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Accounting Policies of Walchandnagar Industries Ltd. Company

Sep 30, 2014

1.1 METHOD OF ACCOUNTING

The Company maintains its accounts under the historical cost convention, except for certain fixed assets which are revalued, on an accrual basis and complies in all material respects with Generally Accepted Accounting Principles in India. The Company has prepared these financial statements to comply in all material respects with Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended) and relevant provisions of the Companies Act, 1956.

1.2 USE OF ESTIMATES

The presentation of the financial statements, in conformity with the Generally Accepted Accounting Principles, requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and disclosure of contingent liabilities. Such estimates and assumptions are based on management''s evaluation of relevant facts and circumstances as on the date of the financial statements. The actual outcome may diverge from these estimates.

1.3 REVENUE RECOGNITION A - Product Sales

(a) Domestic sales of manufactured items are recognized on dispatch and are stated net of returns, discounts and rebates. Sales are recorded exclusive of sales tax.

(b) Export sales are recognized on date of bill of lading/ airway bill and/ or passing of rights to the customer, whichever is earlier and initially recorded at the relevant exchange rates prevailing on the date of transaction;

(c) Income on items delivered directly by suppliers/sub-contractors to the client is recognized on dispatch and receipt of suppliers''/sub-contractors'' invoices;

(d) Income on account of price variation is recognized on the acceptance of the claim by the client and on certainty of its realization.

B - Contract Revenue

(a) In case of certain long term contracts, revenue is recognized on ''Percentage of Completion Method.'' Percentage of completion is determined as a proportion of costs incurred to date to the total estimated contract costs. Contract costs include costs that relate directly to the specific contract and costs that are attributable to contract activity and allocable to the contract. Costs that cannot be attributed or allocable to contract activity are expensed as and when incurred.

(b) When the final outcome of a contract cannot be reliably estimated, contract revenue is recognized only to the extent of costs incurred that are expected to be recoverable. Expected loss is recognized immediately when it is probable that the total estimated contract costs will exceed total contract revenue.

(c) Variations and claims for escalation are recognized as a part of contract revenue to the extent it is probable that they will result in revenue and are capable of being reliably measured.

(d) Difference between costs incurred plus recognized profit/less recognized losses and the amount of invoiced sales is disclosed as Contracts-in-progress.

C - Service Revenue

Revenue from services are recognized as and when the services are performed.

D - Interest and Dividend Income

(a) Interest Income on deployment of surplus funds is recognized using the time proportion method, based on the underlying interest rates.

(b) Dividend is accrued in the year in which it is declared whereby the right to receive is established.

E - Export Benefits

Export benefits in the form of Duty Drawback (All Industry Rate) and DEPB are recognized on accrual basis.

1.4 TANGIBLE FIXED ASSETS

Fixed Assets are stated at cost, net of tax/duty credits availed less depreciation/amortization to date and impairment, if any, except in the case of certain items of land, buildings, plant and machinery and roads, water works and drainage, which are stated on the basis of the revalued cost less depreciation/ amortization to date and impairment, if any.

1.5 INTANGIBLE ASSETS

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any.

1.6 DEPRECIATION/AMORTIZATION

(a) Depreciation is computed on Straight Line Method on certain Buildings and Plant and Machinery, of Heavy Engineering Division and Foundry Division and all the fixed assets of Instrumentation Division, in the manner prescribed in Schedule xIV to the Companies Act, 1956.

Depreciation on the value written-up on revaluation, is calculated on straight line method over the residual technical life assessed by the valuer. Premium on leasehold land is amortized over the period of lease. Depreciation on all other fixed assets is computed on Written Down Value method in the manner prescribed in Schedule xIV to the Companies Act, 1956.

In respect of sites, which are integral foreign operations, depreciation is provided in the manner prescribed by local laws so as to write off the assets over their useful life.

