C) Significant Accounting Policies:
a) Revenue Recognition:
Revenue from sale of goods is recognized when the significant risks and rewards of ownership
have been transferred to the buyer, recovery of the consideration is probable, the associated cost
can be estimated reliably, there is no continuing effective control or managerial involvement with
the goods, and the amount of revenue can be measured reliably.
Revenue from sale of goods is measured at the fair value of the consideration received or
receivable, taking into account contractually defined terms of payment and excluding taxes or
duties collected on behalf of the government.
Interest income is recognized on time proportion method.
D.E.P.B. and DFRC (Balance) licenses at market rate. Export Incentives are accounted on
Entitlement basis.
Dividend Income is recognized when the unconditional right to receive the income is established.
b) Borrowing Cost:
Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets
are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for its intended use. Borrowing costs includes exchange
differences arising from foreign currency borrowings to the extent they are regarded as an
adjustment to the interest cost.
All other borrowing costs are recognized in profit and loss in the period in which they are
incurred.
c) Tax Expenses:
The tax expense for the period comprises current and deferred tax.
- Current tax
Current tax assets and liabilities are measured at the amount expected to be recovered from
or paid to the taxation authorities, based on tax rates and laws that are enacted or
substantively enacted atthe Balance sheet date.
- Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets
and liabilities in the financial statements and the corresponding tax bases used in the
computation of taxable profit.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in
the period in which the liability is settled or the asset realized, based on tax rates (and tax
laws) that have been enacted or substantively enacted by the end of the reporting period. The
carrying amount of deferred tax liabilities and assets are reviewed at the end of each
reporting period.
d) Employee Benefit:
- Short Term Employee Benefits
The undiscounted amount of short-termemployee benefits expected to be paid in exchange
for the services rendered by employees are recognized as an expense during the period when
the employees render the services.
- Long Term Employee Benefits
Liabilities recognized in respect of other long- term employee benefits such as Gratuity, is
measured at the present value of the estimated future cash outflows expected to be made by
the company in respect of services provided by employees up to the reporting date.
- Post-Employment Benefits-
i) Defined Contribution Plans
A defined contribution plan is a post-employment benefit plan under which the
Company pays specified contributions to a separate entity. The Company makes
specified monthly contributions towards Provident Fund and Pension Scheme. The
Company's contribution is recognized as an expense in the Statement of Profit and Loss
during the period in which the employee renders the related service.
ii) Defined Benefit Plans
For Defined benefit plans, the cost of providing benefits is determined using projected
unit credit method, with actuarial valuation being carried out at the end of each annual
reporting period. Re-measurement, comprising actuarial gains and losses and the return
on plan asset (Excluding net interest), is reflected immediately in balance sheet with a
charge or credit recognized in the statement of Profit and Loss in the period in which they
occur. Net interest is calculated by applying the discount rate at the beginning of the
period to the net defined benefit liability or asset. Defined benefit costs are categorized
as follows.
i) Service cost
ii) Net interest expense or income
iii) Re-measurement
e) Property, Plant and Equipment (Fixed Asset, Depreciation &Amortization):
Property, plant and equipment (Fixed Assets) are stated at cost, net of recoverable taxes, trade
discount and rebates less accumulated depreciation and impairment losses, if any. Such cost
includes purchase price, borrowing cost and any cost directly attributable to bringing the assets
to its working condition for its intended use, net changes on foreign exchange contracts and
adjustments arising from exchange rate variations attributable to the assets.
Subsequent costs are included in the asset's carrying amount or recognize das a separate asset,
as appropriate, only when it is probable that future economic benefits associated with the item
will flow to the entity and the cost can be measured reliably.
Depreciation is charged on pro rata basis at straight line method over estimated economic
useful lives of its property, plant and equipment generally in accordance with that provided in
the schedule II to the act.
f) Inventories:
Raw-material, Stock-in-process and Stores are valued at cost. Inventory of Finished Goods are
measured at lower of cost and net realizable value after providing for obsolescence, if any,
except in case of by products which are valued at net realizable value. Cost of inventories
comprises of cost of purchase, cost of conversion and other costs including manufacturing
overheads net of recoverable taxes incurred in bringing them to their respective present
location and condition.
g) Impairment of non-fmancial assets-Property, Plant and Equipment (Fixed Assets):
The company assesses at each reporting date as to whether there is any indication that any
property, plant and equipment of group of assets, called cash generating units(CGU) may be
impaired If any. When it is not possible to estimate the recoverable amount of an individual
asset, the Company estimates the recoverable amount of the CGU to which the asset belongs.
An impairment loss is recognized in the Statement of Profit and Loss to the extent, asset's
carrying amount exceeds its recoverable amount. The recoverable amount is higher of an
asset's fair value less cost of disposal and value in use. Value in use is based on the estimated
future cash flows, discounted to their present value using pre-tax discount rate that reflects
current market assessments ofthetime value ofmoney and risk specific to the assets.
The impairment loss recognized in prior accounting period is reversed if there has been a
change in the estimate of recoverable amount.
h) Foreign currencies transaction and translation:
Transactions in Foreign currencies are recorded at the exchange rate prevailing on the date of
transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the
functional currency closing rates of exchange atthe reporting date.
Exchange differences arising on settlement or translation of monetary items are recognized in
Statement of Profit and Loss except to the extent of exchange differences which are regarded as an
adjustment to interest costs on foreign currency borrowing.
That are directly attributable to the acquisition or construction of qualifying assets, are capitalized
as cost of assets.
i) Cash flow statement:
Cash flows are reported using the indirect method, whereby profit/(loss) after tax is adjusted for
effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipt
or payments. The cash flows from operating, investing and financing activities of the company are
segregated based on the available information.
j) Earnings per share:
Basic earnings per share is computed by dividing the profit after tax by weighted average number
of equity shares outstanding during the year.
Diluted earnings per share is computed by dividing the profit after tax as adjusted for interest and
other charges to expense or income relating to dilutive potential equity shares, by the weighted
average number of equity shares considered for deriving earning per share.
k) Investment:
Non-Currentlnvestments are stated at cost price. Provision for diminution in the value of non¬
current investment is made only if such a decline is other than temporary in the opinion of the
management.
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