13.13 Provisions, Contingent Liabilities and Contingent Assets
A provision is recognized when the Company has a present obligation as a result of past event and it is probable
that an outflow of resources will be required to settle the obligation, in respect of which reliable estimate can be
made. Provisions (excluding retirement benefits) are not discounted to its present value and are determined
based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each
balance sheet date and adjusted to reflect the current best estimates.
Contingent liabilities are disclosed unless the possibility of outflow of resources is remote.
Contingent assets are neither recognized nor disclosed in the financial statements.
The estimated liability for product guarantee/warranties is recorded when products are sold. These estimates
are established using historical information on the nature, frequency and average cost of warranty claims and
management estimates regarding possible future incidence based on corrective actions on product failures. The
timing of outflows will vary as and when warranty claim will arise - being typically upto three years.
13.14 Foreign currency transactions and translations
Income and expenses in foreign currencies are converted at exchange rates prevailing on the date of the
transaction. Foreign currency monetary assets and liabilities are translated at the exchange rate prevailing on the
balance sheet date. Any income or expense on account of exchange difference either on settlement or on
translation is recognized in the Statement of Profit and Loss.
In respect of accounting periods commencing on or after 7th December, 2006, exchange difference arising on
reporting of the long-term foreign currency monetary items at rates different from those at which they were
initially recorded during the period, or reported in the previous financial statements are added to or deducted
from the cost of the asset and are depreciated over the balance life of the asset, if these monetary items pertain
to the acquisition of a depreciable fixed asset.
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