NOTE 1 significant accounting policies to financial statements i. Method of Accounting (a) The financial statements are brpared on the historical cost convention and in accordance with the Generally Accepted Accounting Principles ('GAAP'). (b) The Company follows accrual system of accounting in the brparation of accounts except where otherwise stated. (c) The brparation of the financial statements in conformity with GAAP requires that the management of the Company makes estimates and assumptions that affect the reported accounts of income and expenses of the period, reported values of assets and liabilities and disclosures relating to contingent assets and liabilities as of date of the financial statements. Examples of such estimates include provisions for doubtful debts, provision for doubtful loans and advances, provisions for diminution in value of investments, estimated period of utility of software packages, provision for value of obsolete/non moving inventories etc. Actual results may differ from these estimates. ii. Fixed Assets (a) Fixed Assets are stated at actual cost less accumulated debrciation and impairment loss. Actual cost is inclusive of freight, installation cost, duties, taxes and other incidental expenses for bringing the asset to its working conditions for its intended use but is net of CENVAT. (b) Capital Work-in-Progress -All expenses incurred for acquiring, erecting and commissioning of fixed assets including interest on long term loans utilized for meeting capital expenditure and incidental expenditure incurred during construction of the projects are shown under capital work-in-progress and are allocated to the fixed assets on the completion of the respective projects. (c) Intangible Assets- (i) Revenue expenditure of specialized R&D Division including technical know-how fee incurred for development and improvement of technology, products and designs etc. which will generate probable future economic benefits are recognised as intangible assets.(ii) Purchase of computer software used for the purpose of operations is capitalised. However, any expenses on software support, maintenance, upgrade etc. payable periodically is charged to the Statement of Profit & Loss. iii. Leases (a) Finance Lease or similar arrangements, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized and disclosed as leased assets. Finance charges are charged directly against income. (b) Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased items are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss or on a basis, which reflect the time pattern of such payment appropriately. iv. Debrciation, Amortisation and Impairment (a) Debrciation is provided for on Buildings (including buildings taken on lease) and Plant & Machinery on straight line method and on other fixed assets on written down value method on the basis of useful life specified in Schedule II of the Companies Act, 2013. (b) Debrciation due to increase or decrease in the liability on account of exchange fluctuation or on account of rollover charges on forward exchange contract is provided prospectively over the residual life of the assets. (c) On assets acquired on lease (including improvements to the leasehold brmises), debrciation has been provided for on Straight Line Method on the basis of useful life specified in Schedule II of the Companies Act, 2013 or at the rates worked out on the basis of remaining useful life of the assets, whichever is higher. (d) Premium on leasehold land is amortised over the period of lease. (e) The Technical Know-how fees is written off over a period of six years from the year of the commencement of commercial production of the respective projects. Where the production has not commenced and the benefit of know-how is unlikely to accrue, the fee paid therefore is fully written off in the year in which it is so determined. (f) Intangible assets are amortised over a period of five years or life of the product considered at the end of each financial year whichever is earlier. Amortisation commences when the asset is available for use. (g) At the balance sheet date, an impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount. v. Investments (a) The cost of an investment includes incidental expenses like brokerage, fees and duties incurred prior to acquisition. (b) Long term investments are shown at cost. Provision for diminution is made only if, in the opinion of the management such a decline is other than temporary. (c) Investments which are intended to be held for less than one year are classified as current investments and are carried at lower of cost and fair value determined on an individual investment basis. (d) Advance against share application money are classified under the head "Investments". vii. Revenue Recognition (a) Sales & services include sales during trial run and excise duty recoverable. Liquidated damages are accounted for as and when they are ascertained. (b) Revenue in respect of long term turnkey works contracts is recognised under percentage of completion method subject to such contracts having progressed to a reasonable extent. Revenue in respect of other works contracts and services is recognised on completed contract method. (c) Insurance claims are accounted for as and when admitted by the concerned authority. viii. Foreign Currency Transactions (a) Transactions denominated in foreign currency are normally recorded at the exchange rate brvailing at the time of the transactions. (b) Monetary items denominated in foreign currency at the year end and not covered under forward exchange contracts are translated at the year end rates. (c) Any income or expense on account of exchange difference between the date of transaction and on settlement or on translation is recognised in the profit and loss account as income or expense. (d) I n case of forward exchange contracts, the brmium or discount arising at the inception of such contracts, is amortised as income or expense over the life of the contract. Further exchange difference on such contracts i.e. difference between the exchange rate