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Accounting Policies of Thermax Ltd. Company

Mar 31, 2015

1.1 Basis for Preparation of Financial Statements

The financial statements have been prepared under the historical cost convention on an accrual basis and comply with notified accounting standards referred to in Section 133 read with the General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs and other relevant provisions of the Companies Act, 2013.

1.2 Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of financial statements and the reported amounts of revenues and expenses during the reported period. Differences between the actual outcome and estimates are recognised in the period in which the outcome is known or materialises.

1.3 Fixed Assets - Tangible and Intangible Assets

a. Tangible fixed assets are stated at cost (net of refundable taxes or levies) and include any other attributable cost for bringing the assets to working condition for their intended use.

b. Borrowing costs attributable to qualifying fixed assets are capitalised.

c. Machinery specific spares (other than those required for regular maintenance) are capitalised as part of the related fixed asset.

d. Expenditure incurred on acquisition or, as the case may be, on development of goodwill, technical know- how, software, patents, on research and development and other intangibles is recognised as an Intangible Asset if it is expected that such asset will generate future economic benefits not less than its carrying cost.

1.4 Depreciation

a. Cost incurred on Leasehold land is amortised over the period of lease.

b. The management has carried out an estimation of the useful lives of fixed assets based on internal and external technical evaluation. Based on such evaluation, in respect of the following categories of fixed assets, useful life differs from that specified in the Schedule II to the Companies Act 2013 :

Asset Category Company''s Estimate of Useful Life (Years)

Plant & Machinery 5 to 20

Roads 5 to 30

OfficeEquipment 15

Electrical Installation & Equipment 15

Computers & Data Processing Units 4to6

c. Intangible assets are amortised on the straight line method over the estimated useful life of such assets. An asset''s useful life is estimated based on an evaluation of the future economic benefits expected of such assets.

d. Depreciation on the entire plant and machinery of chemical division is charged considering the chemical plant as a "Continuous Process Plant".

1.5 Impairment

Carrying amount of cash generating units/ assets is reviewed at the Balance Sheet date to determine whether there is any indication of impairment. Provision for impairment loss, if any, is recognized to the extent to which the carrying amount of an asset exceeds its recoverable amount. Recoverable amount is the higher of an asset''s net selling price and its value in use. Value in use is determined on the basis of the discounted present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.

1.6 Investments

Investments that are readily realisable 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 are carried at lower of cost and fair value determined on an individual investment basis. Long term investments are carried at cost. However, provision for diminution is made to recognize a decline, other than temporary in nature, in the carrying amount of such long term investments.

1.7 Inventories

a. Inventories are valued at lower of cost and estimated net realisable value.

b. Cost of raw materials, components, consumables, tools, stores & spares is arrived at on the basis of weighted average cost.

c. Cost of finished goods and work in progress is arrived at on the basis of weighted average cost of raw materials and the cost of conversion thereof for bringing the inventories up to their present location and condition.

d. Inventory obsolescence is provided for on the basis of standard norms.

1.8 Employee Benefits

a. Provident Fund

Liability on account of the company''s obligation under the employee''s provident fund, a defined contribution plan, is charged to the statement of profit and loss on the basis of statutory liability to contribute.

b. Superannuation Fund

Liability on account of the company''s obligation under the employees'' superannuation fund, a defined contribution plan, is charged to the statement of profit and loss on the basis of the plan''s liability to contribute.

c. Gratuity

i. Liability on account of company''s obligation under the employee gratuity plan, a defined benefit plan, is provided on the basis of actuarial valuation at the Balance Sheet date.

ii. Fair value of plan assets, being the fund balance on the balance sheet date with Life Insurance Corporation under group gratuity-cum-life assurance policy, is recognised as an asset.

Ni. Current service cost, interest cost and actuarial gains and losses are charged to the statement of profit and loss.

iv. Past service cost/effect of any curtailment or settlement is charged/credited to the statement of profit and loss, as applicable.

d. Compensated Absences

Liability on account of the company''s obligation under the employee''s leave policy is charged to the statement of profit and loss at the undiscounted amount of such liability calculated with reference to leave earned but not availed of as at the Balance Sheet date.

e. Medical and Leave Travel Assistance benefits

Liability on account of the company''s obligation under the employee''s medical reimbursement scheme and leave travel assistance is charged to the statement of profit and loss at the undiscounted amount of such liability.

f. Bonus & Employee Short-Term Incentive Plan

Liabilities on account of the company''s obligations under statutory regulations, agreement with trade unions and employees'' short term incentive plan, as applicable, are charged to the statement of profit and loss at the undiscounted amount of each liability.

1.9 Provisions and Contingent Liabilities

a. Provisions in respect of present obligations arising out of past events are made when reliable estimates can be made of those. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.

b. The company provides for warranty obligations on substantial completion of contracts based on technical evaluation and past experience.

c. Contingent liabilities are disclosed by way of notes to the financial statements, after careful evaluation by the management of the facts and legal aspects of each matter involved.

