Accounting Policies of Apollo Tyres Ltd. Company
Mar 31, 2023
1 Corporate information
The Company is a public Company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. Its shares are listed on two recognised stock exchanges in India. The registered office of the Company is Apollo Tyres ltd, 3rd Floor, Areekal mansion, Panampilly Nagar, Kochi 682036, India.
The principal business activity of Apollo Tyres Limited (''the Company'') is manufacturing and sale of automotive tyres. The Company started its operations in 1972 with its first manufacturing plant at Perambra in Kerala.
The Company''s largest operations are in India and comprises five tyre manufacturing plants, two located in Cochin and one each at Vadodara, Chennai and Andhra Pradesh and various sales and marketing offices spread across the country. The Company''s European subsidiaries Apollo Tyres (NL) B.V and Apollo Tyres (Hungary) Kft. have a manufacturing plant in the Netherlands and Hungary respectively. It also has sales and marketing subsidiaries across the globe.
2 RECENT ACCOUNTING PRONOUNCEMENTS2.1 Amended standards adopted by the Company
(i) Reference to the Conceptual Framework -amendment to Ind AS 103
The amendment replaced the reference to the ICAI''s "Framework for the Preparation and Presentation of Financial Statements under Indian Accounting Standards" with the reference to the "Conceptual Framework for Financial Reporting under Indian Accounting Standard" without significantly changing its requirements.
The amendment also added an exception to the recognition principle of Ind AS 103 Business Combinations to avoid the issue of potential ''day 2'' gains or losses arising for liabilities and contingent liabilities that would be within the scope of Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets or Appendix C, Levies, of Ind AS 37, if incurred separately. The exception requires entities to apply the criteria in Ind AS 37 or Appendix C, Levies, of Ind AS 37, respectively, instead of the Conceptual Framework, to determine whether a present obligation exists at the acquisition date.
The amendment also adds a new paragraph to IFRS 3 to clarify that contingent assets do not qualify for recognition at the acquisition date.
This amendment had no impact on the financial statements of the Company as there were no contingent assets, liabilities or contingent liabilities within the scope of these amendment that arose during the period.
(ii) Property, Plant and Equipment: Proceeds before Intended Use - amendment to Ind AS 16
The amendment modified paragraph 17(e) of Ind AS 16 to clarify that excess of net sale proceeds of items produced over the cost of testing, if any, shall not be recognised in the statement of profit and loss but deducted from the directly attributable costs considered as part of cost of an item of property, plant, and equipment.
The amendment is effective for annual reporting periods beginning on or after 1 April 2022. This amendment had no impact on the consolidated financial statements of the Company as there were no sales of such items produced by property, plant and equipment made available for use on or after the beginning of the earliest period presented.
(iii) Ind AS 109 Financial Instruments - Fees in the ''10 per cent'' test for derecognition of financial liabilities
The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other''s behalf.
This amendment had no impact on the financial statements of the Company as there were no modifications of the Company''s financial instruments which were covered by amendment.
(iv) Onerous Contracts - Costs of Fulfilling a Contract -amendment to Ind AS 37
An onerous contract is a contract under which the unavoidable of meeting the obligations under the contract costs (i.e., the costs that the Group cannot avoid because it has the contract) exceed the economic benefits expected to be received under it.
The amendment specifies that when assessing whether a contract is onerous or loss-making, an entity needs to include costs that relate directly to a contract to provide goods or services including both incremental costs (e.g., the costs of direct labour and materials) and an allocation of costs directly
related to contract activities (e.g., depreciation of equipment used to fulfil the contract and costs of contract management and supervision). General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract.
2.2 Standards issued but not yet effective
The Ministry of Corporate Affairs has notified Companies (Indian Accounting Standards) Amendment Rules, 2023 dated 31 March 2023 to amend the following Ind AS which are effective from 01 April 2023.
(i) Definition of Accounting Estimates - amendment to Ind AS 8
The amendment clarifies the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. It has also been clarified how entities use measurement techniques and inputs to develop accounting estimates.
The amendment is effective for annual reporting periods beginning on or after 1 April 2023 and apply to changes in accounting policies and changes in accounting estimates that occur on or after the start of that period.
The amendment is not expected to have a material impact on the Company''s financial statements.
(ii) Disclosure of Accounting Policies - amendment to Ind AS 1
The amendment aims to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their ''significant'' accounting policies with a requirement to disclose their ''material'' accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures.
The amendment to Ind AS 1 are applicable for annual periods beginning on or after 1 April 2023. Consequential amendment has been made in Ind AS 107. The Company is currently revisiting their accounting policy information disclosures to ensure consistency with the amended requirements.
(iii) Deferred Tax related to Assets and Liabilities arising from a Single Transaction - amendment to Ind AS 12
The amendment narrows the scope of the initial recognition exception under Ind AS 12, so that it no
longer applies to transactions that give rise to equal taxable and deductible temporary differences.
The amendment should be applied to transactions that occur on or after the beginning of the earliest comparative period presented. In addition, at the beginning of the earliest comparative period presented, a deferred tax asset (provided that sufficient taxable profit is available) and a deferred tax liability should also be recognised for all deductible and taxable temporary differences associated with leases and decommissioning obligations. Consequential amendment has been made in Ind AS 101. The amendment to Ind AS 12 are applicable for annual periods beginning on or after 1 April 2023.
This amendment is likely to have an impact on the Company''s financial statement which is currently being assessed by the management. Any necessary adjustment required shall be accounted for in the next period financial statements.
3 Basis of accounting and preparation of financial statements3.1 Statement of Compliance
The financial statements have been prepared to comply in all respects with the Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) and presentation requirements of Division II of Schedule III to the Companies Act, 2013, (Ind AS compliant Schedule III), as applicable to the financial statements.
The financial statements are presented in Indian Rupee (''INR''), which is also the functional currency of the Company.
The financial statements for the year ended March 31, 2023 were authorised and approved for issue by the Board of Directors on May 09, 2023.
3.2 Basis of preparation and presentation
The financial statements have been prepared on accrual basis under the historical cost convention except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below. The Company has prepared the financial statements on the basis that it will continue to operate as a going concern.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/ or disclosure purposes in these financial statements is determined on above basis, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 - Inventories or value in use in Ind AS 36 - Impairment of Assets.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
⢠Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
⢠Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
⢠Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current when it is:
⢠Expected to be realised or intended to be sold or consumed in normal operating cycle
⢠Held primarily for the purpose of trading
⢠Expected to be realised within twelve months after the reporting period, or
⢠Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when:
⢠It is expected to be settled in normal operating cycle
⢠It is held primarily for the purpose of trading
⢠It is due to be settled within twelve months after the reporting period, or
⢠There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
The Company classifies all other liabilities as noncurrent.
Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
The significant accounting policies are set out below:
Common control business combinations includes transactions, such as transfer of subsidiaries or businesses, between entities within a Company.
Business combinations involving entities or businesses under common control are accounted for using the pooling of interests method.
The pooling of interest method is considered to involve the following:
(i) The assets and liabilities of the combining entities are reflected at their carrying amounts.
(ii) No adjustments are made to reflect fair values, or recognise any new assets or liabilities. The only adjustments that are made are to harmonise accounting policies.
(iii) The financial information in the financial
statements in respect of prior periods is restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination. However, if business combination had occurred after that date, the prior period information shall be restated only from that date.
(iv) The balance of the retained earnings appearing in the financial statements of the transferor is aggregated with the corresponding balance appearing in the financial statements of the transferee.
Inventories are valued at the lower of cost and estimated net realizable value (net of allowances) after providing for obsolescence and other losses, where considered necessary. The cost comprises cost of purchase, cost of conversion and other costs including appropriate production overheads in the case of finished goods and work in progress, incurred in bringing such inventories to their present location and condition. Trade discounts or rebates are deducted in determining the costs of purchase. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
In case of raw materials, stores and spares and traded goods, cost (net of tax credits wherever applicable) is determined on a moving weighted average basis, and, in case of work in progress and finished goods, cost is determined on a First In First Out basis.
Income tax expense recognised in Statement of Profit and Loss comprised the sum of deferred tax and current tax except the ones recognised in other comprehensive income or directly in equity.
Current Tax
Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable income tax laws of India. Taxable profit differs from ''profit before tax'' as reported in the standalone statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The Company shall reflect the
effect of uncertainty for each uncertain tax treatment by using either most likely method or expected value method, depending on which method predicts better resolution of the treatment.
Deferred tax
Deferred tax is recognized on temporary differences between the carrying amount of assets and liabilities in the financial statements and quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date.
Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:
⢠When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss
⢠In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. In assessing the recoverability of deferred tax assets, the Company relies on the same forecast assumptions used elsewhere in the financial statements and in other management reports.
The Company offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority. The Company intends either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax for the year. The deferred tax asset is recognised for MAT credit available only to the extent that it is probable that the concerned Company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the Company recognizes MAT credit as an asset, it is created by way of credit to the statement of profit and loss and shown as part of deferred tax asset. The Company reviews the "MAT credit entitlement" asset at each reporting date and writes down the asset to the extent that it is no longer probable that it will pay normal tax during the specified period.
3.6 Property, plant and equipment (''PPE'')
Property, plant and equipment held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses. Freehold land is not depreciated.
For qualifying assets, borrowing costs are capitalised in accordance with Ind AS 23 - Borrowing costs. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
Property, plant and equipment are capitalised at costs relating to the acquisition and installation (net of tax credits wherever applicable) and include finance cost on borrowed funds attributable to acquisition of qualifying fixed assets for the period up to the date when the asset is ready for its intended use, and adjustments arising from foreign exchange differences arising on foreign currency borrowings to the extent they are regarded as an adjustment to interest costs. Other incidental expenditure attributable to bringing the fixed assets to their working condition for intended use are also capitalized. Subsequent expenditure relating to fixed assets is capitalised only if such expenditure meets the recognition criteria.
Depreciation is recognised so as to write off the cost or valuation of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period.
The Company, based on technical assessment made by technical expert and management estimate, depreciates certain items of building, plant and equipment over estimated useful lives which are
different from the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
The estimated useful life considered for the assets are as under.
|
Category of assets |
Number of years |
|
Building * |
5 - 60 |
|
Plant and equipment |
3 - 25 |
|
Electrical installations |
1 - 10 |
|
Furniture and fixtures |
4 - 10 |
|
Vehicles |
4 - 10 |
|
Office equipment |
4 - 10 |
Assets held under leases are depreciated over their expected lease term on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.
* Leasehold improvements included in Building are amortised over their period of lease or useful life, whichever is lower.
Leasehold land / Improvements thereon are amortized over the primary period of lease.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the Statement of Profit and Loss.
Intangible assets with finite useful lives are carried at cost less accumulated amortisation and impairment losses, if any. The cost of an intangible asset comprises its purchase price, including any import duties and other taxes (other than those subsequently recoverable from the tax authorities), and any directly attributable expenditure on making the asset ready for its intended use and net of any trade discounts and rebates. Subsequent expenditure on an intangible asset after its purchase / completion is recognised as an expense when incurred unless it is probable that such expenditure will enable the asset to generate future economic benefits in excess of its originally assessed standards of performance and such expenditure can be measured and attributed to the asset reliably, in which case such
expenditure is added to the cost of the asset. Internally generated intangibles are not capitalised and the related expenditure is reflected in statement of profit and loss in the period in which the expenditure is incurred.
The intangible assets are amortized over their respective estimated useful lives on a straight-line basis, commencing from the date the asset is available to the Company for its use. The amortisation period is reviewed at the end of each financial year and the changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, which are treated as changes in accounting estimates
Derecognition of intangible assets
An intangible asset is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in the Statement of Profit and Loss when the asset is derecognised.
The useful life considered for the intangible assets are as under:
|
Category of Assets |
Number of years |
|
Computer Software |
3-6 |
In accordance with Ind AS 115, the Company recognises the amount as revenue from contracts with customers, which is received for the transfer of promised goods or services to customers in exchange for those goods or services. The relevant point in time or period of time is the transfer of control of the goods or services (control approach). The Company recognises revenue at point in time. Revenue is reduced for customer returns, taxes on sales, estimated rebates and other similar allowances. To determine when to recognise revenue and at what amount, the five-step model is applied. By applying the five-step model distinct performance obligations are identified. Variable consideration includes various forms of sales related obligations like volume discounts, price concessions, incentives, etc. on the goods sold or services rendered to its customers, dealers and distributors. In all such cases, accumulated experience is used to estimate and provide for the variability in revenue, using the expected value method and the revenue is recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue
recognised will not occur in future on account of refund or discounts. The transaction price is determined and allocated to the performance obligations according to the requirements of Ind AS 115. Performance obligation are deemed to have been met when the control of goods or services transferred to the customer.
The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price for the sale of goods or services, the Company considers the effects of variable consideration, the existence of significant financing components, if any.
Contract balances
Trade receivables
A receivable represents the Company''s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Refer to note 3.19 Financial Instruments in accounting policies.
Contract liabilities
A contract liability is recognised if a payment is received or a payment is due (whichever is earlier) from a customer before the Company transfers the related goods or services. Contract liabilities are recognised as revenue when the Company performs under the contract (i.e., transfers control of the related goods or services to the customer).
Dividend income from investments is recognised when the right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably).
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principle outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset''s net carrying amount on initial recognition.
Royalty income is recognised on an accrual basis in accordance with the substance of the relevant agreement.
Employee benefits include wages and salaries, provident fund, superannuation fund, employee state insurance scheme, gratuity fund and compensated absences.
Defined Contribution Plans
Contributions to defined contribution plans are recognised as an expense when employees have rendered service entitling them to the contributions.
Defined Benefit Plans
For defined benefit retirement plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period.
Defined benefit costs are categorised as follows:
a. service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
b. net interest expense or income; and
c. re-measurement
Re-measurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding net interest), is reflected immediately in the Balance Sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. The re-measurements of the net defined benefit liability are directly recognised in the other comprehensive income in the period in which they arise. Past service cost is recognised in the Statement of Profit and Loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
The obligations recognised in the balance sheet represents the actual deficit or surplus in the Company''s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.
Other current and non-current employee benefits
Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.
Liabilities recognised in respect of other long-term employee benefits are measured at the present value
of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date.
3.11 Government grants, subsidies and export incentives
Government grants and subsidies are recognised when there is reasonable assurance that the Company will comply with the conditions attached to them and the grants / subsidy will be received.
Government grants and subsidies whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the balance sheet which is disclosed as investment promotion subsidy receivable and transferred to the Statement of Profit and Loss on a systematic basis over the expected useful life of the related assets.
Government grants and subsidies related to the income are deferred which is disclosed as deferred revenue arising from government grant in the Balance Sheet and recognized in the Statement of Profit and Loss as an income in the period in which related obligations are met.
Export incentives under various schemes notified by the Government have been recognised on the basis of applicable regulations, and when reasonable assurance to receive such revenue is established and disclosed under other operating income.
Export incentives earned in the year of exports are netted off from cost of raw material imported.
