Accounting Policies of KDDL Ltd. Company
Mar 31, 2023
SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation
The standalone Ind AS financial statements have been
prepared in accordance with Indian Accounting Standards
(Ind AS) notified under the Companies (Indian Accounting
Standards) Rules, 2015 (as amended from time to time) and
presentation requirements of Division II of Schedule III to the
Companies Act, 2013 (Ind AS compliant Schedule III).
Accounting policies have been consistently applied except
where a newly issued accounting standard is initially adopted
or a revision to an existing accounting standard requires a
change in the accounting policy hitherto in use.
The standalone Ind AS financial statements are presented
in INR and all values are rounded to the nearest lacs (INR
00,000), except when otherwise indicated.
The standalone Ind AS financial statements provide
comparative information in respect of the previous year.
The standalone Ind AS financial statements have been
prepared on historical cost basis, except for the following
assets and liabilities which have been measured at fair value
as required under relevant Ind AS.
- Certain financial assets and liabilities are measured at
fair value (Refer accounting policy regarding financial
instruments in Note n)
2.2 Summary of significant accounting policiesa. Current versus non-current classification
The Company presents assets and liabilities in
the balance sheet based on current/non-current
classification. An asset is treated as current when it is:
⢠Expected to be realised or intended to be sold or
consumed in normal operating cycle
⢠Held for primarily for the purpose of trading
⢠Expected to be realised within twelve months
after the reporting period, or
⢠Cash or cash equivalent unless restricted from
being exchanged or used to settle a liability for at
least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when:
⢠It is expected to be settled in normal operating
cycle
⢠It is held for primarily for the purpose of trading
⢠It is due to be settled within twelve months after
the reporting period, or
⢠There is no unconditional right to defer the
settlement of liability for at least twelve after the
reporting period
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non¬
current assets and liabilities.
The operating cycle is the time between the acquisition
of assets for processing and their realisation in cash and
cash equivalents. The Company has identified twelve
months as its operating cycle.
b. Property, plant and equipment (''PPE'')
Recognition and measurement
Capital work-in-progress is stated at cost, net of
accumulated impairment loss, if any. Property, plant
and equipment is stated at cost of acquisition or
construction which includes capitalised finance costs
less accumulated depreciation and/or accumulated
impairment loss, if any.
Cost of an item of PPE comprises its purchase price,
including import duties and non-refundable purchase
taxes, after deducting trade discounts and rebates,
any directly attributable cost of bringing the item to
its working condition for its intended use. The cost
of a self-constructed item of property, plant and
equipment comprises the cost of materials and direct
labour, any other costs directly attributable to bringing
the item to working condition for its intended use,
and estimated costs of dismantling and removing the
item and restoring the site on which it is located, if the
recognition criteria is met. 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.
Recognition criteria
The cost of an item of property, plant and equipment is
recognised as an asset if and only if,
(a) It is probable that future economic benefits
associated with the item will flow to the entity,
and
(b) The cost of the item can be measured reliably.
Capital work-in-progress comprises the cost of fixed
assets that are not ready for their intended use at the
reporting date. Advances paid towards acquisition of
PPE outstanding at each Balance sheet date, are shown
under other non-current assets.
Any gain or loss on disposal of an item of property,
plant and equipment is recognised in the Statement of
Profit and Loss.
Subsequent expenditure
Subsequent expenditure is capitalised only if it is
probable that the future economic benefits associated
with the expenditure will flow to the Company and its
cost can be measured reliably with the carrying amount
of the replaced part getting derecognised.
Depreciation
Depreciation is calculated on cost of items of PPE less
their estimated residual values over their estimated
useful lives using the straight-line method and is
recognised in the Statement of Profit and Loss.
Depreciation on improvements carried out on buildings taken on lease is provided over the period of the lease or useful life of
assets, whichever is lower. Refer lease policy at point ''m'' below for period of leases.
* The Company, based on technical assessment made by technical expert and management estimate, depreciates tools included
in plant and equipment over estimated useful lives of 3 and 15 years which are different from the useful life prescribed in
Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflect fair
approximation of the period over which the assets are likely to be used.
The depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.
Depreciation on additions (disposal) is provided on a pro-rata basis i.e. from (upto) the date on which asset is ready for use
(disposed of).
Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from
its use and disposal. Any gain or loss arising on derocogntion of the asset is measured as the difference between the net disposal
proceeds and the carrying amount of the asset and is recognised in the Statement of Profit and Loss.
Acquired Intangible
Intangible assets that are acquired by the Company
are measured initially at cost. Cost of an item of
Intangible asset comprises its purchase price, including
import duties and non-refundable purchase taxes,
after deducting trade discounts and rebates, any
directly attributable cost of bringing the item to its
working condition for its intended use. After initial
recognition, an intangible asset is carried at its cost less
any accumulated amortisation and any accumulated
impairment loss.
Subsequent expenditure
Subsequent expenditure is capitalised only when it
increases the future economic benefits embodied
in the specific asset to which it relates. All other
expenditure is recognised in Statement of Profit and
Loss as incurred.
Amortisation
Amortisation is calculated to write off the cost of
intangible assets over their estimated useful lives using
the straight-line method, and is included in depreciation
and amortisation expense in Statement of Profit and
Loss.
The estimated useful lives are as follows:
- Technical know-how 4 Years
- Software 6 Years
Amortisation method, useful life and residual values are
reviewed at the end of each financial year and adjusted
if appropriate.
Derecognition
Intangible assets are derecognised on disposal or when
no future economic benefits are expected from its use
and disposal.
Intangible asset under development that are acquired
by the Company comprises its purchase price, including
import duties and non-refundable purchase taxes, after
deducting trade discounts and rebates, any directly
attributable cost of bringing the item to its working
condition for its intended use.
Inventories are valued at the lower of cost and net
realisable value.
The cost of inventories includes expenditure incurred
in acquiring the inventories, production or conversion
costs and other costs incurred in bringing them to their
present location and condition.
Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs
necessary to make the sale. The net realisable value of
work-in-progress is determined with reference to the
selling prices of related finished products.
Raw materials and other supplies held for use in the
production of finished products are not written down
below cost except in cases where material prices have
declined and it is estimated that the cost of the finished
products will exceed their net realisable value.
The comparison of cost and net realisable value is made
on an item-by-item basis.
e. Retirement and other employee benefits
Short-term employee benefits
Short-term employee benefit obligations are measured
on an undiscounted basis and are expensed as the
related service is provided. A liability is recognised
for the amount expected to be paid e.g., salaries and
wages and bonus etc., if the Company has a present
legal or constructive obligation to pay this amount as
a result of past service provided by the employee, and
the amount of obligation can be estimated reliably.
Post-employment benefits
Defined contribution plans
A defined contribution plan is a post-employment
benefit plan under which an entity pays specified
contributions to a separate entity and will have no
legal or constructive obligation to pay further amounts.
The Company makes specified monthly contributions
towards employee provident fund and employee state
insurance scheme (''ESI'') to Government administered
scheme which is a defined contribution plan. The
Company''s contribution is recognised as an expense
in the Statement of Profit and Loss during the period
in which the employee renders the related service.
Certain employees of the Company are also participants
in the superannuation plan ("the Plan"), a defined
contribution plan. The Company makes contributions to
Life Insurance Corporation of India (LIC). Contribution
made by the Company to the plan during the year is
charged to Statement of Profit and Loss. The social
security costs, paid for the overseas employees, are in
the nature of defined contribution schemes as per the
laws of that country.
A defined benefit plan is a post-employment benefit
plan other than a defined contribution plan. Gratuity
is a defined benefit plan. The administration of
the gratuity scheme has been entrusted to the Life
Insurance Corporation of India (''LIC''). The Company''s
net obligation in respect of gratuity is calculated
separately by estimating the amount of future benefit
that employees have earned in the current and prior
periods, discounting that amount and deducting the
fair value of any plan assets.
The calculation of defined benefit obligation is
performed annually by a qualified actuary using the
projected unit credit method.
Re-measurements of the net defined benefit liability
i.e. Gratuity, which comprise actuarial gains and losses
are recognised in Other Comprehensive Income (OCI).
The Company determines the net interest expense
(income) on the net defined benefit liability for the
period by applying the discount rate used to measure
the defined benefit obligation at the beginning of
the annual period to the then- net defined benefit
liability, taking into account any changes in the net
defined benefit liability during the period as a result
of contributions and benefit payments. Net interest
expense and other expenses related to defined benefit
plans are recognised in the Statement of Profit and
Loss.
When the benefits of a plan are changed or when a plan
is curtailed, the resulting change in benefit that relates
to past service (''past service cost'' or ''past service
gain'') or the gain or loss on curtailment is recognised
immediately in the Statement of Profit and Loss. The
Company recognises gains and losses on the settlement
of a defined benefit plan when the settlement occurs.
Compensated absences
The Company''s net obligation in respect of long-term
employee benefits other than post-employment
benefits is 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 related assets
is deducted. Such obligation such as those related to
compensate absences is measured on the basis of
an annual independent actuarial valuation using the
projected unit cost credit method. Remeasurements
gains or losses are recognised in profit or loss in the
period in which they arise. The Company presents the
leave liability 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. Where Company has the unconditional legal and
contractual right to defer the settlement for a period
beyond 12 months, the same is presented as non¬
current liability.
A provision is recognised if, as a result of a past event, the
Company has a present legal or constructive obligation
that can be estimated reliably, and it is probable that
an outflow of economic benefits will be required to
settle the obligation. If the time of money is material,
provisions are determined by discounting the expected
future cash flows (representing the best estimate of the
expenditure required to settle the present obligation at
the balance sheet date) at a pre-tax rate that reflects
current market assessments of the time value of money
and the risks specific to the liability. The unwinding of
the discount is recognised as finance cost. Expected
future losses are not provided for.
g. Contingent liabilities and contingent assets
A contingent liability exists when there is a possible
but not probable obligation, or a present obligation
that may, but probably will not, require an outflow
of resources, or a present obligation whose amount
cannot be estimated reliably. Contingent liabilities do
not warrant provisions, but are disclosed unless the
possibility of outflow of resources is remote.
Mar 31, 2021
1. Corporate information
KDDL Limited (''the Company''), is a public limited company domiciled in India and was incorporated in January 1981 under the provisions of the Companies Act applicable in India. The Company is listed on BSE Limited and National Stock Exchange (NSE) of India Limited in India. The registered office of the Company is located at Plot No.3, Sector III, Parwanoo, Himachal Pradesh, India - 173220.
The Company is primarily engaged in the business of manufacturing dials, watch hands and precision components. Currently, the Company has its manufacturing facilities, at Parwanoo (Himachal Pradesh) and Derabassi (Punjab) - dial manufacturing, Bengaluru (Karnataka) - hands and precision components manufacturing.
The standalone Ind AS financial statements were approved for issue in accordance with a resolution of the directors on 14June2021.
2. Significant accounting policies2.1 Basis of preparation
The standalone Ind AS financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) and presentation requirements of Division II of Schedule III to the Companies Act, 2013(Ind AS compliant Schedule III).
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
The standalone Ind AS financial statements are presented in INR and all values are rounded to the nearest lakhs (INR 00,000),except when otherwise indicated.
The standalone Ind AS financial statements provide comparative information in respect of the previous period.
The standalone Ind AS financial statements have been prepared on historical cost basis, except for the following assets and liabilities which have been measured at fair value as required under relevant Ind AS.
- Certain financial assets and liabilities are measured at fair value (Refer accounting policy regarding financial instruments in Note O)
- Defined benefit plans - plan assets are measured at fair value
2.2 Summary of significant accounting policiesa. Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/non-current classification. An asset is treated as current when it is:
⢠Expected to be realized or intended to be sold or consumed in normal operating cycle
⢠Held for primarily for the purpose of trading
⢠Expected to be realized within twelve months after the reporting period, or
⢠Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
⢠It is expected to be settled in normal operating cycle
⢠It is held for primarily for the purpose of trading
⢠It is due to be settled within twelve months after the reporting period, or
⢠There is no unconditional right to defer the settlement of liability for at least twelve after the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
b. Property, plant and equipment (''PPE'')
Recognition and measurement
Capital work-in-progress is stated at cost, net of accumulated impairment loss, if any. Property, plant and equipment is stated at cost of acquisition or construction which includes capitalised finance costs less accumulated depreciation and/or accumulated impairment loss, if any.
Cost of an item of PPE comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable cost of bringing the item to its working condition for its intended use. The cost of a self-constructed item of property, plant and equipment comprises the cost of materials and direct labour, any other costs directly attributable to bringing the item to working condition for its intendeduse, and estimated costs of dismantling and removing the item and restoring the site on which it is located, if the recognition criteria is met. 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.
Recognition criteria
The cost of an item of property, plant and equipment is recognised as an asset if and only if,
(a) It is probable that future economic benefits associated with the item will flow to the entity, and
(b) The cost of the item can be measured reliably.
Capital work-in-progress comprises the cost of fixed assets that are not ready for their intended use at the reporting date. Advances paid towards acquisition of PPE outstanding at each Balance sheet date, are shown under other non-current assets.
Any gain or loss on disposal of an item of property, plant and equipment is recognised in the Statement of Profit and Loss.
Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company and its cost can be measured reliably with the carrying amount of the replaced part geffing derecognised.
Depreciation
Depreciation is calculated on cost of items of PPE less their estimated residual values over their estimated useful lives using the straight-line method and is recognised in the Statement of Profit and Loss.
Depreciation on items of PPE is provided as per rates corresponding to the useful life specified in Schedule II to the Companies Act, 2013 read with related amendments. The estimated useful lives of items of property, plant and equipment for the current and comparative periods are as follows:
|
Particulars |
Useful life as per Schedule II |
Management estimate of useful life |
|
Buildings - factory |
30 Years |
30 Years |
|
Plant and equipment* |
15 Years |
3 - 15 Years |
|
Furniture and fiffings |
10 Years |
10 Years |
|
Office equipment |
5 Years |
5 Years |
|
Computers |
3 Years |
3 Years |
|
Vehicles |
8 Years |
8 Years |
Depreciation on improvements carried out on buildings taken on lease is provided over the period of the lease or useful life of assets, whichever is lower. Refer lease Policy at point ''n'' below for period of leases.
*The Company, based on technical assessment made by technical expert and management estimate, depreciates tools included in plant and equipment over estimated useful lives of 3 and 15 years which are different from the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
The depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.
Depreciation on additions (disposal) is provided on pro-rata-basis i.e. from (up to) the date on which asset is ready for use (disposed of).
Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use and disposal. Any gain or loss arising on derocogntion of the asset is measured as the difference between the net disposal proceeds and the carrying amount of the asset and is recognised in the Statement of Profit and Loss.
c. Intangible assets Acquired Intangible
Intangible assets that are acquired by the Company are measured initially at cost. Cost of an item of Intangible asset comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable cost of bringing the item to its working condition for its intended use. After initial recognition, an intangible asset is carried at its cost less
any accumulated amortisation and any accumulated impairment loss.
Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in Statement of Profit and Loss as incurred.
Amortisation
Amortisation is calculated to write off the cost of intangible assets over their estimated useful lives using the straight-line method, and is included in depreciation and amortisation expense in Statement of Profit and Loss.
The estimated useful lives are as follows:
- Technical know-how 4 Years
- Software 6 Years
Amortisation method, useful life and residual values are reviewed at the end of each financial year and adjusted if appropriate.
Derecognition
Intangible assets is derecognised on disposal or when no future economic benefits are expected from its use and disposal.
Inventories are valued at the lower of cost and net realisable value.
The methods of determining cost of various categories of inventories are as follows:
|
Raw materials |
Weighted average method |
|
Traded Goods |
Weighted average method |
|
Stores and spares |
Weighted average method |
|
Work-in-progress and finished goods (manufactured) |
Variable cost at weighted average including an appropriate share of variable and fixed production overheads. Fixed production overheads are included based on normal capacity of production facilities. |
|
Scrap |
Net realisable value |
The cost of inventories includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their present location and condition.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary to make the sale. The net realisable value of work-in-progress is determined with reference to the selling prices of related finished products.
Raw materials and other supplies held for use in the production of finished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realisable value.
The comparison of cost and net realisable value is made on an item-by-item basis.
e. Retirement and other employee benefits
Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid e.g., salaries and wages and bonus etc., if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the amount of obligation can be estimated reliably.
Post-employment benefits Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays specified contributions to a separate entity and will have no legal or constructive obligation to pay further amounts. The Company makes specified monthly contributions towards employee provident fund and employee state insurance scheme (''ESI'') to Government administered scheme which is a defined contribution plan. The Company''s contribution is recognised as an expense in the Statement of Profit and Loss during the period in which the employee renders the related service. Certain employees of the Company are also participants in the superannuation plan ("the Plan"), a defined contribution plan. The Company makes contributions to Life Insurance Corporation of India (LIC). Contribution made by the Company to the plan during the year is charged to Statement of Profit and Loss. The social security costs, paid for the overseas employees, are in the nature of defined contribution schemes as per the laws of that country.
Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. Gratuity is a defined benefit plan. The administration of the gratuity scheme has been entrusted to the Life Insurance Corporation of India (''LIC''). The Company''s net obligation in respect of gratuity is calculated separately by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligation is performed annually by a qualified actuary using the projected unit credit method.
