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Accounting Policies of Akzo Nobel India Ltd. Company

Mar 31, 2017

Background

Akzo Nobel India Limited (‘the Company'') was incorporated in India on 12 March 1954 as Indian Explosives Limited. A fresh certificate of incorporation consequent to the change in name to Akzo Nobel India Limited was issued by the Dy. Registrar of Companies, Kolkata on 15 February 2010 under Section 23(1) of the Companies Act, 1956. The Company is domiciled in India and is limited by shares. The registered office of the Company is situated in Kolkata (West Bengal). The Company is engaged in to the business of manufacturing, trading and selling of paints, chemicals and related products. The Company also provides research and development services and other services to the holding company and its group companies.

Note: 1 Significant accounting policies

This note provides a list of the significant accounting policies adopted in the preparation of these standalone financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.

a) Basis of preparation

(i) Compliance with Ind AS

The standalone financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.

The financial statements up to year ended 31 March 2016 were prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act.

(ii) Historical cost convention

The financial statements have been prepared on historical cost convention on a going concern basis, except for the following :-

- Certain financial assets and financial liabilities are measured at fair value.

- Defined benefit plans- plan assets are measured at fair value

- Share- based payments

(iii) Current and non-current classification

The Company presents assets and liabilities in the balance sheet based on current / non-current classification.

An asset is classified as current when it satisfies the following criteria:

- it is expected to be realized in or is intended for sale or consumption in the Company''s normal operating cycle.

- it is held primarily for the purpose of being traded;

- it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.

A liability is classified as current when it satisfies any of the following criteria:

- it is expected to be settled in the Company''s normal operating cycle;

- it is held primarily for the purpose of being traded;

- the Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Current assets/liabilities include current portion of noncurrent financial assets/liabilities respectively.

All other assets/ liabilities are classified as non-current.

Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.

Operating cycle

Based on the nature of the operations and the time between the acquisition of assets for processing and their realization in cash or cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current/ non-current classification of assets and liabilities.

b) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statement of the company are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency'').

The standalone financial statements have been prepared and presented in Indian Rupees (INR), which is the Company''s functional and presentation currency. All financial information presented in the financial statements have been

rounded to the nearest million as per Schedule III to the Companies Act 2013 unless otherwise stated.

(ii) Transactions and Balances

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognized in profit or loss.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equity instruments held at fair value through profit or loss are recognized in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equity investments classified as Fair Value through Other Comprehensive Income (FVOCI) are recognized in other comprehensive income.

c) Property, plant and equipment

Recognition and measurement

Freehold land is carried at historical cost. All other items Fixed Assets are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Cost comprises the purchase price, borrowing costs if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for its intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.

Subsequent costs and disposal

Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.

Gains or losses arising from derecognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.

Items such as spare parts, stand-by equipment and servicing equipment are recognized as property, plant and equipment when they meet the definition of property, plant and equipment. Otherwise, such items are classified as inventory. Capital work-in-progress excluding capital advances includes property, plant and equipment under construction and not ready for intended use as on Balance Sheet date.

Transition to Ind AS

On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment recognized as at 1 April 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment.

Depreciation

Depreciation on fixed assets is calculated using the straight line method (SLM) using rates determined based on management''s assessment of useful economic lives of the asset. Depreciation is provided at the rates equal to or higher than those prescribed in Part C of Schedule II to the Companies Act, 2013.

The above useful lives have been arrived at, based on technical assessment of the management, and are currently reflective of the estimated useful life of the fixed assets. The assets'' residual values and useful lives are reviewed at the end of each reporting period.

Leasehold land is amortized over the period of the lease and Leasehold improvements are amortized over the lower of useful life and the period of lease including the optional period, if any, available to the Company, where it is reasonably certain at the inception of lease that such option would be exercised by the Company.

d) Impairment of assets

An impairment loss is recognized for the amount by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

e) Intangible assets

(i) Customer relationships and Non-Compete fees

Separately acquired customer relationships and non compete fees are shown at historical cost. They have a finite useful life and are subsequently carried at cost less accumulated amortization and impairment losses.

(ii) Amortization

The Company amortizes intangible assets with a finite useful life using the straight-line method over the following periods:

f) Financial assets

(i) Classification

The Company classifies its financial assets in the following measurement categories:

- those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and

- those measured at amortized cost.

The classification depends on the Company''s business model for managing the financial assets and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit and loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.

The Company reclassifies debt investments when and only when its business model for managing those assets changes.

(ii) Measurement

At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial

asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

Debt instruments

Subsequent measurement of debt instruments depends on the Company''s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:

- Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. A gain or loss on a debt investment that is subsequently measured at amortized cost and is not part of a hedging relationship is recognized in the statement of profit and loss when the asset is derecognized or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.

- FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the asset''s cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognized in the statement of profit and loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss and recognized in other gains/ (losses). Interest income from these financial assets is included in other income using the effective interest rate method.

- Fair value through profit or loss (FVTPL): Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss and presented net in the statement of profit and loss within other gains/(losses) in the period in which it arises. Interest income from these financial assets is included in other income.

Investment in Mutual Funds and equity instruments

Investment in mutual funds and equity instruments are classified as fair value through profit or loss as they are not held within a business model whose objective is to hold assets in order to collect contractual cash flows and the contractual terms of such assets do not give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Where the Company''s management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit and loss. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable. Dividends from such investments are recognized in profit or loss as other income when the Company''s right to receive payments is established.

Changes in the fair value of financial assets at fair value through profit or loss are recognized in other gain/ (losses) in the statement of profit and loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.

Investment in bonds

Investment in bonds are financial assets with fixed or determinable payments that are not quoted in an active market. These are classified as financial assets measured at amortized cost as they fulfill both of the following conditions:

- Such assets are held within a business model whose objective is to hold assets in order to collect contractual cash flows.

- The contractual terms of such assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

The Company recognizes these assets on the date when they are originated and are initially measured at fair value plus any directly attributable transaction costs.

Trade Receivables

Trade receivables are financial assets with determinable payments that are not quoted in an active market. These are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, bank deposits and other short-term highly liquid investments/deposits with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdraft.

Other bank balances

Other bank balances consist of term deposits with banks, which have original maturities of more than three months. Such assets are recognized and measured at amortized cost (including directly attributable transaction cost) using the effective interest method, less any impairment losses, if any.

(iii) Impairment of financial assets

The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortized cost and FVOCI for debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

For trade receivables only, the Company applies the simplified approach permitted by Ind AS 109

- Financial Instruments, which requires expected lifetime losses to be recognized from initial recognition of the receivables.

(iv) Derecognition of financial assets

A financial asset is derecognized only when the Company has transferred the rights to receive cash flows from the financial asset, or retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.

Where the Company has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognized. Where the Company has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognized.

Where the Company has neither transferred a financial asset nor retained substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognized if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognized to the extent of continuing involvement in the financial asset.

(v) Income recognition Interest income

Interest income from debt instruments is recognized using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument but does not consider the expected credit losses.

Dividends

Dividends are recognized in profit and loss only when the right to receive payment is established, provided it is probable that the economic benefits associated with the dividend will flow to the Company, and the amount of the dividend can be measured reliably.

g) Financial Liabilities

(i) Trade and other payables

Trade and other payables represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are initially recognized at their fair value and subsequently measured at amortized cost using the effective interest method.

(ii) Borrowings (including finance lease payables)

Borrowings are initially recognized at fair value, net of transaction costs incurred and are subsequently measured at amortized cost.

Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in profit or loss over the period of the borrowings using the effective interest method.

Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss as other gains/(losses).

Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

h) Borrowing costs

Borrowing cost includes interest expense as per effective interest rate (EIR).

Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for its intended use or sale . All other borrowing costs are expensed in the period they occur.

EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortized cost of a financial liability. When calculating the EIR, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.

The Company enters into certain derivative contracts to hedge risks which are not designated as hedges. Such contracts are accounted for at fair value through profit or loss and are included in other income/ expenses as the case may be. The related asset/ liability are disclosed under other financial assets/other financial liabilities.

i) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.

j) Inventories

Raw materials, stores and spare parts, work in progress, traded and finished goods are stated at the lower of cost and net realizable value. Cost of raw materials and traded goods comprises cost of purchases. Cost of work in progress and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also include all other costs incurred in bringing the inventories to their present location and condition. Costs are assigned to individual items of inventory on weighted average basis. Costs of purchased inventory are determined after deducting rebates and discounts. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Excise duty on finished products is included in the value of finished products inventory.

k) Government grants

Grants from the government are recognized at their fair value when there is reasonable assurance that the grant will be received and the Company will comply with all attached conditions.

Government grant relating to the purchase of Property, Plant and equipment are included in current financial assets as accrued receivable and is credited to profit or loss on a straight line basis over the expected lives of the related assets and presented within other income.

l) Provisions

A provision is recognized when the Company has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, in respect of which a reliable estimate can be made of the amount of the obligation. Provisions are not recognized for future operating losses.

Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessment of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognized as interest expense. The unwinding of the discount is recognized as finance cost. Provisions are reviewed by the management at each reporting date and adjusted to reflect the current best estimates.

m) Contingent liabilities

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.

n) Employee benefits

(i) Short-term employee benefits

Liabilities for wages and salaries, including nonmonetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are classified as short-term employee benefits. These benefits include salaries and wages, short-term bonus, pension, incentives etc. These are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.

(ii) Post-employment benefits

The Company operates the following postemployment schemes:

Defined contribution plan

Defined contribution plans are provident fund scheme, superannuation scheme and part of the pension fund scheme for eligible employees. The Company recognizes contribution payable to the respective employee benefit fund as an expenditure, as and when they are due. The Company has no further payment obligations once the contributions have been made.

Defined benefit plans

Provident Fund

The Company makes specified monthly contributions towards employees'' provident fund to Trusts administered by the Company for certain employees. The minimum interest payable by the provident fund trusts to the beneficiaries every year is notified by the Government. The Company has an obligation to make good the shortfall of contribution and interest (basis the actuarial valuation), if any, as at the date of the Balance Sheet.

Gratuity & Pension

The liability or asset recognized in the balance sheet in respect of defined benefit pension fund and gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by an actuary using the projected unit credit method.

The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligations. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit and loss.

Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.

Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in the statement of profit and loss as past service cost.

Post employment medical obligations

The Company provides post-retirement healthcare benefits to certain categories of its employees. The entitlement to these benefits

is conditional on the employee retiring from the services of the Company, after completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit plans. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited in other comprehensive income in the period in which they arise.

Liability for unfunded post-retirement medical benefit is accrued on the basis of actuarial valuation as at the yearend by an actuary using the Projected Unit Credit Method.

o) Other long-term employee benefit obligations

The liabilities for annual leave, pension scheme for certain employees and long service awards are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore accrued using actuarial valuations and are measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligations. Re-measurement as a result of experience adjustments and changes in actuarial assumptions are recognized in the statement of profit of loss.

The obligations are presented as current liabilities in the balance sheet as the Company does not have an unconditional legal and contractual right to defer settlement for a period beyond twelve months after the reporting period.

p) Share based payments

The share based payments are in the nature of cash-settled share-based payment transactions. The fair value of the share based payments is recognized as an expense with a corresponding increase in the payables on a straight line basis over the vesting period after considering the vesting conditions. Under the plan, if certain parameters are met, then employee is entitled to equivalent value of shares post the completion of vesting period. The shares so awarded would vest in favour of the individual post completion of three years from the beginning of the year for which the award is given. On vesting, the eligible employees will be entitled to receive equivalent INR value, taking into account the market price of the share of the holding company.

q) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. The Company recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Company and specific criteria as per the respective arrangement have been met.

Amounts disclosed as revenue are inclusive of excise duty and net of returns, trade allowances, rebates, value added taxes and amounts collected on behalf of third parties.

The Company operates a loyalty programme where customers accumulate points for purchases made which entitle them to incentives. Revenue related to the award points is deferred and recognized when the points are redeemed.

Service income is recognized on accrual basis in the accounting period in which the services are rendered as per the contractual terms with the customers.

r) Income Taxes

The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and unused tax losses.

Tax expense comprises current and deferred tax.

Current and deferred tax is recognized in statement of profit and loss except to the extent that it relates to items recognized directly in equity or other comprehensive income. In this case, the tax is also recognized in equity or in other comprehensive income.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability that at the time of the transaction affects neither accounting profit nor taxable profit. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred tax assets are recognized for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

s) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.

Identification of segments

Results of the operating segments are reviewed regularly by the Country Leadership Team (Managing Director, Chief Financial Officer, Business Heads, Head HR) which has been identified as the Chief Operating Decision Maker (CODM), to assess the financial performance and position of the Company and make strategic decision.

Refer note 33 for reportable segments determined by the Company.

t) Leases

The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.

Arrangements containing a lease have been evaluated as on the date of transition i.e. 1 April 2015 in accordance with Ind-AS 101. Lease arrangements have been separately evaluated for finance or operating lease at the date of transition to Ind AS basis the facts and circumstances existing as at that date. Also, refer note 37 for the related transition provisions to Ind AS.

As a lessee

Leases of property, plant and equipment where the Company, as lessee, has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalized at the lease''s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in borrowings or other financial liabilities as appropriate. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the less or) are charged to profit or loss on a straight-line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the less or’s expected inflationary cost increases.

As a less or

Lease income from operating leases where the Company is a less or is recognized in income on a straight-line basis over the lease term unless the receipts are structured to increase in line with expected general inflation to compensate for the expected inflationary cost increases. The respective leased assets are included in the balance sheet based on their nature.

u) Earnings per share

Basic earnings per share are calculated by dividing the profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential of equity shares and the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.

v) Dividend

Provision is made for the amount of any dividend declared, being appropriately authorized and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.

w) Exceptional Items

Exceptional items are items which are events or transactions that are clearly distinct from the ordinary activities of the enterprise and, therefore, are not expected to occur frequently or regularly.

x) Rounding of amounts

All amounts disclosed in the financial statements and notes have been rounded off to the nearest million as per the requirement of Schedule III to the Companies Act, 2013 unless otherwise stated.


Mar 31, 2015

Basis of preparation of financial statements

The financial statements have been prepared under the historical cost convention on a going concern basis, on the accrual basis of accounting in accordance with the Generally Accepted Accounting Principles (GAAP) in India. Indian GAAP comprises mandatory accounting standards as specified under the section 133 of the Companies Act, 2013 read with Rule 7 of Companies (Accounts) Rules, 2014 and other accounting pronouncements of the Institute of Chartered Accountants of India. Accounting policies set out below have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

Current & non-current classification

All assets and liabilities are classified into current and non-current.

Assets

An asset is classified as current when it satisfies any of the following criteria:

- it is expected to be realised in, or is intended for sale or consumption in, the company's normal operating cycle;

- it is held primarily for the purpose of being traded;

- it is expected to be realised within 12 months after the reporting date; or

- it is cash or cash equivalent unless it is restricted from

being exchanged or used to settle a liability for at least 12 months after the reporting date.

Current assets include the current portion of non-current financial assets. All other assets are classified as non-current.

