Dec 31, 2022
1. Corporate information
Huhtamaki India Limited is a public limited Company domiciled in India with its registered office located at 12A-06 B-Wing,13th Floor, Parinee Crescenzo, C-38/39, G-Block, Bandra Kurla Complex, Bandra (E), Mumbai-400 051 and having manufacturing locations spread across the country. The Company is listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The principal activity of the Company is the manufacture and sale of packaging material.
2. Basis of Preparation, Measurement and Significant Accounting PoliciesA. Basis of Preparation
These financial statements have been prepared in accordance with the Indian Accounting Standards (âInd ASâ) as notified by Ministry of Corporate Affairs pursuant to section 133 of Companies Act, 2013.
The financial statements are presented in Indian Rupees (âINR") which is also the Companyâs functional currency. All the amounts are rounded to the nearest Million and one decimal thereof, unless otherwise indicated.
The financial statements have been prepared on accrual and going concern basis. The accounting policies are applied consistently to all the periods presented in the financial statements. All assets and liabilities have been classified as current or non-current as per the Companyâs normal operating cycle. Based on the nature of products and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.
The financial statements for the year ended December 31, 2022 were approved by the Board of Directors and authorised for issue on February 6, 2023.
The financial statements have been prepared under the historical cost convention, except for the following items: |
|
Items |
Remeasurement basis |
Investments |
Fair Value |
Certain financial assets and liabilities |
Fair Value |
Share based payment arrangements |
Fair value |
Net defined benefit (asset)/liability |
Fair Value of plan assets less present value of defined benefit obligations |
C. Key Accounting Estimates and Judgements
The preparation of financial statements requires management to make judgments, estimates and assumptions in the application of accounting policies that affect the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Continuous evaluation is done on the estimation and judgments based on historical experience and other factors, including expectations of future events that are believed to be reasonable. Revisions to accounting estimates are recognised prospectively.
Judgements:
Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements is included in the following notes:
Note 33 - Revenue Recognition and Rebates and Discounts
Note 4C and 44B - Lease term, determination of ROU assets and liabilities; incremental borrowing rate
Information about critical judgments in applying accounting policies, as well as estimates and assumptions that have the most significant effect to the carrying amounts of assets and liabilities within the next financial year, are included in the following notes:
⢠Measurement of defined benefit obligations - Refer Note 45
⢠Measurement and likelihood of occurrence of provisions and contingencies - Refer Note 44
⢠Recognition of deferred tax assets - Refer Note 9
⢠Impairment of Intangibles - Refer Note 5
⢠Measurement of Share Based Payments - Refer Note 46
⢠Measurement of Fair values - Refer Note 49
⢠Measurement of useful lives for property, plant and equipment and intangible assets - Refer accounting policy on Depreciation below - point 3 c.
⢠Valuation of Inventories - point 3 h.
⢠Recognition and estimation of tax expense - point 3 k.
D. Recent Accounting Developments
Ministry of Corporate Affairs (âMCAâ) notifies new standards or amendments to the existing standards. There is no such notification which would have been applicable from January 1, 2022 except for MCA issued notifications dated March 24, 2021, to amend schedule III to the Companies Act, 2013 to enhance disclosures required to be made by the Company in its financial statements. These amendments are applicable to the Company for financial year starting from January 1, 2022.
Recent Accounting Developments Ministry of Corporate Affairs (MCA), vide notification dated March 23, 2022, has made the following amendments to Ind AS which are effective April 1, 2022. These amendments are applicable to the Company for financial year starting from January 1, 2023.
a. Ind AS 109: Annual Improvements to Ind AS (2021)
b. Ind AS 103: Reference to Conceptual Framework
c. Ind AS 37: Onerous Contracts - Costs of Fulfilling a Contract
d. Ind AS 16: Proceeds before intended use Based on preliminary assessment,
The Company does not expect these amendments to have any significant impact on its financial statements.
3. Significant accounting policiesa) Property, plant and equipment
⢠All items of property, plant and equipment are measured at cost less accumulated depreciation & impairment losses, if any. Cost of property, plant and equipment comprises of purchase price, non-refundable taxes and duties and any directly attributable cost of bringing each asset to its working condition for the intended use. Financing costs relating to borrowed funds attributable to the acquisition of qualifying property, plant and equipment i.e. asset that necessarily takes a substantial period of time to get ready for its intended use, upto the completion of construction or acquisition of such property, plant and equipment are included in the gross book value of the asset. If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.
⢠Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
⢠Gains or losses arising on disposal of property, plant and equipment are recognised in the Statement of Profit and Loss.
⢠Capital work-in-progress includes the cost of property, plant and equipment that are not ready to use at the balance sheet date.
⢠Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under âOther Non-Current Assetsâ.
b) Goodwill and Other Intangible assets
⢠Intangible Assets acquired separately are measured on initial recognition at cost. Following, initial recognition, intangible assets with finite lives are carried at cost less accumulated amortisation and accumulated impairment losses, if any.
⢠Goodwill acquired in a business combination is recognised at fair value at the acquisition date. Subsequently, it is carried at cost less accumulated impairment losses, if any.
⢠Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. 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, and are treated as changes in accounting estimates.
⢠Gains or losses arising on disposal of Intangible assets are recognised in the Statement of Profit and Loss.
c) Depreciation and amortisation:
Property, plant and equipment
Buildings are depreciated on written down value method as per the useful life prescribed in Schedule II to the Companies Act, 2013, which coincide with management estimate of useful life. Other property, plant and equipment are depreciated on straight line method as per the useful life prescribed in Schedule II to the Companies Act, 2013 except those specified below:
Following assets are depreciated at the useful lives different from those prescribed in Schedule II to the Companies Act, 2013 based on technical evaluation of estimated useful lives done by the management.
Assets |
Method of Depreciation |
Useful life |
Plant & Machinery |
Straight Line Method |
10 years |
Computers excludingLaptops |
Straight Line Method |
4 years |
Motor Vehicles |
Straight Line Method |
5 years |
Cellphones and Photocopiers |
Straight Line Method |
3 years |
Air-conditioning Equipment used in manufacturing process |
Straight Line Method |
10 years |
Freehold land is not depreciated.
Leasehold improvements are amortised over the period of lease.
Depreciation Rates in respect of Property, plant and equipment depreciated as per useful lives prescribed in Schedule II are as follows: |
||
Assets |
Method of Depreciation |
Useful life |
Buildings |
Straight Line Method |
40 years |
Laptops |
Straight Line Method |
3 years |
Office Equipment |
Straight Line Method |
5 years |
Furniture and Fixtures |
Straight Line Method |
10 years |
Electrical Fittings |
Straight Line Method |
10 years |
Depreciation on additions/deletions to property, plant and equipment is provided prorata from the month of addition/before the month of deletion.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively.
Intangible Assets
⢠ERP software is amortised over a period of 60 months commencing from the month in which software is put to use.
⢠Specialised software is amortised over a period of 36 months commencing from the month in which such expenditure is incurred.
⢠Corporate club membership fees paid are amortised over the period of use, viz 10 years.
⢠Non-compete fees paid are amortised over the period of restriction, viz 5 years.
⢠Customer List is amortised over a period of 7 years.
⢠Goodwill is not amortised but is tested for impairment annually.
Financial assets
Financial assets are recognised when the Company becomes a party to the contractual provisions of the instrument. On initial recognition, a financial asset is recognised at fair value, in case of financial assets which are recognised at fair value through profit and loss (FVTPL), its transaction cost is recognised in the Statement of Profit and Loss. In other cases, the transaction cost is attributed to the acquisition value of the financial asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in:
⢠Financial asset at amortised cost
⢠Financial asset at fair value through profit or loss (FVTPL)
⢠Financial asset at fair value through other comprehensive income (FVTOCI)
Financial assets are not reclassified subsequent to their recognition, except if and in the period the Company changes its business model for managing financial assets.
Financial asset at amortised cost
An instrument is measured at the amortised cost if (i) the asset is held within a business model whose objective is to hold assets for collecting contractual cash flows; and (ii) contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the Effective Interest Rate (EIR). The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the statement of profit and loss. This category generally applies to trade and other receivables. All financial assets not classified as measured at amortised cost or FVOCI are measured at FVTPL. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Financial asset (Debt Instruments) at fair value through profit or loss
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorisation as at amortised cost or as FVTOCI, is classified as at FVTPL.
Debt instruments included within the FVTPL category are measured at fair value with all changes recognised in the statement of Profit and loss.
Impairment of financial assets
Expected credit losses (ECL) are recognised for all financial assets subsequent to initial recognition other than financials assets in FVTPL category. ECL 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 entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR.
For financial assets other than trade receivables, as per Ind AS 109, the Company recognises 12 month expected credit losses for all originated or acquired financial assets if at the reporting date the credit risk of the financial asset has not increased
significantly since its initial recognition. The expected credit losses are measured as lifetime expected credit losses if the credit risk on financial asset increases significantly since its initial recognition. The Companyâs trade receivables do not contain significant financing component and loss allowance on trade receivables is measured at an amount equal to lifetime expected losses i.e. expected cash shortfall. The impairment losses and reversals are recognised in Statement of Profit and Loss.
At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt instruments at FVOCI are credit-impaired. A financial asset is âcredit-impairedâ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred
Financial liabilities
Initial recognition and measurement
Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument. Financial liabilities are classified, at initial recognition at fair value through profit or loss, net of directly attributable transaction costs.
Subsequent measurement
Financial liabilities are subsequently measured at amortised cost using the EIR method. Financial liabilities carried at fair value through profit or loss are measured at fair value with all changes in fair value recognised in the Statement of Profit and Loss.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the Statement of Profit and Loss when the liabilities are derecognised as well as through the EIR amortisation process.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised when:
⢠The rights to receive cash flows from the asset have expired, or
⢠The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass- throughâ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
e) Derivative financial instruments
The Company uses derivative financial instruments to hedge its foreign currency.
Derivatives are measured at fair value. The treatment of changes in the value of derivative depends on their use as explained below:
(i) Cash flow hedges: Derivatives are held to hedge the uncertainty in timing or amount of future forecast cash flows. Such derivatives are classified as being part of cash flow hedge relationships. For an effective hedge, gains and losses from changes in the fair value of derivatives are recognised in other comprehensive income. Any ineffective elements of the hedge are recognised in the statement of profit and loss. If the hedged cash flow relates to a non-financial asset, the amount accumulated in equity is subsequently included within the carrying value of that asset. For other cash flow hedges, amounts accumulated in other comprehensive income are taken to the statement of profit and loss at the same time as the related cash flow. When a derivative no longer qualifies for hedge accounting, any cumulative gain or loss remains in equity until the related cash flow occurs. When the cash flow takes place, the cumulative gain or loss is taken to the standalone statement of profit and loss. If the hedged cash flow is no longer expected to occur, the cumulative gain or loss is taken to the standalone statement of profit and loss immediately.
(ii) Derivatives for which hedge accounting is not applied: Derivative financial instruments for which hedge accounting is not applied are initially recognised at fair value on the date on which a derivative contract is entered and are subsequently measured at FVTPL.
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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
⢠In the principal market for the asset or liability or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
⢠Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
⢠Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
⢠Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
g) Foreign Currency Transactions
⢠The Companyâs financial statements are presented in INR which is also the functional currency. Transactions denominated in foreign currency are recorded at the exchange rate prevailing on the date of transactions. Exchange differences arising on foreign exchange transactions settled during the year are recognised in the Statement of Profit and Loss for the year.
⢠Monetary assets and liabilities in foreign currency, which are outstanding as at the year-end are translated at the year end at the closing exchange rate and the resultant exchange differences are recognised in the Statement of Profit and Loss.
⢠Non-monetary foreign currency items are carried at historical cost, determined using exchange rate at the date of initial recognition.
⢠Inventories are valued at lower of cost and net realisable value. Cost is determined on the Weighted Average Cost Method.
⢠Raw materials, Components, Stores and Spares held for use in production of Inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost.
⢠The cost of manufactured Inventories and Work-In-Process is the direct cost of manufacture plus appropriate allocated overheads.
⢠The net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and estimated costs necessary to make the sale.
⢠The comparison of cost and net realisable value is made on an item by item basis.
