Notes To The Financial Statements
SCHEDULE - XXI
A) SIGNIFICANT ACCOUNTING POLICIES
1. ACCOUNTING CONVENTION
The Financial Statements are prepared in accordance with applicable Accounting
Standards in India. A summary of important Accounting Policies, which have been applies
consistently, is set out below. Accounting Policies comprises Accounting Standards
specified by Central Government u/s 211 (3C) of the companies Act 1956, other
pronouncements of the Institute of Chartered Accountants of India and guidelines issued by
SEBL. The Financial Statements have also been prepared in accordance with relevant
presentational requirements of Companies Act 1956. The Financial Statements are rounded to
the nearest Rupees.
2. BASIS OF ACCOUNTING
The accounts are prepared under the historical cost convention and on the basis of
going concern. All expenses and incomes to the extent ascertainable are accounted for on
mercantile basis unless otherwise stated.
3. USE OF ESTIMATES.
The presentation of financial statements requires estimates and assumptions to be made
that affect the reported amount of assets and liabilities on the date of financial
statements and the reported amount of revenue and expenses during the reporting period.
Difference between the actual results and estimates are recognized in the period in which
the results are known/materialized.
4. FIXED ASSETS
Fixed Assets are stated at historical cost (including expenses incurred on putting them
in use less depreciation.
Depreciation has been provided on straight -line method, on single shift basis at the
rates specified in the schedule XIV of the Companies Act, 1956.
The inventories are valued in accordance, with the revised Accounting Standard-2
"(AS-2)" Valuation of Inventories" and the revised " Guidance Note on
Accounting Treatment for Excise Duty" issued by the Institute of Chartered
Accountants of India. According the method of valuation adopted are as under :-
i. Stock Raw Material and Packing Material :- At cost price.
ii. Stock of Work in Progress :- At material cost plus apportioned manufacturing
iii. Stock of Finished Goods :- At material cost plus apportioned manufacturing
overheads plus excise duty and other costs incurred in brining the inventories to their
present location and condition or Net Realizable value whichever is lower.
iv. Spares and consumable :- At cost.
(a) Long term Investments are stated at cost of acquisition, provision for diminution
is made only to recognize a decline other than temporary, if any, in the value of
(b) Current investments are carried at lower of cost and fair market value.
(c) Dividends are accounted for as and when received.
8. RETIREMENT BENEFITS
(a) A short term employees benefits are recognized as an expenses at the undiscounted
amount in the profit and loss accounts of the year in which the related is rendered.
(b) Post employees and other long term employees benefits are recognized as an expense
in the profit and loss account for the year in which the employees has rendered services.
The expenses is recognized at the present value of the amount payable determined using
actuation techniques. Actuarial gains and losses in respect of post employment and other
long term benefits are charged to profit and loss account.
9. PROPOSED DIVIDEND
Dividends (including income tax thereon) as proposed by Board of Directors are provided
in the books of account, pending approval at the Annual General Meeting.
10. REVENE RECOGNITION
Sales of goods and services are recognized upon passage of the title to the customer,
which generally coincides with the delivery. Sale is net of sale returns
11. BORROWING COSTS
Borrowing costs that are attributable to the acquisition or construction of fixed
assets are capitalized as part of costs of such assets till such time as the assets is
ready for its intended use. All other borrowing costs are recognized as an expense in the
period in which incurred.
12. TRANSLATION OF FOREIGN EXCHANGE TRANSACTIONS
(a) Foreign exchange transactions in respect of import payments are stated at the
exchange rate prevailing at the time of transaction and variation, if any, accounted for
on the date of payment is squared during the same accounting year.
(b) Monetary items denominated in foreign currencies remaining unsettled at the year
end-if not covered by forward exchange contracts are translated at year end rates.
(c) Any income / expense arising from foreign currency transactions is dealt in the
profit and loss account for the year except in cases where they relate to acquisition of
fixed assets in which case they are adjusted in the carrying cost of such assets.
13. INCOME TAX
(a) Current Tax: Provision is made for income tax based on the liability as
computed after taking credit for allowance and exemptions. Adjustments in books are made
only after the completion of the assessment.
(b) Deferred Tax : Consequent to the Accounting Standard 22 "Accounting for
taxes on income" the differences mat result between the profit offered for income tax
and the profit as per the financial statement are identified and thereafter a deferred tax
liability is recorded for timing differences, namely the differences that originate is one
accounting period and reverse in another.
