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Accounting Policies of Elgi Rubber Company Ltd. Company

Mar 31, 2015

1. a. Basis of preparation of financial statements

The Company has prepared these financial statements to comply in all material respects with the accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014. The financial statements have been prepared on an accrual basis and under the historical cost convention.

The accounting policies adopted in the preparation of financial statements are consistent with those of previous year, except for the change in accounting policy explained below.

b. Use of estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) in India requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities on the date of financial statements and the results of operations during the reporting period. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from the estimates. Significant estimates used by the management in the preparation of these financial statements include, work in progress, provisions for bad and doubtful debts, estimates of the useful life of the fixed assets.

2. Scheme of amalgamation and arrangement

a. As per the Scheme of amalgamation and arrangement (hereinafter referred to as "Scheme", as approved by the Hon'ble High Court of Judicature at Madras on 16th December 2010 between Elgi Rubber Company Limited (ERCL) and Treads direct Limited (TDL) and Elgi Rubber International Limited (ERIL) and Titan Tyrecare Products Limited (TTPL) and Treadsdirect (India) Limited (TDIL), the whole of the undertaking of ERCL and TDL comprising of its business, all assets, both movables and immovables, and liabilities of whatsoever nature and wheresoever situated were transferred to and vested in ERIL as a going concern as from the appointed date ie. 1st April 2010.

b. Engineering undertaking of ERIL was vested in TTPL and tread rubber undertaking of ERIL was vested with TDIL by way of slump sale with effect from the appointed date (01.01.2011).

3.01 Change in accounting policy

Till the year ended 31st March 2014, schedule XIV to the Companies Act, 1956, prescribed requirements concerning depreciation of fixed assets. From the current year, schedule XIV has been replaced by schedule II to the Companies Act, 2013. The applicability of schedule II has resulted in the following changes related to depreciation of fixed assets.

Useful lives/ depreciation rates

Till the year ended 31st March 2014, depreciation rates prescribed under schedule XIV were treated as minimum rates and the Company was not allowed to charge depreciation at lower rates even if such lower rates were justified by the estimated useful life of the asset, schedule II to the Companies Act, 2013 prescribes useful lives for fixed assets which, in many cases, are different from lives prescribed under the erstwhile schedule XIV. However, schedule II allows companies to use higher/'lower useful lives and residual values if such useful lives and residual values can be technically supported and justification for difference is disclosed in the financial statements.

Considering the applicability of schedule II, the management has re-estimated useful lives and residual values of all its fixed assets. The management believes that depreciation rates currently used fairly reflect its estimate of the useful lives and residual values of fixed assets, though these rates in certain cases are different from lives prescribed under schedule II. Accordingly, the carrying amount as at 1st April 2014 is being depreciated over the revised remaining useful life of the asset. The carrying value of Rs. 12,567,219, in case of assets with Nil revised remaining useful life as at 1st April 2014, is reduced after tax adjustment from the retained earnings as at such date. Further, had the Company continued with the previously assessed useful lives, charge for depreciation for the year ended March 31, 2015 would have been lower by Rs. 7.25 million and the profit before tax for the year ended 31st March, 2015 would have been higher by such amount, with a corresponding impact on net block of fixed assets as at 3ta March, 2015.

Depreciation on assets costing less than Rs. 5,000/-

Till year ended 31st March 2014, to comply with the requirements of schedule XIV to the Companies Act, 1956, the Company was charging 100% depreciation on assets costing less than Rs. 5,000/- in the year of purchase. However, schedule II to the Companies Act 2013, applicable from the current year, does not recognize such practice. Hence, to comply with the requirement of schedule II to the Companies Act, 2013, the Company has changed its accounting policy for depreciation of assets costing less than Rs. 5,000/-. As per the revised policy, the Company is depreciating such assets over their useful life as assessed by the management. The management has decided to apply the revised accounting policy prospectively from accounting periods commencing on or after 1st April 2014.