1.10 Revenue Recognition

a. Revenue in respect of products is recognised on dispatch of goods to customers or when they are unconditionally appropriated to the concerned contracts.

b. Revenue in respect of projects for construction of plants and systems, involving designing, engineering, fabrication, supply, erection (or supervision thereof), commissioning, guaranteeing performance thereof etc., execution of which is spread over different accounting periods is recognized on the basis of percentage of completion method.

c. Determination of revenues under the percentage of completion method necessarily involves making estimates by the management (some of which are of a technical nature) of the costs to completion, the expected revenues from each contract (adjusted for probable liquidated damages, if any) and the foreseeable losses to completion.

d. Stage of completion of each contract is determined by the proportion that aggregate contract costs incurred for work done till the balance sheet date bear to the estimated total contract cost.

e. The difference between costs incurred plus recognised profits / less recognised losses and the amount of invoiced sales is disclosed as contracts in progress.

f. Supply of spare parts and services are accounted for on ''as billed'' basis.

g. Revenue in respect of long-term service contracts and maintenance contracts is recognised on the basis of stage of completion or time proportion whichever is more appropriate.

h. Dividend from investments is recognized when the company''s right to receive is established.

i. Government Grants

* A Government grant is accounted for when there is reasonable certainty of compliance with its conditions and of its ultimate collection.

* Revenue expenses (net of government grants, if any) incurred during research and development phase of internal projects are recognised as and when incurred.

* The cost incurred on any intangible asset (net of government grants, if any) in the development phase is recognised to the extent there is reasonable certainty of generating sufficient future economic benefits through commercial exploitation of such asset.

1.11 Borrowing Costs

a. Borrowing costs on working capital are charged to statement of profit and loss in the year incurred.

b. Borrowing costs attributable to the acquisition of a tangible fixed asset are capitalized till the date of substantial completion of the activities necessary to prepare the relevant asset for its intended use.

c. Borrowing costs that are attributable to the acquisition or development of intangible assets are capitalised till the date they are ready to use.

1.12 Foreign Currency Transactions

a. Transactions in foreign currencies are recorded at the exchange rates prevailing on the respective dates of the transactions.

b. Exchange differences on settlement of transactions in foreign currencies are recognised in the statement of profit and loss.

c. Foreign currency monetary item balances in the balance sheet are translated at the closing exchange rates and the resulting exchange difference is recognised in the statement of profit and loss.

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

e. Revenue items of any foreign branches are translated at the relevant currency''s average rate for the year.

1.13 Hedge Accounting

The company uses foreign currency forward contracts to hedge its risk associated with foreign currency fluctuations. In terms of the risk management strategy, the company does not use forward cover contracts for trading or speculative purposes.

Foreign currency forward contracts are initially measured at fair value and are re-measured at subsequent reporting dates. Changes in the fair value of such contracts, which are designated and effective, are recorded in the Hedging Reserve account.

The accumulated changes in fair value recorded in the hedging reserve account are transferred to the statement of profit and loss in the same period during which the underlying transactions affect statement of profit and loss and / or the foreign currency forward contract expires or is exercised, terminated or no longer qualifies for hedge accounting.

1.14 Taxes on Income

a. Current tax is provided on the basis of estimated tax liability, computed as per applicable provisions of the IncomeTaxAct, 1961.

b. Deferred tax is recognised, subject to the consideration of prudence, in respect of deferred tax assets, on timing differences, being the 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 assets and liabilities are measured using the tax rates and tax law that have been enacted by the Balance Sheet date.

1.15 Others

a. A liability for liquidated damages is recognised when it is deducted or claimed by the customer or when a reasonable estimate of the likely obligation can be made.

b. Provision for doubtful debts is made on the basis of standard norms in respect of debtors outstanding beyond predefined period and also, where required, on actual evaluation.

2. Contingent Liabilities - Excise, Customs Duty and Service Tax

Disputed demands in respect of Excise, Customs Duty and Service Tax Rs. 10.42 Crore (Previous Year Rs. 16.24 Crore), Sales Tax Rs. 20.72 Crore (Previous Year Rs. 16.44 Crore) and other Statutes Rs.0.15 Crore (Previous Year Rs. 0.14Crore).


Mar 31, 2013

1.1 Basis for Preparation of Financial Statements

The financial statements have been prepared under the historical cost convention on an accrual basis and comply with notified accounting standards as referred to in Section 211(3C) and other relevant provisions of the Companies Act, 1956.

1.2 Use of Estimates

The preparation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of financial statements and the reported amounts of revenues and expenses during the reported period. Differences between the actual outcome and estimates are recognised in the period in which the outcome is known or materialises.

1.3 Fixed Assets - Tangible and Intangible Assets

a. Tangible fixed assets are stated at cost (net of refundable taxes or levies) and include any other attributable cost for bringing the assets to working condition for their intended use.

b. Borrowing costs attributable to fixed assets are capitalised.

c. Machinery specific spares (other than those required for regular maintenance) are capitalised as a part of the related fixed asset.

d. Expenditure incurred on acquisition or, as the case may be, on development of goodwill, technical know-how, software, patents, on research and development and other intangibles is recognised as an Intangible Asset, if it is expected that such asset will generate future economic benefits not less than their carrying cost.

1.4 Depreciation

a. Cost incurred on Leasehold land is amortised over the period of lease.

b. Depreciation on all tangible fixed assets is provided on the straight line method in the manner and at the rates prescribed in Schedule XIV to the Companies Act, 1956, except for the following :

- in case of data processing equipments and computers, which are depreciated at a higher rates of 33.33% as compared to 16.21% provided in Schedule XIV.

- certain vehicles related to employee perquisites are depreciated at higher rates of 15% and 13.45% as compared to 9.50% provided in Schedule XIV.

c. Depreciation of capitalised machinery specific spares, whose use is expected to be irregular, is charged over the remaining useful life of the related item of plant and machinery. The written down value of such spares is charged to profit and loss account when issued for consumption.

d. Intangible assets are amortised on the straight line method over the estimated useful life of such assets. An asset''s useful life is estimated based on an evaluation of the future economic benefits expected of such assets.

e. Depreciation on the entire plant and machinery of chemical division is charged considering the chemical plant as a "Continuous Process Plant".

