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Accounting Policies of Torrent Pharmaceuticals Ltd. Company

Mar 31, 2014

1.1 Basis for preparation of financial statements

The financial statements have been prepared and presented under the historical cost convention on an accrual basis of accounting and in accordance with the Generally Accepted Accounting Principles (GAAP) in India. GAAP includes Accounting Standards (AS) notifed by the Central Government of India under Section 211 (3C) of The Companies Act, 1956, (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13 September, 2013 of the Ministry of Corporate Affairs) provisions of The Companies Act,1956, pronouncements of Institute of Chartered Accountants of India and guidelines issued by Securities and Exchange Board of India (SEBI). The Company has presented financial statements as per format prescribed by Revised Schedule VI, notifed under The Companies Act,1956, issued by Ministry of Corporate Affairs. Except where otherwise stated, the accounting policies are consistently applied.

All the 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 Revised Schedule VI to the Companies Act, 1956.

Current assets / liabilities include the current portion of non current financial assets / liabilities respectively. All other assets / liabilities are classified as non current.

1.2 Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make assumptions, critical judgements and estimates, which it believes are reasonable under the circumstances, that affect the reported amounts of assets, liabilities and contingent liabilities on the date of financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Difference between the actual results and estimates are recognized in the period in which the results are known or materialize.

1.3 Fixed assets, depreciation and amortization Tangible assets

(a) Tangible fixed assets are stated at cost of acquisition or construction less accumulated depreciation. The cost of fixed asset comprises of its purchase price, non-refundable taxes & levies, freight and other incidental expenses related to the acquisition and installation of the respective assets. Borrowing cost attributable to acquisition or construction of qualifying fixed assets is capitalized to respective assets when the time taken to put the assets to use is substantial.

(b) Pre-operative expenditure comprising of revenue expenses incurred in connection with project implementation during the period up to commencement of commercial production are treated as part of project costs and are capitalized. Such expenses are capitalized only if the project to which they relate, involve substantial expansion of capacity or upgradation.

(c) Depreciation on fixed assets is provided using the straight-line method at the rates prescribed in Schedule XIV of The Companies Act, 1956 or based on useful life of the assets as estimated by the management, whichever is higher.

The management''s estimate of the useful life for various categories of fixed assets are given below:

office buildings 58 years

Factory buildings 28 years

Plant and machinery 10 to 20 years

Laboratory equipment 5 to 20 years

Electrical equipment 10 to 20 years

Furniture and fixtures 10 years

office equipment 10 years

Computer equipment 3 years

Vehicles 10 years

(d) Cost of leasehold land (except for lease of long tenure) is amortized over the period of the lease. Cost of lease hold land where lease period is of long tenure and substantial rights of ownership are with lessee, is not amortized.

Intangible assets

(a) Acquired product licenses are capitalized at costs comprising of direct costs of purchase and expenses directly attributable to the purchase of product licenses.

(b) Software costs are capitalized and recognized as intangible assets based on materiality, accounting prudence and significant economic benefits expected to fow there from for a period longer than one year.

(c) Intangible assets are amortized over their estimated useful lives on a straight-line basis. The management''s estimate of the useful life of various categories of intangible assets are given below:

Product licenses Upto 10 years

Software 3 to 5 years

Impairment of assets

(a) Fixed assets are reviewed for impairment losses at each balance sheet date for events or changes in circumstances indicating that the carrying amount may not be recoverable. An impairment loss is then recognized for the amount by which the carrying amount of the assets exceeds its recoverable amount, which is the higher of an asset''s net selling price and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifable cash flows.

(b) Fixed assets that have been retired from their active use and held for disposal, are classified as current assets, and are stated at lower of their cost and net realizable value.

1.4 Investments

(a) Non-current investments are carried at cost. Provision is made to recognize any diminution in value, other than that of a temporary nature.

(b) Current investments are carried at lower of cost and fair value. Diminution in value is charged to the statement of profit and loss.

(c) Current investments readily convertible in known amount of cash and subject to insignificant risk of changes in value are classified as cash and cash equivalents for preparation of cash fow statement.

1.5 Cash fow statement

The cash fow statement is prepared as per the "Indirect Method" as set out in AS - 3 "Cash Flow Statements" issued by the Institute of Chartered Accountants of India.

1.6 Inventories

Inventories are valued at the lower of cost and net realizable value. Provision for impairment is made when there is uncertainty in salability of an item. Costs incurred in bringing inventories to its existing location and condition are determined on the following basis:

(a) Raw materials and packing materials - Purchase cost of materials on moving average basis.

(b) Finished goods (manufactured) and work-in-progress - Cost of purchase, cost of conversion and other costs proportionately allocated determined on weighted average basis.

(c) Finished goods (traded) - Purchase cost on moving average basis.

1.7 Revenue recognition

(a) Revenue from sale of goods is recognized when the significant risks and rewards of ownership of goods are transferred to the customers. Sales are net of discounts, sales tax, value added tax and estimated returns. Excise duty collected on sales are shown by way of deduction from sales.

(b) Provision for sales returns are estimated on the basis of historical experience, market conditions and specific contractual terms and provided for in the year of sale as reduction from revenue. The methodology and assumptions used to estimate returns are monitored and adjusted regularly in line with contractual and legal obligations, trade practices, historical trends, past experience and projected market conditions.

(c) Income from services is recognized when the services are rendered or when contracted milestones have been achieved.

(d) Revenue from arrangements which includes performance of obligations is recognized in the period in which related performance obligations are completed.

(e) Export entitlements are recognized as income when right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.

(f) Dividend income is recognized when the unconditional right to receive dividend is established.

(g) Interest income is recognized using the time proportionate method, based on rates implicit in the transaction. (h) Revenue in respect of other income is recognized when a reasonable certainty as to its realization exists.

1.8 Employees retirement and other benefits

Short-term employee benefits :

Short-term employee benefits like salaries, wages, bonus and welfare expenses payable wholly within twelve months of rendering the service are accrued in the year in which the associated services are rendered by the employees.