(b) Intangible assets are amortized on a Straight Line Method over the estimated useful economic life and in particular:

i) Patents are amortized on the basis of life of Patents as specified in the Patent Documents;

ii) Technical Know-how is amortized in over a period of six years; and

iii) Computer Software, included in intangible assets, is amortized over a period of three years.

(c) Depreciation on additions to/ deletions from the fixed assets during the year is calculated on pro-rata basis from/ to the date of addition/ deletion.

1.7 CAPITAL WORK-IN-PROGRESS (INCLUDING INTANGIBLE ASSETS UNDER DEVELOPMENT)

Projects under commissioning and other Capital Work-in-Progress (Including Intangible Assets under Development) are carried at cost, comprising direct costs and related incidental expenses.

1.8 IMPAIRMENT OF ASSETS

Impairment is ascertained at each balance sheet date in respect of Cash Generating Units. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value based on an appropriate discounting factor.

1.9 INVESTMENTS

Investments of long term nature are stated at cost less provision for diminution in value, if such decline is other than temporary. Current investments are stated at lower of cost or fair value.

1.10 EMPLOYEE BENEFITS

(a) Short term employee benefits are those which are payable within twelve months of rendering service and are recognized as expense in the period in which the employee renders the related service. (b) Contributions to Provident Fund and Superannuation Fund, ESIC and Labour Welfare Fund which are defined contribution schemes are recognized as an expense in the Statement of Profit and Loss in the period in which the contribution is due.

(c) Gratuity liability is a defined benefit obligation and is provided for on the basis of actuarial valuation using the projected unit credit method at the end of each financial year. Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss.

(d) Long term compensated absences including leave encashment are provided for on the basis of actuarial valuation. Accumulated leave, which is expected to be utilized within next twelve months, is treated as short term employee benefits. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.

1.11 taxes ON INCOME

Tax expenses comprise of current and deferred tax.

Tax on income for the current period is determined on the basis of taxable income and tax credits computed in accordance with the provisions of the Income Tax Act, 1961. The tax rates and tax laws used to compute the amounts are those that are enacted or substantively enacted.

Deferred tax is recognized on timing differences between the accounting income and taxable income that originate in one period and are capable of reversal in one or more subsequent periods and is quantified using the tax rates and tax laws enacted or substantively enacted as on the Balance Sheet date. Deferred tax assets (representing unabsorbed depreciation or carried forward losses) are recognized to the extent that there is a virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realized.

1.12 BORROWING COSTS

Borrowing costs attributable to the acquisition, construction or production of qualifying assets are capitalized as part of such asset till the time the asset is ready for its intended use or sale. All other borrowing costs are recognized as an expense in the Statement of Profit and Loss in the period in which they are incurred.

1.13 INVENTORIES

Inventories are valued after providing for obsolescence, if any, as under:

(a) Raw materials, Components, Stores and Spares are valued at lower of cost or net realizable value. The cost includes freight inward, direct expenses, duties and taxes, other than those subsequently recoverable. In case of Heavy Engineering Division, it is arrived at on "FIFO Method" and other divisions on "Weighted Average Method".

(b) Costs of Dies, Jigs, Tools and Patterns purchased/ manufactured are charged off in relevant year, at lower of cost or net realizable value, arrived at after providing for suitable diminution/ amortization.

(c) Goods-in-transit are valued at costs incurred till the Balance Sheet date.

(d) Work-in-progress is valued at lower of cost or net realizable value. The cost includes direct material, direct labour, and appropriate overheads booked on normal level of activity. The expenditure on uncompleted contracts is amortized over the period of the contract on the basis of sales booked.

(e) Finished goods are valued at lower of cost or net realizable value. Cost includes related overheads and wherever applicable, excise duty.

1.14 FOREIGN CURRENCY TRANSLATION

(a) Initial recognition

Foreign currency transactions are reported in the reporting currency by applying to the foreign currency amount, the exchange rate between reporting currency and the foreign currency at the date of the transaction.