⢠Assessment of net realisable value is made at each subsequent reporting date. When the circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear evidence of an increase in net realisable value because of changed economic circumstances, the amount so written-down is adjusted in terms of policy as stated above. Appropriate adjustments are made to the carrying value of damaged, slow moving and obsolete inventories based on managementâs current best estimate.
According to Ind AS 115, revenue is measured at the amount of consideration the Company expects to receive in exchange for the goods or services when control of the goods or services and the benefits obtainable from them are transferred to the customer. Revenue is recognised using the following five step model specified in Ind AS 115:
Step 1: Identify contracts with customers
Step 2: Identify performance obligations contained in the contract Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligation Step 5: Recognise revenue when a performance obligation is satisfied
The performance obligations arising from sale of products with the Companyâs customers are satisfied at a point in time. Payment terms are generally agreed upon individually with customers. Sales of products are recognised when control of the products has transferred based on the agreed terms. Revenue is net of sales returns and allowances, discounts, volume rebates and any taxes or duties collected on behalf of government such as goods and service tax, etc.
Sale of services are recognised on satisfaction of performance obligation towards rendering of such services.
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.
A contract liability is the Companyâs obligation to transfer goods or services to a customer, for which the Company has already received consideration from customers.
If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company performs under the contract.
Certain contracts of sale include volume rebates that give rise to variable consideration. This includes establishing an accrual at year end, particularly in arrangements with varying terms which are based on annual contracts or shorter-term arrangements. Judgement is required to determine the transaction price for the contract.
Dividend & Interest Income
Dividend income is recognised when the Companyâs right to receive the payment is established by the reporting date.
Interest income is recognised using the effective interest rate (EIR) method.
j) Retirement and Other Employee benefits
(i) Short-term employee benefits
All short term employee benefits such as salaries, incentives, medical benefits which are expected to be settled wholly within 12 months after the end of the period in which the employee renders the related services which entitles him to avail such benefits are recognised on an undiscounted basis and charged to the Statement of Profit and Loss account.
(ii) Retirement Benefits
a. Defined Contribution Plans:
The Company has defined contribution plans for post-employment benefits in the form of provident fund, employeesâ state insurance, labour welfare fund, superannuation scheme etc. which is administered through Government of India. Provident fund is classified as defined contribution plans as the Company has no further obligation beyond making the contributions. The companyâs contributions to defined contribution plans are charged to the Statement of Profit and Loss as and when employee renders related service.
b. Defined Benefit Plans:
The Companyâs gratuity benefit scheme is a defined benefit plan. The Companyâs net obligation in respect of the defined benefit schemes are calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets is deducted.
The present value of the obligation under such defined benefit plans are determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plans are based on the market yields on Government securities as at the balance sheet date.
All defined benefit plans obligations are determined based on valuations, as at the Balance Sheet date, made by independent actuary using the projected unit credit method. The classification of the Companyâs net obligation into current and noncurrent is as per the actuarial valuation report.
Remeasurements, comprising of actuarial gains and losses and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding charge or credit to OCI in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset.
c. Pension plan:
The liability towards pension is based on actuarial valuation carried out by an independent Actuary using Projected unit credit Method. Principal assumptions are in line with those used for Gratuity, as applicable.
(iii) Long-term employee benefits
a. Compensated absences:
Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are considered as long-term employee benefit for measurement purposes and are determined on the basis of valuations, as at balance sheet date, carried out by an independent actuary using Projected Unit Credit Method, The benefit is discounted to determine its present value, and the fair value of any related assets is deducted. Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial assumptions and are recognised immediately in the Statement of Profit and Loss.
The Company presents the leave encashment as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
b. Long service awards:
Long Service awards are other long-term benefits scheme. The present value of the obligation under this long-term benefit is determined based on actuarial valuation using Projected Unit Credit Method.
Income tax expense for the year comprises of current tax and deferred tax. It is recognised in the Statement of Profit and Loss except to the extent it relates to an item to a business combination or to an item which is recognised directly in equity or in other comprehensive income.
Current tax
The amount of current tax reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Current tax assets and current tax liabilities are offset only if there is legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes.
Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which they can be used.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities; and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority.
Uncertain Tax position
The Company periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. The provision is estimated based on one of two methods, the expected value method (the sum of the probability weighted amounts in a range of possible outcomes) or the single most likely amount method, depending on which is expected to better predict the resolution of the uncertainty.
The Companyâs lease asset classes primarily consist of leases for Land and Buildings and Plant & Machinery. The Company assesses whether a contract is or 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:
(i) the contract involves the use of an identified asset
(ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and
(iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognises a right-of-use asset (âROUâ) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short term leases) and leases of low value assets. For these short term and leases of low value assets, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease.
The ROU assets are initially recognised 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, if any. ROU assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset.
The lease liability is initially measured at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates. The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made.
A lease liability is remeasured upon the occurrence of certain events such as a change in the lease term or a change in an index or rate used to determine lease payments. The remeasurement normally also adjusts the leased assets.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
m) Impairment of non-financial 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 assetâs fair value less cost 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 risks specific to the assets. After impairment, depreciation is provided on their revised carrying amount of the asset over its remaining useful life.
An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in the Statement of Profit and Loss. Impairment losses recognized in respect of CGUs are reduced from the carrying amounts of the assets of the CGU. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assetâs carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.
When the Company receives grants of non-monetary assets, the asset and the grant are recorded at fair value amounts and released to profit or loss over the expected useful life in a pattern of consumption of the benefit of the underlying asset i.e. by equal annual instalments.
Income from export incentives is recognised on accrual basis to the extent the ultimate realisation is reasonably certain.
o) Provisions and Contingent Liabilities
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance Sheet date.
If the effect of the time value of money is material, provisions are discounted to reflect its present value using a current pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made.
The Company does not recognise a contingent liability but discloses its existence in the financial statements. Contingent assets are neither recognised nor disclosed in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.
Measurement and disclosure of the employee share-based payment plans is done in accordance with Ind AS 102, Share-Based Payment.
Equity Settled Transactions
The Ultimate Holding Company (âHuhtamaki Oyjâ) offers Share based compensation program for senior executives of the Company. Shares mentioned above are issued by Huhtamaki Oyj and the cost of such shares is not recharged to the Company. However, the Company recognises these share-based payment transactions of Huhtamaki Oyj in accordance with the requirement of paragraph 43 A and 43 B of Ind AS 102 Share Based Payments. As required under para 43 B of Ind AS 102, since the Company receives the services of the employees to whom the shares have been granted by Huhtamaki Oyj and the Company has no obligation to settle the same, the Company accounts for these services as an equity settled share-based payment transaction.
Cash-settled transactions
The cost of cash-settled transactions is measured initially at fair value at the grant date. The fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The liability is remeasured to fair value at each reporting date upto, and including the settlement date, with changes in fair value recognised in employee benefits expense.
Research expenditure of a revenue nature is charged off in the year in which it is incurred and expenditure of a capital nature is capitalised to fixed assets.
Development expenditures on an individual project are recognised as an intangible asset when the Company can demonstrate:
⢠The technical feasibility of completing the intangible asset so that the asset will be available for use or sale.
⢠Its intention to complete and its ability and intention to use or sell the asset.
⢠How the asset will generate future economic benefits.
⢠The availability of resources to complete the asset.
⢠The ability to measure reliably the expenditure during development.
Basic EPS is computed by dividing the net profit for the period attributable to the equity shareholders by the weighted average number of equity shares outstanding during the period. Diluted EPS is computed using the weighted average number of equity and dilutive equity equivalent shares outstanding during the period, except where the results would be anti-dilutive.
Cash and cash equivalents are short-term (three months or less from the date of acquisition), highly liquid investments that are readily convertible into cash and which are subject to an insignificant risk of changes in value.
Business Combinations are accounted for using Ind AS 103 Business Combination. Acquisitions of businesses are accounted for using the acquisition method unless the transaction is between entities under common control. Under acquisition method, acquisition related costs are recognised in the Statement of Profit and Loss as incurred. The acquireeâs identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition are recognised at their respective fair value at the acquisition date, except certain assets and liabilities required to be measured as per applicable standards. Purchase consideration in excess of the Companyâs interest in the acquireeâs net fair value of identifiable assets, liabilities and contingent liabilities is recognised as goodwill. Excess of the Companyâs interest in the net fair value of the acquireeâs identifiable assets, liabilities and contingent liabilities over the purchase consideration is recognised, after reassessment of fair value of net assets acquired, is recognised as Capital reserve.
Business Combinations arising from transfer of interests in entities that are under common control are accounted using pooling of interest method wherein, assets and liabilities of the combining entities are reflected at their carrying value, no adjustment are made to reflect fair values, or recognise any new assets or liabilities. The identity of the reserves is preserved and appears in the financial statements of the transferee in the same form in which they appeared in the financial statements of the transferor.
Borrowing costs, general or specific, that are directly attributable to the acquisition or construction of qualifying assets is capitalised as part of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to the Statement of Profit and Loss.
The Company determines the amount of borrowing costs eligible for capitalisation as the actual borrowing costs incurred on that borrowing during the year less any interest income earned on temporary investment of specific borrowings pending their expenditure on qualifying assets, to the extent that an entity borrows funds specifically for the purpose of obtaining a qualifying asset. In case if the Company borrows generally and uses the funds for obtaining a qualifying asset, borrowing costs eligible for capitalisation are determined by applying a capitalisation rate to the expenditures on that asset.
Borrowing cost includes exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the finance cost.
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM).
The CODM assesses the financial performance (i.e. Net profit after tax) and position of the Company and makes strategic decisions. The Company has only one business segment, which is consumer packaging and company generates revenue majorly from domestic sales. Accordingly, the amounts appearing in these financial statements relate to this one business segment. The accounting policies adopted for segment reporting are in line with the accounting policies of the Company.
The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Managing Director of the Company.
Non-current assets are classified as âheld for saleâ when all the following criteria are met:
a) decision has been made to sell,
b) the assets are available for immediate sale in its present condition,
c) the assets are being actively marketed and
d) sale has been agreed or is expected to be concluded within 12 months of the Balance Sheet date.
Subsequently, such non-current assets classified as âheld for saleâ are measured at the lower of its carrying value and fair value less costs to sell. Non-current assets held for sale are not depreciated or amortised.
Dec 31, 2018
1. Significant accounting policies:
a) Property, plant and equipment
- All items of property, plant and equipment are stated at historical cost less accumulated depreciation & impairment losses, if any. Cost of property, plant and equipments comprises of purchase price, non-refundable taxes and duties and any directly attributable cost of bringing each asset to its working condition for the intended use. Financing costs relating to borrowed funds attributable to the acquisition of qualifying property, plant and equipments i.e. asset that necessarily takes a substantial period of time to get ready for its intended use or sale, upto the completion of construction or acquisition of such property, plant and equipments are included in the gross book value of the asset.
- Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that incremental future economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
- Gains or losses arising on retirement or disposal of property, plant and equipment are recognised in the Statement of Profit and Loss.
- Capital work-in-progress includes the cost of property, plant and equipments that are not ready to use at the balance sheet date.
b) Intangibles
- Intangible Assets acquired seperately are measured on intial recognition at cost. Following, intial recognition, intangible assets with finite lives are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred.
- The useful lives of intangible assets are assessed as either finite or indefinite.
- Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. 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, and are treated as changes in accounting estimates.
- Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level.
The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.
- Gains or losses arising on retirement or disposal of Intangible assets are recognised in the Statement of Profit and Loss.
c) Depreciation and amortisation
Property, plant and equipments:
Buildings are depreciated on written down value method as per the useful life prescribed in Schedule II to the Companies Act, 2013, which coincide with management estimate of useful life. Other property, plant and equipments are depreciated on straight line method as per the useful life prescribed in Schedule II to the Companies Act, 2013 except those specified below.
Following assets are depreciated at the rates different from those prescribed in Schedule II to the Companies Act, 2013 based on technical evaluation of estimated useful lives done by the management.
Depreciation on additions/deletions to property, plant and equipments is provided prorata from the month of addition/till the month of deletion.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively.
Leasehold Land - Premium paid for acquisition of leasehold land is amortised over the primary period of lease, maximum being 99 years.
Intangible Assets:
- ERP software is amortised over a period of 60 months commencing from the month in which software is put to use.
- Specialised software is amortised over a period of 36 months commencing from the month in which such expenditure is incurred.
