Translation Methods and Risk Management in International Finance

The fiscal statements are prepared under the historical cost convention, ongoing concern footing and in footings of the Accounting Standards. The Company follows the mercantile system of accounting and recognizes income and outgo on accrual footing to the extent measurable and where there is certainty of ultimate realisation in regard of incomes.

In instance of foreign subordinates, being non-integral operations, gross points are consolidated at the mean exchange rate predominating during the twelvemonth. All assets and liabilities are converted at the rates predominating at the terminal of the twelvemonth. Any exchange difference originating on consolidation is recognized in the foreign currency interlingual rendition modesty.

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The difference between the cost of investing in the subordinates and joint ventures and the Company ‘s portion of net assets at the clip of acquisition of portions in the subordinates and joint ventures is recognized in the fiscal statements as good will or capital modesty as the instance may be.

The Company has been availing assorted types of fiscal installations from Banks, Financial Institutions, and other loaners in India and/or abroad for run intoing fund demands for implementing the undertakings, enlargement programs and working capital. Options available in the recognition market are decently assessed and sufficient attentions is taken to avail these installations at competitory footings and conditions and are suitably secured as per footings of countenance. The adoptions are at competitory cost and their expense is linked to the project/working capital demands. Senior managerial forces are looking after the agreement of financess, service of debts and direction of internal accumulations


Translation method:

Foreign currency minutess are recorded in the coverage currency, by using to the foreign currency amount the exchange rate between the coverage currency and the foreign currency at the day of the month of the dealing.

Income and expense points are translated at exchange rate at the day of the month of dealing for the twelvemonth ; and all resulting exchange differences are accumulated in a foreign currency interlingual rendition modesty until the disposal of the net investing.

Foreign currency pecuniary points are reported utilizing the shutting rate. Non-monetary points which are carried in footings of historical cost denominated in a foreign currency are reported utilizing the exchange rate at the day of the month of the dealing.

Hazard direction:

The Company ‘s activities expose it to a assortment of fiscal hazards, including the effects of alterations in foreign currency exchange rates and involvement rates. The Company uses derivative fiscal instruments such as foreign exchange contracts, Option contracts and involvement rate barters to pull off its exposures to involvement rate and foreign exchange fluctuations.

Exchange differences on forward exchange contracts & A ; plain vanilla currency options for set uping the sum of describing currency and non intended for trading & A ; guess intents, are recognized in the Profit & A ; Loss history in the period/year in which the exchange rate alterations.


Translational method

The attach toing unaudited condensed amalgamate interim fiscal statements have been prepared in Indian rupees. Entirely for the convenience of the reader, the unaudited condensed amalgamate interim fiscal statements as of and for the six months endedSeptember 30, 2008 have been translated into United States dollars at the noon purchasing rate in New York City on September 30, 2008 for overseas telegram transportations in Indian rupees, as certified for imposts intents by the Federal Reserve Bank of New York of U.S. $ 1.00 = Rs.46.45. No representation is made that the Indian rupee sums have been, could hold been or could be converted into U.S. dollars at such a rate or any other rate.

Risk direction policy

The Company uses foreign exchange forward contracts and options to fudge its motions in foreign exchange rates and does non utilize the foreign exchange forward contracts and options for trading or bad intents.Foreign currency minutess and balances: Foreign currency minutess are recorded utilizing the exchange rates predominating on the day of the months of the several minutess. Exchange differences originating on foreign currency minutess settled during the twelvemonth are recognized in the Net income and Loss Account

Use of estimations: The readying of the fiscal statements in conformance with GAAP requires direction to do estimations and premises that affect the reported sums of assets and liabilities and revelation of contingent liabilities on the day of the month of the fiscal statements and reported sums of grosss and disbursals for the twelvemonth. Actual consequences could differ from these estimations. Any alteration to accounting estimations is recognized prospectively in the current and future periods



All minutess in foreign currency are recorded at the rates of exchange prevailing on the day of the months when the relevant minutess take topographic point ;

Monetary points in the signifier of Loans, Current Assets and Current Liabilities in foreign currency, outstanding at the stopping point of the twelvemonth, are converted in Indian Currency at the appropriate rates of exchange prevailing on the day of the month of the Balance Sheet. Resultant addition or loss is accounted during the twelvemonth ;

In regard of Forward Exchange contracts entered into to fudge foreign currency hazards, the difference between the forward rate and exchange rate at the origin of the contract is recognized as income or disbursal over the life of the contract. Further, the exchange differences originating on such contracts are recognized as income or disbursal along with the exchange differences on the implicit in assets / liabilities. Further, in instance of other contracts with committed exchange rates, the underlying is accounted at the rate so committed. Net income or loss on cancellations / reclamations of forward contracts is recognized during the twelvemonth. In instance of option contracts, the losingss are accounted on grade to market footing


Translation method:

Foreign currency grosss, on the other manus, are short-run and unpredictable, in line with the short-run nature of forward contracts. A study done by Marshall ( 2000 ) besides points out that currency barters are better for fudging against interlingual rendition hazard, while forwards are better for fudging against dealing hazard.

Accounting exposure, besides called interlingual rendition exposure, consequences from the demand to repeat foreign subordinates ‘ fiscal statements into the parent ‘s coverage currency and is the sensitiveness of net income to the fluctuation in the exchange rate between a foreign subordinate and its parent.

Hazard Management:

The chief advantage of a forward is that it can be tailored to the specific demands of the house and an exact hedge can be obtained.

The company uses assorted fudging schemes like forwards, hereafters, barters, and foreign debt which is used to fudge foreign exchange exposure by taking advantage of the International Fischer Effect relationship.


Translation EXPOSURE

The functional currency of the Group ‘s entities is the currency of their primary economic environment. In single companies, minutess in foreign currencies are recorded at the rate of exchange at the day of the month of the trans-action. Monetary assets and liabilities in foreign currencies are translated at year-end rates. Any ensuing exchange differences are taken to the income statement. On consolidation, assets and liabilities of Group entities reported in their functional currencies are translated into Swiss Francs, the Group ‘s presentation currency, at year-end exchange rates. Income and expense points are trans-lated into Swiss Francs at the one-year leaden mean rate of exchange or at the rate on the day of the month of the dealing for signii¬?cant points. Differences originating from the retranslation of opening net assets of Group entities, together with differences originating from the restatement of the net consequences for the twelvemonth of Group entities, are recognised in other comprehensive income. The balance sheet and net consequences of Group entities runing in hyper ini¬‚ationary economic systems are restated for the alterations in the general buying power of the local currency, utilizing ofi¬?cial indices at the balance sheet day of the month, before interlingual rendition into Swiss Francs at year-end rates


The Group designates and paperss certain derived functions as fudging instruments against alterations in just values of recognized assets and liabilities ( just value hedges ) , extremely likely prognosis minutess ( hard currency i¬‚ ow hedges ) and hedges of net investings in foreign operations ( net investing hedges ) . The effectivity of such hedges is assessed at origin and verii¬?ed at regular intervals and at least on a quarterly footing, utilizing prospective and retrospective testing. The Group uses just value hedges to extenuate foreign currency and involvement rate hazards of its recognized assets and liabilities. The alterations in just values of fudging instruments are recognized in the income statement. Hedged points are besides adjusted for the hazard being hedged, with any addition or loss being recognized in the income statement.


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