Re-measurements of the net defined benefit liability i.e. Gratuity, which comprise actuarial gains and losses are recognised in Other Comprehensive Income(OCI). The Company determines the net interest expense (income) on the net defined benefit liability for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability, taking into account any changes in the net defined benefit liability during the periods a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in the Statement of Profit and Loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service (''past service cost'' or ''past service gain'') or the gain or loss on curtailment is recognised imediately in the Statement of Profit and Loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
Compensated absences
The Company''s net obligation in respect of long-term employee benefits other than post-employment benefits is 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 related assets is deducted. Such obligation such as those related to compensate absences is measured on the basis of an annual independent actuarial valuation using the projected unit cost credit method. Re measurements gains or losses are recognised in profit or loss in the period in which they arise. The Company presents the leave liability 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. Where Company has the unconditional legal and contractual right to defer the settlement for a period beyond 12 months, the same is presented as non-current liability.
f. Shared-based payments
The grant date fair value of equity settled share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognised as expense is based on the estimate of the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non- market vesting conditions at the vesting date.
g. Provisions
A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the time of money is material, provisions are determined by discounting the expected future cash flows (representing the best estimate of the expenditure required to settle the present obligation at the balance sheet date) at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. Expected future losses are not provided for.
h. Contingent liabilities and contingent assets
A contingent liability exists when there is a possible but not probable obligation, or a present obligation that may, but probably will not, require an outflow of resources, or a present obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resources is remote.
Contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits to the entity. Contingent assets are recognized when the realisation of income is virtually certain, then the related asset is not a contingent asset and its recognition is appropriate.
A contingent asset is disclosed where an inflow of economic benefits is probable.
Commitments include the amount of purchase order (net of advances) issued to parties for completion of assets. Provisions, contingent liabilities, contingent assets and commitments are reviewed at each reporting date.
j. Revenue from contract with customer
Revenue from contracts with customers is recoganised when the control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
Revenue from sale of goods is recognized based on a 5-Step Methodology which is as follows:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligation in contract Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
Revenue is measured based on transaction price, which is the fair value of the consideration received or receivable, stated net of discounts, returns and value added tax. Transaction price is recognised based on the price specified in the contract, net of the estimated sales incentives/ discounts. Also, in determining the transaction price for the sale of products, the Company considers the effects of variable consideration, the existence of significant financing components, noncash consideration, and consideration payable to the customer (if any).
The Company disaggre gates revenue from contracts with customers by geography.
Sale of services
The Company offers services in fixed term contracts and short term arrangement. Revenue from service is recognized when obligation is performed or services are rendered.
Export benefits
Export incentive entitlements are recognised as income when the right to receive credit as per the terms of the scheme is established in respect of the exports made, and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
Trade Receivable
A receivable is recognised if an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Refer to accounting policies of financial assets in section of Financial instruments - initial recognition and subsequent measurement.
Contract liabilities
A contract liability is recognised if a payment is received or a payment is due (whichever is earlier) from a customer before the Company transfers the related goods or services. Contract liabilities are recognised as revenue when the Company performs under the contract (i.e., transfers control of the related goods or services to the customer).
k. Recognition of interest income or expense
Interest income or expense is accrued on a time basis and recognised using the effective interest method.
The'' effective interest rate'' is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument to:
- the gross carrying amount of the financial asset; or
- the amortised cost of the financial liability.
In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the a mortised cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the a mortised cost of the financial asset. If the
asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.
l. Borrowing costs
Borrowing costs are interest and other costs (including exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs) incurred by the Company in connection with the borrowing of funds. Borrowing costs directly attributable to acquisition or construction of an asset which necessarily take a substantial period of time to get ready for their intended use are capitalized as a part of cost of the asset. Other borrowing costs are recognised as an expense in the period in which they are incurred. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
Income tax comprises current and deferred tax. It is recognised in Statement of Profit and Loss except to the extent that it relates to a business combination or an item recognised directly in equity or in other comprehensive income.
Current income tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. Current income tax assets and liabilities are measured at the amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. It is measured using tax rates (and tax laws)enactedor substantively enacted bythe reporting date.
Current tax assets and current tax liabilities are off set only if there is alegally 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.
Current income tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in other comprehensive income (OCI) or in equity). Current tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The Company shall reflect the effect of uncertainty for each uncertain tax treatment by using either most likely method or expected value method, depending on which method predicts better resolution of the treatment.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes.
Deferred tax liabilities are recognized for all temporary differences, except when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss and In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
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, except when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss and In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.
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 realized 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.
The Company offsets deferred tax assets and deferred tax liabilities if and only if it has alegallyen forceable right to set off current tax liabilities and assets and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authorities.
Sales/value added taxes/GST paid on acquisition of assets or on incurring expenses
Expenses and assets are recognised net of the amount of sales/ value added taxes/GST paid, except:
- When the tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the tax paid is recognised as part of the cost of acquisition of the asset or as part of the expense item, as applicable
- When receivables and payables are stated with the amount of tax included
The net amount of tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
Right-of-use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:
|
Plant and equipment |
3 - 5 Years |
|
Building |
1 - 10 Years |
|
Leasehold land |
99 Years |
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment. Refer to the accounting policies in section (p) Impairment of non-financial assets.
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including insubstance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Short term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases of assets (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of assets that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
Company as a lessor
Leases in which the Company does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straightline basis over the lease terms. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.
Investment property comprises of the sub lease portion of the right-of-use asset which is initially measured at cost. Subsequent to initial recognition, investment property is stated at cost less depreciation less impairment loss, if any. The cost includes an equivalent amount as reduced from the right-of-use asset at the time of commencement of the lease. The Company depreciates the investment property over the period of sub lease term.
A Financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
¦ Debt instruments at amortised cost
¦ Debt instruments at fair value through other comprehensive income (FVOCI)
¦ Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVPL)
¦ Equity instruments measured at fair value through other comprehensive income (FVOCI)
Debt instruments at amortised cost
A ''debt instrument'' is measured at the amortised cost if the asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and 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.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the gross carrying amount of the financial asset or the amortised cost of the financial liability. 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 EIR. The EIR amortisation is included in other income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss.
Debt instrument at FVOCI
A ''debt instrument'' is classified as at the FVOCI if the objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and the asset''s contractual cash flows represent SPPI.
Debt instruments included within the FVOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognised in the other comprehensive income (OCI). On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified to the Statement of Profit and Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
FVPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at amortised cost or as FVOCI, is classified as at FVPL. In addition, at initial recognition, the Company may irrevocably elect to designate a debt instrument, which otherwise meets amortised cost or FVOCI criteria, as at FVPL. However, such adoption is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch'').
Debt instruments included within the FVPL category are measured at fair value with all changes recognised in the Statement of Profit and Loss.
Equity investments
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVPL. For all other equity instruments, the Company may make an irrevocable adoption to present in other comprehensive income subsequent changes in the fair value. The Company makes such adoption on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to the Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss to retained earnings.
Equity instruments included within the FVPL category are measured at fair value with all changes recognised in the Statement of Profit and Loss.
Impairment of financial assets
The Company recognises loss allowances for expected credit loss on financial assets measured at amortised cost. At each reporting date, the Company assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset is'' credit - impaired'' when one or more events that have detrimental impact on the estimated future cash flows of the financial assets have occurred.
Evidence that the financial asset is credit-impaired includes the following observable data:
- significant financial difficulty of the borrower or issuer;
- the breach of contract such as a default or being past due for 90 days or more;
- the restructuring of a loan or advance by the Company on terms that the Company would not consider otherwise;
- it is probable that the borrower will enter bankruptcy or other financial re-organisation;or
- the disappearance of active market for a security because of financial difficulties.
The Company measures loss allowances at an amount equal to lifetime expected credit losses, except for the following, which are measured as 12 month expected credit losses:-
Bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.
Loss allowances for trade receivables are always measured at an amount equal to lifetime expected credit losses. Life time expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument.
12-month expected credit losses are the portion of expected credit losses that result from default events that are possible within 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months). In all cases, the maximum period considered when estimating expected credit losses is the maximum contractual period over which the Company is exposed to credit risk.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company''s historical experience and informed credit assessment and including forward looking information.
Measurement of expected credit losses
Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. difference between the cash flow due to the Company in accordance with the contract and the cash flow that the Company expects to receive).
Presentation of allowance for expected credit losses in the balance sheet
Loss allowance for financial assets measured at the amortised cost is deducted from the gross carrying amount of the assets.
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtors do not have assets or sources of income that could generate sufficient cash flows to repay the amount subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company''s procedure for recovery of amounts due.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e., removed from the Company''s balance sheet) 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 ''passthrough'' 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 passthrough 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.
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables as appropriate.
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.
The Company''s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments.
Subsequent measurement
For purposes of subsequent measurement, financial liabilities are classified in two categories:
¦ Financial liabilities at fair value through profit or loss (FVPL)
¦ Financial liabilities at amortised cost (loans and borrowings)
A financial liability is classified as at FVPL if it is classified as held-for-trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVPL are measured at fair value and net gains and losses, including any interest expense, are recognised in Statement of Profit and Loss.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in Statement of Profit and Loss. Any gain or loss on derecognition is also recognised in Statement of Profit and Loss.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
Derivative financial instruments
The Company uses various types of derivative financial instruments to hedge its currency and interest risk etc. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the Balance Sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
p. Impairment of non-financial assets
The Company''s non-financial assets other than inventories and deferred tax assets, are reviewed at each reporting date to determine if there is indication of any impairment. If any such indication exists, then the asset''s recoverable amount is estimated. For impairment testing, assets that do not generate independent cash flows are grouped together into cash generating units (CGUs). Each CGU represents the smallest Company of assets that generate cash inflows that are largely independent of the cash inflows of other assets or CGUs.
The recoverable amount of as CGU (or an individual asset) is the higher of its value in use and fair value less cost to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current assessments of the time value of money and the risks specific to the CGU (or the asset).
The Company''s corporate assets (e.g., central office building for providing support to CGU) do not generate independent cash inflows. To determine impairment of a corporate asset, recoverable amount is determined for the CGUs to which the corporate asset belongs.
An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognised in Statement of Profit and Loss. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. Such a reversal is made only to the extent that the asset''s carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortisation, if no impairment loss had been recognised.
q. Operating Segments
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company''s other components, and for which discrete financial information is available. All operating segments'' operating results are reviewed regularly by the Company''s Chief Operating Decision Maker (CODM) to make decisions about resources to be allocated to the segments and assess their performance.
r. Cash and cash equivalents
Cash and cash equivalents in the balance sheet include cash at banks and on hand, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Company''s cash management.
Cash flows are reported using the indirect method, whereby profit for the year is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Companyare segregated.
t. Government grants
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.
The Company recognises a liability to pay dividend to equity holders of the Company when the distribution is authorised and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.
v. Earnings per share
Basic earnings/ (loss) per share are calculated by dividing the net profit/ (loss) for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events of bonus issue and share split. For the purpose of calculating diluted earnings/ (loss) per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
w. Foreign currencies
The standalone Ind AS financial statements are presented in INR, which is also the Company''s functional currency. Functional currency is the currency of the primary economic environment in which a Company operates and is normally the currency in which the Company primarily generates and expends cash.
Transactions and balances Initial recognition
Transactions in foreign currencies are initially recorded by the Company at their respective functional currency spot rates at the date the transaction first qualifies for recognition.
Measurement at the reporting date
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Exchange differences arising on settlement or translation of monetary items are recognised in statement of profit and loss.
Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.
A number of the Company''s accounting policies and disclosures require measurement of fair values, for both financial and non-financial assets and liabilities. The Company has an established control framework with respect to measurement of fair values. This includes the top management division which is responsible for overseeing all significant fair value measurements, including Level 3 fair values. The top management division regularly reviews significant unobservable inputs and valuation adjustments. If third party information, is used to measure fair values, then the top management division assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirement of
Ind AS, including the level in the fair value hierarchy in which the valuations should be classified.
Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
- Level1: quoted prices (unadjusted)in active markets for identical assets and liabilities.
- Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
When measuring the fair value of an asset or liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirely in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the changes have occurred.
Further information about the assumptions made in measuring fair values used in preparing these standalone financial statements is included in the respective notes.
2.3 Changes in accounting policies and disclosures
New and amended standards
Amendments to Ind AS 116: Covid-19-Related Rent Concessions
The amendments provide relief to lessees from applying Ind AS 116 guidance on lease modification accounting for rent concessions arising as a direct consequence of the Covid-19 pandemic. As a practical expedient, a lessee may elect not to assess whether a Covid-19 related rent concession from a lessor is a lease modification. A lessee that makes this election accounts for any change in lease payments resulting from the Covid-19 related rent concession the same way it would account for the change under Ind AS 116, if the change were not a lease modification.
The amendments are applicable for annual reporting periods beginning on or after the April 01, 2020. This amendment had no impact on the standalone Ind AS financial statements of the Company.
The MCA has also carried out amendments to the following other accounting standards. The effect on adoption of following mentioned amendments were insignificant on the standalone Ind AS financial statements.
(i) Ind AS 103 Business Combinations
(ii) Amendments to Ind AS 1 and Ind AS 8: Definition of Material
(iii) Amendments to Ind AS 107 and Ind AS 109: Interest Rate Benchmark Reform
MCA issued notification dated March 24, 2021 to amend Schedule III to the Companies Act, 2013 to enhance the disclosures required to be made by a company in its financial statements. These amendments are effect
Mar 31, 2018
1. Reporting entity
KDDL Limited (''the Company''), is a public limited company domiciled in India and was incorporated in January 1981. The Company is listed on BSE Limited and National Stock Exchange (NSE) of India Limited in India.
The Company is primarily engaged in the business of manufacturing dials, watch hands and precision components. Currently, the Company has its manufacturing facilities, at Parwanoo (Himachal Pradesh) and Derabassi (Punjab) - dial manufacturing, Bengaluru (Karnataka) - hands and precision components manufacturing.
2. Significant accounting policies
a) Basis of preparation
i) Statement of compliance
These standalone Ind AS financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 and the Companies (India Accounting Standards) Amendment Rules, 2016 notified under section 133 of Companies Act, 2013, (the ''Act'') and other relevant provisions of the Act.
The Company''s financial statements upto and for the year ended 31 March 2017 were prepared in accordance with the Companies (Accounts) Rules, 2014.
As these are Company''s first financial statements prepared in accordance with Indian Accounting Standards (Ind AS), Ind AS 101, First time adoption of Indian Accounting Standards has been applied. The transition was carried out from Indian Accounting Principles generally accepted in India as prescribed under Section 133 of the Act, which was the previous GAAP. An explanation of how the transition to Ind AS has affected the previously reported financial position, financial performance and cash flow of the Company is provided in Note 34.
The standalone Ind AS financial statements were authorized for issue by the Company''s Board of Directors on 14 May 2018.
ii) Functional and presentation currency
The functional currency of the Company is the Indian rupee. These standalone Ind AS financial statements are presented in Indian rupees. All amounts have been rounded-off to the nearest lakhs, up to two places of decimal, unless otherwise indicated.
iii) Basis of measurement
The standalone Ind AS financial statements have been prepared on the historical cost basis except for the following items:
iv) Use of estimates and judgments
The preparation of standalone Ind AS financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses and the disclosure of contingent liabilities on the date of the standalone Ind AS financial statements. Actual results could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Any revision to accounting estimates is recognized prospectively in current and future periods.
In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effects on the amounts recognized in the standalone Ind AS financial statements is included in the following notes:
- Note 2(a)(v) - Fair value measurement
- Note 2(b) and 3 - Assessment of useful life of Property, plant and equipment
- Note 2(c) and 4 - Assessment of useful life of Intangible assets
- Note 2(f), 2(g),19 and 37 - Recognition and measurement of provisions and contingencies, key assumptions about the likelihood and magnitude of an outflow of resources
- Note 2(l),7 and 20 - Recognition of tax expense including deferred tax
- Note 2(n) - Impairment of financial assets
- Note 2(o) - Impairment test of non-financial assets: key assumptions underlying recoverable amounts and
- Note 38 - Measurement of defined benefit obligations: key actuarial assumptions; Share based payments
v) Measurement of fair values
A number of the Company''s accounting policies and disclosures require measurement of fair values, for both financial and non-financial assets and liabilities. The Company has an established control framework with respect to measurement of fair values. This includes the top management division which is responsible for overseeing all significant fair value measurements, including Level 3 fair values. The top management division regularly reviews significant unobservable inputs and valuation adjustments. If third party information, is used to measure fair values, then the top management division assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirement of Ind AS, including the level in the fair value hierarchy in which the valuations should be classified.
Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
- Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.
- Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
When measuring the fair value of an asset or liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirely in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the changes have occurred.
Further information about the assumptions made in measuring fair values used in preparing these standalone Ind AS financial statements is included in the respective notes
b) Property, plant and equipment (''PPE'')
Recognition and measurement
Items of PPE are measured at cost of acquisition or construction which includes capitalized finance costs less accumulated depreciation and/or accumulated impairment loss, if any.
Cost of an item of PPE comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable cost of bringing the item to its working condition for its intended use. The cost of a self-constructed item of property, plant and equipment comprises the cost of materials and direct labour, any other costs directly attributable to bringing the item to working condition for its intended use, and estimated costs of dismantling and removing the item and restoring the site on which it is located. 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.
Capital work-in-progress comprises the cost of fixed assets that are not ready for their intended use at the reporting date. Advances paid towards acquisition of PPE outstanding at each Balance sheet date, are shown under other non-current assets.
