During the year ended 30th September, 2012, the revised Schedule VI
notified under the Companies Act, 1956, has become applicable to the
Company for preparation and presentation of its financial statements.
The adoption of revised Schedule - VI does not impact recognition and
measurement principles followed for preparation of financial
statements. However, it has significant impact on presentation and
disclosures made in the financial statements. The Company has also
reclassified the previous figures in accordance with the requirements
applicable in the current year.
b) Use of Estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgements, estimates and assumptions
that effect the reported amount of revenues, expenses, assets and
liabilities and the disclosure of the contingent liabilities, at the
end of the reporting period. Although, these estimates are based on the
management's best knowledge of current events and actions, actual
results could differ from these estimates. Any revision to the
accounting estimates is recognised in the period in which the results
c) Tangible Fixed Assets
Fixed assets are stated at cost or at replacement cost in case of
revaluation, less accumulated depreciation/amortisation and impairment
losses, if any. Cost of acquisition or construction is inclusive of all
incidentals and other attributable costs of bringing the asset to its
working condition for its intended use and is net of available duty/tax
d) Intangible Fixed Assets
In accordance with AS 26 - Intangible Assets are valued at cost less
accumulated amortisation and any impairment losses.
i. Prototypes including work-in-progress developed during Research and
Development, tractors and parts thereof used for carrying R & D
activities and advances given for tooling are written off over a period
of four years.
ii. Technical know-how fee and expenditure on major Software products
are written off over a period of six years.
e) Impairment of Assets
Impairment is ascertained at each balance sheet date in respect of cash
generating units as per Accounting Standard 28 - 'Impairment of Assets'
issued by Institute of Chartered Accountants of India. An impairment
loss is recognised in books of account in the financial year concerned
whenever the carrying amount of an asset exceeds its recoverable
amount. The recoverable amount is the greater of the net selling price
and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value based on an appropriate
f) Depreciation and Amortisation
i. Depreciation on Plant and Machinery is provided on Straight Line
ii. Depreciation on all other Fixed Assets is calculated on the basis
of Diminishing Balance Method at the rates prescribed in Schedule XIV
of the Companies Act, 1956 except Leasehold Land, which is amortised
over the lease period.
iii. The depreciation on assets acquired/ sold/ discarded/ demolished
during the year is provided from/upto the month the asset is
commissioned/sold or discarded.
iv. Assets costing upto Rs. 5,000 are depreciated fully in the year of
v. Leasehold Improvements are written off over a period of six years
or lease period whichever is less.
g) Inventory Valuation
i. Raw Material and Components, Stores and Machinery Spares are stated
at lower of cost and net realisable value.
ii. Loose Tools are stated at cost or under.
iii. Work-in-Progress, Finished and Trading Goods/Spare Parts are
stated at lower of cost and net realisable value.
iv. In determining the cost of Raw Materials and Components, Tools,
Jigs and Dies, Stores and Machinery Spares Weighted Average Cost Method
is used while in the case of Trading goods FIFO Method is used.
v. Work-in-Progress and Finished Goods include cost of conversion and
other costs incurred in bringing the Inventories to their present
location and condition.
h) Revenue Recognition
Dividend is accounted for an accrual basis when the right to receive
the dividend is established.
Income recognition/provisions on non-performing assets is in accordance
with the non-banking financial prudential norms (Reserve Bank)
i) Research and Development
Revenue expenditure incurred for research and development is charged to
the Statement of Profit and Loss. Fixed assets purchased for research
and development activities are capitalised in the year the same are put
j) Employee Benefits
i) Defined Contribution Plan:
Employees benefits in the form of provident fund, employee state
insurance and labour welfare fund are considered as defined
contribution plans and the contributions are charged to the Statement
of Profit and Loss of the year when the contribution to respective
funds are due.
ii) Defined Benefit Plan:
Retirement benefits in the form of Gratuity is considered as defined
benefit obligations and are provided for on the basis of an actuarial
valuation, using the projected unit credit method, as at the date of
the balance sheet. Actuarial gain/losses are immediately recognised in
the Statement Profit and Loss.
iii) Other Long-Term Benefits:
Long-term compensated absence is provided for on the basis of an
actuarial valuation, using the projected unit credit method, as at the
date of the balance sheet. Actuarial gain/losses are immediately
recognised in the Statement of Profit and Loss.