1.5 Asset Impairment

Provision for impairment loss, if any, is recognized to the extent to which the carrying amount of an asset exceeds its recoverable amount. Recoverable amount is the higher of an asset''s net selling price and its value in use. Value in use is determined on the basis of the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.

1.6 Investments

Investments that are readily realisable 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 are carried at lower of cost and fair value determined on an individual investment basis. Long term investments are carried at cost. However, provision for diminution is made to recognize a decline, other than temporary in nature, in the carrying amount of such long term investments.

1.7 Inventories

a. Inventories are valued at lower of cost and estimated net realisable value.

b. Cost of raw materials, components, consumables, tools, stores & spares is arrived at on the basis of weighted average cost.

c. Cost of finished goods and work in progress is arrived at on the basis of weighted average cost of raw materials and the cost of conversion thereof for bringing the inventories upto their present location and condition.

d. Inventory obsolescence is provided for on the basis of standard norms.

1.8 Employee Benefits

a. Provident Fund

Liability on account of the company''s obligation under the employee''s provident fund, a defined contribution plan, is charged to the statement of profit and loss on the basis of the statutory liability to contribute.

b. Superannuation Fund

Liability on account of the company''s obligation under the employees'' s uperan nu ation fu nd, a defin ed contribution plan, is charged to the statement of profit and loss on the basis of the plan''s liability to contribute.

c. Gratuity

i. Liability on account of company''s obligation under the employee gratuity plan, a defined benefit plan, is provided on the basis of actuarial valuation.

ii. Fair value of plan assets, being the fund balance on the balance sheet date with Life Insurance Corporation under group gratuity-cum-life assurance policy, is recognised as an asset.

iii. Current service cost, interest cost and actuarial gains and losses are charged to the statement of profit and loss.

iv. Past service cost/effect of any curtailment or settlement is charged/credited to the statement of profit and loss, as applicable.

d. Compensated Absences

Liability on account of the company''s obligation under the employee''s leave policy is charged to the statement of profit and loss at the undiscounted amount of such liability calculated with reference to leave earned but not availed as at the balance sheet date.

e. Medical and Leave Travel Assistance benefits

Liability on account of the company''s obligation under the employee''s medical reimbursement scheme and leave travel assistance is charged to the statement of profit and loss at the undiscounted amount of such liability.

f. Bonus & Employee Short-Term Incentive Plan

Liabilities on account of the company''s obligations under statutory regulations, agreement with trade unions and employees'' short term incentive plan, as applicable, are charged to the statement of profit and loss at the undiscounted amount of such liability.

1.9 Provisions and Contingent Liabilities

a. Provisions in respect of present obligations arising out of past events are made when reliable estimates can be made of them.

b. The company provides for warranty obligations on substantial completion of contracts based on technical evaluation and past experience.

c. Contingent liabilities are disclosed by way of notes to the financial statements, after careful evaluation by the management of the facts and legal aspects of each matter involved.

1.10 Revenue Recognition

a. Revenue in respect of products is recognised on dispatch of goods to customers or when they are unconditionally appropriated to the concerned contracts.

b. Revenue in respect of projects for construction of plants and systems, involving designing, engineering, fabrication, supply, erection (or supervision thereof), commissioning, guaranteeing performance thereof etc., execution of which is spread over different accounting periods is recognized on the basis of percentage of completion method.

c. Stage of completion of each contract is determined by the proportion that aggregate contract costs incurred for work done till the balance sheet date bear to the estimated total contract cost.

d. The difference between costs incurred plus recognised profits / less recognised losses and the amount of invoiced sales is disclosed as contracts in progress.

e. Determination of revenues under the percentage of completion method necessarily involves making estimates by the management (some of which are of a technical nature) of the costs to completion, the expected revenues from each contract (adjusted for probable liquidated damages, if any) and the foreseeable losses to completion.

f. Supply of spare parts and services are accounted for on ''as billed'' basis.

g. Revenue in respect of long-term service contracts and maintenance contracts is recognised on the basis of stage of completion or time proportion as the case may be.

h. Dividend from investments is recognized when the company''s right to receive is established.

i. Government Grants

* A Government grant is accounted for when there is reasonable certainty of compliance with its conditions and of its ultimate collection.

* Revenue expenses (net of government grants, if any) incurred during research and development phase of internal projects are recognised as and when incurred.

* Any Intangible asset (net of government grants, if any) arising from the development phase of such projects is recognised to the extent there is reasonable certainty of generating sufficient future economic ben efi ts throu gh commercial exploitation of such asset.

1.11 Borrowing Costs

a. Borrowing costs on working capital are charged to the statement of profit and loss in the year incurred.

b. Borrowing costs attributable to the acquisition of a tangible fixed asset are capitalized till the date of substantial completion of the activities necessary to prepare the relevant asset for its intended use.

c. Borrowing costs that are attributable to the acquisition or development of intangible assets are capitalised till the date they are put to use.

1.12 Foreign Currency Transactions

a. Transactions in foreign currencies are recorded at the exchange rates prevailing on the respective dates of the transactions.

b. Exchange differences on settlement of transactions in foreign currencies are recognised in the statement of profit and loss.

c. Foreign currency monetary item balances in the balance sheet are translated at the closing exchange rates and the resulting exchange difference is recognised in the statement of profit and loss.

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

e. Revenue items of any foreign branches are translated at the relevant currency''s average rate for the year.

1.13 Hedge Accounting

The company uses foreign currency forward contracts to hedge its risk associated with foreign currency fluctuations. In terms of the risk management strategy, the company does not use forward cover contracts for trading or speculative purposes.

