

License fee paid for technical assistance is amortized on a straight line basis over the period of license. Software licence fee is amortized on a straight line basis over a period of three years.

1.5 Impairment

The carrying amounts of fixed assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of fixed assets of the Company (being a single cash generating unit) exceeds the recoverable amount (ie. higher of net selling price and value in use). In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. After impairment, depreciation is provided on the revised carrying amount of the assets over their remaining useful lives.

1.6 Borrowing Costs

The borrowing costs that are attributable to the acquisition/construction/production of qualifying assets (assets which require substantial period of time to get ready for its intended use) are capitalized as part of the cost of that asset. All other borrowing costs are charged to revenue.

1.7 Inventories

Inventories are stated at lower of cost and net realizable value. Cost is determined on moving weighted average basis and includes expenditure incurred in the normal course of business in bringing inventories to its location and condition, labor and overhead, where applicable. Inventories are written down for obsolete/slow moving/non-moving items wherever necessary.

1.8 Foreign Currency Transactions as applicable under Accounting Standard 11 on The effects of changes in Foreign Exchange Rates Foreign currency transactions are recorded at the exchange rate prevailing on the date of transaction.

At the year end all monetary assets and liabilities denominated in foreign currency are restated at year end exchange rates. The resultant exchange differences arising from settlement of foreign currency transaction and from year end restatement are recognized in the Statement of Profit and Loss except those arising on reporting of long term foreign currency loan relating to acquisition of depreciable fixed assets with effect from April 1, 2007 which is adjusted to the carrying amount of such assets and depreciated over the remaining useful life of such fixed assets.

Profit or loss on cancellation of forward contracts are recognized as income/expense in the Statement of Profit and Loss of the year in which they are cancelled. Difference between the forward exchange rate and the exchange rate at the date of transaction is accounted for as income/expense over the life of the contract.

1.9 Research and Development

Revenue expenditure on Research and Development is charged off in the year in which it is incurred. Capital expenditure on Research and Development is included under Fixed Assets.

1.10 Employee Benefits

a. Short term

Short term Employee Benefits (ie. benefits falling due within one year after the end of the period in which employees render the related service) are recognized as expense in the period in which employee services are rendered as per the Company's scheme based on expected obligations on undiscounted basis.

b. Post-employment

Post-employment benefits comprise of Provident Fund, Superannuation Fund and Gratuity which are accounted for as follows:

i) Provident Fund

This is a defined contribution plan and contributions are remitted to Provident Fund authorities in accordance with relevant statute and charged to the Statement of Profit and Loss in the period in which the related employee services are rendered. The Company has no further obligations for future Provident Fund benefits other than its monthly contributions.

ii) Superannuation Fund

This is a defined contribution plan. The Company contributes, based on the options exercised by the eligible employees, a sum equivalent to 5%/10%/15% of eligible employees' applicable salary towards superannuation fund administered by the Trustees and managed by Life Insurance Corporation of India (LIC). The Company has no further obligations for future superannuation benefits other than its contributions and recognizes such contributions as expense in the period in which the related employee services are rendered.

iii) Gratuity

This is a defined benefit plan. The Company's scheme is administered by LIC. The liability is determined based on year-end actuarial valuation using projected unit credit method. Actuarial gains / losses are recognised immediately in the Statement of Profit and Loss as income/ expense.

c. Other Long term

Other long term employee benefits represent compensated absence (defined benefit plan) which is provided for based on year end actuarial valuation using projected unit credit method. Actuarial gains/losses are recognized immediately in the Statement of Profit and Loss as income/expense.

d. Termination benefits

Termination benefits represent compensation towards Voluntary Retirement Scheme which is expensed as incurred. Termination benefits falling due for more than twelve months after the balance sheet date are accounted using appropriate discount rates.

1.11 Revenue Recognition

Revenue from sales is recognized on transfer of ownership to customers based on the contract with the customers for delivery. Sales include excise duty but are net of sales returns and trade discounts and exclude sales tax / value added tax.

1.12 Derivatives [other than forward exchange contracts covered under AS 11 (refer Note 1.8 above)]

The Company uses derivative financial instruments such as foreign exchange forward contract, option contract, currency and interest rate swaps to hedge its exposure in movements in foreign exchange rates and interest rates relating to underlying transaction. These forward, option, currency and interest rate swap contracts are not used for trading/speculation purposes.

The Company adopted in an earlier year Accounting Standard 30, "Financial Instruments: Recognition and Measurement" issued by The Institute of Chartered Accountants of India to the extent the adoption does not contradict with existing mandatory applicable Accounting Standards and other relevant regulatory requirements.

For forward and option contracts that are designated as effective cash flow hedges, the gain or loss from the effective portion of the hedge is recorded and reported directly in reserves (under the "Hedging Reserve Account") and are reclassified into the Profit and Loss Account upon the occurrence of the hedged transactions. However, the ineffective portion of the cash flow hedges, are recognized in the Profit and Loss Account as it arises.

