NOTES FORMING PART OF THE FINANCIAL STATEMENT FOR THE YEAR ENDED MARCH 31st, 2016 Significant Accounting Policies (Note-1)
(i) Basis of Preparation
These financial statements have been prepared to comply with the Generally Accepted Accounting Principles in India (Indian GAAP), including the Accounting Standards notified under the relevant provisions of the Companies Act, 2013.
The financial statements are prepared on accrual basis under the historical cost convention. The financial statements are presented in Indian rupees. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year.
(ii) Use of Estimates
The preparation of financial statements requires management to make estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. The Estimate and assumptions used in the accompanying financial statement are based upon management evaluation of relevant facts and circumstances as at the date of the financial statements, which in its opinion are prudent and reasonable. Actual results could differ from those estimates. Any revision to accounting estimates is recognized prospectively in current & future periods.
(iii) Fixed Assets
Fixed assets are stated at their original cost of acquisition/revaluation, including taxes, freight, and other incidental expenses related to acquisition and installation of the concerned assets. Internally fabricated assets are valued at cost. Interest on borrowed funds attributable to acquisition/construction of fixed assets & related preoperative expenses up to the date of commencement of commercial production, are capitalized.
(iv) Capital Work In Progress
Project under commissioning and other capital work in progress are carried at cost, comprising direct cost, related incidental expenses and attributable interest.
(v) Depreciation
Depreciation on tangible fixed assets is provided on Straight Line Method (SLM). Depreciation is provided based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013. Saplings have been written off at the rate of 1/7th of the cost as per management estimates of useful life and the residual value is estimated to be nil, as the same does not have a mention in the Schedule II of the Companies Act, 2013.
(vi) Impairment of Assets
As at each Balance Sheet date, the carrying amount of assets is tested for impairment so as to determine
- the provision for impairment loss, if any, required or
- the reversal, if any, required of impairment loss recognized in previous periods.
Impairment loss is recognized when the carrying amount of assets exceeds its recoverable amount.
(vii) Government Grants
Grants in the nature of promoters contribution and in which repayment is ordinarily not expected are treated as a part of shareholders funds and credited to Capital Reserve.
Grants in relation to specific fixed assets are deducted from the cost of the fixed assets.
(viii) Inventories
The basis of valuation of inventories is as under:
- Raw material, semi-finished goods and finished goods are valued at lower of cost or net realizable value. The raw material costs are based on FIFO method. Further, in respect of the manufactured inventories i.e. process stock and finished goods; cost includes raw material cost plus conversion cost and other relatable manufacturing overheads.
- Stores, spares and scrap are valued at lower of cost or under.
- In Compliance with AS-2 Prescribed by ICAI, the company has included excise duty on stock of finished goods; however this has no impact on profit of the company for the year under review
(ix) Foreign Currency Transaction
Transaction in foreign currency is recorded at the exchange rate prevailing at the time of transaction. Exchange differences, if any, arising out of transactions settled during the year are recognized in the profit and loss account. In the case of assets and liabilities standing at the yearend date, the balances are stated at the rates prevailing at the year end and the exchange difference there on are adjusted in the profit and loss account.
In respect of forward contracts taken by the Company, the difference between the forward rate and the exchange rate at the end of transaction is recognized as income/expense over the life of the forward contract.
(x) Intangible Assets and its Amortization
The R&D expenditure on revenue account and capital accounts had been capitalized under the head Fixed Assets and are being amortized over a period of 10 Years
Other intangible assets recognized in the financial statements are amortized over the useful life of the asset.
(xi) 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.
- Sales:
Revenue from sale of goods is recognized when all the significant risks and rewards of ownership are transferred to the buyer and the Company retains no effective control of the goods transferred to a degree usually associated with ownership; and No significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of goods.
- Interest:
Interest income is recognized on a time proportion basis taking into account the amount outstanding held and the interest rate applicable.
- Dividend:
Dividend income is recognized as income when the right to receive the payment is established.
- Insurance and other claims:
Revenue in respect of claims is recognized when no significant uncertainty exists with regard to the amount to be realized and the ultimate collection thereof.
(xii) Employee Benefits
- Provident fund
The Company makes contribution to statutory provident fund in accordance with Employees' Provident Fund and Miscellaneous Provisions Act, 1952. The plan is a defined contribution plan and contribution paid or payable is recognized as an expense in the period in which services are rendered by the employee.
- Employees State Insurance
The Company makes contribution to Employees State Insurance scheme in accordance with Employees’ State Insurance Act, 1948. The scheme is a self-financing social security and health insurance scheme for workers and contribution paid or payable is recognized as an expense in the period in which services are rendered by the employee.
- Gratuity
Gratuity is a post-employment benefit and is in the nature of defined benefit plan. The liability recognized in the balance sheet in respect of gratuity is the present value of the defined benefit obligation at the balance sheet date together with adjustments for unrecognized actuarial gains or losses and past service costs. The defined benefit obligation is calculated annually by an independent actuary using the projected unit credit method.
Actuarial gains and losses arising from adjustments and changes in actuarial assumptions are charged or credited to the Profit and loss account in the year in which such gains or losses arise.
- Compensated absences
Eligible Compensated absences of employees are adjustable against leave which the employee may avail in the future.
(xiii) Taxation
The tax expense comprises of current taxes and deferred taxes. Current Tax is the amount of income tax determined to be payable in respect of taxable income for a period as per the provisions of Income Tax, 1961. Deferred tax is the effect of timing differences between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are reviewed at each balance sheet date and recognized/ derecognized only to the extent that there is reasonable/virtual certainty, depending on the nature of the timing differences, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
(xiv) Borrowing Costs
Borrowing costs that are 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 intended uses. All other borrowing costs are charged to revenue.
(xv) Earning per Share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders 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 of bonus issue and share split.
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.
(xvi) Common Expenses
Common expenses relating to Head office and other administrative offices have been allocated to various profit centre’s on a reasonable basis.
(xvii) Investments
Investments that are readily realizable and intended to be held for not more than one year are classified as current investments; all other investments are classified as long term investments. Long term Investment is carried at cost less provision (if any) for decline in value which is other than temporary in nature. Current investments are carried at lower of cost and fair market value.
(xviii) Leases
Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the lower of the fair value and present value of the minimum lease payments at the inception of the lease term. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalized.
If there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.
Leases, where the lesser effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease receipt/payments are recognized as an income/expense in the Statement of Profit and Loss account.
(xix) Rounding Off
Amounts have been rounded off to the nearest Rupee.
(xx) Provision, Contingent Liabilities & Contingent Assets
Provisions involving substantial degree of estimation in measurement are recognized when there is present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized but are disclosed in the notes. Contingent Assets are neither recognized nor disclosed in the financial statements.
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