Foreign currency forward contracts are initially measured at fair value and are re-measured at subsequent reporting dates. Changes in the fair value of such contracts, which are designated and effective, are recorded in the Hedging Reserve account.

The accumulated changes in fair value recorded in the hedging reserve account are transferred to the statement of profit and loss in the same period during which the underlying transactions affect the statement of profit and loss and / or the foreign currency forward contract expires or is exercised, terminated or no longer qualifies for hedge accounting.

1.14 Taxes on Income

a. Current tax is provided on the basis of estimated tax liability, computed as per applicable provisions of the Income Tax Act, 1961.

b. Deferred tax is recognised, subject to the consideration of prudence, in respect of deferred tax assets, on timing differences, being the differences between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

1.15 Others

a. A liability for liquidated damages is recognised when it is deducted or claimed by the customer or when a reasonable estimate of the likely obligation can be made.

b. Provision for doubtful debts is made on the basis of standard norms in respect of debtors outstanding beyond predefined period and also, where required, on actual evaluation.

c. Annual fees payable under a License Agreement for acquisition of a right to use Licensed Marks is recognised and charged to the statement of profit and loss on payment.


Mar 31, 2012

1.1 Basis for Preparation of Financial Statements

The financial statements have been prepared under historical cost convention on accrual basis and comply with notified accounting standards as referred to in Section 211(3C) and other relevant provisions of the Companies Act, 1956.

1.2 Use of Estimates

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

1.3 Fixed Assets – Tangible and Intangible Assets

a. Tangible fixed assets are stated at cost (net of refundable taxes or levies) and include any other attributable cost for bringing the assets to working condition for their intended use.

b. Borrowing costs, if any, attributable to qualifying assets, are capitalised.

c. Machinery specific spares other than those required for regular maintenance are capitalised as a part of the tangible fixed assets.

d. Expenditure incurred on acquisition or development of goodwill, technical know-how, software, patents, research and development and such other intangibles are recognised as Intangible Asset, if it is expected that such assets will generate sufficient future economic benefits.

1.4 Depreciation

a. Cost incurred on Leasehold land is amortised over the period of lease.

b. Depreciation on all tangible fixed assets is provided by the straight line method in the manner and at the rates prescribed in Schedule XIV to the Companies Act, 1956, except following :

- in case of data processing equipments/computers, which are depreciated at a higher rate of 33.33% as compared to 16.21% provided in Schedule XIV.

- certain vehicle related to employee perquisites are depreciated at a higher rate of 15% / 13.45% as compared to 9.50% provided in Schedule XIV.

c. Depreciation in respect of capitalised machinery specific spares whose use is expected to be irregular is charged over the remaining useful life of the related item of plant and machinery. The written down value of such spares is charged to the statement of profit and loss when issued for consumption.

d. Intangible assets are amortised by straight line method over the estimated useful life of such asset. The useful life is estimated based on the evaluation of future economic benefits expected of such assets.

e. Depreciation on the entire plant and machinery of chemical division is charged considering the chemical plant as a "Continuous Process Plant".

1.5 Asset Impairment

Provision for impairment loss, if any, is recognized to the extent to which the carrying amount of an asset exceeds its recoverable amount. Recoverable amount is the higher of an asset's net selling price and its value in use. Value in use is determined on the basis of the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.

1.6 Investments

Investments that are readily realisable 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 are carried at lower of cost and fair value determined on an individual investment basis. Long term investments are carried at cost. However, provision for diminution is made to recognize a decline, other than temporary in nature, in the carrying amount of such long term investments.

1.7 Inventories

a. Inventories are valued at lower of cost and estimated net realisable value.

b. Cost of raw materials, components, consumables, tools, stores & spares is arrived at on the basis of weighted average cost.

c. Cost of finished goods & work in progress is arrived at on the basis of weighted average cost of raw materials & the cost of conversion thereof for bringing the inventories upto their present location and condition.

d. Inventory obsolescence is provided for on the basis of standard norms and also where required, on actual evaluation.

1.8 Employee Benefits

a. Provident Fund

Liability on account of the company's obligation under the employee's provident fund, a defined contribution plan, is charged to the statement of profit and loss on the basis of actual liability calculated as a percentage of salary.

b. Superannuation Fund

Liability on account of the company's obligation under the employee's superannuation fund, a defined contribution plan, is charged to the statement of profit and loss on the basis of actual liability calculated as a percentage of salary.

c. Gratuity

i. Liability on account of company's obligation under the employee gratuity plan, a defined benefit plan, is provided on the basis of actuarial valuation.

ii. Fair value of plan assets, being the fund balance on the balance sheet date with Life Insurance Corporation under group gratuity-cum-life assurance policy, is recognised as an asset.

iii. Current service cost, interest cost and actuarial gains and losses are charged to the statement of profit and loss.

iv. Past service cost/effect of any curtailment or settlement is charged/ credited to the statement of profit and loss, as applicable.

d. Compensated Absences

Liability on account of the company's obligation under the employee's leave policy is provided on actual basis in respect of leave earned but not availed based on the number of days of carry forward entitlement at balance sheet date.

e. Medical and Leave Travel Assistance benefits

Liability on account of the company's obligation under the employee's medical reimbursement scheme and leave travel assistance is provided on actual basis.

f. Bonus & Employee Short-Term Incentive Plan

Liability on account of the company's obligation under the statutory regulations, agreement with trade union and employees short term incentive plan, as applicable, is provided on actual basis as per the relevant terms as determined.