The change in accounting for depreciation of assets costing less than Rs. 5,000/- did not have any material impact on financial statements of the Company for the current year.

3.02 Revenue Recognition

a. Sales are recognized upon delivery of products and are recorded exclusive of Excise duty, Service tax and sales tax.

b. Export benefits are accounted on accrual basis.

c. Dividend income from investment in mutual funds is recognized on declaration of the same by the respective agency

d. Revenue is recognised when the shareholders' or unit holders' right to receive payment is established by the balance sheet date.

e. Interest Income is recognised on a time proportionate basis taking into account the amount outstanding and the rate applicable

3.03 Fixed Assets

a. Tangible Assets

Tangible fixed assets are stated at cost, less accumulated depreciation and impairment losses, if any. cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.

Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.

Borrowing costs directly attributable to acquisition of fixed assets which take substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use.

Gains or Losses arising from de-recognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.

b. Intangible Assets

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. Intangible assets, comprising of software and intellectual property rights are amortized on a straight line basis over a period of 3 years, which is estimated to be the useful life of the asset.

c. Depreciation

Depreciation on tangible assets for items other than referred to in item 3.3.(c), is provided on written down value method on a pro-rata basis using the estimated life as prescribed under schedule II, at the rates as specified in schedule II of the Companies Act, 2013.

3.04 Research and Development

Any intangible / tangible asset generated out of the research'and development activity is amortized / written off over the estimated life of the asset.

3.05 Investments

Investments are reflected at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of the investments.

3.06 Inventories / Stock of securities

Inventories / Stock of securities are stated at the lower of cost or net realisable value. Cost in respect of inventories is determined at the weighted average method. The cost of finished goods and work-in-process comprises raw material, direct labour, other direct costs and related production overheads allocated on the basis of the normal capacity of production. Net realisable value is the estimate of the selling price in the ordinary course of business, less the costs of completion and selling expenses.

3.07 Exchange fluctuation

a. Foreign currency transactions are accounted at the exchange rates prevailing at the date of the transaction.

b. Gains and losses resulting from the settlement of foreign currency transaction and from the translation of monetary assets and liabilities denominated in foreign currencies at the year-end rates are recognized in the statement of profit and loss.

c. In the case of forward contract, the premium or discount arising at the inception of such a forward exchange contract is amortised as expense or income over the life of the contract.

3.08 Employee / Retirement Benefits

Provident fund: Eligible employees receive benefits from a provident fund, which is a defined contribution plan. Aggregate contributions along with interest thereon, are paid at retirement, death, incapacitation or termination of employment. Both the employee and the Company make monthly contributions to the government administered provident fund. The Company has no obligation beyond its contribution.

Gratuity: A defined benefit retirement plan (the "Gratuity Plan") is provided for all eligible employees. In accordance with the Payment of Gratuity Act, 1972, the gratuity plan provides a lumpsum amount to be vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee's salary and the tenure of employment. Liabilities with regard to the gratuity plan are determined by actuarial valuation as of the balance sheet date, based upon which, the Company contributes all the ascertained liabilities to the Elgi Rubber Company Limited Employees gratuity fund trust and the contributions to the trust are invested in the Life Insurance Corporation of India administered fund.

Superannuation: Certain employees of the Company are also participants in a defined contribution plan. The Company makes the contributions to the superannuation plan administered by the Elgi Rubber Company Employees Superannuation Fund Trust. The Company has no further obligations to the plan beyond its monthly contributions.

Expenses on ex-gratia payment to employees, a defined contribution plan, is accounted as and when accepted by the management.

Compensated absence: A defined benefit plan is provided for all the eligible employees and the contributions of the Company are , invested in the Life Insurance Corporation of India administered fund.

3.09 Lease

The Company is leasing out tyre re-treading machineries to customers. In respect of assets given under a finance lease, the same is recognized as a receivable at an amount equal to the net investment in the lease. Lease rentals are apportioned between principal and interest on the IRR method. The principal amount received reduces the net investment in the lease and interest is recognized as revenue.

