Accounting Policies of Asian Electronics Ltd. Company

Mar 31, 2013

1.1. Method of accounting

a) Revenues and Costs are recognized on accrual basis.

b) Capital issue expenses are charged to Securities Premium Account. However no capital expenses were incurred during the year.

c) Warranty period maintenance cost, being insignifcant, is accounted when incurred.

1.2. Fixed assets and depreciation

a) Fixed assets are stated at cost less accumulated depreciation & impairment losses, if any. Cost comprises of all expenses attributable for bringing the assets to their working condition for intended use. Borrowing costs relating to acquisition of fxed assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use

b) Depreciation on fxed assets, other than leased assets, is provided as per useful lives of the assets estimated by the management, or at the rates prescribed under Schedule XIV of the Companies Act, 1956 whichever is higher as under :

- on the fxed assets acquired upto 31.12.1988, on written down value as appearing in the books on 1.1.1989.

- on the fxed assets acquired after 31.12.1988 on straight line basis, other than a s s e t s lying at Chennai Division, which are depreciated on written down value method.

- assets costing less than Rs.5,000 acquired after 15.12.93 are depreciated at 100%

c) Leased assets are depreciated on straight line basis over the period of lease.

d) Patents and Trade marks are amortized over a period of ten years.

e) Product Development expenditure are amortized over a period of 3-7 years.

f) Software is written off over a period of fve years.

g) Goodwill is amortized using straight line method over a period of fve years.

However, no costs are incurred in respect of para (c) to (g) during the year, and are applicable for historical assets only.

1.3. Impairment

a) The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset''s net selling price and value in use. In assessing value in use, the estimated future cash fows are discounted to their present value at the weighted average cost of capital.

b) After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

c) A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

1.4. Lease rental

Where the Company is the lessee

Finance leases, which effectively transfer to the Company substantially all the risks and benefts incidental to ownership of the leased item, are capitalized at the lower of the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the fnance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalized.

These assets are depreciated on the straight line method over the period of lease.

Where the Company is the lessor

Assets given under a fnance lease are recognized as a receivable at an amount equal to the net investment in the lease. Lease rentals are apportioned between principal and interest on the IRR method. The principal amount received reduces the net investment in the lease and interest is recognized as revenue. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Proft and Loss Account.

Assets subject to operating leases are included in fxed assets. Lease income is recognized in the Proft and Loss Account on a straight-line basis over the lease term. Costs, including depreciation are recognized as an expense in the Proft and Loss Account. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Proft and Loss Account. However, upon termination of operating lease, the assets are removed from the fxed assets and refected under appropriate head of receivables in accordance with the nature of claim and amount.

1.5. Investment

Investments are divided in the following segments:

i) Investments in subsidiaries and associate business entities made with a view to long term business beneft.

ii) Other investments

Investments that are readily realizable and intended to be held for not more than a year are classifed as current investments. All other investments are classifed as long- term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value, save and except what is stated in Note No. 37 below is made to recognize a decline other than temporary in the value of the investments.

1.6. Inventories

Inventories are valued as under:

^ Raw materials, Components, stores and spares: Lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the fnished products in which they will be incorporated are expected to be sold at or above cost. Cost is determined on FIFO basis.

^ Finished goods: at lower of cost and net realizable value

^ Work in progress: at lower of cost and net realizable value

^ Cost in relation to fnished goods and work in progress includes cost of material and appropriate share of manufacturing overheads and includes excise duty payable on uncleared fnished goods and excise duty paid on goods cleared but unsold.

^ Cost of consumable spares purchased during the year is charged to the proft and loss account.

^ Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.

1.7. Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefts will fow to the Company and the revenue can be reliably measured.

a) Revenue from sale of goods is recognized when the signifcant risks and rewards of ownership of the goods have passed to the buyer and on completion of installation. Sales are recorded net of sales tax but include excise duty.

b) Income from annual maintenance service contract is recognized on a straight line basis over the period of contracts. Income from other service contracts is recognized on completion of the service rendered.

c) Income in respect of goods sold on deferred sales basis is recognized as sales at normal sale price. Finance income is recognized over the terms of the payment.

d) Income from supply of equipments/systems is recognized based on dispatches to customer.

e) Income from erection of equipments/systems is recognized based on work done at project site.

f) Interest Income is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.

g) Dividend is recognized if the same is approved before the date of fnalization of accounts.

h) Revenue from projects is recognized on acceptance of the work under the project by the respective project authorities.

1.8. Retirement and other employee benefts

a) Retirement benefts in the form of Provident Fund are a defned contribution scheme and the contributions are charged to the Proft and Loss Account of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective trusts. . During the previous year, the Company has initiated the process of transferring the trust assets and benefts to Govt Provident Fund.

b) Gratuity liability is a defned beneft obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each fnancial year.

c) Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method.

d) Actuarial gains / losses are immediately taken to proft and loss account and are not deferred.