1.9 Provisions and Contingent Liabilities

a. Provisions in respect of present obligations arising out of past events are made in the accounts when reliable estimates can be made of the amount of the obligation.

b. The company provides for warranty obligations on substantial completion of contracts based on technical evaluation and past experience.

c. Contingent liabilities are disclosed by way of note to the financial statements, after careful evaluation by the management of the facts and legal aspects of the matter involved.

1.10 Revenue Recognition

a. Revenue in respect of products is recognised on dispatch of goods to the customer or when they are unconditionally appropriated to the contract.

b. Revenue in respect of projects for construction of plants and systems, involving designing, engineering, fabrication, supply, erection (or supervision thereof), commissioning, guaranteeing performance thereof etc., execution of which is spread over different accounting periods is recognized on the basis of percentage of completion method.

c. Stage of completion is determined by the proportion that contract costs incurred for work done till date bears to the estimated total contract costs.

d. Difference between costs incurred plus recognised profits / less recognised losses and the amount of invoiced sale is disclosed as contract in progress.

e. Determination of revenues under the percentage of completion method necessarily involves making estimates by the Company (some of which are of a technical nature) concerning the costs to completion, the expected revenue from the contract (adjusted for probable liquidated damages, if any) and the foreseeable losses to completion.

f. Supply of spare parts and services are accounted on 'as billed' basis.

g. Revenue in respect of long-term service contracts / maintenance contracts is recognised on the basis of stage of completion.

h. Dividend from investments is recognized when the company's right to receive is established.

i. Government Grants

* Government Grant is accounted when there is reasonable certainty of compliance with its conditions and its ultimate collection.

* Revenue expenses (net of government grants, if any) incurred during research and development phase of internal projects are recognised as and when incurred.

* Any Intangible asset (net of government grants, if any) arising from the development phase of such projects is recognised to the extent there is reasonable certainty of generating sufficient future economic benefits through commercial exploitation of such asset.

1.11 Borrowing Costs

a. Borrowing costs on working capital is charged to the statement of profit and loss in the year of incurrence.

b. Borrowing costs that are attributable to the acquisition of tangible fixed assets are capitalized till the date of substantial completion of the activities necessary to prepare the relevant asset for its intended use.

c. Borrowing costs that are attributable to the acquisition or development of qualifying intangible assets are capitalised till the date they are put to use.

1.12 Foreign Currency Transactions

a. Transactions in foreign currencies are recorded at the exchange rates prevailing on the respective dates of the transactions.

b. Exchange difference on settlement of transactions in foreign currencies is recognised in the statement of profit and loss.

c. Foreign currency monetary items are translated at the closing exchange rates and the resulting exchange difference is recognised in the statement of profit and loss.

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

e. Revenue items of foreign branches are translated at average rate.

1.13 Hedge Accounting

The company uses foreign currency forward contracts to hedge its risk associated with foreign currency fluctuations. In terms of the risk management strategy, the company does not use forward cover contracts for trading or speculative purposes.

Foreign currency forward contracts are initially measured at fair value and are re-measured at subsequent reporting dates. Changes in the fair value of such contracts, which are designated and effective, are recorded in the Hedging Reserve account. The accumulated changes in fair value recorded in the hedging reserve account are transferred to the statement of profit and loss in the same period during which the underlying transactions affect the statement of profit and loss and / or the foreign currency forward contract expires or is exercised, terminated or no longer qualifies for hedge accounting.

1.14 Taxes on Income

a. Current tax is provided on the basis of estimated tax liability, computed as per applicable provisions of the Income Tax Act, 1961.

b. Deferred tax is recognised, subject to the consideration of prudence, in respect of deferred tax assets, on timing differences, being the differences between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

1.15 Others

a. Liability for liquidated damages is recognised when it is deducted / claimed by the customer or when a reasonable estimate of the likely obligation can be made.

b. Provision for doubtful debts is made on the basis of standard norms in respect of debtors outstanding beyond predefined period and also, where required, on actual evaluation.

c. Annual fees payable under a License Agreement for acquisition of a right to use Licensed Marks are recognised and charged to the statement of profit and loss on payment.


Mar 31, 2011

A) Basis for Preparation of Financial Statements

The financial statements have been prepared under historical cost convention on accrual basis and comply with notified accounting standards as referred to in Section 211(3C) and other relevant provisions of the Companies Act, 1956.

b) Use of Estimates

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

c) Fixed Assets – Tangible and Intangible Assets

i. Tangible fixed assets are stated at cost (net of refundable taxes or levies) and include any other attributable cost for bringing the assets to working condition for their intended use.

ii. Borrowing costs, if any, attributable to fixed assets, are capitalised.

iii. Machinery specific spares other than those required for regular maintenance are capitalised as a part of the tangible fixed assets.

iv. Expenditure incurred on acquisition or development of goodwill, technical know- how, software, patents, research and development and such other intangibles are recognised as Intangible Asset, if it is expected that such assets will generate sufficient future economic benefits.

d) Depreciation

i. Cost incurred on Leasehold land is amortised over the period of lease.

ii. Depreciation on all tangible fixed assets is provided by the straight line method in the manner and at the rates prescribed in Schedule XIV to the Companies Act, 1956, except following :

– in case of data processing equipments/ computers, which are depreciated at a higher rate of 33.33% as compared to 16.21% provided in Schedule XIV.