3.10 Provisions

A provision is recognised when the Company has a present obligation as a result of past event, 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 its present value and are determined based on the best estimate 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.

3.11 Cash and Cash equivalents

Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.

3.12 Cash Flow Statement

Cash Flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non cash nature, any deferrals or accruals of past or future operating cash receipts or payments and items income or expense associated with investing or financing cash flows. Cash and cash equivalents include cash on hand and balance with banks in current and deposit accounts, with necessary disclosure of cash and cash equivalent balances that are not available for use by the company.

3.13 Earnings Per Share

Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting preference dividends and attributable taxes, if any) by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events of bonus issue.

For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

3.14 Borrowing Costs

Borrowing costs relating to acquisition are capitalised until the time all substantial activities necessary to prepare the qualifying t assets for their intended use are complete. A qualifying asset is one that necessarily takes substantial period of time to get ready for

its intended use/sale. All other borrowing costs not eligible for inventorisation / capitalisation are charged to revenue.

3.15 Taxes

Tax expense comprises of current and deferred tax. Deferred Tax

a. Deferred tax is recognized, subject to the consideration of prudence in respect of deferred tax assets, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

b. Deferred tax assets are recognized on unabsorbed capital losses only if it is reasonably certain that such deferred tax assets can be realised against future taxable capital gains.

3.16 Treatment of Contingent Liabilities

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized but are disclosed in the notes. Contingent assets are neither recognized nor disclosed in the financial statements.


Mar 31, 2014

Elgi Rubber Company Limited (''Company'' or ''ERCL'') was incorporated on 16.10.2006. ERCL is a leading Company providing solutions to Rubber Industry and engaged in the business of manufacture of Reclaimed Rubber, Retreading machinery, and Retread rubber.

a. Basis of preparation of financial statements

The financial statements have been prepared to comply in all material respect with the accounting standards notified by Companies (Accounting Standards) Rules 2006,(as amended) and the relevant provisions of Companies Act, 1956 (''the Act''). The financial statements have been prepared under the historical cost convention on an accrual basis in accordance with accounting principles generally accepted in India. Accounting policies have been consistently applied by the company and are consistent with those used in the previous year and in case of any such variations in the accounting policies as compared to the previous year, such variations are disclosed separately as a part of notes to accounts.

b. Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) in India requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities on the date of financial statements and the results of operations during the reporting period. Although these estimates are based upon management''s best knowledge of current events and actions, actual results could differ from the estimates. Significant estimates used by the management in the preparation of these financial statements include, work in progress, provisions for bad and doubtful debts, estimates of the useful life of the fixed assets.

2. Scheme of amalgamation and arrangement

a. As per the Scheme of Amalgamation and Arrangement (hereinafter referred to as" Scheme", as approved by the Hon''ble High Court of Judicature at Madras on 16.12.2010 between Elgi Rubber Company Limited (ERCL) and Treadsdirect Limited(TDL) and Elgi Rubber International Limited(ERIL) and Titan Tyrecare Products Limited (TTPL) and Treadsdirect (India) Limited (TDIL), the whole of the undertaking of ERCL and TDL comprising of its business, all assets, both movables and immovables, and liabilities of whatsoever nature and wheresoever situated were transferred to and vested in ERIL as a going concern as from the appointed date ie. 1st April 2010.

b. Engineering undertaking of ERIL was vested in TTPL and tread rubber undertaking of ERIL was vested with TDIL by way of slump sale with effect from the appointed date (01.01.2011).

3. Revenue recognition

a. Sales are recognized upon delivery of products and are recorded exclusive of excise duty, service tax and sales tax.

b. Export benefits are accounted on accrual basis.

c. Dividend income from investment in Mutual Funds is recognized on declaration of the same by the respective agency.

d. Dividend from other companies is accounted on confirmation in the Annual General Meeting of the respective companies.

e. Interest Income is recognised on a time proportionate basis taking into account the amount outstanding and the rate applicable.

