Accounting Policies of Rane Brake Lining Ltd. Company
Mar 31, 2019
1. Summary of Significant accounting policies
1.1 Basis of Preparation
The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Section 133 of the 2013 Act read with the Companies (Indian Accounting Standards) Rules 2015 and other relevant provisions of the 2013 Act.
The financial statements are prepared under historical cost convention except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below, in accordance with the Generally Accepted Accounting Principles in India and comply in all material respects with the accounting standards specified under the section 133 of the Act.
All the assets and liabilities have been classified as current or non-current as per the Companyâs normal operating cycle. Based on the nature of the products 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 12 months for the purpose of current / noncurrent classification of assets and liabilities.
1.2 Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in India requires the management to make judgements, estimates and assumptions that effect the reported amount of assets and liabilities as of the Balance Sheet date, reported amount of revenues and expenses for the year and disclosure of contingent liabilities as of the Balance Sheet date. These estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. Although these estimates are based on the managementâs best knowledge of current events and actions, uncertainty about the assumptions and estimates may result in outcomes requiring a material adjustment to the carrying amount of assets or liabilities in future periods. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
1.3 Property, Plant and Equipment
Property, Plant and Equipment are stated at cost less accumulated depreciation and impairment in value, if any. Cost includes purchase price, (inclusive of import duties and non - refundable purchase taxes, after deducting trade discounts and rebates), other costs directly attributable to bring the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and an initial estimate of the costs of dismantling, removing the item and restoring the site on which it is located, if any. If the Company has acquired a Property, Plant and Equipment on deferred term basis and terms are beyond normal credit terms, property plant and equipment will be recognized on cash price equivalent, i.e. discounted amount. The cost of Assets not ready for use as at the Balance Sheet date are disclosed under Capital Work-In-Progress. The cost of replacement spares/ major inspection relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the company and the cost of the item can be measured reliably. When parts of an item of property plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
Depreciation
Depreciation on Property, Plant and Equipment (Tangible assets) is generally computed on a pro-rata basis on the basis of the estimated life specified in Schedule II of the Companies Act, 2013 under Straight line method. The useful life of assets prescribed in Schedule II to the Companies Act, 2013 are considered for the purpose of Computation of Depreciation. However, If the managementâs estimate of the useful life of a fixed asset at the time of acquisition of the asset or of the remaining useful life on an annual review is different from that envisaged in the aforesaid schedule, depreciation is provided at a such rate based on the useful life / remaining useful life as technically advised. Accordingly, depreciation is provided based on the useful life indicated below which is different from that stated in Schedule II to the Companies Act,2013.
Depreciation charge on additions / deletions is restricted to the period of use. Depreciation methods, useful lives and residual values are reveiwed annually.
1.4 Intangible Assets
I ntangible assets are stated at acquisition cost, net of accumulated amortisation and accumulated impairment losses, if any. Intangible assets are amortised on a straight line basis over their estimated useful life as given below.
Amortisation method and useful lives are reveiwed annually.
1.5 Impairment
Assessment is done annually as to whether there is any indication that an asset (tangible and intangible) may be impaired. For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets, is considered as a cash generating unit. If any such indication exists, an estimate of the recoverable amount of the asset / cash generating unit is made. Assets whose carrying value exceeds their recoverable amount are written down to the recoverable amount. Recoverable amount is higher of an assetâs or cash generating unitâs fair value less cost to sell and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Assessment is also done at each Balance Sheet date as to whether there is any indication that an impairment loss recognised for an asset in prior accounting periods may no longer exist or may have decreased. In such cases, impairment losses are reversed to the extent the assets carrying amount does not exceed, the carrying amount that would have been determined if no impairment loss had previously been recognised.
1.6 Borrowing Cost
Borrowing costs that are attributable to the acquisition / construction / production of qualifying assets (assets which require substantial period of time to get ready for its intended use) are capitalised as part of the cost of that asset. All other borrowing costs are charged to revenue.
1.7 Inventories
Inventories are stated at lower of weighted average cost and net realisable value. Cost of inventories comprises of purchase cost, cost of conversion and other cost including manufacturing overheads incurred in bringing the inventory to present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
1.8 Foreign Currency Transaction Initial Recognition
On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the Functional currency and the foreign currency at the date of the transaction.
Subsequent Recognition
As at the reporting date, non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. All non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
All monetary assets and liabilities in foreign currency are reinstated at the end of accounting period.
Exchange differences on reinstatement of all monetary items are recognised in the Statement of Profit and Loss.
Derivative Financial instruments and Hedge Accounting
The Company is exposed to foreign currency risk arising out of Foreign currency revenue, receivables, cash balances, forecasted cash flows, payables and foreign currency loans. The Company has a detailed foreign currency risk mitigation policy in place, including the use of derivatives lilke the forward currency contracts/ options contracts to hedge forecasted cash flows denominate in Foreign currency. The objective of the same is to mitigate the impact of foreign currency exchange fluctations caused by transacting in foreign currency incase of future cash flows or highly probable forecast transactions. The Company enters into various foreign currency derivative contracts with Banks in the form of Forward currency contracts (âHedging instrumentâ) and recognise the financial assets / liabilities (âhedged itemâ) through formal documentation of the hedging relationship in line with the Companyâs Foreign currency risk management policy.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. Amounts previously recognised in other comprehensive income and accumulated in equity relating to effective portion as described above, are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting.
1.9 Revenue Recognition
The company has applied Ind AS 115 âRevenue from contracts with customersâ with effect from 1 April 2018. The performance obligations under all sales contracts are satisfied at a point of time. Ind AS 115 did not have a material impact on the amount or timing of recognition of reported revenue.
The Company derives revenues primarily from sale of safety critical friction material products such as brake linings, disc pads, clutch facings, clutch buttons, brake shoes and railway brake blocks & other auto components. Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties.
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the probable consideration expected to be received in exchange for those products or services. Revenue is reduced for estimated customer returns, rebates and other similar allowances.
The Company accounts for volume discounts and pricing incentives to customers as a reduction of revenue based on the rateable allocation of the discounts/ incentives to each of the underlying performance obligation that corresponds to the progress by the customer towards earning the discount/ incentive. Also, when the level of discount/pricing incentives varies with increases in levels of revenue transactions, the company recognizes the liability based on its estimate of the customerâs future purchases. If it is probable that the criteria for the discount will not be met, or if the amount thereof cannot be estimated reliably, then discount/pricing incentives is not recognized until the payment is probable and the amount can be estimated reliably. The company recognizes changes in the estimated amount of obligations for discounts/pricing incentives in the period in which the change occurs.
1.10 Employee Benefits
1. Short - Term employee benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits and recognised in the period in which the employee renders the related service.
2. Defined Contribution Plans Provident Fund
Contribution towards provident fund for employees is made to the regulatory authorities, where the Company has no further obligations. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made on a monthly basis.
Superannuation Fund
This is a defined contribution Plan. The company contributes sum equivalent to certain specified percentages of the eligible annual salaries based on the options exercised by the eligible employees to Superannuation Fund administered by Life Insurance Corporation of India (LIC).The Company has no further obligations for future superannuation benefits other than its annual contribution and recognises such contribution as expense as and when due.
3. Defined Benefit Plan Gratuity
The Company provides for gratuity, a defined benefit plan (the âGratuity Planâ) administered by LIC covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation, resignation or termination of employment, of an amount based on the respective employeeâs salary and the tenure of employment. The Companyâs liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses / gains are recognised in the other comprehensive income in the year in which they arise. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified to profit or loss.
4. Other Long term employee benefits Compensated Absence
Accumulated compensated absences, which are expected to be availed or encashed within 12 months from the end of the year are treated as short term employee benefits. The obligation towards the same is measured at the expected cost of accumulating compensated absences as the additional amount expected to be paid as a result of the unused entitlement as at the year end.
Accumulated compensated absences, which are expected to be availed or encashed beyond 12 months from the end of the year end are treated as other long term employee benefits. The Companyâs liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses / gains are recognised in the Profit and Loss Statement in the year in which they arise.
1.11 Taxes on Income
Tax expense for the period, comprising current tax and deferred tax, are included in the determination of the net profit or loss for the period. Current tax is measured at the amount expected to be paid to the tax authorities in accordance with the relevant prevailing tax laws. Tax expenses relating to the items in profit and loss shall be treated as current tax as part of profit and loss and those relating to items in other comprehensive income (OCI) shall be recognised as part of OCI.
Deferred tax is recognised for all the temporary differences between the carrying amounts of assets and liablities in the financial statements and corresponding tax bases used in computation of taxable profit. Deferred tax assets are recognised and carried forward only to the extent that it is probable that taxable profit will be available against which those deductible temporary differences can be utilised. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. At each Balance Sheet date, the Company re-assesses unrecognised deferred tax assets, if any and the same is recognised to the extent it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities representing current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation law.
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. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period. MAT shall be treated as part of deferred tax assets.
1.12 Financial instruments Initial recognition
The company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instruments. All financial assets and liabilities are recognized at fair value on initial recognition. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, that are not at fair value through profit or loss, are added to the fair value on initial recognition.
Subsequent measurement
i. Financial assets carried at amortized cost
A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
ii. Financial assets at fair value through profit or loss
A financial asset which is not classified in the above category is subsequently fair valued through profit or loss.
iii. Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest method. For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments. Derecognition of financial instruments. The company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under IND AS 109. A financial liability (or a part of a financial liability) is derecognized from the Companyâs Balance Sheet when the obligation specified in the contract is discharged or cancelled or expires.
Impairment
All financial assets classified as at amortised cost shall be tested for impairment under Ind AS 109 and measured using Expected Credit Loss (ECL) model.â
1.13 Fair Value
The Company measures financial instruments at fair value in accordance with the accounting policies mentioned above. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy that categorizes into three levels, described as follows, the inputs to valuation techniques used to measure value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs
(Level 3 inputs).
Level 1 â quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 â inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly
Level 3 â inputs that are unobservable for the asset or liability
1.14 Government Grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the company will comply with all attached conditions. All government grants are initially recognized by way of setting up as deferred income. Government grants relating to income are subsequently recognized in the profit or loss over the period necessary to match them with the costs that they are intended to compensate. Government grants relating to the purchase of property, plant and equipment are subsequently recognised in profit or loss on a systematic basis over the expected life of the related depreciable assets. Grants recognized in Profit and Loss as above are presented within other income.
1.15 Research & Development Expenditure
Expenditure on research is recognized as an expense when it is incurred. Expenditure on development which does not meet the criteria for recognition as an intangible asset is recognized as an expense when it is incurred. Items of property, plant and equipment and acquired Intangible assets utilised for Research and Development are capitalized and depreciated in accordance with the policies stated for property, plant and equipment and intangible assets.