– certain vehicle related to employee perquisites are depreciated at a higher rate of 15% / 13.45% as compared to 9.50% provided in Schedule XIV.

iii. Depreciation in respect of capitalised machinery specific spares whose use is expected to be irregular is charged over the remaining useful life of the related item of plant and machinery. The written down value of such spares is charged to profit and loss account when issued for consumption.

iv. Intangible assets are amortised by straight line method over the estimated useful life of such asset. The useful life is estimated based on the evaluation of future economic benefits expected of such assets.

v. Depreciation on the entire plant and machinery of chemical division is charged considering the chemical plant as a “Continuous Process Plant”.

e) Asset Impairment

Provision for impairment loss, if any, is recognized to the extent to which the carrying amount of an asset exceeds its recoverable amount. Recoverable amount is the higher of an assets net selling price and its value in use. Value in use is determined on the basis of the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.

f) Investments

Investments that are readily realisable 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 are carried at lower of cost and fair value determined on an individual investment basis. Long term investments are carried at cost. However, provision for diminution is made to recognize a decline, other than temporary in nature, in the carrying amount of such long term investments.

g) Inventories

i. Inventories are valued at lower of cost and estimated net realisable value.

ii. Cost of raw materials, components, consumables, tools, stores & spares is arrived at on the basis of weighted average cost.

iii. Cost of finished goods & work in progress is arrived at on the basis of weighted average cost of raw materials & the cost of conversion thereof for bringing the inventories upto their present location and condition.

iv. Inventory obsolescence is provided for on the basis of standard norms.

h) Employee Benefits

i) Provident Fund

Liability on account of the companys obligation under the employees provident fund, a defined contribution plan, is charged to profit and loss account on the basis of actual liability calculated as a percentage of salary.

ii) Superannuation Fund

Liability on account of the companys obligation under the employees superannuation fund, a defined contribution plan, is charged to profit and loss account on the basis of actual liability calculated as a percentage of salary.

iii) Gratuity

a. Liability on account of companys obligation under the employee gratuity plan, a defined benefit plan, is provided on the basis of actuarial valuation.

b. Fair value of plan assets, being the fund balance on the balance sheet date with Life Insurance Corporation under group gratuity-cum-life assurance policy, is recognised as an asset.

c. Current service cost, interest cost and actuarial gains and losses are charged to profit and loss account.

d. Past service cost/effect of any curtailment or settlement is charged/ credited to the profit and loss account, as applicable.

iv) Compensated Absences

Liability on account of the companys obligation under the employees leave policy is provided on actual basis in respect of leave earned but not availed based on the number of days of carry forward entitlement at balance sheet date.

v) Medical and Leave Travel Assistance benefits

Liability on account of the companys obligation under the employees medical reimbursement scheme and leave travel assistance is provided on actual basis.

vi) Bonus & Employees Short-Term Incentive Plan

Liability on account of the companys obligation under the statutory regulations, agreement with trade union and employees short term incentive plan, as applicable, is provided on actual basis as per the relevant terms as determined.

i) Provisions and Contingent Liabilities

i. Provisions in respect of present obligations arising out of past events are made in the accounts when reliable estimates can be made of the amount of the obligation.

ii. The company provides for warranty obligations on substantial completion of contracts based on technical evaluation and past experience.

iii. Contingent liabilities are disclosed by way of note to the financial statements, after careful evaluation by the management of the facts and legal aspects of the matter involved.

j) Revenue Recognition

i. Revenue in respect of products is recognised on dispatch of goods to the customer or when they are unconditionally appropriated to the contract.

ii. Revenue in respect of projects for construction of plants and systems, involving designing, engineering, fabrication, supply, erection (or supervision thereof), commissioning, guaranteeing performance thereof etc., execution of which is spread over different accounting periods is recognized on the basis of percentage of completion method.

iii. Stage of completion is determined by the proportion that contract costs incurred for work done till date bears to the estimated total contract costs.

iv. Difference between costs incurred plus recognised profits / less recognised losses and the amount of invoiced sale is disclosed as contract in progress.

v. Determination of revenues under the percentage of completion method

necessarily involves making estimates by the Company (some of which are of a technical nature) concerning the costs to completion, the expected revenue from the contract (adjusted for probable liquidated damages, if any) and the foreseeable losses to completion.

vi. Supply of spare parts and services are accounted on ‘as billed basis.

vii. Revenue in respect of long-term service contracts / maintenance contracts is recognised on the basis of stage of completion.

viii. Dividend from investments is recognized when the companys right to receive is established.

ix. Government Grants

– Government Grant is accounted when there is reasonable certainty of compliance with its conditions and its ultimate collection.

– Revenue expenses (net of government grants, if any) incurred during research and development phase of internal projects are recognised as and when incurred.

– Any Intangible asset (net of government grants, if any) arising from the development phase of such projects is recognised to the extent there is reasonable certainty of generating sufficient future economic benefits through commercial exploitation of such asset.

k) Borrowing Costs

i. Borrowing costs on working capital is charged to profit and loss account in the year of incurrence.

ii. Borrowing costs that are attributable to the acquisition of tangible fixed assets are capitalized till the date of substantial completion of the activities necessary to prepare the relevant asset for its intended use.

iii. Borrowing costs that are attributable to the acquisition or development of intangible assets are capitalised till the date they are put to use.

l) Foreign Currency Transactions

i. Transactions in foreign currencies are recorded at the exchange rates prevailing on the respective dates of the transactions.

ii. Exchange difference on settlement of transactions in foreign currencies is recognised in the profit & loss account.

iii. Foreign currency monetary items are translated at the closing exchange rates and the resulting exchange difference is recognised in the profit & loss account.

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

v. Revenue items of foreign branches are translated at average rate.

m) Hedge Accounting

The company uses foreign currency forward contracts to hedge its risk associated with foreign currency fluctuations. In terms of the risk management strategy, the company does not use forward cover contracts for trading or speculative purposes.

