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Accounting Policies of Triveni Turbine Ltd. Company

Mar 31, 2014

A) Basis of Preparation

The financial statements of the Company have been prepared on accrual basis of accounting under the historical cost convention in accordance with generally accepted accounting principles in India and comply in all material respects with the accounting standards notifed under the Companies (Accounting Standards) Rules, 2006 (as amended), and the relevant provisions of the Companies Act, 1956, read with General Circular 15/2013 dated September 13, 2013 and General Circular 08/2014 dated April 4, 2014 issued by the Ministry of Corporate Affairs.

All assets and liabilities have been classifed as current or non-current as per the criteria set out in the Revised Schedule VI to the Companies Act, 1956. In line with the normal operating cycle of the main product, i.e., manufacture and supply of turbine package, the Company has considered a period of 12 months for the purpose of determination of classifcation between current and non-current assets and liabilities.

b) use of estimates

The presentation of financial statements requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Difference between the actual results and estimates are recognised in the period in which the results are known/ materialize.

c) Fixed Assets

Fixed assets are stated at cost of acquisition less accumulated depreciation. Cost includes taxes, duties (excluding excise duty and VAT for which CENVAT/VAT credit is available), freight and other incidental expenses relating to acquisition and installation of such fixed asset.

d) Recognition of Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will fow to the Company and the revenue can be reliably measured. The following Specific recognition criteria are applied for revenue recognition:

i) Revenue from sale of goods is recognised when all the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods. The Company collects sales taxes and/ or value added taxes (VAT) on behalf of the government and therefore, these are not economic benefits fowing to the Company and accordingly they are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross).

ii) In contracts involving the rendering of services, revenue is recognised as and when the services are rendered. The Company collects service tax on behalf of the government and therefore, it is not an economic benefit fowing to the Company and accordingly it is excluded from revenue.

iii) Revenue from construction contracts is recognised on the percentage of completion method, measured by the proportion that contract costs incurred for work performed till the reporting date bear to the estimated total contract cost. Contract cost for this purpose includes:

a) Costs that relate directly to the Specific contract;

b) Costs that are attributable to contract activity in general and can be allocated to the contract; and

c) Such other costs as are Specifically chargeable to the customer under the terms of the contract.

Foreseeable losses, if any, are provided for immediately.

iv) Income and expenditure relating to the prior period and prepaid expenses which do not exceed Rs.10,000/- in each case, are treated as income/expenditure of the current year.

e) Foreign Currency Transactions

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

ii) Foreign currency monetary items (including forward contracts) are translated at rates prevailing at the reporting date. Exchange differences arising on settlement of transactions and translation of monetary items (including forward contracts) are recognised as income or expense in the year in which they arise.

iii) The premium or discount on foreign currency forward contracts not relating to firm commitments or highly probable forecast transactions and not intended for trading or speculative purposes is amortised as expense or income over the life of each contract.

iv) In respect of derivative contracts relating to firm commitments or highly probable forecast transactions, provision is made for mark-to-market losses, if any, at the balance sheet date. Gains, if any, on such contracts are not recognised till settlement.

f) Investments

Investments, that are readily realisable and intended to be held for not more than one year from the date on which such investments are made, are classifed as current investments. All other investments are classifed as long term investments. Current investments are carried at the lower of cost and fair value. Long term investments are carried at cost. However, provision for diminution is made to recognise a decline, other than temporary, in the value of long-term investments, such reduction being determined and made for each investment individually.

g) Inventories

i) Inventories of raw materials and components, stores and spares are valued at the lower of cost and net realisable value. Cost for the purpose of valuation of inventories is determined on weighted average basis.

ii) Finished goods and work-in-progress are valued at lower of cost and net realisable value. The cost of fnished goods and work-in-progress includes raw material costs, direct cost of conversion and allocation of indirect costs incurred in bringing the inventories to their present location and condition. Excise duty is included in the value of fnished goods.

iii) Patterns, loose tools, jigs and fixtures are amortised equally over three years.