Investments intended to be held for less than one year are classified
as current investments and are carried at lower of cost or market
value. All other investments are classified as long-term investments
and are carried at cost. Investments in foreign companies are stated at
the exchange rates prevailing on the date of investment. A provision
for diminution is made to recognise a decline other than temporary in
the value of long-term investments.
l) Foreign Currency Transactions
Transactions in foreign currency are recorded at the exchange rates
prevailing at the dates of the transactions. Gains/losses arising out
of fluctuation in exchange rates on settlement are recognised in the
Statement of Profit and Loss.
Foreign currency monetary assets and liabilities are restated at the
Exchange Rate prevailing at the year-end and the overall net gain/loss
is adjusted to the Statement of Profit and Loss.
In case of Forward Exchange Contracts, the difference between the
forward rate and the exchange rate at the date of transaction is
recognised in the Statement of Profit and Loss over the life of the
m) Income Taxes
Tax expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India and tax laws
prevailing in the respective tax jurisdictions where the company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Minimum alternate tax (MAT) paid in a year is charged to the Statement
of Profit and Loss as current tax. The company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period, i.e. the period for which MAT credit is allowed to
be carried forward. In the year in which the Company recognizes MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
Statement of Profit and Loss and shown as "Minimum Alternative Tax
Entitlement" The Company reviews the "Minimum Alternative Tax
Entitlement" asset at each reporting date and writes down the asset to
the extent the Company does not have convincing evidence that it will
pay normal tax during the specified period.
Deferred Tax is recognised, subject to consideration of prudence, on
timing differences, representing the difference between the taxable
income/(loss) and accounting income/(loss) that originated in one
period and are capable of reversal in one or more subsequent periods.
Deferred Tax assets and liabilities are measured using tax rates and
the tax laws that have been enacted or substantively enacted by the
Balance Sheet date. Deferred Tax assets viz. unabsorbed depreciation
and carry forward losses are recognised if there is virtual certainty
that sufficient future taxable income will be available against which
such deferred tax assets can be realised.
n) Borrowing Costs
Borrowing costs that are attributable to the acquisition, construction
of qualifying assets are capitalised as part of cost of such assets
upto the date the assets are ready for its intended use. All other
borrowing costs are recognised as an expense in the year in which they
o) Deferred Revenue Expenditure
i. Development expenditure represents project related development
expenditure/business process re-engineering consultancy and market
research. Such expenditure is written off over a period of six years.
ii. Upfront and structuring fees are written off during the period of
term of the respective loan.
p) Employee Stock option Scheme
In respect of stock options granted pursuant to Employees Stock Option
Scheme, the intrinsic value of the options (Excess of market price of
the share over the exercise price of the options) is accounted as
employee compensation cost over the vesting period.
i. Asset acquired under leases where the Company has substantially all
the risks and rewards of ownership are classified as finance leases.
Such assets are capitalised at the inception of the lease at the lower
of the fair value or the present value of minimum lease payments and a
liability is created for an equivalent amount. Each lease rental paid
is allocated between the liability and the interest cost, so as to
obtain a constant periodic rate of interest on the outstanding
liability for each period.
ii. Assets acquired on leases where a significant portion of the risks
and rewards of ownership are retained by the lessor are classified as
operating leases. Lease rentals are charged to the Statement of Profit
and Loss on accrual basis.
r) Government Grants
Government Grants are recognised when there is a reasonable assurance
that the same will be received. Cash subsidies and capital grants
relating to specific assets are reduced from the gross value of the
respective assets, other capital grants and cash subsidies are credited
to capital reserve.
s) Provisions and Contingent Liabilities and Contingent Assets
Provisions are recognised for liabilities that can be measured only by
using a substantial degree of estimation, if
i. the Company has a present obligation as a result of a past event,
ii. a probable outflow of resources is expected to settle the
iii. the amount of obligation can be reliably estimated.
Reimbursements expected in respect of expenditure required to settle a
provision is recognised only when it is virtually certain that the
reimbursement will be received.
Contingent liability is disclosed in case of
i. A present obligation arising from the past event, when it is not
probable that an outflow of resources will be required to settle the
ii. A possible obligation, of which the probability of outflow of
resources is remote.
Contingent assets are neither recognised nor disclosed.
Provisions, contingent liabilities and contingent assets are reviewed
at each balance sheet date.