Any gain or loss on disposal of an item of property, plant and equipment is recognized in the Statement of Profit and Loss.
Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment as at 1 April 2016, measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment as on 1 April 2016.
Subsequent expenditure
Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
Depreciation
Depreciation is calculated on cost of items of PPE less their estimated residual values over their estimated useful lives using the straight-line method and is recognized in the Statement of Profit and Loss.
Depreciation on items of PPE is provided as per rates corresponding to the useful life specified in Schedule II to the Companies Act, 2013 read with the notification dated 29 August 2014 of the Ministry of Corporate Affairs. The estimated useful lives of items of property, plant and equipment for the current and comparative periods are as follows:
- Depreciation on leasehold land and improvements carried out on buildings taken on lease is provided over the period of the lease or useful life of assets, whichever is lower.
Depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.
Depreciation on additions (disposal) is provided on a pro-rata basis i.e. from (upto) the date on which asset is ready for use (disposed of).
Derecognition
A property, plant and equipment is derecognized on disposal or when no future economic benefits are expected from its use and disposal. Losses arising from retirement and gains or losses arising from disposal of a tangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Profit and Loss.
c) Other intangible assets
Acquired Intangible
Intangible assets that are acquired by the Company are measured initially at cost. Cost of an item of Intangible asset comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable cost of bringing the item to its working condition for its intended use. After initial recognition, an intangible asset is carried at its cost less any accumulated amortization and any accumulated impairment loss.
Subsequent expenditure
Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognized in Statement of Profit and Loss as incurred.
Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of its intangible assets recognized as at 1 April 2016, measured as per the previous GAAP, and use that carrying value as the deemed cost of such intangible assets.
Amortization
Amortization is calculated to write off the cost of intangible assets over their estimated useful lives using the straight-line method, and is included in depreciation and amortization expense in Statement of Profit and Loss.
The estimated useful lives are as follows:
- Technical know-how 4 Years
- Software 6 Years
- Web Portal 6 Years
Amortization method, useful life and residual values are reviewed at the end of each financial year and adjusted if appropriate.
Derecognition
Intangible assets is derecognized on disposal or when no future economic benefits are expected from its use and disposal.
The cost of inventories includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their present location and condition.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary to make the sale. The net realizable value of work-in-progress is determined with reference to the selling prices of related finished products.
Raw materials, components and other supplies held for use in the production of finished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realizable value.
The comparison of cost and net realizable value is made on an item-by-item basis.
e) Employee benefits
Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid e.g., salaries and wages and bonus etc., if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the amount of obligation can be estimated reliably.
Share-based payment transactions
The grant date fair value of equity settled share-based payment awards granted to employees is recognized as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognized as expense is based on the estimate of the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that do meet the related service and non- market vesting conditions at the vesting date.
The Company has elected to apply Ind AS 102 Share based payment to equity instruments that vested after the date of transition to Ind AS pursuant to the exemption under Ind AS 101.
Post-employment benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays specified contributions to a separate entity and will have no legal or constructive obligation to pay further amounts. The Company makes specified monthly contributions towards employee provident fund and employee state insurance scheme (''ESI'') to Government administered scheme which is a defined contribution plan. The Company''s contribution is recognized as an expense in the Statement of Profit and Loss during the period in which the employee renders the related service. Certain employees of the Company are also participants in the superannuation plan (âthe Plan"), a defined contribution plan. The Company makes specified monthly contributions to Life Insurance Corporation of India (LIC). Contribution made by the Company to the plan during the year is charged to Statement of Profit and Loss.
Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. Gratuity is a defined benefit plan. The administration of the gratuity scheme has been entrusted to the Life Insurance Corporation of India (''LIC''). The Company''s net obligation in respect of gratuity is calculated separately by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligation is performed annually by a qualified actuary using the projected unit credit method.
Re-measurements of the net defined benefit liability i.e. Gratuity, which comprise actuarial gains and losses are recognized in Other Comprehensive Income (OCI). The Company determines the net interest expense (income) on the net defined benefit liability for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then- net defined benefit liability, taking into account any changes in the net defined benefit liability during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognized in the Statement of Profit and Loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service (''past service cost'' or ''past service gain'') or the gain or loss on curtailment is recognized immediately in the Statement of Profit and Loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.
Compensated absences
The Company''s net obligation in respect of long-term employee benefits other than post-employment benefits is 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 related assets is deducted. Such obligation such as those related to compensate absences is measured on the basis of an annual independent actuarial valuation using the projected unit cost credit method. Remeasurements gains or losses are recognized in profit or loss in the period in which they arise.
f) Provisions (other than for employee benefits)
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows (representing the best estimate of the expenditure required to settle the present obligation at the balance sheet date) at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost. Expected future losses are not provided for.
g) Contingent liabilities and contingent assets
A contingent liability exists when there is a possible but not probable obligation, or a present obligation that may, but probably will not, require an outflow of resources, or a present obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resources is remote.
Contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits to the entity. Contingent assets are recognized when the realization of income is virtually certain, then the related asset is not a contingent asset and its recognition is appropriate.
A contingent asset is disclosed where an inflow of economic benefits is probable.
h) Commitments
Commitments include the amount of purchase order (net of advances) issued to parties for completion of assets. Provisions, contingent liabilities, contingent assets and commitments are reviewed at each reporting date.
i) Revenue
Sale of goods
Revenue from the sale of goods in the course of ordinary activities includes excise duty till 30 June 2017 (goods and service tax (''GST'') with effect from 1 July 2017)and is measured at the fair value of the consideration received or receivable, exclusive of taxes as applicable such as sales tax, value added taxes (VAT), service tax and GST, and is net of returns, trade discounts, quantity discounts and cash discounts. Revenue includes shipping and handling costs billed to the customer.
Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing effective control over, or managerial involvement with, the goods, and the amount of revenue can be measured reliably.
Sale of services
Revenue from services rendered is recognized in profit or loss when the services are rendered and the related costs are incurred.
Export benefits
Export benefits under various schemes notified by the government are recognized on accrual basis when no significant uncertainties as to the amount of consideration that would be derived and as to its ultimate collection exist.
j) Recognition of interest income or expense
Interest income or expense is recognized using the effective interest method.
The ''effective interest rate'' is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument to:
- The gross carrying amount of the financial asset; or
- The amortized cost of the financial liability.
In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortized cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortized cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.
k) Borrowing costs
Borrowing costs are interest and other costs (including exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs) incurred by the Company in connection with the borrowing of funds. Borrowing costs directly attributable to acquisition or construction of an asset which necessarily take a substantial period of time to get ready for their intended use are capitalized as a part of cost of the asset. Other borrowing costs are recognized as an expense in the period in which they are incurred.
l) Income taxes
Income tax comprises current and deferred tax. It is recognized in Statement of Profit and Loss except to the extent that it relates to a business combination or an item recognized directly in equity or in other comprehensive income.
Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. 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. It is measured using tax rates (and tax laws) enacted or substantively enacted by the reporting date.
Current tax assets and current tax liabilities are offset only if there is a legally enforceable right to set off the recognized amounts, and it is intended to realize the asset and settle the liability on a net basis or simultaneously.
Deferred tax
Deferred tax is recognized in respect of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes. Deferred tax is also recognized in respect of carried forward tax losses and tax credits.
Deferred tax assets are recognized to the extent that it is probable that future profits will be available against which they can be used. The existence of unused tax losses is strong evidence that future taxable profit may not be available. Therefore, in case of history of recent losses, the Company recognizes a deferred tax asset only to the extent that it has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which such deferred tax asset can be realized. Deferred tax assets - unrecognized or recognized, are reviewed at each reporting date and are recognized / reduced to the extent that it is probable / no longer probable respectively that the related tax benefits will be realized.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and deferred tax liabilities are offset only if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authorities.
m) Leases
At the inception of each lease, the lease arrangement is classified as either a finance lease or an operating lease based on the substance of the lease arrangement.
Operating leases
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Payment made under operating leases (net of any incentives received from the lessor) are charged to the Statement of Profit and Loss on a straight-line basis over the period of the lease unless the payment are structured to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases.
Finance leases
Leases of property, plant and equipment that transfer to the Company substantially all the risk and rewards of ownership are classified as finance leases. The leased assets are measured initially at an amount equal to the lower of their fair value and the present value of minimum lease payments. Subsequent to initial recognition, the assets are accounted for in accordance with the accounting policy applicable to similar owned assets.
Assets held under leases that do not transfer to the Company substantially all the risk and rewards of ownership (i.e. operating leases) are not recognized in the Company''s Balance Sheet.
n) Financial instruments
A Financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement
All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
- Debt instruments at amortized cost
- Debt instruments at fair value through other comprehensive income (FVOCI)
- Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVPL)
- Equity instruments measured at fair value through other comprehensive income (FVOCI)
Debt instruments at amortized cost
A ''debt instrument'' is measured at the amortized cost if the asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and 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.
After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate (EIR) method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the gross carrying amount of the financial asset or the amortized cost of the financial liability. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in other income in the Statement of Profit and Loss. The losses arising from impairment are recognized in the Statement of Profit and Loss.
Debt instrument at FVOCI
A ''debt instrument'' is classified as at the FVOCI if the objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and the asset''s contractual cash flows represent SPPI.
Debt instruments included within the FVOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income (OCI). On derecognition of the asset, cumulative gain or loss previously recognized in OCI is reclassified to the Statement of Profit and Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
Debt instrument at FVPL
FVPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as at amortized cost or as FVOCI, is classified as at FVPL. In addition, at initial recognition, the Company may irrevocably elect to designate a debt instrument, which otherwise meets amortized cost or FVOCI criteria, as at FVPL. However, such adoption is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch'').
Debt instruments included within the FVPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Equity investments
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognized by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVPL. For all other equity instruments, the Company may make an irrevocable adoption to present in other comprehensive income subsequent changes in the fair value. The Company makes such adoption on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the OCI. There is no recycling of the amounts from OCI to the Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss to retained earnings. KDDL Limited Notes to the Standalone Ind AS Financial Statements for the year ended 31 March 2018
Equity instruments included within the FVPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Impairment of financial assets
The Company recognizes loss allowances for expected credit loss on financial assets measured at amortized cost. At each reporting date, the Company assesses whether financial assets carried at amortized cost are credit- impaired. A financial asset is ''credit-impaired'' when one or more events that have detrimental impact on the estimated future cash flows of the financial assets have occurred.
Evidence that the financial asset is credit-impaired includes the following observable data:
- significant financial difficulty of the borrower or issuer;
- the breach of contract such as a default or being past due for 90 days or more;
- the restructuring of a loan or advance by the Company on terms that the Company would not consider otherwise;
- it is probable that the borrower will enter bankruptcy or other financial re-organization; or
- the disappearance of active market for a security because of financial difficulties.
The Company measures loss allowances at an amount equal to lifetime expected credit losses, except for the following, which are measured as 12 month expected credit losses:
- Bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.
Loss allowances for trade receivables are always measured at an amount equal to lifetime expected credit losses. Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument.
12-month expected credit losses are the portion of expected credit losses that result from default events that are possible within 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months). In all cases, the maximum period considered when estimating expected credit losses is the maximum contractual period over which the Company is exposed to credit risk.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company''s historical experience and informed credit assessment and including forward looking information.
Measurement of expected credit losses
Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. difference between the cash flow due to the Group in accordance with the contract and the cash flow that the Company expects to receive).
Presentation of allowance for expected credit losses in the balance sheet
Loss allowance for financial assets measured at the amortized cost is deducted from the gross carrying amount of the assets.
Write-off
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtors do not have assets or sources of income that could generate sufficient cash flows to repay the amount subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company''s procedure for recovery of amounts due.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e., removed from the Company''s balance sheet) 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 ''pass-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 recognize the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognizes 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.
Financial liabilities
Financial liabilities are classified as measured at amortized cost or FVPL. A financial liability is classified as at FVPL if it is classified as held-for-trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVPL are measured at fair value and net gains and losses, including any interest expense, are recognized in Statement of Profit and Loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in Statement of Profit and Loss. Any gain or loss on derecognition is also recognized in Statement of Profit and Loss.
Derecognition of financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the Statement of Profit and Loss.
Derivative financial instruments
The Company uses various types of derivative financial instruments to hedge its currency and interest risk etc. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Offset Wng
Financial assets and financial liabilities are offset and the net amount presented in the Balance Sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realism the asset and settle the liability simultaneously.
o) Impairment of non-financial assets
The Company''s non-financial assets other than inventories and deferred tax assets, are reviewed at each reporting date to determine if there is indication of any impairment. If any such indication exists, then the asset''s recoverable amount is estimated. For impairment testing, assets that do not generate independent cash flows are grouped together into cash generating units (CGUs). Each CGU represents the smallest Company of assets that generate cash inflows that are largely independent of the cash inflows of other assets or CGUs.
The recoverable amount of as CGU (or an individual asset) is the higher of its value in use and fair value less cost to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current assessments of the time value of money and the risks specific to the CGU (or the asset).
The Company''s corporate assets (e.g., central office building for providing support to CGU) do not generate independent cash inflows. To determine impairment of a corporate asset, recoverable amount is determined for the CGUs to which the corporate asset belongs.
An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognized in Statement of Profit and Loss. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. Such a reversal is made only to the extent that the asset''s 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.
p) Operating Segments
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company''s other components, and for which discrete financial information is available. All operating segments'' operating results are reviewed regularly by the Company''s Chief Operating Decision Maker (CODM) to make decisions about resources to be allocated to the segments and assess their performance.
q) Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents include cash in hand, demand deposits held with banks, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
r) Cash flow statement
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
s) Earnings per share
Basic earnings/ (loss) per share are calculated by dividing the net profit/ (loss) for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the period is adjusted for events of bonus issue and share split. For the purpose of calculating diluted earnings/ (loss) per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
t) Foreign currency transactions
Initial recognition
Transactions in foreign currencies are translated into the functional currency of the Company at the exchange rates at the dates of the transactions.
Measurement at the reporting date
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary assets and liabilities that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Exchange differences on restatement/settlement of all monetary items are recognized in statement of profit and loss.
u) Recent Accounting pronouncements
Applicable standards issued but not yet effective Ind AS 115, Revenue from contracts with customers
Ind AS 115 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Ind AS 115 will supersede the current revenue recognition standard Ind AS 18 Revenue, Ind AS 11 Construction Contracts when it becomes effective.
The core principle of Ind AS 115 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the standard introduces a 5-step approach to revenue recognition:
- Step 1: Identify the contract(s) with a customer
- Step 2: Identify the performance obligation in contract
- Step 3: Determine the transaction price
- Step 4: Allocate the transaction price to the performance obligations in the contract
- Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
Under Ind AS 115, an entity recognizes revenue when (or as) a performance obligation is satisfied, i.e. when ''control'' of the goods or services underlying the particular performance obligation is transferred to the customer.
The Company has completed its evaluation of the possible impact of Ind AS 115 and does not expect the impact of the adoption of the new standard to be material.
Appendix B, Ind AS 21 - The effect of changes in Foreign Exchange rates
The amendment clarifies on the accounting of transactions that include the receipt or payment of advance consideration in a foreign currency. The appendix explains that the date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt. The Company has completed its evaluation and the possible impact of this amendment and does not expect the impact and adoption of this amendment to be material.
(ii) Rights, preferences and restrictions attached to shares
The Company has a single class of equity shares. Accordingly, all equity shares rank equally with regard to dividends and share in the Company''s residual assets on winding up. The equity shares are entitled to receive dividend as declared from time to time. The voting rights of an equity shareholder on a poll (not on show of hands) are in proportion to its share of the paid-up equity capital of the Company. Voting rights cannot be exercised in respect of shares on which any call or other sums presently payable have not been paid. Failure to pay any amount called up on shares may lead to forfeiture of the shares. On winding up of the Company, the holders of equity shares will be entitled to receive the residual assets of the Company, remaining after distribution of all preferential amounts in proportion to the number of equity shares held.
(v) Bonus shares, shares buyback and issue of shares for consideration other than in cash (during five years immediately preceding 31 March 2018)
During the five years immediately preceding 31 March 2018, neither any bonus shares have been issued nor any shares have been bought back. Further, no shares have been issued for consideration other than cash except during the year ended 31 March 2015, 39,750 equity shares of Rs. 10 each had been issued under employee stock option plans for which only exercise price had been received in cash.
(vi) Employee stock option plan
Terms attached to stock options granted to employees of the Company are described in note 38D regarding share based payments.
16 Other equity
(also refer to Statement of Changes in Equity)
(i) Securities premium
Securities premium represents the excess consideration received by the Company over the face value of the shares issued to shareholders. This will be utilized in accordance with the applicable provisions of the Companies Act, 2013.
(ii) General reserve
The General reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the General reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the General reserve will not be reclassified subsequently to the Statement of Profit and Loss.
(iii) Employee stock options outstanding reserve
The fair value of the equity settled share based payment transactions with employees is recognized in Statement of Profit and Loss with corresponding credit to share based payment reserve.
(iv) Retained earnings
Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve, dividends or other distributions paid to shareholders.
(v) Money received against shares warrants
A share warrant is a financial instrument which gives holder the right to acquire equity shares. Money Received against Shares Warrants comprise of share warrants issued by the Company against which shares are yet to be allotted.