h) Depreciation

Depreciation on fixed assets is provided on the straight line basis at the rates specified in Schedule XIV of the Companies Act, 1956 as amended by Notifcation No.GSR 756E dated 16th December 1993, other than on the following assets which are depreciated at higher rates on the straight line basis over their estimated useful economic lives as follows:

i) Employee benefits

i) Short term Employee benefits

All employee benefits payable wholly within 12 months after the end of the period in which the employees render related services are classifed as short term employee benefits and are recognised as expenses in the period in which the employees render the related service. The Company recognises the undiscounted amount of short term employee benefits expected to be paid (including compensated absences) in exchange for services rendered, as a liability.

ii) Post-employment benefits

a) Defined contribution plans: Defined contribution plans are retirement benefit plans under which the Company pays fixed contributions to separate entities (funds) or financial institutions or state managed benefit schemes. The Company''s contributions under the Employees'' Provident Fund Scheme, Employees'' State Insurance Scheme and officers'' Pension Scheme for certain employees are Defined contributions plans. The Contributions paid/payable under the schemes are recognised during the period in which the employees render the related service.

b) Defined benefit plans : Defined benefit plans are plans under which the Company pays certain Defined benefits to employees at the time of their retirement/resignation/death based on rules framed for such schemes. The Employees'' Gratuity Scheme is a Defined benefit plan. The present value of the obligation under a Defined benefit plan is determined based on the actuarial valuation using the Projected Unit Credit method, which recognizes each period of service as giving rise to an additional unit of employee benefit entitlement and measures each unit separately to build up the fnal obligation.

The obligation is measured at the present value of the estimated future cash flows. The discount rate used for determining the present value of the obligation under Defined benefit plan, is based on the market yields on Government securities as at the balance sheet date, with maturity periods approximating the terms of the related obligation.

Actuarial gains and losses are recognised immediately in the statement of profit and Loss.

Gains or losses on the curtailment or settlement of any Defined benefits plan are recognised when the curtailment of settlement occurs. Past service cost is recognised as an expense on a straight-line basis over the average period until the benefits become vested.

iii) Other long-term employee benefits

Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders related services are recognised as a liability at the present value of the Defined benefit obligation at the balance sheet date on the basis of actuarial valuation. The discount rates used for determining the present values of the obligation under Defined benefit plans, are based on the appropriate market yields on Government securities as at the balance sheet date.

iv) Employee Stock Options

Compensation cost in respect of stock options granted to eligible employees is recognized using the intrinsic value of the stock options and is amortised over the vesting period of such options granted.

j) Borrowing costs

Borrowing costs that are attributable to the acquisition of qualifying assets are capitalised upto the period such assets are ready for their intended use. All other borrowing costs are charged in the statement of profit and loss.

k) Taxes on Income

i) Current tax on income is determined on the basis of taxable income computed in accordance with the applicable provisions of the Income-tax Act, 1961.

ii) Deferred tax is recognised for all timing differences between the accounting income and the taxable income for the year and quantifed using the tax rates and laws enacted or substantively enacted as on the balance sheet date.

iii) Deferred tax assets are recognised and carried forward only to the extent that there is a reasonable certainty that suffcient future taxable income will be available against which such deferred tax assets can be realized, except in the case of unabsorbed depreciation or carried forward of losses under the Income-tax Act 1961, where deferred tax assets are recognised only to the extent that there is virtual certainty supported by convincing evidence that suffcient future taxable income will be available against which deferred tax assets can be realised.

iv) Minimum alternate tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the Company will be in a position to avail of such credit under the provisions of the Income-tax Act 1961.

l) Intangible Assets

Intangible assets are recognised in accordance with the criteria specified in Accounting Standard (AS) 26 "Intangible Assets" and are amortised as follows :

m) Impairment of Assets

Impairment of individual assets/cash generating unit (a group of assets that generates identified independent cash flows) are identified using external and internal sources of information and impairment loss, if any, is determined and recognised in accordance with Accounting Standard (AS) 28 - Impairment of Assets.

n) Provisions, Contingent Liabilities and Contingent Assets Provisions are recognised, if :

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

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

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

Reimbursements expected in respect of expenditure required to settle a provision are recognised only when it is virtually certain that the reimbursement will be received.