Long-term employee benefits :

(a) defined contribution plan :

Contribution in case of defined contribution plans (provident fund, superannuation benefit, social security schemes and other fund/schemes) is charged to the statement of profit and loss as and when it is incurred as employee benefits.

(b) defined benefit plan :

The accruing liability on account of gratuity (retirement benefit in the nature of defined benefits plan) is actuarially valued every year. The current service cost, interest cost, expected return on plan assets and the actuarial gain/ loss are debited / credited, as the case may be, to the statement of profit and loss of the year as employees benefits.

(c) Other long-term benefits :

Long-term compensation plan to employees (being deferred compensation paid 12 months or more after the end of the period in which it is earned) are expensed out in the period to which the costs relate at present value of the benefits under the plan.

The liability for compensated absences and leave encashment is provided on the basis of actuary valuation, as at balance sheet date.

1.9 Government grants

(a) Government grants are recognized when there is reasonable assurance that the grant will be received and all relevant conditions are complied with.

(b) Grants received by way of investment subsidy scheme in relation to total investment are credited to capital reserve and are treated as part of owners'' fund.

(c) Grants that compensate expenses are recognized on receipt basis.

1.10 Finance costs

Finance costs consist of interest, amortization of ancilliary costs and other costs in connection with the borrowing of funds and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.

1.11 Cenvat credit

Cenvat (Central value added tax) credit in respect of excise, custom and service tax is accounted on accrual basis on purchase of eligible inputs, capital goods and services. The balance of cenvat credit is reviewed at the end of each year and amount estimated to be un-utilisable is charged to the statement of profit and loss for the year.

1.12 Stores and spares

Stores and spares (other than spares acquired with fixed assets) are charged to the statement of profit and loss as and when purchased.

1.13 Software costs

Expenditure incurred for procuring, developing, improving and maintaining software programs are charged to the statement of profit and loss as and when incurred, except when capitalized in accordance with Note 1.3 above.

1.14 Research and development

Revenue expenditure on research and development is expensed off under the respective head of expenses in the year in which it is incurred. Capital expenditure on research and development is reported as fixed assets under the relevant head. Depreciation on research and development fixed assets are not classified as research and development expenses and instead included under depreciation expenses.

1.15 Leases

Lease rentals in respect of assets taken on operating lease are charged to the statement of profit and loss on accrual and straightline basis over the lease term.

1.16 Accounting for taxes

(a) Current tax is accounted on the basis of estimated taxable income for the current accounting year and in accordance with the provisions of the Income Tax Act, 1961.

(b) Deferred tax resulting from "timing differences" between accounting and taxable profit for the period is accounted by using tax rates and laws that have been enacted or substantively enacted as at the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future. Net deferred tax liabilities are arrived at after setting off deferred tax assets.

1.17 Foreign currency transactions and balances

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

(b) The net gain or loss on account of exchange differences arising on settlement of foreign currency transactions are recognized as income or expense of the period in which they arise.

(c) Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the closing rate. The resultant exchange differences are recognized in the statement of profit and loss. Non-monetary assets and liabilities are carried at the rates prevailing on the date of transaction. The Company has not exercised the option for capitalization or amortization of exchange differences on long term foreign currency monetary items as provided by notifcation issued by the Ministry of Corporate Affairs.

(d) Investments in shares of foreign subsidiaries and other entities are expressed in reporting currency at the rates of exchange prevailing at the time when the original investments were made.

1.18 Derivative instruments and hedge accounting

(a) In case of forward contracts, to which AS 11, "The Effects of Changes in Foreign Exchange Rates" applies, the difference between the forward rate and the exchange rate on the date of the contract is recognized as income or expense over the life of the contract. Exchange differences on such a contract are recognized in the statement of profit and loss in the period in which the exchange rates change.

(b) Foreign currency forward contracts, to which AS 11 does not apply, hedge accounting principles set out in AS 30 "Financial Instruments: Recognition and Measurement" are adopted w.e.f. 01st April, 2011 to the extent they do not confict with existing mandatory accounting standards and other authoritative pronouncements, Company law and other regulatory requirements. These transactions comprise of forward contracts taken to hedge risks associated with foreign currency fuctuations relating to highly probable forecast transactions and designated as cash fow hedges and valued at fair value. Changes in the fair value of these forward contracts that are effective hedges are recognized directly in cash fow hedge reserve account and the ineffective portion is recognized in the statement of profit and loss.

Amount accumulated in cash fow hedge reserve account is reclassified to the statement of profit and loss in the same period during which the forecasted transaction materialize. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifes for hedge accounting.

If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss recognized in cash fow hedge reserve account is immediately transferred to the statement of profit and loss for the period.

1.19 Provisions, contingent liabilities and contingent assets

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outfow of resources for which reliable estimate can be made. Liabilities which are of a contingent nature are not provided but are disclosed at their estimated amount in the notes forming part of the financial statements. Contingent assets are neither recognized nor disclosed in the financial statements.


Mar 31, 2013

1.1 Basis for preparation of financial statements

The financial statements have been prepared and presented under the historical cost convention on an accrual basis of accounting and in accordance with the Generally Accepted Accounting Principles (GAAP) in India. GAAP includes Accounting Standards (AS) notified by the Central Government of India under Section 211(3C) of The Companies Act, 1956, provisions of The Companies Act,1956, pronouncements of Institute of Chartered Accountants of India and guidelines issued by Securities and Exchange Board of India (SEBI). The Company has presented financial statements as per format prescribed by Revised Schedule VI, notified under The Companies Act,1956, issued by Ministry of Corporate Affairs. Except where otherwise stated, the accounting policies are consistently applied.

1.2 Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make assumptions, critical judgements and estimates, which it believes are reasonable under the circumstances, that affect the reported amounts of assets, liabilities and contingent liabilities on the date of financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Difference between the actual results and estimates are recognized in the period in which the results are known or materialize.

