1.1 Significant accounting policies
(i) 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.
(ii) Security Premium Account
Share Premium account includes difference between consideration received in respect of shares and face value of shares.
(iii) Fixed assets
Fixed Assets are carried at cost less accumulated depreciation and impairment losses, if any. The cost of fixed assets includes interest on borrowings attributable to acquisition of qualifying fixed assets up to the date the asset is ready for its intended use and other incidental expenses incurred up to that date. Subsequent expenditure relating to fixed assets is capitalised only if such expenditure results in an increase in the future economic benefits from such asset beyond its previously assessed standard of performance in accordance with AS -10 (Revised) "Property, Plant and Equipment".
(iv) Depreciation
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value.
Depreciation on tangible fixed assets of the Company has been provided on the straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on independent technical evaluation and management's assessment thereof, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc.:
(v) Borrowing costs
Borrowing cost that are attributable to the acquisition and construction of a qualifying assets are capitalized as a part of the cost of the asset. Other borrowing cost are recognised as an expense in the year in which they are incurred.
(vi) Inventories
Inventories are valued as follows:
a) Raw materials, components, stores and spares
Raw materials, stores, spares & other components are valued at lower of cost and net realizable value. However, materials and other items held for use in the production of finished goods are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost is determined on a First in First out Basis and includes all applicable overheads in bringing the inventories to their present location and condition.
b) Work-in-progress and finished goods
Finished goods are valued at lower of cost and net realizable value. Cost of work in pogress includes direct materials and direct labour and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion to make the sale.
(vii) Revenue recognition
Revenue from the sale of goods is recognised on dispatch of appropriation of goods in accordance with the terms of sale and is net of excise duty, incentive on sales including commission, rebates and discounts. Exports sales are recognised on the basis of the date of bill of lading/airways bill.
(viii) Income taxes
Tax expense comprises both current and 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, 1961 enacted in India.
Deferred income taxes reflect the impact of current year timing differences between taxable income and accounting income during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using 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 reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
(ix) Earning Per Share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
(x) Provision and contingent Liabilities
The company creates aprovision where there is present obligation as a result of a past event that probably requires an outflow of resourse & a relaible estimate can be made of the amount of the obligation. Disclosures for a contingent laibility is made when there is a possible obligation or a present obligation that may , but probably will not, require an outflow of resources. where there is a possible obligation or a present obligation that the likelihood of outflow of resources is remote, no provision or disclosure is made.
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