Provisions, Contingent liabilities and Contingent Assets

Provisions are recognised when the Company has a
present legal or constructive obligation as a result of
past events, it is probable that an outflow of resources
embodying economic benefits will be required to settle
the obligation and the amount can be reliably estimated.

If the effect of the time value of money is material,
provisions are discounted using a current pre-tax rate that
reflects, when appropriate, the risks specific to the liability.
When discounting is used, the increase in the provision
due to the passage of time is recognised as a finance cost.
Contingent liabilities are disclosed when there is a
possible obligation arising from past events, the existence
of which will be confirmed only by the occurrence or non¬
occurrence of one or more uncertain future events not
wholly within the control of the Company or a present
obligation that arises from past events where it is either not
probable that an outflow of resources will be required to

settle the obligation or a reliable estimate of the amount
cannot be made.

Claims against the Company where the possibility of
any outflow of resources in settlement is remote, are not
disclosed as contingent liabilities.

Contingent assets are not recognised in financial
statements since this may result in the recognition of
income that may never be realised. However, when the
realisation of income is virtually certain, then the related
asset is not a contingent asset and is recognised. A
contingent asset is disclosed, in financial statements,
where an inflow of economic benefits is probable.

1.19 Retirement and other Employee benefits
Short-term obligations

Short term employee benefits are recognised as an
expense at an undiscounted amount in the Statement of
profit and loss of the year in which the related services are
rendered.

a) Post-employment benefits
Defined Benefit Plans

The liability or asset recognised in the balance sheet
in respect of defined benefit gratuity plans is the
present value of the defined benefit obligation at
the end of the reporting period less the fair value of
plan assets. Liability with regards to gratuity plan is
determined using the projected unit credit method,
with actuarial valuations being carried out by a
qualified independent actuary at the end of each
reporting period.

Remeasurement gains and losses arising from
experience adjustments and changes in actuarial
assumptions are recognised in the period in which
they occur, directly in other comprehensive income
and will not be reclassified to Statement of Profit and
Loss.

Changes in the present value of the defined benefit
obligation resulting from plan amendments or
curtailments are recognised immediately in profit or
loss as past service cost.

The present value of the defined benefit plan
liability is calculated using a discount rate which
is determined by reference to market yields at the
end of the reporting period on government bonds.
The defined benefit obligation recognised in the
Balance Sheet represents the actual deficit or surplus
in the Company's defined benefit plans. Any surplus
resulting from this calculation is limited to the present
value of any economic benefits available in the form
of refunds from the plans or reductions in future
contributions to the plans.

Defined Contribution plans

A defined contribution plan is a post-employment
benefit plan under which the Company pays specified
contributions for provident fund as per the provisions
of the Provident Fund Act, 1952 to the government.
The Company's contribution is recognised as an
expense in the Statement of Profit and Loss during
the period in which the employee renders the related
service. The Company's obligation is limited to the
amounts contributed by it.

Other long-term employee benefit obligations -
Compensated Absences

The Company provides for the encashment of
leave or leave with pay subject to certain rules. The
employees are entitled to accumulate leave subject
to certain limits, for future encashment. The liability is
provided based on the number of days of unutilised
leave at each balance sheet date on the basis of an
independent actuarial valuation.

1.20 Inventories

Inventories are carried at lower of cost and net realisable
value. Cost of inventories comprises all cost of purchase,
duties, taxes (other than those subsequently recoverable
from tax authorities) and all other costs incurred in bringing
inventories to their present location and conditions.

1.21 Earnings Per Share (EPS)

Basic earnings per share are calculated by dividing the
net profit or loss for the period attributable to equity
shareholders (after deducting preference dividends, if any,
and attributable taxes) by the weighted average number
of equity shares outstanding during the period.

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.

1.22 Exceptional items

Exceptional items refer to items of income or expense
within the statement of profit and loss from ordinary
activities which are non-recurring and are of such size,
nature or incidence that their separate disclosure is
considered necessary to explain the performance of the
Company.