Mar 31, 2010
A System of Accounting:
i) The Company follows the Mercantile System of accounting and recognizes income and expenditure on accrual basis.
ii) Financial Statements are prepared on historical cost basis, adjusted for revaluation of certain fixed assets and as a going concern.
B. Revenue recognition on Sales:
The Company recognizes revenue on the sale of products when the risks or rewards of ownership passed to the customers. Turnover of sales is recorded inclusive of excise duty and net of sales tax.
C. Fixed Assets, Expenditure during Construction & Depreciation: Fixed Assets:
i) Fixed Assets are stated at their original cost (including expenses related to acquisition and installation) less depreciation.
ii) Fixed Assets acquired on lease are not capitalized and the lease rentals are absorbed in the Profit & Loss Account.
Expenditure during Construction:
All expenses incurred during the project construction period are accumulated and shown as capital work-in- progress until the assets are ready for use. These accumulated expenses are then allocated to the respective fixed assets on commissioning of the project.
i) Depreciation on all assets is provided on the straight line method at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956, as amended.
ii) No depreciation is provided on Leasehold Land.
D. Revenue Recognition in respect of Claims:
Claims in respect of Duty Entitlement Pass Book scheme are recorded in the year in which it is reasonable to expect ultimate collection thereof.
Long term investments are stated at cost of acquisition. Current Investments which have been reclassified as long term Investments are stated at lower of Cost or Market Value at the date of reclassification.
F. Valuation of Inventory:
Raw Materials are valued at cost. Work-in-process is valued at average cost of the relevant constituents. Finished Goods are valued at cost or Market Value whichever is less.
G. Foreign Currency Transactions:
i) Of Foreign Branches:
Revenue items except opening and closing Inventories and Depreciation are translated at the average rate of exchange. Depreciation is translated at the rates used for the translation of the values of the Assets on which Depreciation is calculated. Opening and closing inventories are translated at the opening and closing rate of exchange respectively. Monetary items are translated using the closing rate of exchange. Non-Monetary items other than Inventories are translated at the exchange rate prevailing on the transaction date. Balance in Head Office Account in the Branch Books is reported at the amount of the balance in the Branch Account in the Head Office Books. Net exchange difference resulting from the translation of the items in the financial statements of the Foreign Branch is recognized as Income or Expense of the year.
Transactions denominated in foreign currency are recorded at the exchange rate prevailing on the transaction date. Monetary items such as receivables, payables and loans denominated in foreign currency are translated at the exchange rate prevailing at the balance sheet date. Exchange differences arising on repayment of liabilities incurred for the purpose of acquiring fixed assets are adjusted in the carrying cost of the respective fixed assets. Other exchange differences arising on foreign currency transactions are recognized as income/ expenditure in the Profit and Loss Account.
H. Retirement benefits:
(a) Provident Fund: Contributions towards Employees Provident Fund are made to the Employees Provident Scheme in accordance with the statutory provisions
(b) Gratuity: The Company makes annual contribution to a Gratuity Fund administered by LIC. The Company accounts for liability for future gratuity benefits based on actuarial valuation, as at the balance sheet date, determined every year using the Projected Unit Credit Method by an Actuary appointed by the Company
(c) Leave Encashment: The Company has a scheme for leave encashment for employees, the liability for which is determined on the basis of a actuarial valuation carried out at the year end.
I. Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognized for liabilities that can be measured only by using a substantial degree of estimation, if
(a) the Company has a present obligation as a result of a past event,
(b) a probable outflow of resources is expected to settle the obligation; and
(c) the amount of the obligation can be reliably estimated.
Reimbursement expected in respect of expenditure required to settle a provision is recognized only when it is virtually certain that the reimbursement will be received. Contingent liability is disclosed in case of
(a) a present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation,
(b) a present obligation when no reliable estimate is possible; and
(c) a possible obligation arising from past events where the probability of outflow of resources is not remote. Contingent Assets are neither recognized, nor disclosed.
Provision, Contingent Liabilities and Contingent Assets are reviewed at each balance Sheet date.
Advance payment of tax including Tax Deducted at Source and its corresponding Provisions for Taxation for the year for which the income tax assessments are pending are shown under the head "Loans and Advances" and "Provisions" respectively.
Deferred Income Tax is provided using the liability method on ali temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are measured at the tax rates that are expected to apply to the period when the liability is settled, based on tax rates (and the tax laws) that have been enacted for the year under consideration.
Deferred Tax Asset is recognised subject to the consideration of prudence and where there is virtual certainty that sufficient future taxable income will be available against which such Deferred Tax Assets can be realised.
K. Miscellaneous Expenditure:
Miscellaneous expenditure of capital nature are written-off over a period of ten years.
L) Technical Know-How Fees:
Technical Know-how fees are amortized over the period of useful life being six years, on straight-line method.
M) Impairment of Assets:
An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value. An impairment loss is charged to the Profit and Loss Account in the year in which the asset is identified as impaired. The impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
N) Operating Lease
Lease of assets under which all the risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease payments under operating leases are recognized as an expense on accrual basis in accordance with the respective lease agreements.