1.16 Provisions and Contingent Liabilities Provisions : Provisions are recognised when there is a present obligation as result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance sheet date and are not discounted to its present value unless the effect of time value of money is material. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent Liabilities : Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made. When there is a possible obligation or a present obligation in respect of which likelihood of outflow of resources embodying economic benefits is remote, no provision or disclosure is made.
1.17 Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Earnings considered in ascertaining the Companyâs earnings per share is the net profit for the period after deducting equity dividends and any attributable tax thereto for the period. The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares, that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
1.18 Provision for Warranty
The Companyâs product warranty obligations and estimations thereof are determined using historical information on the type of product, nature, frequency and average cost of warranty claims and the estimates regarding possible future incidences of product failures. Changes in estimated frequency and amount of future warranty claims, which are inherently uncertain, can materially affect warranty expense.
Mar 31, 2018
Note 1 : Summary of Significant Accounting Policies, critical
judgments and key estimates
1. General Information
Rane Brake Lining Limited (The "Company") is engaged in manufacture of brake linings, disc pads, clutch facings, clutch buttons, brake shoes and railway brake blocks and as such operates in a single reportable business segment of ''Auto components for transportation industry''. The Company is having four manufacturing facilities at Chennai, Hyderabad, Puducherry and Trichy. The Company is a Public Limited Company and listed on Bombay Stock Exchange Limited, Mumbai and National Stock Exchange of India Limited, Mumbai.
2. Summary of Significant Accounting Policies
2.1 Basis of Preparation
The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Section 133 of the Companies Act ("the Act"), 2013 read with the Companies (Indian Accounting Standards) Rules
2015 and other relevant provisions of the Act. Upto the year ended 31 March, 2016, the Company prepared the financial statements in accordance with the requirements of the previous GAAP, which includes standards notified under the Companies (Accounting Standards) Rules, 2006 and other relevant provisions of the Act. These are the Company''s first Ind AS financial statements. The date of transition to the Ind AS is 01 April, 2016. Refer Note 41 for details of the first-time adoption exceptions and exemptions availed by the Company.
The financial statements are prepared under historical cost convention except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below, in accordance with the Generally Accepted Accounting Principles in India and comply in all material respects with the accounting standards specified under the section 133 of the Act.
All the assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle. Based on the nature of the products 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 12 months for the purpose of current / non-current classification of assets and liabilities.
2.2 Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in India requires the management to make judgments, estimates and assumptions that effect the reported amount of assets and liabilities as of the Balance Sheet date, reported amount of revenues and expenses for the year and disclosure of contingent liabilities as of the Balance Sheet date. These estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about the assumptions and estimates may result in outcomes requiring a material adjustment to the carrying amount of assets or liabilities in future periods. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
2.3 Property, Plant and Equipment
Property, Plant and Equipment are stated at cost less accumulated depreciation and impairment in value, if any. Cost includes purchase price, (inclusive of import duties and non-refundable purchase taxes, after deducting trade discounts and rebates), other costs directly attributable to bring the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and an initial estimate of the costs of dismantling, removing the item and restoring the site on which it is located, if any. If the Company has acquired a Property, Plant and Equipment on deferred term basis and terms are beyond normal credit terms, property plant and equipment will be recognized on cash price equivalent, i.e. discounted amount. The cost of Assets not ready for use as at the Balance Sheet date are disclosed under Capital Work-In-Progress. The cost of replacement spares / major inspection relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the company and the cost of the item can be measured reliably. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
Depreciation
Depreciation on Property , Plant and Equipment (Tangible assets) is generally computed on a pro-rata basis on the basis of the estimated life specified in Schedule II of the Companies Act, 2013 under Straight line method. The useful life of assets prescribed in Schedule II to the Companies impairment loss recognized for an asset in prior accounting periods may no longer exist or may have decreased. In such cases, impairment losses are reversed to the extent the assets carrying amount does not exceed, the carrying amount that would have been determined if no impairment loss had previously been recognized.
2.6 Borrowing Cost
Borrowing costs that are attributable to the acquisition / construction / production of qualifying assets (assets which require substantial period of time to get ready for its intended use) are capitalized as part of the cost of that asset. All other borrowing costs are charged to revenue.
2.7 Inventories
Inventories are stated at lower of weighted average cost and net realizable value. Cost of inventories comprises of purchase cost, cost of conversion and other cost including manufacturing overheads incurred in bringing the inventory to present location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
2.8 Foreign Currency Transaction Initial Recognition
On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the functional currency and the foreign currency at the date of the transaction.
Subsequent Recognition
As at the reporting date, non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. All non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
All monetary assets and liabilities in foreign currency are reinstated at the end of accounting period.
Exchange differences on reinstatement of all monetary items are recognized in the Statement of Profit and Loss.
Derivative Financial instruments and Hedge Accounting
The Company is exposed to foreign currency risk arising out of foreign currency revenue, receivables, cash balances, forecasted cash flows, payables and foreign currency loans. The Company has a detailed foreign currency risk mitigation policy in place, including the use of derivatives
Amortization method and useful lives are reviewed annually.
2.5 Impairment
Assessment is done annually as to whether there is any indication that an asset (tangible and intangible) may be impaired. For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets, is considered as a cash generating unit. If any such indication exists, an estimate of the recoverable amount of the asset / cash generating unit is made. Assets whose carrying value exceeds their recoverable amount are written down to the recoverable amount. Recoverable amount is higher of an assetâs or cash generating unitâs fair value less cost to sell and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Assessment is also done at each Balance Sheet date as to whether there is any indication that an
Act, 2013 are considered for the purpose of computation of Depreciation. However, If the managementâs estimate of the useful life of a fixed asset at the time of acquisition of the asset or of the remaining useful life on an annual review is different from that envisaged in the aforesaid schedule, depreciation is provided at such a rate based on the useful life / remaining useful life as technically advised. Accordingly, depreciation is provided based on the useful life indicated below which is different from that stated in Schedule II to the Companies Act, 2013.
like the forward currency contracts / options contracts to hedge forecasted cash flows denominated in foreign currency. The objective of the same is to mitigate the impact of foreign currency exchange fluctuations caused by transacting in foreign currency in case of future cash flows or highly probable forecast transactions. The Company enters into various foreign currency derivative contracts with Banks in the form of Forward currency contracts (''Hedging instrument'') and recognize the financial assets / liabilities (''Hedged item'') through formal documentation of the hedging relationship in line with the Company''s Foreign currency risk management policy.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss.
Amounts previously recognized in other comprehensive income and accumulated in equity relating to effective portion as described above, are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognized hedged item.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting.
2.9 Revenue Recognition
Sale of goods
Revenue from sales is recognized when the substantial risks and rewards of ownership in the goods are transferred to the buyer as per the terms of the contract. Revenue is measured at the fair value of consideration received or receivable, net of trade discounts, rebates, goods and service tax and sales taxes.
Other Income
Interest : Interest income is recognized on a effective interest method taking into account the amount outstanding and the rate applicable.
Dividend : Dividend income is recognized when the right to receive dividend is established.
Insurance Claims : Insurance claims are accounted for on the basis of claims lodged with insurance company and to the extent that there is a reasonable certainty in realizing the claims
2.10 Employee Benefits
1. Short - Term employee benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits and recognized in the period in which the employee renders the related service.
2. Defined Contribution Plans Provident Fund
Contribution towards provident fund for employees is made to the regulatory authorities, where the Company has no further obligations. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made on a monthly basis.
Superannuation Fund
This is a defined contribution Plan. The Company contributes sum equivalent to certain specified percentages of the eligible annual salaries based on the options exercised by the eligible employees to Superannuation Fund administered by Life Insurance Corporation of India (LIC).The Company has no further obligations for future superannuation benefits other than its monthly contribution and recognizes such contribution as expense as and when due.
3. Defined Benefit Plan Gratuity
The Company provides for gratuity, a defined benefit plan (the âGratuity Planâ) administered by LIC covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employeeâs salary and the tenure of employment. The Companyâs liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses / gains are recognized in the other comprehensive income in the year in which they arise. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and is not reclassified to profit or loss.
4. Other Long term employee benefits Compensated Absence
Accumulated compensated absences, which are expected to be availed or encashed within 12 months from the end of the year are treated as short term employee benefits. The obligation towards the same is measured at the expected cost of accumulating compensated absences as the additional amount expected to be paid as a result of the unused entitlement as at the year end.
Accumulated compensated absences, which are expected to be availed or encashed beyond 12 months from the end of the year are treated as other long term employee benefits. The Companyâs liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses / gains are recognized in the Statement of Profit and Loss in the year in which they arise.
2.11 Taxes on Income
Tax expense for the period, comprising current tax and deferred tax, are included in the determination of the net profit or loss for the period. Current tax is measured at the amount expected to be paid to the tax authorities in accordance with the relevant prevailing tax laws. Tax expenses relating to the items in profit and loss shall be treated as current tax as part of profit and loss and those relating to items in other comprehensive income (OCI) shall be recognized as part of OCI.
Deferred tax is recognized for all the temporary differences between the carrying amounts of assets and liabilities in the financial statements and corresponding tax bases used in computation of taxable profit. Deferred tax assets are recognized and carried forward only to the extent that it is probable that taxable profit will be available against which those deductible temporary differences can be utilized. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. At each Balance Sheet date, the Company re-assesses unrecognized deferred tax assets, if any, and the same is recognized to the extent it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle the asset and the liability on a net basis. Deferred tax assets and deferred
tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities representing current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation law.
Minimum Alternate Tax (MAT) credit is recognized as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the specified period. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period. MAT shall be treated as part of deferred tax assets.
2.12 Financial instruments Initial recognition
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instruments. All financial assets and liabilities are recognized at fair value on initial recognition. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, that are not at fair value through profit or loss, are added to the fair value on initial recognition.
Subsequent measurement
i. Financial assets carried at amortized cost
A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
ii. Financial assets at fair value through profit or loss
A financial asset which is not classified in the above category is subsequently fair valued through profit or loss.
iii. Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest method. For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
Derecognition of financial instruments
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under IND AS 109. A financial liability (or a part of a financial liability) is derecognized from the Companyâs Balance Sheet when the obligation specified in the contract is discharged or cancelled or expires.
Impairment
All financial assets classified as at amortized cost shall be tested for impairment under Ind AS 109 and measured using Expected Credit Loss (ECL) model.
2.13 Fair Value
The Company measures financial instruments at fair value in accordance with the accounting policies mentioned above. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy that categorizes into three levels, described as follows, the inputs to valuation techniques used to measure value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs).