During the previous year ended 31 March 2017, the Company had issued 377,356 share warrant sat Rs.265 per share warrant (including securities premium of Rs 255 per share warrant) on a preferential allotment basis to certain promoters and promoter entities (''warrant holders'') and had also received 25% application money amounting to Rs 66.25 per share warrant. The warrants are to be converted into equivalent number of equity shares on payment of balance 75% amount at any time on or before the end of eighteen months from the date of allotment failing which these would stand forfeited. In the events the warrants are not converted into equity shares with in the said period, the Company is eligible to forfeit the amounts received towards the warrants. During the year ended 31 March 2018, the Company has allotted 113,206 equity shares on conversion of equivalent number of share warrants to certain warrant holders on realization of balance 75% towards these warrants.
Mar 31, 2017
1. Background and nature of operations
KDDL Limited (the "Company") incorporated in January 1981 is engaged in the business of manufacturing dials, watch hands and precision components. Currently, the Company has manufacturing facilities, at Pawanoo (Himachal Pradesh) and Derabassi (Punjab) - dial manufacturing, Bangalore (Karnataka) - hands and precision components manufacturing.
2. Significant accounting policies
a. Basis of preparation
These financial statements have been prepared under the historical cost convention on a going concern basis, on the accrual basis of accounting in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP). Indian GAAP comprises mandatory accounting standards as specified under Section 133 of the Companies Act, 2013 (''the Act''), read with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended) and other accounting pronouncements of The Institute of Chartered Accountants of India.
All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in the Revised Schedule III to the Companies Act, 2013. Based on the nature of services and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current/ non-current classification of its assets and liabilities.
b. Use of estimates
In preparing the financial statements in conformity with accounting principles generally accepted in India, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Any revisions to accounting estimates are recognized in the current and future periods.
c. Revenue recognition
a) Revenue from sale of goods is recognized when the significant risks and rewards in respect of ownership of the goods are transferred to the customer and is stated inclusive of excise duty and net of trade discounts, sales returns and sales tax wherever applicable.
b) Duty Entitlement Pass Book (DEPB) and any other scheme are recognized in the statement of profit and loss when the right to receive credit as per the terms of the scheme is established in respect of the exports made.
c) Revenue in respect of tool development and job charges is recognized as per the terms of the contract with the customers.
d) Interest income is recognized on a time proportion basis, taking into account the amount outstanding and the rates applicable.
e) Dividend income is recognized when the Company''s right to receive the same is established.
d. Fixed assets Tangible assets
Fixed assets are stated at cost (gross block) less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price (net of cenvat credit availed) and any attributable cost of bringing the asset to its working condition for its intended use.
Expenditure on account of modification / alteration in plant and machinery / building, which increases the future benefit from the existing asset beyond its previous assessed standard of performance, is capitalized.
Borrowing costs directly attributable to acquisition or construction of fixed assets, which necessarily takes a substantial period of time to get ready for their intended use are capitalized.
Assets acquired on hire purchase are capitalized at the inception of the hire purchase agreement. Interest cost is charged to statement of profit and loss on accrual basis.
Intangible assets
Intangible assets are stated at cost (gross block) less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price (net of cenvat credit availed) and any attributable cost of bringing the asset to its working condition for its intended use.
e. Depreciation and amortization
Pursuant to the notification in Part II of Schedule II to the Companies Act, 2013, effective from 1 April 2014, the management has reassessed and changed, wherever necessary the useful lives to compute depreciation, to conform to the requirements of the Companies Act, 2013. Depreciation on fixed assets is provided on straight line method based on life prescribed as per Schedule II of the Companies Act, 2013.
- Depreciation on improvements carried out on buildings taken on lease (included under buildings) is provided over the period of the lease or useful life of the assets, whichever is lower.
- Depreciation on a particular class of dies and tools manufactured by the Company and put to use after 1 April 2003 is provided over a period of 3 years.
- The cost of leasehold land other than land purchased during the current year at Bangalore for setting up new plant (amortized over the period of lease) is not amortized as these are perpetual leases.
- Know-how is amortized over a period of four years.
- Software is amortized over a period not exceeding six years,
f. Inventories
Inventories are valued as follows:
1. Raw materials and components, stores and spares, finished goods and work-in-progress: At lower of cost and net realizable value.
2. Cost of inventories is ascertained on the following basis:
a) Raw materials and components and stores and spares cost includes material cost, custom duty, freight and related direct expenses incurred in bringing the inventories to present location and condition. Cost is determined on moving weighted average basis.
b) Work-in-progress is valued at raw material cost plus conversion costs depending upon the stage of completion.
c) Finished goods are stated at the lower of cost or net realizable value. Cost is determined using moving weighted average cost basis and includes the raw material cost plus conversion costs, packing cost and other overheads costs incurred to bring the goods to their present location and condition.
g. Investments
Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments.
Long-term investments are stated at cost. Provision is made for diminution in the value of long-term investments to recognize decline, if any, other than temporary in nature.
h. Foreign currency transactions
Investments in foreign entities are recorded at the exchange rate prevailing on the date of making the investment. Transactions in foreign currencies are recorded at the rates prevailing on the date of the transaction and monetary items denominated in foreign currency are restated at the rate prevailing on the balance sheet date.
Differences arising on foreign currency translations of transactions settled during the year are recognized in the statement of profit and loss.
Forward exchange contracts not covered under Accounting Standard 11 ''Effect of change in Foreign Exchange Rates'', that are entered to hedge the foreign currency risk of highly probable forecast transactions and unrecognized firm commitments are marked to market at the balance sheet date and exchange loss is recognized in the statement of profit and loss immediately. Any gain is ignored and not recognize in the financial statements, in accordance with the principles of prudence enunciated in Accounting Standard 1-Disclosure of Accounting Policies.
The premium or discount arising at the inception of the forward contracts other than those entered into to hedge the foreign currency risk of firm commitments or highly probable forecast transactions is amortized as expense or income over the life of the contract.
Any profit or loss arising on cancellation or renewal of forward exchange contracts is recognize as income or expense for the year.
i. Employee benefits
Short term employee benefits
All employee benefits payable/available within twelve months of rendering the service are classified as short term employee benefits. Benefits such as salaries, wages, bonus, etc are recognized in the statement of profit and loss in the period in which the employee renders the related service.
Post-employment benefits Defined contribution plan
The company makes specified contribution towards employee provident fund to Employees Provident Fund administered by the Regional Provident Commissioner. The Company''s contribution to provident fund, being a defined contribution plan, is recognized in the statement of profit and loss in the financial year to which it relates.
In respect of superannuation, the Company makes contribution to Life Insurance Corporation of India ("LIC") of an amount payable by the trusts to LIC, which is charged to the statement of profit and loss.
Defined benefit plan
Gratuity is a post-employment defined benefit plan. The present value of obligation for gratuity is determined based on actuarial valuation using the Projected Unit Credit Method, less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. Gratuity and superannuation funds are administered by trustees of independently constituted trusts. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to the statement of profit and loss in the year in which such gains or losses arise.
Other long-term liability
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 recognized as a liability determined based on actuarial valuation using the Projected Unit Credit Method at the balance sheet date.
Actuarial Gains/Losses
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to the statement of profit and loss in the year in which such gains or losses arise.
j. Employee Stock Option Plan (ESOP)
Stock options granted to the employees under the stock options schemes are accounted at intrinsic value as per the accounting treatment prescribed by the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (''Guidelines'') and guidance note on Employee share based payments issued by the Institute of Chartered Accountants of India. Accordingly, the excess of market price, determined as per the Guidelines and guidance note, of underlying equity shares (market value), over the exercise price of the options is recognize as deferred stock compensation expense and is charged to statement of profit and loss on a straight line basis over the vesting period of the options. The amortized portion of the cost is shown under shareholders'' funds.
k. Taxes on income
Tax expense comprises current tax and deferred income tax.
Current tax is determined as the amount of tax payable in respect of taxable income for the year.
Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. In respect of carry forward losses and unabsorbed depreciation, deferred tax assets are recognized only to the extent there is virtual certainty that sufficient future taxable income will be available against which such losses can be realized.
I. Earnings per share
The earnings considered in ascertaining the Company''s earnings per share comprise the net profit or loss for the year attributable to the equity shareholders. Earnings per share are computed using the weighted average number of shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity share holders and the weighted average number of shares outstanding during the period are adjusted for the effect of all dilutive potential equity shares.
m. Leases
Leases of assets under which significant risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease rentals in respect of assets taken under an operating lease are charged to the statement of profit and loss on a straight line basis over the lease term.
In respect of assets given on operating lease, income is being recognize on a straight line basis over the lease term.
n. Contingent liabilities and provisions
A provision is created when there is a 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 at the reporting date. 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.
The company does not recognize assets which are of contingent nature until there is virtual certainty of readability of such assets. However, if it has become virtually certain that an inflow of economic benefits will arise, asset and related income is recognized in the financial statements of the period in which the change occurs.
o. Impairment of assets
The Company on an annual basis makes an assessment of any indicator that may lead to impairment of assets. If any such indication exists, the Company estimates the recoverable amount of the assets. If such recoverable amount is less than the carrying amount, then the carrying amount is reduced to its recoverable amount by treating the difference as impairment loss and is charged to the statement of profit and loss.
p. Cash and cash equivalents
Cash and cash equivalents comprise cash and deposit with banks. The Company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.
Mar 31, 2016
Summary of significant accounting policies and other explanatory information for the year ended 31 March 2016
1. Background and nature of operations
KDDL Limited (the "Company") incorporated in January 1981 is engaged in the business of manufacturing dials, watch hands and precision components. Currently, the Company has manufacturing facilities, at Pawanoo (Himachal Pradesh) and Derabassi (Punjab) - dial manufacturing, Bangalore (Karnataka) - hands and precision components manufacturing.
2. Significant accounting policies
a. Basis of preparation
These financial statements have been prepared under the historical cost convention on a going concern basis, on the accrual basis of accounting in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP). Indian GAAP comprises mandatory accounting standards as specified under Section 133 of the Companies Act, 2013 (''the Act''), read with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended) and other accounting pronouncements of The Institute of Chartered Accountants of India.
All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in the Revised Schedule III to the Companies Act, 2013. Based on the nature of services and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of current/ non-current classification of its assets and liabilities.
b. Use of estimates
In preparing the financial statements in conformity with accounting principles generally accepted in India, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Any revisions to accounting estimates are recognized in the current and future periods.
c. Revenue recognition
a) Revenue from sale of goods is recognized when the significant risks and rewards in respect of ownership of the goods are transferred to the customer and is stated inclusive of excise duty and net of trade discounts, sales returns and sales tax wherever applicable.
b) Duty Entitlement Pass Book (DEPB) and any other scheme are recognized in the statement of profit and loss when the right to receive credit as per the terms of the scheme is established in respect of the exports made.
c) Revenue in respect of tool development and job charges is recognized as per the terms of the contract with the customers.
d) Interest income is recognized on a time proportion basis, taking into account the amount outstanding and the rates applicable.
e) Dividend income is recognized when the Company''s right to receive the same is established.
d. Fixed assets Tangible assets
Fixed assets are stated at cost (gross block) less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price (net of cenvat credit availed) and any attributable cost of bringing the asset to its working condition for its intended use.
Expenditure on account of modification / alteration in plant and machinery / building, which increases the future benefit from the existing asset beyond its previous assessed standard of performance, is capitalized.
Borrowing costs directly attributable to acquisition or construction of fixed assets, which necessarily takes a substantial period of time to get ready for their intended use are capitalized.
Assets acquired on hire purchase are capitalized at the inception of the hire purchase agreement. Interest cost is charged to statement of profit and loss on accrual basis.
Intangible assets
Intangible assets are stated at cost (gross block) less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price (net of cenvat credit availed) and any attributable cost of bringing the asset to its working condition for its intended use.
e. Depreciation and amortization
Pursuant to the notification in Part II of Schedule II to the Companies Act, 2013, effective from 1 April 2014, the management has reassessed and changed, wherever necessary the useful lives to compute depreciation, to conform to the requirements of the Companies Act, 2013. Depreciation on fixed assets is provided on straight line method based on life prescribed as per Schedule II of the Companies Act, 2013.
- Depreciation on improvements carried out on buildings taken on lease (included under buildings) is provided over the period of the lease or useful life of the assets, whichever is lower.
- Depreciation on a particular class of dies and tools manufactured by the Company and put to use after 1 April 2003 is provided over a period of 3 years.
- The cost of leasehold land other than land purchased during the current year at Bangalore for setting up new plant (amortized over the period of lease) is not amortized as these are perpetual leases.
- Know-how is amortized over a period of four years.
- Software is amortized over a period not exceeding six years.
f. Inventories
Inventories are valued as follows:
1. Raw materials and components, stores and spares, finished goods and work-in-progress:
At lower of cost and net realizable value.
2. Cost of inventories is ascertained on the following basis:
a) Raw materials and components and stores and spares cost includes material cost, custom duty, freight and related direct expenses incurred in bringing the inventories to present location and condition. Cost is determined on moving weighted average basis.
b) Work-in-progress is valued at raw material cost plus conversion costs depending upon the stage of completion.
c) Finished goods are stated at the lower of cost or net realizable value. Cost is determined using moving weighted average cost basis and includes the raw material cost plus conversion costs, packing cost and other overheads costs incurred to bring the goods to their present location and condition.
g. Investments
Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments.
Long-term investments are stated at cost. Provision is made for diminution in the value of long-term investments to recognize decline, if any, other than temporary in nature.
h. Foreign currency transactions
Investments in foreign entities are recorded at the exchange rate prevailing on the date of making the investment. Transactions in foreign currencies are recorded at the rates prevailing on the date of the transaction and monetary items denominated in foreign currency are restated at the rate prevailing on the balance sheet date.
Differences arising on foreign currency translations of transactions settled during the year are recognized in the statement of profit and loss.
Forward exchange contracts not covered under Accounting Standard 11 ''Effect of change in Foreign Exchange Rates'', that are entered to hedge the foreign currency risk of highly probable forecast transactions and unrecognized firm commitments are marked to market at the balance sheet date and exchange loss is recognized in the statement of profit and loss immediately. Any gain is ignored and not recognized in the financial statements, in accordance with the principles of prudence enunciated in Accounting Standard 1- Disclosure of Accounting Policies.
The premium or discount arising at the inception of the forward contracts other than those entered into to hedge the foreign currency risk of firm commitments or highly probable forecast transactions is amortized as expense or income over the life of the contract.
Any profit or loss arising on cancellation or renewal of forward exchange contracts is recognized as income or expense for the year.
i. Employee benefits
Short term employee benefits
All employee benefits payable/available within twelve months of rendering the service are classified as short term employee benefits. Benefits such as salaries, wages, bonus, etc are recognized in the statement of profit and loss in the period in which the employee renders the related service.
Post-employment benefits
Defined contribution plan
The company makes specified contribution towards employee provident fund to Employees Provident Fund administered by the Regional Provident Commissioner. The Company''s contribution to provident fund, being a defined contribution plan, is recognized in the statement of profit and loss in the financial year to which it relates.
In respect of superannuation, the Company makes contribution to Life Insurance Corporation of India ("LIC") of an amount payable by the trusts to LIC, which is charged to the statement of profit and loss.
Defined benefit plan
Gratuity is a post-employment defined benefit plan. The present value of obligation for gratuity is determined based on actuarial valuation using the Projected Unit Credit Method, less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. Gratuity and superannuation funds are administered by trustees of independently constituted trusts. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to the statement of profit and loss in the year in which such gains or losses arise.
Other long term liability
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 recognized as a liability determined based on actuarial valuation using the Projected Unit Credit Method at the balance sheet date.
Actuarial Gains/Losses
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to the statement of profit and loss in the year in which such gains or losses arise.
j. Employee Stock Option Plan (ESOP)
Stock options granted to the employees under the stock options schemes are accounted at intrinsic value as per the accounting treatment prescribed by the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (''Guidelines'') and guidance note on Employee share based payments issued by the Institute of Chartered Accountants of India. Accordingly, the excess of market price, determined as per the Guidelines and guidance note, of underlying equity shares (market value), over the exercise price of the options is recognized as deferred stock compensation expense and is charged to statement of profit and loss on a straight line basis over the vesting period of the options. The amortized portion of the cost is shown under shareholders'' funds.
k. Taxes on income
Tax expense comprises current tax and deferred income tax.
Current tax is determined as the amount of tax payable in respect of taxable income for the year.
Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. In respect of carry forward losses and unabsorbed depreciation, deferred tax assets are recognized only to the extent there is virtual certainty that sufficient future taxable income will be available against which such losses can be realized.
l. Earnings per share
The earnings considered in ascertaining the Company''s earnings per share comprise the net profit or loss for the year attributable to the equity shareholders. Earnings per share are computed using the weighted average number of shares outstanding during the year.
For the purpose of calculating diluted earning per share, the net profit or loss for the period attributable to equity share holders and the weighted average number of shares outstanding during the period are adjusted for the effect of all dilutive potential equity shares.
m. Leases
Leases of assets under which significant risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease rentals in respect of assets taken under an operating lease are charged to the statement of profit and loss on a straight line basis over the lease term.
In respect of assets given on operating lease, income is being recognized on a straight line basis over the lease term.
n. Contingent liabilities and provisions
A provision is created when there is a 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 at the reporting date. 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.