3.12 Foreign currency transactions and translations
The Company''s financial statements are presented in INR which is also the Company''s functional currency. Foreign currency transactions are recorded at rates of exchange prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the rate of exchange prevailing at the year-end. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
According to Appendix B of Ind AS 21 "Foreign currency transactions and advance consideration", purchase or sale transactions must be translated at the exchange
rate prevailing on the date the asset or liability is initially recognized. In practice, this is usually the date on which the advance payment is paid or received. In the case of multiple advances, the exchange rate must be determined for each payment and collection transaction.
Exchange differences on monetary items are recognised in the Statement of Profit and Loss in which they arise except for:
a. exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;
b. exchange differences on transactions entered into in order to hedge certain foreign currency risks; and
c. exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to the Statement of Profit and Loss on repayment of the monetary items.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred. Other finance costs includes interest on other contractual obligations.
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing costs also include exchange differences to the extent regarded as an adjustment to the borrowing costs.
The Company as lessee
The Company''s lease asset classes primarily consist of leases for Building and Plant and Machinery. The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a
lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (1) the contract involves the use of an identified asset, (2) the Company has substantially all of the economic benefits from the use of the asset through the period of the lease, and (3) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a Right of use (ROU) asset and a corresponding lease liability for all lease arrangements under which it is a lessee, except for short-term leases and low value leases. For short-term leases and low value leases, the Company recognizes the lease payments as an expense on a straightline basis over the term of the lease.
Certain lease arrangements include options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities include these options when it is reasonably certain that they will be exercised.
The ROU assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses. ROU assets are depreciated from the date of commencement of the lease on a straight line basis over the shorter of the lease term and the useful life of the underlying asset.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. For leases under which the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate based on the information available at the date of commencement of the lease in determining the present value of lease payments. Lease liabilities are re measured with a corresponding adjustment to the related ROU asset if the Company changes its assessment as to whether it will exercise an extension or a termination option.
Lease liability and ROU assets have been separately presented in the Balance sheet and the payment of principal and interest portion of lease liabilities has been classified as financing cash flows.
The weighted average incremental borrowing rate applied to lease liabilities is 8% p.a.
Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year.
Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e., average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits / reverse share splits and bonus shares, as appropriate.
3.16 Impairment of tangible and intangible assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets or cash generating units to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest Company of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, or whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cashgenerating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cashgenerating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the Statement of Profit and Loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the Statement of Profit and Loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
3.17 Provisions and contingencies
A provision is recognized when the Company has a present obligation (legal / constructive) as a result of past events and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
Contingent liability is disclosed for (i) Possible obligation which will be confirmed only by future events not wholly within the control of the Company or (ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Provisions for the expected cost of sales related obligations are recognised at the date of sale of the relevant products, at the management''s best estimate of the expenditure required to settle the Company''s obligation.
3.18 Financial instruments
Financial assets and financial liabilities are recognised when an entity becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit and loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. However, trade receivable that do not contain a significant financing component are measured at transaction price. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit and loss are recognised immediately in the Statement of Profit and Loss.
3.19 Financial assets
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.
3.19.1 Classification of financial asset
a. Loans and receivable
Financial assets that meet the following conditions are subsequently measured at amortised cost less impairment loss (except for investments that are designated as at FVTPL on initial recognition):
i. the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
ii. the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Interest income is recognised in the Statement of Profit and Loss and is included in the ''Other Income'' line item.
b. Assets available for sale
Financial assets that meet the following conditions are subsequently measured at fair value through other comprehensive income (''FVTOCI'') (except for investments that are designated as at FVTPL on initial recognition):
i. the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and
ii. the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
All other financial assets are subsequently measured at fair value.
c. Assets held for trading
A financial asset is held for trading if:
i. it has been acquired principally for the purpose of selling it in the near term; or
ii. on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profittaking; or
iii. it is a derivative that is not designated and effective as a hedging instrument or a financial guarantee.
Dividends on these investments in equity instruments are recognised in the Statement of Profit and Loss when the right to receive the dividends is established and it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.
d. Financial assets at fair value through profit and loss (''FVTPL'')
Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for equity instruments which are not held for trading.
Debt instrument that do not meet the amortised cost criteria or fair value through other comprehensive income criteria (see above) are measured at FVTPL. In addition, debt instruments that meet the amortised cost criteria or the fair value through other comprehensive income criteria but are designated as at FVTPL are measured at FVTPL.
A financial asset may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on re-measurement recognised in the Statement of Profit and Loss. The net gain or loss recognised in the Statement of Profit and Loss is included in the ''other income'' line item. Dividend on financial assets at FVTPL is recognised when the Company''s right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of the part of cost of the investment and the amount of dividend can be measured reliably.
3.19.2 Impairment of financial assets
The Company applies the expected credit loss model for recognising impairment loss on financial assets measured at amortised cost, debt instruments at FVTOCI, lease receivables, trade receivables, other contractual rights to receive cash or other financial assets, and financials guarantees not designated as at FVTPL.
Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights. Credit loss is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive (i.e., all cash shortfalls), discounted at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets). The Company estimates cash flows by considering all contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) through the expected life of that financial instruments.
The Company measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. If the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses.12-month expected credit losses are the portion of the life-time expected credit losses and represent the lifetime cash shortfalls that will result if a default occurs within the 12 months after the reporting date and thus, are not cash shortfalls that are predicted over the next 12 months.
If the Company measured loss allowance for a financial instrument at lifetime expected credit loss model in the previous period, but determines at the end of a reporting period that the credit risk has not increased significantly since initial recognition due to improvement in credit quality as compared to the previous period, the Company again measures the loss allowance based on 12- month expected credit losses.
When making the assessment of whether there has been a significant increase in credit risk since initial recognition, the Company uses the change in the risk of a default occurring over the expected life of the financial instrument. To make that assessment, the Company compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition.
For trade receivables and contract assets, the Company applies a simplified approach in calculating ECLs. Therefore, the Company does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Company has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
3.19.3 De-recognition of financial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
On de-recognition of a financial asset in its entirety, the difference between the asset''s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in the Statement of Profit and Loss if such gain or loss would have otherwise been recognized in the Statement of Profit and Loss on disposal of that financial asset.
On de-recognition of a financial asset other than in its entirety (e.g. when the Company retains an option to repurchase part of a transferred asset), the Company allocates the previous carrying amount of the financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in the Statement of Profit and Loss if such gain or loss would have otherwise been
recognized in the Statement of Profit and Loss on disposal of that financial asset. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.
3.20 Financial liabilities and equity instruments
3.20.1 Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
3.20.2 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
3.20.3 Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL. However, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies, financial guarantee contracts issued by the Company are measured in accordance with the specific accounting policies set out below.
3.20.3.1 Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL.
A financial liability is classified as held for trading if:
i. it has been incurred principally for the purpose of repurchasing it in the near term; or
ii. on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profittaking; or
iii. it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:
i. such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
Mar 31, 2022
The principal business activity of Apollo Tyres Limited (''the Company'') is manufacturing and sale of automotive tyres. The Company started its operations in 1972 with its first manufacturing plant at Perambra in Kerala. The Company''s largest operations are in India and comprises five tyre manufacturing plants, two located in Cochin and one each at Vadodara, Chennai and Andhra Pradesh and various sales and marketing offices spread across the country. The Company''s European subsidiaries Apollo Vredestein BV (''AVBV'') and Apollo Tyres (Hungary) Kft. have a manufacturing plant in the Netherlands and Hungary respectively and has sales and marketing subsidiaries all over Europe. The Company also has sales and marketing subsidiaries in Middle East, Africa and ASEAN region. 2 recent accounting pronouncements 2.1 Amended standards adopted by the Company I nterest Rate Benchmark Reform - Phase 2: Amendments to Ind AS 109, Ind AS 107, Ind AS 104 and Ind AS 116 The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest rate (RFR). The amendments include the following practical expedients: o A practical expedient to require contractual changes, or changes to cash flows that are directly required by the reform, to be treated as changes to a floating interest rate, equivalent to a movement in a market rate of interest o Permit changes required by IBOR reform to be made to hedge designations and hedge documentation without the hedging relationship being discontinued o Provide temporary relief to entities from having to meet the separately identifiable requirement when an RFR instrument is designated as a hedge of a risk component These amendments had no impact on the financial statements of the Company. The Company intends to use the practical expedients in future periods if they become applicable. Ind AS 116: COVID-19 related rent concessions MCA issued an amendment to Ind AS 116 Covid-19-Related Rent Concessions beyond June 30, 2021 to update the condition for lessees to apply the relief to a reduction in lease payments originally due on or before June 30, 2022 from June 30, 2021. The amendment applies to annual reporting periods beginning on or after April 1, 2021. These amendments had no impact on the financial statements of the Company. 2.2 Standards issued but not yet effective The Ministry of Corporate Affairs ("MCA") vide its notification dated March 23, 2022 has notified Companies (Indian Accounting Standards) Amendment Rules, 2022 to further amend the Companies (Indian Accounting Standards) Rules, 2015. Amendments have been made to the following standards. Amendment to Ind AS 16, Property, Plant and Equipment The Ministry of Corporate Affairs ("MCA") vide notification dated March 23, 2022, has issued an amendment to Ind AS 16 which specifies that an entity shall deduct from the cost of an item of property, plant and equipment any proceeds received from selling items produced while the entity is preparing the asset for its intended use. Amendment to Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets The Ministry of Corporate Affairs ("MCA") vide notification dated March 23, 2022, has issued an amendment to Ind AS 37 which specifies that the cost of fulfilling a contract comprises: the incremental costs of fulfilling that contract and an allocation of other costs that relate directly to fulfilling contracts. Amendment to Ind AS 109, Financial Instruments The Ministry of Corporate Affairs ("MCA") vide notification dated March 23, 2022, has issued an amendment to Ind AS 109 which clarifies that which fees an entity should include when it applies the ''10%'' test in assessing whether to derecognise a financial liability. An entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other''s behalf. The amendments listed above will be effective on or after April 1, 2022 and are not expected to significantly affect the current or future periods. The financial statements have been prepared to comply in all material respects with the Indian Accounting Standards (Ind AS) as notified by Ministry of Corporate Affairs under Section 133 of the Companies Act, 2013 (''the Act'') read with the Companies (Indian Accounting Standards) Rules, 2015, as amended and other relevant provisions of the Act. The financial statements are presented in Indian Rupee (''INR''), which is also the functional currency of the Company. The financial statements for the year ended March 31, 2022 were authorised and approved for issue by the Board of Directors on May 12, 2022. The financial statements have been prepared on accrual basis under the historical cost convention except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/ or disclosure purposes in these financial statements is determined on above basis, except for share-based payment transactions that are within the scope of Ind AS 102 - Share Based Payment, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 - Inventories or value in use in Ind AS 36 - Impairment of Assets. In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: ⢠Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; ⢠Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and ⢠Level 3 inputs are unobservable inputs for the asset or liability. The principal accounting policies are set out below: Common control business combinations includes transactions, such as transfer of subsidiaries or businesses, between entities within a Company. Business combinations involving entities or businesses under common control are accounted for using the pooling of interests method. The pooling of interest method is considered to involve the following: (i) The assets and liabilities of the combining entities are reflected at their carrying amounts. (ii) No adjustments are made to reflect fair values, or recognise any new assets or liabilities. The only adjustments that are made are to harmonise accounting policies. (iii) The financial information in the financial statements in respect of prior periods is restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination. However, if business combination had occurred after that date, the prior period information shall be restated only from that date. (iv) The balance of the retained earnings appearing in the financial statements of the transferor is aggregated with the corresponding balance appearing in the financial statements of the transferee. Inventories are valued at the lower of cost and estimated net realizable value (net of allowances) after providing for obsolescence and other losses, where considered necessary. The cost comprises cost of purchase, cost of conversion and other costs including appropriate production overheads in the case of finished goods and work in progress, incurred in bringing such inventories to their present location and condition. Trade discounts or rebates are deducted in determining the costs of purchase. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. In case of raw materials, stores and spares and traded goods, cost (net of tax credits wherever applicable) is determined on a moving weighted average basis, and, in case of work in progress and finished goods, cost is determined on a First In First Out basis. Income tax expense recognised in Standalone Statement of Profit and Loss comprised the sum of deferred tax and current tax except the ones recognised in other comprehensive income or directly in equity. Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable income tax laws of India. Taxable profit differs from ''profit before tax'' as reported in the standalone statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax is recognized on temporary differences between the carrying amount of assets and liabilities in the financial statements and quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Minimum alternate tax (''MAT'') credit entitlement is recognised as an asset only when and to the extent there is convincing evidence that normal income tax will be paid during the specified period. In the year in which MAT credit becomes eligible to be recognised as an asset is created by way of a credit to the Standalone Statement of Profit and Loss and shown as MAT credit entitlement. This is reviewed at each balance sheet date and the carrying amount of MAT credit entitlement is written down to the extent it is not reasonably certain that normal income tax will be paid during the specified period. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Current and deferred tax are recognised in the Statement of Profit and Loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses. Freehold land is not depreciated. Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. For qualifying assets, borrowing costs are capitalised in accordance with Ind AS 23 - Borrowing costs. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Leasehold land / Improvements thereon are amortized over the primary period of lease. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the Statement of Profit and Loss. Property, plant and equipment are capitalised at costs relating to the acquisition and installation (net of tax credits wherever applicable) and include finance cost on borrowed funds attributable to acquisition of qualifying fixed assets for the period up to the date when the asset is ready for its intended use, and adjustments arising from foreign exchange differences arising on foreign currency borrowings to the extent they are regarded as an adjustment to interest costs. Other incidental expenditure attributable to bringing the fixed assets to their working condition for intended use are capitalized. Subsequent expenditure relating to fixed assets is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance. Depreciation is recognised so as to write off the cost or valuation of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used. Assets held under leases are depreciated over their expected lease term on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives. The estimated useful life considered for the assets are as under. Category of assets Number of years Building 5 - 60 Plant and equipment 3 - 25 Electrical installations 1 - 10 Furniture and fixtures o I ¦''tf Vehicles o 1 ¦''tf Office equipment o I ¦''tf Intangible assets with finite useful lives are carried at cost less accumulated amortisation and impairment losses, if any. The cost of an intangible asset comprises its purchase price, including any import duties and other taxes (other than those subsequently recoverable from the tax authorities), and any directly attributable expenditure on making the asset ready for its intended use and net of any trade discounts and rebates. Subsequent expenditure on an intangible asset after its purchase / completion is recognised as an expense when incurred unless it is probable that such expenditure will enable the asset to generate future economic benefits in excess of its originally assessed standards of performance and such expenditure can be measured and attributed to the asset reliably, in which case such expenditure is added to the cost of the asset. The intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis, commencing from the date the asset is available to the Company for its use. The amortisation period are reviewed at the end of each financial year and the amortisation method is revised to reflect the changed pattern. An intangible asset is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in the Statement of Profit and Loss when the asset is derecognised. The useful life considered for the intangible assets are as Category of Assets Number of years Computer Software 3-6 In accordance with Ind AS 115, the Company recognises the amount as revenue from contracts with customers, which is received for the transfer of promised goods to customers in exchange for those goods. The relevant point in time or period of time is the transfer of control of the goods (control approach). The Company recognises revenue at point in time. Revenue is reduced for customer returns, taxes on sales, estimated rebates and other similar allowances. To determine when to recognise revenue and at what amount, the five-step model is applied. By applying the five-step model distinct the period in which they occur. The re-measurements of the net defined benefit liability are recognised directly in the other comprehensive income in the period in which they arise. Past service cost is recognised in the Statement of Profit and Loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows: a. service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements); b. net interest expense or income; and c. re-measurement The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus in the Company''s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans. Other current and non-current employee benefits Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service. Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date. 3.11 Government grants, subsidies and export incentives Government grants and subsidies are recognised when there is reasonable assurance that the Company will comply with the conditions attached to them and the grants / subsidy will be received. Government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the balance sheet and transferred to the Statement of Profit and Loss on a systematic basis over the expected useful life of the related assets. Government grants related to the income are deferred and recognized in the Statement of Profit and Loss as an income in the period in which related obligations are met. Export incentives under various schemes notified by the Government have been recognised on the basis of performance obligations are identified. The transaction price is determined and allocated to the performance obligations according to the requirements of Ind AS 115. Performance obligations are deemed to have been met when the control of goods is transferred to the customer, i.e., generally when the goods have been delivered to the customer. Revenues for services are recognised when the service rendered has been completed." Dividend income from investments is recognised when the right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably). Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principle outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset''s net carrying amount on initial recognition. Royalty income is recognised on accrual basis in accordance with the substance of the relevant agreement (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably). Employee benefits include wages and salaries, provident fund, superannuation fund, employee state insurance scheme, gratuity fund and compensated absences. Contributions to defined contribution plans are recognised as an expense when employees have rendered service entitling them to the contributions. For defined benefit retirement plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding net interest), is reflected immediately in the Balance Sheet with a charge or credit recognised in other comprehensive income in applicable regulations, and when reasonable assurance to receive such revenue is established. Export incentives earned in the year of exports are netted off from cost of raw material imported. 3.12 Foreign currency transactions and translations Foreign currency transactions are recorded at rates of exchange prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the rate of exchange prevailing at the year-end. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences on monetary items are recognised in the Statement of Profit and Loss in which they arise except for: a. exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings; b. exchange differences on transactions entered into in order to hedge certain foreign currency risks; and c. exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to the Statement of Profit and Loss on repayment of the monetary items. According to Appendix B of Ind AS 21 "Foreign currency transactions and advance consideration", purchase or sale transactions must be translated at the exchange rate prevailing on the date the asset or liability is initially recognized. In practice, this is usually the date on which the advance payment is paid or received. In the case of multiple advances, the exchange rate must be determined for each payment and collection transaction. 3.13 Employee share based payments Stock appreciation rights (Phantom stock units) are granted to employees under the Cash-settled Employee Share-based Payment Plan (Phantom Stock Plan). For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value of the liability. At the end of each reporting period until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in the Statement of Profit and Loss. Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred. Other finance costs includes interest on other contractual obligations. The Company''s lease asset classes primarily consist of leases for Building and Plant and Machinery. The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (1) the contract involves the use of an identified asset, (2) the Company has substantially all of the economic benefits from the use of the asset through the period of the lease, and (3) the Company has the right to direct the use of the asset. At the date of commencement of the lease, the Company recognizes a Right of use (ROU) asset and a corresponding lease liability for all lease arrangements under which it is a lessee, except for short-term leases and low value leases. For short-term leases and low value leases, the Company recognizes the lease payments as an expense on a straight-line basis over the term of the lease. Certain lease arrangements include options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities include these options when it is reasonably certain that they will be exercised. The ROU assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses. ROU assets are depreciated from the date of commencement of the lease on a straight -line basis over the shorter of the lease term and the useful life of the underlying asset. The lease liability is initially measured at amortized cost at the present value of the future lease payments. For leases under which the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate based on the information available at the date of commencement of the lease in determining the present value of lease payments. Lease liabilities are re measured with a corresponding adjustment to the related ROU asset if the Company changes its assessment as to whether it will exercise an extension or a termination option. Lease liability and ROU assets have been separately presented in the Balance sheet and the payment of principal portion of lease liabilities has been classified as financing cash flows. The weighted average incremental borrowing rate applied to lease liabilities is 8% p.a. Basic earnings per share is computed by dividing the profit / (Ioss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit / (Ioss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e., average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits / reverse share splits and bonus shares, as appropriate. At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets or cash generating units to determine whether there is any indication that those assets have suffered an impairment Ioss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment Ioss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cashgenerating units, or otherwise they are allocated to the smallest Company of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, or whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cashgenerating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cashgenerating unit) is reduced to its recoverable amount. An impairment Ioss is recognised immediately in the Statement of Profit and Loss, unless the relevant asset is carried at a revalued amount, in which case the impairment Ioss is treated as a revaluation decrease. When an impairment Ioss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment Ioss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment Ioss is recognised immediately in the Statement of Profit and Loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment Ioss is treated as a revaluation increase. A provision is recognized when the Company has a present obligation (legal / constructive) as a result of past events and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material). Contingent liability is disclosed for (i) Possible obligation which will be confirmed only by future events not wholly within the control of the Company or (ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Provisions for the expected cost of sales related obligations are recognised at the date of sale of the relevant products, at the management''s best estimate of the expenditure required to settle the Company''s obligation. Financial assets and financial liabilities are recognised when an entity becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit and loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit and loss are recognised immediately in the Statement of Profit and Loss. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets. Financial assets that meet the following conditions are subsequently measured at amortised cost less impairment loss (except for investments that are designated as at FVTPL on initial recognition): i. the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and ii. the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Interest income is recognised in the Statement of Profit and Loss and is included in the ''Other Income'' line item. Financial assets that meet the following conditions are subsequently measured at fair value through other comprehensive income (''FVTOCI'') (except for investments that are designated as at FVTPL on initial recognition):" i. the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and ii. the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. All other financial assets are subsequently measured at fair value. c. Assets held for trading A financial asset is held for trading if: i. it has been acquired principally for the purpose of selling it in the near term; or ii. on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or iii. it is a derivative that is not designated and effective as a hedging instrument or a financial guarantee. Dividends on these investments in equity instruments are recognised in the Statement of Profit and Loss when the right to receive the dividends is established and it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably. d. Financial assets at fair value through profit and loss (''FVTPL'') Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for equity instruments which are not held for trading. Debt instrument that do not meet the amortised cost criteria or fair value through other comprehensive income criteria (see above) are measured at FVTPL. In addition, debt instruments that meet the amortised cost criteria or the fair value through other comprehensive income criteria but are designated as at FVTPL are measured at fvtpl. A financial asset may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on re-measurement recognised in the Statement of Profit and Loss. The net gain or loss recognised in the Statement of Profit and Loss is included in the ''other income'' line item. Dividend on financial assets at FVTPL is recognised when the Company''s right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably. The Company applies the expected credit loss model for recognising impairment loss on financial assets measured at amortised cost, debt instruments at FVTOCI, lease receivables, trade receivables, other contractual rights to receive cash or other financial assets, and financials guarantees not designated as at FVTPL. Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights. Credit loss is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive (i.e., all cash shortfalls), discounted at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets). The Company estimates cash flows by considering all contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) through the expected life of that financial instruments. The Company measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. If the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. 12-month expected credit losses are portion of the life-time expected credit losses and represent the lifetime cash shortfalls that will result if default occurs within the 12 months after the reporting date and thus, are not cash shortfalls that are predicted over the next 12 months. If the Company measured loss allowance for a financial instrument at lifetime expected credit loss model in the previous period, but determines at the end of a reporting period that the credit risk has not increased significantly since initial recognition due to improvement in credit quality as compared to the previous period, the Company again measures the loss allowance based on 12- month expected credit losses. When making the assessment of whether there has been a significant increase in credit risk since initial recognition, the Company uses the change in the risk of a default occurring over the expected life of the financial instrument. To make that assessment, the Company compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition. For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115 -Revenue from contracts with customers, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses. Credit impaired balances are disclosed under provision for doubtful debts. 3.20.3 De-recognition of financial assets The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. On de-recognition of a financial asset in its entirety, the difference between the asset''s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in the Statement of Profit and Loss if such gain or loss would have otherwise been recognized in the Statement of Profit and Loss on disposal of that financial asset. On de-recognition of a financial asset other than in its entirety (e.g. when the Company retains an option to repurchase part of a transferred asset), the Company allocates the previous carrying amount of the financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in the Statement of Profit and Loss if such gain or loss would have otherwise been recognized in the Statement of Profit and Loss on disposal of that financial asset. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts. The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period. For foreign currency denominated financial assets measured at amortised cost and FVTPL, the exchange differences are recognised in the Statement of Profit and Loss except for those which are designated as hedging instruments in hedging relationship. Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs. All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL. However, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies, financial guarantee contracts issued by the Company are measured in accordance with the specific accounting policies set out below. Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL. A financial liability is classified as held for trading if: i. it has been incurred principally for the purpose of repurchasing it in the near term; or ii. on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or iii. it is a derivative that is not designated and effective as a hedging instrument. A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if: i. such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or ii. the financial liability forms part of a Company of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company''s documented risk management or investment strategy, and information about the company is provided internally on that basis; or iii. it forms part of a contract containing one or more embedded derivatives, and Ind AS 109 - Financial Instruments permits the entire combined contract to be designated as at FVTPL in accordance with Ind AS 109. Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in the Statement of Profit and Loss. Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included in the ''finance costs'' line item. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition. A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument. Financial guarantee contracts issued by the Company are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at: i amount of loss allowance determined in accordance with impairment requirements of Ind AS 109 - Financial Instruments; and ii. amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with the revenue recognition policies of Ind AS 115, Revenue from Contracts with Customers. For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the instruments and are recognised in the ''Other Income'' line item. The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. For financial liabilities that are measured as at FVTPL, the foreign exchange component forms part of the fair value gains or losses and is recognised in the Statement of Profit and Loss. The Company derecognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in the Statement of Profit and Loss. The Company enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including options, foreign exchange forward contracts and cross currency swaps. Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in the Statement of Profit and Loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in the Statement of Profit and Loss depends on the nature of the hedging relationship and the nature of the hedged i
Mar 31, 2018
1.1 Statement of Compliance The financial statements have been prepared to comply in all material respects with the Indian Accounting Standards (Ind AS) as notified by Ministry of Corporate Affairs under Section 133 of the Companies Act, 2013 (âthe Actâ) read with the Companies (Indian Accounting Standards) Rules, 2015, as amended and other relevant provisions of the Act. The financial statements are presented in Indian Rupee (âINRâ), which is also the functional currency of the Company. The financial statements for the year ended March 31, 2018 were authorised and approved for issue by the Board of Directors on May 10, 2018. 1.2 Basis of preparation and presentation The financial statements have been prepared on accrual basis under the historical cost convention except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on above basis, except for share-based payment transactions that are within the scope of Ind AS 102 - Share Based Payment, lease transactions that are within the scope of Ind AS 17 - Leases, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 - Inventories or value in use in Ind AS 36 - Impairment of Assets. In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: - Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; - Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and - Level 3 inputs are unobservable inputs for the asset or liability. The principal accounting policies are set out below: 1.3 Business Combinations Common control business combinations includes transactions, such as transfer of subsidiaries or businesses, between entities within a group. Business combinations involving entities or businesses under common control shall be accounted for using the pooling of interests method. The pooling of interest method is considered to involve the following: (i) The assets and liabilities of the combining entities are reflected at their carrying amounts. (ii) No adjustments are made to reflect fair values, or recognise any new assets or liabilities. The only adjustments that are made are to harmonise accounting policies. (iii) The financial information in the financial statements in respect of prior periods should be restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination. However, if business combination had occurred after that date, the prior period information shall be restated only from that date. (iv) The balance of the retained earnings appearing in the financial statements of the transferor is aggregated with the corresponding balance appearing in the financial statements of the transferee. 1.4 Inventories Inventories are valued at the lower of cost and estimated net realizable value (net of allowances) after providing for obsolescence and other losses, where considered necessary. The cost comprises of cost of purchase, cost of conversion and other costs including appropriate production overheads in the case of finished goods and work in progress, incurred in bringing such inventories to their present location and condition. Trade discounts or rebates are deducted in determining the costs of purchase. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. In case of raw materials, stores & spares and traded goods, cost (net of tax credits wherever applicable) is determined on a moving weighted average basis, and, in case of work in progress and finished goods, cost is determined on a First In First Out basis. 1.5 Taxation Income tax expense recognised in Standalone Statement of Profit and Loss comprised the sum of deferred tax and current tax except the ones recognised in other comprehensive income or directly in equity. Current Tax Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable income tax laws of India. Taxable profit differs from âprofit before taxâ as reported in the standalone statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax Deferred tax is recognized on temporary differences between the carrying amount of assets and liabilities in the financial statements and quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Minimum alternate tax (âMATâ) credit entitlement is recognised as an asset only when and to the extent there is convincing evidence that normal income tax will be paid during the specified period. In the year in which MAT credit becomes eligible to be recognised as an asset is created by way of a credit to the Standalone Statement of Profit and Loss. This is reviewed at each balance sheet date and the carrying amount of MAT credit entitlement is written down to the extent it is not reasonably certain that normal income tax will be paid during the specified period. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Current and Deferred tax for the year Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. 1.6 Property, plant and equipment (âPPEâ) Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses. Freehold land is not depreciated. Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. For qualifying assets, borrowing costs are capitalised in accordance with Ind AS 23 - Borrowing costs. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Property, plant and equipment are capitalised at costs relating to the acquisition and installation (net of tax credits wherever applicable) and include finance cost on borrowed funds attributable to acquisition of qualifying fixed assets for the period up to the date when the asset is ready for its intended use, and adjustments arising from foreign exchange differences arising on foreign currency borrowings to the extent they are regarded as an adjustment to interest costs. Other incidental expenditure attributable to bringing the fixed assets to their working condition for intended use are capitalized. Subsequent expenditure relating to fixed assets is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance. Depreciation is recognised so as to write off the cost or valuation of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives. The estimated useful life considered for the assets are as under. Leasehold land / Improvements thereon are amortized over the primary period of lease. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. 1.7 Intangible assets Intangible assets with finite useful lives are carried at cost less accumulated amortisation and impairment losses, if any. The cost of an intangible asset comprises its purchase price, including any import duties and other taxes (other than those subsequently recoverable from the tax authorities), and any directly attributable expenditure on making the asset ready for its intended use and net of any trade discounts and rebates. Subsequent expenditure on an intangible asset after its purchase / completion is recognised as an expense when incurred unless it is probable that such expenditure will enable the asset to generate future economic benefits in excess of its originally assessed standards of performance and such expenditure can be measured and attributed to the asset reliably, in which case such expenditure is added to the cost of the asset. The intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis, commencing from the date the asset is available to the Company for its use. The amortisation period are reviewed at the end of each financial year and the amortisation method is revised to reflect the changed pattern. Derecognition of intangible assets An intangible asset is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised. 1.8 Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for customer returns, taxes on sales, estimated rebates and other similar allowances. Revenue from sale of goods is recognised when the following conditions are satisfied: - the Company has transferred the significant risks and rewards of ownership of the goods to the buyer which generally coincides with the delivery of goods, - the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over goods sold; - the amount of revenue can be measured reliably; - it is probable that the economic benefits associated with the transaction will flow to the Company; - the costs incurred or to be incurred in respect of the transaction can be measured reliably. 