(b) Conversion

Foreign currency monetary items are re-instated using the exchange rate prevailing at the reporting date. Non-monetary items which are measured in terms of historical costs denominated in a foreign currency are reported using the exchange rate at the date of transaction. Non-monetary items which are measured at fair value or other similar valuation denominated in a foreign currency, are translated using the exchange rate at the date when such value was determined.

The financial statements of overseas sites of the company which are integral foreign operations are translated as if the transactions of the foreign operations have been those of the company itself.

(c) Exchange differences

The Company has opted to avail the option provided under Paragraph 46A of Accounting Standard 11 - The Effects of Changes in Foreign Exchange Rates, inserted vide Notification dated December 29, 2011. Accordingly, exchange differences on long term foreign currency monetary items are being dealt with in the following manner:

Foreign exchange difference on account of a depreciable asset is adjusted in the cost of the depreciable asset, which would be depreciated over the balance life of the asset. In other cases, the foreign exchange difference is accumulated in Foreign Currency Monetary Item Translation Difference Account and amortized over the balance period of such long term asset/ liability.

All other exchange differences are recognized as income or as expense in the period to which they relate.

(d) Premium or discount on forward exchange contracts for hedging an underlying asset/ liability, is recognized in the Statement of Profit and Loss over the period of the contract.

1.15 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

Provisions are recognized for liabilities that can be measured by using a substantial degree of estimation, if:

(a) the Company has a present obligation as a result of 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

Contingent Assets are neither recognized nor disclosed. Contingent Liabilities are not recognized, but are disclosed in Notes to Accounts. Provisions, Contingent Liabilities and Contingent Assets are reviewed at each balance sheet date.

1.16 LEASES

Assets acquired under leases where the significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases and lease rentals are charged to the Statement of Profit and Loss on accrual basis.

1.17 SEGMENT REPORTING

The accounting policies adopted for segment reporting are in line with the accounting policies of the company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue expenses, assets and liabilities which relate to the company as a whole and are not allocable to segments on reasonable basis have been included under unallocated revenue/expenses/assets/liabilities.

Information given, is in accordance with the requirements of Accounting Standard 17 on Segment Reporting, notified under the Companies (Accounting Standards) Rules, 2006 (as amended). The Company has identified business segments as the primary segment and geographical segment as secondary segment. Segments have been identified after taking into account the nature of the products, differential risk and returns, organizational structure and internal reporting system.

The Company''s Primary business segments are organized on product lines as follows:

(i) Heavy Engineering (also known as Industrial Machinery Division) - engaged in engineering, fabrication and manufacturing of Machinery for Sugar Plants, Cement Plants, Boilers and Power Plants, Industrial and Marine Gears, Mineral Processing and EPC, Petro-chemicals and Space, Defense and Nuclear Power Business;

(ii) Foundry and Machine Shop - Manufacturing of Grey and Ductile Iron Castings required by various industries and machining of components; and

(iii) Others - Non Reportable Segment includes units manufacturing Precision Instruments such as pressure and temperature gauges.

1.18 EARNINGS PER SHARE

The company reports basic and diluted earnings per share in accordance with Accounting Standard 20 - Earnings Per Share notified under the Companies (Accounting Standards) Rules, 2006 (as amended). Basic earnings per share are computed by dividing the net profit after tax by the weighted average number of equity shares outstanding during the year.

For the purpose of calculating Diluted Earnings per share, the net profit or loss for the period attributable to equity share holders and weighted average number of equity shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.

(b) TERMS AND RIGHTS ATTACHED TO EQUITY SHARES:

The Company has only one class of equity shares having par value of Rs. 2 per share. Each shareholder of equity share 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 approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

4 (ii) Corporate Loan of Rs. 7500 Lakhs (Rs. 4000 Lakhs from State Bank of India and Rs. 3500 Lakhs from Bank of India) at an interest rate of 12.50 % is secured by:

(a) First pari passu charge on specified demarcated fixed assets of the company''s Heavy Engineering Division.

(b) Mortgage of two specified immovable properties at Pune city.

(c) 2nd pari passu charge on current assets of the Company.