Liabilities

A liability is classified as current when it satisfies any of the following criteria:

- it is expected to be settled in the company's normal operating cycle;

- it is held primarily for the purpose of being traded;

- it is due to be settled within 12 months after the reporting date; or

- the company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in it settlement by the issue of equity instruments do not affect its classification.

Current liabilities include current portion of non-current financial liabilities. All other liabilities are classified as non-current.

Use of estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles in India (GAAP) require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements and the results of operations during the year. Differences between actual results and estimates are recognised in the year in which the results are known or materialised and, if material, their effects are disclosed in notes to financial statements. Examples of such estimates are estimated useful life of assets, provision for doubtful debts, income taxes, future obligations under employee retirement benefit plans, classification of assets/liabilities as current or non-current, etc. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

Fixed assets / Depreciation

Tangible fixed assets are carried at the cost of acquisition or construction, less accumulated depreciation and impairment loss, if any. The cost of fixed assets comprises of its purchase price, including import duties and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition for its intended use. Expenses directly attributable to new manufacturing facility during its construction period are capitalized. Know-how related to plans, designs and drawings of buildings or plant and machinery is capitalized under relevant tangible asset heads. Profit or Loss on disposal of tangible assets is recognised in the statement of Profit and Loss.

Capital work-in-progress and capital advances

Capital Work-in-progress excluding capital advances includes fixed assets under construction and not ready for intended use as on Balance Sheet date.

Depreciation on fixed assets other than leasehold improvements has been provided pro-rata to the period of use, on the straight line method, using rates determined based on management's assessment of useful economic lives of the asset. Depreciation is provided at the rates equal to or higher than those prescribed in Part C of Schedule II to the Companies Act, 2013.

Asset Category Estimated useful life (in years) to Financial Statements for the year ended 31 March 2015

(Amounts in Rupees million, unless stated otherwise)

During the current year, pursuant to the Companies Act, 2013 being effective from 1 April 2014, the Company has revised depreciation rates of fixed assets as per the useful life specified in Part 'C' of Schedule II of the Act, read with notification dated 29 August 2014 of the Ministry of Corporate Affairs, on the original cost/acquisition of assets or other amounts substituted for cost, except for the following classes of fixed assets which are depreciated as under:

a. Plant and Machinery under operating lease: 6 years

b. Furniture and fixtures (at stores): 3 years

The above useful lives have been arrived at, based on the technical assessment of the management, and are currently reflective of the estimated useful lives of the fixed assets (also refer note 3.8 of the financial statements).

Leasehold improvements are amortised over the lower of useful life or the period of lease including the optional period, if any, available to the Company, where it is reasonably certain at the inception of lease that such option would be exercised by the Company.

Revenue recognition

Revenue from sale of goods is recognised when significant risks and rewards of ownership are transferred to customers. Sales are stated inclusive of excise duty and net of rebates, returns, trade discounts and sales tax/VAT.

Service income is recognised on accrual basis as per the contractual terms with the customers, net of service tax.

Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

Dividend or other income from mutual fund investments is recognised on declaration of dividend or on redemption, as the case may be. Profit on sale of investments is recorded on transfer of title from the Company and is determined as the difference between the redemption price and carrying value of the investment.

Investments

Investments are classified into current and long-term investments. Investments that are readily realizable and intended to be held for not more than a year from the date of acquisition are classified as current investments. All other investments are classified as long-term investments. However, that part of long term investments expected to be realized within twelve months from Balance Sheet date is also presented under "Current Assets" under "Current portion of long term investments" in consonance with the current / non-current classification of revised Schedule III to the Companies Act, 2013.

Current investments are stated at the lower of cost and fair value. The comparison of cost and fair value is done separately in respect of each category of investments. Long-term investments are stated at cost. A provision for diminution in the value of long-term investments is made only if such a decline is other than temporary in the opinion of the management. On disposal of an investment, the difference between its carrying amount and net disposal proceeds is recognized in the statement of Profit and Loss.

Current investments are carried at the lower of cost and fair value.

Long term investments (including their current maturities) are stated at cost less amount written off, where there is a diminution in value, other than temporary.

Current assets

(a) Inventories

Stores and spare parts are valued at the lower of cost and net realisable value, computed on a weighted average basis.

Raw materials, packing materials and work-in-process are carried at cost, computed on a weighted average basis, after providing for obsolescence. In case there is a decline in replacement cost of such materials and the net realisable value of finished products in

which they will be used is expected to be below cost, the value of such materials and work-in- process is appropriately written down.

Finished products are valued at the lower of cost (computed on weighted average basis) and net realisable value.

Cost includes an appropriate portion of manufacturing and other overheads, where applicable. Excise duty on finished products is included in the value of finished products inventory.

(b) All other items of current assets are stated at cost after adequate provisions for any diminution in the carrying value.

Cash Flow Statement

Cash flows are reported using the indirect method, whereby, profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and items of income or expense associated with the investing or financing cash flows. The cash flows from operating, investing and financing activities of the company are segregated.

Foreign currency transactions

Foreign currency transactions are accounted for at the exchange rate prevailing on the date of the transaction. All monetary foreign currency assets and liabilities are converted at the exchange rates prevailing at the date of the balance sheet. All exchange differences other than in relation to acquisition of fixed assets and other long term foreign currency monetary liabilities are dealt with in the statement of Profit and Loss.

In case of foreign exchange forward contracts taken for underlying transactions, and covered by Accounting Standard 11, "Accounting for the effects of changes in foreign exchange rates", the premium or discount is amortised as income or expense over the life of the contract. The exchange difference

is calculated as the difference between the foreign currency amount of the contract translated at the exchange rate at the reporting date, or the settlement date where the transaction is settled during the reporting period, and the corresponding foreign currency amount translated at the later of the date of inception of the forward exchange contract and the last reporting date. Such exchange differences is recognised in the statement of Profit and Loss in the reporting period in which the exchange rates change.

Any profit or loss arising on the cancellation or renewal of such contracts is recognised as income or expense for the year.

Operating Lease

The assets given under operating lease are shown in the Balance Sheet under fixed assets and depreciated on a basis consistent with the depreciation policy of the Company.

Lease rentals are accounted on accrual basis in accordance with the respective lease agreements.

Lease payments under operating leases are recognised as an expense in the statement of Profit and Loss on a straight line basis over the lease term and disclosed as lease rent equalization reserve in the Balance Sheet.

Employee benefits

a) Short term employee benefits

All employee benefits payable /available within twelve months of rendering the service are classsified as short- term employee benefits. Benefits such as salaries, wages and bonus, etc., are recognised in the statement of Profit and Loss in the period in which the employee renders the related service.

b) Post -employment benefits Defined contribution plans

Defined contribution plans are provident fund scheme, superannuation scheme and part of the pension fund scheme for eligible employees. The Company's contribution to defined contribution plans are recognised in the statement of Profit and Loss in the financial year to which they relate.

The Company makes specified monthly contributions towards employees provident fund to trusts administered by the Company/Regional Provident Fund Commissioner; towards superannuation fund to trusts managed by Life Insurance Corporation of India; and towards pension fund to respective trusts administered by the Company, where established. Where such pension trusts have not been established, the Company makes provision for the liability as on the date of the Balance Sheet. The minimum interest payable by the provident fund trusts to the beneficiaries every year is notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return on investments of the trusts and the notified interest rate basis actual valuation as at the date of the Balance Sheet.