1.9 Other income Dividend income from investments is recognised when the right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably). Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principle outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that assetâs net carrying amount on initial recognition. Royalty income is recognised on accrual basis in accordance with the substance of the relevant agreement (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably). 1.10 Employee benefits Employee benefits include wages & salaries, provident fund, superannuation fund, employee state insurance scheme, gratuity fund and compensated absences. Defined Contribution Plans Contributions to defined contribution plans are recognised as an expense when employees have rendered service entitling them to the contributions. Defined Benefit Plans For defined benefit retirement plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Re-measurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding net interest), is reflected immediately in the Balance Sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. The re-measurements of the net defined benefit liability are recognised directly in the other comprehensive income in the period in which they arise. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows: - service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements); - net interest expense or income; and - re-measurement The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus in the Companyâs defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans. Other current and non-current employee benefits Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service. Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date. 1.11Government grants, subsidies and export incentives Government grants and subsidies are recognised when there is reasonable assurance that the Company will comply with the conditions attached to them and the grants / subsidy will be received. Government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the balance sheet and transferred to profit or loss as and when the related obligations are met. Revenue grant is recognised as an income in the period in which related obligation is met. Export Incentives earned in the year of exports are netted off from cost of raw material imported. 1.12 Foreign currency transactions and translations Foreign currency transactions are recorded at rates of exchange prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the rate of exchange prevailing at the year-end. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for: - exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings; - exchange differences on transactions entered into in order to hedge certain foreign currency risks; and - exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items. 1.13 Employee share based payments Stock appreciation rights (Phantom stock units) are granted to employees under the Cash-settled Employee Share-based Payment Plan (Phantom Stock Plan). For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value of the liability. At the end of each reporting period until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the year. 1.14 Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. 1.15 Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The Company as lessee Finance lease: Assets held under finance leases are initially recognised as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Companyâs general policy on borrowing costs. Contingent rentals are recognised as expenses in the periods in which they are incurred. Operating lease: Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed or the payments to the lessor are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. 1.16 Earnings per share Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits / reverse share splits and bonus shares, as appropriate. 1.17 Impairment of tangible and intangible assets At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets or cash generating units to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, or whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. 1.18 Provisions and contingencies A provision is recognized when the Company has a present obligation (legal / constructive) as a result of past events and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material). Contingent liability is disclosed for (i) Possible obligation which will be confirmed only by future events not wholly within the control of the Company or (ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Provisions for the expected cost of sales related obligations are recognised at the date of sale of the relevant products, at the managementâs best estimate of the expenditure required to settle the Companyâs obligation. 1.19 Financial instruments Financial assets and financial liabilities are recognised when an entity becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss. 1.20 Financial assets All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets. 1.20.1 Classification of financial asset a. Loans and receivable Financial assets that meet the following conditions are subsequently measured at amortised cost less impairment loss (except for investments that are designated as at FVTPL on initial recognition): - the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and - the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Interest income is recognised in profit or loss and is included in the âOther Incomeâ line item. b. Assets available for sale Financial assets that meet the following conditions are subsequently measured at fair value through other comprehensive income (âFVTOCIâ) (except for investments that are designated as at FVTPL on initial recognition): - the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and - the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. All other financial assets are subsequently measured at fair value. c. Assets held for trading A financial asset is held for trading if: - i t has been acquired principally for the purpose of selling it in the near term; or - on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or - it is a derivative that is not designated and effective as a hedging instrument or a financial guarantee. Dividends on these investments in equity instruments are recognised in profit or loss when the right to receive the dividends is established and it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably. d. Financial assets at fair value through profit or loss (âFVTPLâ) Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for equity instruments which are not held for trading. Debt instrument that do not meet the amortised cost criteria or fair value through other comprehensive income criteria (see above) are measured at FVTPL. In addition, debt instruments that meet the amortised cost criteria or the fair value through other comprehensive income criteria but are designated as at FVTPL are measured at FVTPL. A financial asset may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on re-measurement recognised in profit or loss. The net gain or loss recognised in profit or loss is included in the âother incomeâ line item. Dividend on financial assets at FVTPL is recognised when the Companyâs right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably. 1.20.2 Impairment of financial assets The Company applies the expected credit loss model for recognising impairment loss on financial assets measured at amortised cost, debt instruments at FVTOCI, lease receivables, trade receivables, other contractual rights to receive cash or other financial assets, and financials guarantees not designated as at FVTPL. Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights. Credit loss is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive (i.e., all cash shortfalls), discounted at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets). The Company estimates cash flows by considering all contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) through the expected life of that financial instruments. The Company measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. If the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses.12-month expected credit losses are portion of the life-time expected credit losses and represent the lifetime cash shortfalls that will result if default occurs within the 12 months after the reporting date and thus, are not cash shortfalls that are predicted over the next 12 months. If the Company measured loss allowance for a financial instrument at lifetime expected credit loss model in the previous period, but determines at the end of a reporting period that the credit risk has not increased significantly since initial recognition due to improvement in credit quality as compared to the previous period, the Company again measures the loss allowance based on 12- month expected credit losses. When making the assessment of whether there has been a significant increase in credit risk since initial recognition, the Company uses the change in the risk of a default occurring over the expected life of the financial instrument. To make that assessment, the Company compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition. For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 11 - Construction Contracts and Ind AS 18 - Revenue, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses. 1.20.3 De-recognition of financial assets The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. On de-recognition of a financial asset in its entirety, the difference between the assetâs carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss if such gain or loss would have otherwise been recognized in profit or loss on disposal of that financial asset. On de-recognition of a financial asset other than in its entirety (e.g. when the Company retains an option to repurchase part of a transferred asset), the Company allocates the previous carrying amount of the financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss if such gain or loss would have otherwise been recognized in profit or loss on disposal of that financial asset. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts. 1.20.4 Foreign Exchange gains and losses The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period. For foreign currency denominated financial assets measured at amortised cost and FVTPL, the exchange differences are recognised in profit or loss except for those which are designated as hedging instruments in hedging relationship. 1.21 Financial liabilities and equity instruments 1.21.1 Classification as debt or equity Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. 1.21.2 Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs. 1.21.3 Financial liabilities All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL. However, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies, financial guarantee contracts issued by the Company are measured in accordance with the specific accounting policies set out below. 1.21.3.1 Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL. A financial liability is classified as held for trading if: - it has been incurred principally for the purpose of repurchasing it in the near term; or - on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or - it is a derivative that is not designated and effective as a hedging instrument. A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if: - such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or - the financial liability forms part of a Company of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Companyâs documented risk management or investment strategy, and information about the Companying is provided internally on that basis; or - i t forms part of a contract containing one or more embedded derivatives, and Ind AS 109 - Financial Instruments permits the entire combined contract to be designated as at FVTPL in accordance with Ind AS 109. Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. 1.21.3.2 Financial liabilities subsequently measured at amortised cost Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included in the âfinance costsâ line item. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition. 1.21.3.3 Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument. Financial guarantee contracts issued by the Company are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at: - amount of loss allowance determined in accordance with impairment requirements of Ind AS 109 -Financial Instruments; and - amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with the revenue recognition policies of Ind AS 18 -Revenue. For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the instruments and are recognised in the âOther Incomeâ line item. The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. For financial liabilities that are measured as at FVTPL, the foreign exchange component forms part of the fair value gains or losses and is recognised in profit or loss. 1.21.3.4 Derecognition of financial liabilities The Company derecognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. 1.22 Derivative financial instruments The Company enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including options, foreign exchange forward contracts and cross currency swaps. Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedging relationship and the nature of the hedged item. 1.23 Hedge Accounting The Company designates certain hedging instruments, which include derivatives, embedded derivatives and nonderivatives in respect of foreign currency risk, as either fair value hedges, cash flow hedges, or hedges of net investments in foreign operations. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges. At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk. Cash flow hedges The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in the âOther incomeâ/ âOther expenseâ line item. Amounts previously recognised in other comprehensive income and accumulated in equity relating to (effective portion as described above) are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item. However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, such gains and losses are transferred from equity (but not as a reclassification adjustment) and included in the initial measurement of the cost of the non -financial asset or non-financial liability. In cases where the designated hedging instruments are options and forward contracts, the Company has an option, for each designation, to designate on an instrument only the changes in intrinsic value of the options and spot element of forward contracts respectively as hedges. In such cases, the time value of the options is accounted based on the type of hedged item which those options hedge. In case of transaction related hedged item in the above cases, the change in time value of the options is recognised in other comprehensive income to the extent it relates to the hedged item and accumulated in a separate component of equity i.e. Reserve for time value of options and forward elements of forward contracts in hedging relationship. This separate component is removed and directly included in the initial cost or other carrying amount of the asset or the liability (i.e. not as a reclassification adjustment thus not affecting other comprehensive income) if the hedged item subsequently results in recognition of a non-financial asset or a non-financial liability. In other cases, the amount accumulated is reclassified to profit or loss as a reclassification adjustment in the same period in which the hedged expected future cash flows affect profit or loss. In case of time-period related hedged item in the above cases, the change in time value of the options is recognised in other comprehensive income to the extent it relates to the hedged item and accumulated in a separate component of equity i.e. Reserve for time value of options and forward elements of forward contracts in hedging relationship. The time value of options at the date of designation of the options in the hedging relationships is amortised on a systematic and rational basis over the period during which the optionsâ intrinsic value could affect profit or loss. This is done as a reclassification adjustment and hence affects other comprehensive income. In cases where only the spot element of the forward contracts is designated in a hedging relationship and the forward element of the forward contract is not designated, the Company makes the choice for each designation whether to recognise the changes in forward element of fair value of the forward contracts in profit or loss or to account for this element similar to the time value of an option. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income and accumulated in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately in profit or loss. 1.24 Cash and cash equivalents Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value. For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term balances, as defined above, net of outstanding cash credits as they are considered an integral part of the Companyâs cash management. 1.25 Rounding off amounts All amounts disclosed in the financial statements and notes have been rounded off to the nearest millions as per the requirements of Schedule III of the Act unless otherwise stated. 1.26 Critical accounting judgements and key sources of estimation uncertainty The preparation of financial statements in conformity with Ind AS requires management to make certain judgements and estimates that may effect the application of accounting policies, reported amounts and related disclosures. These judgments and estimates may have an impact on the assets and liabilities, disclosure of contingent liabilities at the date of the financial statements, and income and expense items for the period under review. Actual results may differ from these judgements and estimates. All assumptions, expectations and forecasts that are used as a basis for judgments and estimates in the financial statements represent as accurately an outlook as possible for the Company. These judgements and estimates only represent the interpretation of the Company as of the dates on which they were prepared. Important judgments and estimates relate largely to provisions, pensions, tangible and intangible assets (lives, residual values and impairment), deferred tax assets and liabilities and valuation of financial instruments.
1 Corporate information
3 Basis of accounting and preparation of financial statements
3.1 Statement of Compliance
3.2 Basis of preparation and presentation
3.3 Business Combinations
3.4 Inventories
3.5 Taxation
Current Tax
Deferred tax
Current and Deferred tax for the year
3.6 Property, plant and equipment (''PPE'')
3.7 Intangible assets
Derecognition of intangible assets
3.8 Revenue recognition
3.9 Other income
3.10 Employee benefits
Defined Contribution Plans
Defined Benefit Plans
3.14 Borrowing costs
3.15 Leases
The Company as lessee
3.16 Earnings per share
3.17 Impairment of tangible and intangible assets
3.18 Provisions and contingencies
3.19 Financial instruments
3.20 Financial assets
3.20.1 Classification of financial asset
a. Loans and receivable
b. Assets available for sale
3.20.2 Impairment of financial assets
3.20.4 Foreign Exchange gains and losses
3.21 Financial liabilities and equity instruments
3.21.1 Classification as debt or equity
3.21.2 Equity instruments
3.21.3 Financial liabilities
3.21.3.1 Financial liabilities at FVTPL
3.21.3.2 Financial liabilities subsequently measured at amortised cost
3.21.3.3 Financial guarantee contracts
3.21.3.4 Derecognition of financial liabilities
3.22 Derivative financial instruments
Mar 31, 2017
1 CORPORATE INFORMATION
The Companyâs principal business activity is manufacturing and sale of automotive tyres. The Company started its operations in 1972 with its first manufacturing plant at Perambra in Kerala.
The Companyâs largest operations are in India and comprise of four tyre manufacturing plants - located two in Cochin and one each at Vadodara & Chennai respectively and various sales & marketing offices spread across the country. The Companyâs European subsidiary Apollo Vredestein BV (AVBV) has a manufacturing plant in the Netherlands and sales & marketing subsidiaries all over Europe. The Company also has sales and marketing subsidiaries in Middle East, Africa and ASEAN region.
2 RECENT ACCOUNTING PRONOUNCEMENTS
Standards issued but not yet effective
In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7 - Statement of cash flows and Ind AS 102
- Share-based payment. These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7 - Statement of cash flows and IFRS 2 -Share based payment, respectively. The amendments are applicable to the Companies from April 1, 2017.
Amendment to Ind AS 7 - Statement of cash flows
The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.
Amendment to Ind AS 102 - Share based payment
The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes.
It clarifies that the fair value of cash-settled awards is determined on a basis consistent with that used for equity-settled awards. Market-based performance conditions and non-vesting conditions are reflected in the âfair valuesâ, but non-market performance conditions and service vesting conditions are reflected in the estimate of the number of awards expected to vest. Also, the amendment clarifies that if the terms and conditions of a cash-settled share-based payment transaction are modified with the result that it becomes an equity-settled share-based payment transaction, the transaction is accounted for as such from the date of the modification. Further, the amendment requires the award that include a net settlement feature in respect of withholding taxes to be treated as equity-settled in its entirety. The cash payment to the tax authority is treated as if it was part of an equity settlement.
3 BASIS OF ACCOUNTING AND PREPARATION OF FINANCIAL STATEMENTS
3.1 Statement of Compliance
The financial statements have been prepared in accordance with the Indian Accounting Standards (Ind AS) as notified under the Companies (Indian Accounting Standards) Rules, 2015.
Beginning April 1, 2016, the Company has for the first time adopted Ind AS with a transition date of April 1, 2015. The financial statements have been prepared in accordance with Ind AS prescribed under Section 133 of the Companies Act, 2013 and other recognized accounting practices and policies to the extent applicable.
3.2 Basis of Preparation and Presentation
The financial statements have been prepared on accrual basis under the historical cost convention except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on above basis, except for share-based payment transactions that are within the scope of Ind AS 102 - Share Based Payment, lease transactions that are within the scope of Ind AS 17 - Leases, and measurements that have some similarities to fair value but are not fair value, such as net realizable value in Ind AS 2 - Inventories or value in use in Ind AS 36 - Impairment of Assets.
In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
- Level 3 inputs are unobservable inputs for the asset or liability.
The principal accounting policies are set out below:
3.3 Business Combinations
Common control business combinations includes transactions, such as transfer of subsidiaries or businesses, between entities within a group.
Business combinations involving entities or businesses under common control shall be accounted for using the pooling of interests method.