1.3 Fixed assets, depreciation and amortization Tangible assets:

(a) Tangible fixed assets are stated at cost of acquisition or construction less accumulated depreciation. The cost of fixed asset comprises of its purchase price, non-refundable taxes & levies, freight and other incidental expenses related to the acquisition and installation of the respective assets. Borrowing cost attributable to acquisition or construction of qualifying fixed assets is capitalized to respective assets when the time taken to put the assets to use is substantial.

(b) Pre-operative expenditure comprising of revenue expenses incurred in connection with project implementation during the period up to commencement of commercial production are treated as part of project costs and are capitalized. Such expenses are capitalized only if the project to which they relate, involve substantial expansion of capacity or upgradation.

(c) Depreciation on fixed assets is provided using the straight-line method at the rates prescribed in Schedule XIV of The Companies Act, 1956 or based on useful life of the assets as estimated by the management, whichever is higher.

The management''s estimate of the useful life for various categories of fixed assets are given below:

(d) Cost of leasehold land (except for lease of long tenure) is amortized over the period of the lease. Cost of lease hold land where lease period is of long tenure and substantial rights of ownership are with lessee, is not amortized.

Intangible assets:

(a) Acquired product licenses are capitalized at costs comprising of direct costs of purchase and expenses directly attributable to the purchase of product licenses.

(b) Software costs are capitalized and recognized as intangible assets based on materiality, accounting prudence and significant economic benefits expected to flow there from for a period longer than one year.

(c) Intangible assets are amortized over their estimated useful lives on a straight-line basis. The management''s estimate of the useful life of various categories of fixed assets are given below:

Impairment of assets:

(a) Fixed assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is then recognized for the amount by which the carrying amount of the assets exceeds its recoverable amount, which is the higher of an asset''s net selling price and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.

(b) Fixed assets that have been retired from their active use and held for disposal, are classified as current assets, and are stated at lower of their cost and net realizable value.

1.4 Investments

(a) Long-term investments are carried at cost. Provision is made to recognize any diminution in value, other than that of a temporary nature.

(b) Current investments are carried at lower of cost and fair value. Diminution in value is charged to the statement of profit and loss.

(c) Current investments readily convertible in known amount of cash and subject to insignificant risk of changes in value are classified as cash and cash equivalents for preparation of cash flow statement.

1.5 Cash flow statement

The cash flow statement is prepared as per the "Indirect Method" as set out in AS 3 "Cash Flow Statements" issued by the

Institute of Chartered Accountants of India.

1.6 Inventories

Inventories are valued at the lower of cost and net realizable value. Provision for impairment is made when there is high uncertainty in salability of an item. Costs incurred in bringing inventories to its existing location and condition are determined on the following basis:

(a) Raw materials and packing materials - Purchase cost of materials on moving average basis.

(b) Finished goods (manufactured) and work-in-progress - Cost of purchase, cost of conversion and other costs proportionately allocated determined on weighted average basis.

(c) Finished goods (traded)-Purchase cost on moving average basis.

1.7 Revenue recognition

(a) Revenue from sale of goods is recognized when the significant risks and rewards of ownership of goods are transferred to the customers. Sales are net of discounts, sales tax, value added tax and estimated returns. Excise duty collected on sales are shown by way of deduction from sales.

(b) Provision for sales returns are estimated primarily on the basis of historical experience, market conditions and specific contractual terms and provided for in the year of sale as reduction from revenue. The methodology and assumptions used to estimate returns are monitored and adjusted regularly in line with contractual and legal obligations, trade practices, historical trends, past experience and projected market conditions.

(c) Income from services is recognized when the services are rendered or when contracted milestones have been achieved.

(d) Revenue from arrangements which includes performance of obligations is recognized in the period in which related performance obligations are completed.

(e) Export entitlements are recognized as income when right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.

(f) Dividend income is recognized when the unconditional right to receive dividend is established.

(g) Interest income is recognized using the time proportionate method, based on rates implicit in the transaction.

(h) Revenue in respect of other income is recognized when a reasonable certainty as to its realization exists.

1.8 Employees retirement and other benefits Short-term employee benefits:

Short-term employee benefits like salaries, wages, bonus and welfare expenses payable wholly within twelve months of rendering the service are accrued in the year in which the associated services are rendered by the employees.

Long-term employee benefits:

(a) Defined contribution plan:

Contribution in case of defined contribution plans (provident fund, superannuation benefit, social security schemes and other fund/schemes) is charged to the statement of profit and loss as and when it is incurred as employee benefits.

(b) Defined benefit plan:

The accruing liability on account of gratuity (retirement benefit in the nature of defined benefits plan) is actuarially valued every year. The current service cost, interest cost, expected return on plan assets and the actuarial gain/loss are debited / credited, as the case may be, to the statement of profit and loss of the year as employee benefits.

(c) Other long-term benefits :

Long-term compensation plan to employees (being deferred compensation paid 12 months or more after the end of the period in which it is earned) are expensed out in the period to which the costs relate at present value of the benefits under the plan.

The liability for compensated absences and leave encashment is provided on the basis of actuary valuation, as at balance sheet date.

1.9 Government grants

(a) Government grants are recognized when there is reasonable assurance that the grant will be received and all relevant conditions are complied with.

(b) Grants received by way of investment subsidy scheme in relation to total investment are credited to capital reserve and are treated as part of owners'' fund.

(c) Grants that compensate expenses are recognized on receipt basis.

1.10 Finance costs

Finance costs consist of interest, amortization of ancilliary costs and other costs in connection with the borrowing of funds and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.

1.11 Cenvat credit

Cenvat (Central value added tax) credit in respect of excise, custom and service tax is accounted on accrual basis on purchase of eligible inputs, capital goods and services. The balance of cenvat credit is reviewed at the end of each year and amount estimated to be un-utilisable is charged to the statement of profit and loss for the year.

