1. BASIS FOR PREPARATION OF ACCOUNTS
The Financial Statement have been prepared under historical cost convention on accrual basis in accordance with generally accepted accounting principles and applicable Accounting Standards issued by The Institute of Chartered Accountants of India and the provisions of Companies Act, 1956.
2. FIXED ASSETS
Fixed Assets are stated at cost, net of VAT/MODVAT/CENVAT, less accumulated depreciation. All costs including borrowing costs till commencement of commercial production and adjustment arising from exchange rate variations relating to borrowings
attributable to the fixed assets are capitalized. Capital expenditure on assets not owned by
company is reflected in capital work in progress account till the period of completion and thereafter in the fixed assets. Machinery spares that can be used only in connection with an item of fixed asset and their use is expected to be irregular are capitalized. Replacement of such spares is charged to revenue.
3. INTANGIBLE ASSETS
In accordance with the Accounting Standard (AS) 26 relating to intangible assets, all costs incurred on technical know-how/ license fee relating to production process are charged to revenue in the year of incurrence. Costs incurred on technical know-how/ license fee relating to process design/plants/facilities are capitalized at the time of capitalization of the said plant/ facility and amortized on pro-rata basis over a period of five years. Computer software is capitalized on the date of installation and is amortized over a period of three years.
4. IMPAIRMENT OF ASSETS
Carrying amount of cash generating units/ assets is reviewed for impairment. Impairment, if any, is recognized where the carrying amount exceeds the recoverable amount being the higher of net realizable price and value in use.
5. EXPENDITURE ON NEW PROJECTS AND SUBSTANTIAL EXPANSION
Expenditure directly relating to construction activity including trial run production expenses (net of income, if any) is capitalized. Indirect expenditure incurred during construction period is capitalized as part of the indirect construction cost to the extent to which the expenditure is indirectly related to construction or is incidental thereto. Other indirect expenditure (including borrowing costs) incurred during the construction period which is not related to the construction activity nor is incidental thereto, is charged to the Profit & Loss Account.
6. DEPRECIATION
Depreciation on fixed assets is provided on straight line method at the rates and in the manner prescribed in Schedule-XIV to the Companies Act, 1956, except steel plant acquired prior to 01.04.92; and induction furnace plant acquired prior to 01.04.1995 on which depreciation is provided on written down value method at the rates and in the manner prescribed in Schedule-XIV to the Companies Act, 1956.
On incremental/ decremental cost arising on account of translation of foreign currency liabilities for acquisition of fixed assets, depreciation has been provided as aforesaid over the residual life of the respective plants, Premium of leasehold land is amortized over the period of lease except leasehold land acquired on lease of ninety years or more.
Depreciation on fixed assets costing up to Rs. 5000/- is charged @ 100% on pro-rata basis.
Assets not owned by the company is amortized on pro-rata basis over a period of five years from the year in which such assets are commissioned.
7. FOREIGN CURRENCY TRANSACTIONS
Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the date of the transaction. Monetary items denominated in foreign currencies outstanding at the year-end are translated at exchange rate applicable as on that date. Non monetary items are valued at the exchange rate prevailing on the date of transaction. Any income or expense on account of exchange difference either on settlement or on translation is recognized in the profit and loss account except in cases where these relate to the acquisition of fixed assets.
Exchange differences arising on liabilities incurred on repayment of borrowings in foreign currency for acquisition of fixed assets are adjusted in the carrying cost except borrowing utilized for acquisition of assets within India on or after 1st April 2004 in which case these are recognized in the Profit & Loss A/C.