Foot Note- The non current trade receivables considered good of Rs. 1154.07 Lakhs includes Rs. 921.27 Lakhs ( Previous year Rs. 921.27 Lakhs) from parties against whom the company has initiated legal/ arbitration proceedings.


Sep 30, 2013

1.1 METHOD OF ACCOUNTING

The Company maintains its accounts under the historical cost convention, except for certain fixed assets which are revalued, on an accrual basis and complies in all material respects with generally accepted accounting principles in India. the Company has prepared these financial statements to comply in all material respects with Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended) and relevant provisions of the Companies Act, 1956.

1.2 use of estimates

The presentation of the financial statements in conformity with the generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and disclosure of contingent liabilities. Such estimates and assumptions are based on management''s evaluation of relevant facts and circumstances as on the date of financial statements. The actual outcome may diverge from these estimates.

1.3 revenue recognition

income is recognized on accrual basis, except where mentioned otherwise, in particular:

(a) Domestic sales of manufactured items are recognized on dispatch and are stated net of returns;

(b) Export sales are recognized on date of bill of lading/airway bill and/or passing of rights to the customer whichever is earlier and initially recorded at the relevant exchange rates prevailing on the date of transaction;

(c) income on items delivered directly by suppliers/sub-contractors to the client is recognized on dispatch and receipt of suppliers''/ sub-contractors'' invoices;

(d) income from project site activities is recognized on acceptance by the client on the basis of the work performed;

(e) income on account of price variation is recognized on acceptance of the claim by the client and on certainty of its realization;

(f) Revenue from long term projects of Special Products division involving dispatch, commissioning and erection is recognized on the basis of milestone specified in the contracts after matching costs and revenue at each stage; and

(g) dividend is accrued in the year in which it is declared whereby the right to receive is established.

1.4 tangible fixed ASSETS

Fixed Assets are stated at cost, net of tax/duty credits availed less depreciation/amortization to date and impairment, if any, except in the case of certain items of land, buildings, plant and machinery and roads, water works, drainage, which are stated on the basis of the revalued cost less depreciation/amortization to date and impairment, if any.

1.5 intangible ASSETS

intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any.

1.6 depreciation/amortization

(a) The depreciation is computed on the Straight-Line Method on certain Buildings and Plant & Machinery, of heavy Engineering Division and Foundry Division and all the fixed assets of Tiwac Division in the manner prescribed in Schedule XIV to the Companies Act, 1956.

The Depreciation on the value written up on revaluation is calculated on straight line method over the residual technical life assessed by the value.

Premium on leasehold land is amortized over the period of lease.

The depreciation on all other fixed assets is computed on the Written Down Value method in the manner prescribed in Schedule xiV to the Companies Act, 1956.

in respect of branches, which are an integral part of foreign operations, depreciation is provided in the manner prescribed by local laws so as to write off the assets over their useful life.

(b) intangible assets are amortized on a Straight Line basis over the estimated useful economic life and in case of:

(i) Patents are amortized on the basis of life of Patents as specified in the Patent Documents;

(ii) Technical Know-how is amortized on Straight Line Basis in six equal installments; and

(iii) Computer Software, included in intangible assets, is amortized over a period of three years.

(c) Depreciation on additions to/deletions from the fixed assets during the year is calculated on pro-rata basis from the date of addition/deletion.

1.7 Capital Work-in Progress (including intangible Assets under Development)

Projects under commissioning and other Capital Work-in-Progress (including intangible Assets under Development) are carried at cost, comprising direct cost and related incidental expenses.

1.8 impairment of ASSETS

impairment is ascertained at each balance sheet date in respect of Cash Generating units. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the net selling price and value in use. in assessing value in use, the estimated future cash flows are discounted to their present value based on an appropriate discount factor.

1.9 investments

investments of long term nature are stated at cost less provision for diminution in value, if such decline is other than temporary. Current investments are stated at lower of cost or net realizable value.