- Corporate club membership fees paid are amortised over the period of use, viz. 10 years.
- Non-compete fees paid are amortised over the period of restriction, viz. 5 years.
- Customer List is amortised over a period of 7 years.
- Goodwill is not amortised but is tested for impairment annually.
d) Financial instruments
Financial assets:
Financial assets are recognised when the Company becomes a party to the contractual provisions of the instrument.
On initial recognition, a financial asset is recognised at fair value, in case of Financial assets which are recognised at Fair Value Through Profit and Loss (FVTPL), its transaction cost are recognised in the statement of profit and loss.
In other cases, the transaction cost are attributed to the acquisition value of the financial asset.
Subsequent measurement:
For purposes of subsequent measurement, financial assets are classified in:
- Financial asset at amortised cost
- Financial asset Fair Value Through Profit and Loss (FVTPL)
- Financial asset at Fair Value Through Other Comprehensive Income (FVTOCI)
Financial assets are not reclassified subsequent to their recognition, except if and in the period the Company changes its business model for managing financial assets.
Financial asset at amortised cost:
An instrument is measured at the amortised cost if (i) the asset is held within a business model whose objective is to hold assets for collecting contractual cash flows; and (ii) contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the Effective Interest Rate (EIR).
The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss. This category generally applies to trade and other receivables.
Financial asset (Debt Instruments) at fair value through profit or loss:
FVTPL is a residual category for debt instruments.
Any debt instrument, which does not meet the criteria for categorisation as at amortised cost or as FVTOCI, is classified as at FVTPL.
Debt instruments included within the FVTPL category are measured at fair value with all changes recognised in the Profit and Loss.
De-recognition:
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the company''s statement of financial position) when the right to receive cash flows from the asset is transferred or expired.
Impairment of financial assets:
Expected Credit Losses (ECL) are recognised for all financial assets subsequent to initial recognition other than financials assets in FVTPL category. ECL 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 entity expects to receive (i.e. all cash shortfalls), discounted at the original EIR.
For financial assets other than trade receivables, as per Ind AS 109, the Company recognises 12 months expected credit losses for all originated or acquired financial assets if at the reporting date the credit risk of the financial asset has not increased significantly since its initial recognition. The expected credit losses are measured as lifetime expected credit losses if the credit risk on financial asset increases significantly since its initial recognition. The Company''s trade receivables do not contain significant financing component and loss allowance on trade receivables is measured at an amount equal to life time expected losses i.e. expected cash shortfall.
The impairment losses and reversals are recognised in Statement of Profit and Loss.
Financial liabilities:
Initial recognition and measurement
Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument. Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
Subsequent measurement
Financial liabilities are subsequently measured at amortised cost using the EIR method. Financial liabilities carried at fair value through profit or loss are measured at fair value with all changes in fair value recognised in the Statement of Profit and Loss.
Loans and Borrowings
This is the category most relevant to the Company.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
e) Derivative financial instruments
The Company uses derivative financial instruments such as forward currency contracts to hedge its foreign currency risks. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instruments, and if so, the nature of the item being hedged and the type of hedge relationship designated.
The Company enters into certain derivative contracts to hedge risks which are not designated as hedges.
Such contracts are accounted for at fair value through profit or loss.
f) Fair value measurement
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.
The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability or
- In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
- Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
- Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
g) Foreign Currency Transactions
- The Company''s financial statements are presented in INR which is also the functional currency.
Transactions denominated in foreign currency are recorded at the exchange rate prevailing on the date of transactions. Exchange differences arising on foreign exchange transactions settled during the year are recognised in the statement of profit and loss of the year.
- Monetary assets and liabilities in foreign currency, which are outstanding as at the year end are translated at the year end at the closing exchange rate and the resultant exchange differences are recognised in the statement of profit and loss.
- Non-monetary foreign currency items are carried at cost, determined using exchange rate at the date of intial recognition
h) Inventories
- Inventories are valued at lower of cost and net realisable value, Cost is determined on Weighted Average Method.
- Raw materials, Components, Stores and Spares held for use in production of Inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost.
- The cost of manufactured inventories and work-in-process is the direct cost of manufacture plus appropriate allocated overheads.
- The net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and estimated costs necessary to make the sale.
i) Revenue Recognition
Revenue is recognised to the extent it is probable that the economic benefits will flow to the Company and revenue can be reliably measured. It is recognised when significant risks and rewards of ownership of goods have passed to the buyer as per the terms of the contract, there is no continuing managerial involvement with the goods. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government. Sales are net of returns & discounts.
Revenue from services is recognised on the basis of contractual arrangements as and when services are rendered.
Dividend income is recognised when the Company''s right to receive the payment is established by the reporting date.
Interest income is recognised using the Effective Interest Rate (EIR) method.
j) Retirement and Other Employee benefits
(i) Short-term employee benefits:
All short-term employee benefits such as salaries, incentives, medical benefits which are expected to be settled wholly within 12 months after the end of the period in which the employee renders the related services which entitles him to avail such benefits are recognised on an undiscounted basis and charged to the statement of profit and loss account.
(ii) Retirement Benefits:
a) Defined Contribution Plans
The Company has defined contribution plans for post-employment benefits in the form of provident fund which is administered through Government of India. Provident fund is classified as defined contribution plans as the Company has no further obligation beyond making the contributions.
The Company''s contributions to defined contribution plans are charged to the statement of profit and loss as and when employee renders related service.
b) Defined Benefit Plans
The Company''s gratuity benefit scheme is a defined benefit plan. The Company''s net obligation in respect of the defined benefit schemes are calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit are discounted to determine its present value, and the fair value of any plan assets is deducted.
The present value of the obligation under such defined benefit plans are determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plans are based on the market yields on Government securities as at the balance sheet date.
Re-measurements, comprising of actuarial gains and losses and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding charge or credit to OCI in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset.
c) Other Long-Term Employment Benefits
Compensated absences which are not expected to occur within 12 months after the end of the period in which the employee renders the related services are considered as long-term employee benefit for measurement purposes and are determined on the basis of valuations, as at balance sheet date, carried out by an independent actuary using Projected Unit Credit Method. Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial assumptions and are recognised immediately in the Profit and Loss Account. The Company presents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
Long service awards is other long-term benefits scheme. The present value of the obligation under this long-term benefit is determined based on acturial valuation using Projected Unit Credit Method.
k) Taxation
Current income tax:
Income tax expense for the year comprises of current tax and deferred tax. It is recognised in the Statement of Profit and Loss except to the extent it relates an item which is recognised directly in equity or in other comprehensive income. Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax:
Deferred tax is recognised in respect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes.
Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. 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.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities; and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority.
l) Leases
The Company evaluates whether an arrangement is (or contains) a lease based on the substance of the arrangement at the inception of the lease. An arrangement which is dependent on the use of a specific asset or assets and conveys a right to use the asset or assets, even if it is not explicitly specified in an arrangement is (or contains) a lease.
Leases in which a substantial portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments and receipts under such leases are recognised to the Statement of Profit and Loss on a straight-line basis over the term of the lease unless the lease payments to the lessor are structured to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases, in which case the same are recognised as an expense in line with the contractual term.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards incidental to ownership to the lessee.
m) Impairment of non-financial 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 asset''s net selling price 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 risks specific to the assets.
Net selling price is the amount obtainable from the sale of an asset in an arm''s length transaction between knowledgeable, willing parties, less the costs of disposal. After impairment, depreciation is provided on their revised carrying amount of the asset over its remaining useful life.
Impairment losses are recognised in the statement of profit and loss.
n) Government Grants and Subsidies
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed.
When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.
When the Company receives grants of non-monetary assets, the asset and the grant are recorded at fair value amounts and released to profit or loss over the expected useful life in a pattern of consumption of the benefit of the underlying asset i.e. by equal annual instalments.
o) Provisions and Contingent Liabilities
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance Sheet date.
If the effect of the time value of money is material, provisions are discounted to reflect its present value using a current pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made.
p) Share-based payments
Measurement and disclosure of the employee share based payment plans is done in accordance with Ind AS 102, Share-Based Payment.
Equity Settled Transactions:
The Ultimate Holding Company (âHuhtamaki Oyj'') offers Share based compensation programme for senior executives of the Company.
Shares mentioned above are issued by Huhtamaki Oyj and the cost of such shares is not recharged to the Company. However, the Company recognises these share based payment transactions of Huhtamaki Oyj in accordance with the requirement of paragraph 43 A and 43 B of Ind AS 102 Share Based Payments. As required under para 43 B of Ind AS 102, since the Company receives the services of the employees to whom the shares have been granted by Huhtamaki Oyj and the Company has no obligation to settle the same, the Company accounts for these services as an equity settled share based payment transaction.
Cash-settled transactions:
The cost of cash-settled transactions is measured initially at fair value at the grant date. The fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The liability is remeasured to fair value at each reporting date upto, and including the settlement date, with changes in fair value recognised in employee benefits expense.
q) Research Expenditure
Research expenditure of a revenue nature is charged off in the year in which it is incurred and expenditure of a capital nature is capitalised to fixed assets.
Development expenditures on an individual project are recognised as an intangible asset when the Company can demonstrate:
- The technical feasibility of completing the intangible asset so that the asset will be available for use or sale.
- Its intention to complete and its ability and intention to use or sell the asset.
- How the asset will generate future economic benefits.
- The availability of resources to complete the asset.
- The ability to measure reliably the expenditure during development.
r) Earnings Per Share ( EPS)
Basic EPS is computed by dividing the net profit for the period attributable to the equity shareholders by the weighted average number of equity shares outstanding during the period. Diluted EPS is computed using the weighted average number of equity and dilutive equity equivalent shares outstanding during the period, except where the results would be anti dilutive.
s) Cash and Cash Equivalents
Cash and cash equivalents are short-term (three months or less from the date of acquisition), highly liquid investments that are readily convertible into cash and which are subject to an insignificant risk of changes in value.
t) Business Combinations
Business Combinations are accounted for using Ind AS 103 Business Combination. Acquisitions of businesses are accounted for using the acquisition method unless the transaction is between entities under common control. Acquisition related costs are recognised in the statement of profit and loss as incurred. The acquiree''s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition are recognised at their respective fair value at the acquisition date, except certain assets and liabilities required to be measured as per applicable standards. Purchase consideration in excess of the Company''s interest in the acquiree''s net fair value of identifiable assets, liabilities and contingent liabilities is recognised as goodwill. Excess of the Company''s interest in the net fair value of the acquiree''s identifiable assets, liabilities and contingent liabilities over the purchase consideration is recognised, after reassessment of fair value of net assets acquired, is recognised as Capital reserve.
Business Combinations arising from transfer of interests in entities that are under common control are accounted using pooling of interest method wherein, assets and liabilities of the combining entities are reflected at their carrying value, no adjustment are made to reflect fair values, or recognise any new assets or liabilities.
The identity of the reserves is preserved and appears in the financial statements of the transferee in the same form in which they appeared in the financial statements of the transferor.
Dec 31, 2016
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES 1. Basis of Preparation of Financial Statements
The financial statements have been prepared in accordance with generally accepted accounting principles in India, under the historical cost convention (with the exception of freehold land which has been revalued and derivative financial instruments which have been measured at fair value), on the accrual basis of accounting and 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 accounting policies have been consistently followed by the company.
2. Use of Estimates
The financial statements are prepared in accordance with generally accepted accounting principles (GAAP) in India which requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent liabilities. The estimates and assumptions used in the accompanying financial statements are based upon management''s evaluation of the relevant facts and circumstances as of the date of the financial statements which in management''s opinion are prudent and reasonable. Actual results may differ from the estimates and assumptions used in preparing the accompanying financial statements. Any revision to accounting estimates is recognized prospectively in current and future periods.
3. Fixed Assets
- Fixed assets are stated at cost (or revalued amounts as the case may be) less accumulated depreciation & impairment losses, if any. Cost of fixed assets comprises of purchase price, duties, levies and any directly attributable cost of bringing each asset to its working condition for the intended use.
- Financing costs relating to borrowed funds attributable to the acquisition of qualifying fixed assets upto the completion of construction or acquisition of such fixed assets are included in the gross book value of the asset.
- Cenvat credit availed for excise duty and countervailing duty availed for customs duty payments made on fixed assets is reduced from the cost of fixed assets.