Contingent liability is disclosed in the case of:

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

b) a possible obligation, unless the probability of outflow of resources is remote.

Contingent assets are not recognised.

o) Research and development

Revenue expenditure on research and development is charged under respective heads of account. Capital expenditure on research and development is included as part of fixed assets and depreciated on the same basis as other fixed assets.

b) Terms/rights attached to equity shares

The Company has only one class of equity shares with a par value of Rs. 1/- per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of equity shares are entitled to receive the remaining assets of the Company, after meeting all liabilities and distribution of all preferential amounts, in proportion to their shareholding.

c) Terms/rights attached to preference shares

As per the Scheme of Arrangement ("Scheme") duly approved by the Allahabad High Court vide order dated April 19, 2011, 28,000,000 equity shares of Rs. 1/- each fully paid up held by Triveni Engineering & Industries Limited stood converted into 2,800,000 - 8% Cumulative Reedemable Preference Shares of Rs. 10/ each fully paid up. These Preference Shares carried right to cumulative dividend @ 8% p.a. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. The preference shareholders have a preference vis-a-vis equity shareholders with respect to any dividend that may be declared by the Company as well as with regard to redemption of capital in the event of liquidation.The Preference Shares are redeemable at par at the end of 5 years from the date of allotment. However, the Company has an option to redeem these shares at any time after the end of six months from the date of allotment. Accordingly, the preference shares were redeemed during the year. .

d) Shares allotted as fully paid up pursuant to contract(s) without payment being received in cash (during the 5 years immediately preceding) 257,880,150 equity shares of Rs.1/- each were allotted on May 10, 2011,as fully paid up to the shareholders of Triveni Engineering & Industries Ltd (TEIL) in the ratio of one equity share for every one equity share held by them in TEIL, pursuant to the Scheme.

Disclosures required by Accounting Standard (AS) 29 - Provisions,Contingent liabilities and Contingent assets.

Nature of Provisions

Warranties : The Company gives warranties on certain products and services, undertaking to repair or replace the items that fail to perform satisfactorily during the warranty period. Provisions made as at March 31,2014 represent the amount of the expected cost of meeting such obligations. The timing of the outflows is expected to be within the period of two years.

Liquidated damages : In respect of certain products, the Company has contractual obligations towards customers for matters relating to delivery and performance. The provisions represent the amount estimated to meet the cost of such obligations. The timing of the outflow is expected to be within one year.

Cost to completion: The provision represents the costs of materials and services required for erection and integeration of turbine packages at the site, prior to commisioning.

Loss on foreign exchange derivatives: Represents provision made for mark-to-market losses on derivative contracts outstanding at the year-end which were entered into for hedging certain firm commitments or highly probable forecast transactions.

c) Fair Valuation

The fair value of options used to compute proforma net income and earning per equity share has been done by an independent professional using the Black Scholes Options pricing formula.

The weighted average fair value of each option of the Company as on the date of the corporate adjustment, issued under New Stock Option Scheme was Rs. 29.30.


Mar 31, 2013

A) Basis of Preparation

These financial statements have been prepared as a going concern, on an accrual basis of accounting under the historical cost convention and comply in all material respects with the accounting standards notified under section 211 (3C) and the other relevant provisions of the Companies Act, 1956.

In line with the normal operating cycle of the main product, i.e., manufacture and supply of turbine package, the Company has considered a period of 12 months for the purpose of determination of classification between current and non-current assets and liabilities.

b) Use of Estimates

The presentation of financial statements requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Difference between the actual results and estimates are recognised in the period in which the results are known / materialise.

c) Fixed Assets

Fixed assets are stated at cost of acquisition less accumulated depreciation. Cost includes taxes, duties (excluding excise duty and VAT for which CENVAT / VAT credit is available), freight and other incidental expenses relating to acquisition and installation of such fixed assets.

d) Recognition of Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria are applied for revenue recognition:

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

ii) In contracts involving the rendering of services, revenue is recognised as and when the services are rendered. The Company collects service tax on behalf of the government and therefore, it is not an economic benefit flowing to the Company and accordingly it is excluded from revenue.

iii) Revenue from construction contracts is recognised on the percentage of completion method, measured by the proportion that contract costs incurred for work performed till the reporting date bear to the estimated total contract cost. Contract cost for this purpose includes:

a) Costs that relate directly to the specific contract;

b) Costs that are attributable to contract activity in general and can be allocated to the contract; and

c) Such other costs as are specifically chargeable to the customer under the terms of the contract.