The company does not recognize assets which are of contingent nature until there is virtual certainty of reliability of such assets. However, if it has become virtually certain that an inflow of economic benefits will arise, asset and related income is recognized in the financial statements of the period in which the change occurs.
o. Impairment of assets
The Company on an annual basis makes an assessment of any indicator that may lead to impairment of assets. If any such indication exists, the Company estimates the recoverable amount of the assets. If such recoverable amount is less than the carrying amount, then the carrying amount is reduced to its recoverable amount by treating the difference as impairment loss and is charged to the statement of profit and loss.
p. Cash and cash equivalents
Cash and cash equivalents comprise cash and deposit with banks. The Company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.
Mar 31, 2015
A Basis of preparation
These financial statements have been prepared under the historical cost
convention on a going concern basis, on the accrual basis of accounting
in accordance with the Generally Accepted Accounting Principles in
India (Indian GAAP). Indian GAAP comprises mandatory accounting
standards as specified under Section 133 of the Companies Act, 2013
('the Act'), read with Rule 7 of the Companies (Accounts) Rules, 2014
(as amended) and other accounting pronouncements of The Institute of
Chartered Accountants of India.
All assets and liabilities have been classified as current or
non-current as per the Company's normal operating cycle and other
criteria set out in the Revised Schedule III to the Companies Act,
2013. Based on the nature of services and the time between the
acquisition of assets for processing and their realisation in cash and
cash equivalents, the Company has ascertained its operating cycle as
twelve months for the purpose of current/ non-current classification of
its assets and liabilities.
b Use of estimates
In preparing the financial statements in conformity with accounting
principles generally accepted in India, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates. Any revisions to accounting estimates are recognised
in the current and future periods.
c Revenue recognition
a) Revenue from sale of goods is recognised when the significant risks
and rewards in respect of ownership of the goods are transferred to the
customer and is stated inclusive of excise duty and net of trade
discounts, sales returns and sales tax wherever applicable.
b) Duty Entitlement Pass Book (DEPB) and any other scheme are
recognized in the statement of profit and loss when the right to
receive credit as per the terms of the scheme is established in respect
of the exports made.
c) Revenue in respect of tool development and job charges is recognized
as per the terms of the contract with the customers.
d) Interest income is recognised on a time proportion basis, taking
into account the amount outstanding and the rates applicable.
e) Dividend income is recognised when the Company's right to receive
the same is established. d Fixed assets
Tangible Assets
Fixed assets are stated at cost (gross block) less accumulated
depreciation and impairment losses, if any. Cost comprises the purchase
price (net of cenvat credit availed) and any attributable cost of
bringing the asset to its working condition for its intended use.
Expenditure on account of modification / alteration in plant and
machinery / building, which increases the future benefit from the
existing asset beyond its previous assessed standard of performance, is
capitalised.
Borrowing costs directly attributable to acquisition or construction of
fixed assets, which necessarily takes a substantial period of time to
get ready for their intended use are capitalised.
Assets acquired on hire purchase are capitalised at the inception of
the hire purchase agreement. Interest cost is charged to statement of
profit and loss on accrual basis.
Intangible assets
Intangible assets are stated at cost (gross block) less accumulated
depreciation and impairment losses, if any. Cost Intangible assets are
stated at cost (gross block) less accumulated depreciation and
impairment losses, if any. Cost comprises the purchase price (net of
cenvat credit availed) and any attributable cost of bringing the asset
to its
working condition for its intended use. e Depreciation and
amortisation
Pursuant to the notification in Part II of Schedule II to the Companies
Act, 2013, effective from 1 April 2014, the management has reassessed
and changed, wherever necessary the useful lives to compute
depreciation, to conform to the requirements of the Companies Act,
2013. Depreciation on fixed assets for year ended 31 March 2015 is
provided on straight line method based on life prescribed as per
Schedule II of the Companies Act, 2013.
- Depreciation on improvements carried out on buildings taken on
lease (included under buildings) is provided over the period of the
lease or useful life of the assets, whichever is lower.
- Depreciation on a particular class of dies and tools manufactured
by the Company and put to use after 1 April 2003 is provided over a
period of 3 years.
- The cost of leasehold land is not amortised as these are perpetual
leases.
- Know-how is amortised over a period of four years.
- Software is amortised over a period not exceeding six years.
Depreciation on fixed assets for the year ended 31 March 2014 was
provided on straight line method as per the rates prescribed under
Schedule XIV to the Companies Act, 1956.
f. Inventories
Inventories are valued as follows:
1. Raw materials and components, stores and spares, finished goods and
stock in process: At lower of cost and net realisable value.
2. Cost of inventories is ascertained on the following basis:
a) Raw materials and components and stores and spares cost includes
material cost, custom duty, freight and related direct expenses
incurred in bringing the inventories to present location and condition.
Cost is determined on moving weighted average basis.
b) Work in progress is valued at raw material cost plus conversion
costs depending upon the stage of completion.
c) Finished goods are stated at the lower of cost or net realizable
value. Cost is determined using moving weighted average cost basis and
includes the raw material cost plus conversion costs, packing cost and
other overheads costs incurred to bring the goods to their present
location and condition.
g. Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments.
Long-term investments are stated at cost. Provision is made for
diminution in the value of long-term investments to recognise decline,
if any, other than temporary in nature.
h. Foreign Currency transactions
Investments in foreign entities are recorded at the exchange rate
prevailing on the date of making the investment. Transaction in
foreign currencies are recorded at the rates prevailing on the date of
the transaction and monetary items denominated in foreign currency are
restated at the rate prevailing on the balance sheet date.
Differences arising on foreign currency translations of transactions
settled during the year are recognised in the statement of profit and
loss.
Forward exchange contracts not covered under Accounting Standard 11
'Effect of change in Foreign Exchange Rates', that are entered to hedge
the foreign currency risk of highly probable forecast transactions and
unrecognized firm commitments are marked to market at the balance sheet
date and exchange loss is recognised in the statement of profit and
loss immediately. Any gain is ignored and not recognised in the
financial statements, in accordance with the principles of prudence
enunciated in Accounting Standard 1- Disclosure of Accounting Policies.
The premium or discount arising at the inception of the forward
contracts other than those entered into to hedge the foreign currency
risk of firm commitments or highly probable forecast transactions is
amortised as expense or income over the life of the contract.
Any profit or loss arising on cancellation or renewal of forward
exchange contracts is recognised as income or expense for the year.
i. Employee benefits
Short term employee benefits
All employee benefits payable/available within twelve months of
rendering the service are classified as short term employee benefits.
Benefits such as salaries, wages, bonus, etc are recognized in the
statement of profit and loss in the period in which the employee
renders the related service.
Post-employment benefits Defined contribution plan
The company makes specified contribution towards employee provident
fund to Employees Provident Fund administered by the Regional Provident
Commissioner. The Company's contribution to provident fund, being a
defined contribution plan, is recognized in the statement of profit and
loss in the financial year to which it relates.
In respect of superannuation, the Company makes contribution to Life
Insurance Corporation of India ("LIC") of an amount payable by the
trusts to LIC, which is charged to the statement of profit and loss.
Defined benefit plan
Gratuity is a post-employment defined benefit plan. The present value
of obligation for gratuity is determined based on actuarial valuation
using the Projected Unit Credit Method, less the fair value of plan
assets, together with adjustments for unrecognized actuarial gains or
losses and past service costs. Gratuity and superannuation funds are
administered by trustees of independently constituted trusts. Actuarial
gains and losses arising from experience adjustments and changes in
actuarial assumptions are charged or credited to the statement of
profit and loss in the year in which such gains or losses arise.
Other long term liability
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 recognized as a liability determined based on
actuarial valuation using the Projected Unit Credit Method at the
balance sheet date.
Actuarial Gains/Losses
Actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions are charged or credited to the
statement of profit and loss in the year in which such gains or losses
arise.
j. Employee Stock Option Plan (ESOP)
Stock options granted to the employees under the stock options schemes
are accounted at intrinsic value as per the accounting treatment
prescribed by the Securities and Exchange Board of India (Employee
Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,
1999 ('Guidelines') and guidance note on Employee share based payments
issued by the Institute of Chartered Accountants of India. Accordingly,
the excess of market price, determined as per the Guidelines and
guidance note, of underlying equity shares (market value), over the
exercise price of the options is recognised as deferred stock
compensation expense and is charged to statement of profit and loss on
a straight line basis over the vesting period of the options. The
amortised portion of the cost is shown under shareholders' funds.
k. Taxes on income
Tax expense comprises current tax and deferred income tax.
Current tax is determined as the amount of tax payable in respect of
taxable income for the year.
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. In respect of carry
forward losses and unabsorbed depreciation, deferred tax assets are
recognized only to the extent there is virtual certainty that
sufficient future taxable income will be available against which such
losses can be realised.
i. Earnings per share
The earnings considered in ascertaining the Company's earnings per
share comprise the net profit or loss for the year attributable to the
equity shareholders. Earnings per share are computed using the weighted
average number of shares outstanding during the year.
For the purpose of calculating diluted earning per share, the net
profit or loss for the period attributable to equity share holders and
the weighted average number of shares outstanding during the period are
adjusted for the effect of all dilutive potential equity shares.
m. Leases
Leases of assets under which significant risks and rewards of ownership
are effectively retained by the lessor are classified as operating
leases. Lease rentals in respect of assets taken under an operating
lease are charged to the statement of profit and loss on a straight
line basis over the lease term.
In respect of assets given on operating lease, income is being
recognised on a straight line basis over the lease term.
n. Contingent liabilities and provisions
A provision is created when there is a 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 at the
reporting date. 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.
The Company does not recognize assets which are of contingtent nature
until there is virtual certainty of realisability of such assets.
However, if it has become virtually certain that an inflow of economic
benefits will arise, asset and related income is recognized in the
financial statements of the period in which the change occurs.
o Impairment of Assets
The Company on an annual basis makes an assessment of any indicator
that may lead to impairment of assets. If any such indication exists,
the Company estimates the recoverable amount of the assets. If such
recoverable amount is less than the carrying amount, then the carrying
amount is reduced to its recoverable amount by treating the difference
as impairment loss and is charged to the statement of profit and loss.
p Cash and cash equivalent
Cash and cash equivalents comprise cash and deposit with banks. The
Company considers all highly liquid investment with a remaining
maturity at the date of purchase of three months or less and that are
readily convertible to known amounts of cash to be cash equivalent.
a. The Company has only one class of equity shares having a par value
of Rs.10 each. Each holder of equity share is entitled to one vote per
share. In the event of liquidation of the Company, holders of equity
shares will be entitled to receive any of the remaining assets of the
Company, after distribution of all preferential amounts. The
distribution will be in proportion to the number of equity shares held
by the shareholders.
d. Shares reserved for issue under options and other commitments
As on 31 March 2015, 39,750 (previous year : 84,000) equity shares have
been reserved for issue under the Employee Stock Plan of the company
(Refer note 41).
e. Utlisation of proceeds received pursuant to issue of shares
The Company has allotted 39,750 equity shares of face value of Rs 10
each during the year ended 31 March 2015 to the eligible employees on
account of exercise of vested stock under Employee Stock Option Plan
2011. Consequent to the said allotment, the Company has received Rs.
4,770,000 as allotment money. Out of such proceeds, Rs 3,330,000 has
been utilised by the Company for meeting its working capital
requirements. The outstanding balance of Rs 1,440,000 has been kept in
a separate bank account.
f. Shares issued for consideration other than cash
The Company has not issued any share pursuant to a contract without
payment being received in cash in the current year and preceding five
years. The Company has not issued any bonus shares nor has there been
any buy-back of shares in the current year and preceding five years.
Term loans from banks amounting to Rs.161,638,987 (previous year Rs.
199,039,685) (including current maturities of long term debt amounting
to Rs. 65,393,521 (previous year Rs. 65,569,287) as referred to in Note
11) are secured as under:
- Term loans from Bank of India amounting to Rs. 78,373,720 (previous
year Rs 78,365,764)(including current maturities of long term debt
amounting to Rs. 30,213,521(previous year Rs. 32,703,000) and buyers
credit Nil (previous year Rs 12,842,509) availed as a sub limit to term
loan) carrying interest rate of 3.20% and 2.95% over the bank base rate
are secured by way of first pari passu charge on all the plant and
machinery and furniture and fixtures of the Company excluding the fixed
assets installed at packaging division at Chandigarh (KPAC), hands
division at Bengaluru (KHAN-2), and the plant and machinery and
furniture and fixtures of dials division at Parwanoo (TTPA) acquired
before 31 March 2005 and second charge on all the current assets (save
and except the book debts) subject to the first charge in favour of the
Company's bankers for securing the working capital limits. The term
loan is further secured by way of first pari passu mortgage charge on
land and building of dials division at Derabassi (KDER). The term loans
are also personally guaranteed by the Chairman and Chief Executive
Officer (CEO) of the Company.
- Term loans from IDBI amounting to Rs. 3,780,000 (previous year Rs.
8,820,000)(including current maturities of long term debt amounting to
Rs. 3,780,000 (previous year Rs.5,040,000 ), carrying interest rate of
2.5% over the bank base rate and Corporate loan amounting to Rs.
39,284,000 (previous year Rs 40,000,000)(includng current maturities of
long term debt amounting to Rs. 14,288,000)(previous year Rs.
10,714,287) carrying interest rate of 3% over the bank base rate are
secured by way of first pari passu charge on all the plant and
machinery and furniture and fixtures of KDER, tool room division at
Bengaluru (EIGEN) and hands division at Bengaluru (KHAN-1) and second
charge on all the current assets (save and except the book debts)
subject to the first charge in favour of the Company's bankers for
securing the working capital limits. The term loan is further secured
by way of first pari passu mortgage charge on land and building of
KDER. The term loans are also personally guaranteed by the Chairman and
Chief Executive Officer (CEO) of the Company.
-Term loan from Corporation Bank amounting to Rs. 40,201,267 (previous
year Rs.42,313,207) (including current maturities of long term debt
amounting to Rs. 17,112,000 (previous year Rs 17,112,000) and buyers
credit nil (previous year Rs 16,698,205) availed as a sub limit to term
loan) carrying interest rate of 5.50% over the bank base rate, are
secured by way of first exclusive charge on all the plant and machinery
and furniture and fixtures of KHAN-2 and second charge on all the
current assets (save and except the book debts) subject to the first
charge in favour of the Company's bankers for securing the working
capital limits. The loan is further secured by exclusive mortgage
charge on land and building of KHAN-1.
Repayment terms of term loans from banks (including the current
maturities of long term debt as referred to in Note 11) are given as
under:
- Term loan from IDBI amounting to Rs. 3,780,000 is repayable in 3
quarterly instalments of Rs. 1,260,000 commencing from 30 April 2015.
The last instalment would be repaid on 31 October 2015.
- Term loan from IDBI amounting to Rs. 39,284,000 (sanctioned amount
being Rs. 50,000,000) is repayable in 10 quarterly instalments of Rs.
3,572,000 and last instalment of Rs. 35,64,000 commencing from 30 June
2015. The last instalment would be repaid on 31 December 2017.
- Term loan from Bank of India amounting to Rs. 22,807,748 is repayable
in 12 equal quarterly instalments of Rs. 1,875,000 and last instalment
of Rs. 307,748 commencing from 31 December 2015. The last instalment
would be repaid on 31 December 2018.
- Term loan from Bank of India amounting to Rs. 1,016,834 is repayable
in 2 equal quarterly instalments of Rs. 682,000 and Rs 334,834 on 30
June 2015 and 30 September 2015 respectively.
- Term loan from Bank of India amounting to Rs. 13,238,432 is repayable
in 10 quarterly instalments of Rs. 1,250,000 and last instalment of Rs.
738,432 commencing from 30 April 2015. The last instalment would be due
on 30 October 2017.
- Term loan from Bank of India amounting to Rs. 1,071,687 is repayble
in one instalment of Rs. 1,071,687 on 30 April 2015.
- Term loan from Corporation Bank amounting to Rs. 16,201,207
(sanctioned amount being Rs. 50,000,000) is repayable in 5 quarterly
instalments of Rs.2,778,000 and last instalment of Rs. 2,311,207
commencing from 30 June 2015. The last instalment would be repaid on 30
September 2016.
- Term loan from Corporation Bank amounting to Rs. 24,000,000
(sanctioned amount being Rs. 30,000,000) is repayable in 16 quarterly
instalments of Rs. 1,500,000 commencing from 30 June 2015. The last
instalment would be repaid on 31 March 2019.
- Term loan from Bank of India amounting to Rs. 21,422,265 (sanctioned
amount Rs. 50,000,000) is repayable in 6 quarterly instalments of Rs.
3,125,000 and last instalment of Rs. 2,672,265 commencing from 30 April
2015. The last instalment would be repaid on 31 October 2016.
- Term loan from Bank of India amounting to Rs. 18,816,754 is repayable
in 10 quarterly instalments of Rs. 1,718,750 and last instalment of Rs.