1.10 employee benefits

(a) Short term employee benefits are those which are payable within twelve months of rendering service and are recognized as expense in the period in which the employee renders the related service.

(b) Contributions to the Provident Fund and Superannuation Fund, ESiC and Labour Welfare Fund which are defined contribution schemes are recognized as an expense in the Statement of Profit and Loss in the period in which the contribution is due.

(c) Gratuity liability is a defined benefit obligation and is provided for on the basis of actuarial valuation using the projected unit credit method at the end of each financial year. Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss.

(d) Long term compensated absences including leave encashment are provided for on the basis of actuarial valuation. Accumulated leave, which is expected to be utilized within next twelve months, is treated as short term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.

1.11 taxes on income

Tax expenses comprise current and deferred tax.

Tax on income for the current period is determined on the basis of taxable income and tax credits computed in accordance with the provisions of the income Tax Act, 1961. The tax rates and tax laws used to compute amount are those that are enacted or substantively enacted.

Deferred tax is recognized on timing differences between the accounting income and taxable income that originate in one period and are capable of reversal in one or more subsequent periods and is quantified using the tax rates and tax laws enacted or substantively enacted as on the balance sheet date.

Deferred tax assets (representing unabsorbed depreciation or carried forward losses) are recognized to the extent that there is a virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realized.

1.12 borrowing costs

Borrowing costs attributable to acquisition, construction or production of qualifying assets are capitalized as part of such asset till the time the asset is ready for its intended use or sale. All other borrowing costs are recognized as an expense in the Statement of Profit and Loss in the period in which they are incurred.

1.13 inventories

inventories are valued after providing for obsolescence, if any, as under: -

(a) Raw materials, Components, Stores and Spares at lower of cost or net realizable value. The cost includes freight inward, direct expenses, duties and taxes other than those subsequently recoverable. in case of heavy Engineering Division, it is arrived at on "FiFo Method" and other divisions on "Weighted Average Method".

(b) Costs of Dies, Jigs, Tools, Mould Boxes and Patterns purchased/manufactured are charged off in relevant year at lower of cost or net realizable value, arrived at after providing for suitable diminution/amortization.

(c) Goods in transit at cost incurred till balance sheet date.

(d) Work in Progress at lower of cost or net realizable value. The cost includes direct material, direct labour, and appropriate overheads booked on normal level of activity. The expenditure on uncompleted contracts is amortized over the period of contract on the basis of sales booked.

(e) Finished Goods at lower of cost or net realizable value. Cost includes related overheads and wherever applicable excise duty.

1.14 Foreign CURRENCY Translation

(a) initial recognition

Foreign currency transactions are reported in the reporting currency by applying to the foreign currency amount the exchange rate between reporting currency and the foreign currency at the date of transaction.

(b) Conversion

Foreign currency monetary items are re-instated using the exchange rate prevailing at the reporting date. Non monetary items which are measured in terms of historical costs denominated in a foreign currency are reported using the exchange rate at the date of transaction. Non monetary items which are measured at fair value or other similar valuation denominated in a foreign currency, are translated using the exchange rate at the date when such value was determined.

The financial statements of foreign branches of the company which are integral to the operations are translated as if the transactions of the foreign operations have been those of the company itself.

(c) Exchange differences

The Company has opted to avail the choice provided under Paragraph 46A of AS-11; The Effects of Changes in Foreign Exchange Rates, inserted vide Notification dated December 29, 2011. Accordingly, exchange differences on long term foreign currency monetary items are being dealt with in the following manner:

Foreign exchange difference on account of a depreciable asset is adjusted in the cost of the depreciable asset, which would be depreciated over the balance life of the asset;

I n other cases, the foreign exchange difference is accumulated in a Foreign Currency Monetary item Translation Difference Account and amortized over the balance period of such long term asset/liability.

All other exchange differences are recognized as income or as expense in the period to which they relate.

(d) Premium or discount on forward exchange contracts is recognized in the Statement of Profit and Loss over the period of contract.