- Machinery spares which are specific to a particular item of fixed asset and whose use is expected to be irregular are capitalized and depreciated over the residual useful life of the asset.
- Capital work-in-progress includes the cost of fixed assets that are not ready to use at the balance sheet date.
4. Intangibles
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. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred.
5. Depreciation
a. Tangible Assets
Buildings are depreciated on written down value method as per the useful life prescribed in Schedule II to the Companies Act, 2013, which coincide with management estimate of useful life. Other fixed assets are depreciated on straight line method as per the useful life prescribed in Schedule II to the Companies Act, 2013 except those specified below.
Following assets are depreciated at the rates different from those prescribed in Schedule II to the Companies Act, 2013 based on technical evaluation of estimated useful lives done by the management.
Leasehold Land - Premium paid for acquisition of leasehold land is amortized over the period of lease.
b. Intangible Assets
ERP software is amortized over a period of 60 months commencing from the month in which software is put to use.
Specialized software is amortized over a period of 36 months commencing from the month in which such expenditure is incurred. All up gradations/enhancements are generally charged to profit and loss account, unless they bring significant additional benefits.
Goodwill is amortized over a period of 10 years
Corporate club membership fees paid are amortized over the period of use, viz 10 years.
Non compete fees paid are amortized over the period of restriction, viz 5 years.
6. Foreign Currency Transactions
- Transactions denominated in foreign currency are recorded at the exchange rate prevailing on the date of transactions. Exchange differences arising on foreign exchange transactions settled during the year are recognized in the profit and loss account of the year.
- Monetary assets and liabilities in foreign currency, which are outstanding as at the year-end are translated at the year end at the closing exchange rate and the resultant exchange differences are recognized in the profit and loss account.
- Non-monetary foreign currency items are carried at cost.
- The premium or discount on forward exchange contracts covered by AS-11 The Effects of Changes in Foreign Exchange Rates is recognized over the period of the contracts in the profit and loss account. Exchange gain or loss on forward exchange contracts covered by AS-11 The Effects of Changes in Foreign Exchange Rates is recognized in the profit and loss account.
- In compliance with the Institute of Chartered Accountants of India (ICAI) announcement dated 29th March, 2008 on accounting for derivatives, the mark to market valuation loss on forward contracts entered into, to cover the forecast transactions is charged to profit and loss account. Gain on Mark to Market valuation is ignored.
- Operations of foreign branch are classified as "Integral foreign operationsâ. Revenue and expenses are translated at the monthly average rate. Monetary assets and liabilities at the yearend are translated at the yearend exchange rates. Non-monetary items comprising of fixed assets are translated using exchange rate at the date of transaction. The net exchange difference resulting from the translations of items in the financial statements of the foreign branch are recognized as income/expense for the year.
7. Inventories
- Inventories are valued at lower of cost and net realizable value, Cost is determined on Weighted Average Method.
- Raw materials, Components, Stores and Spares held for use in production of Inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost.
- The cost of manufactured inventories and Work-In-Process is the direct cost of manufacture plus appropriate allocated overheads & excise duty wherever applicable.
- The cost of loose tools is amortized over its estimated useful life.
8. Revenue Recognition
- Revenue is recognized to the extent it is probable that the economic benefits will flow to the Company and revenue can be reliably measured. It is recognized when significant risks and rewards of ownership of goods have passed to the buyer.
- Gross sales are inclusive of Excise Duty.
- Sales are net of returns & discounts.
- Dividend income is recognized when the right to receive dividend is unconditional at the balance sheet date.
- Interest on investments is accounted on a time proportion basis taking into account the amounts invested and the rate of interest.
9. Retirement Benefits
a. Defined Contribution Plans:
Contributions payable to the recognized provident fund, which is a defined contribution plan, are charged to the profit and loss account as incurred.
b. Defined Benefit Plans:
The Company''s gratuity benefit scheme and Long service awards are defined benefit plan. The Company''s net obligation in respect of the defined benefit schemes are calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit are discounted to determine its present value, and the fair value of any plan assets is deducted.
The present value of the obligation under such defined benefit plans are determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plans are based on the market yields on Government securities as at the balance sheet date.
Actuarial gains and losses are recognized immediately in the statement of profit and loss.
c. Other Long Term Employment Benefits :
Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are considered as long-term employee benefit for measurement purposes and are determined on the basis of valuations, as at balance sheet date, carried out by an independent actuary using Projected Unit Credit Method. Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial assumptions and are recognized immediately in the Profit and Loss Account. The company presents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
Pension is other long term benefits scheme. The present value of the obligation under this long term benefit is determined based on actuarial valuation using Projected Unit Credit Method.
10. Investments
- Investments, which are readily realizable and intended to be held for not more than one year from the date on which such Investments are made, are classified as current Investments. All other Investments are classified as Long Term Investments.
- Long term investments are valued at cost and an appropriate provision is made for diminution, which is other than temporary, in their value.
- Current investments are valued at cost or fair value, whichever is lower.
11. Research Expenditure
Research expenditure of a revenue nature is charged off in the year in which it is incurred and expenditure of a capital nature is capitalized to fixed assets.
12. Taxation
Income tax expense comprises current income tax (i.e. amount of tax for the period determined in accordance with the income tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period). The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognized only if there is a virtual certainty of realization of such assets. Deferred tax assets are reviewed at each balance sheet date and written down or written up to reflect the amount that is reasonably/virtually certain (as the case may be) to be realized.
Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. The company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the 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 in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-tax Act, 1961, the said asset is created by way of credit to the statement of profit and loss and shown as âMAT Credit Entitlement.â The company reviews the âMAT Credit Entitlementâ asset at each reporting date and writes down the asset to the extent the company does not have convincing evidence that it will pay normal tax during the specified period.
13. Leases
Operating Leases - Where the Company is lessee/less or.
Lease payments / receipts under operating leases are recognized as an expense / income in the statement of profit and loss account on a straight line basis over the lease term.
14. 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 asset''s net selling price 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 risks specific to the assets. After impairment, depreciation is provided on their revised carrying amount of the asset over its remaining useful life.
15. Government Grants and Subsidies
Grants and Subsidies from the Governments are recognized when there is a reasonable assurance that (i) the company will comply with the conditions attached to them, and (ii) the grants / subsidy will be received.
Government Grants of the nature of Promoter Contribution are credited to Capital Reserve and treated as part of the Shareholders Funds.
16. Provisions and Contingent Liabilities
The Company creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources would be required to settle the obligation, the provision is reversed.
Contingent assets are not recognized in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognized in the period in which the change occurs.
17. Stock Appreciation Rights (SAR)
The Cost of Cash-settled Stock Appreciation Rights (SARs) is measured initially using intrinsic value method at the grant date taking into account the terms and conditions upon which the instruments were granted. This intrinsic value is amortized on a straight-line basis over the vesting period with recognition of corresponding liability. This liability is premeasured at each Balance Sheet date up to and including the settlement date with changes in intrinsic value recognized in Profit and Loss Account.
The SARs that do not vest because of failure to satisfy vesting condition are reversed by a credit to employee compensation expense, equal to the amortized cost in respect of the lapsed portion.
18. Earnings Per Share ( EPS)
Basic EPS is computed by dividing the net profit for the period attributable to the equity shareholders by the weighted average number of equity shares outstanding during the period. Diluted EPS is computed using the weighted average number of equity and dilutive equity equivalent shares outstanding during the period, except where the results would be anti dilutive.
Dec 31, 2014
1. Basis of Preparation of Financial Statements
The financial statements have been prepared under the historical cost
convention (with the exception of freehold land which has been revalued
and derivative financial instruments which have been measured at fair
value),on the accrual basis of accounting and comply with the Companies
(Accounting Standards) Rules 2006 (as amended) issued by the Central
Government and relevant provisions of the Companies Act, 1956 to the
extent applicable, read with General Circular 08/2014 dated 4 April
2014 issued by Ministry of Corporate Affairs. The accounting policies
have been consistently followed by the company.
2. Use of Estimates
The financial statements are prepared in accordance with generally
accepted accounting principles (GAAP) in India which requires
management to make estimates and assumptions that affect the reported
amounts of assets, liabilities and disclosure of contingent
liabilities. The estimates and assumptions used in the accompanying
financial statements are based upon management''s evaluation of the
relevant facts and circumstances as of the date of the financial
statements which in management''s opinion are prudent and reasonable.
Actual results may differ from the estimates and assumptions used in
preparing the accompanying financial statements. Any revision to
accounting estimates is recognized prospectively in current and future
periods.
3. Fixed Assets
* Fixed assets are stated at cost (or revalued amounts as the case may
be) less accumulated depreciation & impairment losses,if any. Cost of
fixed assets comprises of purchase price, duties, levies and any
directly attributable cost of bringing each asset to its working
condition for the intended use.
* Financing costs relating to borrowed funds attributable to the
acquisition of qualifying fixed assets upto the completion of
construction or acquisition of such fixed assets are included in the
gross book value of the asset.
* Cenvat credit availed for excise duty and countervailing duty availed
for customs duty payments made on fixed assets is reduced from the cost
of fixed assets.
* Machinery spares which are specific to a particular item of fixed
asset and whose use is expected to be irregular are capitalised and
depreciated over the residual useful life of the asset.
* Capital work-in-progress includes the cost of fixed assets that are
not ready to use at the balance sheet date.
4. Intangibles
Intangible Assets acquired seperately are measured on intial
recognition at cost. Following, intial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
5. Depreciation
a. Tangible Assets
Buildings are depreciated on written down value method at the rates
prescribed in Schedule XIV to the Companies Act, 1956, which coincide
with management estimate of useful life except those specified below.
Other fixed assets are depreciated on straight line method at the rates
prescribed in Schedule XIV to the Companies Act, 1956 except those
specified below.
Following assets are depreciated at the rates higher than those
prescribed in Schedule XIV to the Companies Act, 1956 as in
management''s judgement, their estimated useful lives are shorter than
those prescribed under Schedule XIV to the Companies Act, 1956.
Assets Method of Depreciation Rate
Computers Straight Line Method 25.00%
Motor Vehicles Straight Line Method 19.00%
General Furniture Straight Line Method 9.50%
Office and Other Equipments Straight Line Method 19.00%
Cellphones and Photocopiers Straight Line Method 31.67%
Airconditioning Equipment
used in manufacturing process Straight Line Method 10.34%
Administrative Buildings Written Down Value Method 10.00%
Electrical Fittings Straight Line Method 10.34%
Depreciation on additions/deletions to fixed assets is provided prorata
from the date of addition/till the date of deletion.
Leasehold Land - Premium paid for acquisition of leasehold land is
amortised over the period of lease, viz 99 years.
b. Intangible Assets
ERP software is amortised over a period of 60 months commencing from
the month in which software is put to use. Specialised software is
amortised over a period of 36 months commencing from the month in which
such expenditure is incurred. All upgradations/enhancements are
generally charged to profit and loss account,unless they bring
significant additional benefits.
Corporate club membership fees paid are amortised over the period of
use, viz 10 years.
Non compete fees paid are amortised over the period of restriction, viz
3 years.
6. Foreign Currency Transactions
* Transactions denominated in foreign currency are recorded at the
exchange rate prevailing on the date of transactions. Exchange
differences arising on foreign exchange transactions settled during the
year are recognized in the statement of profit and loss of the year.
* Monetary assets and liabilities in foreign currency, which are
outstanding as at the year-end are translated at the year end at the
closing exchange rate and the resultant exchange differences are
recognised in the statement of profit and loss.
* Non-monetary foreign currency items are carried at cost.
* The premium or discount on forward exchange contracts covered by
AS-11 The Effects of Changes in Foreign Exchange Rates is recognised
over the period of the contracts in the statement of profit and loss.
Exchange gain or loss on forward exchange contracts covered by AS-11
The Effects of Changes in Foreign Exchange Rates is recognised in the
statement of profit and loss.
* In compliance with the Institute of Chartered Accountants of India
(ICAI) announcement dated 29th March,2008 on accounting for
derivatives, the mark to market valuation loss on forward contracts
entered into, to cover the forecast transactions is charged to the
statement of profit and loss. Gain on Mark to Market valuation is
ignored.
7. Inventories
* Inventories are valued at lower of cost and net realisable value,
Cost is determined on Weighted Average Method.