Level 1 â quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 â inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly
Level 3 â inputs that are unobservable for the asset or liability
2.14 Government Grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the company will comply with all attached conditions. All government grants are initially recognized by way of setting up as deferred income. Government grants relating to income are subsequently recognized in the profit or loss over the period necessary to match them with the costs that they are intended to compensate. Government grants relating to the purchase of property, plant and equipment are subsequently recognized in profit or loss on a systematic basis over the expected life of the related depreciable assets. Grants recognized in Profit and Loss as above are presented within other income.
2.15 Research & Development Expenditure
Expenditure on research is recognized as an expense when it is incurred. Expenditure on development which does not meet the criteria for recognition as an intangible asset is recognized as an expense when it is incurred.
Items of property, plant and equipment and acquired Intangible assets utilized for Research and Development are capitalized and depreciated in accordance with the policies stated for property, plant and equipment and intangible assets.
2.16 Provisions and Contingent Liabilities
Provisions : Provisions are recognized when there is a present obligation as result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance sheet date and are not discounted to its present value unless the effect of time value of money is material. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
Contingent Liabilities : Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made. When there is a possible obligation or a present obligation in respect of which likelihood of outflow of resources embodying economic benefits is remote, no provision or disclosure is made.
2.17 Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Earnings considered in ascertaining the Companyâs earnings per share is the net profit for the period after deducting equity dividends and any attributable tax thereto for the period. The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares, that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity
shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
2.18 Provision for Warranty
The Companyâs product warranty obligations and estimations thereof are determined using historical information on the type of product, nature, frequency and average cost of warranty claims and the estimates regarding possible future incidences of product failures. Changes in estimated frequency and amount of future warranty claims, which are inherently uncertain, can materially affect warranty expense.
3. Critical accounting judgments, assumptions and key sources of estimation uncertainty
The following are the critical judgments, assumptions concerning the future, and key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
3.1. Useful lives of property, plant and equipment
As described at Note 2.3 above, the charge in respect of periodic depreciation for the year is derived after determining an estimate of an assetâs expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Companyâs assets are determined by the management at the time the asset is acquired and reviewed annually. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technical or commercial obsolescence arising from changes or improvements in production or from a change in market demand of the product or service output of the asset.
3.2. Employee Benefits
The cost of defined benefit plans are determined using actuarial valuation, which involves making assumptions about discount rates, expected rates of return on assets, future salary increases, and mortality rates. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty.
3.3. Taxation
Significant assumptions and judgments are involved in determining the provision for tax based on tax enactments, relevant judicial pronouncements and tax expert opinions, including an estimation of the likely outcome of any open tax assessments / litigations. Deferred income tax assets are recognized to the extent that it is probable that future taxable income will be available, based on estimates thereof.
3.4. Provisions and contingencies
Critical judgments are involved in measurement of provisions and contingencies and estimation of the likelihood of occurrence thereof based on factors such as expert opinion, past experience etc.
4. Recent accounting pronouncements
a) Appendix B to Ind AS 21, Foreign currency transactions and advance consideration: On 28 March, 2018, Ministry of Corporate Affairs ("MCA") has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The amendment will come into force from 01 April, 2018. The Company has evaluated the effect of this on the financial statements and the impact is not material.
b) Ind AS 115 - Revenue from Contract with Customers: On 28 March, 2018, Ministry of Corporate Affairs ("MCA") has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard 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. The management has evaluated the effect on adoption of Ind AS 115 on the accounts and the same is expected to be insignificant.
Note 30 : Segment Reporting
The Company is engaged in the activities related to manufacture and supply of auto components for transportation industry and the Chief Operating Decision Maker (Board of Directors) review the operating results as a whole for purposes of making decisions about resources to be allocated and assess its performance, the entire operations are to be classified as a single business segment, namely components for transportation industry. The geographical segments considered for disclosure are - India and Rest of the World. All the manufacturing facilities are located in India:
** Non-current assets are used in the operations of the Company to generate revenues both in India and outside India.
30.3 Information about major customers
Revenue from sale of Products to largest customers (greater than 10% of total sales) is Rs, 172.07 crores (31 March, 2017 : Rs, 224.30 crores)
NOTE 31 : Employee Benefit Plans
A. Defined contribution plans
The Company participates in a number of defined contribution plans on behalf of relevant personnel. Any expense recognized in relation to these schemes represents the value of contributions payable during the period by the Company at rates specified by the rules of those plans. The only amounts included in the balance sheet are those relating to the prior months contributions that were not due to be paid until after the end of the reporting period.
The major defined contribution plans operated by the Company are as below:
(a) Provident fund and pension
I n accordance with the Employeeâs Provident Fund and Miscellaneous Provisions Act, 1952 eligible employees of the Company are entitled to receive benefits in respect of provident fund, a defined contribution plan, in which both employees and the Company make monthly contributions at a specified percentage of the covered employeesâ salary.
The contributions, as specified under the law, are made to Employee Provident Fund Organization.
(b) Superannuation fund
The Company has a superannuation plan for the benefit of its employees. Employees who are members of the defined benefit superannuation plan are entitled to benefits depending on the years of service and salary drawn.
The Company contributes up to 15% of the eligible employeesâ salary to Superannuation Fund administered by Life Insurance Corporation of India (LIC). Such contributions are recognized as an expense as and when incurred. The Company does not have any further obligation beyond this contribution.
The total expense recognized in profit or loss of Rs, 3.21 crores (for the year ended 31 March, 2017: Rs, 3.46 crores) represents contributions payable to these plans by the company at rates specified in the rules of the plans. As at 31 March, 2018, contributions of Rs, 0.33 crores (as at 31 March, 2017: Rs, 0.53 crores) due in respect to 2017-18 (2016-17) reporting period had not been paid over to the plans. The amounts were paid subsequent to the end of the respective reporting periods.
B. Defined benefit plans
The defined benefit plans operated by the Company are as below:
The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides for a lump-sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service. Vesting occurs upon completion of five years of service. The Company makes annual contributions to Gratuity Fund administered by Life Insurance Corporation of India (LIC). The Company accounts for the liability for gratuity benefits payable in the future based on an actuarial valuation.
The defined benefit plans typically expose the Company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.
Investment risk The present value of the defined benefit plan liability is calculated using a discount rate determined by reference to government/high quality bond yields; if the return on plan asset is below this rate, it will create a plan deficit.
Interest risk A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the return on the plan''s debt investments.
Longevity risk The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan''s liability.
Salary risk The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan''s liability.
C. Details of defined benefit obligation and plan assets:
Leave obligations
The leave obligations cover the Companyâs liability for earned leave.
The amount of provision of Rs, 1.54 crores (31 March, 2017 - Rs, 1.49 crores, 01 April, 2016 - Rs, 1.98 crores) is presented as current, since the Company does not have an unconditional right to defer settlement for any of these obligations. However based on past experience, the Company does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months.
The current service cost and the net interest expense for the year are included in the ''Employee benefits expense'' line item in the statement of statement of profit and loss.
The remeasurement of the net defined benefit liability is included in other comprehensive income.
(v) Risk Exposure
The Company has invested the plan assets with the insurer managed funds. The insurance company has invested the plan assets in Government Securities, Debt Funds, Equity shares, Mutual Funds, Money Market Instruments and Time Deposits. The expected rate of return on plan asset is based on expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligation.
The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. The expected rate of return on plan assets is based on the composition of plan assets held (through LIC), historical results of the return on plan assets, the companyâs policy for plan asset management and other relevant factors.
Significant actuarial assumptions for the determination of the defined obligation are discount rate, expected salary increase and mortality. The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognized in the balance sheet.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.
Defined benefit liability and employer contributions
Mar 31, 2017
1. General Information
Rane Brake Lining Limited (The "Companyâ) is engaged in manufacture of brake linings, disc pads, clutch facings, clutch buttons, brake shoes and railway brake blocks and as such operates in a single reportable business segment of ''components for transportation industry''. The Company is having four manufacturing facilities at Chennai, Hyderabad, Puducherry and Trichy. The Company is a Public Limited Company and listed on Bombay Stock Exchange Limited, Mumbai and National Stock Exchange of India Limited, Mumbai.
2. Summary of Significant accounting policies
2.1 Basis of Preparation
The financial statements are prepared under historical cost convention in accordance with the Generally Accepted Accounting Principles in India and comply in all material respects with the accounting standards specified under the section 133 of the Act, as amended, read with rule 7 of the Companies (Accounts) Rules, 2014. All the assets and liabilities have been classified as current or noncurrent as per the Company''s normal operating cycle. Based on the nature of the products 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 12 months for the purpose of current / non-current classification of assets and liabilities.
2.2 Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in India requires the management to make estimates and assumptions that affect the reported amount of assets and liabilities as of the Balance Sheet date, reported amount of revenues and expenses for the year and disclosure of contingent liabilities as of the Balance Sheet date. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about the assumptions and estimates may result in outcomes requiring a material adjustment to the carrying amount of assets or liabilities in future periods. Difference between actual results and estimates are recognized in the Profit and Loss Statement in the year in which the results are known / materialized.
2.3 Fixed Assets & Depreciation
Property, Plant & Equipment (Tangible Assets)
Property, Plant and Equipment are stated at cost less accumulated depreciation and impairment in value, if any. Cost includes purchase price, (inclusive of import duties and non-refundable purchase taxes, after deducting trade discounts and rebates), other costs directly attributable for bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and an initial estimate of the costs of dismantling, removing the item and restoring the site on which it is located, if any.
If the Company has acquired a Property, Plant and Equipment on deferred term basis and terms are beyond normal credit terms, property plant and equipment will be recognized on cash price equivalent, i.e. discounted amount.
The cost of Assets not ready for use as at the Balance Sheet date are disclosed under Capital Work-In-Progress.
The cost of replacement spares / major inspection relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the company and the cost of the item can be measured reliably. When parts of an item of property plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
Depreciation on Property , Plant and Equipment (Tangible assets) is generally computed on a pro-rata basis on the basis of the estimated life specified in Schedule II of the Companies Act, 2013 under Straight line method. The useful life of assets prescribed in Schedule II to the Companies Act, 2013 are considered for the purpose of Computation of Depreciation. However, If the management''s estimate of the useful life of a fixed asset at the time of acquisition of the asset or of the remaining useful life on a subsequent review is different from that envisaged in the aforesaid schedule, depreciation is provided at such a rate based on the useful life / remaining useful life as technically advised. Accordingly, depreciation is provided based on the useful life indicated below which is different from that stated in Schedule II to the Companies, Act, 2013.
Assets individually costing '' 10,000 or less are depreciated at the rate of 100%.
Depreciation methods, useful lives and residual values are reviewed at each financial year end.
2.4 Intangible Assets
Intangible assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortized on a straight line basis over their estimated useful life as given below.
