| (i) Accounting convention
The financial statements are prepared under the historical cost
convention, as modified to include the revaluation of certain fixed
assets, and in accordance with applicable accounting standards and
relevant presentational requirements of the Companies Act, 1956.
(ii) Fixed assets
Fixed assets are stated at cost less accumulated depreciation, except
for land, buildings and plant and machinery acquired upto March 31,
1997, which were revalued as at December 31, 1997 and are, therefore,
stated at their net revalued amounts. Cost of acquisition or
construction is inclusive of freight, duties, taxes, incidental charges
and interest on loans taken and funds borrowed for the acquisition of
the assets upto the date of commissioning of the assets.
(iii) Depreciation
a) On buildings and plant and machinery acquired upto March 31, 1997
(which were revalued as at December 31,1997), depreciation has been
provided on a pro-rata basis on the Straight Line Method (SLM) at rates
arrived at on the basis of the balance useful life of the relevant
assets as determined by the valuer, or at the SLM rates and manner
specified in schedule XIV to the Companies Act, 1956, whichever is
higher.
b) Depreciation on buildings and plant and machinery acquired on or
after April 1, 1997 has been provided on a pro-rata basis on the SLM
method, at rates prescribed in Schedule XIV to the Companies Act, 1956,
except for the foreign exchange fluctuation on translation of foreign
currency liabilities for acqusition of fixed assets which are
depreciated over the remaining useful lives of the respective assets.
c) In respect of other assets, depreciation is charged on a pro-rata
basis at the Written Down Value Method at rates prescribed in Schedule
XIV to the Companies Act, 1956.
d) Leasehold land is not being amortised as the lease is a long lease.
(iv) Inventories
Stores and spares are valued at cost or under. Other items of
inventories (other than scrap) are valued at the lower of cost and net
realisable value. Scrap (included under raw materials) is valued at net
realisable value. The basis for determining cost for different
categories of inventory are as follows :
Stores, spares, raw materials and
packing materials Monthly weighted average cost.
Work in progress and finished goods
Monthly weighted average material cost, labour and appropriate share of
manufacturing and administrative overheads.
(v) Investments
Investments are stated at cost.
(vi) Sales
Sates are accounted for on despatch of goods from the factory to the
customers. Sales are net of returns and include excise duty but exclude
sales taxes.
(vii) Customs duty
Customs duty and countervailing duty on plant and machinery, raw
materials, stores and spare parts are accounted for on clearance of
goods from the customs warehouses.
(viii) Retirement benefits
The contribution to the superannuation, gratuity and provident funds
are charged against revenue each year.
(ix) Leave entitlement
Provision for leave entitlement is made in accordance with the rules of
the Company on arithmetical basis and not on an actuarial basis.
(x) Foreign currency transactions
Liabilities incurred for the acquisition of fixed assets are translated
at the exchange rate prevailing at the end of the year and the
gain/loss, on such translation is adjusted in the carrying cost of the
related fixed assets.
(xi) Research and development
Revenue expenditure is charged as an expense in the year in which it is
incurred. Capital expenditure is included in fixed assets.
(xii) Capital based grants
Subsidies or grants received in respect of fixed assets are treated as
a capital receipt and credited to capital reserve. Subsidies or grants
so received are not apportioned to the profit and loss account over the
life of the fixed assets in respect of which they have been received.
(xiii) Miscellaneous expenditure
"Expenditure incurred in connection with restructuring of long term
loans" represents the premium charged by financial institutions for
reducing the interest rates on restructuring loans, which is being
written off over the period to be benefited by the reduced interest
rates.
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