1.15 provisions, contingent liabilities and contingent ASSETS

Provisions are recognized for liabilities that can be measured only by using a substantial degree of estimation, if:

(a) the Company has a present obligation as a result of 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 Contingent Assets are neither recognized nor disclosed.

Contingent Liabilities are not recognized, but are disclosed in Notes to Accounts.

Provisions, Contingent Liabilities and Contingent Assets are reviewed at each balance sheet date.

1.16 LEASES

Assets acquired under leases where the significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases and lease rentals are charged to the Statement of Profit and Loss on accrual basis.

1.17 SEGMENT Reporting (Refer Note 34)

The accounting policies adopted for segment reporting are in line with the accounting policies of the company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue expenses, assets and liabilities which relate to the company as a whole and are not allocable to segments on reasonable basis have been included under unallocated revenue/expenses/assets/liabilities. information given is in accordance with the requirements of Accounting Standard 17 on Segment Reporting issued by the institute of Chartered Accountants of India.

The Company has identified business segments as the primary and geographic segment as secondary segment. Segment have been identified after taking into account the nature of the products, differential risk and returns, the organizational structure and internal reporting system.

The Company''s Primary business segments are organized on product lines as follows:

(i) Heavy Engineering (also known as industrial Machinery Division) - engaged in engineering, fabrication and manufacturing of Machinery for Sugar Plants, Cement Plants, Boilers & Power Plants, industrial & Marine Gears, Mineral Processing & EPC, Petro Chemicals and Space, Defense and Nuclear Power Business;

(ii) Foundry & Machine Shop - Manufacturing of Grey & Ductile iron Castings required by various industries and machining of components; and

(iii) others - Non Reportable Segment, includes units manufacturing Precision instruments such as pressure and temperature gauges.

1.18 earnings PER SHARE

The Company reports basic and diluted earnings per share in accordance with Accounting Standard 20, "Earning Per Share" notified under the Companies (Accounting Standards) Rules, 2006. Basic earnings per share are computed by dividing the net profit after tax by the weighted average number of equity shares outstanding during the year.

For the purpose of calculating Diluted Earnings per share, the net profit or loss for the period attributable to equity share holders and weighted average number of equity shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.


Sep 30, 2009

1. Method of Accounting:

The Company maintains its accounts under the historical cost convention on an accrual basis and complies in all material respects with generally accepted accounting principles in India and relevant provisions of Companies Act, 1956.

2. Use of Estimates:

The presentation of the financial statements in conformity with the generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and disclosure of contingent liabilities. Such estimates and assumptions are based on managements evaluation of relevant facts and circumstances as on the date of financial statements. The actual outcome may diverge from these estimates.

3. Revenue Recognition:

Income is recognised on accrual basis, except where mentioned otherwise, in particular:

(i) Domestic sales of manufactured items are recognised on dispatch and are stated net of returns.

(ii) Export sales are recognised on date of bill of lading/airway bill.

(iii) Income on items delivered directly by suppliers/sub-contractors to the client is recognised on despatch and receipt of suppliers/sub-contractorsinvoices.

(iv) Income from project site activities is recognised on acceptances by the client on the basis of the work performed.

(v) Income on account of price variation is recognised on acceptance of the claim by the client and on certainty of its realization.

(vi) Revenue from long term projects of Special Products Division involving despatch, commissioning and erection is recognized on the basis of milestone specified in the contracts.

4. Fixed Assets:

Fixed Assets are stated at cost, net of tax/duty credits availed, except in the case of certain items of land, buildings, plant and machinery and roads, water works, drainage, which are stated on the basis of the revalued cost.

5. Depreciation/Amortisation:

(i) The depreciation is computed on the Straight-Line Method on certain Buildings, Plant & Machinery and Furniture and Fixtures of Heavy Engineering Division and of Foundry Division and all the fixed assets of Tiwac Division in the manner prescribed in Schedule XIV to the Companies Act,1956.

The depreciation on all other fixed assets is computed on the Written Down Value method in the manner prescribed in Schedule XIV to the Companies Act, 1956.