1,629,254 commencing from 30 June 2015. The last instalment would be
repaid on 31 December 2017.
b. Details of security and terms of repayment of term loans from others
Term loan from Intec Capital limited amounting to Rs. 10,160,134 (
previous year Nil) (including current maturities of long term debt
amounting to Rs. 1,736,449 (previous year Nil) carrying fixed interest
rate of 11.75% is secured by way of hypothecation of the specific asset
purchased out of proceeds of the loan. The loan is also personally
guaranteed of Chairman and Chief Executive Officer (CEO) of the
Company. The loan is to be repaid in 56 monthly intallments as per the
repayment schedule in equivated annual installments commencing from 1
April 2015. The last instalment would be repaid on 1 November 2019.
c. Vehicle loans from banks carrying interest rate in the range of 8.5%
per annum to 12.25% per annum are secured against hypothecation of
specific vehicle purchased out of the proceeds of those loans. The
loans are to be repaid as per the respective repayment schedule in
equivated monthly installments.
d. Inter corporate deposits amounting to Rs. 15,000,000 from VBL
Innovations Private Limited carrying interest rate of 16% per annum due
for repayment in 20 May 2016.
e. Inter corporate deposit amounting to Rs. 9,300,000 from Vardhan
Properties and Investments Limited carrying interest rate of 14% per
annum are due for repayment in June 2015 .
f. Public deposits carrying interest rates in the range of 9.5% per
annum to 12.5% per annum are repayable in 6 months to 3 years from the
respective dates of deposit.
(ii) Defined benefit plan/other long term benefit plans
a. Gratuity
b. Compensated absences
The following table set out the status of the plan for gratuity and
compensated absences as required under Accounting Standard (AS) - 15
(R) - Employee benefits and the reconciliation of opening and closing
balances of the present value of the defined benefit obligation:
Notes :
1) The discount rate is based on the prevailing market yield of Indian
Government bonds as at the balance sheet date for the estimated terms
of obligations.
2) The expected return is based on the expectation of the average long
term rate of return on investments of the fund during the estimated
terms of obligations.
3) The estimates of future salary increases considered takes into
account the inflation, seniority, promotion and other relevant factors.
4) Plan assets mainly comprise funds managed by the insurer i.e. Life
insurance corporation of India.
5) For Gratuity, the Company makes annual contributions to the Life
insurance corporation of India ('LIC') of an amount advised by the LIC.
6) An amount of Rs. 3,500,000 was paid by the Company on 31 March 2014
but had not been considered by LIC as contributions received as on 31
March 2014, though the same had been considered as contribution made
for the year ended 31 March 2014.
a. Details of security of short-term secured loans
- Working capital borrowings carrying interest rate varying from 12.50%
to 13.25% are secured by hypothecation of stocks of stores and spares,
raw materials and components, finished goods and stock-in-process and
book debts and other assets of the Company (both present and future),
on pari passu basis except packaging unit (KPAC) and are further
secured by a second charge on the entire fixed assets of the Company.
These loans are also guaranteed by the Chairman and Chief Executive
Officer (CEO) of the Company and is repayable on demand.
- Buyers credit from corporation bank amounting to Rs 8,231,865
carrying interest rate 6 month libor plus .80% is secured against
hypothecation of inventory and receivables is repayable on demand.
- Buyers credit from IDBI amounting to Rs 26,952,400 carrying interest
rate varying from 6 month libor plus .65% to 6 month libor plus 1.25%
is secured against hypothecation of inventory and receivables is
repayable on demand.
- Buyers credit from bank of India amounting to Rs 6,445,273 carrying
interest rate varying from 6 month libor plus 1.2% to 6 month libor
plus 1.3% is secured against hypothecation of inventory and receivables
is repayable on demand.
a. Dues to micro and small enterprises pursuant to section 22 of the
Micro, Small and Medium Enterprises Development Act (MSMED), 2006
Amount due to entities covered under Micro and Small Enterprises as
defined in the MSMED Act, 2006, have been identified on the basis of
information available with the management of the Company. As per the
information available with the management of the company, there was no
amount due to any such entities which needs to be disclosed.
a. Dues to micro and small enterprises pursuant to section 22 of the
Micro, Small and Medium Enterprises Development Act (MSMED), 2006
Amount due to entities covered under Micro and Small Enterprises as
defined in the MSMED Act, 2006, have been identified on the basis of
information available with the management of the Company. As per the
information available with the management of the company, there was no
amount due to any such entities which needs to be disclosed.
* The Board of Directors have recommended dividend @ 20% (previous year
15%) amounting to Rs 2 (previous year Rs 1.5) per share. The dividend
proposed by the Board of Directors is subject to the approval of the
shareholders in the ensuing Annual general meeting.
a) Cash and cash equivalents include Rs 1,420,904 (previous year Rs
1,288,986) held in dividend accounts which is not available for use by
the Company.
b) Rs 34,536,375 (previous year 23,342,756) has been placed as fixed
deposits with banks for repayment of deposits as required under section
73 of the Companies Act, 2013 (corresponding to section 58A of the
Companies Act, 1956) and margin money for working capital.
*During the year ended 31 March 2015 and 31 March 2014, the Company has
provided for other than temporary diminution in the value of its
investment in its joint venture, Satva Jewellery and Design Limited
amounting to Rs. 1,396,171 and Rs 300,000 respectively considering the
erosion of their net worth based on the their financial results as per
management estimate and future projections.
**During the year ended 31 March 2014, the Company has closed down two
of its units KHIM I situated at Parwanoo and KHAR situated at Barwala.
The Company has written off fixed assets comprising of leasehold
improvements, plant and machinery, furniture and fixtures and office
equipments having net book value of Rs. 2,338,943 at KHIM I and Rs.
3,235,917 at KHAR and the remaining net book values have been
transferred to other units of the Company.
Mar 31, 2014
A. Basis of preparation
The financial statements have been prepared to comply in accordance
with generally accepted accounting principles in India, the accounting
standards notified under the Companies Act, 1956 ("the Act") read with
the General Circular 15/2013 dated 13 September 2013 of the Ministry of
Corporate Affairs in respect of section 133 of the Companies Act, 2013.
The financial statements have been prepared under the historical cost
convention on the accrual basis except in case of the assets for which
provision for impairment is made. The accounting policies have been
consistently applied by the Company and are consistent with those used
in the previous year.
b. Use of estimates
In preparing the financial statements in conformity with accounting
principles generally accepted in India, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates. Any revisions to accounting estimates are recognised
in the current and future periods.
c. Revenue recognition
a) Revenue from sale of goods is recognised when the significant risks
and rewards in respect of ownership of the goods are transferred to the
customer and is stated inclusive of excise duty and net of trade
discounts, sales returns and sales tax wherever applicable.
b) Duty Entitlement Pass Book (DEPB) and any other scheme are
recognized in the statement of profit and loss when the right to
receive credit as per the terms of the scheme is established in respect
of the exports made.
c) Revenue in respect of tool development and job charges is recognized
as per the terms of the contract with the customers.
d) Interest income is recognised on a time proportion basis, taking
into account the amount outstanding and the rates applicable.
e) Dividend income is recognised when the Company''s right to receive
the same is established.
d. Fixed assets
Fixed assets are stated at cost (gross block) less accumulated
depreciation and impairment losses, if any. Cost comprises the purchase
price (net of Cenvat credit availed) and any attributable cost of
bringing the asset to its working condition for its intended use.
Expenditure on account of modification / alteration in plant and
machinery / building, which increases the future benefit from the
existing asset beyond its previous assessed standard of performance, is
capitalised.
Borrowing costs directly attributable to acquisition or construction of
fixed assets, which necessarily takes a substantial period of time to
get ready for their intended use are capitalised.
Assets acquired on hire purchase are capitalised at the inception of
the hire purchase agreement. Interest cost is charged to statement of
profit and loss on accrual basis.
e. Depreciation and amortisation
Depreciation is provided on straight line method as per the rates
specified in Schedule XIV to the Act, as applicable at the time of
addition of the respective fixed assets, on pro-rata basis from the
month of addition, except for the following:
- Depreciation on improvements carried out on buildings taken on lease
(included under buildings) is provided over the period of the lease.
- Depreciation on a particular class of dies and tools manufactured by
the Company and put to use after 01 April 2003 is provided over a
period of 3 years.
- The rates of depreciation are indicative of the useful lives of the
assets.
- The cost of leasehold land is not amortised as these are perpetual
leases.
- Know-how is amortised over a period of four years.
- Software is amortised over a period not exceeding six years.
f. Inventories
Inventories are valued as follows:
1. Raw materials & components, stores and spares, finished goods and
stock in process: At lower of cost and net realisable value.
2. Scrap: At estimated realisable value.
3. Cost of inventories is ascertained on the following basis:
a) Raw materials and components and stores & spares on moving weighted
average basis.
b) Cost of finished goods and stock in process comprise material cost
on moving weighted average. Finished goods are stated inclusive of
excise duty, labour and related estimated overheads including
depreciation.
g. Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments.
Long-term investments are stated at cost. Provision is made for
diminution in the value of long-term investments to recognise decline,
if any, other than temporary in nature.
h. Foreign currency transactions
Investments in foreign entities are recorded at the exchange rate
prevailing on the date of making the investment. Transactions in
foreign currencies are recorded at the rates prevailing on the date of
the transaction and monetary items denominated in foreign currency are
restated at the rate prevailing on the balance sheet date.
Differences arising on foreign currency translations of transactions
settled during the year are recognised in the statement of profit and
loss.
Forward exchange contracts not covered under Accounting Standard 11
''Effect of change in Foreign Exchange Rates'', that are entered to hedge
the foreign currency risk of highly probable forecast transactions and
unrecognized firm commitments are marked to market at the balance sheet
date and exchange loss is recognised in the statement of profit and
loss immediately. Any gain is ignored and not recognised in the
financial statements, in accordance with the principles of prudence
enunciated in Accounting Standard 1- Disclosure of Accounting Policies.
The premium or discount arising at the inception of the forward
contracts other than those entered into to hedge the foreign currency
risk of firm commitments or highly probable forecast transactions is
amortised as expense or income over the life of the contract.
Any profit or loss arising on cancellation or renewal of forward
exchange contracts is recognised as income or expense for the year.
i. Employee benefits
The Company''s contribution to provident fund, being a defined
contribution plan, is recognised in the statement of profit and loss.
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 recognised as a liability determined based on
actuarial valuation using the Projected Unit Credit Method at the
balance sheet date. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are charged or
credited to the statement of profit and loss in the year in which such
gains or losses arise.
Gratuity is a post employment defined benefit plan. The present value
of obligation for gratuity is determined based on actuarial valuation
using the Projected Unit Credit Method, less the fair value of plan
assets, together with adjustments for unrecognised actuarial gains or
losses and past service costs. Gratuity and superannuation funds are
administered by trustees of independently constituted trusts. Actuarial
gains and losses arising from experience adjustments and changes in
actuarial assumptions are charged or credited to the statement of
profit and loss in the year in which such gains or losses arise.
In respect of superannuation, the Company makes contribution to Life
Insurance Corporation of India ("LIC") of an amount payable by the
trusts to LIC, which is charged to the statement of profit and loss.
j. Employee Stock Option Scheme (ESOS)
Stock options granted to the employees under the stock options schemes
are accounted at intrinsic value as per the accounting treatment
prescribed by the Securities and Exchange Board of India (Employee
Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,
1999 (''Guidelines'') and guidance note on Employee share based payments
issued by the Institute of Chartered Accountants of India. Accordingly,
the excess of market price, determined as per the Guidelines and
guidance note, of underlying equity shares (market value), over the
exercise price of the options is recognised as deferred stock
compensation expense and is charged to statement of profit and loss on
a straight line basis over the vesting period of the options. The
amortised portion of the cost is shown under shareholders'' funds.
k. Taxes on income
Tax expense comprises current tax and deferred income tax.
Current tax is determined as the amount of tax payable in respect of
taxable income for the year.
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. In respect of carry
forward losses and unabsorbed depreciation, deferred tax assets are
recognized only to the extent there is virtual certainty that
sufficient future taxable income will be available against which such
losses can be realised.
Minimum Alternate tax (''MAT'') credit is recognised as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period. In the year in
which MAT credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in guidance note issued
by the Institute of Chartered Accountants of India, the said asset is
created by way of a credit to the statement of profit and loss and
shown as MAT credit entitlement. The Company reviews the same at each
balance sheet date and writes down the carrying amount of MAT credit
entitlement to the extent there is no longer convincing evidence to the
effect that the Company will pay normal income tax during the specified
period.
l. Earnings per share
The earnings considered in ascertaining the Company''s earnings per
share comprise the net profit or loss for the year attributable to the
equity shareholders. Earnings per share are computed using the weighted
average number of shares outstanding during the year.
For the purpose of calculating diluted earning per share, the net
profit or loss for the period attributable to equity share holders and
the weighted average number of shares outstanding during the period are
adjusted for the effect of all dilutive potential equity shares.
m. Leases
Leases of assets under which significant risks and rewards of ownership
are effectively retained by the lessor are classified as operating
leases. Lease rentals in respect of assets taken under an operating
lease are charged to the statement of profit and loss on a straight
line basis over the lease term.
In respect of assets given on operating lease, income is being
recognised on a straight line basis over the lease term.
n. Contingent liabilities and provisions
The Company makes a provision when there is a present obligation as a
result of a past event where the outflow of economic resources is
probable and a reliable estimate of the amount of obligation can be
made. A disclosure is made for possible or present obligations that may
but probably will not require outflow of resources or where a reliable
estimate cannot be made, as a contingent liability in the financial
statements.
o. Impairment of assets
The Company on an annual basis makes an assessment of any indicator
that may lead to impairment of assets. If any such indication exists,
the Company estimates the recoverable amount of the assets. If such
recoverable amount is less than the carrying amount, then the carrying
amount is reduced to its recoverable amount by treating the difference
as impairment loss and is charged to the statement of profit and loss.
d. Shares reserved for issue under options and other commitments
As on 31 March 2014, 84,000 (previous year : 90,000) Employee Stock
Options were outstanding under the Employee Stock Option Plan of the
Company. Each option would entitle the holder thereof to subscribe to
one Equity Share of Rs. 10 each in the Company. For details of shares
reserved for issue under the employee stock option (ESOP) plan of the
Company, please refer note 43.
5. Money received against zero coupon convertible warrants
a. During 2010-2011, the Company issued 1,687,600 zero coupon
convertible warrants on preferential basis upon payment of a
consideration of Rs.10.25 per warrant. Each zero coupon convertible
warrant is convertible into one equity share of Rs.10 each at a premium
of Rs.31 per share on payment of remaining consideration. Holders of
such warrants have the option to convert these warrants into equity
shares upon payment of aforesaid consideration on or before eighteen
months from the date of allotment of warrants, viz., 02 November 2010.
During the year, holders of Nil (previous year 200,100) zero coupon
convertible warrants exercised the option of conversion of warrants
into equity shares and Nil (previous year 100) zero coupon convertible
warrants has been forfeited on account of non payment of balance on due
date.
Term loans from banks amounting to Rs. 199,039,685 (previous year Rs.
145,982,759) (including current maturities of long term debt amounting
to Rs. 65,569,287 (previous year Rs. 51,443,577) as referred to in
Note 12) are secured as under:
- Term loans from Bank of India amounting to Rs. 78,365,764 (previous
year Rs 89,756,813)(including current maturities of long term debt
amounting to Rs. 32,703,000(previous year Rs. 27,256,577)) and buyers
credit Rs 12,842,509 (previous year Rs 11,668,202) availed as a sub
limit to term loan) carrying interest rate of 2.65% and 2.90% over the
bank base rate are secured by way of first pari passu charge on all the
plant & machinery and furniture & fixtures of the Company excluding the
fixed assets installed at packaging division at Chandigarh (KPAC),
hands division at Bengaluru (KHAN-2), dials division at Barwala (KHAR)
and the plant & machinery and furniture & fixtures of dials division at
Parwanoo (TTPA) acquired before 31 March 2005 and second charge on all
the current assets (save and except the book debts) subject to the
first charge in favour of the Company''s bankers for securing the
working capital limits. The term loan is further secured by way of
first pari passu mortgage charge on land and building of dials division
at Derabassi (KDER). The loan includes construction loan for dials unit
at Parwanoo (TTPA) which is secured by first pari passu charge on land
and building of TTPA. The term loans are also personally guaranteed by
the Chairman and Chief Executive Officer (CEO) of the Company.
- Term loans from IDBI amounting to Rs. 8,820,000 (previous year Rs.
17,275,000)(including current maturities of long term debt amounting to
Rs. 5,040,000 (previous year Rs.13,075,000)), carrying interest rate of
2.5% over the bank base rate and Corporate loan amounting to Rs.
40,000,000 ((previous year nil)(includng current maturities of long
term debt amounting to Rs. 10,714,287)(previous year Nil)) are secured
by way of first pari passu charge on all the plant & machinery and
furniture & fixtures of KDER, tool room division at Bengaluru (EIGEN)
and hands division at Bengaluru (KHAN-1) and second charge on all the
current assets (save and except the book debts) subject to the first
charge in favour of the Company''s bankers for securing the working
capital limits. The term loan is further secured by way of first pari
passu mortgage charge on land and building of KDER. The term loans are
also personally guaranteed by the Chairman and Chief Executive Officer
(CEO) of the Company.
-Term loan from Corporation Bank amounting to Rs. 42,313,207 (previous
year Rs. 38,950,746) (including current maturities of long term debt
amounting to Rs. 17,112,000 (previous year Rs 11,112,000) and buyers
credit Rs 16,698,205 (previous year Rs 15,525,738) availed as a sub
limit to term loan) carrying interest rate of 5.50% over the bank base
rate, are secured by way of first exclusive charge on all the plant &
machinery and furniture & fixtures of KHAR and KHAN-2 and second charge
on all the current assets (save and except the book debts) subject to
the first charge in favour of the Company''s bankers for securing the
working capital limits. The loan is further secured by exclusive
mortgage charge on land and building of KHAN-1.