2.5 Impairment
Assessment is done at each Balance Sheet date as to whether there is any indication that an asset (Property , Plant and Equipment (Tangible asset) and intangible asset) may be impaired. For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets, is considered as a cash generating unit. If any such indication exists, an estimate of the recoverable amount of the asset / cash generating unit is made. Assets whose carrying value exceeds their recoverable amount are written down to the recoverable amount. Recoverable amount is higher of an asset''s or cash generating unit''s net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Assessment is also done at each Balance Sheet date as to whether there is any indication that an impairment loss recognized for an asset in prior accounting periods may no longer exist or may have decreased.
2.6 Borrowing Cost
Borrowing costs that are attributable to the acquisition / construction / production of qualifying assets (assets which require substantial period of time to get ready for its intended use) are capitalized as part of the cost of that asset. All other borrowing costs are charged to revenue.
2.7 Inventories
Inventories are stated at lower of weighted average cost and net realizable value. Cost of inventories comprises of purchase cost, cost of conversion and other cost including manufacturing overheads incurred in bringing the inventory to present location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
2.8 Foreign Currency Transaction
Initial Recognition
On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Subsequent Recognition
As at the reporting date, non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. All non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
All monetary assets and liabilities in foreign currency are reinstated at the end of accounting period.
Exchange differences on reinstatement of all monetary items are recognised in the Profit and Loss Statement.
Forward Exchange Contracts
Premium or discount arising on inception of forward exchange contracts, which are intended to hedge the foreign currency risk of existing assets or liabilities has been amortised as income / expense over the life of the contract and exchange differences on such contracts are recognised in the Profit and Loss Statement in the reporting period in which the exchange rates change.
Gain or loss on forward exchange contracts, which are intended to hedge the foreign currency risks of future transactions in respect of which firm commitments are made or which are highly probable forecast transactions are determined by marking such contracts outstanding on Balance Sheet date to market. The portion of the gains or losses on forward contracts determined to be "effective hedgesâ has been recognized directly in Hedging Reserve Account, whereas the portion relatable to "ineffective hedgesâ has been recognized in the Profit and Loss Statement. The gains or losses that are recognized directly in the Hedging Reserve Account are subsequently reclassified into the Profit and Loss Statement in the period during which the asset acquired or liability assumed affects the profit or loss. The profit or loss recognized in Hedging Reserve account, which is not expected to be recovered in future periods, has been recognized in the Profit and Loss Statement.
2.9 Revenue Recognition
Revenue from sales is recognized when the substantial risks and rewards of ownership in the goods are transferred to the buyer as per the terms of the contract and are recognized net of trade discounts, rebates, sales taxes and excise duties.
2.10 Other Income
Interest : Interest income is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable. Dividend : Dividend income is recognized when the right to receive dividend is established.
2.11 Employee Benefits
1. Short - Term employee benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits and recognized in the period in which the employee renders the related service.
2. Defined Contribution Plans Provident Fund
Contribution towards provident fund for employees is made to the regulatory authorities, where the Company has no further obligations. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made on a monthly basis.
Superannuation Fund
This is a defined contribution Plan. The company contributes sum equivalent to certain specified percentages of the eligible annual salaries based on the options exercised by the eligible employees to Superannuation Fund administered by Life Insurance Corporation of India (LIC). The Company has no further obligations for future superannuation benefits other than its annual contribution and recognizes such contribution as expense as and when due
3. Defined Benefit Plan Gratuity
The Company provides for gratuity, a defined benefit plan (the "Gratuity Planâ) administered by LIC covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee''s salary and the tenure of employment. The Company''s liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses / gains are recognized in the Profit and Loss Statement in the year in which they arise
4. Other Long term employee benefits Compensated Absence
Accumulated compensated absences, which are expected to be availed or encashed within 12 months from the end of the year end are treated as short term employee benefits. The obligation towards the same is measured at the expected cost of accumulating compensated absences as the additional amount expected to be paid as a result of the unused entitlement as at the year end.
Accumulated compensated absences, which are expected to be availed or encashed beyond 12 months from the end of the year end are treated as other long term employee benefits. The Company''s liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses / gains are recognized in the Profit and Loss Statement in the year in which they arise.
2.12 Taxes on Income
Tax expense for the period, comprising current tax and deferred tax, are included in the determination of the net profit or loss for the period. Current tax is measured at the amount expected to be paid to the tax authorities in accordance with the relevant prevailing tax laws.
Deferred tax is recognized for all the timing differences, subject to the consideration of prudence in respect of deferred tax assets. Deferred tax assets are recognized and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. At each Balance Sheet date, the Company re-assesses unrecognized deferred tax assets, if any.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle the asset and the liability on a net basis. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities representing current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws.
Minimum Alternative Tax credit is recognized as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the specified period. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period.
2.13 Investments
Investments which are readily realizable and intended to be held for not more than one year from the date on which such investments are made are classified as current investments. All other investments are classified as long term investments. Current investments are carried at lower of cost and quoted / fair value, computed category wise. Long Term Investments are stated at cost. Decline in value, if any, which is not considered temporary in nature, is provided for.
2.14 Research & Development Expenditure
Revenue expenditure on Research and Development is charged off in the year in which it is incurred. Capital expenditure on Research and Development is included under Fixed Assets.
2.15 Provisions and Contingent Liabilities
Provisions : Provisions are recognized when there is a present obligation as result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance Sheet date and are not discounted to its present value
Contingent Liabilities : Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made..
2.16 Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
Earnings considered in ascertaining the Company''s earnings per share is the net profit for the period after deducting equity dividends and any attributable tax thereto for the period. The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares, that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
2.17 Dividend
The final dividend on shares is recorded as a liability on the date of approval by shareholders and interim dividends are recorded as a liability on the date of declaration by company''s Board of Directors.
Mar 31, 2015
1.1 Basis of Preparation
The financial statements are prepared under historical cost convention
in accordance with the Generally Accepted Accounting Principles in
India and comply in all material respects with the accounting standards
specif ed under the section 133 of the Act read with rule 7 of the
Companies (Accounts) Rules, 2014.
All the assets and liabilities have been classif ed as current or
non-current as per the Company''s normal operating cycle. Based on the
nature of the products 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 12 months for the
purpose of current / non-current classification of assets and
liabilities.
2.2 Use of Estimates
The preparation of the financial statements in conformity with
accounting principles generally accepted in India requires the
management to make estimates and assumptions that affect the reported
amount of assets and liabilities as of the Balance Sheet date, reported
amount of revenues and expenses for the year and disclosure of
contingent liabilities as of the Balance Sheet date. Although these
estimates are based on the managements best knowledge of current events
and actions, uncertainty about the assumptions and estimates may result
in outcomes requiring a material adjustment to the carrying amount of
assets or liabilities in future periods. Difference between actual
results and estimates are recognised in the Profit and Loss Statement
in the year in which the results are known/ materialised.
2.3 Fixed Assets & Depreciation
(i) Tangible Assets
Fixed Assets are valued at cost, namely, cost of acquisition and other
incidental expenses directly related to their installation / erection
less accumulated depreciation and impairment, if any. Capital
work-in-progress comprises of the cost of fixed assets that are not yet
ready for their intended use at the reporting date. Subsequent
expenditure related to an item of fixed asset is added to its book
value only if it increases the future benefit from the existing asset
beyond its previously assessed standard of performance.
Depreciation on tangible assets is generally computed on a pro-rata
basis on the basis of the estimated life specif ed in Schedule II of
the Companies Act, 2013 under Straight line method. The useful life of
assets prescribed in Schedule II to the Companies Act, 2013 are
considered for the purpose of Computation of Depreciation. However, If
the management''s estimate of the useful life of a fixed asset at the
time of acquisition of the asset or of the remaining useful life on a
subsequent review is different from that envisaged in the aforesaid
schedule, depreciation is provided at a such rate based on the useful
life / remaining useful life as technically advised. Accordingly,
depreciation is provided based on the useful life indicated below which
is different from that stated in Schedule II to the Companies Act,
2013.
2.4 Impairment
Assessment is done at each Balance Sheet date as to whether there is
any indication that an asset (tangible and intangible) may be impaired.
For the purpose of assessing impairment, the smallest identif able
group of assets that generates cash inflows from continuing use that
are largely independent of the cash inflows from other assets or groups
of assets, is considered as a cash generating unit. If any such
indication exists, an estimate of the recoverable amount of the asset /
cash generating unit is made. Assets whose carrying value exceeds their
recoverable amount are written down to the recoverable amount.
Recoverable amount is higher of an asset''s or cash generating unit''s
net selling price and its value in use. Value in use is the present
value of estimated future cash flows expected to arise from the
continuing use of an asset and from its disposal at the end of its
useful life. Assessment is also done at each Balance Sheet date as to
whether there is any indication that an impairment loss recognised for
an asset in prior accounting periods may no longer exist or may have
decreased.
2.5 Borrowing Cost
Borrowing costs that are attributable to the acquisition / construction
/ production of qualifying assets (assets which require substantial
period of time to get ready for its intended use) are capitalised as
part of the cost of that asset. All other borrowing costs are charged
to revenue.
2.6 Inventories
Inventories are stated at lower of weighted average cost and net
realisable value. Cost of inventories comprises of purchase cost, cost
of conversion and other cost including manufacturing overheads incurred
in bringing the inventory to present location and condition. Net
realisable value is the estimated selling price in the ordinary course
of business, less the estimated costs of completion and the estimated
costs necessary to make the sale.
2.7 Foreign Currency Transaction
Initial Recognition
On initial recognition, all foreign currency transactions are recorded
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Subsequent Recognition
As at the reporting date, non-monetary items which are carried in terms
of historical cost denominated in a foreign currency are reported using
the exchange rate at the date of the transaction. All non-monetary
items which are carried at fair value or other similar valuation
denominated in a foreign currency are reported using the exchange rates
that existed when the values were determined.
All monetary assets and liabilities in foreign currency are restated at
the end of accounting period.
Exchange differences on restatement of all monetary items are
recognised in the Statement of Profit and Loss.
Forward Exchange Contracts
Premium or discount arising on inception of forward exchange contracts,
which are intended to hedge the foreign currency risk of existing
assets or liabilities has been amortised as income /expense over the
life of the contract and exchange differences on such contracts are
recognised in the Statement of Profit and Loss in the reporting period
in which the exchange rates change.
Gain or loss on forward exchange contracts, which are intended to hedge
the foreign currency risks of future transactions in respect of which f
rm commitments are made or which are highly probable forecast
transactions are determined by marking such contracts outstanding on
Balance Sheet date to market. The portion of the gains or losses on
forward contracts determined to be "effective hedges" has been
recognized directly in Hedging Reserve Account, whereas the portion
relatable to "ineffective hedges" has been recognized in the Statement
of Profit and Loss. The gains or losses that are recognized directly in
the Hedging Reserve Account are subsequently reclassif ed into the
Statement of Profit and Loss in the period during which the asset
acquired or liability assumed affects the Profit or loss. The Profit or
loss recognized in Hedging Reserve account, which is not expected to be
recovered in future periods, has been recognized in the Profit and Loss
Statement.