4. Fixed assets

a. Fixed Assets are reflected at historical cost (net of Cenvat / VAT) less depreciation to date.

b. At Balance Sheet date, an assessment is done to determine whether there is any indication of impairment in the carrying amount of the Company''s fixed assets. If any such indication exists, the asset''s recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount.

An assessment is also done at each Balance Sheet date whether there is any indication that an impairment loss recognized for an asset in prior accounting periods may no longer exist or may have decreased. If any such indication exists, the asset''s recoverable amount is estimated. The carrying amount of the fixed asset is increased to the revised estimate of its recoverable amount 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 in prior years. A reversal of impairment loss is recognized in the Statement of Profit and Loss.

After recognition of impairment loss or reversal of impairment loss as applicable, the depreciation charge for the asset is adjusted in future periods to allocate the asset''s revised carrying amount, less its residual value (if any) on straight line basis over its remaining useful life.

5. Depreciation

a. Depreciation on fixed assets for items other than referred to in item 5(c), is provided on written down value method on a pro-rata basis, at the rates as specified in Schedule XIV of the Companies Act, 1956.

b. Assets purchased, where the actual cost does not exceed Rs.5,000/- is depreciated at the rate of 100%, in the year of purchase.

c. Intangible assets of software are amortized over a period of 3 years on a pro-rata basis, which is estimated to be the life of the intangible asset.

6. Research and Development

Any intangible / tangible asset generated out of the Research and Development activity is amortized / written off over the estimated life of the asset.

7. Investments

Investments are reflected at cost, except cases where provision is considered necessary.

8. Inventories / Stock of securities

Inventories / Stock of Securities are stated at the lower of cost or net realisable value. Cost in respect of inventories is determined at the weighted average method. The cost of finished goods and work-in-process comprises raw material, direct labour, other direct costs and related production overheads allocated on the basis of the normal capacity of production. Net realisable value is the estimate of the selling price in the ordinary course of business, less the costs of completion and selling expenses.

9. Cash flow statement

Cash Flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non cash nature, any deferrals or accruals of past or future operating cash receipts or payments and items of income or expense associated with investing or financing cash flows. Cash and cash equivalents include cash on hand and balance with banks in current and deposit accounts, with necessary disclosure of cash and cash equivalent balances that are not available for use by the company.

10. Exchange fluctuation

a. Foreign Currency transactions are accounted at the exchange rates prevailing at the date of the transaction.

b. Gains and Losses resulting from the settlement of foreign currency transaction and from the translation of monetary assets and liabilities denominated in foreign currencies at the year-end rates are recognized in the Statement of Profit and Loss.

c. In the case of forward contract, the premium or discount arising at the inception of such a forward exchange contract is amortised as expense or income over the life of the contract.

11. Employee / Retirement benefits

a. Provident Fund: Eligible employees receive benefits from a Provident Fund, which is a defined Contribution Plan. Aggregate contributions along with interest thereon, are paid at retirement, death, incapacitation or termination of employment. Both the employee and the Company make monthly contributions to the Government administered Provident Fund. The Company has no obligation beyond its contribution.

b. Gratuity: A defined benefit retirement plan (the "Gratuity Plan") is provided for all eligible employees. In accordance with the Payment of Gratuity Act, 1972, the Gratuity Plan provides a lumpsum amount to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee''s salary and the tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation as of the balance sheet date, based upon which, the Company contributes all the ascertained liabilities to the Elgi Rubber Company Limited Employees Gratuity Fund Trust and the contributions to the trust are invested in the Life Insurance Corporation of India administered Fund.

c. Superannuation: Certain employees of the Company are also participants in a defined contribution plan. The Company makes the contributions to the Superannuation Plan administered by the Elgi Rubber Company Employees Superannuation Fund Trust. The Company has no further obligations to the Plan beyond its monthly contributions.

d. Expenses on ex-gratia payment to employees, a defined contribution plan, is accounted as and when accepted by the management.

e. Provision in respect of compensated absence is made, based on actuarial valuation.