Repayment terms of term loans from banks (including the current
maturities of long term debt as referred to in Note 12) are given as
under:
- Term loan from IDBI amounting to Rs. 8,820,000 is repayable in 7
quarterly instalments of Rs. 1,260,000.
- Term loan from IDBI amounting to Rs. 40,000,000 (sanctioned amount
being Rs. 50,000,000) is repayable in 11 quarterly instalments of Rs.
3,571,429 and last instalment of Rs. 714,281.
- Term loan from Bank of India amounting to Rs. 27,410,504 is repayable
in 15 quarterly instalments of Rs. 1,718,750 and last instalment of Rs.
1,629,254.
- Term loan from Bank of India amounting to Rs. 3,406,000 is repayable
in 4 quarterly instalments of Rs. 682,000 and last instalment of Rs.
678,000.
- Term loan from Bank of India amounting to Rs. 18,238,432 is repayable
in 14 quarterly instalments of Rs. 1,250,000 and last instalment of Rs.
738,432.
- Term loan from Bank of India amounting to Rs. 6,671,687 is repayable
in 4 quarterly instalments of Rs. 1,400,000 and last instalment of Rs.
1,071,687.
- Term loan from Corporation Bank amounting to Rs. 29,011,412
(sanctioned amount being Rs. 50,000,000) is repayable in 10 quarterly
instalments of Rs.2,778,000 and last instalment of Rs. 1,231,412.
- Term loan from Corporation Bank amounting to Rs. 30,000,000
(sanctioned amount being Rs. 30,000,000) is repayable in 20 quarterly
instalments of Rs. 1,500,000.
- Term loan from Bank of India amounting to Rs. 35,481,650 (sanctioned
amount Rs. 50,000,000) is repayable in 11 quarterly instalments of Rs.
3,125,000 and last instalment of Rs. 1,106,650.
b. Inter corporate deposits amounting to Rs. 15,000,000 from VBL
Innovations Private Limited carrying interest rate of 16% p.a. and Rs.
15,000,000 from EON Coatings Limited carrying interest rate of 14% p.a
are due for repayment in May 2014 and June 2014 respectively.
c. Inter corporate deposit amounting to Rs. 5,000,000 from Dream
Digital carrying interest rate of 15% p.a. and Rs. 9,300,000 from
Vardhan Properties & Investments Limited carrying interest rate of 14%
p.a. are due for repayment in July 2014 and June 2015 respectively.
d. Vehicle loans from banks carrying interest rate in the range of 10%
p.a. to 12.25% p.a. are secured against hypothecation of specific
vehicles purchased out of the proceeds of those loans. The loans are to
repaid as per the respective repayment schedules in equal monthly
instalments.
e. Public deposits carrying interest rates in the range of 12% p.a. to
12.5% p.a., are repayable in 2 to 3 years from the respective dates of
deposit.
7. Deferred tax liabilities (net)
In accordance with accounting standard 22 on Accounting for Taxes on
Income, deferred tax charge has been recognised in the statement of
profit and loss. Tax effect of significant timing differences that
reverses in one or more subsequent years gave rise to the following net
deferred tax items. During the previous year, pursuant to the merger of
Himachal Fine Blanks Limited with the Company, Rs. 1,796,475 has been
recognised as an adjustment to opening balance of deferred tax
liability as on 1 April 2012 (refer note 44).
In the previous year, the Company had recognised deferred tax asset on
unabsorbed depreciation amounting to Rs. 21,125,183. However, as per
the return of income filed for the previous year, the Company has
claimed unabsorbed depreciation amounting to Rs. 19,008,843. Hence,
prior year deferred tax adjustment of Rs. 751,536 has been recognised
in the statement of profit and loss on the differential amount.
(ii) Defined benefit plan/ other long term benefit plans
a. Gratuity
b. Compensated absences
The following table set out the status of the plan for gratuity and
compensated absences as required under Accounting Standard (AS) - 15
(R) - Employee benefits and the reconciliation of opening and closing
balances of the present value of the defined benefit obligation:
a. Dues to micro, small and medium enterprises pursuant to section 22
of the Micro, Small and Medium Enterprises Development Act (MSMED),
2006
Amount due to entities covered under Micro, Small and Medium
Enterprises as defined in the Micro, Small, Medium Enterprises
Development Act, 2006, have been identified on the basis of information
available with the Company. There was no amount due to any such
entities which needs to be disclosed. This has been relied upon by the
auditors.
Mar 31, 2013
A. Basis of preparation
The financial statements of KDDL Limited ("the Company") have been
prepared on accrual basis under the historical cost convention, in
accordance with the generally accepted accounting principles in India
and to comply with the Accounting Standards referred to in sub section
(3C) of section 211 of the Companies Act, 1956 ("the Act") and the
Rules framed there under. The accounting policies have been
consistently applied by the Company unless otherwise stated.
All assets and liabilities have been classified as current or
non-current, wherever applicable as per the operating cycle of the
Company in terms with the guidance as set out in the Revised Schedule
VI to the Companies Act, 1956.
b. Use of estimates
In preparing the financial statements in conformity with accounting
principles generally accepted in India, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates. Any revisions to accounting estimates are recognised
in the current and future periods.
c. Revenue recognition
a) Revenue from sale of goods is recognised when the significant risks
and rewards in respect of ownership of the goods are transferred to the
customer and is stated inclusive of excise duty and net of trade
discounts, sales returns and sales tax wherever applicable.
b) Duty Entitlement Pass Book (DEPB) and any other scheme are
recognized in the statement of profit and loss when the right to
receive credit as per the terms of the scheme is established in respect
of the exports made.
c) Revenue in respect of tool development and job charges is recognized
as per the terms of the contract with the customers.
d) Interest income is recognised on a time proportion basis, taking
into account the amount outstanding and the rates applicable.
e) Dividend income is recognised when the Company''s right to receive
the same is established.
d. Fixed assets
Fixed assets are stated at cost (gross block) less accumulated
depreciation and impairment losses, if any. Cost comprises the purchase
price (net of Cenvat credit availed) and any attributable cost of
bringing the asset to its working condition for its intended use.
Expenditure on account of modification / alteration in plant and
machinery / building, which increases the future benefit from the
existing asset beyond its previous assessed standard of performance, is
capitalised.
Borrowing costs directly attributable to acquisition or construction of
fixed assets, which necessarily takes a substantial period of time to
get ready for their intended use are capitalised.
Assets acquired on hire purchase are capitalised at the inception of
the hire purchase agreement. Interest cost is charged to statement of
profit and loss on accrual basis.
e. Depreciation and amortisation
Depreciation is provided on straight line method as per the rates
specified in Schedule XIV to the Act, as applicable at the time of
addition of the respective fixed assets, on pro-rata basis from the
month of addition, except for the following:
- Depreciation on improvements carried out on buildings taken on lease
(included under buildings) is provided over the period of the lease.
- Depreciation on a particular class of dies and tools manufactured by
the Company and put to use after 01 April 2003 is provided over a
period of 3 years.
- The rates of depreciation are indicative of the useful lives of the
assets.
- The cost of leasehold land is not amortised as these are perpetual
leases.
- Know-how is amortised overa period of fouryears.
- Software is amortised over a period not exceeding six years.
f. Inventories
Inventories are valued as follows:
1. Raw materials & components, stores and spares, finished goods and
stock in process: At lower of cost and net realisable value.
2. Scrap: At estimated realisable value.
3. Cost of inventories is ascertained on the following basis:
a) Raw materials and components and stores & spares on moving weighted
average basis.
b) Cost of finished goods and stock in process comprise material cost
on moving weighted average. Finished goods are stated inclusive of
excise duty, labour and related estimated overheads including
depreciation.
g. Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments.
Long-term investments are stated at cost. Provision is made for
diminution in the value of long-term investments to recognise decline,
if any, otherthan temporary in nature.
h. Foreign currency transactions
Investments in foreign entities are recorded at the exchange rate
prevailing on the date of making the investment. Transactions in
foreign currencies are recorded at the rates prevailing on the date of
the transaction and monetary items denominated in foreign currency are
restated at the rate prevailing on the balance sheet date.
Differences arising on foreign currency translations of transactions
settled during the year are recognised in the statement of profit and
loss.
Forward exchange contracts not covered under Accounting Standard 11
''Effect of change in Foreign Exchange Rates'', that are entered to hedge
the foreign currency risk of highly probable forecast transactions and
unrecognized firm commitments are marked to market at the balance sheet
date and exchange loss is recognised in the statement of profit and
loss immediately. Any gain is ignored and not recognised in the
financial statements, in accordance with the principles of prudence
enunciated in Accounting Standard 1- Disclosure of Accounting Policies.
The premium or discount arising at the inception of the forward
contracts other than those entered into to hedge the foreign currency
risk of firm commitments or highly probable forecast transactions is
amortised as expense or income over the life of the contract.
Any profit or loss arising on cancellation or renewal of forward
exchange contracts is recognised as income or expense for the year.
i. Employee benefits
The Company''s contribution to provident fund, being a defined
contribution plan, is recognised in the statement of profit and loss.
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 recognised as a liability determined based on
actuarial valuation using the Projected Unit Credit Method at the
balance sheet date. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are charged or
credited to the statement of profit and loss in the year in which such
gains or losses arise.
Gratuity is a post employment defined benefit plan. The present value
of obligation for gratuity is determined based on actuarial valuation
using the Projected Unit Credit Method, less the fair value of plan
assets, together with adjustments for unrecognised actuarial gains or
losses and past service costs. Gratuity and superannuation funds are
administered by trustees of independently constituted trusts. Actuarial
gains and losses arising from experience adjustments and changes in
actuarial assumptions are charged or credited to the statement of
profit and loss in the year in which such gains or losses arise.
In respect of superannuation, the Company makes contribution to Life
Insurance Corporation of India ("LIC") of an amount payable by the
trusts to LIC, which is charged to the statement of profit and loss.
j. Employee Stock Option Scheme (ESOS)
Stock options granted to the employees under the stock options schemes
are accounted at intrinsic value as per the accounting treatment
prescribed by the Securities and Exchange Board of India (Employee
Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,
1999 (''Guidelines'') and guidance note on Employee share based payments
issued by the Institute of Chartered Accountants of India. Accordingly,
the excess of market price, determined as per the Guidelines and
guidance note, of underlying equity shares (market value), over the
exercise price of the options is recognised as deferred stock
compensation expense and is charged to statement of profit and loss on
a straight line basis over the vesting period of the options. The
amortised portion of the cost is shown under shareholders''funds. k.
Taxes on income
Tax expense comprises current tax and deferred income tax.
Current tax is determined as the amount of tax payable in respect of
taxable income for the year.
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. In respect of carry
forward losses and unabsorbed depreciation, deferred tax assets are
recognized only to the extent there is virtual certainty that
sufficient future taxable income will be available against which such
losses can be realised.
Minimum Alternate tax (''MAT'') credit is recognised as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period. In the year in
which MAT credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in guidance note issued
by the Institute of Chartered Accountants of India, the said asset is
created by way of a credit to the statement of profit and loss and
shown as MAT credit entitlement. The Company reviews the same at each
balance sheet date and writes down the carrying amount of MAT credit
entitlement to the extent there is no longer convincing evidence to the
effect that the Company will pay normal income tax during the specified
period.
I. Earnings per share
The earnings considered in ascertaining the Company''s earnings per
share comprise the net profit or loss for the year attributable to the
equity shareholders. Earnings per share are computed using the weighted
average number of shares outstanding during the year.
For the purpose of calculating diluted earning per share, the net
profit or loss for the period attributable to equity share holders and
the weighted average number of shares outstanding during the period are
adjusted for the effect of all dilutive potential equity shares.
m. Leases
Leases of assets under which significant risks and rewards of ownership
are effectively retained by the lessor are classified as operating
leases. Lease rentals in respect of assets taken under an operating
lease are charged to the statement of profit and loss on a straight
line basis over the lease term.
In respect of assets given on operating lease, income is being
recognised on a straight line basis over the lease term.
n. Contingent liabilities and provisions
The Company makes a provision when there is a present obligation as a
result of a past event where the outflow of economic resources is
probable and a reliable estimate of the amount of obligation can be
made. A disclosure is made for possible or present obligations that may
but probably will not require outflow of resources or where a reliable
estimate cannot be made, as a contingent liability in the financial
statements.
o. Impairment of assets
The Company on an annual basis makes an assessment of any indicator
that may lead to impairment of assets. If any such indication exists,
the Company estimates the recoverable amount of the assets. If such
recoverable amount is less than the carrying amount, then the carrying
amount is reduced to its recoverable amount by treating the difference
as impairment loss and is charged to the statement of profit and loss.
Mar 31, 2012
A. Basis of preparation
The financial statements of KDDL Limited ("the Company") have been
prepared on accrual basis under the historical cost convention, in
accordance with the generally accepted accounting principles in India
and to comply with the Accounting Standards referred to in sub section
(3C) of section 211 of the Companies Act, 1956 ("the Act") and the
Rules framed there under. The accounting policies have been
consistently applied by the Company unless otherwise stated.
All assets and liabilities have been classified as current or
non-current, wherever applicable as per the operating cycle of the
Company in terms with the guidance as set out in the Revised Schedule
VI to the Companies Act, 1956.
b. Use of estimates
In preparing the financial statements in conformity with accounting
principles generally accepted in India, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates. Any revisions to accounting estimates are recognised
in the current and future periods.
c. Revenue recognition
a) Revenue from sale of goods is recognised when the significant risks
and rewards in respect of ownership of the goods are transferred to the
customer and is stated inclusive of excise duty and net of trade
discounts, sales returns and sales tax wherever applicable.
b) Duty Entitlement Pass Book (DEPB) and any other scheme are
recognized in the statement of profit and loss when the right to
receive credit as per the terms of the scheme is established in respect
of the exports made.
c) Revenue in respect of tool development and job charges is recognized
as per the terms of the contract with the customers.
d) Interest income is recognised on a time proportion basis, taking
into account the amount outstanding and the rates applicable.
e) Dividend income is recognised when the Company's right to receive
the same is established.
d. Fixed assets
Fixed assets are stated at cost (gross block) less accumulated
depreciation and impairment losses, if any. Cost comprises the purchase
price (net of Cenvat credit availed) and any attributable cost of
bringing the asset to its working condition for its intended use.
Expenditure on account of modification / alteration in plant and
machinery / building, which increases the future benefit from the
existing asset beyond its previous assessed standard of performance, is
capitalised.
Borrowing costs directly attributable to acquisition or construction of
fixed assets, which necessarily takes a substantial period of time to
get ready for their intended use are capitalised.
Assets acquired on hire purchase are capitalised at the inception of
the hire purchase agreement. Interest cost is charged to statement of
profit and loss on accrual basis.
e. Depreciation and amortisation
Depreciation is provided on straight line method as per the rates
specified in Schedule XIV to the Act, as applicable at the time of
addition of the respective fixed assets, on pro-rata basis from the
month of addition, except for the following:
- Depreciation on improvements carried out on buildings taken on lease
(included under buildings) is provided over the period of the lease.
- Depreciation on a particular class of dies and tools manufactured by
the Company and put to use after 01 April 2003 is provided over a
period of 3 years.
- The rates of depreciation are indicative of the useful lives of the
assets.
- The cost of leasehold land is not amortised as these are perpetual
leases.
- Know-how is amortised over a period of four years.
- Software is amortised over a period not exceeding six years.
f. Inventories
Inventories are valued as follows:
1. Raw materials & components, stores and spares, finished goods and
stock in process: At lower of cost and net realisable value.
2. Scrap: At estimated realisable value.
3. Cost of inventories is ascertained on the following basis:
a) Raw materials and components and stores & spares on moving weighted
average basis.
b) Cost of finished goods and stock in process comprise material cost
on moving weighted average. Finished goods are stated inclusive of
excise duty, labour and related estimated overheads including
depreciation.
g. Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments.
Long-term investments are stated at cost. Provision is made for
diminution in the value of long-term investments to recognise decline,
if any, other than temporary in nature.
h. Foreign currency transactions
Investments in foreign entities are recorded at the exchange rate
prevailing on the date of making the investment. Transactions in
foreign currencies are recorded at the rates prevailing on the date of
the transaction and monetary items denominated in foreign currency are
restated at the rate prevailing on the balance sheet date.
Differences arising on foreign currency translations of transactions
settled during the year are recognised in the statement of profit and
loss.
The exchange differences arising on forward contracts other than those
entered into to hedge the foreign currency risk of firm commitments or
highly probable forecast transactions are recognised in the year in
which they arise based on the difference between
i) foreign currency amount of the contract translated at the exchange
rate on the reporting date and
ii) the same foreign currency amount translated at the later of the
date of inception of the forward exchange contract or the last
reporting date.
The premium or discount arising at the inception of the forward
contracts other than those entered into to hedge the foreign currency
risk of firm commitments or highly probable forecast transactions is
amortised as expense or income over the life of the contract.
Any profit or loss arising on cancellation or renewal of forward
exchange contracts is recognised as income or expense for the year.
i. Employee benefits
The Company's contribution to provident fund, being a defined
contribution plan, is recognised in the statement of profit and loss.
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 recognised as a liability determined based on
actuarial valuation using the Projected Unit Credit Method at the
balance sheet date. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are charged or
credited to the statement of profit and loss in the year in which such
gains or losses arise.