Foreign currency forward contracts are initially measured at fair value and are re-measured at subsequent reporting dates. Changes in the fair value of such contracts, which are designated and effective, are recorded in the Hedging Reserve account.

The accumulated changes in fair value recorded in the hedging reserve account are transferred to profit and loss account in the same period during which the underlying transactions affect profit and loss account and / or the foreign currency forward contract expires or is exercised, terminated or no longer qualifies for hedge accounting.

n) Taxes on Income

i. Current tax is provided on the basis of estimated tax liability, computed as per applicable provisions of the Income Tax Act, 1961.

ii. Deferred tax is recognised, subject to the consideration of prudence, in respect of deferred tax assets, on timing differences, being the differences between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

o) Others

i. Liability for liquidated damages is recognised when it is deducted / claimed by the customer or when a reasonable estimate of the likely obligation can be made.

ii. Provision for doubtful debts is made on the basis of standard norms in respect of debtors outstanding beyond predefined period and also, where required, on actual evaluation.

iii. Annual fees payable under a License Agreement for acquisition of a right to use Licensed Marks are recognised and charged to profit and loss account on payment.


Mar 31, 2010

A) Basis for Preparation of Financial Statements

The financial statements have been prepared under historical cost convention on accrual basis and comply with notified accounting standards as referred to in Section 211(3C) and other relevant provisions of the Companies Act, 1956.

b) Use of Estimates

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

c) Fixed Assets – Tangible and Intangible Assets

i. Tangible fixed assets are stated at cost (net of refundable taxes or levies) and include any other attributable cost for bringing the assets to working condition for their intended use.

ii. Borrowing costs, if any, attributable to fixed assets, are capitalised.

iii. Machinery specific spares other than those required for regular maintenance are capitalised as a part of the tangible fixed assets.

iv. Expenditure incurred on acquisition or development of goodwill, technical know- how, software, patents, research and development and such other intangibles are recognised as Intangible Asset, if it is expected that such assets will generate sufficient future economic benefits.

d) Depreciation

i. Cost incurred on Leasehold land is amortised over the period of lease.

ii. Depreciation on all tangible fixed assets is provided by the straight line method in the manner and at the rates prescribed in Schedule XIV to the Companies Act, 1956, except following :

– in case of data processing equipments/ computers, which are depreciated at a higher rate of 33.33% as compared to 16.21% provided in Schedule XIV.

– certain vehicle related to employee perquisites are depreciated at a higher rate of 15% / 13.45% as compared to 9.50% provided in Schedule XIV.

iii. Depreciation in respect of capitalised machinery specific spares whose use is expected to be irregular is charged over the remaining useful life of the related item of plant and machinery. The written down value of such spares is charged to profit and loss account when issued for consumption.

iv. Intangible assets are amortised by straight line method over the estimated useful life of such asset. The useful life is estimated based on the evaluation of future economic benefits expected of such assets.

v. Depreciation on the entire plant and machinery of chemical division is charged considering the chemical plant as a “Continuous Process Plant”.

e) Asset Impairment

Provision for impairment loss, if any, is recognized to the extent by which the carrying amount of an asset exceeds its recoverable amount. Recoverable amount is the higher of an asset’s net selling price and its value in use. Value in use is determined on the basis of the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.

f) Investments

Investments that are readily realisable 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 are carried at lower of cost and fair value determined on an individual investment basis. Long term investments are carried at cost. However, provision for diminution is made to recognize a decline, other than temporary in nature, in the carrying amount of such long term investments.

g) Inventories

i. Inventories are valued at lower of cost and estimated net realisable value.

ii. Cost of raw materials, components, consumables, tools, stores & spares is arrived at on the basis of weighted average cost.

iii. Cost of finished goods & work in progress is arrived at on the basis of weighted average cost of raw materials & the cost of conversion thereof for bringing the inventories upto their present location and condition.

iv. Inventory obsolescence is provided for on the basis of standard norms.

h) Employee Benefits

i) Provident Fund

Liability on account of the company’s obligation under the employee’s provident fund, a defined contribution plan, is charged to profit and loss account on the basis of actual liability calculated as a percentage of salary.

ii) Superannuation Fund

Liability on account of the company’s obligation under the employee’s superannuation fund, a defined contribution plan, is charged to profit and loss account on the basis of actual liability calculated as a percentage of salary.

iii) Gratuity

a. Liability on account of company’s obligation under the employee gratuity plan, a defined benefit plan, is provided on the basis of actuarial valuation.

b. Fair value of plan assets, being the fund balance on the balance sheet date with Life Insurance Corporation under group gratuity-cum-life assurance policy, is recognised as an asset.

c. Current service cost, interest cost and actuarial gains and losses are charged to profit and loss account.

d. Past service cost/effect of any curtailment or settlement is charged/credited to the profit and loss account, as applicable.

iv) Leave Encashment

Liability on account of the company’s obligation under the employee’s leave policy is provided on actual basis in respect of leave earned but not availed based on the number of days of carry forward entitlement at balance sheet date.

v) Medical and Leave Travel Assistance benefits

Liability on account of the company’s obligation under the employee’s medical reimbursement scheme and leave travel assistance is provided on actual basis.

vi) Bonus & Employee’s Short-Term Incentive Plan

Liability on account of the company’s obligation under the statutory regulations, agreement with trade union and employees short term incentive plan, as applicable, is provided on actual basis as per the relevant terms as determined.

i) Provisions and Contingent Liabilities

i. Provisions in respect of present obligations arising out of past events are made in the accounts when reliable estimates can be made of the amount of the obligation.