* Raw materials,Components,Stores and Spares held for use in production
of Inventories are not written down below cost if the finished products
in which they will be incorporated are expected to be sold at or above
cost.
* The cost of manufactured inventories and Work-In-Process is the
direct cost of manufacture plus appropriate allocated overheads &
excise duty wherever applicable.
* The cost of bought out inventory is computed using the Weighted
Average Method.
* The cost of loose tools is amortised over its estimated useful life.
8. Revenue Recognition
* Revenue is recognised to the extent it is probable that the economic
benefits will flow to the Company and revenue can be reliably measured.
It is recognised when significant risks and rewards of ownership of
goods have passed to the buyer.
* Gross sales are inclusive of Excise Duty.
* Sales are net of returns & discounts.
* Dividend income is recognised when the right to receive dividend is
unconditional at the balance sheet date.
* Interest on investments is accounted on a time proportion basis
taking into account the amounts invested and the rate of interest.
9. Retirements Benefits
a. Defined Contribution Plans:
Contributions payable to the recognised provident fund, which is a
defined contribution plan, are charged to the statement of profit and
loss as incurred.
b. Defined Benefit Plans :
The Company''s gratuity benefit scheme, Pension Scheme and Long service
awards are defined benefit plans. The Company''s net obligation in
respect of the defined benefit schemes are calculated by estimating the
amount of future benefit that employees have earned in return for their
service in the current and prior periods; that benefit are discounted
to determine its present value, and the fair value of any plan assets
is deducted.
The present value of the obligation under such defined benefit plans is
determined based on actuarial valuation using the Projected Unit Credit
Method, which recognises each period of service as giving rise to
additional unit of employee benefit entitlement and measures each unit
separately to build up the final obligation.
The obligation is measured at the present value of the estimated future
cash flows. The discount rates used for determining the present value
of the obligation under defined benefit plans are based on the market
yields on Government securities as at the balance sheet date.
When the calculation results in a benefit to the Company, the
recognized asset is limited to the lower of the net total of the
present value of the defined benefit obligation at the balance sheet
date minus any past service cost minus fair value of plan assets as at
balance sheet date and the present value of any future refunds from the
plan or reductions in future contributions to the plan.
Actuarial gains and losses are recognised immediately in the statement
of profit and loss.
c. Other Long Term Employment Benefits :
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related services are determined on the basis of valuations, as at
balance sheet date, carried out by an independent actuary using
Projected Unit Credit Method. Actuarial gains and losses comprise
experience adjustments and the effects of changes in actuarial
assumptions and are recognised immediately in the statement of Profit
and Loss.
d. Other Short Term Employment Benefits:
Company provides short term benefit of sick leave to its employees with
certain accumulation provisions and same being short term and expected
to be utilised within twelve months are provided on undiscounted basis.
10. Investments
* Investments, which are readily realisable and intended to be held for
not more than one year from the date on which such Investments are
made, are classified as current Investments. All other Investments are
classified as Long Term Investments.
* Long term investments are valued at cost and an appropriate provision
is made for diminution, which is other than temporary, in their value.
* Current investments are valued at cost or market value, whichever is
lower.
11. Research Expenditure
Research expenditure of a revenue nature is charged off in the year in
which it is incurred and expenditure of a capital nature is capitalised
to fixed assets.
12. Taxation
Income tax expense comprises current income tax (i.e. amount of tax for
the period determined in accordance with the income tax law) and
deferred tax charge or credit (reflecting the tax effects of timing
differences between accounting income and taxable income for the
period). The deferred tax charge or credit and the corresponding
deferred tax liabilities or assets are recognized using the tax rates
and tax laws that have been enacted or substantively enacted by the
balance sheet date. Deferred tax assets are recognized only to the
extent there is reasonable certainty that the assets can be realized in
future; however, where there is unabsorbed depreciation or carried
forward loss under taxation laws, deferred tax assets are recognized
only if there is a virtual certainty of realization of such assets.
Deferred tax assets are reviewed at each balance sheet date and written
down or written up to reflect the amount that is reasonably/virtually
certain (as the case may be) to be realized.
Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the 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 in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as "MAT Credit Entitlement." The
company reviews the "MAT Credit Entitlement" asset at each reporting
date and writes down the asset to the extent the company does not have
convincing evidence that it will pay normal tax during the specified
period.
13. Leases
Operating Leases
Lease payments under operating leases are recognised as an expense in
the statement of profit and loss on a straight line basis over the
lease term.
14. 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 asset''s net selling price 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 risks
specific to the assets. After impairment, depreciation is provided on
their revised carrying amount of the asset over its remaining useful
life.
15. Government Grants and Subsidies
Grants and Subsidies from the Governments are recognised when there is
a reasonable assurance that (i) the company will comply with the
conditions attached to them, and (ii) the grants / subsidy will be
received.
Government Grants of the nature of Promoter Contribution are credited
to Capital Reserve and treated as part of the Shareholders Funds.
16. provisions and Contingent Liabilities
The Company creates a provision when there is present obligation as a
result of a past event that probably requires an outflow of resources
and a reliable estimate can be made of the amount of the obligation. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. When there is a possible obligation or
a present obligation in respect of which the likelihood of outflow of
resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to
reflect the current best estimate. If it is no longer probable that an
outflow of resources would be required to settle the obligation, the
provision is reversed.
Contingent assets are not recognized in the financial statements.
However, contingent assets are assessed continually and if it is
virtually certain that an inflow of economic benefits will arise, the
asset and related income are recognized in the period in which the
change occurs.
17. Earnings per share (Eps)
Basic EPS is computed by dividing the net profit for the period
attributable to the equity shareholders by the weighted average number
of equity shares outstanding during the period. Diluted EPS is computed
using the weighted average number of equity and dilutive equity
equivalent shares outstanding during the period, except where the
results would be anti dilutive.
Dec 31, 2013
1. Basis of Preparation of Financial Statements
The financial statements have been prepared under the historical cost
convention (with the exception of freehold land which has been revalued
and derivative financial instruments which have been measured at fair
value),on the accrual basis of accounting and comply with the Companies
(Accounting Standards) Rules 2006 (as amended) issued by the Central
Government and relevant provisions of the Companies Act, 1956 to the
extent applicable. The accounting policies have been consistently
followed by the company.
2. Use of Estimates
The financial statements are prepared in accordance with generally
accepted accounting principles (GAAP) in India which requires
management to make estimates and assumptions that affect the reported
amounts of assets, liabilities and disclosure of contingent
liabilities. The estimates and assumptions used in the accompanying
financial statements are based upon management''s evaluation of the
relevant facts and circumstances as of the date of the financial
statements which in management''s opinion are prudent and reasonable.
Actual results may differ from the estimates and assumptions used in
preparing the accompanying financial statements. Any revision to
accounting estimates is recognized prospectively in current and future
periods.
3. Fixed Assets
- Fixed assets are stated at cost (or revalued amounts as the case may
be) less accumulated depreciation & impairment losses, if any. Cost of
fixed assets comprises of purchase price, duties, levies and any directly
attributable cost of bringing each asset to its working condition for
the intended use.
- Financing costs relating to borrowed funds attributable to the
acquisition of qualifying fixed assets up to the completion of
construction or acquisition of such fixed assets are included in the
gross book value of the asset.
- Canvas credit availed for excise duty and countervailing duty availed
for customs duty payments made on fixed assets is reduced from the
cost of fixed assets.
- Machinery spares which are specific to a particular item of fixed
asset and whose use is expected to be irregular are capitalised and
depreciated over the residual useful life of the asset.
- Capital work-in-progress includes the cost of fixed assets that are
not ready to use at the balance sheet date.
4. Depreciation
a. Tangible Assets
Buildings are depreciated on written down value method at the rates
prescribed in Schedule XIV to the Companies Act, 1956, which coincide
with management estimate of useful life except those specified below.
Other fixed assets are depreciated on straight line method at the
rates prescribed in Schedule XIV to the Companies Act, 1956 except
those specified below.
Following assets are depreciated at the rates higher than those
prescribed in Schedule XIV to the Companies Act, 1956 as in
management''s judgment, their estimated useful lives are shorter than
those prescribed under Schedule XIV to the Companies Act, 1956.
Depreciation on additions/deletions to fixed assets is provided
prorate from the date of addition/till the date of deletion.
Leasehold Land - Premium paid for acquisition of leasehold land is
amortised over the period of lease, viz 99 years.
b. Intangible Assets
ERP software is amortised over a period of 60 months commencing from
the month in which software is put to use.
Specialised software is amortised over a period of 36 months commencing
from the month in which such expenditure is incurred. All
up gradations/enhancements are generally charged to profit and loss
account, unless they bring significant additional benefits.
Corporate club membership fees paid are amortised over the period of
use, viz 10 years.
Non compete fees paid are amortised over the period of restriction, viz
3 years.
5. Foreign Currency Transactions
- Transactions denominated in foreign currency are recorded at the
exchange rate prevailing on the date of transactions. Exchange
differences arising on foreign exchange transactions settled during the
year are recognized in the profit and loss account of the year.
- Monetary assets and liabilities in foreign currency, which are
outstanding as at the year-end are translated at the year end at the
closing exchange rate and the resultant exchange differences are
recognised in the profit and loss account.
- Non-monetary foreign currency items are carried at cost.
- The premium or discount on forward exchange contracts covered by
AS-11 The Effects of Changes in Foreign Exchange Rates is recognised
over the period of the contracts in the profit and loss account.
Exchange gain or loss on forward exchange contracts covered by AS-11
The Effects of Changes in Foreign Exchange Rates is recognised in the
profit and loss account.
- In compliance with the Institute of Chartered Accountants of India
(ICAI) announcement dated 29th March,2008 on accounting for
derivatives, the mark to market valuation loss on forward contracts
entered into, to cover the forecast transactions is charged to profit
and loss account. Gain on Mark to Market valuation is ignored.
6. Inventories
- Inventories are valued at lower of cost and net realisable value.
- Raw materials, Components, Stores and Spares held for use in production
of Inventories are not written down below cost if the finished
products in which they will be incorporated are expected to be sold at
or above cost.
- The cost of manufactured inventories and Work-In-Process is the
direct cost of manufacture plus appropriate allocated overheads &
excise duty wherever applicable. Cost is determined on Weighted Average
Method.
- The cost of bought out inventory is computed using the Weighted
Average Method .
- The cost of loose tools is amortised over its estimated useful life.
7. Revenue Recognition
- Revenue is recognised to the extent it is probable that the economic
benefits will flow to the Company and revenue can be reliably
measured. It is recognised when significant risks and rewards of
ownership of goods have passed to the buyer.
- Gross sales are inclusive of Excise Duty.
- Sales are net of returns & discounts.
- Dividend income is recognised when the right to receive dividend is
unconditional at the balance sheet date.
- Interest on investments is accounted on a time proportion basis
taking into account the amounts invested and the rate of interest.
8. Retirements Benefits
a. Defined Contribution Plans:
Contributions payable to the recognised provident fund, which is a
defined contribution plan, are charged to the profit and loss account
as incurred.
b. Defined Benefit Plans :
The Company''s gratuity benefit scheme is a defined benefit plan. The
Company''s net obligation in respect of the gratuity benefit scheme is
calculated by estimating the amount of future benefit that employees
have earned in return for their service in the current and prior
periods; that benefit is discounted to determine its present value,
and the fair value of any plan assets is deducted.
The present value of the obligation under such defined benefit plans
is determined based on actuarial valuation using the Projected Unit
Credit Method, which recognises each period of service as giving rise
to additional unit of employee benefit entitlement and measures each
unit separately to build up the final obligation.
The obligation is measured at the present value of the estimated future
cash flows. The discount rates used for determining the present value
of the obligation under defined benefit plans are based on the market
yields on Government securities as at the balance sheet date.
When the calculation results in a benefit to the Company, the
recognized asset is limited to the lower of the net total of the
present value of the defined benefit obligation at the balance sheet
date minus any past service cost minus fair value of plan assets as at
balance sheet date and the present value of any future refunds from the
plan or reductions in future contributions to the plan.