12. Lease

The Company is leasing out tyre re-treading machineries to customers. In respect of assets given under a finance lease, the same is recognized as a receivable at an amount equal to the net investment in the lease. Lease rentals are apportioned between principal and interest on the IRR method. The principal amount received reduces the net investment in the lease and interest is recognized as revenue.

13. Earnings per share

Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting preference dividends and attributable taxes, if any) by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events of bonus issue.

For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

14. Borrowing costs

Borrowing costs relating to acquisition are capitalised until the time all substantial activities necessary to prepare the qualifying assets for their intended use are complete. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use/sale. All other borrowing costs not eligible for inventorisation / capitalisation are charged to revenue.

15. Taxes

Tax expense comprises of current and deferred tax.

Deferred tax

a. Deferred tax is recognized, subject to the consideration of prudence in respect of deferred tax assets, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

b. Deferred tax assets are recognized on unabsorbed capital losses only if it is reasonably certain that such deferred tax assets can be realised against future taxable capital gains.

16. Treatment of contingent liabilities

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized but are disclosed in the notes. Contingent assets are neither recognized nor disclosed in the financial statements.


Mar 31, 2013

1. a. Basis of preparation of financial statements

The financial statements have been prepared to comply in all material respect with the accounting standards notified by Companies (Accounting Standards) Rules 2006,(as amended) and the relevant provisions of Companies Act, 1956 (''the Act''). The financial statements have been prepared under the historical cost convention on an accrual basis in accordance with accounting principles generally accepted in India. Accounting policies have been consistently applied by the company and are consistent with those used in the previous year and in case of any such variations in the accounting policies as compared to the previous year, such variations are disclosed separately as a part of notes to accounts.

b. Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) in India requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities on the date of financial statements and the results of operations during the reporting period. Although these estimates are based upon management''s best knowledge of current events and actions, actual results could differ from the estimates. Significant estimates used by the management in the preparation of these financial statements include, work in progress, provisions for bad and doubtful debts, estimates of the useful life of the fixed assets.

2. Scheme of amalgamation and arrangement

a. As per the Scheme of Amalgamation and Arrangement (hereinafter referred to as "Scheme", as approved by the Hon''ble High Court of Judicature at Madras on 16.12.2010 between Elgi Rubber Company Limited (ERCL) and Treadsdirect Limited (TDL) and Elgi Rubber International Limited (ERIL) and Titan Tyrecare Products Limited (TTPL) and Treadsdirect (India) Limited (TDIL), the whole of the undertaking of ERCL and TDL comprising of its business, all assets, both movables and immovables, and liabilities of whatsoever nature and wheresoever situated were transferred to and vested in ERIL as a going concern as from the appointed date ie. 1st April 2010.

b. Engineering undertaking of ERIL was vested in TTPL and tread rubber undertaking of ERIL Was vested with TDIL by way of slump sale with effect from the appointed date (01.01.2011).

3. Revenue recognition

a. Sales are recognized upon delivery of products and are recorded exclusive of excise duty, service tax and sales tax.

b. Export benefits are accounted on accrual basis.

c. Dividend income from investment in mutual funds is recognized on declaration of the same by the respective agency.

d. Dividend from other companies is accounted on confirmation in the annual general meeting of the respective companies.

e. Interest income is recognised on a time proportionate basis taking into account the amount outstanding and the rate applicable.

4. Fixed assets

a. Fixed assets are reflected at historical cost (net of Cenvat / VAT) less depreciation to date.

b. At Balance Sheet date, an assessment is done to determine whether there is any indication of impairment in the carrying amount of the Company''s fixed assets. If any such indication exists, the asset''s recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount.

An assessment is also done at each Balance Sheet date whether there is any indication that an impairment loss recognized for an asset in prior accounting periods may no longer exist or may have decreased. If any such indication exists, the asset''s recoverable amount is estimated. The carrying amount of the fixed asset is increased to the revised estimate of its recoverable amount 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 in prior years. A reversal of impairment loss is recognized in the Statement of Profit and Loss.