1.12 Stores and spares

Stores and spares (other than spares acquired with fixed assets) are charged to the statement of profit and loss as and when purchased.

1.13 Software costs

Expenditure incurred for procuring, developing, improving and maintaining software programs are charged to the statement of profit and loss as and when incurred, except when capitalized in accordance with Note 1.3 above.

1.14 Research and development

Revenue expenditure on research and development is expensed off under the respective head of expenses in the year in which it is incurred. Capital expenditure on research and development is reported as fixed assets under the relevant head. Depreciation on research and development fixed assets are not classified as research and development expenses and instead included under depreciation expenses.

1.15 Leases

Lease rentals in respect of assets taken on operating lease are charged to the statement of profit and loss on accrual and straight-line basis over the lease term.

1.16 Accounting for taxes

(a) Current tax is accounted on the basis of estimated taxable income for the current accounting year and in accordance with the provisions of The Income Tax Act, 1961.

(b) Deferred Tax resulting from "timing differences" between accounting and taxable profit for the period is accounted by using tax rates and laws that have been enacted or substantively enacted as at the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future. Net deferred tax liabilities are arrived at after setting off deferred tax assets.

1.17 Foreign currency transactions and balances

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

(b) The net gain or loss on account of exchange differences arising on settlement of foreign currency transactions are recognized as income or expense of the period in which they arise.

(c) Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the closing rate. The resultant exchange differences are recognized in the statement of profit and loss. The Company has not exercised the option for capitalization or amortization of exchange differences on long-term foreign currency monetary items as provided by notification issued by the Ministry of Corporate Affairs.

(d) Investments in shares of foreign subsidiaries and other entities are expressed in reporting currency at the rates of exchange prevailing at the time when the original investments were made.

1.18 Derivative instruments and hedge accounting

(a) In case of forward contracts, to which AS 11, "The Effects of Changes in Foreign Exchange Rates" applies, the difference between the forward rate and the exchange rate on the date of the contract is recognized as income or expense over the life of the contract. Exchange differences on such a contract are recognized in the statement of profit and loss in the period in which the exchange rates change.

(b) Foreign currency forward contracts, to which AS 11 does not apply, hedge accounting principles set out in AS 30 "Financial Instruments: Recognition and Measurement" are adopted w.e.f. 01-Apr-2011 to the extent they do not conflict with existing mandatory accounting standards and other authoritative pronouncements, Company law and other regulatory requirements. These transactions comprise of forward contracts taken to hedge risks associated with foreign currency fluctuations relating to highly probable forecast transactions and designated as cash flow hedges and valued at fair value. Changes in the fair value of these forward contracts that are effective hedges are recognized directly in cash flow hedge reserve account and the ineffective portion is recognized in the statement of profit and loss.

Amount accumulated in cash flow hedge reserve account is reclassified to the statement of profit and loss in the same period during which the forecasted transaction materialize. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting.

If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss recognized in cash flow hedge reserve account is immediately transferred to the statement of profit and loss for the period.

1.19 Provisions, contingent liabilities and contingent assets

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources for which reliable estimate can be made. Liabilities which are of a contingent nature are not provided but are disclosed at their estimated amount in the notes forming part of the financial statements. Contingent assets are neither recognized nor disclosed in the financial statements.


Mar 31, 2012

1.1 Basis for preparation of financial statements

The financial statements have been prepared and presented under the historical cost convention on accrual basis of accounting and in accordance with the Generally Accepted Accounting Principles (GAAP) in India. GAAP includes Accounting Standards (AS) notifi ed by the Government of India under Section 211(3C) of the Companies Act, 1956, provisions of the Companies Act, 1956, pronouncements of Institute of Chartered Accountants of India and guidelines issued by Securities and Exchange Board of India (SEBI). The Company has presented financial statements as per format prescribed by Revised Schedule VI, notifi ed under the Companies Act, 1956, issued by Ministry of Corporate Affairs. Except where otherwise stated, the accounting policies are consistently applied.

1.2 Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make assumptions, critical judgements and estimates, which it believes are reasonable under the circumstances that affect the reported amounts of assets, liabilities and contingent liabilities on the date of financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Difference between the actual results and estimates are recognized in the period in which the results are known or materialize.

1.3 Fixed assets, depreciation and amortization Tangible assets :

(a) Tangible fixed assets are stated at cost of acquisition or construction less accumulated depreciation. The cost of fixed asset includes non-refundable taxes & levies, freight and other incidental expenses related to the acquisition and installation of the respective assets. Borrowing cost attributable to acquisition or construction of qualifying fixed assets is capitalized to respective assets when the time taken to put the assets to use is substantial.

(b) Pre-operative expenditure comprising of revenue expenses incurred in connection with project implementation during the period upto commencement of commercial production are treated as part of project costs and are capitalized. Such expenses are capitalized only if the project to which they relate, involve substantial expansion of capacity or upgradation.

(c) Depreciation on fixed assets is provided on straightline method on the basis of the depreciation rates prescribed in Schedule XIV of the Companies Act, 1956 or based on useful life of the asset as estimated by the management, whichever is higher.

(d) Cost of leasehold land (except for lease of long tenure) is amortized over the period of the lease. Cost of lease hold land where lease period is of long tenure and substantial rights of ownership are with lessee, is not amortized.

Intangible assets :

(a) Certain software costs are capitalized and recognized as intangible assets based on materiality, accounting prudence and signifi cant economic benefits expected to fl ow there from for a period longer than one year.

(b) The capitalized software costs are amortized using the straightline method over estimated useful life of 3 to 5 years, as estimated at the time of capitalization.

Impairment of assets :

(a) Fixed Assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is then recognized for the amount by which the carrying amount of the assets exceeds its recoverable amount, which is the higher of an asset's net selling price and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifi able cash fl ows.

(b) Fixed Assets that have been retired from their active use and held for disposal, are classifi ed as current assets, and are stated at lower of their cost or net realisable value.