Defined benefit plans

Liability for funded post retirement gratuity, pension and unfunded post retirement medical benefit is accrued on the basis of actuarial valuation as at the date of the Balance Sheet using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured as the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plans, is based on the market yields of Government securities as at the Balance Sheet date, having maturity periods approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the statement of Profit and Loss. In case of funded schemes, differential between fair value of plan assets of the trusts and the present value of obligations, as per the actual valuation, is recognised as an asset or liability based on the assessment of related cash flows.

c) Other long term employee benefits

Entitlements to annual leave and sick leave and long term service awards are recognised when they accrue to employees. All leave entitlements can be

encashed only at the time of retirement/ termination of employment or may be availed during the term of employment, subject to a restriction on the maximum number of accumulation of leave entitlement days. The Company determines the liability for long term employee benefits on the basis of actuarial valuation as at the year end.

Research and development

Revenue expenditure on research and development, including contribution to research associations, is charged to the statement of Profit and Loss. Capital expenditure on tangible assets for research and development is shown as additions to fixed assets.

Earnings per share

The basic and dilutive earnings per share is computed by dividing the net profit attributable to equity shareholders for the year by the weighted average number of equity shares outstanding during the year. Dilutive earnings per share is computed and disclosed after adjusting the effects of all dilutive potential equity shares, if any, except when the results will be anti-dilutive.

Borrowing costs

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as a part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue.

Taxation

Income-tax expense comprises current tax (i.e. the amount of tax for the year determined in accordance with the Income-tax Act, 1961) and deferred tax charge or credit (reflecting the tax effects of timing differences between the accounting income and taxable income for the year). A provision is made for income tax, based on the tax liability computed, after considering tax allowances and exemptions. Provisions are recorded when it is estimated that our liability due to disallowances or other matters is probable. The deferred tax charge

or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantially enacted as of the Balance Sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty of realisation. However, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each Balance Sheet date and written down or written up to reflect the amount that is reasonably/ virtually certain (as the case may be) to be realised.

Minimum Alternative Tax ('MAT') under the provisions of the Income-tax Act, 1961 is recognised as current tax in the statement of Profit and Loss. The credit available under the Income-tax Act, 1961 in respect of MAT paid is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the period for which the MAT credit can be carried forward for set-off against the normal tax liability. MAT credit recognised as an asset is reviewed at each Balance Sheet date and written down to the extent the aforesaid convincing evidence no longer exists.

Provisions and contingent liabilities

The Company recognises a provision when there is a present obligation as a result of a past event and

it is more likely than not that there will be an outflow of resources embodying economic benefits to settle such obligation and the amount of such obligation can be reliably estimated. Where no reliable estimate can be made, disclosure is made as contingent liability. Provisions are not discounted to their present values and are determined based on the management's estimation of the outflow required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect current management estimates.

Contingent liabilites are disclosed in respect of possible obligations that have arisen from past events and the existence of which will be confirmed only by the occurence or non-occurrence of future events, not wholly within the control of the Company.

When there is an obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

Cash and cash equivalents

Cash and cash equivalents comprise cash and deposit with banks with an original maturity of 3 months or less. The Company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.

(ii) The Company has only one class of equity shares, having a par value of Rs 10 per share. Each shareholder is eligible to one vote per share held. The Company declares and pays dividend in Indian Rupees. The dividend proposed, if any, by the Board of Directors is subject to approval of shareholders in the ensuing Annual General Meeting. The repayment of equity share capital in the event of liquidation and buy back of shares is possible subject to prevalent regulations.

In the event of liquidation, normally, the equity shareholders are eligible to receive the remaining assets of the Company, after distribution of all preferential amounts, if any, in proportion to their shareholding.

With effect from 4 June 2012, Imperial Chemical Industries Limited, England ceased to be the holding company on allotment of new shares as per a scheme of amalgamation. The ultimate holding company is Akzo Nobel N.V, Netherlands ('the Promoter Group'), which does not hold any shares directly in the Company.

(iv) Number of equity shares of Rs 10 each bought back in the five years immediately preceding the Balance Sheet date, aggregates to 2,535,195 (2013-14: 5,336,281)

1. Adjustment against revaluation reserve of Rs 0.1 million (2013-14 : ' 0.1 million) in respect of depreciation on revalued assets.

2. Dividend proposed Rs 20 per share (2013-14Rs75 per share)

3. In a prior year, the erstwhile Akzo Nobel Car Refinishes India Private Limited (AN Car)(since amalgamated w.e.f. 1 April 2011 with the Company) had received an interest free advance of Rs 17 million in the nature of share application money from a fellow subsidiary, under an assignment of dues by Akzo Nobel International Chemicals B.V (the non-resident holding company of AN Car). AN Car had not allotted the shares or refunded the amount till 31 March 2011. In the previous year, an application had been made to the Foreign Investment Promotion Board (FIPB) for regularising the above transaction. Further, as directed by FIPB, the Company had referred the matter to the Reserve Bank of India (RBI) wherein the RBI approved the said amount be treated as a capital grant. Accordingly, the amount of Rs 17 million was transferred to the Capital Reserve.

(b) Provisions relating to indirect taxes are in respect of proceedings of various sales tax, excise duty, customs duty and other indirect tax cases, including those relating to divested businesses. Outflows in all these cases, including their timing and certainty, would depend on the developments/outcome in these cases, though, presently classified as short term due to uncertainty involved.

(c) Provisions relating to divested businesses (other than any indirect tax cases relating to such businesses) are in respect of existing / anticipated costs arising from divestment of businesses (Catalyst, Explosives,Rubber Chemicals, Uniqema, Paints Advanced Refinish and Adhesives) and subsidiaries (Quest International India Limited and Polyinks Limited). Outflows in these cases will depend upon settlement of demands/claims.

Consequent on receipt of provisional approval from authorities, the Company during the year, re-assessed the provision with regard to liability on sale of Catalyst business and the net impact of Rs 27 million has been disclosed as an exceptional item in the statement of Profit and Loss. The tax impact of the transfer is being evaluated and will be recognised in the period in which the transfer is consummated.

(d) Others relate to litigation matters in respect of sale of properties, demand for past arrears in respect of electricity, and provision for margin on expected sales returns.

(e) The utilisation of the above provisions would depend on the resolution of the related issues, though classified as long term or short term, based on the management's best estimates and information presently available.

(1) Land and buildings at certain locations were revalued on 1 October 1982 based on a valuation carried out by an independent valuer.

(2) Gross depreciation for the year includes depreciation of Rs 0.1 million (2013-14: Rs 0.1 million) on revalued assets charged against revaluation reserve.

(3) Title in certain immovable properties, taken over pursuant to the Scheme of Amalgamation is to be transferred in the name of the Company.

(4) * During the year, according to Schedule II of the Companies Act, 2013, the Company based on an internal assessment and independent technical evaluation carried out by external valuer, had reassessed the remaining estimated useful life of fixed assets with effect from 1 April 2014. Accordingly, th useful life of certain assets have been changed from the previous estimates.

(5) Pursuant to the Companies Act, 2013 ('the Act') being effective from 1 April 2014, the Company has changed the useful life specified in Part 'C' of Schedule II of the Act. As a result of this change, the depreciation charge for the year ended 31 March 2015 is higher by Rs 30 million. Further, based on the transitional provision provided in Note 7(b) of Schedule II to the Act, an amount of Rs 32 million net of adjustment of related tax impact of Rs 11 million has been debited to the opening balance of Retained earnings in respect of the fixed assets where life has expired as per the said Schedule as on 31 March 2014.

(1) Land and buildings at certain locations were revalued on 1 October 1982 based on a valuation carried out by an independent valuer.

(2) Gross depreciation for the year includes depreciation of Rs 0.1 million (2012-13: Rs 0.1 million) on revalued assets charged against revaluation reserve.

(3) Title in certain immovable properties, taken over pursuant to the Scheme of Amalgamation is to be transferred in the name of the Company.