at the reporting /settlement date and the exchange rate on the date of inception of contract/the last reporting date, is recognized as income/expense for the period except where the foreign currency liabilities have been incurred in connection with fixed assets acquired up to March, 2004 and subsequent thereto in case of fixed assets acquired from a country outside India, where the exchange differences are adjusted in the carrying amount of concerned fixed assets. ix. Provisioning/Write off of Doubtful Debts The trade receivables are continuously reviewed by the Management for ascertaining its recoverability. The receivables which are outstanding for more than three years from their respective due dates are written off to Statement of profit and loss. The debtors which are outstanding for more than two years but less than three years are provided for at 100% whereas debtors outstanding for more than one year but less than two years are provided for at 30% of the amount outstanding. No write off or provisions are made for specific cases where management is of the view that the amounts are recoverable even if falling under the aging as mentioned above. x. Borrowing Costs Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying asset are capitalized as part of cost of such asset. Other borrowing costs are recognized as an expense in the period in which they are incurred. xi. Excise and Customs Duty Excise duty payable on production is accounted for on accrual basis. Provision is made in the books of accounts for customs duty on imported items on arrival and lying in bonded warehouse and awaiting clearance. xii. CENVAT Credit The CENVAT credit available on purchase of raw materials, other eligible inputs and capital goods is adjusted against excise duty payable on clearance of goods produced. The unadjusted CENVAT credit is shown under the head " Short Term Loans and advances". xiii. Employees Benefits (Effective April 1, 2007, the Company has adopted the Revised Accounting Standard - 15(Revised-2005) 'Employee Benefits'. The relevant policies are: Short Term Employee Benefits Short term employee benefits are recognised in the period during which the services have been rendered. Long Term Employee Benefits a) Defined Contribution plan (i) Provident Fund and employees' state insurance schemes All employees of the Company are entitled to receive benefits under the Provident Fund, which is a defined contribution plan. Both the employee and the employer make monthly contributions to the plan at a brdetermined rate (brsently 12%) of the employees' basic salary. These contributions are made to the fund administered and managed by the Government of India. In addition, some employees of the Company are covered under the employees' state insurance schemes, which are also defined contribution schemes recognized and administered by the Government of India. The Company's contributions to both these schemes are expensed in the Statement of Profit and Loss. The Company has no further obligations under these plans beyond its monthly contributions. (ii) Gratuity The Company provides for gratuity obligations through a defined benefit retirement plan (the 'Gratuity Plan') covering all employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement or termination of employment based on the respective employee salary and years of employment with the Company. The Company provides for the Gratuity Plan based on actuarial valuations in accordance with Accounting Standard 15 (revised), "Employee Benefits "The Company makes annual contributions to the HDFC Standard Life Insurance Company Ltd for the Gratuity Plan in respect of employees. The brsent value of obligation under gratuity is determined based on actuarial valuation using Project 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. b) Other long term benefit Leave Encashment The Company has provided for the liability at period end on account of unavailed earned leave as per the actuarial valuation as per the Projected Unit Credit Method. c) Actuarial gains and losses are recognized as and when incurred. xiv. Preliminary, Securities issue expenses and Redemption brmium Preliminary, Securities issue expenses and Redemption brmium on bonds and debentures are adjusted against securities brmium account. xv. Research & Development Costs Revenue expenditure on research phase is charged to Statement of Profit & Loss in the year in which it is incurred. Capital Expenditure is added to the cost of fixed assets. xvi. Taxes on Income Tax expense comprises of current, deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. Unrecognized deferred tax assets of earlier years are re-assessed and recognized to the extent it has become reasonably certain that future taxable income will be available against which such deferred tax assets can be realized. xvii. Segment Reporting Segments are identified in line with the Accounting Standard on Segment Reporting (AS-17) taking into account the organization structure as well as the differential risk and returns of the segments. The unallocable items include income and expenses items which are not directly identifiable to any segment and therefore not allocated to any business segments. xviii. Earning Per Share In determining earnings per share, the Company considers the net profit after tax and includes the post-tax effect of any extra ordinary items. The number of shares used in computing basic earnings per share is the weighted average number of shares outstanding during the period. xix. Provisions, Contingent Liabilities and Contingent Assets Provisions involving substantial degree of estimation in measurement are recognised when there is a brsent obligation as a result of past events and it is provable that there will be a out flow of resources. Contingent liabilities are not recognized but are disclosed in the notes. Contingent assets are neither recognized nor disclosed in the Financial Statements. Previous years figures have been regrouped/reclassified wherever necessary and the figures have been rounded off to the nearest rupee. |