After recognition of impairment loss or reversal of impairment loss as applicable, the depreciation charge for the asset is adjusted in future periods to allocate the asset''s revised carrying amount, less its residual value (if any) on straight line basis over its remaining useful life.

5. Depreciation

a. Depreciation on fixed assets for items other than referred to in item 5(c), is provided on written down value method on a pro-rata basis, at the rates as specified in Schedule XIV of the Companies Act, 1956.

b. Assets purchased, where the actual cost does not exceed Rs.5,000/- is depreciated at the rate of 100%, in the year of purchase.

c. Intangible assets of software are amortized over a period of 3 years on a pro-rata basis, which is estimated to be the life of the intangible asset.

6. Research and Development

Any intangible / tangible asset generated out of the Research and Development activity is amortized / written off over the estimated life of the asset.

7. Investments

Investments are reflected at cost, except cases where provision is considered necessary.

8. Inventories / Stock of securities

Inventories / Stock of securities are stated at the lower of cost or net realisable value. Cost in respect of inventories is determined at the weighted average method. The cost of finished goods and work in process comprises raw material, direct labour, other direct costs and related production overheads allocated on the basis of the normal capacity of production. Net realisable value is the estimate of the selling price in the ordinary course of business, less the costs of completion and selling expenses.

Cash flow statement

Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non cash nature, any deferrals or accruals of past or future operating cash receipts or payments and items income or expense associated with investing or financing cash flows. Cash and cash equivalents include cash on hand and balance with banks in current and deposit accounts, with necessary disclosure of cash and cash equivalent balances that are not available for use by the company.

10. Exchange fluctuation

a. Foreign currency transactions are accounted at the exchange rates prevailing at the date of the transaction.

b. Gains and Losses resulting from the settlement of foreign currency transaction and from the translation of monetary assets and liabilities denominated in foreign currencies at the year end rates are recognized in the Statement of Profit and Loss.

c. In the case of forward contract, the premium or discount arising at the inception of such a forward exchange contract is amortised as expense or income over the life of the contract.

11. Employee / Retirement benefits

a. Provident Fund: Eligible employees receive benefits from a provident fund, which is a defined Contribution Plan. Aggregate contributions along with interest thereon, are paid at retirement, death, incapacitation or termination of employment. Both the employee and the Company make monthly contributions to the government administered provident fund. The Company has no obligation beyond its contribution.

b. Gratuity: A defined benefit retirement plan (the "Gratuity Plan") is provided for all eligible employees. In accordance with the Payment of Gratuity Act, 1972, the Gratuity Plan provides a lumpsum amount to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee''s salary and the tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation as of the balance sheet date, based upon which, the Company contributes all the ascertained liabilities to the Elgi Rubber Company Limited Employees Gratuity Fund Trust and the contributions to the trust are invested in the Life Insurance Corporation of India administered Fund.

c. Superannuation: Certain employees of the Company are also participants in a defined contribution plan. The Company makes the contributions to the Superannuation Plan administered by the Elgi Rubber Company Employees Superannuation Fund Trust. The Company has no further obligations to the Plan beyond its monthly contributions.

d. Expenses on ex gratia payment to employees, a defined contribution plan, is accounted as and when accepted by the management.

e. Provision in respect of compensated absence is made, based on actuarial valuation.

12. Lease

The Company is leasing out tyre retreading machineries to customers. In respect of assets given under a finance lease, the same is recognized as a receivable at an amount equal to the net investment in the lease. Lease rentals are apportioned between principal and interest on the IRR method. The principal amount received reduces the net investment in the lease and interest is recognized as revenue.

13. Earnings per share

Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting preference dividends and attributable taxes, if any) by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events of bonus issue.