Foot notes:

1. Investment in shares are fully paid up, except where indicated otherwise.

2. The non-convertible redeemable bonds carry a maturity face value of Rs 30,000 per bond with a zero coupon. The related income based on implicit yield to maturity has been accrued and included in Long term loans and advances. These have been considered as quoted based on their readily available resale prices.

3. Book and market value of investments :

Book value of unquoted investments in absolute value: Rs 55,129 (2013-14: Rs 55,129)

4. Fixed maturity plans of mutual funds wherever considered quoted are so considered based on readily available net asset values.

2. Advances to employees include housing advances given, against which the employees have submitted property title papers or other assets/documents as envisaged under the housing advance scheme.

Foot notes:

1. Fixed deposits held as margin money is against various guarantees issued by banks on behalf of the Company in favour of Government authorities.

2. The Company has credit facilities with certain banks against guarantee issued by the ultimate holding company.

3. The Company can utilise these balances only towards settlement of unclaimed dividends.


Mar 31, 2013

Basis of preparation of financial statements

The financial statements are prepared on accrual basis under the historical cost convention, modified to include revaluation of certain assets, in accordance with applicable Accounting Standards ("AS") specified in the Companies (Accounting Standards) Rules, 2006 and presentational requirements of the Companies Act, 1956.

All assets and liabilities have been classified as current or non- current as per the Company''s normal operating cycle and other criteria set out in Schedule VI to the Companies Act, 1956. Based on the nature of activities and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle within a period of twelve months for the purpose of current/non-current classification of its assets and liabilities.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles in India (GAAP) requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements and the results of operations during the year. Differences between actual results and estimates are recognised in the year in which the results are known or materialised. Examples of such estimates are estimated useful life of assets, provision for doubtful debts, classification of assets/liabilities as current or non-current, etc. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

Fixed assets/depreciation

Fixed assets are stated at cost or at revalued amounts less accumulated depreciation. Cost of fixed assets includes all incidental expenses and interest costs on borrowings, attributable to the acquistion of qualifying assets, up to the date of commissioning of such assets.

Depreciation is provided on the straight-line method over the useful life of fixed assets as estimated by the Management. The rates of depreciation prescribed in Schedule XIV to the Companies Act, 1956 are considered as the minimum rates. If the Management''s estimate of the useful life of the asset at the time of acquisition of the asset or of the remaining useful life on a subsequent review, is shorter than that envisaged in the aforesaid schedule, depreciation is provided at a higher rate based on Management''s estimate of the useful life/ remaining useful life. Pursuant to this policy, depreciation on assets at certain locations/types of assets has been provided at the rates based on the following estimated useful lives of fixed assets:

Leasehold land is amortised over the period of the lease. Leasehold improvements are amortised over the remaining period of lease, or the derived useful lives of assets as prescribed in Schedule XIV to the Companies Act, 1956, whichever is shorter.

Additional charge of depreciation on amount added on revaluation is adjusted against revaluation reserve.

Fixed assets individually costing up to Rs 5,000 are fully depreciated in the year of purchase.

The carrying amounts of the Company''s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset''s recoverable amount is estimated as higher of its net selling price and value in use. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the Statement of Profit and Loss. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset''s carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortisation, had no impairment loss been recognised.

Revenue recognition

Revenue from sale of goods is recognised when significant risks and rewards of ownership are transferred to customers. Sales are stated inclusive of excise duty and net of rebates, returns, export benefits, trade discounts and sales tax/VAT.

Service income is recognised on an accrual basis as per the contractual terms with the customers, net of service tax.

Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

Dividend or other income from mutual fund investments is recognised on declaration of dividend or on redemption, as the case may be.

Investments

Long term investments (including their current maturities) are stated at cost less amount written off, where there is a diminution in value, other than temporary.

Current investments are stated at lower of cost and fair value.

Current assets

(a) Inventories

Stores and spare parts are valued at the lower of cost and net realisable value, computed on a weighted average basis. Raw materials, packing materials and work-in-process are carried at cost, computed on a weighted average basis, after providing for obsolescence. In case there is a decline in replacement cost of such materials and the net realisable value of finished products in which they will be used is expected to be below cost, the value of such materials and work-in-process is appropriately written down.

Finished products are valued at the lower of cost (computed on weighted average basis) and net realisable value.

Cost includes an appropriate portion of manufacturing and other overheads, where applicable. Excise duty on finished products is included in the value of finished products inventory.

(b) All other items of current assets are stated at cost after adequate provisions for any diminution in the carrying value.

Foreign currency transactions

Foreign currency transactions are accounted for at the exchange rate prevailing on the date of the transaction. All monetary foreign currency assets and liabilities are converted at the exchange rates prevailing at the date of the balance sheet. All exchange differences are dealt with in the profit and loss account.

The Company enters into forward contracts to hedge the foreign currency risk associated with monetary foreign currency liabilities. The premium on the forward contracts is amortised over the period of the contract. Any profit or loss arising on the cancellation or renewal of such forward exchange contract is recognised as income or expense for the period. Exchange differences on such forward contracts are recognised in the Statement of profit and loss in the reporting period in which the exchange rates change.

Operating Lease

The assets given under operating lease are shown in the balance sheet under fixed assets and depreciated on a basis consistent with the depreciation policy of the Company. The net lease income is recognised in the Statement of profit and loss on a straight line basis over the period during which the benefit is derived from the leased assets.

Employee benefits

a) Short term employee benefits

All employee benefits payable/available within twelve months of rendering the service are classsified as short- term employee benefits. Benefits such as salaries, wages and bonus, etc., are recognised in the Statement of profit and loss in the period in which the employee renders the related service.

b) Post-employment benefits

Defined contribution plans

Defined contribution plans are provident fund scheme, superannuation scheme and part of the pension fund scheme for eligible employees. The Company''s contribution to defined contribution plans are recognised in the Statement of profit and loss in the financial year to which they relate.

The Company makes specified monthly contributions towards employees provident fund to trusts administered by the Company/Regional Provident Fund Commissioner; towards superannuation fund to trusts managed by Life Insurance Corporation of India; and towards pension fund to respective trusts administered by the Company, where established. Where such pension trusts have not been established, the Company makes provision for the liability as on the date of the Balance Sheet. The minimum interest payable by the provident fund trusts to the beneficiaries every year is notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return on investments of the trusts and the notified interest rate.

Defined benefit plans

Liability for funded post retirement gratuity, pension and unfunded post retirement medical benefit is accrued on the basis of actuarial valuation as at the date of the balance sheet using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured as the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plans, is based on the market yields of Government securities as at the balance sheet date, having maturity periods approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the Statement of profit and loss. In case of funded schemes, differential between fair value of plan assets of the trusts and the present value of obligations, as per the acturial valuation, is recognised as an asset or liability based on the assessment of related cash flows.

c) Other long term employee benefits

Entitlements to annual leave and sick leave and long term service awards are recognised when they accrue to employees. All leave entitlements can be encashed only at the time of retirement/termination of employment or may be availed during the term of employment, subject to a restriction on the maximum number of accumulation of leave entitlement days. The Company determines the liability for long term employee benefits on the basis of actuarial valuation as at the year end.

Research and development

Revenue expenditure on research and development, including contribution to research associations, is charged to the Statement of profit and loss. Capital expenditure on tangible assets for research and development is shown as additions to fixed assets.

Earnings per share

The Company reports basic and diluted earnings per equity share in accordance with Accounting Standard 20, Earnings per share, notified by the Companies (Accounting Standards) Rules, 2006. The basic and dilutive earnings per share are computed by dividing the net profit attributable to equity shareholders for the year by the weighted average number of equity shares outstanding during the period/year. Dilutive earnings per share is computed and disclosed after adjusting the effects of all dilutive potential equity shares, if any, except when the results will be anti-dilutive.