Foreseeable losses, if any, are provided for immediately.

iv) Income and expenditure relating to the prior period and prepaid expenses which do not exceed Rs. 10,000/- in each case, are treated as income / expenditure of the current year.

e) Foreign Currency Transactions

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

ii) Foreign currency monetary items (including forward contracts) are translated at rates prevailing at the reporting date. Exchange differences arising on settlement of transactions and translation of monetary items (including forward contracts) are recognised as income or expense in the year in which they arise.

iii) The premium or discount on foreign currency forward contracts not relating to firm commitments or highly probable forecast transactions and not intended for trading or speculative purposes is amortised as expense or income over the life of each contract.

iv) In respect of derivative contracts relating to firm commitments or highly probable forecast transactions, provision is made for mark-to-market losses, if any, at the balance sheet date. Gains, if any, on such contracts are not recognised till settlement.

f) Investments

Investments that are readily realisable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long term investments. Current investments are carried at the lower of cost and fair value. Long term investments are carried at cost. However, provision for diminution is made to recognise a decline, other than temporary in the value of long-term investments, such reduction being determined and made for each investment individually.

g) Inventories

i) Inventories of raw materials and components, stores and spares are valued at the lower of cost and net realisable value. Cost for the purpose of valuation of inventories is determined on a weighted average basis.

ii) Finished goods and work-in-progress are valued at the lower of cost and net realisable value. The cost of finished goods and work-in-progress includes raw material costs, direct cost of conversion and allocation of indirect costs incurred in bringing the inventories to their present location and condition. Excise duty is included in the value of finished goods.

iii) Patterns, loose tools, jigs and fixtures are amortised equally over three years.

h) Depreciation

Depreciation on fixed assets is provided on the straight line method at the rates specified in Schedule XIV of the Companies Act, 1956, other than on the following assets which are depreciated at higher rates on the straight line basis over their estimated useful economic lives as follows:

i) Employee Benefits

i) Short term Employee Benefits

All employee benefits payable wholly within 12 months after the end of the period in which the employees render the related services are classified as short term employee benefits and are recognised as expenses in the period in which the employees render the related service. The Company recognises the undiscounted amount of short term employee benefits expected to be paid (including compensated absences) in exchange for services rendered, as a liability.

ii) Post-employment benefits

a) Defined contribution plans: The Company''s contributions under the Employees'' Provident Fund Scheme, Employees'' State Insurance Scheme and Officers'' Pension Scheme for certain employees are defined contributions plans. The contributions paid / payable under these schemes are recognised during the period in which the employees render the related service.

b) Defined benefit plans : The Company''s Employees'' Gratuity Scheme is a defined benefit plan. The present value of the obligation under the defined benefit plan is determined based on the actuarial valuation using the Projected Unit Credit method, which recognises each period of service as giving rise to an additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The obligation is measured at the present value of the estimated future cash flows. The discount rate used for determining the present value of the obligation under the defined benefit plan, is based on the market yields on Government securities at the balance sheet date, with maturity periods approximating the terms of the related obligation.

Actuarial gains and losses are recognised immediately in the statement of profit and loss.