ii. The company provides for warranty obligations on substantial completion of contracts based on technical evaluation and past experience.

iii. Contingent liabilities are disclosed by way of note to the financial statements, after careful evaluation by the management of the facts and legal aspects of the matter involved.

j) Revenue Recognition

i. Revenue in respect of products is recognised on dispatch of goods to the customer or when they are unconditionally appropriated to the contract.

ii. Revenue in respect of projects for construction of plants and systems, involving designing, engineering, fabrication, supply, erection (or supervision thereof), commissioning, guaranteeing performance thereof etc., execution of which is spread over different accounting periods is recognized on the basis of percentage of completion method.

iii. Stage of completion is determined by the proportion that contract costs incurred for work done till date bears to the estimated total contract costs.

iv. Difference between costs incurred plus recognised profits / less recognised losses and the amount of invoiced sale is disclosed as contract in progress.

v. Determination of revenues under the percentage of completion method necessarily involves making estimates by the Company (some of which are of a technical nature) concerning the costs to completion, the expected revenue from the contract (adjusted for probable liquidated damages, if any) and the foreseeable losses to completion.

vi. Supply of spare parts and services are accounted on ‘as billed’ basis.

vii. Revenue in respect of long-term service contracts / maintenance contracts is recognised on the basis of stage of completion.

viii. Dividend from investments is recognized when the company’s right to receive is established.

k) Borrowing Costs

i. Borrowing costs on working capital is charged to profit and loss account in the year of incurrence.

ii. Borrowing costs that are attributable to the acquisition of tangible fixed assets are capitalized till the date of substantial completion of the activities necessary to prepare the relevant asset for its intended use.

iii. Borrowing costs that are attributable to the acquisition or development of intangible assets are capitalised till the date they are put to use.

l) Foreign Currency Transactions

i. Transactions in foreign currencies are recorded at the exchange rates prevailing on the respective dates of the transactions.

ii. Exchange difference on settlement of transactions in foreign currencies is recognised in the profit & loss account.

iii. Foreign currency monetary items are translated at the closing exchange rates and the resulting exchange difference is recognised in the profit & loss account.

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

v. Revenue items of foreign branches are translated at average rate.

m) Hedge Accounting

The company uses foreign currency forward contracts to hedge its risk associated with foreign currency fluctuations. In terms of the risk management strategy, the company does not use forward cover contracts for trading or speculative purposes.

Foreign currency forward contracts are initially measured at fair value and are re-measured at subsequent reporting dates. Changes in the fair value of such contracts, which are designated and effective, are recorded in the Hedging Reserve account.

The accumulated changes in fair value recorded in the hedging reserve account are transferred to profit and loss account in the same period during which the underlying transactions affect profit and loss account and / or the foreign currency forward contract expires or is exercised, terminated or no longer qualifies for hedge accounting.

n) Taxes on Income

i. Current tax is provided on the basis of estimated tax liability, computed as per applicable provisions of the Income Tax Act, 1961.

ii. Deferred tax is recognised, subject to the consideration of prudence, in respect of deferred tax assets, on timing differences, being the differences between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

o) Others

i. Liability for liquidated damages is recognised when it is deducted / claimed by the customer or when a reasonable estimate of the likely obligation can be made.

ii. Provision for doubtful debts is made on the basis of standard norms in respect of debtors outstanding beyond predefined period and also, where required, on actual evaluation.

iii. Annual fees payable under a License Agreement for acquisition of a right to use Licensed Marks are recognised and charged to profit and loss account on payment.

2. Contingent Liability

a) Disputed demands in respect of Excise, Customs Duty and Service Tax Rs. 22.11 Crore (Previous Year Rs. 14.22 crore), Sales Tax Rs. 13.38 Crore (Previous Year Rs. 6.53 Crore) and other Statutes Rs. 0.09 Crore (Previous Year Rs. 0.14 Crore).

b) Income Tax

i) Demands disputed in appellate proceedings Rs. 34.55 Crore (Previous Year Rs. 24.53 Crore).

ii) References / Appeals preferred by Income Tax department in respect of which, should the ultimate decision be unfavourable to the company, the liability is estimated to be Rs. 19.38 Crore (Previous Year Rs. 22.30 Crore).

c) Counter Guarantees given by the company to the banks on behalf of group companies : Rs. 0.34 Crore on behalf of Thermax Engineering Construction Co. Ltd. (TECC), Rs. 92.64 Crore on behalf of Thermax Instrumentation Ltd. (TIL) and Rs. Nil on behalf of ME Engineering Ltd (ME Engg.), towards securing advances received from clients and performance of contracts.(Previous Year Rs. 6.32 Crore for TECC, Rs. 40.16 Crore for TIL and Rs. 1.30 Crore for ME Engg.).

d) Counter Guarantees given to the banks for guarantees issued by them on company’s behalf Rs. 1417.84 Crore (Previous Year Rs. 837.11 Crore).

e) Indemnity Bonds/Corporate guarantees given to Customs, other Government departments and various customers Rs. 69.80 Crore (Previous Year Rs 33.49 Crore).

f) Liability for unexpired export obligations Rs. 48.71 Crore (Previous Year Rs. 19.67 Crore).

g) Claims against the company not acknowledged as debts Rs. 9.45 Crore (Previous Year Rs. 7.75 Crore).

h) Bills Discounted with banks Rs. 43.39 Crore (Previous Year Rs. 73.45 Crore).

i) Liability in respect of partly paid shares in Parasrampuria Synthetics Ltd. Rs. 0.19 Crore (Previous Year Rs. 0.19 Crore).