In respect of Branches, which are integral foreign operations, depreciation is provided to write off the cost of assets in equal annual installments over their estimated useful lives over the contract period.

(ii) Depreciation on Patents is provided on the basis of life of Patents as specified in the Patent Documents.

(iii) Technical know-how is depreciated on Straight Line Basis in six equal installments.

(iv) Computer software included in intangible assets is amortized over a period of three years.

(v) Depreciation on additions to/deletions from the fixed assets during the year is calculated on pro-rata basis from the date of addition/deletion.

6. Capital Work-in-Progress:

Projects under commissioning and other Capital Work-in-Progress are carried at cost, comprising direct cost and related incidental expenses.

7. Impairment of Assets:

Impairment is ascertained at each balance sheet date in respect of Cash Generating Units. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value based on an appropriate discount factor.

8. Investments:

Investments of long term nature are stated at cost less permanent diminution in value, if any. Current Investments are stated at lower of cost or net realizable value.

9. Employee Benefits:

(i) Short term employee benefits are those which are payable within twelve months of rendering service and are recognized as expense in the period in which the employee renders the related service.

(ii) Contributions to the Provident Fund and Superannuation Fund which are defined contribution schemes are recognized as an expense in the Profit and Loss Account in the period in which the contribution is due.

(iii) Gratuity liability is a defined benefit obligation and is provided for on the basis of its actuarial valuation using the projected unit credit method at the end of each financial year. Actuarial gains and losses are recognized immediately in the Profit and Loss Account.

(iv) Long term compensated absences including leave encashment are provided for on the basis of actuarial valuation.

10. Taxes on Income:

Tax expenses comprise current and deferred tax.

Tax on income for the current period is determined on the basis of taxable income and tax credits computed in accordance with the provisions of the Income Tax Act, 1961.

Deferred tax is recognized on timing differences between the accounting income and taxable income that originate in one period and are capable of reversal in one or more subsequent periods and is quantified using the tax rates and tax laws enacted or substantively enacted as on the balance sheet date.

Deferred tax assets are recognized and carried forward 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 realized.

11. Borrowing Costs:

Borrowing costs attributable to acquisition, construction or production of qualifying assets are capitalized as part of such asset till the time the asset is ready for its intended use or sale. All other borrowing costs are recognised as an expense in the period in which they are incurred.

12. Inventories:

Inventories are valued after providing for obsolescence, if any, as under: -

(a) Raw materials, Components, Stores and Spares at lower of cost or net realizable value. The cost includes freight inward, direct expenses, duties and taxes other than those subsequently recoverable. In case of Heavy Engineering Division, it is arrived at on "FIFO Method" and for others on "Weighted Average Method".

(b) Dies, Jigs, Tools, Mould Boxes and patterns at lower of cost or net realizable value arrived at after providing for suitable diminution.

(c) Goods in transit at cost incurred till date.

(d) Work in Progress at lower of estimated cost or net realizable value. The cost includes direct material, direct labour, and appropriate overheads booked on normal level of activity. The expenditure on uncompleted contracts is amortised over the period of contract on the basis of sales booked.

(e) Finished Goods at lower of cost or net realisable value. Cost includes related overheads and excise duty.

13. Foreign Currency Transactions:

Foreign Currency Transactions are accounted at the rates prevailing on the date of transaction. Exchange differences arising on foreign currency transactions settled during the year are recognized in the profit and loss account.

All foreign currency denominated monetary assets and liabilities are translated at the exchange rate prevailing at the date of balance sheet and resultant exchange differences are recognized in the profit and loss account for the year.

In respect of branches, which are integral foreign operations, all transactions are translated at the rates prevailing on the date of transaction. Branch monetary Assets and Liabilities are restated at the year end rates, except for fixed assets and depreciation thereon which are restated at historical cost.

Premium or discount on forward exchange contracts is recognized in the profit and loss account over the period of contract.