The pooling of interest method is considered to involve the following:
(i) The assets and liabilities of the combining entities are reflected at their carrying amounts.
(ii) No adjustments are made to reflect fair values, or recognize any new assets or liabilities. The only adjustments that are made are to harmonies accounting policies.
(iii) The financial information in the financial statements in respect of prior periods should be restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination. However, if business combination had occurred after that date, the prior period information shall be restated only from that date.
(iv) The balance of the retained earnings appearing in the financial statements of the transferor is aggregated with the corresponding balance appearing in the financial statements of the transferee.
3.4 Inventories
Inventories are valued at the lower of cost and estimated net realizable value (net of allowances) after providing for obsolescence and other losses, where considered necessary. The cost comprises of cost of purchase, cost of conversion and other costs including appropriate production overheads in the case of finished goods and work-in-progress, incurred in bringing such inventories to their present location and condition. Trade discounts or rebates are deducted in determining the costs of purchase. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
In case of raw materials, stores & spares and traded goods, cost (net of CENVAT/VAT credits wherever applicable) is determined on a moving weighted average basis, and, in case of work-in-progress and finished goods, cost is determined on a First In First Out basis.
3.5 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current Tax
Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable income tax laws of the country in which the respective entities in the Company are incorporated. Taxable profit differs from âprofit before taxâ as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognized on temporary differences between the carrying amount of assets and liabilities in the financial statements and quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date. Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Current and Deferred tax for the year
Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively.
3.6 Property, Plant And Equipment (PPE)
Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses. Freehold land is not depreciated.
Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognized impairment loss. For qualifying assets, borrowing costs are capitalized in accordance with Ind AS 23 - Borrowing costs. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.
Property, plant and equipment are capitalized at costs relating to the acquisition and installation (net of Cenvat /VAT credits wherever applicable) and include finance cost on borrowed funds attributable to acquisition of qualifying fixed assets for the period up to the date when the asset is ready for its intended use, and adjustments arising from foreign exchange differences arising on foreign currency borrowings to the extent they are regarded as an adjustment to interest costs. Other incidental expenditure attributable to bringing the fixed assets to their working condition for intended use are capitalized. Subsequent expenditure relating to fixed assets is capitalized only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance.
Depreciation is recognized so as to write-off the cost or valuation of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.
Leasehold land / Improvements thereon are amortized over the primary period of lease.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.
The company has applied Ind AS 16 - Property, Plant and Equipment retrospectively to its PPE and has not availed deemed cost exemption as available under Ind AS 101 - First-time adoption of Indian Accounting Standards.
3.7 Intangible Assets
Intangible assets with finite useful lives are carried at cost less accumulated amortization and impairment losses, if any. The cost of an intangible asset comprises its purchase price, including any import duties and other taxes (other than those subsequently recoverable from the taxing authorities), and any directly attributable expenditure on making the asset ready for its intended use and net of any trade discounts and rebates. Subsequent expenditure on an intangible asset after its purchase / completion is recognized as an expense when incurred unless it is probable that such expenditure will enable the asset to generate future economic benefits in excess of its originally assessed standards of performance and such expenditure can be measured and attributed to the asset reliably, in which case such expenditure is added to the cost of the asset.
The intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis, commencing from the date the asset is available to the Company for its use. The amortization period are reviewed at the end of each financial year and the amortization method is revised to reflect the changed pattern.
Derecognition of intangible assets
An intangible asset is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is derecognized.
3.8 Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for customer returns, taxes on sales, estimated rebates and other similar allowances.
Revenue from sale of goods is recognized when the following conditions are satisfied:
- the Company has transferred the significant risks and rewards of ownership of the goods to the buyer which generally coincides with the delivery of goods,
- the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over goods sold;
- the amount of revenue can be measured reliably:
- it is probable that the economic benefits associated with the transaction will flow to the Company;
- the costs incurred or to be incurred in respect of the transaction can be measured reliably.
3.9 Other Income
Dividend income from investments is recognized when the right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably).
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principle outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that assetâs net carrying amount on initial recognition.
Royalty income is recognized on accrual basis in accordance with the substance of the relevant agreement (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably).
3.10 Employee Benefits
Employee benefits include wages & salaries, provident fund, superannuation fund, employee state insurance scheme, gratuity fund and compensated absences.
Defined Contribution Plans
Contributions to defined contribution plans are recognized as an expense when employees have rendered service entitling them to the contributions.
Defined Benefit Plans
For defined benefit retirement plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Re-measurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding net interest), is reflected immediately in the Balance Sheet with a charge or credit recognized in other comprehensive income in the period in which they occur. Re-measurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Past service cost is recognized in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorized as follows:
- service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements),
- net interest expense or income; and,
- re-measurement.
The retirement benefit obligation recognized in the balance sheet represents the actual deficit or surplus in the Companyâs defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.
Other Short-term and long-term employee benefits
Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.
Liabilities recognized in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date.
3.11 Government Grants, Subsidies and Export Incentives
Government grants and subsidies are recognized when there is reasonable assurance that the Company will comply with the conditions attached to them and the grants / subsidy will be received.
Government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets are recognized as deferred revenue in the balance sheet and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.
Revenue grant is recognized as an income in the period in which related obligation is met.
Export Incentives earned in the year of exports are treated as income and netted off from cost of raw material imported.
3.12 Foreign Currency Transactions And Translations
Foreign currency transactions are recorded at rates of exchange prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the rate of exchange prevailing at the year-end. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Revenue grant is recognized as an income in come in the period in which related obligation is met.
Exchange differences on monetary items are recognized in profit or loss in the period in which they arise except for:
- exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings,
- exchange differences on transactions entered into in order to hedge certain foreign currency risks; and,
- exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognized initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items.
3.13 Employee Share Based Payments
Stock appreciation rights (Phantom stock units) are granted to employees under the Cash-settled Employee Share-based Payment Plan (Phantom Stock Plan).
For cash-settled share-based payments, a liability is recognized for the goods or services acquired, measured initially at the fair value of the liability. At the end of each reporting period until the liability is settled, and at the date of settlement, the fair value of the liability is premeasured, with any changes in fair value recognized in profit or loss for the year.
3.14 Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
3.15 Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
The Company as lessee
Finance lease:
Assets held under finance leases are initially recognized as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the less or is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Companyâs general policy on borrowing costs. Contingent rentals are recognized as expenses in the periods in which they are incurred.
Operating lease:
Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed or the payments to the lessor are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
3.16 Earnings Per Share
Basic earnings per share is computed by dividing the profit/(loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year.
Diluted earnings per share is computed by dividing the profit/(loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits/reverse share splits and bonus shares, as appropriate.
3.17 Impairment Of Tangible And Intangible Assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets or cash generating units to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, or whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase
3.18 Provisions And Contingencies
A provision is recognized when the Company has a present obligation (legal/constructive) as a result of past events and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
Contingent liability is disclosed for (i) Possible obligation which will be confirmed only by future events not wholly within the control of the Company or (ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Provisions for the expected cost of sales related obligations under local sale of goods legislation are recognized at the date of sale of the relevant products, at the managementâs best estimate of the expenditure required to settle the Companyâs obligation.
3.19 Financial Instruments
Financial assets and financial liabilities are recognized when an entity becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.
3.20 Financial Assets
All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.
All recognized financial assets are subsequently measured in their entirety at either amortized cost or fair value, depending on the classification of the financial assets.
3.20.1 Classification of financial asset
Financial assets that meet the following conditions are subsequently measured at amortized cost less impairment loss (FVTPL) (except for investments that are designated as at fair value through profit or loss on initial recognition):
- the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
- the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets that meet the following conditions are subsequently measured at fair value through other comprehensive income (FVTOCI) (except for investments that are designated as at fair value through profit or loss on initial recognition):
- the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and
- the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
All other financial assets are subsequently measured at fair value.
3.20. 2 Amortized cost and Effective interest method
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Interest income is recognized in profit or loss and is included in the other income.
A financial asset is held for trading if:
it has been acquired principally for the purpose of selling it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or it is a derivative that is not designated and effective as a hedging instrument or a financial guarantee.
Dividends on these investments in equity instruments are recognized in profit or loss when the right to receive the dividends is established and it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.
3.20.3 Financial assets at fair value through profit or loss (FVTPL)
Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for equity instruments which are not held for trading.
Debt instrument that do not meet the amortized cost criteria or fair value through other comprehensive income criteria (see above) are measured at FVTPL. In addition, debt instruments that meet the amortized cost criteria or the fair value through other comprehensive income criteria but are designated as at FVTPL are measured at FVTPL.
A financial asset may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on re-measurement recognized in profit or loss. The net gain or loss recognized in profit or loss is included in the other income line item. Dividend on financial assets at FVTPL is recognized when the Companyâs right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably.
3.20.4 Impairment of financial assets
The Company applies the expected credit loss model for recognizing impairment loss on financial assets measured at amortized cost, debt instruments at FVTOCI, lease receivables, trade receivables, other contractual rights to receive cash or other financial assets, and financials guarantees not designated as at FVTPL.
Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights. Credit loss is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive (i.e., all cash shortfalls), discounted at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets). The Company estimates cash flows by considering all contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) through the expected life of that financial instruments.
The Company measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. If the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses.12-month expected credit losses are portion of the life-time expected credit losses and represent the lifetime cash shortfalls that will result if default occurs within the 12-months after the reporting date and thus, are not cash shortfalls that are predicted over the next 12-months.
I f the Company measured loss allowance for a financial instrument at lifetime expected credit loss model in the previous period, but determines at the end of a reporting period that the credit risk has not increased significantly since initial recognition due to improvement in credit quality as compared to the previous period, the Company again measures the loss allowance based on 12-month expected credit losses.
When making the assessment of whether there has been a significant increase in credit risk since initial recognition, the Company uses the change in the risk of a default occurring over the expected life of the financial instrument. To make that assessment, the Company compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition.
For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 11 - Construction Contracts and Ind AS 18 - Revenue, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses.
3.20.5 De-recognition of financial assets
The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to amortized the financial asset and also amortized a collateralized borrowing for the proceeds received.
On de-recognition of a financial asset in its entirety, the difference between the assetâs carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss if such gain or loss would have otherwise been recognized in profit or loss on disposal of that financial asset.
On de-recognition of a financial asset other than in its entirety (e.g. when the Company retains an option to repurchase part of a transferred asset),
the Company allocates the previous carrying amount of the financial asset between the part it continues to amortized under continuing involvement, and the part it no longer amortized on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in profit or loss if such gain or loss would have otherwise been recognized in profit or loss on disposal of that financial asset. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts.
3.20.6 Foreign Exchange gains and losses
The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period.
- For foreign currency denominated financial assets measured at amortized cost and FVTPL, the exchange differences are recognized in profit or loss except for those which are designated as hedging instruments in hedging relationship.
3.21 Financial Liabilities And Equity Instruments
3.21.1 Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
3.21.2 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.
3.21.3 Financial liabilities
All financial liabilities are subsequently measured at amortized cost using the effective interest method or at FVTPL. However, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies, financial guarantee contracts issued by the Company are measured in accordance with the specific accounting policies set out below.
3.21.3.1 Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL.
A financial liability is classified as held for trading if:
it has been incurred principally for the purpose of repurchasing it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:
such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
the financial liability forms part of a Company of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Companyâs documented risk management or investment strategy, and information about the Companying is provided internally on that basis; or
i t forms part of a contract containing one or more embedded derivatives, and Ind AS 109 permits the entire combined contract to be designated as at FVTPL in accordance with Ind AS 109 - Financial Instruments
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss.
3.21.3.2 Financial liabilities subsequently measured at amortized cost
Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortized cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortized cost are determined based on the effective interest method. Interest expense that is not capitalized as part of costs of an asset is included in the âfinance costsâ line item.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
3.21.3.3 Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contracts issued by the Company are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at:
the amount of loss allowance determined in accordance with impairment requirements of Ind AS 109 - Financial Instruments; and
the amount initially recognized less, where appropriate, cumulative amortization recognized in accordance with the revenue recognition policies of Ind AS 18 - Revenue.
For financial liabilities that are denominated in a foreign currency and are measured at amortized cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortized cost of the instruments and are recognized in the other income.
The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. For financial liabilities that are measured as at FVTPL, the foreign exchange component forms part of the fair value gains or losses and is recognized in profit or loss.
3.21.3.4 Derecognition of financial liabilities
The Company deamortizeds financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.
3.22 Derivative Financial Instruments
The Company enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including foreign exchange forward contracts and cross currency swaps.
Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently premeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedging relationship and the nature of the hedged item.
3.23 Hedge Accounting
The Company designates certain hedging instruments, which include derivatives, embedded derivatives and non-derivatives in respect of foreign currency risk, as either fair value hedges, cash flow hedges, or hedges of net investments in foreign operations. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.
At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss, and is included in the âOther incomeâ line item. Amounts previously recognized in other comprehensive income and accumulated in equity relating to (effective portion as described above) are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognized hedged item. However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, such gains and losses are transferred from equity (but not as a reclassification adjustment) and included in the initial measurement of the cost of the non-financial asset or non-financial liability.
I n cases where the designated hedging instruments are options and forward contracts, the Company has an option, for each designation, to designate on an instrument only the changes in intrinsic value of the options and spot element of forward contracts respectively as hedges. In such cases, the time value of the options is accounted based on the type of hedged item which those options hedge.
In case of transaction related hedged item in the above cases, the change in time value of the options is recognized in other comprehensive income to the extent it relates to the hedged item and accumulated in a separate component of equity i.e. Reserve for time value of options and forward elements of forward contracts in hedging relationship. This separate component is removed and directly included in the initial cost or other carrying amount of the asset or the liability (i.e. not as a reclassification adjustment thus not affecting other comprehensive income) if the hedged item subsequently results in recognition of a non-financial asset or a non-financial liability. In other cases, the amount accumulated is reclassified to profit or loss as a reclassification adjustment in the same period in which the hedged expected future cash flows affect profit or loss.
In case of time-period related hedged item in the above cases, the change in time value of the options is recognized in other comprehensive income to the extent it relates to the hedged item and accumulated in a separate component of equity i.e. Reserve for time value of options and forward elements of forward contracts in hedging relationship. The time value of options at the date of designation of the options in the hedging relationships is amortized on a systematic and rational basis over the period during which the optionsâ intrinsic value could affect profit or loss. This is done as a reclassification adjustment and hence affects other comprehensive income.
In cases where only the spot element of the forward contracts is designated in a hedging relationship and the forward element of the forward contract is not designated, the Company makes the choice for each designation whether to amortized the changes in forward element of fair value of the forward contracts in profit or loss or to account for this element similar to the time value of an option .
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognized in other comprehensive income and accumulated in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profit or loss.
3.24 First-Time Adoption - Mandatory Exceptions & Optional Exemptions
3.24.1 Overall Principle
The Company has prepared the opening balance sheet as per Ind AS as of April 1, 2015 (the transition date) by recognizing all assets and liabilities whose recognition is required under Ind AS, not recognizing items of assets and liabilities which are not permitted under Ind AS, by reclassifying items from previous GAAP to Ind AS as required under Ind AS, and applying Ind AS in measurement of recognized assets and liabilities. However, this principle is subject to the certain exception and certain optional exemptions availed by the Company as detailed below.