Borrowing costs

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as a part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue.

Taxation

Income tax expense comprises current tax and deferred tax charge or credit. Current tax provision is made based on the tax liability computed after considering tax allowances and exemptions under the Income Tax Act, 1961.

The deferred tax charge or credit and the corresponding deferred tax liability and assets are recognised using the tax rates that have been enacted or substantively enacted on the balance sheet date.

Deferred tax assets are recognised only to the extent there is reasonable certainty of realisation in future. In case there are unabsorbed depreciation or carry forward losses, deferred tax assets are recognised only if there is virtual certainty of realisation of such amounts. Deferred tax assets are reviewed at each balance sheet date to reassess their realisability.

The credits arising from Minimum Alternate Tax (MAT) paid are recognised as receivable only if there is convincing evidence that the Company will have sufficient taxable income in future years in order to utilise such credits.

Provisions and contingent liabilities

The Company recognises a provision when there is a present obligation as a result of a past event and it is more likely than not that there will be an outflow of resources embodying economic benefits to settle such obligations and the amount of such obligation can be reliably estimated. Provisions are not discounted to their present values and are determined based on the management''s estimation of the outflow required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect current management estimates.

Contingent liabilites are disclosed in respect of possible obligations that have arisen from past events and the existence of which will be confirmed only by the occurence or non-occurrence of future events, not wholly within the control of the Company.

When there is an obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.


Mar 31, 2012

Basis of preparation of financial statements

The financial statements are prepared on accrual basis under the historical cost convention, modified to include revaluation of certain assets, in accordance with applicable Accounting Standards ("AS") specified in the Companies (Accounting Standards) Rules, 2006 and presentational requirements of the Companies Act, 1956.

All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in the Revised Schedule VI to the Companies Act, 1956. Based on the nature of activities and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current/non-current classification of its assets and liabilities.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles in India (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements and the results of operations during the year. Differences between actual results and estimates are recognised in the year in which the results are known or materialise. Examples of such estimates are estimated useful life of assets, provision for doubtful debts, etc. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

Fixed assets/depreciation

Fixed assets are stated at cost or at revalued amounts less accumulated depreciation. Cost of fixed assets includes all incidental expenses and interest costs on borrowings, attributable to the acquisition of qualifying assets, up to the date of commissioning of such assets.

Depreciation is provided on the straight-line method over the useful life of fixed assets as estimated by the management. The rates of depreciation prescribed in Schedule XIV to the Companies Act, 1956, are considered as the minimum rates. If the management's estimate of the useful life of the asset at the time of acquisition of the asset, or of the remaining useful life on a subsequent review, is shorter than the envisaged in the aforesaid schedule, depreciation is provided at a higher rate based on the management's estimate of the useful life/remaining useful life. Pursuant to this policy, depreciation on assets at certain locations has been provided at the rates based on the following estimated useful lives of fixed assets:

Leasehold land is amortised over the period of the lease. Leasehold improvements are amortised over the remaining period of lease, or the derived useful lives of assets as prescribed in Schedule XIV to the Companies Act, 1956, whichever is shorter.

Additional charge of depreciation on amount added on revaluation is adjusted against revaluation reserve.

Fixed assets individually costing up to Rs 5,000 are fully depreciated in the year of purchase.

Fixed assets are reviewed for impairment on each Balance Sheet date, in accordance with AS 28 "Impairment of Assets".

Revenue recognition

Revenue from sale of goods is recognised when significant risk and rewards of ownership is transferred to customers.

Service income is recognised on an accrual basis as per the contractual terms with the customers, net of Service Tax.

Sales are stated inclusive of Excise Duty and net of rebates, export benefits, trade discounts and Sales Tax/VAT.

Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.

Dividend or other income from mutual fund investments is recognised on declaration of dividend or on redemption, as the case may be.

Investments

Long-term investments are stated at cost less amount written off, where there is a diminution in value, other than temporary.

Current investments are stated at lower of cost and fair value.

Current assets

(a) Inventories

Stores and spare parts are valued at lower of cost and net realisable value, computed on a weighted average basis.

Raw materials, packing materials and work-in-process are carried at cost, computed on a weighted average basis, after providing for obsolescence. In case there is a decline in replacement cost of such materials and the net realisable value of finished products in which they will be used is expected to be below cost, the value of such materials and work in process is appropriately written down.

Each item of finished products is valued at lower of cost (computed on weighted average basis) and net realisable value. Cost includes an appropriate portion of manufacturing and other overheads, where applicable. Excise Duty on finished products is included in the value of finished products inventory.

(b) All other items of current assets are stated at cost after adequate provisions for any diminution in the carrying value.

Foreign currency transactions

Foreign currency transactions are accounted for at the exchange rate prevailing on the date of the transaction. All monetary foreign currency assets and liabilities are converted at the exchange rates prevailing at the date of the Balance Sheet. All exchange differences are dealt with in the Profit and Loss Account.

The Company enters into forward contracts to hedge the foreign currency risk associated with monetary foreign currency liabilities. The premium on the forward contracts is amortised over the period of the contract. Any profit or loss arising on the cancellation or renewal of such forward exchange contract is recognised as income or expense for the period. Exchange differences on such forward contracts are recognised in the Statement of Profit and Loss in the reporting period in which the exchange rates change.

Operating lease

The assets given under operating lease are shown in the Balance Sheet under fixed assets and depreciated on a basis consistent with the depreciation policy of the Company. The net lease income is recognised in the Profit and Loss Account on a straight line basis over the period during which the benefit is derived from the leased assets.

Employee benefits

a) Short-term employee benefits

All employee benefits payable/available within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and bonus, etc, are recognised in the Profit and Loss Account in the period in which the employee renders the related service.

b) Post-employment benefits

Defined contribution plans

Defined contribution plans are provident fund scheme, superannuation scheme and part of the pension fund scheme for eligible employees.The Company's contribution to defined contribution plans are recognised in the Profit and Loss Account in the financial year to which they relate.

The Company makes specified monthly contribution towards employee provident fund to trusts administered by the Company/Regional Provident Fund Commissioner; towards superannuation fund to trusts managed by Life Insurance Corporation of India; and towards pension fund to respective trusts administered by the Company, where established. Where such pension trusts have not been established, the Company makes provision for the liability as on date of Balance Sheet. The minimum interest payable by the provident fund trust to the beneficiaries every year is notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return on investments of the trust and the notified interest rate.

Defined benefit plans

Liability for funded post-retirement gratuity, pension and unfunded post-retirement medical benefit is accrued on the basis of actuarial valuation as at the date of the Balance Sheet using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured as the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plans is based on the market yields of Government securities as at the Balance Sheet date, having maturity periods approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the Profit and Loss Account. In case of funded schemes, differential between fair value of plan assets of trusts and the present value of obligation as per acturial valuation is recognised as an asset or liability based on the assessment of related cash flows.

c) Other long-term employee benefits

Entitlements to annual leave and sick leave and long service awards are recognised when they accrue to employees. All leave entitlements can only be encashed at the time of retirement/termination of employment or may be availed during the term of employment, subject to a restriction on the maximum number of accumulation of leave entitlement days. The Company determines the liability for long term employee benefits on the basis of actuarial valuation as at the year end.

Research and development

Revenue expenditure on research and development including contribution to research associations is charged to statement of profit and loss. Capital expenditure on tangible assets for research and development is shown as additions to fixed assets.