1.4 Investments

(a) Long-term investments are stated at cost. Provision is made to recognize any diminution in value, other than that of a temporary nature.

(b) Current investments are carried at lower of cost and fair value. Diminution in value is charged to the statement of Profit and loss.

(c) Current investments readily convertible in known amount of cash and subject to insignifi cant risk of changes in value are classifi ed as cash and cash equivalents for preparation of cash fl ow statement.

1.5 Cash fl ow statement

The cash fl ow statement is prepared under the "Indirect Method" as set out in AS - 3 "Cash Flow Statements" issued by the Institute of Chartered Accountants of India.

1.6 Inventories

Inventories are valued at the lower of cost and net realizable value. Provision for impairment is made when there is high uncertainty in salability of an item. Costs incurred in bringing inventories to its existing location and condition are determined on the following basis:

(a) Raw materials and packing materials - Purchase cost of materials on moving average basis.

(b) Finished goods (manufactured) and work-in-progress - Cost of purchase, cost of conversion and other costs proportionately allocated determined on weighted average basis.

(c) Finished goods (traded) - Purchase cost on moving average basis.

1.7 Revenue recognition

(a) Revenue from sale of goods is recognized when the signifi cant risks and rewards of ownership of goods are transferred to the customer. Sales are net of discounts, sales tax, value added tax and estimated returns. Excise duty collected on sales are shown by way of deduction from sales.

(b) Provision for sales returns are estimated primarily on the basis of historical experience, market conditions and specifi c contractual terms and provided for in the year of sale as reduction from revenue. The methodology and assumptions used to estimate returns are monitored and adjusted regularly in line with contractual and legal obligations, trade practices, historical trends, past experience and projected market conditions.

(c) Income from services is recognized when the services are rendered or when contracted milestones have been achieved.

(d) Revenue from arrangements which includes performance of obligations is recognized in the period in which related performance obligations are completed.

(e) Export entitlements are recognized as income when right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no signifi cant uncertainty regarding the ultimate collection of the relevant export proceeds.

(f) Dividend income is recognized when the right to receive dividend is established.

(g) Interest income is recognized using the time-proportion method, based on rates implicit in the transaction. (h) Revenue in respect of other income is recognized when a reasonable certainty as to its realization exists.

1.8 Employee retirement and other benefits

Short-term employee benefits :

Short-term employee benefits like salaries, wages, bonus and welfare expenses payable wholly within twelve months of rendering the services are accrued in the year in which the associated services are rendered by the employees.

Long-term employee benefits :

(a) Defi ned contribution plan :

Contribution in case of defi ned contribution plans (provident fund, superannuation benefit, social security schemes and other fund/schemes) is charged to the statement of Profit and loss as and when it is incurred as employees' costs.

(b) Defi ned benefit plan :

The accruing liability on account of gratuity (retirement benefit in the nature of defi ned benefits plan) is actuarially valued every year. The current service cost, interest cost, expected return on plan assets and the actuarial gain / loss are debited / credited, as the case may be to the statement of Profit and loss of the year as employees' costs.

(c) Other long-term benefits :

Long-term compensation plan to employees (being deferred compensation paid 12 months or more after the end of the period in which it is earned) are expensed out in the period to which the costs relate at present value of the benefits under the plan.

The liability for compensated absences and leave encashment is provided on the basis of actuary valuation, as at balance sheet date.

1.9 Government grants

(a) Government grants are recognized when there is reasonable assurance that the grant will be received and all relevant conditions are complied with.

(b) Grants received by way of investment subsidy scheme in relation to total investment are credited to capital reserve and are treated as part of owners' fund.

(c) Grants that compensate expenses are recognized on receipt basis.

1.10 Finance costs

Finance costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.

1.11 Cenvat credit

Cenvat (Central value added tax) credit in respect of excise, custom and service tax is accounted on accrual basis on purchase of eligible inputs, capital goods and services. The balance of cenvat credit is reviewed at the end of each year and amount estimated to be un-utilizable is charged to the statement of Profit and loss for the year.

1.12 Stores and spares

Stores and spares (other than spares acquired with fixed assets) are charged to the statement of Profit and loss as and when purchased.

1.13 Software costs

Expenditure incurred for procuring, developing, improving and maintaining software programs are charged to the statement of Profit and loss as and when incurred, except when capitalized in accordance with Note 1.3 above.

1.14 Research and development

Revenue expenditure on research and development is expensed off under the respective head of expenses in the year in which it is incurred. Capital expenditure on research and development is reported as fixed assets under the relevant head. Depreciation on research and development fixed assets is not classifi ed as research and development expenses and instead included under depreciation expenses.

1.15 Leases

Lease rentals in respect of assets taken on operating lease are charged to the statement of Profit and loss on accrual and on straight line basis over the lease term.

1.16 Accounting for taxes

(a) Current tax is accounted on the basis of estimated taxable income for the current accounting year and in accordance with the provisions of the Income Tax Act, 1961.

(b) Deferred tax resulting from "timing differences" between accounting and taxable Profit for the period is accounted by using tax rates and laws that have been enacted or substantively enacted as at the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future. Net deferred tax liabilities are arrived at after setting off deferred tax assets.

1.17 Foreign currency transactions and balances

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

(b) The net gain or loss on account of exchange differences arising on settlement of foreign currency transactions are recognized as income or expense of the period in which they arise.

(c) Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at closing rate. The resultant exchange differences are recognized in the statement of profi t and loss. The Company has not exercised the option for capitalization or amortization of exchange differences on long-term foreign currency monetary items as provided by notifi cation issued by the Ministry of Corporate Affairs.

(d) Investments in shares of foreign subsidiaries and other entities are expressed in reporting currency at the rates of exchange prevailing at the time when the original investments were made.

(e) In case of forward contracts, to which AS 11, "The Effects of Changes in Foreign Exchange Rates" applies, the difference between the forward rate and the exchange rate on the date of the contract is recognized as income or expense over the life of the contract. Exchange differences on such a contract are recognized in the statement of profi t and loss in the period in which the exchange rates change.