Actuarial gains and losses are recognised immediately in the profit
and loss account.
c. Other Long Term Employment Benefits :
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related services are determined on the basis of valuations, as at
balance sheet date, carried out by an independent actuary using
Projected Unit Credit Method. Actuarial gains and losses comprise
experience adjustments and the effects of changes in actuarial
assumptions and are recognised immediately in the Profit and Loss
Account.
d. Other Short Term Employment Benefits:
Company provides short term benefit of sick leave to its employees
with certain accumulation provisions and same being short term and
expected to be utilised within twelve months are provided on
undiscounted basis.
9. Investments
- Investments, which are readily realisable and intended to be held for
not more than one year from the date on which such Investments are
made, are classified as current Investments. All other Investments are
classified as Long Term Investments.
- Long term investments are valued at cost and an appropriate provision
is made for diminution, which is other than temporary, in their value.
- Current investments are valued at cost or market value, whichever is
lower.
10. Research Expenditure
Research expenditure of a revenue nature is charged off in the year in
which it is incurred and expenditure of a capital nature is capitalised
to fixed assets.
11. Taxation
Income tax expense comprises current income tax (i.e. amount of tax for
the period determined in accordance with the income tax law) and
deferred tax charge or credit (reflecting the tax effects of timing
differences between accounting income and taxable income for the
period). The deferred tax charge or credit and the corresponding
deferred tax liabilities or assets are recognized using the tax rates
and tax laws that have been enacted or substantively enacted by the
balance sheet date. Deferred tax assets are recognized only to the
extent there is reasonable certainty that the assets can be realized in
future; however, where there is unabsorbed depreciation or carried
forward loss under taxation laws, deferred tax assets are recognized
only if there is a virtual certainty of realization of such assets.
Deferred tax assets are reviewed at each balance sheet date and written
down or written up to reflect the amount that is reasonably/virtually
certain (as the case may be) to be realized.
12. Leases
Operating Leases
Lease payments under operating leases are recognised as an expense in
the statement of profit and loss account on a straight line basis over
the lease term.
13. 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 asset''s net selling price 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 risks specific
to the assets. After impairment, depreciation is provided on their
revised carrying amount of the asset over its remaining useful life.
14. Government Grants and Subsidies
Grants and Subsidies from the Governments are recognised when there is
a reasonable assurance that (i) the company will comply with the
conditions attached to them, and (ii) the grants / subsidy will be
received.
Government Grants of the nature of Promoter Contribution are credited
to Capital Reserve and treated as part of the Shareholders Funds.
15. Provisions and Contingent Liabilities
The Company creates a provision when there is present obligation as a
result of a past event that probably requires an outflow of resources
and a reliable estimate can be made of the amount of the obligation. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. When there is a possible obligation
or a present obligation in respect of which the likelihood of outflow
of resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to
reflect the current best estimate. If it is no longer probable that an
outflow of resources would be required to settle the obligation, the
provision is reversed.
Contingent assets are not recognized in the financial statements.
However, contingent assets are assessed continually and if it is
virtually certain that an inflow of economic benefits will arise, the
asset and related income are recognized in the period in which the
change occurs.
16. Earnings Per Share ( EPS)
Basic EPS is computed by dividing the net profit for the period
attributable to the equity shareholders by the weighted average number
of equity shares outstanding during the period. Diluted EPS is computed
using the weighted average number of equity and dilutive equity
equivalent shares outstanding during the period, except where the
results would be anti dilutive.
Dec 31, 2012
1. Basis of Preparation of Financial Statements
The financial statements have been prepared under the historical cost
convention (with the exception of freehold land which has been
revalued),on the accrual basis of accounting and comply with the
Companies (Accounting Standards) Rules 2006 (as amended) issued by the
Central Government and relevant provisions of the Companies Act, 1956
to the extent applicable. The accounting policies have been
consistently followed by the company.
2. Presentation and disclosure of Financial Statements
During the year ended on 31 December 2012, the revised schedule VI
notified under the Companies Act,1956, has become applicable to the
company, for preparation and presentation of its Financial statements,
the adoption of revised schedule VI does not impact recognition and
measurement principles followed for preparation of Financial
statements. However, it has significant impact on presentation and
disclosure made in the Financial statements. The company has also
reclassified the previous year figures in accordance with the
requirements applicable in the current year .
3. Use of Estimates
The financial statements are prepared in accordance with generally
accepted accounting principles (GAAP) in India which requires
management to make estimates and assumptions that affect the reported
amounts of assets, liabilities and disclosure of contingent
liabilities. The estimates and assumptions used in the accompanying
financial statements are based upon management''s evaluation of the
relevant facts and circumstances as of the date of the financial
statements which in management''s opinion are prudent and reasonable.
Actual results may differ from the estimates and assumptions used in
preparing the accompanying financial statements. Any revision to
accounting estimates is recognized prospectively in current and future
periods.
4. Fixed Assets
- Fixed assets are stated at cost (or revalued amounts as the case may
be) less accumulated depreciation & impairment losses, if any. Cost of
fixed assets comprises of purchase price, duties, levies and any
directly attributable cost of bringing each asset to its working
condition for the intended use.
- Financing costs relating to borrowed funds attributable to the
acquisition of qualifying fixed assets up to the completion of
construction or acquisition of such fixed assets are included in the
gross book value of the asset.
- Cenvat credit availed for excise duty and countervailing duty availed
for customs duty payments made on fixed assets is reduced from the cost
of fixed assets.
- Machinery spares which are specific to a particular item of fixed
asset and whose use is expected to be irregular are capitalised and
depreciated over the residual useful life of the asset.
- Capital work-in-progress includes the cost of fixed assets that are
not ready to use at the balance sheet date.
5. Depreciation
a. Tangible Assets
Buildings are depreciated on written down value method at the rates
prescribed in Schedule XIV to the Companies Act, 1956 except those
specified below.
Other fixed assets are depreciated on straight line method at the
rates prescribed in Schedule XIV to the Companies Act, 1956 except
those specified below.
Following assets are depreciated at the rates higher than those
prescribed in Schedule XIV to the Companies Act, 1956 as in
management''s judgment, their estimated useful lives are shorter than
those prescribed under Schedule XIV to the Companies Act, 1956.
Leasehold Land - Premium paid for acquisition of leasehold land is
amortised over the period of lease, viz 99 years.
b. Intangible Assets
ERP software is amortised over a period of 60 months commencing from
the month in which software is put to use.
Specialised software is amortised over a period of 36 months commencing
from the month in which such expenditure is incurred. All
up gradations/enhancements are generally charged to profit and loss
account, unless they bring significant additional benefits.
Corporate club membership fees paid are amortised over the period of
use,viz 10 years.
Non compete fees paid are amortised over the period of restriction, viz
3 years.
6. Foreign Currency Transactions
- Transactions denominated in foreign currency are recorded at the
exchange rate prevailing on the date of transactions. Exchange
differences arising on foreign exchange transactions settled during the
year are recognized in the profit and loss account of the year.
- Monetary assets and liabilities in foreign currency, which are
outstanding as at the year-end are translated at the year end at the
closing exchange rate and the resultant exchange differences are
recognised in the profit and loss account.
- Non-monetary foreign currency items are carried at cost.
- The premium or discount on forward exchange contracts covered by
AS-11 The Effects of Changes in Foreign Exchange Rates is recognised
over the period of the contracts in the profit and loss account.
Exchange gain or loss on forward exchange contracts covered by AS-11
The Effects of Changes in Foreign Exchange Rates is recognised in the
profi t and loss account.
- In compliance with the Institute of Chartered Accountants of India
(ICAI) announcement dated 29th March,2008 on accounting for
derivatives, the mark to market valuation loss on forward contracts
entered into, to cover the forecast transactions is charged to profit
and loss account. Gain on Mark to Market valuation is ignored.
7. Inventories
- Inventories are valued at lower of cost and net realisable value.
- The cost of manufactured inventories is the direct cost of
manufacture plus appropriate allocated overheads & excise duty wherever
applicable. Cost is determined on Weighted Average Method.
- The cost of bought out inventory is computed using the Weighted
Average Method .
- The cost of loose tools is amortised over its estimated useful life.
8. Revenue Recognition
- Revenue is recognised to the extent it is probable that the economic
benefits will flow to the Company and revenue can be reliably measured.
It is recognised when significant risks and rewards of ownership of
goods have passed to the buyer.
- Gross sales are inclusive of Excise Duty.
- Sales are net of returns & discounts.
- Sales returns are accounted for in the year of return.
- Dividend income is recognised when the right to receive dividend is
unconditional at the balance sheet date.
- Interest on investments is accounted on a time proportion basis
taking into account the amounts invested and the rate of interest.
9. Retirements Benefits
a. Defined Contribution Plans:
Contributions payable to the recognised provident fund, which is a
defined contribution plan, are charged to the profit and loss account
as incurred.
b. Defined Benefit Plans :
The Company''s gratuity benefit scheme is a defined benefit plan. The
Company''s net obligation in respect of the gratuity benefit scheme is
calculated by estimating the amount of future benefit that employees
have earned in return for their service in the current and prior
periods; that benefit is discounted to determine its present value, and
the fair value of any plan assets is deducted.
The present value of the obligation under such defined benefit plans is
determined based on actuarial valuation using the Projected Unit Credit
Method, which recognises each period of service as giving rise to
additional unit of employee benefit entitlement and measures each unit
separately to build up the final obligation.
The obligation is measured at the present value of the estimated future
cash flows. The discount rates used for determining the present value
of the obligation under defined benefit plans are based on the market
yields on Government securities as at the balance sheet date.
When the calculation results in a benefit to the Company, the
recognized asset is limited to the lower of the net total of the
present value of the defined benefit obligation at the balance sheet
date minus any past service cost minus fair value of plan assets as at
balance sheet date and the present value of any future refunds from the
plan or reductions in future contributions to the plan.
Actuarial gains and losses are recognised immediately in the profit and
loss account.
c. Other Long Term Employment Benefits :
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related services are determined on the basis of valuations, as at
balance sheet date, carried out by an independent actuary using
Projected Unit Credit Method. Actuarial gains and losses comprise
experience adjustments and the effects of changes in actuarial
assumptions and are recognised immediately in the Profit and Loss
Account.
d. Other Short Term Employment Benefits:
Company provides short term benefit of sick leave to its employees with
certain accumulation provisions and same being short term and expected
to be utilised within twelve months are provided on undiscounted basis.
10. Investments
- Long term investments are valued at cost and an appropriate provision
is made for diminution, which is other than temporary, in their value.
- Current investments are valued at cost or market value, whichever is
lower.
11. Research and Development Expenditure
Research and development expenditure of a revenue nature is charged off
in the year in which it is incurred and expenditure of a capital nature
is capitalised to fixed assets.
12. Taxation
Income tax expense comprises current income tax (i.e. amount of tax for
the period determined in accordance with the income tax law) and
deferred tax charge or credit (reflecting the tax effects of timing
differences between accounting income and taxable income for the
period). The deferred tax charge or credit and the corresponding
deferred tax liabilities or assets are recognized using the tax rates
and tax laws that have been enacted or substantively enacted by the
balance sheet date. Deferred tax assets are recognized only to the
extent there is reasonable certainty that the assets can be realized in
future; however, where there is unabsorbed depreciation or carried
forward loss under taxation laws, deferred tax assets are recognized
only if there is a virtual certainty of realization of such assets.
Deferred tax assets are reviewed at each balance sheet date and written
down or written up to reflect the amount that is reasonably/virtually
certain (as the case may be) to be realized.
13. Leases
Operating Leases
Lease payments under operating leases are recognised as an expense in
the statement of profit and loss account on a straight line basis over
the lease term.
14. 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 asset''s net selling price 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 risks
specific to the assets. After impairment, depreciation is provided on
their revised carrying amount of the asset over its remaining useful
life.
15. Provisions and Contingent Liabilities
The Company creates a provision when there is present obligation as a
result of a past event that probably requires an outflow of resources
and a reliable estimate can be made of the amount of the obligation. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outfl ow of resources. When there is a possible obligation
or a present obligation in respect of which the likelihood of outflow
of resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to
reflect the current best estimate. If it is no longer probable that an
outflow of resources would be required to settle the obligation, the
provision is reversed.
Contingent assets are not recognized in the financial statements.
However, contingent assets are assessed continually and if it is
virtually certain that an inflow of economic benefits will arise, the
asset and related income are recognized in the period in which the
change occurs.