3.24.2 Classification of debt instruments
The Company has determined the classification of debt instruments in terms of whether they meet the amortized cost criteria or the FVTOCI criteria based on the facts and circumstances that existed as of the transition date.
3.24.3 Determining whether an arrangement contains a lease
The company has applied Appendix C of Ind AS 17 - Leases determining whether an Arrangement contains a Lease to determine whether an arrangement existing at the transition date contains a lease on the basis of facts and circumstances existing at that date.
3.25 Critical Accounting Judgments And Key Sources Of Estimation Uncertainty
The preparation of financial statements in conformity with Ind AS requires management to make certain judgments and estimates that may affect the application of accounting policies, reported amounts and related disclosures.
These judgments and estimates may have an impact on the assets and liabilities, disclosure of contingent liabilities at the date of the financial statements, and income and expense items for the period under review. Actual results may differ from these judgments and estimates.
All assumptions, expectations and forecasts that are used as a basis for judgments and estimates in the financial statements represent as accurately an outlook as possible for the group. These judgments and estimates only represent our interpretation as of the dates on which they were prepared.
Important judgments and estimates relate largely to provisions, pensions, tangible and intangible assets (lives, residual values and impairment), deferred tax assets and liabilities and valuation of financial instruments.
Mar 31, 2013
1.1 BASIS OF ACCOUNTING AND PREPARATION OF FINANCIAL STATEMENTS
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
the Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on accrual basis under the historical
cost convention with the exception of certain fixed assets, that are
carried at revalued amounts. The accounting policies adopted in the
preparation of the financial statements are consistent with those
followed in the previous year.
1.2 USE OF ESTIMATES
The preparation of financial statements requires the management to make
estimates and assumptions considered in the reported amounts of assets
and liabilities, including the disclosure of contingent liabilities as
of the date of the financial statements and the reported income and
expenses during the reporting period like provision for employee
benefits, provision for doubtful debts/advances, allowance for slow and
non-moving inventories, useful lives of fixed assets, provision for
sales related obligations and provision for taxation etc. Management
believes that the estimates used in preparation of the financial
statements are prudent and reasonable. Actual results could vary from
these estimates. Any revision to accounting estimates is recognized in
the period in which the results are known /materialized.
1.3 INVENTORIES
Inventories are valued at the lower of cost and estimated net
realizable value (net of allowances) after providing for obsolescence
and other losses, where considered necessary. The cost comprises of
cost of purchase, cost of conversion and other costs including
appropriate production overheads in the case of finished goods and work
in process, incurred in bringing such inventories to their present
location and condition.
In case of raw materials, stores & spares and traded goods, cost (net
of CENVAT/VAT credits wherever applicable) is determined on a moving
weighted average basis, and, in case of work in process and finished
goods, cost is determined on a First In First Out basis.
1.4 CASH AND CASH EQUIVALENTS
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short-term balances (with an original maturity of three
months or less from the date of acquisition), highly liquid investments
that are readily convertible into known amounts of cash and which are
subject to insignificant risk of changes in value.
1.5 CASH FLOW STATEMENT
Cash flows are reported using the indirect method, whereby profit /
(loss) before extraordinary items and 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. The cash flows from
operating, investing and financing activities of the Company are
segregated based on the available information.
1.6 DEPRECIATION AND AMORTISATION
Tangible Fixed Assets
Depreciation on fixed assets is provided using straight line method at
the rates specified in Schedule XIV of the Companies Act 1956, except
for certain vehicles and other equipments for which the depreciation is
provided at 30% and 16.67% respectively. Certain plant and machinery
are classified as continuous process plants based on technical
evaluation by the management and are depreciated at the applicable
rates.
Additional depreciation consequent to the enhancement in the value of
fixed assets on the revaluation is adjusted in the fixed assets
revaluation reserve account.
Leasehold land / Improvements thereon are amortized over the primary
period of lease.
In respect of fixed assets whose useful life has been revised, the
unamortized depreciable amount is charged over the revised remaining
useful life.
Intangible Assets
The intangible assets are amortized over a period of five years based
on its estimated useful life and the amortisation period are reviewed
at the end of each financial year and the amortisation method is
revised to reflect the changed pattern.
1.7 REVENUE RECOGNITION
Revenue is recognized when the significant risks and rewards of
ownership of goods have been passed to the buyer which generally
coincides with the delivery of goods to customers. Gross sales are
inclusive of excise duty and are net of trade discounts/sales
returns/VAT.
1.8 OTHER INCOME
Interest income is accounted on accrual basis. Dividend income on
investments is accounted for when the right to receive the payment is
established. Royalty income is accounted when the right to receive the
same is established.
1.9 TANGIBLE FIXED ASSETS
Fixed assets are stated at cost, as adjusted by revaluation of certain
land, buildings, plant and machineries based on the then replacement
cost as determined by approved independent valuer in 1986 and 1987,
less depreciation.
All costs relating to the acquisition and installation of fixed assets
(net of Cenvat /VAT credits wherever applicable) are capitalized and
include finance cost on borrowed funds attributable to acquisition of
qualifying fixed assets for the period up to the date when the asset is
ready for its intended use, and adjustments arising from foreign
exchange differences arising on foreign currency borrowings to the
extent they are regarded as an adjustment to interest costs. Other
incidental expenditure attributable to bringing the fixed assets to
their working condition for intended use are capitalized. Subsequent
expenditure relating to fixed assets is capitalised only if such
expenditure results in an increase in the future benefits from such
asset beyond its previously assessed standard of performance.
Fixed assets taken on finance lease are capitalized and depreciation is
provided on such assets, while the interest is charged to the statement
of profit and loss.
Fixed assets retired from active use and held for sale are stated at
the lower of their net book value and net realisable value and are
disclosed separately in the Balance Sheet.
Capital work-in-progress: Projects under which assets are not ready for
their intended use and other capital work-in-progress are carried at
cost, comprising direct cost, related incidental expenses and
attributable interest.
1.10 FOREIGN CURRENCY TRANSACTIONS AND TRANSLATIONS
Foreign currency transactions are recorded at rates of exchange
prevailing on the date of transaction. Monetary assets and liabilities
denominated in foreign currencies as at the balance sheet date are
translated at the rate of exchange prevailing at the year-end. Exchange
differences arising on actual payments/realizations and year-end
restatements are dealt with in the statement of profit and loss.
The Company enters into forward exchange contracts and other
instruments that are in substance a forward exchange contract to hedge
its risks associated with foreign currency fluctuations. The premium or
discount arising at the inception of a forward exchange contract (other
than for a firm commitment or a highly probable forecast) or similar
instrument, which are not intended for trading or speculation purposes,
is amortized as expense or income over the life of the contract.
Exchange difference on such contracts is recognized in the statement of
profit and loss in the year in which the exchange rates change.
Exchange difference arising on a monetary item that, in substance,
forms part of the Company''s net investment in a non-integral foreign
operation has been accumulated in a foreign currency translation
reserve in the Company''s financial statements until the disposal of net
investment, at which time they would be recognized as income or as
expense.
1.11 GOVERNMENT GRANTS, SUBSIDIES AND EXPORT INCENTIVES
Government grants and subsidies are recognised when there is reasonable
assurance that the Company will comply with the conditions attached to
them and the grants / subsidy will be received. Government grants whose
primary condition is that the Company should purchase, construct or
otherwise acquire capital assets are presented by deducting them from
the carrying value of the assets. The grant is recognised as income
over the life of a depreciable asset by way of a reduced depreciation
charge.
Export Incentives in the form of advance licences / credits earned
under duty entitlement pass book scheme are treated as income in the
year of export at the estimated realizable value / actual credit earned
on exports made during the year.
Government grants in the nature of promoters'' contribution like
investment subsidy, where no repayment is ordinarily expected in
respect thereof, are treated as capital reserve.
1.12 INVESTMENTS
Long term investments are stated at cost and provision for diminution
is made if the decline in value is other than temporary in nature.
Current investments are stated at lower of cost and fair value
determined on the basis of each category of investments.
1.13 EMPLOYEE BENEFITS
Employee benefits include provident fund, superannuation fund, gratuity
fund and compensated absences.
Liability for gratuity to employees determined on the basis of
actuarial valuation as on balance sheet date is funded with the Life
Insurance Corporation of India and is recognized as an expense in the
year incurred.
Liability for short term compensated absences is recognized as expense
based on the estimated cost of eligible leave to the credit of the
employees as at the balance sheet date on undiscounted basis. Liability
for long term compensated absences is determined on the basis of
actuarial valuation as on the balance sheet date.
Contributions to defined contribution schemes such as provident fund,
employees'' pension fund, superannuation fund and cost of other benefits
are recognized as an expense in the year incurred.
Actuarial gains and losses arising from experience adjustments and
effects of changes in actuarial assumptions are immediately recognized
in the statement of profit and loss as income or expense.
1.14 EMPLOYEE SHARE BASED PAYMENTS
Stock appreciation rights (Phantom stock units) granted to employees
under the Cash-settled Employee Share- based Payment Plan (Phantom
Stock Plan) is recognized based on intrinsic value method. Intrinsic
value of the phantom stock unit is determined as excess of closing
market price on the reporting date over the exercise price of the unit
and is charged as employee benefit over the vesting period in
accordance with "Guidance Note on Accounting for Employee Share-based
payments" issued by Institute of Chartered Accountants of India.
1.15 BORROWING COSTS
Borrowing costs include interest, amortisation of ancillary costs
incurred and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost. Borrowing costs are capitalized as a part of the cost of
qualifying asset when it is possible that they will result in future
economic benefits and the cost can be measured reliably. Other
borrowing costs are recognized as an expense in the period in which
they are incurred.
1.16 SEGMENT REPORTING
The Company identifies operating and geographic segments based on the
dominant source, nature of risks and returns and the internal
organisation and management structure. The operating segments are the
segments for which separate financial information is available and for
which operating profit / loss amounts are evaluated regularly by the
executive Management in deciding how to allocate resources and in
assessing performance.
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company. Segment revenue, segment
expenses, segment assets and segment liabilities have been identified
to segments on the basis of their relationship to the operating
activities of the segment.
1.17 LEASES
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased assets are classified as
operating leases. Operating Lease payments are recognized as an expense
in the revenue account as per the lease terms.
Assets leased by the Company in its capacity as lessee where
substantially all the risks and rewards of ownership vest in the
Company are classified as finance leases. Such leases are capitalised
at the inception of the lease at the lower of the fair value and the
present value of the minimum lease payments and a liability is created
for an equivalent amount. Each lease rental paid is allocated between
the liability and the interest cost so as to obtain a constant periodic
rate of interest on the outstanding liability for each year.
1.18 EARNINGS PER SHARE
Basic earnings per share is computed by dividing the profit / (loss)
after tax (including the post tax effect of extraordinary items, if
any) by the weighted average number of equity shares outstanding during
the year. Diluted earnings per share is computed by dividing the
profit / (loss) after tax (including the post tax effect of
extraordinary items, if any) as adjusted for dividend, interest and
other charges to expense or income (net of any attributable taxes)
relating to the dilutive potential equity shares, by the weighted
average number of equity shares considered for deriving basic earnings
per share and the weighted average number of equity shares which could
have been issued on the conversion of all dilutive potential equity
shares. Potential equity shares are deemed to be dilutive only if their
conversion to equity shares would decrease the net profit per share
from continuing ordinary operations. Potential dilutive equity shares
are deemed to be converted as at the beginning of the period, unless
they have been issued at a later date. The dilutive potential equity
shares are adjusted for the proceeds receivable had the shares been
actually issued at fair value (i.e. average market value of the
outstanding shares). Dilutive potential equity shares are determined
independently for each period presented. The number of equity shares
and potentially dilutive equity shares are adjusted for share splits /
reverse share splits and bonus shares, as appropriate.
1.19 TAXES ON INCOME
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Act, 1961.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which
gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is probable that
future economic benefit associated with it will flow to the Company.
Deferred tax is recognized on timing differences between the accounting
income and the taxable income for the year, and quantified using the
tax rates and laws enacted or substantially enacted as on the balance
sheet date. Deferred tax assets are recognized only to the extent
there is a reasonable certainty that assets can be realized in future.
However, where there is unabsorbed depreciation or carry forward of
losses, deferred tax assets are recognized only if there is a virtual
certainty of realization of such assets.
1.20 INTANGIBLE ASSETS
Intangible assets are carried at cost less accumulated amortisation and
impairment losses, if any. The cost of an intangible asset comprises
its purchase price, including any import duties and other taxes (other
than those subsequently recoverable from the taxing authorities), and
any directly attributable expenditure on making the asset ready for its
intended use and net of any trade discounts and rebates. Subsequent
expenditure on an intangible asset after its purchase / completion is
recognised as an expense when incurred unless it is probable that such
expenditure will enable the asset to generate future economic benefits
in excess of its originally assessed standards of performance and such
expenditure can be measured and attributed to the asset reliably, in
which case such expenditure is added to the cost of the asset.
1.21 RESEARCH AND DEVELOPMENT EXPENSES
Revenue expenditure pertaining to research is charged to the Statement
of Profit and Loss. Development costs of products are also charged to
the Statement of Profit and Loss unless a product''s technological
feasibility has been established, in which case such expenditure is
capitalised. The amount capitalised comprises expenditure that can be
directly attributed or allocated on a reasonable and consistent basis
to creating, producing and making the asset ready for its intended use.
Fixed assets utilised for research and development are capitalised and
depreciated in accordance with the policies stated for Tangible Fixed
Assets and Intangible Assets.
1.22 IMPAIRMENT OF ASSETS
The carrying amounts of assets / cash generating units are reviewed at
each balance sheet date if there is any indication of impairment based
on internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the asset''s net selling price
and its value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value at the pre tax
weighted average cost of capital.
1.23 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
A provision is recognized when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on best estimates required to settle the obligation at the
balance sheet date. These are reviewed at each balance sheet date and
adjusted to reflect the current best estimates.
Contingent liability is disclosed for (i) Possible obligation which
will be confirmed only by future events not wholly within the control
of the Company or (ii) Present obligations arising from past events
where it is not probable that an outflow of resources will be required
to settle the obligation or a reliable estimate of the amount of the
obligation cannot be made. Contingent assets are not recognized in the
financial statements since this may result in the recognition of income
that may never be realized.
1.24 PROVISION FOR SALES RELATED OBLIGATIONS
The estimated liability for sales related obligations is recorded when
products are sold. These estimates are established using historical
information on the nature, frequency and average cost of obligations
and management estimates regarding possible future incidence. The
timing of outflows will vary as and when the obligation will arise -
being typically upto three years.
1.25 DERIVATIVE CONTRACTS
The Company enters into derivative contracts in the nature of foreign
currency swaps, currency options, forward contracts with an intention
to hedge its existing assets and liabilities, firm commitments and
highly probable transactions. Derivative contracts which are closely
linked to the existing assets and liabilities are accounted as per the
policy stated for Foreign Currency Transactions and Translations.
All other derivative contracts are marked-to-market and losses are
recognised in the Statement of Profit and Loss. Gains arising on the
same are not recognised, until realised, on grounds of prudence.