The tax effect is calculated on the accumulated timing difference at the end of an
Accounting period based on prevailing enacted regulations,
Deferred tax assets are recognized only if there is reasonable certainty that they will
be realized and are reviewed for the appropriateness of their respective carrying value at
each balance sheet date.
(c) MAT: Minimum Alternative Tax payable under the provisions of the income tax
Act, 1961 is recognized as an asset in the year in which credit becomes eligible and is
set off in the year in which the Company becomes liable to pay income taxes at the enacted
tax rates and shall be reversed in the year in which It lapses.
14. AMORTISATION OF INTANGIBLE ASSETS AND MISCELLANCE EXPENDITURE
Preliminary expenses are amortized over a period of five years. Listing expenses and
Initial public offer expenses are also incurred during the year. All these expenses will
be written off over the period of next five years starting from the year of public issue.
15. PROVISIONS, CONTINGENT LIABILITIES AND CONTIGENT ASSETS
Provisions involving substantial degree of estimation in management 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
16. IMPAIREMENT OF ASSETS
An assets is treated as impaired when the carrying cost of assets exceeds its
recoverable value. An impairment loss is charged to the profit & loss account in the
year in which an assets is identified as impaired. The impairment loss recognized in prior
accounting periods is reversed if there has been a change in the estimate of recoverable
amount: Accounting policies not specially referred to are consistent with generally
accepted accounting principals.
17. FORWARD EXCHANGE CONTRACT
A company may enter into a forward exchange contract or another financial Instrument
that is in substance a forward exchange contract, Which are not intended for trading or
speculation purposes, to establish the amount of the reporting currency required or
available at the settlement date of the traction. As per AS-11 (R) any premiums or
discount at the inception of such a forward exchange contract are amortized over the life
of the contract and exchange difference on such contracts are recognized in the statement
of profit or loss in the reporting period.
18. In accordance with the guidance notes of the ICAI, the company has recognized
minimum alternative tax of Rs. 1,31,33,587 relating to the current year.
(B) NOTES ON ACCOUNTS
1. The figures for the year have been re-grouped / rearranged /re-cast wherever
necessary market it comparable.
2. The company has sent letters of balance confirmation to all the parties but only a
few have responded so far. So the balance in the party accounts whether in debit or in
credit are subject to reconciliation.
3. DIRECTOR'S REMUNERATION
4. AUDITOR'S REMUNERATION
5. A sum of Rs. 69,125 (Previous Year Rs.1,15,125 ) is due from Staff of the company
being imprest for traveling, conveyance and other charges.
6. Fixed deposits with banks of Rs. 60,99,000.00 (previous year Rs. 78,42,256) as
pledged as Margin Money with banks.
7. Remittance in foreign currency on account of Dividend is NIL (P/Y NIL)
8. Disclosure as required by AS-18 (Related Party Disclosures) issued by ICAI.
7. EARNING PER SHARE (EPS)
8. The company operates only in one business segment viz. "Pharmaceutical
Formulation" and is engaged in manufacturing and trading of medicines. Since in the
opinion of management, the inherent nature of activities "engaged by the company are
governed by the same set of risks and rewards, so these have been grouped and identified
as a single segment in accordance with the Accounting Standard on Segment Reporting
(AS-17) issued by ICAI.
9. In the opinion of the board, and to the best of their knowledge and belief the value
on realization of the current assets, loans & advance shown in the Balance Sheet in
the ordinary course of business will be at least equal to the amount at which they are
stated in the Balance Sheet and provision for all known and determined liabilities has
10. Some of suppliers of material have been identified as small scale industrial
undertaking on the basis of information available with the company. However none of these
parties has an outstanding credit balance exceeding Rs, 1,00,000.00 as on 31.03.2011
11. Contingent Liabilities:.
12. During the year, the company has undertaken a review of all fixed assets in line
with the requirements of AS-28 on "Impairment of Assets" issued by the Institute
of Chartered Accountant of India. Based on such review, no provision for impairment is
required to be recognized for the year.
13. The figures in the Balance Sheet and Profit & Loss Account for the year have
been rounded off to nearest multiple of rupee.
14. The company has provided a Provision for gratuity and leave encasement as per
valuation which was done as required under accounting standard (AS-15) "accounting
for retirement benefits" by an independent Actuarian valuer.
15. Additional information pursuant to the provision of paragraph 3, 4C & 4D of
Part II of schedule VI of the Companies Act, 1956. (as certified by the management)
iii) Detail of Prediction / Purchases, Sales and Closing Stock for the year 2010-11