The Company recognizes gains or losses from changes in fair values of forward, option, currency and interest rate swap contracts that are not designated in a hedge relationship through Statement of Profit and Loss in the period in which they arise.

1.13 Provisions

Provisions are recognized when the Company has a present obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made.

Product warranty provisions cover the estimated liability to repair or replace products still under warranty on the Balance Sheet date and is determined by applying historical experience levels of repairs and replacements developed by using the percentage (of aggregate warranty claims on aggregate eligible sales of past three years) applied on aggregate of current year and previous year's eligible sales. Product warranty liability is generally extended for a period of one to two years from the date of sale.

1.14 Taxation

Current tax is provided as the amount of tax payable in respect of taxable income for the year, measured using the applicable tax rules and laws. Deferred tax is provided on timing differences between taxable income and accounting income measured using tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date.

Deferred tax assets are recognised only if there is a virtual/reasonable certainty, as applicable, in keeping with Accounting Standard 22 on 'Accounting for Taxes on Income' that there will be sufficient future taxable income available to realise such assets. Deferred tax assets are reviewed for the appropriateness of their respective carrying amount at each Balance Sheet date.

1.15 Government grants

Grants of Capital nature and related to specific Fixed Assets are deducted from gross value of assets. Other grants of Capital nature are credited to Capital Reserve.


Mar 31, 2011

1.1 Basis of preparation of Financial Statements

The Financial Statements are prepared under historical cost convention in accordance with the generally accepted accounting principles in India and comply in all material respects with the applicable accounting standards notified under Section 211 (3C) of the Companies Act, 1956 (the Act'), Accounting Standard 30 on 'Financial Instruments: Recognition and Measurement' as set out in Note 1.12 below and with the relevant provisions of the Act.

1.2 Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in India requires the management to make estimates and assumptions that affect the reported amount of assets and liabilities as of the Balance Sheet date, reported amount of revenues and expenses for the year and disclosure of contingent liabilities as of the Balance Sheet date. The estimates and assumptions used in these financial statements are based upon management's evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results could differ from these estimates.

1.3 Fixed Assets

Fixed Assets are stated at cost of acquisition/construction less accumulated depreciation/amortization, impairment loss, if any, and inclusive of borrowing cost, where applicable, and adjustments for exchange difference referred to in Note 1.8 below. Cost includes inward freight, non-refundable duties/taxes and incidental expenses directly related to acquisition/installation. Licence fee towards Softwares/Technical assistance are capitalized when it is expected to provide future enduring economic benefits. Capital work-in-progress includes cost of assets not ready for their intended use and includes advances paid towards acquiring/constructing fixed assets.

1.4 Depreciation

Depreciation on fixed assets is calculated on straight line method at the rates specified in Schedule XIV to the Companies Act, 1956 except for the following assets which are depreciated over their following estimated useful lives.

Assets Useful life (years)

Vehicles 5

Furniture and Fit tings 5

Office Equipments (other than compu ters) 3

Computers 4

Cost of Leasehold land is amortised over the period of lease.

Leasehold land Development Costs are amortized over a period of ten years.

Assets individually costing Rs. 10,000 or less are fully depreciated in the year of addition.

Licence fee paid for technical assistance is amortized on a straight line basis over the period of licence. Software licence fee is amortized on a straight line basis over a period of three years.

1.5 Impairment

The carrying amounts of fixed assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying

Schedules forming part of the Accounts NOTES ON ACCOUNTS (Contd.)

amount of fixed assets of the Company (being a single cash generating unit) exceeds the recoverable amount (ie. higher of net selling price and value in use). In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. After impairment, depreciation is provided on the revised carrying amount of the assets over their remaining useful lives.

1.6 Borrowing Costs

The borrowing costs that are attributable to the acquisition/construction/production of qualifying assets (assets which require substantial period of time to get ready for its intended use) are capitalized as part of the cost of that asset. All other borrowing costs are charged to revenue.

1.7 Inventories

Inventories are stated at lower of cost and net realizable value. Cost is determined on moving weighted average basis and includes expenditure incurred in the normal course of business in bringing inventories to its location and condition, labour and overhead, where applicable. Inventories are written down for obsolete/slow moving/non-moving items wherever necessary. Cost of loose tools is amortized over a period of three years.

1.8 Foreign Currency Transactions as applicable under Accounting Standard 11 on 'The effects of changes in Foreign Exchange Rates'

Foreign currency transactions are recorded at the exchange rate prevailing on the date of transaction.

