Annual Report FY 2009-10 - Welspun

C rp Ltd(b)(c)(d)Export benefits: Duty Entitlement Pass Book (DEPB) and Focus Market are accounted on accrual basis. Target Plus /DutyFree Entitlement Certificate scheme of EXIM policy are recognized when utilized.Revenue from Services is recognized when the services are completed.Dividend income is recognized when the right to receive the dividend is unconditional.8. InventoriesInventories are valued at lower of cost or net realizable value. The basis of determining cost for various categories ofinventories is as follows;(i) Raw Materials, Stores and Spares - Moving weighted average basis.(ii) Work / Goods in Process and Finished Goods - Cost of Direct Material, Labour and other manufacturing expenses.9. Foreign Currency Transactions(a)(b)(c)Foreign exchange transactions are converted into Indian Rupees at the prevailing rate on the date of the transactions.Current monetary assets and liabilities are translated at the exchange rate prevailing on the last day of the year. Nonmonetary items are carried at cost.Gains or losses arising out of remittance / translations at the year-end are credited / debited to the profit and lossaccount for the year and where it relates to acquisition of fixed assets, are adjusted to the carrying cost of such assetsexcept treatment as per amendment to AS-11 (Refer note no 6 (b)).Premium / discount on forward exchange contracts not relating to firm commitments or highly probable forecastedtransactions and not intended for Trading or Speculation purpose is amortized as income or expense over the life of thecontract.10. Derivative Instruments and Hedge AccountingThe Company uses foreign currency forward contracts to hedge its risk associated with foreign currency fluctuations relatingto certain firm commitments and forecasted transactions. The Company designates these hedging instruments as cash flowhedges and applying the recognition and measurement principles set out in Accounting Standard 30 “Financial Instruments:Recognition and Measurement” (AS 30). The gain or loss on the effective hedges is recorded in “Hedging Reserve Account”until the transaction is complete. The gain or loss is accounted in Profit and Loss Account upon completion of the transactionor when the hedge instrument expires or terminates or ceases to qualify for hedge accounting.11. Employee Benefitsa) Short term employee benefits are recognized as an expense at the undiscounted amount in the Profit and Loss accountof the year in which the related service is rendered.b) Post employment and other long term benefits are recognized as an expense in the profit and loss account of the year inwhich the employee has rendered services. The expense is recognized at the present value of the amounts payabledetermined using actuarial valuation techniques. Actuarial gains and losses in respect of post employment and otherlong-term benefits are charged to the Profit and Loss account.(c)Payments to defined contribution retirement benefit schemes are charged as expenses as and when they fall due.12. Employee Stock Options SchemeIn respect of employee stock options granted pursuant to the Company's Stock Option Scheme, the intrinsic value of theoptions (excess of market price of the share over the exercise price of the option) is treated as discount and accounted asemployee compensation cost over the vesting period.13. Accounting for Taxes on Income(a)(b)Current tax is determined as the amount of tax payable in respect of taxable income of the year computed as per theIncome Tax Act, 1961.Deferred tax is recognized subject to consideration of prudence, on timing difference, being the difference betweentaxable income and accounting income that originate in one period and are capable of reversal in one or moresubsequent periods and measured using prevailing enacted or substantively enacted tax rates.67