1. Basis for preparation of financial statements
The financial statements are prepared under historical cost convention,
on accrual basis, in accordance with the generally accepted accounting
principles in India and to comply with the Accounting Standards
prescribed in the Companies (Accounting Standards) Rules, 2006 issued
by the Central Government in exercise of the power conferred under
sub-section (1) (a) of Section 642 and the relevant provisions of the
Companies Act, 1956 (the Act).
2. Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent liabilities on the date of
the financial statements and the results of operations during the
reporting periods. Although these estimates are based upon management''s
best knowledge of current events and actions, actual results could
differ from those estimates and revisions, if any, are recognized in
the current and future periods.
3. Fixed Assets and Depreciation/Amortisation
(i) Fixed assets are stated at cost less accumulated
depreciation/amortisation. Cost comprises the purchase price and any
attributable cost of bringing the asset to its working condition for
its intended use.
(ii) Fixed assets under construction, advances paid towards acquisition
of fixed assets and cost of assets not ready for use as at the year-
end, are disclosed as capital work-in- progress.
(iii) Expenses incurred relating to project prior to commencement of
commercial production are classified as Pre-operative expenses pending
allocation and are disclosed under Capital work in progress (net of
income earned during the project development stage).
(iv) Depreciation on fixed assets is provided on straightline method
(except intangible assets which are amortised over the period of three
years) on pro rata basis from the date of addition at the rates and in
the manner prescribed in Schedule XIV to the Companies Act, 1956 which
are as under:
Asset category Rate of Depreciation/
Amortization
Computers 16.21% p.a.
Office equipments 4.75% p.a.
Furniture and
fixtures 6.33% p.a.
Vehicles 9.50% p.a.
Building 1.63% p.a.
Leasehold
improvements Over the period of lease
or estimated useful life,
if shorter
Assets costing Rs. 5,000 or less are individually depreciated at the
rate of one hundred percent.
4. Revenue Recognition
Interest income
Income from interest is accounted for on time proportion basis taking
into account the amount outstanding and the applicable rate of
interest.
5. Taxation
Provision for tax comprises current income tax and deferred tax.
Current income tax is determined in respect of taxable income with
deferred tax being determined as the tax effect of timing differences
representing the difference between taxable income and accounting
income that originate in one period, and are capable of reversal in one
or more subsequent period(s). Such deferred tax is quantified using
rates and laws enacted or substantively enacted as at the end of the
financial year.
6. Foreign Currency Transactions
Transactions in foreign currency and non monetary assets are accounted
for at the exchange rate prevailing on the date of the transaction. All
monetary items denominated in foreign currency are converted at the
year end exchange rate. The exchange differences arising on such
conversion and on settlement of the transactions are recognized in the
Pre-operative expenses pending allocation account.
7. Employee Benefits
Expenses and liabilities in respect of employee benefits are recorded
in accordance with Revised Accounting Standard 15 - Employee Benefits
(Revised 2005)
i) Gratuity
Gratuity is a post employment benefit and is in the nature of a 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 at or near the balance sheet date by an
independent actuary using the projected unit credit method.
Actuarial gains and losses arising from past experience and changes in
actuarial assumptions are charged or credited to the Pre-operative
expenses pending allocation account in the year in which such gains or
losses are determined.
ii) Provident Fund
The Company makes contribution to statutory provident fund in
accordance with Employees Provident Fund and Miscellaneous Provision
Act, 1952 which is a defined contribution plan and contribution payable
is recognized as an expense in the period in which services are
rendered by the employee.
iii) Compensated Absences
Liability in respect of compensated absences becoming due or expected
to be availed within one year from the balance sheet date is recognized
on the basis of undiscounted value of estimated amount required to be
paid or estimated value of benefit expected to be availed by the
employees. Liability in respect of compensated absences becoming due or
expected to be availed more than one year after the balance sheet date
is estimated on the basis of an actuarial valuation performed by an
independent actuary using the projected unit credit method.
iv) Other short term benefits
or estimated useful life,
if shorter
Assets costing Rs. 5,000 or less are individually depreciated at the
rate of one hundred percent.
4. Revenue Recognition
Interest income
Income from interest is accounted for on time proportion basis taking
into account the amount outstanding and the applicable rate of
interest.
5. Taxation
Provision for tax comprises current income tax and deferred tax.
Current income tax is determined in respect of taxable income with
deferred tax being determined as the tax effect of timing differences
representing the difference between taxable income and accounting
income that originate in one period, and are capable of reversal in one
or more subsequent period(s). Such deferred tax is quantified using
rates and laws enacted or substantively enacted as at the end of the
financial year.