(f) Foreign currency forward contracts, to which AS 11 does not apply, hedge accounting principles set out in AS 30 "Financial Instruments: Recognition and Measurement" are adopted w.e.f. 1st April, 2011 to the extent they do not conflict with existing mandatory accounting standards and other authoritative pronouncements, Company law and other regulatory requirements. These transactions comprise of forward contracts taken to hedge risks associated with foreign currency fl uctuations relating to highly probable forecast transactions and designated as cash fl ow hedges and valued at fair value. Changes in the fair value of these forward contracts that are effective hedges are recognized directly in cash flow hedge reserve account and the ineffective portion is recognized in the statement of Profit and loss.

Amount accumulated in cash flow hedge reserve account is reclassified to the statement of Profit and loss in the same period during which the forecasted transaction materialize. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifi es for hedge accounting.

If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss recognized in cash fl ow hedge reserve account is immediately transferred to the statement of Profit and loss for the period.

1.18 Provisions, contingent liabilities and contingent assets

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outfl ow of resources. Liabilities which are of contingent nature are not provided but are disclosed at their estimated amount in the notes forming part of the fi nancial statements. Contingent assets are neither recognized nor disclosed in the financial statements.


Mar 31, 2011

1. Basis for Preparation of Financial Statements

The financial statements are prepared and presented under the historical cost convention on accrual basis of accounting and in accordance with the Generally Accepted Accounting Principles (GAAP) in India. GAAP includes provisions of the Companies Act, 1956, Accounting Standards (AS) notifi ed by the Government of India under Section 211 (3C) of the Companies Act, 1956, pronouncements of Institute of Chartered Accountants of India and guidelines issued by Securities and Exchange Board of India. Except where otherwise stated, the accounting principles are consistently applied.

2. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make assumptions and estimates, which it believes are reasonable under the circumstances that affect the reported amounts of assets, liabilities and contingent liabilities on the date of financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Difference between the actual results and estimates are recognised in the period in which the results are known or materialise.

3. Fixed Assets

(a) Tangible fixed assets are stated at cost of acquisition or construction less accumulated depreciation. The cost of fixed asset includes non-refundable taxes and levies, freight and other incidental expenses related to the acquisition and installation of the respective assets. Borrowing cost attributable to acquisition or construction of qualifying fixed assets are capitalised to respective assets when the time taken to put the assets to use is substantial.

(b) Pre-operative expenditure comprising of revenue expenses incurred in connection with project implementation during the period up to commencement of commercial production are treated as part of project costs and are capitalised. Such expenses are capitalised only if the project to which they relate involve substantial expansion of capacity or upgradation.

(c) Certain software costs are capitalised and recognised as intangible assets in terms of Accounting Standard 26 on Intangible Assets based on materiality, accounting prudence and signifi cant economic benefits expected to flow there from for a period longer than one year.

(d) Fixed Assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is then recognised for the amount by which the carrying amount of the assets exceeds its recoverable amount, which is the higher of an assets net selling price and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifi able cash flows.

(e) Fixed Assets that have been retired from their active use and held for disposal, are classifi ed as current assets, and are stated at lower of their cost or net realisable value.

4. Depreciation and Amortisation

(a) Depreciation on fixed assets is provided on straight line method on the basis of the depreciation rates prescribed in Schedule XIV of the Companies Act, 1956 or based on useful life of the asset as estimated by the management, whichever is higher.

(b) Cost of leasehold land (except for lease of long tenure) is amortised over the period of the lease. Cost of lease hold land where lease period is of long tenure and substantial rights of ownership are with lessee, is not amortised.

(c) The Capitalised Software costs are amortised using the straight-line method over estimated useful life of 3 to 5 years, as estimated at the time of capitalization.

5. Investments

(a) Long term investments are stated at cost. Provision is made to recognise any diminution in value, other than that of a temporary nature.

(b) Current investments are carried at lower of cost and fair value. Diminution in value is charged to the profit and loss account.

6. Cash Flow Statement

The Cash Flow Statement is prepared under the "Indirect Method" as set out in AS - 3 Cash Flow Statements issued by the Institute of Chartered Accountants of India.

7. Inventories

Inventories are valued at the lower of cost and net realisable value. Provision for impairment is made when there is high uncertainty in salability of an item. Cost of inventories is determined on the following basis:

(a) Cost of raw material and packing material is determined on moving average basis.

(b) Work in process is determined on weighted average basis.

(c) Cost of fi nished goods produced is determined on weighted average basis.

(d) Cost of fi nished goods (traded) is determined on moving average basis.

8. Revenue Recognition

(a) Revenue from sale of goods is recognised when the signifi cant risks and rewards of ownership of goods are transferred to the customer. Sales are net of discounts, VAT/sales tax and returns; excise duties collected on sales are shown by way of deduction from sales.

(b) Income from services is recognised when the services are rendered or when contracted milestones have been achieved.

(c) Revenue from arrangements which includes performance of obligations is recognised in the period in which related performance obligations are completed.

(d) Export entitlements are recognised as income when right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no signifi cant uncertainty regarding the ultimate collection of the relevant export proceeds.

(e) Dividend income is recognised when the right to receive dividend is established.

(f) Interest income is recognized using the time-proportion method, based on rates implicit in the transaction.

(g) Revenue in respect of other income is recognised when a reasonable certainty as to its realisation exists.

9. Employees Retirement and Other Benefits

(a) The accruing liability on account of gratuity (retirement benefit in the nature of defi ned benefits plan), is actuarially valued every year. The current service cost, interest cost, expected return on plan assets and the actuarial gain / loss are expensed to the profit and loss account of the year as Employees Costs.

(b) The Companys contribution in case of defi ned contribution plans (Provident Fund, Superannuation benefit and other funds ) is charged to profit and loss account as and when it is incurred as Employee Costs.