For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

14. Borrowing costs

Borrowing costs relating to acquisition are capitalised until the time all substantial activities necessary to prepare the qualifying assets for their intended use are complete. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use / sale. All other borrowing costs not eligible for inventorisation / capitalisation are charged to revenue.

15.Taxes

Tax expense comprises of current and deferred tax. Deferred tax

a. Deferred tax is recognized, subject to the consideration of prudence in respect of deferred tax assets, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in pne or more subsequent periods.

b. Deferred tax assets are recognized on unabsorbed capital losses only if it is reasonably certain that such deferred tax assets can be realised against future taxable capital gains.

16. Treatment of contingent liabilities

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized but are disclosed in the notes. Contingent assets are neither recognized nor disclosed in the financial statements.


Mar 31, 2012

1. a. Basis of Preparation of Financial Statements

The financial statements have been prepared to comply in all material respect with the accounting standards notified by Companies (Accounting Standards) Rules 2006,(as amended) and the relevant provisions of Companies Act, 1956 (the Act). The financial statements have been prepared under the historical cost convention on an accrual basis in accordance with accounting principles generally accepted in India. Accounting policies have been consistently applied by the company and are consistent with those used in the previous year and in case of any such variations in the accounting policies as compared to the previous year, such variations are disclosed separately as a part of notes to accounts.

b. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) in India requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities on the date of financial statements and the results of operations during the reporting period. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from the estimates. Significant estimates used by the management in the preparation of these financial statements include, work in progress, provisions for bad and doubtful debts, estimates of the useful life of the fixed assets.

2. Scheme of Amalgamation and Arrangement

a. As per the Scheme of Amalgamation and Arrangement (hereinafter referred to as 'Scheme', as approved by the Hon'ble High Court of Judicature at Madras on 16.12.2010 between Elgi Rubber Company Limited (ERCL) and Treadsdirect Limited(TDL) and Elgi Rubber International Limited(ERIL) and Titan Tyrecare Products Limited (TTPL) and Treadsdirect (India) Limited (TDIL), the whole of the undertaking of ERCL and TDL comprising of its business, all assets, both movables and immovables, and liabilities of whatsoever nature and wheresoever situated were transferred to and vested in ERIL as a going concern as from the appointed date ie. 1st April 2010.

b. Engineering undertaking of ERIL was vested in TTPL and tread rubber undertaking of ERIL was vested with TDIL by way of slump sale with effect from the appointed date (01.01.2011).

3. Income Recognition

a. Sales are recognized upon delivery of products and are recorded exclusive of excise duty, service tax and sales tax.

b. Export benefits are accounted on accrual basis.

c. Dividend income from investment in Mutual Funds is recognized on declaration of the same by the respective agency.

d. Dividend from other companies is accounted on confirmation in the Annual General Meeting of the respective companies.

e. Interest income is recognised on a time proportionate basis taking into account the amount outstanding and the rate applicable

4. Fixed Assets

a. Fixed Assets are reflected at historical cost (net of Cenvat / VAT) less depreciation to date.

b. At Balance Sheet date, an assessment is done to determine whether there is any indication of impairment in the carrying amount of the Company's fixed assets. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount.

An assessment is also done at each Balance Sheet date whether there is any indication that an impairment loss recognized for an asset in prior accounting periods may no longer exist or may have decreased. If any such indication exists, the asset's recoverable amount is estimated. The carrying amount of the fixed asset is increased to the revised estimate of its recoverable amount 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 in prior years. A reversal of impairment loss is recognized in the Statement of Profit and Loss.

After recognition of impairment loss or reversal of impairment loss as applicable, the depreciation charge for the asset is adjusted in future periods to allocate the asset's revised carrying amount, less its residual value (if any) on straight line basis over its remaining useful life.

5. Depreciation

a. Depreciation on fixed assets for items other than referred to in item 5(c), is provided on written down value method on a pro-rata basis, at the rates as specified in Schedule XIV of the Companies Act, 1956.

b. Assets purchased, where the actual cost does not exceed Rs.5,000/- is depreciated at the rate of 100%, in the year of purchase.

c. Intangible assets of software are amortized over a period of 3 years on a pro-rata basis, which is estimated to be the life of the intangible asset.

