The financial statements are prepared on a historical cost convention on the accrual basis and materially comply with the accounting standard notified by Companies (Accounting Standards) Rules, 2008 and relevant provisions of the Companies Act, 1956.

ii) Fixed Assets

Fixed assets are stated at cost of acquisition less accumulated depreciation. All costs including financial costs till commencement of commercial production are capitalized. In case of net charges arising from exchange rate variations relating to borrowings attributable to the fixed assets were capitalized till 31.03.2005 and on revision of Accounting standard 11 "The Effects of Changes in Foreign Exchange Rates (Revised 2003)" the same are being charged to Statement of Profit & Loss.

iii) Depreciation

Depreciation on fixed assets (excluding intangible assets) of the Company is provided on straight-line method at the rates and in the manner specified in schedule XIV of the Companies Act, 1956, so as to write-off 95% of the original cost of the assets, except depreciation on incremental cost arising on account of translation of foreign currency liabilities for fixed assets capitalized upto 31.03.2005, which is being amortized over the residual life of the assets. The company has, on the basis of technical opinion, treated the Plant & Machinery as continuous process plant and charged the depreciation accordingly. Depreciation on intangible assets is provided on straight-line method, equivalent to cost of assets over a period of 10 years.

iv) Inventories

a) Inventories are valued at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and selling expenses. Cost in respect of raw material and store & spares parts are computed on FIFO basis. Cost in respect of process and finished goods are computed on weighted average basis method. Finished goods and process stock includes cost of conversion and other costs incurred in acquiring the inventory and bringing them to their present location and condition.

b) Waste is valued at estimated net realizable value.

v) Excise Duty

In view of the excise duty exemption route adopted by the Company from 13.07.2004 vide notification no. 30/2004 - dated 09.07.2004 of Central Excise Act, 1944 "Exemption to specified goods of public interest", the Company does not have obligation for payment of excise duty from that date.

vi) Revenue Recognition

a) Sales are shown inclusive of export benefits, job receipts and are net of returns, discount, rebates and claims.

b) Export benefits are recognized in the Profit & Loss account when the right to receive credit as per the terms of the scheme is established in respect of the exports made.

vii) Borrowing Cost

Borrowing costs, which are attributable to acquisition or construction of qualifying assets, are capitalized as part of cost of such assets till such assets are ready for its intended use. A qualifying asset is one, which necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue.

viii) Retirement Benefits

a) The Employee and Company make monthly fixed contribution to Government of India employee's provident fund equal to a specified percentage of the covered employee's salary, provision for the same is made in the year in which services are rendered by the employee.

b) The Liability of gratuity to employees, which is a defined benefit plan, is determined on the basis of actuarial valuation based on projected unit credit method. Actuarial gain/loss in respect of the same is charged to the profit and loss account.

c) Leave encashment benefits to eligible employees has been ascertained on actuarial basis and provided for. Actuarial gain/loss in respect of the same is charged to the profit and loss account.

ix) Foreign Currency Transactions/Exchange Fluctuation

a) Monetary transactions related to foreign currency are accounted for at the equivalent rupee converted at the rates prevailing at the time of respective transactions and outstanding in respect thereof are translated at year end rates except for the debts which are doubtful of recovery.

b) Non-monetary foreign currency items are carried at cost.

x) Provisions, Contingent Liabilities and Contingent Assets.

Provisions involving substantial degree of estimation in measurement are recognized when there is a 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 on financial statement. Contingent assets are neither recognized nor disclosed in the financial statement.