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Note 1: Significant Income Computing Policies

a. Basis of presentation of Computation Statements:

The Computation statement is prepared on the basis of fundamental accounting assumptions complying with the Income Computation and Disclosure Standards issued by the CBDT and in accordance with the applicable provisions of the Income Tax Act.

b. Inventories:

Inventories are valued at Cost or at Net Realizable Value whichever is less. The measurement of cost adopted for different classification of inventory are as below:

1.Raw Materials and Components


2. Work In Progress


3. Finished Goods


4. Stock-in-trade

Standard Cost

5. Stores and Spares


Where standard cost has been used, the standard cost approximates the actual cost. Cost of inventories comprises of all cost of purchase, cost of services, cost of conversion and other costs incurred in bringing them to their present location and condition.

c. Construction

Not Applicable

d. Revenue Recognition:

In transactions involving sale of goods, total amount is recognized as revenue. The amount of revenue from service transactions disclosed appropriately in the financial statements and in case of service transactions in progress, percentage of completion method has been used to determine the stage of completion.

Interest is recognized on time proportion basis.

e. Fixed Assets:

Fixed Assets are stated at written down value, details of which are provided as a separate annexure to the Computation statement. Depreciation has been provided on written down method at the rates prescribed under the Income Tax Act.

Cost comprises of its purchase price, import duties and other taxes, excluding those subsequently recoverable and the adjustments on account of change in rate of exchange of currency or subsidy, grant or reimbursement where applicable.

Pre-operative expenses and borrowing costs have been apportioned to the assets up to the time the assets are first put to use.

f. Foreign Currency Transactions:

Transactions in foreign currency are recorded at the exchange rate prevailing on the date of the transaction. Foreign currency monetary items at the yearend are stated by applying the closing rate and exchange differences are adjusted in the Statement of Profit and Loss. Non-monetary items in a foreign currency are stated by using the exchange rate at the date of the transaction and exchange differences are not recognized as income or expense in this year.

g. Government Grants:

  • Not Applicable….
  • Where Applicable:

Grant from the Government of India / Government of Tamil Nadu has been received towards investment in fixed assets/………………,  whole of which has been deducted from the actual cost of fixed assets.

Grant from the Government of India / Government of Tamil Nadu has been received towards staff salary / ISO certification / Barcoding / ……….. whole of which has been recognized as income.

h. Securities:

Not Applicable…

i. Borrowing Cost:

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset have been capitalized up to the time the assets are first put to use. Other borrowing costs are charged to revenue.

j. Provision, Contingent Liabilities and Contingent Assets:

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is reasonably certain that there will be an outflow of resources.  Contingent Liabilities and Contingent Assets are neither recognized nor disclosed in the computation statements.

The above statement is given as a model/template for further improvement and usage. The users to check the applicability of the ICDS and also the appropriateness of declaration with reference to the entity.


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Category Income Tax   Report

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