6. Research and Development

Any intangible / tangible asset generated out of the Research and Development activity is amortized / written off over the estimated life of the asset.

7. Investments

Investments are reflected at cost, except cases where provision is considered necessary.

8. Inventories / Stock of Securities

Inventories / Stock of Securities are stated at the lower of cost or net realisable value. Cost in respect of inventories is determined at the weighted average method. The cost of finished goods and work-in-process comprises raw material, direct labour, other direct costs and related production overheads allocated on the basis of the normal capacity of production. Net realisable value is the estimate of the selling price in the ordinary course of business, less the costs of completion and selling expenses.

9. Cash Flow Statement

Cash Flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non cash nature, any deferrals or accruals of past or future operating cash receipts or payments and items income or expense associated with investing or financing cash flows. Cash and cash equivalents include cash on hand and balance with banks in current and deposit accounts, with necessary disclosure of cash and cash equivalent balances that are not available for use by the company.

10. Exchange Fluctuation

a. Foreign Currency transactions are accounted at the exchange rates prevailing at the date of the transaction.

b. Gains and Losses resulting from the settlement of foreign currency transaction and from the translation of monetary assets and liabilities denominated in foreign currencies at the year end rates are recognized in the Statement of Profit and Loss.

c. In the case of forward contract, the premium or discount arising at the inception of such a forward exchange contract is amortised as expense or income over the life of the contract.

11. Employee / Retirement Benefits

a. Provident Fund: Eligible employees receive benefits from a Provident Fund, which is a defined Contribution Plan. Aggregate contributions along with interest thereon, are paid at retirement, death, incapacitation or termination of employment. Both the employee and the Company make monthly contributions to the Government administered Provident Fund. The Company has no obligation beyond its contribution.

b. Gratuity: A defined benefit retirement plan (the "Gratuity Plan") is provided for all eligible employees. In accordance with the Payment of Gratuity Act, 1972, the Gratuity Plan provides a lumpsum amount to be vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee's salary and the tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation as of the balance sheet date, based upon which, the Company contributes all the ascertained liabilities to the Elgi Rubber Company Limited Employees Gratuity Fund Trust and the contributions to the trust are invested in the Life Insurance Corporation of India administered Fund.

c. Superannuation: Certain employees of the Company are also participants in a defined contribution plan. The Company makes the contributions to the Superannuation Plan administered by the Elgi Rubber Company Employees Superannuation Fund Trust. The Company has no further obligations to the Plan beyond its monthly contributions.

d. Expenses on ex-gratia payment to employees, a defined contribution plan, is accounted as and when accepted by the management.

e. Provision in respect of compensated absence is made, based on actuarial valuation.

12. Lease

The Company is leasing out tyre re-treading machineries to customers. In respect of assets given under a finance lease, the same is recognized as a receivable at an amount equal to the net investment in the lease. Lease rentals are apportioned between principal and interest on the IRR method. The principal amount received reduces the net investment in the lease and interest is recognized as revenue.

13. Earnings per share

Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting preference dividends and attributable taxes, if any) by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events of bonus issue.

For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

14. Borrowing Costs

Borrowing costs relating to acquisition are capitalised until the time all substantial activities necessary to prepare the qualifying assets for their intended use are complete. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use/sale. All other borrowing costs not eligible for inventorisation / capitalisation are charged to revenue.

15. Taxes

Tax expense comprises of current and deferred tax.

Deferred Tax

a. Deferred tax is recognized, subject to the consideration of prudence in respect of deferred tax assets, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

b. Deferred tax assets are recognized on unabsorbed capital losses only if it is reasonably certain that such deferred tax assets can be realised against future taxable capital gains.

16. Treatment of Contingent Liabilities

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized but are disclosed in the notes. Contingent assets are neither recognized nor disclosed in the financial statements.

 
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