(A) Use of estimates
The preparation of financial statements in conformity with Indian GAAP requires the
management to make judgments, estimates and assumptions that affect the reported
amounts of revenues, expenses, assets and liabilities and the disclosure of contingent
liabilities, at the end of the reporting period. Although these estimates are based on the
management's best knowledge of current events and actions, uncertainty about these
assumptions and estimates could result in the outcomes requiring a material adjustment
to the carrying amounts of assets or liabilities in future periods.
(B) Tangible fixed assets
Fixed Assets are stated at cost of acquisition and installation, net of CENVAT, VAT and
GST less accumulated depreciation. Borrowing costs incurred during the period of
construction/acquisitions of assets are added to the cost of Fixed Assets. Major expenses
on modification / alterations increasing efficiency / capacity of the plant are also
capitalized.
Subsequent expenditure related to an item of fixed asset is added to its book value only
if it increases the future benefits from the existing asset beyond its previously assessed
standard of performance. All other expenses on existing fixed assets, including day-to¬
day repair and maintenance expenditure and cost of replacing parts, are charged to the
statement of profit and loss for the period during which such expenses 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.
(C) Depreciation on Tangible Fixed Assets
Depreciation on tangible fixed assets has not been provided for the financial year.
(D) Borrowing Costs
Borrowing cost includes interest, amortization of ancillary costs incurred in connection
with the arrangement of borrowings and exchange differences arising from foreign
currency borrowings to the extent they are regarded as an adjustment to the interest
cost. Borrowing costs directly attributable to the acquisition, construction or production
of an asset that necessarily takes a substantial period of time to get ready for its intended
use or sale are capitalized as part of the cost of the respective asset. All other borrowing
costs are expensed in the period they occur.
(E) Impairment of Tangible Assets
The company assesses at each reporting datewhether there is an indication that an asset
may be impaired. If any indication exists, or when annual impairment testing for an asset
is required, the company estimates the asset's recoverable amount. An impairment loss
is recognised in the accounts to the extent the carrying amount exceeds, the recoverable
amount.
(F) Income taxes
Current tax is determined as the amount of tax payable in respect of taxable income for
the year.
Deferred tax if recognized, on difference between taxable income and accounting income
that originate in one period and are capable of reversal in one or more subsequent
periods. Where there is an unabsorbed depreciation or carry forward loss, deferred tax
assets are recognised only to the extent there is reasonable certainty of realization in
future. Such assets are reviewed at each balance sheet date to reassess realization.
(G) Investments
Investments, which are readily realizable and intended to be held for not more than one
year from the date on which such investments are made, are classified as current
investments. All other investments are classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost comprises purchase
price and directly attributable acquisition charges such as brokerage, fees andduties.
Current investments are carried in the financial statements at lower of cost and fair
value determined on an individual investment basis. Long-term investments are carried
at cost. However, provision for diminution in value is made to recognize a decline other
than temporary in the value of the investments.
On disposal of an investment, the difference between its carrying amount and net
disposal proceeds is charged or credited to the statement of profit and loss.
(H) Inventories
Raw materials and stores and spares are valued at lower of cost and net realizable value.
However, materials and other items held for use in the production of inventories are not
written down below cost if the stores and spares are determined on FIFO basis.
Work-in-progress and finished goods are valued at lower of cost and net realizable value.
Cost includes direct materials and labour and a proportion of manufacturing overheads
based on normal operating capacity. Cost of finished goods includes excise duty and is
determined on First-in-First-out basis.
Waste is valued at net realizable value.
Net realizable value is the estimated selling price in the ordinary course of business, less
estimated costs of completion and estimated costs necessary to make the sale.
(I) Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will
flow to the company and the revenue can be reliably measured. The following specific
recognition criteria must also be met before revenue is recognized
Sale of goods
Revenue from sale of goods is recognized when all the significant risks and rewards of
ownership of the goods have been passed to the buyer, usually on delivery of the goods.
Interest
Interest income is recognized on a time proportion basis taking into account the amount
outstanding and the applicable interest rate. Interest income is included under the head
“other income” in the statement of profit and loss.
(J) Government grants and subsidies
Grants and subsidies from the government are recognized when there is reasonable
assurance that the company will comply with the conditions attached to them, and the
grant / subsidy will be received.
When the grant or subsidy relates to revenue, it is recognized as income on a systematic
basis in the statement of profit and loss over the periods necessary to match them with
the related costs, which they are intended to compensate. Such grants are deducted in
reporting the related expense. Where the grant relates to an asset, it is recognized as
deferred income and released to income in equal amounts over the expected useful life
of the related asset.
Government grants of the nature of promoters' contribution are credited to capital
reserve
and treated as a part of the shareholders’ funds.
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