1.26 INSURANCE CLAIMS
Insurance claims are accounted for on the basis of claims admitted /
expected to be admitted and to the extent that there is no uncertainty
in receiving the claims.
1.27 SERVICE TAX INPUT CREDITS
Service tax input credit is accounted for in the books in the period in
which the underlying service received is accounted and when there is no
uncertainty in availing / utilising the credits.
1.28 OPERATING CYCLE
Based on the nature of products / activities of the Company and the
normal time between acquisition of assets and their realisation in cash
or cash equivalents, the Company has determined its operating cycle as
12 months for the purpose of classification of its assets and
liabilities as current and non-current
Mar 31, 2012
1.1 BASIS OF ACCOUNTING AND PREPARATION OF FINANCIAL STATEMENTS
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
the Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on accrual basis under the historical
cost convention with the exception of certain fixed assets, that are
carried at revalued amounts. The accounting policies adopted in the
preparation of the financial statements are consistent with
those followed in the previous year.
1.2 USE OF ESTIMATES
The preparation of financial statements requires the management to make
estimates and assumptions considered in the reported amounts of assets
and liabilities, including the disclosure of contingent liabilities as
of the date of the financial statements and the reported income and
expenses during the reporting period like provision for employee
benefits, provision for doubtful debts/advances, allowance for slow and
non-moving inventories, useful lives of fixed assets, other sales
related obligations and provision for taxation etc. Management believes
that the estimates used in preparation of the financial statements are
prudent and reasonable. Actual results could vary from these estimates.
Any revision to accounting estimates is recognized in the period in
which the results are known/materialized.
1.3 INVENTORIES
Inventories are valued at the lower of cost and estimated net
realizable value (net of allowances) after providing for obsolescence
and other losses, where considered necessary. The cost comprises of
cost of purchase, cost of conversion and other costs including
appropriate production overheads in the case of finished goods and work
in process, incurred in bringing such inventories to their present
location and condition. In case of raw materials, stores & spares and
traded goods, cost (net of CENVAT/VAT credits wherever applicable) is
determined on a moving weighted average basis, and, in case of work in
process and finished goods, cost is determined on a First In First Out
basis.
1.4 CASH AND CASH EQUIVALENTS
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short-term balances (with an original maturity of three
months or less from the date of acquisition), highly liquid investments
that are readily convertible into known amounts of cash and which are
subject to insignificant risk of changes in value.
1.5 CASHFLOW STATEMENT
Cash flows are reported using the indirect method, whereby profit/
(loss) before extraordinary items and 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. The cash flows from
operating, investing and financing activities of the Company are
segregated based on the available information.
1.6 DEPRECIATION AND AMORTISATION
Depreciation on fixed assets is provided using straight line method
At the rates specified in Schedule XIV of the Companies Act 1956, except
for certain vehicles and other equipments for which the depreciation is
provided at 30% and 16.67% respectively. Certain plant and machinery
are classified as continuous process plants based on technical
evaluation by the management and are depreciated at the applicable
rates. Additional depreciation consequent to the enhancement in the
value of fixed assets on the revaluation is adjusted in the fixed
assets revaluation reserve account. Leasehold land / Improvements
thereon are amortised over the primary period of lease. In respect of
fixed assets whose useful life has been revised, the unamortised
depreciable amount is charged over the revised remaining useful life.
The estimated useful life of the intangible assets and the amortisation
period are reviewed at the end of each financial year and the
amortisation method is revised to reflect the changed pattern.
1.7 REVENUE RECOGNITION
Revenue is recognized when the significant risks and rewards of
ownership of goods have been passed to the buyer. Gross sales are
inclusive of excise duty and are net of trade discounts/sales
returns/VAT.
1.8 OTHER INCOME
Interest income is accounted on accrual basis. Dividend income on
investments is accounted for when the right to receive the payment is
established. Royalty income is accounted when the right to receive the
same is established.
1.9 TANGIBLE FIXED ASSETS
Fixed assets are stated at cost, as adjusted by revaluation of certain
land, buildings, plant and machineries based on the then replacement
cost as determined by approved independent valuer in 1986 and 1987,
less depreciation. All costs relating to the acquisition and
installation of fixed assets (net of Cenvat/VAT credits wherever
applicable) are capitalized and include finance cost on borrowed funds
attributable to acquisition of qualifying fixed assets for the period
up to the date when the asset is ready for its intended use, and
adjustments arising from foreign exchange differences arising on
foreign currency borrowings to the extent they are regarded as an
adjustment to interest costs. Other incidental expenditure attributable
to bringing the fixed assets to their working condition for intended
use are capitalized. Subsequent expenditure relating to fixed assets
is capitalised only if such expenditure results in an increase in the
future benefits from such asset beyond its previously assessed standard
of performance. Fixed assets taken on finance lease are capitalized and
depreciation is provided on such assets, while the interest is charged
to the profit and loss account. Fixed assets retired from active use
and held for sale are stated at the lower of their net book value and
net realisable value and are disclosed separately in the Balance Sheet.
Capital work-in-progress: Projects under which assets are not ready for
their intended use and other capital work-in-progress are carried at
cost, comprising direct cost, related incidental expenses and
attributable interest.
1.10 FOREIGN CURRENCY TRANSACTIONS AND TRANSLATIONS
Foreign currency transactions are recorded at rates of exchange
prevailing on the date of transaction. Monetary assets and liabilities
denominated in foreign currencies as at the balance sheet date are
translated at the rate of exchange prevailing at the year-end. Exchange
differences arising on actual payments/realizations and year-end
restatements are dealt with in the profit & loss account. The Company
enters into forward exchange contracts and other instruments that are
in substance a forward exchange contract to hedge its risks associated
with foreign currency fluctuations. The premium or discount arising at
the inception of a forward exchange contract (other than for a firm
commitment ora highly probable forecast) or similar instrument, which
are not intended for trading or speculation purposes, is amortized as
expense or income over the life of the contract. Exchange difference on
such contracts is recognized in the profit and loss account in the year
in which the exchange rates change. Exchange difference arising on a
monetary item that, in substance, forms part of the Company's net
investment in a non-integral foreign operation has been accumulated in
a foreign currency translation reserve in the Company's financial
statements until the disposal of net investment, at which time they
would be recognized as income or as expense.
1.11 GOVERNMENT GRANTS, SUBSIDIESAND EXPORT INCENTIVES
Government grants and subsidies are recognised when there is reasonable
assurance that the Company will comply with the conditions attached to
them and the grants / subsidy will be received. Government grants whose
primary condition is that the Company should purchase, construct or
otherwise acquire capital assets are presented by deducting them from
the carrying value of the assets. The grant is recognised as income
over the life of a depreciable asset by way of a reduced depreciation
charge. Export Incentives in the form of advance licences / credits
earned under duty entitlement pass book scheme are treated as income in
the year of export at the estimated realizable value / actual credit
earned on exports made during the year and are credited to the raw
material consumption account Government grants in the nature of
promoters' contribution like investment subsidy, where no repayment is
ordinarily expected in respect thereof, are treated as capital reserve.
1.12 INVESTMENTS
Long term investments are stated at cost and provision for diminution
is made if the decline in value is other than temporary in nature.
Current investments are stated at lower of cost and fair value
determined on the basis of each category of investments.
1.13 EMPLOYEE BENEFITS
Employee benefits include provident fund, superannuation fund, gratuity
fund and compensated absences. Liability for gratuity to employees
determined on the basis of actuarial valuation as on balance sheet date
is funded with the Life Insurance Corporation of India and is
recognized as an expense in the year incurred. Liability for short term
compensated absences is recognized as expense based on the estimated
cost of eligible leave to the credit of the employees as at the balance
sheet date on undiscounted basis. Liability for long term compensated
absences is determined on the basis of actuarial valuation as on the
balance sheet date. Contributions to defined contribution schemes such
as provident fund, employees' pension fund, superannuation fund and
cost of other benefits are recognized as an expense in the year
incurred. Actuarial gains and losses arising from experience
adjustments and effects of changes in actuarial assumptions are
immediately recognized in the profit & loss account as income or
expense.
1.14 EMPLOYEE SHARE BASED PAYMENTS
Accounting value of stock appreciation rights (Phantom stock units)
granted to employees under the Cash-settled Employee Share-based
Payment Plan (Phantom Stock Plan) is recognized based on intrinsic
value method. Intrinsic value of the phantom stock unit is determined
as excess of closing market price on the reporting date over the
exercise price of the unit and is charged as employee benefit over the
vesting period in accordance with "Guidance Note on Accounting for
Employee Share-based payments" issued by Institute of Chartered
Accountants of India.
1.15 BORROWING COSTS
Borrowing costs include interest, amortisation of ancillary costs
incurred and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost. Borrowing costs are capitalized as a part of the cost
of qualifying asset when it is possible that they will result in
future economic benefits and the cost can be measured reliably. Other
borrowing costs are recognized as an expense in the period in which
they are incurred.
1.16 SEGMENT REPORTING
The Company's operations comprise of only one business
segment-Automobile Tyres, Automobile Tubes & Automobile Flaps in the
context of reporting business/geographical segment as required under
mandatory accounting standards AS- 17 "Segment Reporting". The
accounting policies adopted for segment reporting are in line with the
accounting policies of the Company. Segment revenue, segment expenses,
segment assets and segment liabilities have been identified to segments
on the basis of their relationship to the operating activities of the
segment.
1.17 LEASES
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased assets are classified as
operating leases. Operating Lease payments are recognized as an expense
in the revenue account as per the lease terms. Assets leased by the
Company in its capacity as lessee where substantially all the risks and
rewards of ownership vest in the Company are classified as finance
leases. Such leases are capitalised at the inception of the lease at
the lower of the fair value and the present value of the minimum lease
payments and a liability is created for an equivalent amount. Each
lease rental paid is allocated between the liability and the interest
cost so as to obtain a constant periodic rate of interest on the
outstanding liability for each year.
1.18 EARNINGS PERSHARE
Basic earnings per share is computed by dividing the profit / (loss)
After tax (including the post tax effect of extraordinary items, if any)
by the weighted average number of equity shares outstanding during the
year. Diluted earnings per share is computed by dividing the profit /
(loss) after tax (including the post tax effect of extraordinary items,
if any) as adjusted for dividend, interest and other charges to expense
or income relating to the dilutive potential equity shares, by the
weighted average number of equity shares considered for deriving basic
earnings per share and the weighted average number of equity shares
which could have been issued on the conversion of all dilutive
potential equity shares.
1.19 TAXES ON INCOME
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Act, 1961. Minimum Alternate Tax (MAT) paid in accordance with the tax
laws, which gives future economic benefits in the form of adjustment to
future income tax liability, is considered as an asset if there is
convincing evidence that the Company will pay normal income tax.
Accordingly, MAT is recognised as an asset in the Balance Sheet when it
is probable that future economic benefit associated with it will flow
to the Company. Deferred tax is recognized on timing differences
between the accounting income and the taxable income for the year, and
quantified using the tax rates and laws enacted or substantially
enacted as on the balance sheet date. Deferred tax assets are
recognized only to the extent there is a reasonable certainty that
assets can be realized in future. However, where there is unabsorbed
depreciation or carry forward of losses, deferred tax assets are
recognized only if there is a virtual certainty of realization of such
assets.
1.20 INTANGIBLE ASSETS
Intangible assets are carried at cost less accumulated amortisation and
impairment losses, if any. The cost of an intangible asset comprises
its purchase price, including any import duties and other taxes (other
than those subsequently recoverable from the taxing authorities), and
any directly attributable expenditure on making the asset ready for its
intended use and net of any trade discounts and rebates. Subsequent
expenditure on an intangible asset after its purchase / completion is
recognised as an expense when incurred unless it is probable that such
expenditure will enable the asset to generate future economic benefits
in excess of its originally assessed standards of performance and such
expenditure can be measured and attributed to the asset reliably, in
which case such expenditure is added to the cost of the asset.
1.21 RESEARCH AND DEVELOPMENT EXPENSES
Revenue expenditure pertaining to research is charged to the Statement
of Profit and Loss. Development costs of products are also charged to
the Statement of Profit and Loss unless a product's technological
feasibility has been established, in which case such expenditure is
capitalised. The amount capitalised comprises expenditure that can be
directly attributed or allocated on a reasonable and consistent basis
to creating, producing and making the asset ready for its intended use.
Fixed assets utilised for research and development are capitalised and
depreciated in accordance with the policies stated for Tangible Fixed
Assets and Intangible Assets.
1.22 IMPAIRMENT OF ASSETS
The carrying amounts of assets/ cash generating units are reviewed at
each balance sheet date if there is any indication of impairment based
on internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the asset's net selling price
and its value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value at the pre tax
weighted average cost of capital.
1.23 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
A provision is recognized when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on best estimates required to settle the obligation at the
balance sheet date. These are reviewed at each balance sheet date and
adjusted to reflect the current best estimates. Contingent liability is
disclosed for (i) Possible obligation which will be
confirmed only by future events not wholly within the control of the
Company or (ii) Present obligations arising from past events where it
is not probable that an outflow of resources will be required to settle
the obligation or a reliable estimate of the amount of the obligation
cannot be made. Contingent assets are not recognized in the
financial statements since this may result in the recognition of income
that may never be realized.
1.24 PROVISION FOR SALES RELATED OBLIGATIONS
The estimated liability for sales related obligations is recorded when
products are sold. These estimates are established using historical
information on the nature, frequency and average cost of obligations
and management estimates regarding possible future incidence. The
timing of outflows will vary as and when the obligation will arise -
being typically upto three years.
1.25 DERIVATIVE CONTRACTS
The Company enters into derivative contracts in the nature of foreign
currency swaps, currency options, forward contracts with an intention
to hedge its existing assets and liabilities, firm commitments and
highly probable transactions. Derivative contracts which are closely
linked to the existing assets and liabilities are accounted as per the
policy stated for Foreign Currency Transactions and Translations. All
other derivative contracts are marked-to-market and losses are
recognised in the Statement of Profit and Loss. Gains arising on the
same are not recognised, until realised, on grounds of prudence.
1.26 INSURANCE CLAIMS
Insurance claims are accounted for on the basis of claims admitted/
expected to be admitted and to the extent that there is no uncertainty
in receiving the claims.
1.27 SERVICE TAX INPUT CREDITS
Service tax input credit is accounted for in the books in the period in
which the underlying service received is accounted and when there is no
uncertainty in availing / utilising the credits.
(e) The rights, preferences and restrictions attached to equity shares
of the Company:
The Company has only one class of shares referred to as equity shares
having a par value of Re. 1 each. The holder of equity shares are
entitled to one vote per share.
The Company declares and pays dividends in Indian Rupees. The dividends
proposed by the Board of Directors is subject to the approval of the
shareholders in the ensuing Annual General Meeting.
(f) In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive remaining assets of the Company,
after distribution of all preferential amounts. The distribution will
be in proportion to the number of equity shares held by the
shareholders.
Mar 31, 2011
1. A. BASIS OF ACCOUNTING
The financial statements are prepared on historical cost convention,
with the exception of certain fixed assets which were re-valued, based
on accrual method of accounting and in accordance with the accounting
principles generally accepted in India. They comply with the mandatory
accounting standards notified by the Central Government of India and
with the relevant provisions of the Companies Act, 1956.