Gratuity is a post employment defined benefit plan. The present value
of obligation for gratuity is determined based on actuarial valuation
using the Projected Unit Credit Method, less the fair value of plan
assets, together with adjustments for unrecognised actuarial gains or
losses and past service costs. Gratuity and superannuation funds are
administered by trustees of independently constituted trusts. Actuarial
gains and losses arising from experience adjustments and changes in
actuarial assumptions are charged or credited to the statement of
profit and loss in the year in which such gains or losses arise.
In respect of superannuation, the Company makes contribution to Life
Insurance Corporation of India ("LIC") of an
j. Employee Stock Option Scheme(ESOS)
Stock options granted to the employees under the stock options schemes
are accounted at intrinsic value as per the accounting treatment
prescribed by the Securities and Exchange Board of India (Employee
Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,
1999 ('Guidelines') and guidance note on Employee share based payments
issued by the Institute of Chartered Accountants of India. Accordingly,
the excess of market price, determined as per the Guidelines and
guidance note, of underlying equity shares (market value), over the
exercise price of the options is recognised as deferred stock
compensation expense and is charged to statement of profit and loss on
a straight line basis over the vesting period of the options. The
amortised portion of the cost is shown under shareholders' funds.
k. Taxes on income
Tax expense comprises current tax and deferred income tax.
Current tax is determined as the amount of tax payable in respect of
taxable income for the year.
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax
is measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. In respect of carry
forward losses and unabsorbed depreciation, deferred tax assets are
recognized only to the extent there is virtual certainty that
sufficient future taxable income will be available against which such
losses can be realised.
Minimum Alternate tax ('MAT') credit is recognised as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period. In the year in
which MAT credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in guidance note issued
by the Institute of Chartered Accountants of India, the said asset is
created by way of a credit to the statement of profit and loss and
shown as MAT credit entitlement. The Company reviews the same at each
balance sheet date and writes down the carrying amount of MAT credit
entitlement to the extent there is no longer convincing evidence to the
effect that the Company will pay normal income tax during the specified
period.
l. Earnings per share
The earnings considered in ascertaining the Company's earnings per
share comprise the net profit or loss for the year attributable to the
equity shareholders. Earnings per share are computed using the weighted
average number of shares outstanding during the year.
For the purpose of calculating diluted earning per share, the net
profit or loss for the period attributable to equity share holders and
the weighted average number of shares outstanding during the period are
adjusted for the effect of all dilutive potential equity shares.
m. Leases
Leases of assets under which significant risks and rewards of ownership
are effectively retained by the lessor are classified as operating
leases. Lease rentals in respect of assets taken under an operating
lease are charged to the statement of profit and loss on a straight
line basis over the term of the lease.
In respect of assets given on operating lease, income is being
recognised on a straight line basis over the term of the lease.
n. Contingent liabilities and provisions
The Company makes a provision when there is a present Obligation as a
result of a past event where the outflow of economic resources is
probable and a reliable estimate of the amount of obligation can be
made. A disclosure is made for possible or present obligations that may
but probably will not require outflow of resources or where a reliable
estimate cannot be made, as a contingent liability in the financial
statements.
o. Impairment of assets
The Company on an annual basis makes an assessment of any indicator that
may lead to impairment of assets. If any such indication exists, the
Company estimates the recoverable amount of the assets. If such
recoverable amount is less than the carrying amount, then the carrying
amount is reduced to its recoverable amount by treating the difference
as impairment loss and is charged to the statement of profit and loss.
Mar 31, 2011
1. Basis of preparation
The financial statements of KDDL Limited ("the Company") have been
prepared on accrual basis under the historical cost convention, in
accordance with the generally accepted accounting principles in India
and to comply with the Accounting Standards referred to in sub section
(3C) of section 211 of the Companies Act, 1956 ("the Act") and the
Rules framed there under. The accounting policies have been
consistently applied by the Company unless otherwise stated.
2. Use of estimates
In preparing the financial statements in conformity with accounting
principles generally accepted in India, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates. Any revisions to accounting estimates are recognised
in the current and future periods.
3. Revenue recognition
a) Revenue from sale of goods is recognised when the significant risks
and rewards in respect of ownership of the goods are transferred to the
customer and is stated inclusive of excise duty and net of trade
discounts, sales returns and sales tax wherever applicable.
b) Duty Entitlements Pass Book (DEPB) and any other scheme are
recognized in the profit and loss account when the right to receive
credit as per the terms of the scheme is established in respect of the
exports made.
c) Revenue in respect of tool development and job charges is recognized
as per the terms of the contract with the customers.
d) Interest income is recognized on a time proportion basis, taking
into account the amount outstanding and the rates applicable.
e) Dividend income is recognized when the Company's right to receive
the same is established.
4. Fixed assets
Fixed assets are stated at cost (gross block) less accumulated
depreciation and impairment losses, if any. Cost comprises the purchase
price (net of Cenvat credit availed) and any attributable cost of
bringing the asset to its working condition for its intended use.
Expenditure on account of modification / alteration in plant and
machinery / building, which increases the future benefit from the
existing asset beyond its previous assessed standard of performance, is
capitalised.
Borrowing costs directly attributable to acquisition or construction of
fixed assets, which necessarily takes a substantial period of time to
get ready for their intended use are capitalized.
Assets acquired on hire purchase are capitalized at the inception of
the hire purchase agreement. Interest cost is charged to profit and
loss account on accrual basis.
5. Depreciation and amortisation
Depreciation is provided on straight line method as per the rates
specified in Schedule XIV to the Act, as applicable at the time of
addition of the respective fixed assets, on pro-rata basis from the
month of addition, except for the following:
Depreciation on improvements carried out on buildings taken on lease
(included under buildings) is provided over the period of the lease.
Depreciation on a particular class of dies and tools manufactured by
the Company and put to use after 01 April 2003 is provided over a
period of 3 years.
The rates of depreciation are indicative of the useful lives of the
assets.
The cost of leasehold land is not amortised as these are perpetual
leases.
Know-how is amortised over a period of four years.
Software is amortised over a period not exceeding six years.
6. Inventories
Inventories are valued as follows:
1. Raw materials & components, stores and spares, finished goods and
stock in process: At lower of cost and net realisable value.
2. Scrap: At estimated realisable value.
3. Cost of inventories is ascertained on the following basis:
a) Raw materials and components and stores & spares - on moving
weighted average basis.
b) Cost of finished goods and stock in process comprise material cost
on moving weighted average. Finished goods are stated inclusive of
excise duty, labour and related estimated overheads including
depreciation.
7. Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments.
Long-term investments are stated at cost. Provision is made for
diminution in the value of long-term investments to recognise decline,
if any, other than temporary in nature.
8. Foreign currency transactions
Investments in foreign entities are recorded at the exchange rate
prevailing on the date of making the investment. Transactions in
foreign currencies are recorded at the rates prevailing on the date of
the transaction and monetary items denominated in foreign currency are
restated at the rate prevailing on the balance sheet date.
Differences arising on foreign currency translations of transactions
settled during the year are recognised in the profit and loss account.
The exchange differences arising on forward contracts other than those
entered into to hedge the foreign currency risk of firm commitments or
highly probable forecast transactions are recognised in the year in
which they arise based on the difference between i) foreign currency
amount of the contract translated at the exchange rate on the reporting
date and ii) the same foreign currency amount translated at the later
of the date of inception of the forward exchange contract or the last
reporting date.
The premium or discount arising at the inception of the forward
contracts other than those entered into to hedge the foreign currency
risk of firm commitments or highly probable forecast transactions is
amortised as expense or income over the life of the contract.
Any profit or loss arising on cancellation or renewal of forward
exchange contracts is recognised as income or expense for the year.
9. Employee benefits
The Company's contribution to provident fund, being a defined
contribution plan, is recognised in the profit and loss account.
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 recognized as a liability determined based on
actuarial valuation using the Projected Unit Credit Method at the
Balance Sheet date. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are charged or
credited to the Profit and Loss Account in the year in which such gains
or losses arise.
Gratuity is a post employment defined benefit plan. The present value
of obligation for gratuity is determined based on actuarial valuation
using the Projected Unit Credit Method, less the fair value of plan
assets, together with adjustments for unrecognized actuarial gains or
losses and past service costs. Gratuity and superannuation funds are
administered by trustees of independently constituted trusts. Actuarial
gains and losses arising from experience adjustments and changes in
actuarial assumptions are charged or credited to the Profit and Loss
Account in the year in which such gains or losses arise. In respect of
superannuation, the Company makes contribution to Life Insurance
Corporation of India ("LIC") of an amount payable by the trusts to LIC,
which is charged to the profit and loss account.
10. Taxes on income
Tax expense comprises current tax and deferred income tax.
Current tax is determined as the amount of tax payable in respect of
taxable income for the year.
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. In respect of carry
forward losses and unabsorbed depreciation, deferred tax assets are
recognized only to the extent there is virtual certainty that
sufficient future taxable income will be available against which such
losses can be realised.
Minimum alternate tax ('MAT1) credit is recognised as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period. In the year in
which MAT credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in guidance note issued
by the Institute of Chartered Accountants of India, the said asset is
created by way of a credit to the Profit and Loss Account and shown as
MAT credit entitlement. The Company reviews the same at each balance
sheet date and writes down the carrying amount of MAT credit
entitlement to the extent there is no longer convincing evidence to the
effect that the company will pay normal income tax during the specified
period.
11. Earnings per share
The earnings considered in ascertaining the Company's earnings per
share comprise the net profit or loss for the year attributable to the
equity shareholders. Earnings per share are computed using the weighted
average number of shares outstanding during the year.
For the purpose of calculating diluted earning per share, the net
profit or loss for the period attributable to equity share holders and
the weighted average number of shares outstanding during the period are
adjusted for the effect of all dilutive potential equity shares.
12. Leases
Lease of assets under which significant risks and rewards of ownership
are effectively retained by the lessor are classified as operating
leases. Lease rentals in respect of assets taken under an operating
lease are charged to the profit and loss account on a straight line
basis over the term of the lease. In respect of assets given on
operating lease, income is being recognised on a straight line basis
over the term of the lease.
13. Contingent liabilities and provisions
The Company makes a provision when there is a present obligation as a
result of a past event where the outflow of economic resources is
probable and a reliable estimate of the amount of obligation can be
made. A disclosure is made for possible or present obligations that may
but probably will not require outflow of resources or where a reliable
estimate cannot be made, as a contingent liability in the financial
statements.
14. Impairment of assets
The Company on an annual basis makes an assessment of any indicator
that may lead to impairment of assets. If any such indication exists,
the Company estimates the recoverable amount of the assets. If such
recoverable amount is less than the carrying amount, then the carrying
amount is reduced to its recoverable amount by treating the difference
as impairment loss and is charged to the profit and loss account.
Mar 31, 2010
1. Basis of preparation
The financial statements of KDDL Limited ("the Company") have been
prepared on accrual basis under the historical cost convention, in
accordance with the generally accepted accounting principles in India
and to comply with the Accounting Standards referred to in sub section
(3C) of section 211 of the Companies Act, 1956 ("the Act") and the
Rules framed there under. The accounting policies have been
consistently applied by the Company unless otherwise stated.
2. Use of estimates
In preparing the financial statements in conformity with accounting
principles generally accepted in India, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates. Any revisions to accounting estimates are recognised
in the current and future periods.
3. Revenue recognition
a) Revenue from sale of goods is recognised when the significant risks
and rewards in respect of ownership of the goods are transferred to the
customer and is stated inclusive of excise duty and net of trade
discounts, sales returns and sales tax wherever applicable.
b) Export entitlements under the Duty Entitlement Pass Book scheme are
recognised in the profit and loss account when the right to receive
credit as per the terms of the scheme is established in respect of the
exports made.
c) Revenue in respect of tool development and job charges is recognized
as per the terms of the contract with the customers.
d) Interest income is recognized on a time proportion basis, taking
into account the amount outstanding and the rates applicable.
e) Dividend income is recognized when the Companys right to receive
the same is established.
4. Fixed assets
Fixed assets are stated at cost (gross block) less accumulated
depreciation and impairment losses, if any. Cost
comprises the purchase price (net of Cenvat credit availed) and any
attributable cost of bringing the asset to its working condition for
its intended use.
Expenditure on account of modification / alteration in plant and
machinery / building, which increases the future benefit from the
existing asset beyond its previous assessed standard of performance, is
capitalised.
Borrowing costs directly attributable to acquisition or construction of
fixed assets, which necessarily takes a substantial period of time to
get ready for their intended use are capitalized.
5. Depreciation
Depreciation is provided on straight line method as per the rates
specified in Schedule XIV to the Act, as applicable at the time of
addition of the respective fixed assets, on pro-rata basis from the
month of addition, except for the following:
Depreciation on improvements carried out on buildings taken on lease
(included under buildings) is provided over the period of the lease.
Depreciation on a particular class of dies and tools manufactured by
the Company and put to use after 01 April 2003 is provided over a
period of 3 years.
The above rates of depreciation are indicative of the useful lives of
the assets.
The cost of leasehold land is not amortised.
Know-how is amortised over a period of four years.
6. Inventories
Inventories are valued as follows:
1. Raw materials & components, stores and spares, finished goods and
stock in process: At lower of cost and net realisable value.
2. Scrap: At estimated realisable value.
3. Cost of inventories is ascertained on the following basis:
a) Raw materials and components and stores & spares - on moving
weighted average basis.
b) Cost of finished goods and stock in process comprise material,
labour and related estimated overheads including depreciation.
7. Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments.
Long-term investments are stated at cost. Provision is made for
diminution in the value of long-term investments to recognise decline,
if any, other than temporary in nature.
8. Foreign currency transactions
Investments in foreign entities are recorded at the exchange rate
prevailing on the date of making the investment. Transactions in
foreign currencies are recorded at the rates prevailing on the date of
the transaction and monetary items denominated in foreign currency are
restated at the rate prevailing on the balance sheet date.
Differences arising on foreign currency translations of transactions
settled during the year are recognised in the profit and loss account.
The exchange differences arising on forward contracts other than those
entered into to hedge the foreign currency risk of firm commitments or
highly probable forecast transactions are recognised in the year in
which they arise based on the difference between
i) foreign currency amount of the contract translated at the exchange
rate on the reporting date and
ii) the same foreign currency amount translated at the later of the
date of inception of the forward exchange contract or the last
reporting date.
The premium or discount arising at the inception of the forward
contracts other than those entered into to hedge the foreign currency
risk of firm commitments or highly probable forecast transactions is
amortised as expense or income over the life of the contract.
Any profit or loss arising on cancellation or renewal of forward
exchange contracts is recognised as income or expense for the year.
9. Employee benefits
The Companys contribution to provident fund, being a defined
contribution plan, is recognised in the profit and loss account.
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 recognized as a liability determined based on
actuarial valuation using the Projected Unit Credit Method at the
Balance Sheet date. Gratuity is a post employment defined benefit
plan. The present value of obligation for gratuity is determined based
on actuarial valuation using the Projected Unit Credit Method, which
recognizes each period of service. Gratuity and superannuation funds
are administered by trustees of independently constituted trusts.
In respect of superannuation, the Company makes contribution to Life
Insurance Corporation of India ("LIC") of an amount payable by the
trusts to LIC, which is charged to the profit and loss account.
10. Taxes on income
Tax expense comprises current tax and deferred income tax.
Current tax is determined as the amount of tax payable in respect of
taxable income for the year.
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. In respect of carry
forward losses and unabsorbed depreciation, deferred tax assets are
recognized only to the extent there is virtual certainty that
sufficient future taxable income will be available against which such
losses can be realised. Minimum alternate tax payable under the
provisions of the Income Tax Act, 1961 is recognised as an asset in the
year in which credit becomes eligible and is set off in the year in
which the Company becomes liable to pay income taxes at the enacted tax
rates.
11. Earnings per share
The earnings considered in ascertaining the Companys earnings per
share comprise the net profit or loss for the year attributable to the
equity shareholders. Earnings per share are computed using the weighted
average number of shares outstanding during the year.
For the purpose of calculating diluted earning per share, the net
profit or loss for the period attributable to equity share holders and
the weighted average number of shares outstanding during the period are
adjusted for the effect of all dilutive potential equity shares.
12. Leases
Lease rentals in respect of assets taken under an operating lease are
charged to the profit and loss account on a straight line basis over
the term of the lease. In respect of assets given on operating lease,
income is being recognised on a straight line basis over the term of
the lease.
13. Contingent liabilities and provisions
The Company makes a provision when there is a present obligation as a
result of a past event where the outflow of economic resources is
probable and a reliable estimate of the amount of obligation can be
made. A disclosure is made for possible or present obligations that may
but probably will not require outflow of resources or where a reliable
estimate i cannot be made, as a contingent liability in the financial
statements. I
14. Impairment of assets
The Company on an annual basis makes an assessment of any indicator
that may lead to impairment of assets. If any such indication exists,
the Company estimates the recoverable amount of the assets. If such
recoverable amount is less than the carrying amount, then the carrying
amount is reduced to its recoverable amount by treating the difference
as impairment loss and is charged to the profit and loss account. If at
the balance sheet date there is an indication that if a previously
assessed impairment loss no longer exists, the recoverable amount is
reassessed and the asset is reflected at the recoverable amount subject
to a maximum of depreciated historical cost.
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