ACCOUNTING POLICIES
1. BASIS OF ACCOUNTING
The financial statements are brpared on accrual basis of accounting at historical cost convention to comply in all material aspects in accordance with Generally Accepted Accounting Principles in India , the relevant provisions of the Companies Act, 1956 including Accounting Standards notified by the Companies (Accounting Standards) Rules 2006, unless otherwise stated.
2. FIXED ASSETS
2.1 Land received free from the State Government till 31st March, 1969 has not been valued. Such land, which have been taken over by the Company after 1st April, 1969, have been valued at estimated fair price ruling on the date of taking possession.
Land, other than the above, has been capitalised at cost to the Company. Expenditure on development is shown under land.
The gross block of Fixed Assets (other than land acquired free from the State Government) is stated at cost of acquisition or construction including any cost attributable to bringing the assets to their working conditions for their intended use.
With effect from 01.04.2000, Borrowing Costs whether specific or general, utilised for acquisition, construction or production of qualifying assets, are capitalised as part of the cost of such assets, till the activities necessary for its intended use or sale are complete.
2.2 Fixed Assets acquired with financial assistance / subsidy from outside agencies either wholly or partly are capitalised at net cost to the Company.
2.3 Where the actual cost of Fixed / Current Assets are not readily ascertainable, they are accounted initially on provisional basis but adjusted subsequently to cost when ascertained.
2.4 Fixed Assets declared surplus / discarded are valued at lower of net book value and net realisable value, where the amounts involved
are material and debrciation provided till the end of the month brceding the month in which they are disposed off. The entire excess / deficit of sale proceeds over the net book value of Fixed Assets is transferred to the Statement of Profit and Loss.
2.5 Expenditure on re-conditioning, re-siting and re-layout of machinery and equipment which do not increase the future benefits from the existing assets beyond the brviously assessed standard of performance based on the technical assessment, is not capitalised.
2.6 Cost of the initial pack of Spares procured with Plant, Machinery and Equipment is capitalised and debrciated in the same manner as Plant, Machinery and Equipment.
2.7 Indirect expenses on Administration and Supervision in respect of expansion facilities / new projects at the existing operating Divisions are charged to Revenue.
3. IMPAIRMENT OF ASSETS
As at the end of each Balance Sheet date, the carrying amount of assets is assessed as to whether there is any indication of impairment. If the estimated recoverable amount is found less than its carrying amount, the impairment loss is recognised and assets are written down to their recoverable amount.
4. TOOLS AND EQUIPMENT
Expenditure on special purpose tools, jigs and fixtures including those specific to projects / products is initially capitalised for amortisation over production on technical assessment and to the extent not amortised is carried forward as Non-current asset. Expenditure on maintenance, re-work, re-conditioning, periodical inspection, referencing of tooling, replenishing of cutting tools and work of similar nature is charged to revenue at the time of issue.
5. NON-CURRENT ASSETS
- INTANGIBLE ASSETS /
OTHER NON-CURRENT ASSETS
5.1 Research and Development Expenditure
Expenditure on Research and Development as and when incurred is debited to the Statement of Profit and Loss.
To the extent of Development Costs, which relate to Design, Construction and Testing of a chosen alternative for new or improved material, devices, products, processes, systems or services are recognized as an intangible asset, if it is probable that expenditure will enable the asset to generate future economic benefit. Such intangible assets are amortized over a period not exceeding ten years using straight line method.
5.2 Expenditure on licence fees, documentation charges etc. based on the definition criteria of intangible assets in terms of identifiability, control and future economic benefits from the assets, are amortised over production on technical estimates, and to the extent not amortised, are carried forward.
5.3 The cost of software internally generated / acquired for internal use which is not an integral part of the related hardware, is recognized as an intangible asset in the Books of Accounts and is amortised over a period not exceeding three years, on straight line method. Amortisation commences when the asset is available for use.
6. DEFERRED DEBTS
Unpaid instalment payments under deferred payment terms for the cost of imported material and tooling content of the equipment / products sold are accounted as deferred debts from the customer and are recovered as and when the instalments are paid.
7. SUNDRY DEBTORS
Disputed / Time-barred debts from the Government departments are generally not treated as doubtful debts.