B. USE OF ESTIMATES
The preparation of financial statements requires the management to make
estimates and assumptions considered in the reported amounts of assets
and liabilities, including the disclosure of contingent liabilities as
of the date of the financial statements and the reported income and
expenses during the reporting period like provision for employee
benefits, provision for doubtful debts/advances, allowance for slow and
non-moving inventories, useful lives of fixed assets, provision for
warranty and sales related obligations and provision for taxation etc.
Management believes that the estimates used in preparation of the
financial statements are prudent and reasonable. Actual results could
vary from these estimates. Any revision to accounting estimates is
recognized in the period in which the results are known/materialized.
2. FIXED ASSETS
(a) Fixed assets are stated at cost ,as adjusted by revaluation of
certain land, buildings, plant and machineries based on the then
replacement cost as determined by approved independent valuer in 1986
and 1987, less depreciation.
(b) All costs relating to the acquisition and installation of fixed
assets (net of Cenvat /VAT credits wherever applicable) are capitalized
and include finance cost on borrowed funds attributable to acquisition
of qualifying fixed assets for the period up to the date when the asset
is ready for its intended use, and adjustments arising from foreign
exchange differences arising on foreign currency borrowings to the
extent they are regarded as an adjustment to interest costs.(Also refer
accounting policy No. 4 on Borrowing Costs.) Other incidental
expenditure attributable to bringing the fixed assets to their working
condition for intended use are capitalized.
(c) Fixed assets taken on finance lease are capitalized and
depreciation is provided on such assets, while the interest is charged
to the profit and loss account.
3. DEPRECIATION Depreciation on fixed assets is provided using
straight line method at the rates specified in Schedule XIV of the
Companies Act 1956, except for certain vehicles and other equipments
for which the depreciation is provided at 30% and 16.67% respectively.
Certain plant and machinery are classified as continuous process plants
based on technical evaluation by the management and are depreciated at
the applicable rates.
Additional depreciation consequent to the enhancement in the value of
fixed assets on the revaluation is adjusted in the fixed assets
revaluation reserve account.
Leasehold land/Improvements thereon are amortized over the primary
period of lease.
In respect of fixed assets whose useful life has been revised, the
unamortized depreciable amount is charged over the revised remaining
useful life.
4. BORROWING COSTS Borrowing costs are capitalized as a part of the
cost of qualifying asset when it is possible that they will result in
future economic benefits and the cost can be measured reliably. Other
borrowing costs are recognized as an expense in the period in which
they are incurred.
5. IMPAIRMENT OF ASSETS The carrying amounts of assets are reviewed at
each balance sheet date if there is any indication of impairment based
on internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the assets net selling price and
its value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value at the pre tax weighted
average cost of capital.
6. INTANGIBLE ASSETS The expenditure incurred by the Company on
acquisition and implementation of software systems/development costs up
to the stage when the new product reaches technical feasibility, has
been recognized as an intangible asset and is amortized over a period
of five years based on its estimated useful life.
7. INVESTMENTS Long term investments are stated at cost and provision
for diminution is made if the decline in value is other than temporary
in nature. Current investments are stated at lower of cost and fair
value determined on the basis of each category of investments.
8. INVENTORIES
Inventories are valued at the lower of cost and estimated net
realizable value (net of allowances). The cost comprises of cost of
purchase, cost of conversion and other costs including appropriate
production overheads in the case of finished goods and work in process,
incurred in bringing such inventories to their present location and
condition. In case of raw materials, stores & spares and traded goods,
cost (net of CENVAT/VAT credits wherever applicable) is determined on a
moving weighted average basis, and, in case of work in process and
finished goods, cost is determined on a First In First Out basis.
9. FOREIGN CURRENCY TRANSACTIONS
Foreign currency transactions are recorded at rates of exchange
prevailing on the date of transaction. Monetary assets and liabilities
denominated in foreign currencies as at the balance sheet date are
translated at the rate of exchange prevailing at the year-end. Exchange
differences arising on actual payments/realizations and year-end
restatements are dealt with in the profit & loss account.
The Company enters into forward exchange contracts and other
instruments that are in substance a forward exchange contract to hedge
its risks associated with foreign currency fluctuations. The premium or
discount arising at the inception of a forward exchange contract (other
than for a firm commitment or a highly probable forecast) or similar
instrument is amortized as expense or income over the life of the
contract. Exchange difference on such contracts is recognized in the
profit and loss account in the year in which the exchange rates change.
Exchange difference arising on a monetary item that, in substance,
forms part of the Companys net investment in a non-integral foreign
operation has been accumulated in a foreign currency translation
reserve in the Companys financial statements until the disposal of net
investment, at which time they would be recognized as income or as
expense.
10. REVENUE RECOGNITION
Revenue is recognized when the significant risks and rewards of
ownership of goods have been passed to the buyer.
Gross sales are inclusive of excise duty and are net of trade
discounts/sales returns/VAT.
Dividend income on investments is accounted for when the right to
receive the payment is established.
Interest Income is recognized on time proportion basis.
11. EXPORT INCENTIVES
Export Incentives in the form of advance licences/credits earned under
duty entitlement pass book scheme are treated as income in the year of
export at the estimated realizable value/actual credit earned on
exports made during the year and are credited to the raw material
consumption account.
12. EMPLOYEE BENEFITS
Liability for gratuity to employees determined on the basis of
actuarial valuation as on balance sheet date is funded with the Life
Insurance Corporation of India and is recognized as an expense in the
year incurred.
Liability for short term compensated absences is recognized as expense
based on the estimated cost of eligible leave to the credit of the
employees as at the balance sheet date on undiscounted basis. Liability
for long term compensated absences is determined on the basis of
actuarial valuation as on the balance sheet date.
Contributions to defined contribution schemes such as provident fund,
employees pension fund and superannuation fund and cost of other
benefits are recognized as an expense in the year incurred.
Actuarial gains and losses arising from experience adjustments and
effects of changes in actuarial assumptions are immediately recognized
in the profit & loss account as income or expense.
Phantom Stock Plan
Accounting value of stock appreciation rights (Phantom stock units)
granted to employees under the Cash-settled Employee Share-based
Payment Plan (Phantom Stock Plan) is recognized based on intrinsic
value method. Intrinsic value of the phantom stock unit is determined
as excess of closing market price on the reporting date over the
exercise price of the unit and is charged as employee benefit over the
vesting period in accordance with "Guidance Note on Accounting for
Employee Share-based payments" issued by Institute of Chartered
Accountants of India.
13. TAXES ON INCOME
Current tax is determined on the income for the year chargeable to tax
in accordance with the Income Tax Act, 1961. Deferred tax is
recognized on timing differences between the accounting income and the
taxable income for the year, and quantified using the tax rates and
laws enacted or substantially enacted as on the balance sheet date.
Deferred tax assets are recognized only to the extent there is a
reasonable certainty that assets can be realized in future. However,
where there is unabsorbed depreciation or carry forward of losses,
deferred tax assets are recognized only if there is a virtual certainty
of realization of such assets.
14. MAT CREDIT ENTITLEMENT
MAT Credit is recognized as an asset only when and to the extent there
is convincing evidence that the Company will pay normal income tax
during the specified period. The Company reviews the same at each
Balance Sheet date and writes down the carrying amount of MAT credit
entitlement to the extent that there is no longer convincing evidence
to the effect that Company will pay normal income tax during the
specified period.
15. OPERATING LEASES
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased assets are classified as
operating leases. Operating Lease payments are recognized as an expense
in the revenue account as per the lease terms.
16. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
A provision is recognized when the Company has a present obligation as
a result of past events; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to their
present value and are determined based on best estimates required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
Contingent liability is disclosed for (i) Possible obligation which
will be confirmed only by future events not wholly within the control
of the Company or (ii) Present obligations arising from past events
where it is not probable that an outflow of resources will be required
to settle the obligation or a reliable estimate of the amount of the
obligation cannot be made. Contingent assets are not recognized in the
financial statements since this may result in the recognition of income
that may never be realized.
Mar 31, 2010
1. A. BASIS OF ACCOUNTING
The financial statements are prepared on historical cost convention,
with the exception of certain fixed assets which were re-valued, based
on accrual method of accounting and in accordance with the accounting
principles generally accepted in India. They comply with the mandatory
accounting standards notified by the Ceantral Government of India and
with the relevant provisions of the Companies Act, 1956.
B. USE OF ESTIMATES
The preparation of financial statements requires the management to make
estimates and assumptions considered in the reported amounts of assets
and liabilities, including the disclosure of contingent liabilities as
of the date of the financial statements and the reported income and
expenses during the reporting period. Management believes that the
estimates used in preparation of the financial statements are prudent
and reasonable. Actual results could vary from these estimates. Any
revision to accounting estimates is recognised in the period in which
the results are known/materialised.
2. FIXED ASSETS
(a) Fixed assets are stated at cost ,as adjusted by revaluation of
certain land, buildings, plant and machineries based on the then
replacement cost as determined by approved independent valuer in 1986
and 1987, less depreciation.
(b) All costs relating to the acquisition and installation of fixed
assets (net of CENVAT/VAT credits wherever applicable) are capitalised
and include finance cost on borrowed funds attributable to acquisition
of qualifying fixed assets for the period up to the date when the asset
is ready for its intended use, and adjustments arising from foreign
exchange differences arising on foreign currency borrowings to the
extent they are regarded as an adjustment to interest costs.(Also refer
accounting policy No. 4 on Borrowing Costs.) Other incidental
expenditure attributable to bringing the fixed assets to their working
condition for intended use are capitalised.
(c) Fixed assets taken on finance lease are capitalised and
depreciation is provided on such assets, while the interest is charged
to the profit and loss account.
3. DEPRECIATION
Depreciation on fixed assets is provided using straight line method at
the rates specified in Schedule XIV of the Companies Act 1956, except
for certain vehicles and other equipments for which the depreciation is
provided at 30% and 16.67% respectively .Certain plant and machinery
are classified as continuous process plants based on technical
evaluation by the management and are depreciated at the applicable
rates.
Additional depreciation consequent to the enhancement in the value of
fixed assets on the revaluation is adjusted in the fixed assets
revaluation reserve account.
Leasehold land/Improvements thereon are amortised over the primary
period of lease.
In respect of fixed assets whose useful life has been revised, the
unamortised depreciable amount is charged over the revised remaining
useful life.
4. BORROWING COSTS
Borrowing costs are capitalised as a part of the cost of qualifying
asset when it is possible that they will result in future economic
benefits and the cost can be measured reliably. Other borrowing costs
are recognised as an expense in the period in which they are incurred.
5. IMPAIRMENT OF ASSETS
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognised wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and its value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the pre tax weighted average cost of capital.
6. INTANGIBLE ASSETS
The expenditure incurred by the Company on acquisition and
implementation of software systems/development costs up to the stage
when the new product reaches technical feasibility, has been recognised
as an intangible asset and is amortised over a period of five years
based on its estimated useful life.
7. INVESTMENTS
Long term investments are stated at cost and provision for diminution
is made if the decline in value is other than temporary in nature.
Current investments are stated at lower of cost and fair value
determined on the basis of each category of investments.
8. INVENTORIES
Inventories are valued at the lower of cost and estimated net
realisable value (net of allowances). The cost comprises of cost of
purchase, cost of conversion and other costs including appropriate
production overheads in the case of finished goods and work in process,
incurred in bringing such inventories to their present location and
condition.
In case of raw materials .stores & spares and traded goods, cost (net
of CENVAT/VAT credits wherever applicable) is determined on a moving
weighted average basis, and, in case of work in process and finished
goods, cost is determined on a First In First Out basis
9. FOREIGN CURRENCY TRANSACTIONS
Foreign currency transactions are recorded at rates of exchange
prevailing on the date of transaction. Monetary assets and liabilities
denominated in foreign currencies as at the balance sheet date are
translated at the rate of exchange prevailing at the year-end. Exchange
differences arising on actual payments/realisations and year-end
restatements are dealt with in the profit & loss account.
The Company enters into forward exchange contracts and other
instruments that are in substance a forward exchange contract to hedge
its risks associated with foreign currency fluctuations. The premium or
discount arising at the inception of a forward exchange contract (other
than for a firm commitment or a highly probable forecast) or similar
instrument is amortised as expense or income over the life of the
contract. Exchange difference on such contracts is recognised in the
profit and loss account in the year in which the exchange rates change.
Exchange difference arising on a monetary item that, in substance,
forms part of the Companys net investment in a non-integral foreign
operation has been accumulated in a foreign currency translation
reserve in the Companys financial statements until the disposal of net
investment, at which time they would be recognised as income or as
expense.
10. REVENUE RECOGNITION
Revenue is recognised when the significant risks and rewards of
ownership of goods have been passed to the buyer. Gross sales are
inclusive of excise duty and are net of trade discounts/sales
returns/VAT.
Dividend income on investments is accounted for when the right to
receive the payment is established.
Interest Income is recognised on time proportion basis.
11. EXPORT INCENTIVES
Export Incentives in the form of advance licences/credits earned under
duty entitlement pass book scheme are treated as income in the year of
export at the estimated realisable value/actual credit earned on
exports made during the year and are credited to the raw material
consumption account.
12. EMPLOYEE BENEFITS
- Liability for gratuity to employees determined on the basis of
actuarial valuation as on balance sheet date is funded with the Life
Insurance Corporation of India and is recognised as an expense in the
year incurred.
- Liability for short term compensated absences is recognised as
expense based on the estimated cost of eligible leave to the credit of
the employees as at the balance sheet date on undiscounted basis.
Liability for long term compensated absences is determined on the basis
of actuarial valuation as on the balance sheet date.
- Contributions to defined contribution schemes such as provident fund,
employees pension fund and superannuation fund and cost of other
benefits are recognised as an expense in the year incurred.
- Actuarial gains and losses arising from experience adjustments and
effects of changes in actuarial assumptions are immediately recognised
in the profit & loss account as income or expense.
13. DEFERRED REVENUE EXPENDITURE
Payments under voluntary retirement scheme are being charged to profit
and loss account over a period of three years or over the period ending
March 31, 2010 which ever is earlier.
14. TAXES ON INCOME
Current tax is determined on the income for the year chargeable to tax
in accordance with the Income Tax Act, 1961.
Deferred tax is recognised on timing differences between the accounting
income and the taxable income for the year, and quantified using the
tax rates and laws enacted or substantially enacted as on the balance
sheet date. Deferred tax assets are recognised only to the extent there
is a reasonable certainty that assets can be realized in future.
However, where there is unabsorbed depreciation or carry forward of
losses, deferred tax assets are recognised only if there is a virtual
certainty of realisation of such assets.
15. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
A provision is recognised when the Company has a present obligation as
a result of past events; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made.
Provisions are not discounted to their present value and are determined
based on best estimates required to settle the obligation at the
balance sheet date. These are reviewed at each balance sheet date and
adjusted to reflect the current best estimates.
Contingent liability is disclosed for (i) Possible obligation which
will be confirmed only by future events not wholly within the control
of the Company or (ii) Present obligations arising from past events
where it is not probable that an outflow of resources will be required
to settle the obligation or a reliable estimate of the amount of the
obligation cannot be made. Contingent assets are not recognised in the
financial statements since this may result in the recognition of income
that may never be realised.
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