(c) Long term compensation plan to employees (being deferred compensation paid 12 months or more after the end of the period in which it is earned) are expensed out in the period to which the costs relate at present value of the benefits under the plan.

(d) The liability for compensated absences and leave encashment is provided on the basis of actuary valuation, as at Balance Sheet date.

10. Government Grants

(a) Government grants are recognised when there is reasonable assurance that the grant will be received and all relevant conditions are complied with.

(b) Grants received by way of investment subsidy scheme in relation to total investment are credited to capital reserve and are treated as part of owners fund.

(c) Grants that compensate expenses are recognized on receipt basis and are shown as deduction from the related expenses for which they are intended to compensate.

11. Borrowing Costs

Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.

12. Cenvat Credit

Cenvat (Central value added tax) credit in respect of Excise, Custom and Service tax is accounted on accrual basis on purchase of eligible inputs, capital goods and services. The balance of cenvat credit is reviewed at the end of each year and amount estimated to be un-utilisable is charged to the profit and loss account for the year.

13. Stores and Spares

Stores and spares (other than spares acquired with fixed assets) are charged to the profit and loss account as and when purchased.

14. Software Costs

Expenditure incurred for procuring, developing, improving and maintaining software programs are charged to the profit and loss account as and when incurred, except when capitalised in accordance with Note 3 (c) above.

15. Research and Development

Research and Development expenses are charged to revenue. Capital expenditure on research and development is reported as fixed assets under the relevant head. Depreciation on research and development fi xed assets is included under depreciation expense.

16. Leases

Lease rentals in respect of assets taken on operating lease are charged to the profit and loss account on accrual and on straight line basis over the lease term.

17. Accounting for Tax

(a) Current Tax is accounted on the basis of estimated taxable income for the current accounting year and in accordance with the provisions of Income Tax Act, 1961.

(b) Deferred Tax resulting from "timing differences" between accounting and taxable profit for the period is accounted by using tax rates and laws that have been enacted or substantially enacted as at the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realized in future. Net deferred tax liability is arrived at after setting off deferred tax assets.

18. Foreign Currency Transactions and Balances

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

(b) The net gain or loss on account of exchange differences arising on settlement of foreign currency transactions are recognised as income or expense of the period in which they arise.

(c) In case of forward contracts, to which AS 11, The Effects of Changes in Foreign Exchange Rate applies, the difference between the forward rate and the exchange rate on the date of the contract is recognised as income or expense over the life of the contract. Exchange differences on such a contract are recognised in the profit and loss account in the period in which the exchange rates change. Derivatives not covered under AS 11 are marked to market at balance sheet date and resulting loss, if any, is recognised in the profit and loss account in view of the principle of prudence as per Announcement on Accounting of Derivatives by Institute of Chartered Accountants of India dated 29-Mar-2008.

(d) Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are reported using the rate prevailing as on that date. The resultant exchange differences are recognised in the profit and loss account. The Company has not exercised the option for capitalisation or amortisation of exchange differences on long term foreign currency monetary items as provided by notifi cation dated 31-Mar-2009, issued by the Ministry of Corporate Affairs.

(e) Investments in shares of foreign subsidiaries and other entities are expressed in reporting currency at the rates of exchange prevailing at the time when the original investments were made.

19. Provisions, Contingent Liabilities and Contingent Assets

Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Liabilities which are of contingent nature are not provided but are disclosed at their estimated amount in the notes forming part of the accounts. Contingent assets are neither recognised nor disclosed in the financial statements.






Mar 31, 2010

1. Basis for Preparation of Financial Statements

The financial statements are prepared and presented under the historical cost convention on accrual basis of accounting and in accordance with the Generally Accepted Accounting Principles (GAAP) in India. GAAP includes provisions of the Companies Act, 1956, Accounting Standards notified by the Government of India under Section 211 (3C) of the Companies Act, 1 956, pronouncements of Institute of Chartered Accountants of India and guidelines issued by Securities and Exchange Board of India. Except where otherwise stated, the accounting principles are consistently applied.

2. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make assumptions and estimates, which it believes are reasonable under the circumstances that affect the reported amounts of assets, liabilities and contingent liabilities on the date of financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Difference between the actual results and estimates are recognised in the period in which the results are known or materialise.

3. Fixed Assets

(a) Tangible fixed assets are stated at cost of acquisition or construction less accumulated depreciation. The cost of fixed asset includes non-refundable taxes and levies, freight and other incidental expenses related to the acquisition and installation of the respective assets. Borrowing cost attributable to acquisition or construction of qualifying fixed assets are capitalised to respective assets when the time taken to put the assets to use is substantial.

(b) Pre-operative expenditure comprising of revenue expenses incurred in connection with project implementation during the period up to commencement of commercial production are treated as part of project costs and are capitalised. Such expenses are capitalised only if the project to which they relate involve substantial expansion of capacity or upgradation.

(c) Certain software costs are capitalised and recognised as intangible assets in terms of Accounting Standard 26 on Intangible Assets based on materiality, accounting prudence and significant economic benefits expected to flow there from for a period longer than one year.

(d) Fixed Assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is then recognised for the amount by which the carrying amount of the assets exceeds its recoverable amount, which is the higher of an assets net selling price and value in use. For the purposes of assessing impairment, assets ore grouped at the lowest levels for which there are separately identifiable cash flows.

(e) Fixed Assets that have been retired from their active use and held for disposal, are classified as current assets, and are stated at lower of their cost or net realisable value.

4. Depreciation and Amortisation

(a) Depreciation on fixed assets is provided on straight line method on the basis of the depreciation rates prescribed in Schedule XIV of the Companies Act, 1 956 or based on useful life of the asset as estimated by the management, whichever is higher.