Gain or losses on the curtailment or settlement of any defined benefit plan is recognised when the curtailment of settlement occurs. Past service cost is recognised as an expense on a straight-line basis over the average period until the benefits become vested.

iii) Other long-term employee benefits Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognised as a liability at the present value of the defined benefit obligation at the balance sheet date on the basis of an actuarial valuation. The discount rates used for determining the present values of the obligation under defined benefit plans, are based on the appropriate market yields on Government securities at the balance sheet date.

iv) Employee Stock Options

Compensation cost in respect of stock options granted to eligible employees is recognised using the intrinsic value of the stock options and is amortised over the vesting period of options granted.

j) Borrowing costs

Borrowing costs that are attributable to the acquisition of qualifying assets are capitalised upto the period such assets are ready for their intended use. All other borrowing costs are charged in the statement of profit and loss.

k) Taxes on Income

i) Current tax on income is determined on the basis of taxable income computed in accordance with the applicable provisions of the Income-tax Act, 1961.

ii) Deferred tax is recognised for timing differences between the accounting income and the taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the balance sheet date.

iii) Deferred tax assets are recognised and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised, except in the case of unabsorbed depreciation or carried forward of losses under the Income-tax Act 1961, where deferred tax assets are recognised only to the extent that there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which deferred tax assets can be realised.

iv) Minimum alternate tax (MAT) credit is recognised as an asset to the extent that there is convincing evidence that the Company will be in a position to avail of such credit under the provisions of the Income-tax Act 1961.

l) Intangible Assets

Intangible assets which are expected to provide future enduring economic benefits are recognised at cost and are amortised as follows:

m) Impairment of Assets

Impairment of individual assets / cash generating unit (a group of assets that generates identified independent cash flows) are identified using external and internal sources of information and impairment loss, if any, is determined and recognised to the extent, the carrying amount of assets exceed their recoverable amount. Recoverable amount is higher of an asset''s net selling price and its value in use. Value in use is 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.

n) Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognised, if :

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

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

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

Reimbursements expected in respect of expenditure required to settle a provision are recognised only when it is virtually certain that the reimbursement will be received.

Contingent liabilities are disclosed in the case of:

a) a present obligation arising from a past event, when it does not appear probable that an outflow of resources will be required to settle the obligation.

b) a possible obligation, unless the probability of outflow of resources is remote.

Contingent assets are not recognised.

o) Research and Development

Revenue expenditure on research and development is charged under respective heads of account. Capital expenditure on research and development is included as part of fixed assets and depreciated on the same basis as other fixed assets.


Mar 31, 2012

A) Basis of Preparation

These financial statements have been prepared on the accrual basis of accounting under the historical cost convention and to comply in all material respects with the accounting standards notified under section 211 (3C) and other relevant provisions of the Companies Act, 1956.

b) Adoption of revised Schedule VI of the Companies Act, 1956

For the year ended 31st March, 2012, the revised Schedule VI, notified under the Companies Act, 1956 has become applicable to the Company for preparation and presentation of its financial statements. The adoption of revised Schedule VI does not impact recognition and measurement of principles followed for preparation of its financial statements. However, it has significant impact on presentation and disclosures made in the financial statements. The Company has also reclassified the previous year figures in accordance with the requirements applicable in the current year.

All assets and liabilities have been classified as current and non-current as per the criteria set out in the revised Schedule VI. In line with the normal operating cycle of the main product, i.e., manufacture and supply of turbine package, the Company has considered a period of 12 months for the purpose of determination of classification between current and non-current assets and liabilities.

c) Use of Estimates

The presentation of financial statements requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognised in the period in which the results are known/materialise.

d) Fixed Assets

Fixed assets are stated at cost of acquisition less accumulated depreciation. Cost includes taxes, duties (excluding excise duty and VAT for which input credit is available), freight and other incidental expenses relating to acquisition and installation.

e) Recognition of Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria are applied for revenue recognition :

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

ii) In contracts involving the rendering of services, revenue is recognised as and when the services are rendered. The Company collects service tax on behalf of the government and therefore, it is not an economic benefit flowing to the Company and accordingly it is excluded from revenue.