2.8 Revenue Recognition
Revenue from sales is recognised when the substantial risks and rewards
oflownership in the goods are transferred to the buyer as per the terms
of the contract and are recognised net of trade discounts, rebates,
sales taxes and excise duties.
2.9 Other Income
Interest : Interest income is recognised on a time proportion basis
taking into account the amount outstanding and
the rate applicable.
Dividend : Dividend income is recognised when the right to receive
dividend is established.
2.10 Employee Benefi ts
1. Short - Term employee benefi ts
All employee benefits payable wholly within twelve months of rendering
the service are classif ed as short-term employee benefits and
recognised in the period in which the employee renders the related
service.
2. Defi ned Contribution Plans
Provident Fund
Contribution towards provident fund for employees is made to the
regulatory authorities, where the Company has no further obligations.
Such benefits are classif ed as Def ned Contribution Schemes as the
Company does not carry any further obligations, apart from the
contributions made on a monthly basis.
Superannuation Fund
This is a def ned contribution Plan. The company contributes sum
equivalent certain specif ed percentages of the eligible annual
salaries based on the options exercised by the eligible employees to
Superannuation Fund administered by Life Insurance Corporation of India
(LIC).The Company has no further obligations for future superannuation
benefits other than its annual contribution and recognises such
contribution as expense as and when due.
3. Defi ned Benefi t Plan
Gratuity
The Company provides for gratuity, a def ned benefit plan (the
"Gratuity Plan") administered by LIC covering eligible employees in
accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan
provides a lump sum payment to vested employees at retirement, death,
incapacitation or termination of employment, of an amount based on the
respective employee''s salary and the tenure of employment. The
Company''s liability is actuarially determined (using the Projected Unit
Credit method) at the end of each year. Actuarial losses / gains are
recognised in the Statement of Profit and Loss in the year in which
they arise.
4. Other Long term employee benefi ts
Compensated Absences
Accumulated compensated absences, which are expected to be availed or
encashed within 12 months from the end of the year end are treated as
short term employee benefits. The obligation towards the same is
measured at the expected cost of accumulating compensated absences as
the additional amount expected to be paid as a result of the unused
entitlement as at the year end.
Accumulated compensated absences, which are expected to be availed or
encashed beyond 12 months from the end of the year end are treated as
other long term employee benefits. The Company''s liability is
actuarially determined (using the Projected Unit Credit method) at the
end of each year. Actuarial losses / gains are recognised in the
Statement of Profit and Loss in the year in which they arise.
2.11 Taxes on Income
Tax expense for the period, comprising current tax and deferred tax,
are included in the determination of the net Profit or loss for the
period. Current tax is measured at the amount expected to be paid to
the tax authorities in accordance with the relevant prevailing tax
laws.
Deferred tax is recognised for all the timing differences, subject to
the consideration of prudence in respect of deferred tax assets.
Deferred tax assets are recognised and carried forward only to the
extent that there is a reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realised. Deferred tax assets and liabilities are measured using
the tax rates and tax laws that have been enacted or substantively
enacted by the Balance Sheet date. At each Balance Sheet date, the
Company re-assesses unrecognised deferred tax assets, if any.
Current tax assets and current tax liabilities are offset when there is
a legally enforceable right to set off the recognised amounts and there
is an intention to settle the asset and the liability on a net basis.
Deferred tax assets and deferred tax liabilities are offset when there
is a legally enforceable right to set off assets against liabilities
representing current tax and where the deferred tax assets and the
deferred tax liabilities relate to taxes on income levied by the same
governing taxation laws.
Minimum Alternative Tax 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 specif ed period. Such asset is reviewed
at each Balance Sheet date and the carrying amount of the MAT credit
asset is written down to the extent there is no longer a convincing
evidence to the effect that the Company will pay normal income tax
during the specif ed period.
2.12 Investments
Investments which are readily realisable and intended to be held for
not more than one year from the date on which such investments are made
are classif ed as current investments. All other investments are
classif ed as long term investments. Current investments are carried at
lower of cost and quoted/fair value, computed category wise. Long Term
Investments are stated at cost. Decline in value, if any, which is not
considered temporary in nature, is provided for.
2.13 Research & Development Expenditure
Revenue expenditure on Research and Development is charged off in the
year in which it is incurred. Capital expenditure on Research and
Development is included under Fixed Assets.
2.14 Provisions and Contingent Liabilities
Provisions : Provisions are recognised when there is a present
obligation as result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation at the Balance
sheet date and are not discounted to its present value.
Contingent Liabilities : Contingent liabilities are disclosed when
there is a possible obligation arising from past events, the existence
of which will be confirmed only by the occurrence or non occurrence of
one or more uncertain future events not wholly within the control of
the company or a present obligation that arises from past events where
it is either not probable that an outflow of resources will be required
to settle or a reliable estimate of the amount cannot be made.
2.15 Earnings Per Share
Basic earnings per share is calculated by dividing the net Profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. Earnings
considered in ascertaining the Company''s earnings per share is the net
Profit for the period after deducting equity dividends and any
attributable tax thereto for the period. The weighted average number of
equity shares outstanding during the period and for all periods
presented is adjusted for events, such as bonus shares, other than the
conversion of potential equity shares, that have changed the number of
equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net prof
t or loss for the period attributable to equity shareholders and the
weighted average number of shares outstanding during the period is
adjusted for the effects of all dilutive potential equity shares.
Mar 31, 2014
1.1 Basis of Preparation
The financial statements are prepared under historical cost convention
in accordance with the Generally Accepted Accounting Principles in
India and comply in all material respects with the accounting standards
notified under the Companies Act, 1956 read with the General circular
15/2013 dated 13th September 2013 of the Ministry of corporate affairs
in respect of section 133 of the Companies Act, 2013.
All the 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 Schedule VI to the Companies Act, 1956. Based
on the nature of the products 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 12
months for the purpose of current / non-current classification of
assets and liabilities.
1.2 Use of Estimates
The preparation of the financial statements in conformity with
accounting principles generally accepted in India requires the
management to make estimates and assumptions that affect the reported
amount of assets and liabilities as of the Balance Sheet date, reported
amount of revenues and expenses for the year and disclosure of
contingent liabilities as of the Balance Sheet date.
Although these estimates are based on the managements best knowledge of
current events and actions, uncertainty about the assumptions and
estimates may result in outcomes requiring a material adjustment to the
carrying amount of assets or liabilities in future periods. Difference
between actual results and estimates are recognised in the Profit and
Loss Statement in the year in which the results are known /
materialised.
1.3 Fixed Assets & Depreciation
(i) Tangible Assets
Fixed Assets are valued at cost, namely, cost of acquisition and other
incidental expenses directly related to their installation / erection
less accumulated depreciation and impairment, if any. Capital work-in-
progress comprises of the cost of fixed assets that are not yet ready
for their intended use at the reporting date. Subsequent expenditure
related to an item of fixed asset is added to its book value only if it
increases the future benefit from the existing asset beyond its
previously assessed standard of performance.
Depreciation on tangible assets is computed on a pro-rata basis at the
rates specified in Schedule XIV of the Companies Act, 1956 on the
Straight line method. The rates of depreciation prescribed in Schedule
XIV to the Companies Act, 1956 are considered as the minimum rates. If
the management''s estimate on the useful life of a fixed asset at the
time of acquisition of the asset or of the remaining useful life on a
subsequent review is shorter than that envisaged in the aforesaid
schedule, depreciation is provided at a higher rate based on the
technical estimate of the useful life / remaining useful life.
According to this policy, depreciation is provided at the rates
indicated below which is higher than the corresponding rates prescribed
in Schedule XIV to the Companies Act, 1956
1.4 Impairment
Assessment is done at each Balance Sheet date as to whether there is
any indication that an asset (tangible and intangible) may be impaired.
For the purpose of assessing impairment, the smallest identifiable
group of assets that generates cash inflows from continuing use that
are largely independent of the cash inflows from other assets or groups
of assets, is considered as a cash generating unit. If any such
indication exists, an estimate of the recoverable amount of the asset /
cash generating unit is made. Assets whose carrying value exceeds their
recoverable amount are written down to the recoverable amount.
Recoverable amount is higher of an asset''s or cash generating unit''s
net selling price and its value in use. Value in use is the present
value of estimated future cash flows expected to arise from the
continuing use of an asset and from its disposal at the end of its
useful life. Assessment is also done at each Balance Sheet date as to
whether there is any indication that an impairment loss recognised for
an asset in prior accounting periods may no longer exist or may have
decreased.
1.5 Borrowing Cost
Borrowing costs that are attributable to the acquisition / construction
/ production of qualifying assets (assets which require substantial
period of time to get ready for its intended use) are capitalised as
part of the cost of that asset. All other borrowing costs are charged
to revenue.
1.6 Inventories
Inventories are stated at lower of cost and net realisable value. Cost
of inventories comprises of purchase cost, cost of conversion and other
cost including manufacturing overheads incurred in bringing the
inventory to present location and condition. Net realisable value is
the estimated selling price in the ordinary course of business, less
the estimated costs of completion and the estimated costs necessary to
make the sale.
1.7 Foreign Currency Transaction
Initial Recognition
On initial recognition, all foreign currency transactions are recorded
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Subsequent Recognition
As at the reporting date, non-monetary items which are carried in terms
of historical cost denominated in a foreign currency are reported using
the exchange rate at the date of the transaction. All non-monetary
items which are carried at fair value or other similar valuation
denominated in a foreign currency are reported using the exchange rates
that existed when the values were determined.
All monetary assets and liabilities in foreign currency are restated at
the end of accounting period.
Exchange differences on restatement of all monetary items are
recognised in the Statement of Profit and Loss.
Forward Exchange Contracts
Forward Contracts for firm commitment and highly probable forecast
transactions outstanding as at the year end are marked to market and
the resultant loss, if any, is recognized in Profit & Loss statement
and in case of gain the same is ignored.
1.8 Revenue Recognition
Revenue from sales is recognised when the substantial risks and rewards
of ownership in the goods are transferred to the buyer as per the terms
of the contract and are recognised net of trade discounts, rebates,
sales taxes and excise duties.
1.9 Other Income
Interest : Interest income is recognised on a time proportion basis
taking into account the amount outstanding and the rate applicable.
Dividend : Dividend income is recognised when the right to receive
dividend is established.
1.10 Employee Benefits
1. Short - Term employee benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short- term employee benefits and
recognised in the period in which the employee renders the related
service.