Earnings per share

The Company reports basic and diluted earnings per equity share ('EPS') in accordance with Accounting Standard 20, Earnings Per Share, notified by the Companies (Accounting Standards) Rules, 2006. The basic and diluted Earnings Per Share is computed by dividing the net profit attributable to equity shareholders for the year by the weighted average number of equity shares outstanding during the period/year. Diluted Earnings Per Share is computed and disclosed after adjusting the effects of all dilutive potential equity shares, if any, except when the results will be anti-dilutive.

Borrowing costs

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as a part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue.

Taxation

Income Tax expense comprises current tax and deferred tax charge or credit. Current tax provision is made based on the tax liability computed after considering tax allowances and exemptions under the Income Tax Act, 1961.

The deferred tax charge or credit and the corresponding deferred tax liability and assets are recognised using the tax rates that have been enacted or substantively enacted on the balance sheet date.

Deferred tax assets arising from unabsorbed depreciation or carry forward losses are recognised only if there is virtual certainty of realisation of such amounts. Other deferred tax assets are recognised only to the extent there is reasonable certainty of realisation in future. Deferred tax assets are reviewed at each Balance Sheet date to reassess their realisability.

The credits arising from minimum alternate tax (MAT) paid are recognised as receivable only if there is convincing evidence that the Company will have sufficient taxable income in future years in order to utilise such credits.

Provisions and contingent liabilities

The Company recognises a provision when there is a present obligation as a result of a past event and it is more likely than not that there will be an outflow of resources embodying economic benefits to settle such obligations and the amount of such obligation can be reliably estimated. Provisions are not discounted to their present value and are determined based on the management's estimation of the outflow required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect current management estimates.

Contingent liabilites are disclosed in respect of possible obligations that have arisen from past events and the existence of which will be confirmed only by the occurence or non-occurrence of future events not wholly within the control of the Company.

When there is an obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.


Mar 31, 2011

Basis of preparation of financial statements

The financial statements are prepared on accrual basis under the historical cost convention, modified to include revaluation of certain assets, in accordance with applicable Accounting Standards ("AS") specified in the Compa- nies (Accounting Standards) Rules, 2006 and presentational requirements of the Companies Act, 1956.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles in India (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements and the results of operations during the year. Differences between actual results and estimates are recognised in the year in which the results are known or materialised. Examples of such estimates are estimated useful life of assets, provision for doubtful debts, etc. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

Fixed assets / depreciation

Fixed assets are stated at cost or at revalued amounts less accumulated depreciation. Cost of fixed assets includes all incidental expenses and interest costs on borrowings, attributable to the acquistion of qualifying assets, upto the date of commissioning of such assets.

Depreciation for the year is computed on the straight line method, as per the rates derived from useful lives of fixed assets as estimated by the management, or as prescribed in Schedule XIV to the Companies Act, 1956, whichever is higher. Accordingly, plant and machinery under operating lease are being depreciated over six years. Additional charge of depreciation on amount added on revaluation is adjusted against revaluation reserve.

Leasehold land is amortised over the period of the lease. Leasehold improvements are amortised over the remaining period of lease, or the derived useful lives of assets as prescribed in Schedule XIV to the Companies Act, 1956, whichever is shorter.

Fixed assets individually costing upto Rs 5,000 are fully depreciated in the year of purchase.

Fixed assets are reviewed for impairment on each Balance Sheet date, in accordance with AS 28 "Impairment of Assets".

Revenue recognition

- Revenue from sale of products is recognised when the products are despatched to customers, which coincides with the transfer of risks and rewards.

- Sales are stated inclusive of excise duty and net of rebates, trade discounts and sales tax/VAT

- Dividend or other income from mutual fund investments is recognised on declaration of dividend or on redemption, as the case may be.

Investments

- Long term investments are stated at cost less amount written off, where there is a diminution in value, other than temporary.

- Current investments are stated at lower of cost and fair value.

Current assets

(a) Inventories

- Stores and spare parts are valued at lower of cost and net realisable value, computed on a weighted average basis.

- Raw materials, packing materials and work-in-process are carried at cost, computed on a weighted average basis, after providing for obsolescence. In case there is a decline in replacement cost of such materials and the net realisable value of finished products in which they will be used is expected to be below cost, the value of such materials and work in process is appropriately written down.

- Each item of finished products is valued at lower of cost (computed on weighted average basis) and net realisable value. Cost includes an appropriate portion of manufacturing and other overheads, where applicable. Excise duty on finished products is included in the value of finished products inventory.

(b) All other items of current assets are stated at cost after adequate provisions for any diminution in the carrying value.

Foreign currency transactions

- Foreign currency transactions are accounted for at the exchange rate prevailing on the date of the transaction. All monetary foreign currency assets and liabilities are converted at the exchange rates prevailing at the date of the balance sheet. All exchange differences are dealt with in the profit and loss account.

- In case of forward exchange contracts, covered by Accounting Standard 11, the premium is amortised over the period of the contract. Any profit or loss arising on the cancellation or renewal of a forward exchange contract is recognised as income or expense for the year.

- Exchange difference is calculated as the difference between the foreign currency amount of the contract, translated at the exchange rate at the reporting date, or the settlement date where the transaction is settled during the reporting period, and the corresponding foreign currency amount translated at the later of the date of inception of the forward exchange contract and the last reporting date. Such exchange differences are recognised in the profit and loss account in the reporting period in which the exchange rates change.

Lease Transactions

- Operating Lease

The assets given under operating lease are shown in the balance sheet under fixed assets and depreciated on a basis consistent with the depreciation policy of the Company. The net lease income is recognised in the profit and loss account on a straight line basis over the period during which the benefit is derived from the leased assets.

Employee benefits

a) Short term employee benefits

All employee benefits payable /available within twelve months of rendering the service are classsified as short- term employee benefits. Benefits such as salaries, wages and bonus etc., are recognised in the profit and loss account in the period in which the employee renders the related service.

b) Post-employment benefits Defined contribution plans

Defined contribution plans are provident fund scheme and part of the pension fund scheme for eligible employees. The Companys contribution to defined contribution plans are recognised in the profit and loss account in the financial year to which they relate.

The Company makes specified monthly contribution towards employee provident fund and pension fund to respective trusts administered by the Company. The minimum interest payable by the provident fund trust to the beneficiaries every year is notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return on investments of the trust and the notified interest rate.

Defined benefit plans

Liability for funded post retirement gratuity and pension and unfunded post retirement medical benefit is accrued on the basis of actuarial valuation as at the date of the balance sheet. The obligation is measured as the present value of the estimated future cash flows. Actuarial gains and losses are recognised immediately in the profit and loss account. In case of funded schemes, differential between fair value of plan assets of trusts and the present value of obligation as per acturial valuation is recognised as an asset or liability based on the assessment of related cash flows.

c) Other long term employee benefits

Entitlements to annual leave and sick leave are recognised when they accrue to employees. All leave entitlements can only be encashed at the time of retirement/ termination of employment or may be availed during the term of employment, subject to a restriction on the maximum number of accumulation of leave entitlement days. The Company determines the liability for such accumulated leave entitlements on the basis of actuarial valuation as at the year end.

Research and development

Revenue expenditure on research and development including contribution to research associations is charged to profit and loss account. Capital expenditure on tangible assets for research and development is shown as additions to fixed assets.

Taxation

Income tax expense comprises current tax and deferred tax charge or credit. Current tax provision is made based on the tax liability computed after considering tax allowances and exemptions under the Income Tax Act, 1961.

The deferred tax charge or credit and the corresponding deferred tax liability and assets are recognised using the tax rates that have been enacted or substantively enacted on the balance sheet date.