16. Earnings Per Share ( EPS)
Basic EPS is computed by dividing the net profit for the period
attributable to the equity shareholders by the weighted average number
of equity shares outstanding during the period. Diluted EPS is computed
using the weighted average number of equity and dilutive equity
equivalent shares outstanding during the period, except where the
results would be anti dilutive.
Dec 31, 2011
I. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The financial statements have been prepared under the historical cost
convention (with the exception of freehold land which has been
revalue),on the accrual basis of accounting and comply with the
Companies(Accounting Standards) Rules 2006 (as amended) issued by the
Central Government and relevant provisions of the Companies Act, 1956
to the extent applicable. The accounting policies have been
consistently followed by the company.
Use of Estimates
The financial statements are prepared in accordance with generally
accepted accounting principles (GAAP) in India which requires
management to make estimates and assumptions that affect the reported
amounts of assets, liabilities and disclosure of contingent
liabilities. The estimates and assumptions used in the accompanying
financial statements are based upon management's evaluation of the
relevant facts and circumstances as of the date of the financial
statements which in management's opinion are prudent and reasonable.
Actual results may differ from the estimates and assumptions used in
preparing the accompanying financial statements. Any revision to
accounting estimates is recognized prospectively in current and future
periods.
II. FIXED ASSETS
1 Fixed assets are stated at cost ( or revealed amounts as the case may
be) less accumulated depreciation & impairment losses, if any.
Cost of fixed assets comprises of purchase price, duties, levies and
any directly attributable cost of bringing each asset to its working
condition for the intended use.
2 Financing costs relating to borrowed funds attributable to the
acquisition of qualifying fixed assets upto the completion of
construction or acquisition of such fixed assets are included in the
gross book value of the asset.
3 Cenvat credit availed for excise duty and countervailing duty availed
for customs duty payments made on fixed assets is reduced from the cost
of fixed assets.
4 Machinery spares which are specific to a particular item of fixed
asset and whose use is expected to be irregular are capitalised and
depreciated over the residual useful life of the asset.
5 Capital work-in-progress includes the cost of fixed assets that are
not ready to use at the balance sheet date and advances paid to acquire
fixed assets before the balance sheet date.
III. DEPRECIATION
Tangible Assets
Buildings are depreciated on written down value method at the rates
prescribed in Schedule XIV to the Companies Act, 1956 except those
specified below.
Other fixed assets are depreciated on straight line method at the rates
prescribed in Schedule XIV to the Companies Act, 1956 except those
specified below.
Following assets are depreciated at the rates higher than those
prescribed in Schedule XIV to the Companies Act, 1956 as in
management's judgement, their estimated useful lives are shorter than
those prescribed under Schedule XIV to the Companies Act, 1956.
Depreciation on exchange fluctuations capitalised till 31 December 2006
to fixed assets is provided over the residual useful life of the fixed
assets. Depreciation on additions/deletions to fixed assets is provided
prorate from the date of addition/ till the date of deletion.
Leasehold Land - Premium paid for acquisition of leasehold land is
amortised over the period of lease.
Intangible Assets
ERP Software is amortised over a period of 60 months commencing from
the month in which software is put to use. Specialised Software is
amortised over a period of 36 months commencing from the month in which
such expenditure is incurred. All upgradations/ enhancements are
generally charged to profit and loss account, unless they bring
significant additional benefits.
Corporate Club membership fees paid are amortised over the period of
use.
Non compete fees paid are amortised over the period of restriction.
IV. FOREIGN CURRENCY TRANSACTIONS
1 Transactions denominated in foreign currency are recorded at the
exchange rate prevailing on the date of transactions. Exchange
differences arising on foreign exchange transactions settled during the
year are recognized in the profit and loss account of the year.
2 Monetary assets and liabilities in foreign currency, which are
outstanding as at the year-end are translated at the year end at the
closing exchange rate and the resultant exchange differences are
recognised in the profit and loss account.
3 Non-monetary foreign currency items are carried at cost.
4 The premium or discount on forward exchange contracts covered by
AS-11 The Effects of Changes in Foreign Exchange Rates is recognised
over the period of the contracts in the profit and loss account.
Exchange gain or loss on forward exchange contracts covered by AS-11
The Effects of Changes in Foreign Exchange Rates is recognised in the
profit and loss account.
5 In compliance with the Institute of Chartered Accountants of India
(ICAI) announcement dated 29th March,2008 on accounting for
Derivatives, the mark to market valuation loss on forward contracts
entered into, to cover the forecast transactions is charged to profit
and loss account.
V. INVENTORIES
1 Inventories are valued at lower of cost and net realisable value.
2 The cost of manufactured inventories is the direct cost of
manufacture plus appropriate allocated overheads & excise duty where
ever applicable.
3 The cost of bought out inventory is computed using the Weighted
Average method .
4 The cost of loose tools is amortised over its estimated useful life.
VI. REVENUE RECOGNITION
1 Revenue is recognised to the extent it is probable that the economic
benefits will flow to the Company and revenue can be reliably measured.
It is recognised when significant risks and rewards of ownership of
goods have passed to the buyer.
2 Gross sales are inclusive of Excise Duty and Sales Tax .
3 Sales returns are accounted for in the year of return.
4 Dividend income is recognised when the right to receive dividend is
unconditional at the balance sheet date.
5 Interest on investments is accounted on a time proportion basis
taking into account the amounts invested and the rate of interest.
VII. RETIREMENT BENEFITS
1 Defined Contribution Plans
Contributions payable to the recognised provident fund, which is a
defined contribution Plan, are charged to the profit and loss account
as incurred.
2 Defined Benefit Plans
The Company's gratuity benefit scheme is a defined benefit plan. The
Company's net obligation in respect of the gratuity benefit scheme is
calculated by estimating the amount of future benefit that employees
have earned in return for their service in the current and prior
periods; that benefit is discounted to determine its present value, and
the fair value of any plan assets is deducted.
The present value of the obligation under such defined benefit plans is
determined based on actuarial valuation using the Projected Unit Credit
Method, which recognises each period of service as giving rise to
additional unit of employee benefit entitlement and measures each unit
separately to build up the final obligation.
The obligation is measured at the present value of the estimated future
cash flows. The discount rates used for determining the present value
of the obligation under defined benefit plans are based on the market
yields on Government securities as at the balance sheet date.
When the calculation results in a benefit to the Company, the
recognized asset is limited to the lower of the net total of the
present value of the defined benefit obligation at the balance sheet
date minus any past service cost minus fair value of plan assets as at
balance sheet date and the present value of any future refunds from the
plan or reductions in future contributions to the plan.
Actuarial gains and losses are recognised immediately in the Profit and
Loss Account.
Family Pension and Long Term Service Award plan are defined benefit
plans and are valued based on actuarial valuation.
3 Other Long term employment benefits
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related services are determined on the basis of valuations, as at
balance sheet date, carried out by an independent actuary using
Projected Unit Credit Method. Actuarial gains and losses comprise
experience adjustments and the effects of changes in actuarial
assumptions and are recognised immediately in the Profit and Loss
Account.
4 Other short term employment benefits
Company provides short term benefit of sick leave to its employees with
certain accumulation provisions and same being short term and expected
to be utilised within twelve months are provided on undiscounted basis.
VIII. INVESTMENTS
Long term investments are valued at cost and an appropriate provision
is made for diminution, which is other than temporary, in their value.
Current investments are valued at cost or market value, whichever is
lower.
IX. RESEARCH AND DEVELOPMENT EXPENDITURE
Research and development expenditure of a revenue nature is charged off
in the year in which it is incurred and expenditure of a capital nature
is capitalised to fixed assets.
X. TAXATION
Income tax expense comprises current income tax (i.e. amount of tax for
the period determined in accordance with the income tax law) and
deferred tax charge or credit (reflecting the tax effects of timing
differences between accounting income and taxable income for the
period). The deferred tax charge or credit and the corresponding
deferred tax liabilities or assets are recognized using the tax rates
and tax laws that have been enacted or substantively enacted by the
balance sheet date. Deferred tax assets are recognized only to the
extent there is reasonable certainty that the assets can be realized in
future; however, where there is unabsorbed depreciation or carried
forward loss under taxation laws, deferred tax assets are recognized
only if there is a virtual certainty of realization of such assets.
Deferred tax assets are reviewed at each balance sheet date and written
down or written up to reflect the amount that is reasonably/virtually
certain (as the case may be) to be realized.
XI LEASES Operating Leases
Lease payments under operating leases are recognised as an expense in
the statement of profit and loss account on a straight line basis over
the lease term.
XII 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 asset's net selling price 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 risks
specific to the assets.
After impairment, depreciation is provided on their revised carrying
amount of the asset over its remaining useful life.
XIII PROVISIONS AND CONTINGENT LIABILITIES
The Company creates a provision when there is present obligation as a
result of a past event that probably requires an outflow of resources
and a reliable estimate can be made of the amount of the obligation. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. When there is a possible obligation or
a present obligation in respect of which the likelihood of outflow of
resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to
reflect the current best estimate. If it is no longer probable that an
outflow of resources would be required to settle the obligation, the
provision is reversed. Contingent assets are not recognized in the
financial statements. However, contingent assets are assessed
continually and if it is virtually certain that an inflow of economic
benefits will arise, the asset and related income are recognized in the
period in which the change occurs.
XIV. EARNINGS PER SHARE (EPS)
Basic EPS is computed by dividing the net profit for the period
attributable to the equity shareholders by the weighted average number
of equity shares outstanding during the period. Diluted EPS is computed
using the weighted average number of equity and dilutive equity
equivalent shares outstanding during the period, except where the
results would be anti dilutive.
Note:
i) The above does not include gratuity and leave encashment benefits as
the provision for these are determined for the Company as a whole and
therefore separate amounts for the directors are not available.
ii) Chairman and Managing Director, Chief Executive Officer and
Executive Director of the Company are entitled to options under "Option
Rights Plan" and shares under the "Share Ownership Plan" of Huhtamaki
Oyj (the ultimate Holding company) which entitles the holder of the
option rights to subscribe to the shares of the ultimate holding
company at a future date, at a price fixed based on the fair market
price of the shares during specified period plus certain percentage of
market value on the exercise date and the recipient of grants under
share ownership plan is entitled to receive shares at nil cost
respectively. The schemes detailed above are assessed, managed and
administered by the ultimate holding company and there is no cost
charged to the Company.
The charge taken by Huhtamaki Oyj in its accounts for the year ended
31st December 2011 for these options and shares is Rs.8,604 Thousand
(Previous year Rs.7,193 Thousand)
iii) The above remuneration paid/payable to the Chairman and Managing
Director of the Company does not include Rs.14,055 Thousand (Previous
year Rs.11,812 Thousand) paid by Huhtamaki Oyj, the ultimate parent
company for his role as Executive Vice President Flexibles Packaging
Global, Huhtamaki Oyj.
The Company depreciates its fixed assets as enumerated in Schedule 15
Policy III wherein estimated useful lives for certain assets are lower
than implicit estimated useful lives prescribed by Schedule XIV of the
Companies Act,1956. Thus, the depreciation charge in the books is
higher than the minimum prescribed by the Companies Act,1956.This
higher depreciation charge has been considered as deduction for the
Computation of Managerial Remuneration above.
Dec 31, 2010
I. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The financial statements have been prepared under the historical cost
convention (with the exception of fireehold land which has been
revalued),on the accrual basis of accounting and comply with the
Companies (Accounting Standards) Rules 2006 issued by the Central
Government and relevant provisions of the Companies Act, 1956 to the
extent applicable.The accounting policies have been consistently
followed by the company.
Use of Estimates
The financial statements are prepared in accordance with generally
accepted accounting principles (GAAP) in India which requires
management to make estimates and assumptions that affect the reported
amounts of assets, liabilities and disclosure of contingent
liabilities.The estimates and assumptions used in the accompanying
financial statements are based upon managements evaluation of the
relevant facts and circumstances as of the date of the financial
statements which in managements opinion are prudent and reasonable.
Actual results may differ from the estimates and assumptions used in
preparing the accompanying financial statements. Any revision to
accounting estimates is recognized prospectively in current and future
periods.
II. FIXED ASSETS
1 Fixed assets are stated at cost ( or revalued amounts as the case may
be) less accumulated depreciation & impairement losses, if any.