6. Foreign Currency Transactions
Transactions in foreign currency and non monetary assets are accounted
for at the exchange rate prevailing on the date of the transaction. All
monetary items denominated in foreign currency are converted at the
year end exchange rate. The exchange differences arising on such
conversion and on settlement of the transactions are recognized in the
Pre-operative expenses pending allocation account.
7. Employee Benefits
Expenses and liabilities in respect of employee benefits are recorded
in accordance with Revised Accounting Standard 15 - Employee Benefits
(Revised 2005)
i) Gratuity
Gratuity is a post employment benefit and is in the nature of a 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 at or near the balance sheet date by an
independent actuary using the projected unit credit method.
Actuarial gains and losses arising from past experience and changes in
actuarial assumptions are charged or credited to the Pre-operative
expenses pending allocation account in the year in which such gains or
losses are determined.
ii) Provident Fund
The Company makes contribution to statutory provident fund in
accordance with Employees Provident Fund and Miscellaneous Provision
Act, 1952 which is a defined contribution plan and contribution payable
is recognized as an expense in the period in which services are
rendered by the employee.
iii) Compensated Absences
Liability in respect of compensated absences becoming due or expected
to be availed within one year from the balance sheet date is recognized
on the basis of undiscounted value of estimated amount required to be
paid or estimated value of benefit expected to be availed by the
employees. Liability in respect of compensated absences becoming due or
expected to be availed more than one year after the balance sheet date
is estimated on the basis of an actuarial valuation performed by an
independent actuary using the projected unit credit method.
iv) Other short term benefits
Expense in respect of other short term benefits is recognized on the
basis of the amount payable for the period during which services are
rendered by the employee.
8. Leases
Leases of assets under which significant risks and rewards of ownership
are effectively retained by the lessor are classified as operating
leases. Lease payments under an operating lease are recognized as
expense in the Pre-operative expenses pending allocation account on a
straight line basis over the lease term.
9. Impairment of Assets
The Company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount and the reduction is treated as an impairment loss and is
recognized in the Profit and Loss Account. If at the balance sheet date
there is an indication that a previously assessed impairment loss no
longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount subject to a maximum of depreciated
historical cost.
10. Contingent Liabilities and Provisions
basis of the amount payable for the period during which services are
rendered by the employee.
8. Leases
Leases of assets under which significant risks and rewards of ownership
are effectively retained by the lessor are classified as operating
leases. Lease payments under an operating lease are recognized as
expense in the Pre-operative expenses pending allocation account on a
straight line basis over the lease term.
9. Impairment of Assets
The Company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount and the reduction is treated as an impairment loss and is
recognized in the Profit and Loss Account. If at the balance sheet date
there is an indication that a previously assessed impairment loss no
longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount subject to a maximum of depreciated
historical cost.
10. Contingent Liabilities and Provisions
Depending upon the facts of each case and after due evaluation of legal
aspects, claims against the Company not acknowledged as debts are
treated as contingent liabilities. In respect of statutory dues
disputed and contested by the Company, contingent liabilities are
provided for and disclosed as per original demand without taking into
account any interest or penalty that may accrue thereafter. The Company
makes a provision when there is a present obligation as a result of a
past event where the outflow of economic resources is probable and a
reliable estimate of the amount of obligation can be made. Possible
future or present obligations that may but will probably not require
outflow of resources or where the same cannot be reliably estimated,
have been disclosed as a contingent liability in the financial
statements.
11. Miscellaneous Expenditure
Miscellaneous expenditure on account of increase in share capital and
other related expenses are written off over a period of 5 years from
the date of commencement of commercial production. Any reimbursements
received from the depository are credited to Miscellaneous
expenditure in the year such reimbursement is received.
12. Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes a
substantial period of time to get ready for its intended use. All other
borrowing costs are charged to the profit and loss account as incurred
13. Earnings 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.
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 dilutive potential equity shares.
aspects, claims against the Company not acknowledged as debts are
treated as contingent liabilities. In respect of statutory dues
disputed and contested by the Company, contingent liabilities are
provided for and disclosed as per original demand without taking into
account any interest or penalty that may accrue thereafter. The Company
makes a provision when there is a present obligation as a result of a
past event where the outflow of economic resources is probable and a
reliable estimate of the amount of obligation can be made. Possible
future or present obligations that may but will probably not require
outflow of resources or where the same cannot be reliably estimated,
have been disclosed as a contingent liability in the financial
statements.
11. Miscellaneous Expenditure
Miscellaneous expenditure on account of increase in share capital and
other related expenses are written off over a period of 5 years from
the date of commencement of commercial production. Any reimbursements
received from the depository are credited to Miscellaneous
expenditure in the year such reimbursement is received.
12. Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes a
substantial period of time to get ready for its intended use. All other
borrowing costs are charged to the profit and loss account as incurred
13. Earnings 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.
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 dilutive potential equity shares.
2 comments:
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