Provisions, contingent liabilities and contingent asset

Provisions

Provisions are recognised when the Company has a
present obligation (legal or constructive) as a result
of a past event and it is probable that an outflow of
resources embodying economic benefits will be
required to settle the obligation and a reliable estimate
can be made of the amount of the obligation. Provisions
are discounted, if the effect of the time value of money
is material, using pre-tax rates that reflects the risks
specific to the liability. When discounting is used, an
increase in the provisions due to the passage of time
is recognised as finance cost. These provisions are
reviewed at each balance sheet date and adjusted to
reflect the current best estimates.

Contingent liabilities

A contingent liability is a possible obligation that arises
from past events whose existence will be confirmed
by the occurrence or non-occurrence of one or more
uncertain future events beyond the control of the
company or a present obligation that is not recognized
because it is not probable that an outflow of resources
will be required to settle the obligation. A contingent
liability also arises in extremely rare cases where
there is a liability that cannot be recognized because it
cannot be measured reliably. Contingent liabilities are
disclosed separately.

Show cause notices issued by various Government
authorities are considered for evaluation of contingent
liabilities only when converted into demand.

Contingent assets

Where an inflow of economic benefits is probable, the
Company discloses a brief description of the nature
of the contingent assets at the end of the reporting
period, and, where practicable, an estimate of their
financial effect. Contingent assets are disclosed but
not recognised in the financial statements.

m. Cash and cash equivalents

Cash comprises cash on hand and demand deposits
with banks. Cash equivalents are short-term balances
with original maturity of less than 3 months, highly
liquid investments that are readily convertible into
cash, which are subject to insignificant risk of changes
in value.

n. Cash Flow Statement

Cash flows are presented using indirect method,
whereby profit / (loss) before tax is adjusted for the
effects of transactions of non-cash nature and any
deferrals or accruals of past or future cash receipts or
payments.

Bank borrowings are generally considered to be
financing activities. However, where bank overdrafts
which are repayable on demand form an integral part
of an entity's cash management, bank overdrafts are
included as a component of cash and cash equivalents
for the purpose of Cash flow statement.

o. Earnings per share

The basic earnings per share are computed by
dividing the net profit for the period attributable to
equity shareholders by the weighted average number
of equity shares outstanding during the period.

Diluted EPS is computed by dividing the net profit after
tax by the weighted average number of equity shares
considered for deriving basic EPS and also weighted
average number of equity shares that could have
been issued upon conversion of all dilutive potential
equity shares. Dilutive potential equity shares are
deemed converted as of the beginning of the period,
unless issued at a later date. Dilutive potential equity
shares are determined independently for each period
presented. The number of equity shares and potentially
dilutive equity shares are adjusted for bonus shares,
as appropriate.