1.9. Foreign currency translation

a) Initial Recognition

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

b) Conversion

Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.

c) Exchange Differences

Exchange differences arising on the settlement of monetary items or on reporting Company''s monetary items at rates different from those at which they were initially recorded during the year, or reported in previous fnancial statements, are recognized as income or as expenses in the year in which they arise except those arising from investments in non-integral operations.

Forward Exchange Contracts are not intended for trading or speculation purposes However during the year no such contracts were entered or outstanding.

The premium or discount arising at the inception of forward exchange contracts is amortized as expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of proft and loss in the year in which the exchange rates change. Any proft or loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the year.

1.10. Taxes on Income

Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Deferred income taxes refects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.

Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is virtual certainty that suffcient future taxable income will be available against which such deferred tax assets can be realized. Deferred tax assets on unabsorbed depreciation and unabsorbed tax losses are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profts.

At each balance sheet date the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become virtually certain, that suffcient future taxable income will be available against which such deferred tax assets can be realized.

The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer virtually certain, that suffcient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes virtually certain, that suffcient future taxable income will be available.

1.11. Earnings Per Share

Basic earnings per share are calculated by dividing the net proft or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. Partly paid equity shares are treated as a fraction of an equity share to the extent that they were entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average number of equity shares outstanding during the period is adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split (consolidation of shares).

For the purpose of calculating diluted earnings per share, the net proft 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 all dilutive potential equity shares.

1.12. Provisions

A provision is recognized when an enterprise has a present obligation as a result of past event; it is probable that an outfow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to refect the current best estimates.

1.13. Cash and Cash Equivalents

Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.

1.14. ContingentLiabilities, if any, are disclosed by way of notes to accounts.

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Mar 31, 2011

Basis of Preparation

The financial statements have been prepared to comply in all material respects with the Notified accounting standard by Companies Accounting Standards Rules, 2006 and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis except in case of assets for which provision for impairment is made. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year. The previous year figures are being regrouped wherever necessary for comparative evaluations. The significant accounting policies followed by the Company are stated below:

Use of Estimates

The preparation of financial statements is in conformity with generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period end. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from these estimates.

1. Method of accounting

a) Revenues and Costs are recognized on accrual basis.

b) Capital issue expenses are charged to Securities Premium Account.

c) Warranty period maintenance cost, being insignificant, is accounted when incurred.

2. Fixed assets and depreciation

a) Fixed assets are stated at cost less accumulated depreciation & impairment losses, if any. Cost comprises of all expenses attributable for bringing the assets to their working condition for intended use. Borrowing costs relating to acquisition of fixed assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use

b) Depreciation on fixed assets, other than leased assets, is provided as per useful lives of the assets estimated by the management, or at the rates prescribed under Schedule XIV of the Companies Act, 1956 whichever is higher as under :

- on the fixed assets acquired upto 31.12.1988, on written down value as appearing in the books on 1.1.1989.

- on the fixed assets acquired after 31.12.1988 on straight line basis, other than assets lying at Chennai Division, which are depreciated on written down value method.

- assets costing less than Rs.5,000 acquired after 15.12.93 are depreciated at 100%

c) Leased assets are depreciated on straight line basis over the period of lease.

d) Patents and Trade marks are amortized over a period of ten years.

e) Miscellaneous expenditure is written off over a period of five years.

f) Product Development expenditure are amortized over a period of 3-7 years.

g) Software is written off over a period of five years.

h) Goodwill is amortized using straight line method over a period of five years.

However, no costs are incurred in respect of para (c) to (h) during the year, and are applicable for historical assets only.

3. Impairment

a) The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/ external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset's net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.

b) After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

c) A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

4. Lease rental

Where the Company is the lessee

Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the lower of the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalized.

These assets are depreciated on the straight line method over the period of lease.

Where the Company is the lessor

Assets given under a finance lease are recognized as a receivable at an amount equal to the net investment in the lease. Lease rentals are apportioned between principal and interest on the IRR method. The principal amount received reduces the net investment in the lease and interest is recognized as revenue. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Profit and Loss Account.

Assets subject to operating leases are included in fixed assets. Lease income is recognized in the Profit and Loss Account on a straight-line basis over the lease term. Costs, including depreciation are recognized as an expense in the Profit and Loss Account. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Profit and Loss Account. However, upon termination of operating lease, the assets are removed from the fixed assets and reflected under appropriate head of receivables in accordance with the nature of claim and amount.

5. Investment

Investments are divided in the following segments:

i) Investments in subsidiaries and associate business entities made with a view to long term business benefit.

ii) Other investments

Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.