14. Provisions, Contingent Liabilities and Contingent Assets:

Provisions are recognised for liabilities that can be measured only by using a substantial degree of estimation, if:

(a) the Company has a present obligation as a result of 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. Contingent Assets are neither recognised, nor disclosed.

Contingent Liabilities are not recognised, but are disclosed in Notes to Accounts.

Provisions, Contingent Liabilities and Contingent Assets are reviewed at each Balance Sheet date.

15. Research & Development Expenditure:

Revenue Expenditure is charged to Profit & Loss Account and Capital Expenditure is added to the cost of fixed assets in the year in which it is incurred.

16. Leases:

pAssets acquired under leases where the significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases and lease rentals are charged to the profit & loss account on accrual basis.

Assets leased out under operating lease are capitalized. Rental Income is recognised on accrual basis over the lease term.

17. Earnings per share:

The Company reports basic and diluted earnings per share in accordance with Accounting Standard 20, "Earnings Per Share" issued by the Institute of Chartered Accountants of India (ICAI). Basic earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding during the year.

Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earning per share is computed using the weighted average number of equity shares and potential dilutive equity shares outstanding at the year end.

18. Segment accounting policy: (Refer C).

B. RELATED PARTY DISCLOSURES:

Related party disclosures as required under Accounting Standard 18 issued by the ICAI are given below:

(a) Relationship:

(i) Individuals owning, directly or indirectly, an interest in the voting power of the reporting enterprise that gives them control or significant influence over the enterprise, and relatives of any such individual.

Mr. Chakor L. Doshi : Chairman

: Wife : Mrs. Champa C. Doshi

Son : Mr. Chirag C. Doshi : Daughter: Mrs. Kanika G. Sanger : Daughter-in-Law: Mrs.Tanaz Chirag Doshi (ii) Key Management personnel and relatives:

Mr. J. L. Deshmukh : Managing Director & CEO

Brother: Mr. Pratap L. Deshmukh Mr. Chirag C. Doshi : Managing Director

(iii) Enterprises over which any person described in (i) or (ii) above are able to exercise significant influence: Bombay Cycle & Motor Agency Ltd. Walchand Great Achievers Pvt. Ltd. Walchand Kamdhenu Commercials Pvt. Ltd. Chiranika Trading Pvt. Ltd. Chiranika Enterprises Chiranika Corporation

The Companys Primary business segments are organised on product lines as follows:

Heavy Engineering (also known as Industrial Machinery Division) - engaged in engineering, fabrication and manufacturing of Machinery for Sugar Plants, Cement Plants and Boilers, Heavy Duty Gears, Mineral Processing, EPC Petro Chemicals and Space, Defence and Nuclear Power Business.

Foundry & Machine Shop-Manufacturing of CI & SGI Castings required by various Industries and machining of components.

Others-Non-reportable segment, includes units manufacturing pressure and temperature gauges and Infotech Services.

Segment Accounting Policies:

Segment accounting policies are in line with the accounting policies of the Company. In addition the following specific accounting policies have been followed for segment reporting:

(i) Segment Revenue includes Sales and other income directly identifiable with/allocable to the segment including inter segment revenue.

(ii) Expenses that are directly identifiable with/allocable to segments are considered for determining the Segment Result. Expenses, which relate to the Company as a whole and not allocable to segments, are included under "Unallocated Expenditure".

(iii) Income which relates to the Company as a whole and not allocable to segments is included in "Unallocated Income".

(iv) Segment assets and liabilities include those directly identifiable with the respective segments.

Unallocated assets and liabilities represent the assets and liabilities that relate to the Company as a whole and not allocable to any segment.

(v) Inter-Segment Transfer Pricing

Segment Revenue resulting from transactions with other business segments is accounted on the basis of transfer price agreed between the segments. Such transfer prices are agreed on a negotiated basis.

(vi) The Company has identified geographical distribution between domestic sale and exports as the Secondary Segment.

The Revenue, Assets & Liabilities, to the extent possible to be identified separately have been reported.

 
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