2. Defined Contribution Plans
Provident Fund
Contribution towards provident fund for employees is made to the
regulatory authorities, where the Company has no further obligations.
Such benefits are classified as Defined Contribution Schemes as the
Company does not carry any further obligations, apart from the
contributions made on a monthly basis.
Superannuation Fund
This is a defined contribution Plan. The company contributes sum
equivalent to 0%, 5%,10% and 15% of the eligible annual salaries based
on the options exercised by the eligible employees to Superannuation
Fund administered by Life Insurance Corporation of India (LIC).The
Company has no further obligations for future superannuation benefits
other than its annual contribution and recognises such contribution as
expense as and when due.
3. Defined Benefit Plan
Gratuity
The Company provides for gratuity, a defined benefit plan (the
"Gratuity Plan") administered by LIC covering eligible employees in
accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan
provides a lump sum payment to vested employees at retirement, death,
incapacitation or termination of employment, of an amount based on the
respective employee''s salary and the tenure of employment. The
Company''s liability is actuarially determined (using the Projected Unit
Credit method) at the end of each year. Actuarial losses / gains are
recognised in the Statement of Profit and Loss in the year in which
they arise.
4. Other Long term employee benefits
Compensated Absences
Accumulated compensated absences, which are expected to be availed or
encashed within 12 months from the end of the year end are treated as
short term employee benefits. The obligation towards the same is
measured at the expected cost of accumulating compensated absences as
the additional amount expected to be paid as a result of the unused
entitlement as at the year end.
Accumulated compensated absences, which are expected to be availed or
encased beyond 12 months from the end of the year end are treated as
other long term employee benefits. The Company''s liability is
actuarially determined (using the Projected Unit Credit method) at the
end of each year. Actuarial losses / gains are recognised in the
Statement of Profit and Loss in the year in which they arise.
1.11 Taxes on Income
Tax expense for the period, comprising current tax and deferred tax,
are included in the determination of the net profit or loss for the
period. Current tax is measured at the amount expected to be paid to
the tax authorities in accordance with the relevant prevailing tax
laws.
Deferred tax is recognised for all the timing differences, subject to
the consideration of prudence in respect of deferred tax assets.
Deferred tax assets are recognised and carried forward only to the
extent that there is a reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realised. Deferred tax assets and liabilities are measured using
the tax rates and tax laws that have been enacted or substantively
enacted by the Balance Sheet date. At each Balance Sheet date, the
Company re-assesses unrecognised deferred tax assets, if any.
Current tax assets and current tax liabilities are offset when there is
a legally enforceable right to set off the recognised amounts and there
is an intention to settle the asset and the liability on a net basis.
Deferred tax assets and deferred tax liabilities are offset when there
is a legally enforceable right to set off assets against liabilities
representing current tax and where the deferred tax assets and the
deferred tax liabilities relate to taxes on income levied by the same
governing taxation laws.
Minimum Alternative Tax 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. Such asset is reviewed
at each Balance Sheet date and the carrying amount of the MAT credit
asset is written down to the extent there is no longer a convincing
evidence to the effect that the Company will pay normal income tax
during the specified period.
1.12 Investments
Investments which are readily realisable and intended to be held for
not more than one year from the date on which such investments are made
are classified as current investments. All other investments are
classified as long term investments. Current investments are carried at
lower of cost and quoted/fair value, computed category wise. Long Term
Investments are stated at cost. Decline in value, if any, which is not
considered temporary in nature, is provided for.
1.13 Research & Development Expenditure
Revenue expenditure on Research and Development is charged off in the
year in which it is incurred. Capital expenditure on Research and
Development is included under Fixed Assets.
1.14 Provisions and Contingent Liabilities
Provisions : Provisions are recognised when there is a present
obligation as result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation at the Balance
sheet date and are not discounted to its present value.
Contingent Liabilities : Contingent liabilities are disclosed when
there is a possible obligation arising from past events, the existence
of which will be confirmed only by the occurrence or non occurrence of
one or more uncertain future events not wholly within the control of
the company or a present obligation that arises from past events where
it is either not probable that an outflow of resources will be required
to settle or a reliable estimate of the amount cannot be made.
1.15 Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. Earnings
considered in ascertaining the Company''s earnings per share is the net
profit for the period after deducting equity dividends and any
attributable tax thereto for the period. The weighted average number of
equity shares outstanding during the period and for all periods
presented is adjusted for events, such as bonus shares, other than the
conversion of potential equity shares, that have changed the number of
equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period is
adjusted for the effects of all dilutive potential equity shares.
Mar 31, 2013
1.1 Basis of Preparation
The financial statements are prepared under historical cost convention
in accordance with the generally accepted accounting principles in
India and comply in all material respects with the accounting standards
notified under Section 211(3C) (Companies (Accounting Standards) Rules,
2006, as amended) and with the other relevant provisions of the
Companies Act, 1956.
All the 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 Schedule VI to the Companies Act, 1956. Based
on the nature of the products 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 12
months for the purpose of current / non-current classification of
assets and liabilities.
1.2 Use of Estimates
The preparation of the financial statements in conformity with
accounting principles generally accepted in India requires the
management to make estimates and assumptions that affect the reported
amount of assets and liabilities as of the Balance Sheet date, reported
amount of revenues and expenses for the year and disclosure of
contingent liabilities as of the Balance Sheet date. The estimates and
assumptions used in the accompanying financial statements are based
upon management''s evaluation of the relevant facts and circumstances as
of the date of the financial statements. Actual results could differ
from these estimates.
1.3 Fixed Assets & Depreciation
(i) Tangible Assets
Fixed Assets are valued at cost, namely, cost of acquisition and other
incidental expenses directly related to their installation / erection
less accumulated depreciation and impairment, if any. Capital
work-in-progress comprises of the cost of fixed assets that are not yet
ready for their intended use at the reporting date. Subsequent
expenditure related to an item of fixed asset is added to its book
value only, if it increases the future benefit from the existing asset
beyond its previously assessed standard of performance.
Depreciation on tangible assets is computed on a pro-rata basis at the
rates specified in Schedule XIV of the Companies Act, 1956 on the
Straight line method. The rates of depreciation prescribed in Schedule
XIV to the Companies Act, 1956 are considered as the minimum rates. If
the management''s estimate on the useful life of a fixed asset at the
time of acquisition of the asset or of the remaining useful life on a
subsequent review is shorter than that envisaged in the aforesaid
schedule, depreciation is provided at a higher rate based on the
technical estimate of the useful life / remaining useful life.
According to this policy, depreciation is provided at the rates
indicated below which is higher than the corresponding rates prescribed
in Schedule XIV to the Companies Act, 1956
Assets individually costing Rs. 10,000 or less are depreciated at the
rate of 100%
(ii) Intangible Assets
Intangible assets are stated at acquisition cost, net of accumulated
amortisation and accumulated impairment losses, if any. Intangible
assets are amortised on a straight line basis over their estimated
useful life as given below.
1.4 Impairment
Assessment is done at each Balance Sheet date as to whether there is
any indication that an asset (tangible and intangible) may be impaired.
For the purpose of assessing impairment, the smallest identifiable
group of assets that generates cash inflows from continuing use that
are largely independent of the cash inflows from other assets or groups
of assets, is considered as a cash generating unit. If any such
indication exists, an estimate of the recoverable amount of the asset /
cash generating unit is made. Assets whose carrying value exceeds their
recoverable amount are written down to the recoverable amount.
Recoverable amount is higher of an asset''s or cash generating unit''s
net selling price and its value in use. Value in use is the present
value of estimated future cash flows expected to arise from the
continuing use of an asset and from its disposal at the end of its
useful life. Assessment is also done at each Balance Sheet date as to
whether there is any indication that an impairment loss recognised for
an asset in prior accounting periods may no longer exist or may have
decreased.
1.5 Borrowing Cost
Borrowing costs that are attributable to the acquisition / construction
/ production of qualifying assets (assets which require substantial
period of time to get ready for its intended use) are capitalised as
part of the cost of that asset. All other borrowing costs are charged
to revenue.
1.6 Inventories
Inventories are stated at lower of cost and net realisable value. Cost
is determined using the moving weighted average basis. Goods in transit
are valued at cost. The cost of finished goods and work in progress
comprises raw materials, direct labour, other direct costs and related
production overheads. Net realisable value is the estimated selling
price in the ordinary course of business, less the estimated costs of
completion and the estimated costs necessary to make the sale.
1.7 Foreign Currency Transaction
Initial Recognition
On initial recognition, all foreign currency transactions are recorded
by applying to the foreign currency amount, the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Subsequent Recognition
As at the reporting date, non-monetary items which are carried in terms
of historical cost denominated in a foreign currency are reported using
the exchange rate at the date of the transaction. All non-monetary
items which are carried at fair value or other similar valuation
denominated in a foreign currency are reported using the exchange rates
that existed when the values were determined.
All monetary assets and liabilities in foreign currency are restated at
the end of accounting period.
Exchange differences on restatement of all monetary items are
recognised in the Statement of Profit and Loss.
Forward Exchange Contracts
Forward Contracts for firm commitment and highly probable forecast
transactions outstanding as at the year end are marked to market and
the resultant loss, if any, is recognized in Profit & Loss statement
and in case of gain the same is ignored.
1.8 Revenue Recognition
Revenue from sales is recognised when the substantial risks and rewards
of ownership in the goods are transferred to the buyer as per the terms
of the contract and are recognised net of trade discounts, rebates,
sales taxes and excise duties.
1.9 Other Income
Interest: Interest income is recognised on a time proportion basis
taking into account the amount outstanding and the rate applicable.
Dividend : Dividend income is recognised when the right to receive
dividend is established.
1.10 Employee Benefits
1. Short - Term employee benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short-term employee benefits and
recognised in the period in which the employee renders the related
service.
2. Defined Contribution Plans
Provident Fund
Contribution towards provident fund for employees is made to the
regulatory authorities, where the Company has no further obligations.
Such benefits are classified as Defined Contribution Schemes as the
Company does not carry any further obligations, apart from the
contributions made on a monthly basis.
Superannuation Fund
This is a defined contribution Plan. The company contributes sum
equivalent to 0%, 5%,10% and 15% of the eligible annual salaries based
on the options exercised by the eligible employees to Superannuation
Fund administered by Life Insurance Corporation of India (LIC).The
Company has no further obligations for future superannuation benefits
other than its annual contribution and recognises such contribution as
expense as and when due.
3. Defined Benefit Plan
Gratuity
The Company provides for gratuity, a defined benefit plan (the
"Gratuity Plan") administered by LIC covering eligible employees in
accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan
provides a lump sum payment to vested employees at retirement, death,
incapacitation or termination of employment, of an amount based on the
respective employee''s salary and the tenure of employment. The
Company''s liability is actuarially determined (using the Projected Unit
Credit method) at the end of each year. Actuarial losses / gains are
recognised in the Statement of Profit and Loss in the year in which
they arise.