6. Inventories

Inventories are valued as under:

^ Raw materials, Components, stores and spares: Lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost is determined on FIFO basis.

^ Finished goods: at lower of cost and net realizable value.

^ Work in progress: at lower of cost and net realizable value.

^ Cost in relation to finished goods and work in progress includes cost of material and appropriate share of manufacturing overheads and includes excise duty payable on uncleared finished goods and excise duty paid on goods cleared but unsold.

^ Cost of consumable spares purchased during the year is charged to the profit and loss account.

^ Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.

7. Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

a) Revenue from sale of goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer and on completion of installation. Sales are recorded net of sales tax but include excise duty.

b) Income from annual maintenance service contract is recognized on a straight line basis over the period of contracts. Income from other service contracts is recognized on completion of the service rendered.

c) Income in respect of goods sold on deferred sales basis is recognized as sales at normal sale price. Finance income is recognized over the terms of the payment.

d) Income from supply/erection of equipments/systems is recognized based on dispatches to customer/work done at project site.

e) Interest Income is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.

f) Dividend is recognized when the shareholders' right to receive payment is established by the balance sheet date.

g) Revenue from projects is recognized on acceptance of the work under the project by the respective project authorities.

8. Retirement and other employee benefits

a) Retirement benefits in the form of Provident Fund are a defined contribution scheme and the contributions are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective trusts.

b) Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year.

c) Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method.

d) Actuarial gains / losses are immediately taken to profit and loss account and are not deferred.

9. Foreign currency translation

a) Initial Recognition

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

b) Conversion

Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.

c) Exchange Differences

Exchange differences arising on the settlement of monetary items or on reporting Company's monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise except those arising from investments in non-integral operations.

Forward Exchange Contracts are not intended for trading or speculation purposes.

The premium or discount arising at the inception of forward exchange contracts is amortized as expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of profit and loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the year.

10. Taxes on Income

Tax expense comprises of current, deferred and fringe benefit tax. Current income tax and fringe benefit tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.

Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. Deferred tax assets on unabsorbed depreciation and unabsorbed tax losses are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.

At each balance sheet date the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become virtually certain, that sufficient future taxable income will be available against which such deferred tax assets can be realized.

The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer virtually certain, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes virtually certain, that sufficient future taxable income will be available.

11. Earnings Per Share

Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. Partly paid equity shares are treated as a fraction of an equity share to the extent that they were entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average number of equity shares outstanding during the period is adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split (consolidation of shares).

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 all dilutive potential equity shares.

12. Provisions

A provision is recognized when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

13. Cash and Cash Equivalents

Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.

14. Contingent Liabilities, if any, are disclosed by way of notes to accounts.

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Mar 31, 2010

Basis of Preparation

The financial statements have been prepared to comply in all material respects with the Notified accounting standard by Companies Accounting Standards Rules, 2006 and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis except in case of assets for which provision for impairment is made. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year. The previous figures are being regrouped wherever necessary for comparative evaluations. The significant accounting policies followed by the Company are stated below:

Use of Estimates

The preparation of financial statements is in conformity with generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period end. Although these estimates are based upon management’s best knowledge of current events and actions, actual results could differ from these estimates.

1. Method of accounting

a) Revenues and Costs are recognized on accrual basis.

b) Capital issue expenses are charged to Securities Premium Account.

c) Warranty period maintenance cost, being insignifcant, is accounted when incurred.

However, in case of ESCO assets, relevant portion of income is accounted net of the warranty costs as estimated.

2. Fixed assets and depreciation

a) Fixed assets are stated at cost less accumulated depreciation & impairment losses, if any. Cost comprises of all expenses attributable for bringing the assets to their working condition for intended use. Borrowing costs relating to acquisition of fixed assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use

b) Depreciation on fixed assets, other than leased assets, is provided as per useful lives of the assets estimated by the management, or at the rates prescribed under Schedule XIV of the Companies Act, 1956 whichever is higher as under : on the fixed assets acquired upto 31.12.1988, on written down value as appearing in the books on 1.1.1989. - on the fixed assets acquired after 31.12.1988 on straight line basis, other than assets lying at Chennai Division, which are depreciated on written down value method. assets costing less than Rs.5,000 acquired after 15.12.93 are depreciated at 100%

c) Leased assets are depreciated on straight line basis over the period of lease.

d) Patents and Trade marks are amortized over a period of ten years.

e) Miscellaneous expenditure is written off over a period of five years.

f) Product Development expenditure are amortized over a period of 3-7 years.

g) Software is written off over a period of five years.

h) Goodwill is amortized using straight line method over a period of five years. However, no costs are incurred in respect of para (c) to (h) during the year, and are applicable for historical assets only.