8. INVENTORY
8.1 Inventories are valued at lower of cost and net realisable value. The cost of raw material, components and stores are assigned by using the actual weighted average cost formula and those in transit at cost to date. In the case of stock-in-trade and work-in-progress, cost includes costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their brsent location and condition.
8.2 Provision for redundancy is maintained at a suitable percentage / level of the value of closing inventory of raw material and components, stores and spare parts and construction material. Besides, where necessary, adequate provision is made for the redundancy of such material in respect of completed / specific projects and other surplus / redundant material pending transfer to salvage stores.
8.3 Stores declared surplus / unserviceable / redundant are charged to revenue.
8.4 Consumables issued from main stores and lying unused at the end of the year are not reckoned as inventory.
8.5 Saleable / Disposable scrap is valued at estimated realisable value.
9. SALES
9.1 Manufacturing, Repair and Overhaul / Spares Sale
Sales are set up on completion of contracted work on the basis of
-Acceptance by the buyer’s Inspector, by way of signaling out certificate, in the case of the manufacture or repair and overhaul of aircraft
and helicopters.
- For other deliverables like spares, site repairs, Cat ‘B’ repair servicing etc., sales are set up based on acceptance by the buyer’s inspection agency or as agreed to by the buyer.
- Sales are set up based on prices agreed with the customers. Where the prices are yet to be agreed with the customer, sales are set up on provisional basis.
9.2 Development Sales
Development sales are set up on incurrence of expenditure identifiable to work orders and milestones achieved as per contract. Where milestones have not been defined sales will be as per actual incurrence of expenditure.
10. EMPLOYEE BENEFIT
10.1 Liability towards gratuity provided on yearly actuarial valuation in respect of all employees is remitted to a trust progressively.
10.2 Provision for vacation leave is made on the basis of actuarial valuation.
11. DEbrCIATION
Debrciation on Fixed Assets is charged on straight line method. The rates of debrciation
on assets acquired on or prior to 1.4.1989 are on the basis of estimated life. The rates of debrciation are as brscribed in Sch.XIV to the Companies Act, 1956 for assets capitalised after 1.4.1989 (except for assets separately listed in Notes to Balance Sheet). However, each of the Fixed Assets is fully debrciated to rupee one value. Pro-rata debrciation is charged to the assets from the first day of the month of addition.
Fixed Assets costing Rs. 10,000/- and below are debrciated fully in the year of purchase.
12. FOREIGN CURRENCY TRANSACTION
Assets and Liabilities are re-instated at the year-end at the rate brvalent on 31 st March of each year. The Income / Expenditure on account of this is charged to revenue.
13. CLAIMS BY / AGAINST THE COMPANY
Claims on suppliers / underwriters / carriers towards loss / damages, claims for export subsidy, duty drawbacks, and claims on Customs department for refunds are accounted when claims are brferred.
Claims for Liquidated damages by / against the Company are recognised in Accounts on acceptance.
No provision is made for liabilities which are contingent in nature, but if material are disclosed by way of Notes.
14. WARRANTY
Provision for warranty is made at the time of setting up of sales for manufactured / overhauled aircraft / Helicopters/ engines / rotables / accessories and supply of spares within the frame work of the conditions agreed with the customers.
Incurrence of Expenditure:
Expenditure incurred against Work Order towards warranty is charged to revenue and corresponding provision is withdrawn.
Withdrawal of un-utilised Warranty Provisions :
For Defence Customers :
- For manufacturing programme, the un-utilised provision is withdrawn only after the expiry of warranty liability for all the aircraft / Helicopters / engines covered under the respective contract.
- For Overhaul programme, the un-utilised provision is withdrawn on expiry of warranty liability for each aircraft / Helicopters / engine / rotables.
For supply of Spares (only for own fabricated spares), the un-utilised provision is withdrawn on expiry of warranty liability for each spare as per respective customer order.
For Non- Defence Customers:
For supply and services to Civil customers, withdrawal of un-utilised provision is made on expiry of warranty liability as per terms and conditions of respective contract.
( R.K.TYAGI ) ( Dr. A.K. MISHRA )
Chairman Director (Finance)
( ASHOK TANDON )
Executive Director
(Company Secretary)
Place: Delhi
Date: 5th August, 2013.