4. Other Long term employee benefits
Compensated Absences
Accumulated compensated absences, which are expected to be availed or
encashed within 12 months from the end of the year end are treated as
short term employee benefits. The obligation towards the same is
measured at the expected cost of accumulating compensated absences as
the additional amount expected to be paid as a result of the unused
entitlement as at the year end.
Accumulated compensated absences, which are expected to be availed or
encashed beyond 12 months from the end of the year end are treated as
other long term employee benefits. The Company''s liability is
actuarially determined (using the Projected Unit Credit method) at the
end of each year. Actuarial losses / gains are recognised in the
Statement of Profit and Loss in the year in which they arise.
1.11 Taxes on Income
Tax expense for the period, comprising current tax and deferred tax,
are included in the determination of the net profit or loss for the
period. Current tax is measured at the amount expected to be paid to
the tax authorities in accordance with the relevant prevailing tax
laws.
Deferred tax is recognised for all the timing differences, subject to
the consideration of prudence in respect of deferred tax assets.
Deferred tax assets are recognised and carried forward only to the
extent that there is a reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realised. Deferred tax assets and liabilities are measured using
the tax rates and tax laws that have been enacted or substantively
enacted by the Balance Sheet date. At each Balance Sheet date, the
Company re-assesses unrecognised deferred tax assets, if any.
Current tax assets and current tax liabilities are offset when there is
a legally enforceable right to set off the recognised amounts and there
is an intention to settle the asset and the liability on a net basis.
Deferred tax assets and deferred tax liabilities are offset when there
is a legally enforceable right to set off assets against liabilities
representing current tax and where the deferred tax assets and the
deferred tax liabilities relate to taxes on income levied by the same
governing taxation laws.
Minimum Alternative Tax 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. Such asset is reviewed
at each Balance Sheet date and the carrying amount of the MAT credit
asset is written down to the extent there is no longer a convincing
evidence to the effect that the Company will pay normal income tax
during the specified period.
1.12 Research & Development Expenditure
Revenue expenditure on Research and Development is charged off in the
year in which it is incurred. Capital expenditure on Research and
Development is included under Fixed Assets.
1.13 Provisions and Contingent Liabilities
Provisions : Provisions are recognised when there is a present
obligation as result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation at the Balance
sheet date and are not discounted to its present value.
Contingent Liabilities : Contingent liabilities are disclosed when
there is a possible obligation arising from past events, the existence
of which will be confirmed only by the occurrence or non occurrence of
one or more uncertain future events not wholly within the control of
the company or a present obligation that arises from past events where
it is either not probable that an outflow of resources will be required
to settle or a reliable estimate of the amount cannot be made.
1.14 Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. Earnings
considered in ascertaining the Company''s earnings per share is the net
profit for the period after deducting equity dividends and any
attributable tax thereto for the period. The weighted average number of
equity shares outstanding during the period and for all periods
presented is adjusted for events, such as bonus shares, other than the
conversion of potential equity shares, that have changed the number of
equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period is
adjusted for the effects of all dilutive potential equity shares.
Mar 31, 2012
1. General Information
Rane Brake Lining Limited (The "Company") is engaged in manufacture of
brake linings, disc pads, clutch facings, clutch buttons, brake shoes
and railway brake blocks and as such operates in a single reportable
business segment of "components for transportation industry". The
Company is having four manufacturing facilities at Chennai, Hyderabad,
Puducherry and Trichy. The Company is a Public Limited Company and
listed on The Madras Stock Exchange Limited, Chennai, Bombay Stock
Exchange Limited, Mumbai and National Stock Exchange of India Limited,
Mumbai.
2.1 Basis of Preparation
The financial statements are prepared under historical cost convention
in accordance with the generally accepted accounting principles in
India and comply in all material respects with the accounting standards
notified under Section 211(3C) (Companies (Accounting Standards) Rules,
2006, as amended) and with the other relevant provisions of the
Companies Act, 1956.
All the 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 Schedule VI to the Companies Act, 1956. Based
on the nature of the products 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 12
months for the purpose of current / non current classification of
assets and liabilities.
2.2 Use of Estimates
The preparation of the financial statements in conformity with
accounting principles generally accepted in India requires the
management to make estimates and assumptions that affect the reported
amount of assets and liabilities as of the balance sheet date, reported
amount of revenues and expenses for the year and disclosure of
contingent liabilities as of the Balance Sheet date. The estimates and
assumptions used in the accompanying financial statements are based
upon management's evaluation of the relevant facts and circumstances
as of the date of the financial statements. Actual results could differ
from these estimates.
2.3 Fixed Assets
(i) Tangible Assets
Tangible Assets are stated at acquisition cost, net of accumulated
depreciation and accumulated impairment losses. Subsequent expenditures
related to an item of tangible asset are added to its book value only
if they increase the future benefits from the existing asset beyond its
previously assessed standard of performance. Items of tangible assets
that have been retired from active use and are held for disposal are
stated at the lower of their net book value and net realisable value
and are shown separately in the financial statements. Any expected loss
is recognised immediately in the Statement of Profit and Loss.
Losses arising from the retirement of, and gains or losses arising from
disposal of fixed assets, which are carried at cost are recognised in
the Statement of Profit and Loss.
2.4 Impairment
Assessment is done at each Balance Sheet date as to whether there is
any indication that an asset (tangible and intangible) may be impaired.
For the purpose of assessing impairment, the smallest identifiable
group of assets that generates cash inflows from continuing use that
are largely independent of the cash inflows from other assets or groups
of assets, is considered as a cash generating unit. If any such
indication exists, an estimate of the recoverable amount of the asset /
cash generating unit is made. Assets whose carrying value exceeds their
recoverable amount are written down to the recoverable amount.
Recoverable amount is higher of an asset's or cash generating
unit's net selling price and its value in use. Value in use is the
present value of estimated future cash flows expected to arise from the
continuing use of an asset and from its disposal at the end of its
useful life. Assessment is also done at each Balance Sheet date as to
whether there is any indication that an impairment loss recognised for
an asset in prior accounting periods may no longer exist or may have
decreased.
2.5 Inventories
Inventories are stated at lower of cost and net realisable value. Cost
is determined using the moving weighted average basis. Goods in transit
are valued at cost. The cost of finished goods and work in progress
comprises raw materials, direct labour, other direct costs and related
production overheads. Net realisable value is the estimated selling
price in the ordinary course of business, less the estimated costs of
completion and the estimated costs necessary to make the sale.
2.6 Foreign Currency Transaction Initial Recognition
On initial recognition, all foreign currency transactions are recorded
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Subsequent Recognition
As at the reporting date, non-monetary items which are carried in terms
of historical cost denominated in a foreign currency are reported using
the exchange rate at the date of the transaction. All non-monetary
items which are carried at fair value or other similar valuation
denominated in a foreign currency are reported using the exchange rates
that existed when the values were determined.
All monetary assets and liabilities in foreign currency are restated at
the end of accounting period.
Exchange differences on restatement of all monetary items are
recognised in the Statement of Profit and Loss. Forward Exchange
Contracts
The premium or discount arising at the inception of forward exchange
contracts entered into to hedge an existing asset / liability, is
amortised as expense or income over the life of the contract. Exchange
differences on such a contract are recognised in the Statement of
Profit and Loss in the reporting period in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of such a
forward exchange contract are recognised as income or as expense for
the period.
2.7 Revenue Recognition
Revenue from sales is recognised when the substantial risks and rewards
of ownership in the goods are transferred to the buyer as per the terms
of the contract and are recognised net of trade discounts, rebates,
sales taxes and excise duties.
2.8 Other Income
Interest: Interest income is recognised on a time proportion basis
taking into account the amount outstanding and the rate applicable.
Dividend: Dividend income is recognised when the right to receive
dividend is established.
2.9 Employee Benefits Provident Fund
Contribution towards provident fund for employees is made to the
regulatory authorities, where the Company has no further obligations.
Such benefits are classified as Defined Contribution Schemes as the
Company does not carry any further obligations, apart from the
contributions made on a monthly basis.
Superannuation Fund
This is a defined contribution Plan. The company contributes sum
equivalent to 0%, 5%,10% and 15% of the eligible annual salaries based
on the options exercised by the eligible employees to Superannuation
Fund administered by Life Insurance Corporation of India (LIC).The
Company has no further obligations for future superannuation benefits
other than its annual contribution and recognises such contribution as
expense as and when due.
Gratuity
The Company provides for gratuity, a defined benefit plan (the
"Gratuity Plan") administered by LIC covering eligible employees in
accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan
provides a lump sum payment to vested employees at retirement, death,
incapacitation or termination of employment, of an amount based on the
respective employee's salary and the tenure of employment. The
Company's liability is actuarially determined (using the Projected Unit
Credit method) at the end of each year. Actuarial losses / gains are
recognised in the Statement of Profit and Loss in the year in which
they arise.
Compensated Absences
Accumulated compensated absences, which are expected to be availed or
encashed within 12 months from the end of the year and are treated as
short term employee benefits. The obligation towards the same is
measured at the expected cost of accumulating compensated absences as
the additional amount expected to be paid as a result of the unused
entitlement as at the year end.
Accumulated compensated absences, which are expected to be availed or
encashed beyond 12 months from the end of the year and are treated as
other long term employee benefits. The Company's liability is
actuarially determined (using the Projected Unit Credit method) at the
end of each year. Actuarial losses / gains are recognised in the
Statement of Profit and Loss in the year in which they arise.
2.10 Current and deferred tax
Tax expense for the period, comprising current tax and deferred tax,
are included in the determination of the net profit or loss for the
period. Current tax is measured at the amount expected to be paid to
the tax authorities in accordance with the relevant prevailing tax
laws.
Deferred tax is recognised for all the timing differences, subject to
the consideration of prudence in respect of deferred tax assets.
Deferred tax assets are recognised and carried forward only to the
extent that there is a reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realised. Deferred tax assets and liabilities are measured using
the tax rates and tax laws that have been enacted or substantively
enacted by the Balance Sheet date. At each Balance Sheet date, the
Company re- assesses unrecognised deferred tax assets, if any.
Current tax assets and current tax liabilities are offset when there is
a legally enforceable right to set off the recognised amounts and there
is an intention to settle the asset and the liability on a net basis.
Deferred tax assets and deferred tax liabilities are offset when there
is a legally enforceable right to set off assets against liabilities
representing current tax and where the deferred tax assets and the
deferred tax liabilities relate to taxes on income levied by the same
governing taxation laws.
Minimum Alternative Tax 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. Such asset is reviewed
at each Balance Sheet date and the carrying amount of the MAT credit
asset is written down to the extent there is no longer a convincing
evidence to the effect that the Company will pay normal income tax
during the specified period.