3. Impairment

a) The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.

b) After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.

c) A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

4. Lease rental

Where the Company is the lessee

Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the lower of the fair value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Lease management fees, legal charges and other initial direct costs are capitalized.

These assets are depreciated on the straight line method over the period of lease.

Where the Company is the lessor

Assets given under a finance lease are recognized as a receivable at an amount equal to the net investment in the lease. Lease rentals are apportioned between principal and interest on the IRR method. The principal amount received reduces the net investment in the lease and interest is recognized as revenue. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Profit and Loss Account.

Assets subject to operating leases are included in fixed assets. Lease income is recognized in the Profit and Loss Account on a straight-line basis over the lease term. Costs, including depreciation are recognized as an expense in the Profit and Loss Account. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Profit and Loss Account. However, upon termination of operating lease, the assets are removed from the fixed assets and refected under appropriate head of receivables in accordance with the nature of claim and amount.

5. Investment

Investments are divided in the following segments:

i) Investments in subsidiaries and associate business entities made with a view to long term business benefit.

ii) Other investments

Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classifed as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.

6. Inventories

Inventories are valued as under:

- Raw materials, Components, stores and spares: Lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost is determined on FIFO basis.

- Finished goods: at lower of cost and net realizable value

- Work in progress: at lower of cost and net realizable value

- Cost in relation to finished goods and work in progress includes cost of material and appropriate share of manufacturing overheads and includes excise duty payable on uncleared finished goods and excise duty paid on goods cleared but unsold.

- Cost of consumable spares purchased during the year is charged to the profit and loss account.

- Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.

7. Revenue recognition

I. ESCO:

The Companys business includes supplies of products and/or services and contracts in the nature of energy savings and linked payments over long term in excess of a year. The contracts involve supply, installation and future maintenance of lights at locations. They are more popularly known as ESCO contracts. The contracts are generally with Municipal Corporations and Government Bodies. The natures of contracts involve free replacements in case of defects. Considering the various implications, the Company accounts for the transactions in the following manner:

a) Sales: Equipment manufactured and supplied under the above contracts is recognized as sales at Net Present Value (NPV) by discounting the future receivables for interest and maintenance.

b) Future Maintenance Expenses: The expenses are accounted for as and when they are incurred.

c) Interest Income: Interest income (i.e. the difference between the Contract Value and the Sales at NPV) is accounted on accrual basis (from current year) over the tenure of the contract.

d) Liabilities: Any specific term loan taken is shown separately under the head of Secured Loan.

e) Assets: Any amount receivables under the above contracts are shown under a separate head. The assets include rights over products and receivables.

II. Others

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

a) Revenue from sale of goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer and on completion of installation. Sales are recorded net off sales tax but include excise duty.

b) Income from annual maintenance service contract is recognized on a straight line basis over the period of contracts. Income from other service contracts is recognized on completion of the service rendered.

c) Income in respect of goods sold on deferred sales basis is recognized as sales at normal sale price. Finance income is recognized over the terms of the payment.

d) Income from supply/erection of equipments/systems is recognized based on dispatches to customer/work done at project site.

e) Interest Income is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.

f) Dividend is recognized when the shareholders right to receive payment is established by the balance sheet date.

g) Revenue from projects is recognized on acceptance of the work under the project by the respective project authorities.

8. Retirement and other employee benefits

a) Retirement benefits in the form of Provident Fund are a defined contribution scheme and the contributions are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective trusts.

b) Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year.

c) Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method.

d) Actuarial gains / losses are immediately taken to profit and loss account and are not deferred.

9. Foreign currency translation

a) Initial Recognition

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

b) Conversion

Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.

c) Exchange Differences

Exchange differences arising on the settlement of monetary items or on reporting Company’s monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise except those arising from investments in non-integral operations. Forward Exchange Contracts are not intended for trading or speculation purposes

The premium or discount arising at the inception of forward exchange contracts is amortized as expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of profit and loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the year.

10. Taxes on Income

Tax expense comprises of current, deferred and fringe benefit tax. Current income tax and fringe benefit tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Deferred income taxes refects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.

Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. Deferred tax assets on unabsorbed depreciation and unabsorbed tax losses are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.

At each balance sheet date the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become virtually certain, that sufficient future taxable income will be available against which such deferred tax assets can be realized.

The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer virtually certain, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes virtually certain, that sufficient future taxable income will be available.

11. Earnings Per Share

Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. Partly paid equity shares are treated as a fraction of an equity share to the extent that they were entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average number of equity shares outstanding during the period is adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split (consolidation of shares).

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 all dilutive potential equity shares.

12. Provisions

A provision is recognized when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to refect the current best estimates.

13. Cash and Cash Equivalents

Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.

14. Contingent Liabilities, if any, are disclosed by way of notes to accounts.