Deferred tax assets arising from unabsorbed depreciation or carry forward losses are recognised only if there is virtual certainty of realisation of such amounts. Other deferred tax assets are recognised only to the extent there is reasonable certainty of realisation in future. Deferred tax assets are reviewed at each balance sheet date to reassess their realisability.

Provisions and contingent liabilities

The Company recognises a provision when there is a present obligation as a result of a past event and it is more likely than not that there will be an outflow of resources embodying economic benefits to settle such obligations and the amount of such obligation can be reliably estimated. Provisions are not discounted to their present value and are determined based on the managements estimation of the outflow required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to refect current management estimates.

Contingent liabilites are disclosed in respect of possible obligations that have arisen from past events and the existence of which will be confirmed only by the occurence or non-occurrence of future events not wholly within the control of the Company.

When there is an obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.


Mar 31, 2010

The financial statements are prepared on accrual basis under the historical cost convention, modified to include revaluation of certain assets, in accordance with applicable Accounting Standards ("AS") specified in the Companies (Accounting Standards) Rules. 2006 and presentational requirements of the Companies Act. 1956.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles in India (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements and the results of operations during the year. Differences between actual results and estimates are recognised in the year in which the results are known or materialised. Examples of such estimates are estimated useful life of assets, provision for doubtful debts, etc. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

Fixed assets / depreciation

Fixed Assets are stated at cost or at revalued amounts less accumulated depreciation. Cost of fixed assets includes all incidental expenses and interest costs on iionowings. attributable to the acquistion of the qualifying assets, upto the date of commissioning of the assets.

Depreciation for the year is computed on the straight line method, as per the rates derived from useful lives of fixed assets as estimated by the management, or as prescribed in Schedule XIV to the Companies Act. 1956, whichever is higher. Accordingly, plant and machinery under operating lease are being depreciated over six years. Additional charge of depreciation on amount added on revaluation is adjusted against revaluation reserve.

Intangible assets comprising Patents. Trademarks and Knowhow. arising from acquisition of businesses are amortised on a straight line method in line with AS 26 "Intangible assets".

Leasehold land is amortised over the period of the lease. Leasehold improvements are amortised over the remaining period of lease, or the derived useful lives of assets as prescribed in Schedule XIV to the Companies Act, 1956, whichever is shorter.

Fixed assets individually costing upto Rs 5,000 are fully depreciated in the year of purchase.

Fixed assets are reviewed for impairment on each Balance Sheet date, in accordance with AS 28 "Impairment of Assets".

Revenue recognition

- Revenue from sale of products is recognised when the products are despatched against orders from customers in accordance with the contract terms, which coincides with the transfer of risks and rewards.

- Sales are stated inclusive of excise duty and net of rebates, trade discounts and sales tax/VAT.

- Dividend or other income from mutual fund investments is recognised on declaration of dividend or on redemption. as the case may be.

Income from sale of properties

Income from the sale of properties is accounted on transfer of the risk and benefits in the property to the purchaser. Investments

- Long term investments are stated at cost less amount writen off, where there is a diminution in value, other than temporary.

- Cut rent investments are stated at lower of cost and fair value.

Current assets

(a) Inventories

- Stores and spare parts are valued at cost or under, computed on a weighted average basis.

- Raw materials, packing materials and work-in-process are carried at cost, computed on a weighted average basis, after providing for obsolescence. In case there is a decline in replacement cost of such materials and the net realisable value of finished products in which they will be used is expected to be below cost, the value of such materials and work in process is appropriately written down.

- Each item of finished products is valued at lower of cost (computed on weighted average basis) and net realisable value. Cost includes an appropriate portion of manufacturing and other overheads, where applicable. Excise duty on finished products is included in the value of finished products inventory.

(b) All other items of current assets are stated at cost after adequate provisions for any diminution in the carrying value.

Foreign currency transactions

- Foreign currency transactions are accounted for at the exchange rate prevailing on the date of the transaction. All monetary foreign currency assets and liabilities are converted at the exchange rates prevailing at the date of the balance sheet. All exchange differences are dealt with in the profit and loss account.

- In case of forward exchange contracts, covered by Accounting Standard 11, the premium is amortised over the period of the contract. Any profit or loss arising on the cancellation or renewal of a forward exchange contract is recognised as income or expense for the year.

- Exchange difference is calculated as the difference between the foreign currency amount of the contract translated at the exchange rate at the reporting date, or the settlement date where the transaction is settled during the reporting period and the corresponding foreign currency amount translated at the later of the date of inception of the forward exchange contract and the last reporting date. Such exchange differences are recognised in the profit and loss account in the reporting period in which the exchange rates change.

Lease Transactions

- Operating Lease

The assets given under operating lease are shown in the balance sheet under fixed assets and depreciated on a basis consistent with the depreciation policy of the Company. The net lease income is recognised in the profit and loss account on a straight line basis over the period during which the benefit is derived from the leased assets.

Employee benefits

a) Short term employee benefits

All employee benefits payable /available within twelve months of rendering the service are classsified as short-term employee benefits. Benefits such as salaries, wages and bonus etc., are recognised in the profit and loss account in the period in which the employee renders the related service.

b) Post-employment benefits

Defined contribution plans

Defined contribution plans are provident fund scheme and part of the pension fund scheme for eligible employees.The Companys contribution to defined contribution plans are recognised in the profit and loss account in the financial year to which they relate.

The Company makes specified monthly contribution towards employee provident fund and pension fund to the respective trusts administered by the Company. The minimum interest payable by the provident fund trust to the beneficiaries every year is notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return on investments of the trust and the notified interest rate.

Defined benefit plans

Liability for funded post retirement gratuity and pension and unfunded post retirement medical benefit is accrued on the basis of actuarial valuation as at the date of the balance sheet. The obligation is measured as the present value of the estimated future cash flows. Actuarial gains and losses are recognised immediately in the profit and loss account. In case of funded schemes, differential between fair value of plan assets of the trusts and the present value of obligation as per actuarial valuation is recognised as an asset or liability based on the assessment of related cash flows.

c) Other long term employee benefits

Entitlements to annual leave and sick leave are recognised when they accrue to employees. All leave entitlements can only be encashed at the time of retirement/ termination of employment or may be availed during the term of employment, subject to a restriction on the maximum number of accumulation of leave entitlement days. The Company determines the liability for such accumulated leave entitlements on the basis of actuarial valuation as at the year end.

Research and development

Revenue expenditure on research and development including contribution to research associations is charged to profit and loss account. Capital expenditure on tangible assets for research and development is shown as additions to fixed assets.

Taxation

Income tax expense comprises current tax, fringe benefit tax and deferred tax charge or credit. Current tax provision is made based on the tax liability computed after considering tax allowances and exemptions under the Income Tax Act, 1961.

The deferred tax charge or credit and the corresponding deferred tax liability and assets are recognised using the tax rates that have been enacted or substantially enacted on the balance sheet date.

Deferred tax assets arising from unabsorbed depreciation or carry forward losses are recognised only if there is virtual certainty of realisation of such amounts. Other deferred tax assets are recognised only to the extent there is reasonable certainty of realisation in future. Deferred tax assets are reviewed at each balance sheet date to reassess their realisability.

Provisions and Contingent Liabilities

The Company recognises a provision when there is a present obligation as a result of a past event and it is more likely than not that there will be an outflow of resources embodying economic benefits to settle such obligations and the amount of such obligation can be reliably estimated. Provisions are not discounted to their present value and are determined based on the managements estimation of the outflow required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect current management estimates.

Contingent liabilites are disclosed in respect of possible obligations that have arisen from past events and the existence of which will be confirmed only by the occurence or non-occurrence of future events not wholly within the control of the Company.

When there is an obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

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