Income and expenditure relating to prior periods and prepaid expenses which do not exceed Rs 10,000/- in each case, are treated as income/expenditure of the current year.

f) Foreign Currency Transactions

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

ii) Foreign currency monetary items (including forward contracts) are translated at year end rates. Exchange differences arising on settlement of transactions and translation of monetary items (including forward contracts) are recognised as income or expense in the year in which they arise.

iii) The premium or discount on forward exchange contracts not relating to firm commitments or highly probable forecast transactions and not intended

for trading or speculative purposes is amortised as expense or income over the life of each contract.

iv) In respect of derivative contracts relating to firm commitments or highly probable forecast transactions, provision is made for mark-to-market losses, if any, at the balance sheet date. Gains, if any, on such contracts are not recognised till settlement.

g) Investments

Investments that are readily realisable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long term investments. Current investments are carried at the lower of cost and fair value. Long term investments are carried at the cost. However, provision for diminution is made to recognise a decline, other than temporary in the value of long-term investments, such reduction being determined and made for each investment individually.

h) Inventories

i) Inventories of raw materials and components, stores and spares are valued at the lower of cost and net realisable value. Cost for the purpose of valuation of inventories is determined on a weighted average basis.

ii) Finished goods and work-in-progress are valued at lower of cost and net realisable value. The cost of finished goods and work-in-progress includes raw material costs, direct cost of conversion and allocation of indirect costs incurred in bringing the inventories to their present location and condition. Excise duty is included in the value of finished goods.

iii) Patterns, loose tools, jigs and fixtures are amortised equally over three years.

j) Employee Benefits

i) Short term Employee Benefits

All employee benefits payable wholly within 12 months after the end of the period in which the employees render the related services are classified as short term employee benefits and are recognised as expenses in the period in which the employees render the related service. The Company recognises the undiscounted amount of short term employee benefits expected to be paid (including compensated absences) in exchange for services rendered, as a liability.

ii) Post-employment benefits

a) Defined contribution plans: The Company's contribution under the employees' provident fund scheme and employees' state insurance scheme are defined contribution plans. The contribution paid/payable under the schemes is recognised during the period in which the employees render the related service.

b) Defined benefit plans: The employees' gratuity fund scheme is Company's defined benefit plan. The present value of the obligation under this defined benefit plan is determined based on the actuarial valuation using the Projected Unit Credit method, which recognises each period of service as giving rise to an additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The obligation is measured at the present value of the estimated future cash flows. The discount rate used for determining the present value of the obligation under defined benefit plan, is based on the market yields on Government securities as at the balance sheet date, with maturity periods approximating the terms of the related obligation.

Actuarial gains and losses are recognised immediately in the statement of Profit and Loss.

Gains or losses on the curtailment or settlement of any defined benefits plan is recognised when the curtailment or settlement occurs. Past service cost is recognised as an expense on a straight-line basis over the average period until the benefits become vested.

iii) Other long-term employee benefits

Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognised as a liability at the present value of the defined benefit obligation at the balance sheet date. The discount rates used for determining the present values of the obligation under defined benefit plans, are based on the market yields on Government securities as at the balance sheet date.

k) Borrowing Costs

Borrowing costs that are attributable to the acquisition of qualifying assets are capitalised upto the period such assets are ready for their intended use. All other borrowing costs are charged in the statement of profit and loss.

m) Impairment of Assets

Impairment of individual assets/cash generating unit (a group of assets that generates identified independent cash flows) are identified using external and internal sources of information and impairment loss, if any, is determined and recognised in accordance with Accounting Standard (AS) 28-Impairment of Assets.

n) Provisions, Contingent liabilities and Contingent assets Provisions are recognised, if :

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

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

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

Reimbursements expected in respect of expenditure required to settle a provision are recognised only when it is virtually certain that the reimbursement will be received.

Contingent liability is disclosed in the case of

a) a present obligation arising from a past event, when it is dependent on the outcome of a process such as legal process and it is not probable that an outflow of resources will be required to settle the obligation.

b) a possible obligation, dependent as stated in (a) above unless the probability of outflow of resources is remote.

Contingent Assets are neither recognised nor disclosed.

o) Research and Development Revenue expenditure on research and development is charged under respective heads of account. Capital expenditure on research and development is included as part of fixed assets and depreciated on the same basis as other fixed assets.

 
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