The management estimates of the useful life of various categories of fixed assets are given below :

Office Buildings 58 years

Factory Buildings 28 years

Plant and Machinery 10 to 20 years

Laboratory Equipments 5 to 20 years

Electrical Equipments 10 to 20 years

Furniture and Fixtures 10 years

Office Equipments 10 years

Computer Equipments 3 years

Vehicles 10 years

(b) Cost of leasehold land (except for lease of long tenure) is amortised over the period of the lease. Cost of lease hold land where lease period is of long tenure and substantial rights of ownership are with lessee, is not amortised.

(c) The capitalised Software costs are amortised using the straight-line method over estimated useful life of 3 to 5 years, as estimated at the time of capitalization.

5. Investments

(a) Long term investments are stated at cost. Provision is made to recognise any diminution in value, other than that of a temporary nature.

(b) Current investments are carried at lower of cost and fair value. Diminution in value is charged to the profit and loss account.

6. Cash Flow Statement

The Cash Flow Statement is prepared under the "Indirect Method" as set out in Accounting Standard 3 Cash Flow Statements issued by the Institute of Chartered Accountants of India.

7. Inventories

Inventories are valued at the lower of cost and net realisable value. Provision for impairment is made when there is high uncertainty in salability of an item. Cost of inventories is determined on the following basis:

(a) Cost of raw material and packing material is determined on moving average basis.

(b) Work in process is determined on weighted average basis.

(c) Cost of finished goods produced is determined on weighted average basis.

(d) Cost of finished goods (traded) is determined on moving average basis.

8. Revenue Recognition

(a) Revenue from sale of goods is recognised when the significant risks and rewards of ownership of goods are transferred to the customer. Sales are net of discounts, VAT / sales tax and returns; excise duties collected on sales are shown by way of deduction from sales.

(b) Income from services is recognised when the services are rendered or when contracted milestones have been achieved.

(c) Revenue from arrangements which includes performance of obligations is recognised in the period in which related performance obligations are completed.

(d) Export entitlements are recognised as income when right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.

(e) Dividend income is recognised when the right to receive dividend is established.

(f) Interest income is recognised using the time-proportion method, based on rates implicit in the transaction.

(g) Revenue in respect of other income is recognised when a reasonable certainty as to its realisation exists.

9. Employees Retirement and Other Benefits

(a) The accruing liability on account of gratuity (retirement benefit in the nature of defined benefits plan), is actuarially valued every year. The current service cost, interest cost, expected return on plan assets and the actuarial gain / loss are expensed to the profit and loss account of the year as Employees Costs.

(b) The Companys contribution in case of defined contribution plans (Provident Fund, Superannuation benefit and other funds) is charged to profit and loss account as and when it is incurred as Employee Costs.

(c) Long term compensation plan to employees (being deferred compensation paid 12 months or more after the end of the period in which it is earned) are expensed out in the period to which the costs relate at present value of the benefits under the plan.

(d) The liability for compensated absences and leave encashment is provided on the basis of actuary valuation, as at Balance Sheet date.

10. Government Grants

(a) Government grants are recognised when there is reasonable assurance that the grant will be received and all relevant conditions are complied with.

(b) Grants received by way of investment subsidy scheme in relation to total investment are credited to capital reserve and are treated as part of owners fund.

(c) Grants that compensate expenses are recognized on receipt basis and are shown as deduction from the related expenses for which they are intended to compensate.

11. Borrowing Costs

Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.

12. Cenvat Credit

Cenvat (Central value added tax) credit in respect of Excise, Custom and Service tax is accounted on accrual basis on purchase of eligible inputs, capital goods and services. The balance of cenvat credit is reviewed at the end of each year and amount estimated to be un-utilisable is charged to the profit and loss account for the year.

13. Stores and Spares

Stores and spares (other than spares acquired with fixed assets) are charged to the profit and loss account as and when purchased.

14. Software Costs

Expenditure incurred for procuring, developing, improving and maintaining software programs are charged to the profit and loss account as and when incurred, except when capitalised in accordance with Note 3 (c) above.

15. Research and Development

Research and Development expenses are charged to revenue. Capital expenditure on research and development is reported as fixed assets under the relevant head. Depreciation on research and development fixed assets is included under depreciation expense.

16. Leases

Lease rentals in respect of assets taken on operating lease are charged to the profit and loss account on accrual and on straight line basis over the lease term.

17. Accounting for Tax

(a) Current Tax is accounted on the basis of estimated taxable income for the current accounting year and in accordance with the provisions of Income Tax Act, 1 961.

(b) Deferred Tax resulting from "timing differences" between accounting and taxable profit for the period is accounted by using tax rates and laws that have been enacted or substantially enacted as at the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future. Net deferred tax liability is arrived at after setting off deferred tax assets.

18. Foreign Currency Transactions and Balances

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

(b) The net gain or loss on account of exchange differences arising on settlement of foreign currency transactions are recognised as income or expense of the period in which they arise.

(c) In case of forward contracts, to which AS 11, The Effects of Changes in Foreign Exchange Rate applies, the difference between the forward rate and the exchange rate on the date of the contract is recognised as income or expense over the life of the contract. Exchange differences on such a contract are recognised in the profit and loss account in the period in which the exchange rates change. Derivatives not covered under AS 1 1 are marked to market at balance sheet date and resulting loss, if any, is recognised in the profit and loss account in view of the principle of prudence as per Announcement on Accounting of Derivatives by Institute of Chartered Accountants of India dated 29-Mar-2008.

(d) Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are reported using the rate prevailing as on that date. The resultant exchange differences are recognised in the profit and loss account. The Company has not exercised the option for capitalisation or amortisation of exchange differences on long term foreign currency monetary items as provided by notification dated 31 -Mar-2009, issued by the Ministry of Corporate Affairs.

(e) Investments in shares of foreign subsidiaries and other entities are expressed in reporting currency at the rates of exchange prevailing at the time when the original investments were made.

19. Provisions, Contingent Liabilities and Contingent Assets

Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Liabilities which are of contingent nature are not provided but are disclosed at their estimated amount in the notes forming part of the accounts. Contingent assets are neither recognised nor disclosed in the financial statements.

 
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