At the year end all monetary assets and liabilities denominated in foreign currency are restated at year end exchange rates. The resultant exchange differences arising from settlement of foreign currency transaction and from year end restatement are recognized in Profit and Loss Account except those arising on reporting of long term foreign currency loan relating to acquisition of depreciable fixed assets with effect from April 1, 2007 which is adjusted to the carrying amount of such assets and depreciated over the remaining useful life of such fixed assets.

Profit or loss on cancellation of forward contracts are recognized as income/expense in the Profit and Loss Account of the year in which they are cancelled. Difference between the forward exchange rate and the exchange rate at the date of transaction is accounted for as income/expense over the life of the contract.

1.9 Research and Development

Revenue expenditure on Research and Development is charged off in the year in which it is incurred. Capital expenditure on Research and Development is included under Fixed Assets.

1.10 Employee Benefits

a. Short term

Short term Employee Benefits (ie. benefits falling due within one year after the end of the period in which employees render the related service) are recognized as expense in the period in which employee services are 'rendered as per the Company's scheme based on expected obligations on undiscounted basis.

b. Post-employment

Post-employment benefits comprise of Provident Fund, Superannuation Fund and Gratuity which are accounted for as follows:

i) Provident Fund

This is a defined contribution plan and contributions are remitted to Provident Fund authorities in accordance with relevant statute and charged to Profit and Loss Account in the period in which

the related employee services are rendered. The Company has no further obligations for future Provident Fund benefits other than its monthly contributions.

ii) Superannuation Fund

This is a defined contribution plan. The Company contributes, based on the options exercised by the eligible employees, a sum equivalent to 5%/10%/15% of eligible employees' applicable salary towards superannuation fund administered by the Trustees and managed by Life Insurance Corporation of India (LIC). The Company has no further obligations for future superannuation benefits other than its contributions and recognizes such contributions as expense in the period in which the related employee services are rendered.

iii) Gratuity

This is a defined benefit plan. The Company's scheme is administered by LIC. The liability is determined based on year-end actuarial valuation using projected unit credit method. Actuarial gains / losses are recognised immediately in the Profit and Loss Account as income/ expense.

c. Other Long term

Other long term employee benefits represent compensated absence (defined benefit plan) which is provided for based on year end actuarial valuation using projected unit credit method. Actuarial gains/losses are recognised immediately in the Profit and Loss Account as income/expense.

d. Termination benefits

Termination benefits represent compensation towards Voluntary Retirement Scheme which is expensed as incurred.Termination benefits falling due for more than twelve months after the balance sheet date are accounted using appropriate discount rates.

1.11 Revenue Recognition

Revenue from sales is recognised on transfer of ownership to customers based on the contract with the customers for delivery. Sales include excise duty but are net of sales returns and trade discounts and exclude sales tax / value added tax.

1.12 Derivatives [other than forward exchange contracts covered under AS 11 (refer Note 1.8 above)]

The Company uses derivative financial instruments such as foreign exchange forward contract, option contract, currency and interest rate swaps to hedge its exposure in movements in foreign exchange rates and interest rates relating to underlying transaction. These forward, option, currency and interest rate swap contracts are not used for trading/speculation purposes.

The Company adopted in an earlier year Accounting Standard 30,"Financial Instruments: Recognition and Measurement" issued by The Institute of Chartered Accountants of India to the extent the adoption does not contradict with existing mandatory applicable Accounting Standards and other relevant regulatory requirements.

For forward and option contracts that are designated as effective cash flow hedges, the gain or loss from the effective portion of the hedge is recorded and reported directly in reserves (under the "Hedging Reserve Account") and are reclassified into the Profit and Loss Account upon the occurrence of the hedged transactions. However, the ineffective portion of the cash flow hedges, are recognized in the Profit and Loss Account as it arises.

The Company recognizes gains or losses from changes in fair values of forward, option, currency and interest rate swap contracts that are not designated in a hedge relationship through Profit and Loss Account in the period in which they arise.

1.13 Provisions

Provisions are recognised when the Company has a present obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made.

Product warranty provisions cover the estimated liability to repair or replace products still under warranty on the Balance Sheet date and is determined by applying historical experience levels of repairs and replacements developed by using the percentage (of aggregate warranty claims on aggregate eligible sales of past three years) applied on aggregate of current year and previous year's eligible sales. Product warranty liability is generally extended for a period of one to two years from the date of sale.

1.14 Taxation

Current tax is provided as the amount of tax payable in respect of taxable income for the year, measured using the applicable tax rules and laws.

Deferred tax is provided on timing differences between taxable income and accounting income measured using tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date.

Deferred tax assets are recognised only if there is a virtual/reasonable certainty, as applicable, in keeping with Accounting Standard 22 on Accounting for Taxes on Income' that there will be sufficient future taxable income available to realise such assets. Deferred tax assets are reviewed for the appropriateness of their respective carrying amount at each Balance Sheet date.

 
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