Cost of fixed assets comprises of purchase price, duties, levies and
any directly attributable cost of bringing each asset to its working
condition for the intended use.
2 Financing costs relating to borrowed funds attributable to the
acquisition of qualifying fixed assets upto the completion of
construction or acquisition of such fixed assets are included in the
gross book value of the asset.
3 Cenvat credit availed for excise duty and countervailing duty availed
for customs duty payments made on fixed assets is reduced from the cost
of fixed assets.
4 Machinery spares which are specifc to a particular item of fixed
asset and whose use is expected to be irregular are capitalised and
depreciated over the residual useful life of the asset.
5 Capital work-in-progress includes the cost of fixed assets that are
not ready to use at the balance sheet date and advances paid to acquire
fixed assets before the balance sheet date.
III. DEPRECIATION
Tangible Assets
Buildings are depreciated on written down value method at the rates
prescribed in Schedule XIV to the Companies Act, 1956 except those
specifed below.
Other fixed assets are depreciated on straight line method at the rates
prescribed in Schedule XIV to the Companies Act, 1956 except those
specifed below.
Depreciation on exchange fuctuations capitalised till 31 December 2006
to fixed assets is provided over the residual useful life of the fixed
assets. Depreciation on additions/ deletions to fixed assets is
provided prorata from the date of addition / till the date of deletion.
Leasehold Land - Premium paid for acquisition of leasehold land is
amortised over the period of lease.
Intangible Assets
ERP Software is amortised over a period of 60 months commencing from
the month in which software is put to use.
Specialised Software is amortised over a period of 36 months commencing
from the month in which such expenditure is incurred. All upgradations
/ enhancements are generally charged to Profit and loss account, unless
they bring signifcant additional benefits.
Club fees paid are amortised over a period of 10 years.
IV. FOREIGN CURRENCY TRANSACTIONS
1 Transactions denominated in foreign currency are recorded at the
exchange rate prevailing on the date of transactions. Exchange
differences arising on foreign exchange transactions settled during the
year are recognized in the Profit and loss account of the year.
2 Monetary assets and liabilities in foreign currency, which are
outstanding as at the year-end are translated at the year end at the
closing exchange rate and the resultant exchange differences are
recognised in the Profit and loss account.
3 Non-monetary foreign currency items are carried at cost.
4 The premium or discount on forward exchange contracts covered by
AS-11 The Effects of Changes in Foreign Exchange Rates is recognised
over the period of the contracts in the Profit and loss account.
Exchange gain or loss on forward exchange contracts covered by AS-11
The Effects of Changes in Foreign Exchange Rates is recognised in the
Profit and loss account.
5 In compliance with the Institute of Chartered Accountants of India
(ICAI) announcement dated 29th March,2008 on accounting for
Derivatives, the mark to market valuation loss on forward contracts
entered into, to cover the forecast transactions is charged to Profit
and loss account.
V. INVENTORIES
1 Inventories are valued at lower of cost and net realisable value.
2 The cost of manufactured inventories is the direct cost of
manufacture plus appropriate allocated overheads & excise duty wherever
applicable.
3 The cost of bought out inventory is computed using the Weighted
Average method .
4 The cost of loose tools is amortised over its estimated useful life.
VI. REVENUE RECOGNITION
1 Revenue is recognised to the extent it is probable that the economic
benefits will flow to the Company and revenue can be reliably measured.
It is recognised when signifcant risks and rewards of ownership of
goods have passed to the buyer.
Dec 31, 2009
I. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The financial statements have been prepared under the historical cost
convention (with the exception of freehold land which has been
revalued),on the accrual basis of accounting and comply with the
Companies (Accounting Standards) Rules 2006 issued by the Central
Government, in consultation with the National Advisory Committee on
Accounting Standards (NACAS) and relevant provisions of the Companies
Act, 1956 to the extent applicable.
Use of Estimates
The financial statements are prepared in accordance with generally
accepted accounting principles (GAAP) in India which requires
management to make estimates and assumptions that affect the reported
amounts of assets, liabilities and disclosure of contingent
liabilities.The estimates and assumptions used in the accompanying
financial statements are based upon managements evaluation of the
relevant facts and circumstances as of the date of the financial
statements which in managements opinion are prudent and reasonable.
Actual results may differ from the estimates and assumptions used in
preparing the accompanying financial statements. Any revision to
accounting estimates is recognized prospectively in current and future
periods.
II. FIXED ASSETS
1 Cost of fixed assets comprises of purchase price, duties, levies and
any directly attributable cost of bringing each asset to its working
condition for the intended use.
2 Financing costs relating to borrowed funds attributable to the
acquisition of qualifying fixed assets upto the completion of
construction or acquisition of such fixed assets are included in the
gross book value of the asset.
3 Cenvat credit availed for excise duty and countervailing duty availed
for customs duty payments made on fixed assets is reduced from the cost
of fixed assets.
4 Machinery spares which are specific to a particular item of fixed
asset and whose use is expected to be irregular are capitalised and
depreciated over the residual useful life of the asset.
5 Capital work-in-progress includes the cost of fixed assets that are
not ready to use at the balance sheet date and advances paid to acquire
fixed assets before the balance sheet date.
III. DEPRECIATION
Tangible Assets
Buildings are depreciated on written down value method at the rates
prescribed in Schedule XIV to the Companies Act, 1956 except those
specified below.
Other fixed assets are depreciated on straight line method at the rates
prescribed in Schedule XIV to the Companies Act, 1956 except those
specified below.
IV. FOREIGN CURRENCY TRANSACTIONS
1 Transactions denominated in foreign currency are recorded at the
exchange rate prevailing on the date of transactions.
Exchange differences arising on foreign exchange transactions settled
during the year are recognized in the profit and loss account of the
year.
2 Monetary assets and liabilities in foreign currency, which are
outstanding as at the year-end are translated at the year end at the
closing exchange rate and the resultant exchange differences are
recognised in the profit and loss account.
3 Non-monetary foreign currency items are carried at cost.
4 The premium or discount on forward exchange contracts covered by
AS-11 The Effects of Changes in Foreign Exchange Rates is recognised
over the period of the contracts in the profit and loss account.
Exchange gain or loss on forward exchange contracts covered by AS-11
The Effects of Changes in Foreign Exchange Rates is recognised in the
profit and loss account.
5 In compliance with the Institute of Chartered Accountants of
India(ICAI) announcement dated 29th March,2008 on accounting for
Derivatives, the mark to market valuation loss on forward contracts
entered into to cover the forecast transactions is charged to profit
and loss account.
V. INVENTORIES
1 Inventories are valued at lower of cost and net realisable value.
2 The cost of manufactured inventories is the direct cost of
manufacture plus appropriate allocated overheads.
3 The cost of bought out inventory is computed using the Weighted
Average method .
4 The cost of loose tools is amortised over its estimated useful life.
VI. REVENUE RECOGNITION
1 Revenue from sale of manufactured goods is recognised on despatch to
customers.
2 Gross sales are inclusive of Excise Duty and Sales Tax .
3 Sales returns are accounted for in the year of return.
4 Dividend income is recognised when the right to receive dividend is
unconditional at the balance sheet date.
5 Interest on investments is accounted on a time proportion basis
taking into account the amounts invested and the rate of interest.
VII. RETIREMENT BENEFITS
1 Defined Contribution Plans
Contributions payable to the recognised provident fund, which is a
defined contribution Plan, are charged to the profit and loss account
as incurred.
2 Defined Benefit Plans
The Companys gratuity benefit scheme is a defined benefit plan. The
Companys net obligation in respect of the gratuity benefit scheme is
calculated by estimating the amount of future benefit that employees
have earned in return for their service in the current and prior
periods; that benefit is discounted to determine its present value, and
the fair value of any plan assets is deducted.
The present value of the obligation under such defined benefit plans is
determined based on actuarial valuation using the Projected Unit Credit
Method, which recognises each period of service as giving rise to
additional unit of employee benefit entitlement and measures each unit
separately to build up the final obligation.
The obligation is measured at the present value of the estimated future
cash flows. The discount rates used for determining the present value
of the obligation under defined benefit plans are based on the market
yields on Government securities as at the balance sheet date.
When the calculation results in a benefit to the Company, the
recognized asset is limited to the lower of the net total of the
present value of the defined benefit obligation at the balance sheet
date minus any past service cost minus fair value of plan assets as at
balance sheet date and the present value of any future refunds from the
plan or reductions in future contributions to the plan.
Actuarial gains and losses are recognised immediately in the Profit and
Loss Account.
Family Pension and Long Term Service Award plan are defined benefit
plans and are valued based on actuarial valuation.
3 Other Long term employment benefits:
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related services are determined on the basis of valuations, as at
balance sheet date, carried out by an independent actuary using
Projected Unit Credit Method. Actuarial gains and losses comprise
experience adjustments and the effects of changes in actuarial
assumptions and are recognised immediately in the Profit and Loss
Account.
4 Other short term employment benefits :
Company provides short term benefit of sick leave to its employees with
certain accumulation provisions and same being short term and expected
to be utilised within twelve months are provided on undiscounted basis.
VIII. INVESTMENTS
Long term investments are valued at cost and an appropriate provision
is made for diminution, which is other than temporary, in their value.
Current investments are valued at cost or market value, whichever is
lower.
IX. RESEARCH AND DEVELOPMENT EXPENDITURE
Research and development expenditure of a revenue nature is charged off
in the year in which it is incurred and expenditure of a capital nature
is capitalised to fixed assets.
X. TAXATION
Income tax expense comprises current income tax (i.e. amount of tax for
the period determined in accordance with the income tax law), fringe
benefits tax and deferred tax charge or credit (reflecting the tax
effects of timing differences between accounting income and taxable
income for the period). The deferred tax charge or credit and the
corresponding deferred tax liabilities or assets are recognized using
the tax rates and tax laws that have been enacted or substantively
enacted by the balance sheet date. Deferred tax assets are recognized
only to the extent there is reasonable certainty that the assets can be
realized in future; however, where there is unabsorbed depreciation or
carried forward loss under taxation laws, deferred tax assets are
recognized only if there is a virtual certainty of realization of such
assets. Deferred tax assets are reviewed at each balance sheet date and
written down or written up to reflect the amount that is
reasonably/virtually certain (as the case may be) to be realized.
Provision for fringe benefits tax CFBT) is made on the basis of
applicable FBT on the taxable value of eligible expenses of the company
as prescribed under the Income Tax Act, 1961.
XI LEASES
Operating Leases
Lease payments under operating leases are recognised as an expense in
the statement of profit and loss account on a straight line basis over
the lease term.
XII IMPAIRMENT OF ASSETS
The Company assesses at each balance sheet date whether there is any
indication that an asset or a group of assets (cash generating unit)
may be impaired. If any such indication exists, the Company estimates
the recoverable amount of the asset or the cash generating unit to
which the asset belongs. If such recoverable amount of the asset or the
recoverable amount of the cash generating unit to which the asset
belongs is less than its carrying amount, the carrying amount is
reduced to its recoverable amount. The reduction is treated as an
impairment loss and is recognized in the profit and loss account. If at
the balance sheet date there is an indication that a previously
assessed impairment loss no longer exists, the recoverable amount is
reassessed and the asset is reflected at the recoverable amount subject
to reversal of loss being limited to maximum of historical impairment
loss booked.
XIII PROVISIONS AND CONTINGENT LIABILITIES
The Company creates a provision when there is present obligation as a
result of a past event that probably requires an outflow of resources
and a reliable estimate can be made of the amount of the obligation. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. When there is a possible obligation or
a present obligation in respect of which the likelihood of outflow of
resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to
reflect the current best estimate. If it is no longer probable that an
outflow of resources would be required to settle the obligation, the
provision is reversed.
Contingent assets are not recognized in the financial statements.
However, contingent assets are assessed continually and if it is
virtually certain that an inflow of economic benefits will arise, the
asset and related income are recognized in the period in which the
change occurs.
Loss contingencies arising from claims, litigation, assessment, fines,
penalties, etc. are recorded when it is probable that a liability has
been incurred and the amount can be reasonably estimated.
XIV. EARNINGS PER SHARE
Basic EPS is computed using the weighted average number of equity
shares outstanding during the period. Diluted EPS is computed using the
weighted average number of equity and dilutive equity equivalent shares
outstanding during the period-end, except where the results would be
anti dilutive.