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ii)
economic benefits in the form of adjustment of future income tax liability, is considered as an
asset if there is convincing evidence that the Company will pay normal tax after the tax holiday
period. Accordingly, it is recognized as an asset in the balance sheet when it is probable that
the future economic benefit associated with it will flow to the Company and the asset can be
measured reliably.
The tax effect of the timing differences that result between taxable income and accounting income
and are capable of reversal in one or more subsequent periods are recorded as a deferred tax
asset or deferred tax liability.
Deferred tax assets and liabilities are recognized for future tax consequences attributable
to timing differences. They are measured using the substantively enacted tax rates and tax
regulations at the reporting date.
The carrying amount of deferred tax assets at each balance sheet date is reduced to the extent
that it is no longer reasonably certain that sufficient future taxable income will be available against
which the deferred tax asset can be realized.
Tax on distributed profits payable in accordance with the provisions of Section 115O of the
Income Tax Act, 1961 is in accordance with the Guidance Note on “Accounting for Corporate
Dividend Tax” regarded as a tax on distribution of profits and is not considered in determination
of profits for the year.
Foreign Entities:
Foreign Companies recognize tax liabilities and assets in accordance with local laws.
11. Earnings per Share
The Company reports Basic and Diluted Earnings Per Share (EPS/DEPS) in accordance with
Accounting Standard 20 on “Earnings Per Share”. Basic EPS is computed by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted average number of equity shares
outstanding during the year.
Diluted EPS is computed by dividing the net profit or loss for the year attributable to equity shareholders
by the weighted average number of equity shares outstanding during the year as adjusted for the
effects of all dilutive potential equity shares, except where the results are anti-dilutive.
12. Impairment of assets
The carrying amount of assets, other than inventories is reviewed at each balance sheet date to
determine whether there is any indication of impairment. If any such indication exists, the recoverable
amount of the assets is estimated. The recoverable amount is the greater of the asset’s net selling
price and value in use which is determined based on the estimated future cash flow discounted to their
present values. An impairment loss is recognized whenever the carrying amount of an asset or its
cash generating unit exceeds its recoverable amount. Impairment loss is reversed if there has been a
change in the estimates used to determine the recoverable amount.
13. Provisions, Contingent Liabilities and Contingent Assets
The Company recognises provisions when there is present obligation as a result of past event and it
is probable that there will be an outflow of resources and reliable estimate can be made of the amount
of the obligation. A disclosure for Contingent liabilities is made in the notes on accounts when there
is a possible obligation or present obligations that may, but probably will not, require an outflow of
resources. Contingent assets are neither recognised nor disclosed in the financial statements.
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