2.11 Provisions and Contingent Liabilities
Provisions: Provisions are recognised when there is a present
obligation as result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation at the Balance
sheet date and are not discounted to its present value.
Contingent Liabilities: Contingent liabilities are disclosed when there
is a possible obligation arising from past events, the existence of
which will be confirmed only by the occurrence or non occurrence of one
or more uncertain future events not wholly within the control of the
company or a present obligation that arises from past events where it
is either not probable that an outflow of resources will be required to
settle or a reliable estimate of the amount cannot be made.
2.12 Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. Earnings
considered in ascertaining the Company's earnings per share is the
net profit for the period after deducting equity dividends and any
attributable tax thereto for the period. The weighted average number of
equity shares outstanding during the period and for all periods
presented is adjusted for events, such as bonus shares, other than the
conversion of potential equity shares, that have changed the number of
equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period is
adjusted for the effects of all dilutive potential equity shares.
Mar 31, 2011
1.1 Basis of preparation of Financial Statements
The financial statements are prepared under historical cost convention
in accordance with the generally accepted accounting principles in
India and comply in all material respects with the accounting standards
notified by the Companies (Accounting Standards) Rules, 2006 and with
the relevant provisions of the Companies Act, 1956.
1.2 Use of Estimates
The preparation of the financial statements in conformity with
accounting principles generally accepted in India requires the
management to make estimates and assumptions that affect the reported
amount of assets and liabilities as of the balance sheet date, reported
amount of revenues and expenses for the year and disclosure of
contingent liabilities as of the Balance Sheet date. The estimates and
assumptions used in the accompanying financial statements are based
upon managements evaluation of the relevant facts and circumstances as
of the date of the financial statements. Actual results could differ
from these estimates.
1.3 Fixed Assets
Fixed Assets are stated at cost of acquisition or construction, net of
cenvat credit and depreciation. Cost includes direct cost and
financing cost related to borrowing attributable to acquisition that
are capitalised until the assets are ready for use. Capital
work-in-progress includes cost of assets not ready for their intended
use and includes advances paid to acquire fixed assets.
1.4 Depreciation
Depreciation charge on additions / deletions is restricted to the
period of use.
Assets individually costing Rs. 10,000 or less are fully depreciated in
the year of addition. Software license fee is amortised over a period
of three years.
1.5 Investments
Current Investments are valued at lower of cost and fair value
1.6 Inventories
Stores and spares, raw materials and components are valued at cost of
purchase (net of Cenvat and applicable VAT credits) ascertained on
moving weighted average basis. Goods in transit are valued at cost.
Work in progress and finished goods are valued at lower of cost and net
realisable value. Cost includes customs duty, excise duty and
conversion costs and other expenses incurred for bringing the
inventories to their present condition and location.
1.7 Foreign Currency Transactions
Foreign currency transactions are recorded at the exchange rate
prevailing on the date of transaction.
At the year end all monetary assets and liabilities denominated in
foreign currency are restated at contracted / closing exchange rates as
applicable. Exchange differences on settlement / restatement are
adjusted to Profit and Loss Account.
In respect of forward contracts, the exchange difference is dealt with
in the Profit and Loss account over the period of the contracts.
Realised gains or losses on cancellation of forward contracts are
recognised in the Profit and Loss account of the year in which they are
cancelled.
1.8 Research and Development
Revenue expenditure on Research and Development is charged off as and
when incurred.
1.9 Employee Benefits
a. Short Term
Short term Employee Benefits including leave encashment benefits are
recognised as an expense as per the Companys scheme based on expected
obligations on undiscounted basis.
b. Long Term
The long term Employee Benefits represent leave encashment benefits
which are provided for based on actuarial valuation using projected
unit credit method.
c. Post retirement
Post retirement benefits comprise of Provident Fund, Superannuation and
Gratuity which are accounted for as follows:
i) Provident Fund
This is a defined contribution plan and the contributions remitted to
the Provident Fund authorities in accordance with the relevant Statute
are charged to Profit and Loss account as and when due. The Company has
no further obligations for future provident fund benefits other than
its monthly contributions.
ii) Superannuation Fund
This is a defined contribution Plan. The company contributes sum
equivalent to 0%, 5%, 10% and 15% of the annual salaries based on the
options exercised by the eligible employees to Superannuation Fund
administered by Life Insurance Corporation of India (LIC).The Company
has no further obligations for future superannuation benefits other
than its annual contribution and recognises such contribution as
expense as and when due.
iii) Gratuity
This is a defined benefit plan. The Companys scheme is administered by
LIC. The liability is determined based on the actuarial valuation using
projected unit credit method. Actuarial gains and losses comprising of
experience adjustments and the effects of changes in actuarial
assumptions are recognised immediately in the profit and loss account
as income or expense.
1.10 Revenue Recognition
Revenue from sales is recognised on despatch of goods to customers.
Sales include excise duty but are net of sales returns and trade
discounts and exclude sales tax.
1.11 Taxation
Provision for current tax is made based on the liability computed in
accordance with the relevant tax rates and tax laws. Deferred tax is
accounted for by computing the tax effect of the timing differences,
which arise during the year and reverse out in the subsequent periods.
Deferred tax is calculated at the tax rates enacted or substantively
enacted by the Balance Sheet date. Deferred tax assets are recognised
only if there is a virtual / reasonable certainty that they will be
realised in the foreseeable future and are reviewed for the
appropriateness of their respective carrying values at each Balance
Sheet date.
1.12 Financial instruments
The company is exposed to foreign currency fluctuations on foreign
currency assets and forecasted cash flows denominated in foreign
currency. The company limits the effects of foreign exchange rate
fluctuations by following established risk management policies
including the use of derivatives. The company enters into forward
exchange contracts, where the counter party is a bank.
The forward rate contracts in foreign currencies taken in respect of
highly probable forecast transactions are marked to market and the
resultant losses, if any, are recognised in the profit and loss
account.
2. Secured Loans
2.1 Term loans other than short term loan are secured by way of
hypothecation of all the movable fixed assets of the Company.
2.2 Short term loan from a bank is secured on a pari passu basis by a
first charge by way of hypothecation of inventories, book debts and all
the movable fixed assets of the Company.
2.3 Cash credit and packing credit facilities are secured on a pari
passu basis by a first charge created by way of hypothecation of
inventories and book debts.
3. Unsecured Loans
Government of Andhra Pradesh, Commissionerate of Industries had issued
to the Company Eligibility Certificate No.20/2/8/1551 dated 27th
January 1999 for deferral of sales tax beyond the base sales turnover
of Rs.21 crores for a period of 14 years i.e. from 1.7.1998 to
30.6.2012 which would be treated as interest free loan subject to
execution of agreement and other documents with the Commercial Taxes
Department as per terms and conditions stipulated by the Department.
The Company had accordingly executed an agreement on 23rd November 1999
with the Government of Andhra Pradesh Commercial Taxes Department.
However, pending creation of a charge / mortgage on all immovable
properties situated at Pregnapur Village, Hyderabad, the sales tax
deferred for the period from 1st January 1999 to 31st March 2011
aggregating Rs. 53,432 thousands (Rs. 48,086 thousands) has been
classified under Unsecured Loans. Repayment of the deferred amount
begin from July , 2012.
4. Cash and Bank Balances
Current Accounts include Interest Warrant Account Rs.426 thousands (Rs.
559 thousands) and Unpaid Dividend Account Rs. 1,341 thousands (Rs.
1,207 thousands)
Mar 31, 2010
1.1 Basis of preparation of Financial Statements
The financial statements are prepared under historical cost convention
in accordance with the generally accepted accounting principles in
India and comply in all material respects with the accounting standards
notified by the Companies (Accounting Standards) Rules, 2006 and with
the relevant provisions of the Companies Act, 1956.
1.2 Use of Estimates
The preparation of the financial statements in conformity with
accounting principles generally accepted in India requires the
management to make estimates and assumptions that affect the reported
amount of assets and liabilities as of the balance sheet date, reported
amount of revenues and expenses for the year and disclosure of
contingent liabilities as of the Balance Sheet date. The estimates and
assumptions used in the accompanying financial statements are based
upon managements evaluation of the relevant facts and circumstances as
of the date of the financial statements. Actual results could differ
from these estimates.
1.3 Fixed Assets
Fixed Assets are stated at cost of acquisition or construction, net of
cenvat credit and depreciation. Cost includes direct cost and financing
cost related to borrowing attributable to acquisition that are
capitalised until the assets are ready for use. Capital
work-in-progress includes cost of assets not ready for their intended
use and includes advances paid to acquire fixed assets.
1.4 Depreciation
Depreciation on fixed assets is calculated on straight-line method at
the rates specified in Schedule XIV to the Companies Act, 1956 except
for the following assets, which are depreciated at the rates indicated
below.
Depreciation charge on additions / deletions is restricted to the
period of use.
Assets individually costing Rs.10,000 or less are fully depreciated in
the year of addition. Software licence fee is amortised over a period
of three years.
1.5 Investments
Current Investments are valued at lower of cost and fair value.
1.6 Inventories
Stores and spares, raw materials and components are valued at cost of
purchase (net of cenvat and applicable VAT credits) ascertained on
moving weighted average basis. Goods in transit are valued at cost.
Work in progress and finished goods are valued at lower of cost and net
realisable value. Cost includes customs duty, excise duty and
conversion costs and other expenses incurred for bringing the
inventories to their present condition and location.
1.7 Foreign currency transactions
Foreign currency transactions are recorded at the exchange rate
prevailing on the date of transaction.
At the year end all monetary assets and liabilities denominated in
foreign currency are restated at contracted / closing exchange rates as
applicable. Exchange differences on settlement / restatement are
adjusted to Profit and Loss Account.
In respect of forward contracts, the exchange difference is dealt with
in the Profit and Loss account over the period of the contracts.
Realised gains or losses on cancellation of forward contracts are
recognised in the Profit and Loss Account of the year in which they are
cancelled.
1.8 Research and Development
Revenue expenditure on Research and Development is charged off as and
when incurred.
1.9 Employee Benefits
a. Short Term
Short term Employee Benefits including leave encashment benefits are
recognised as an expense as per the CompanyÃs scheme based on expected
obligations on undiscounted basis.
b. Long term
The long term Employee Benefits represent leave encashment benefits
which are provided for based on actuarial valuation using projected
unit credit method.
c. Post retirement
Post retirement benefits comprise of Provident Fund, Superannuation and
Gratuity which are accounted for as follows:
i) Provident Fund
This is a defined contribution plan and the contributions remitted to
the Provident Fund authorities in accordance with the relevant Statute
are charged to Profit and Loss Account as and when due. The Company
has no further obligations for future provident fund benefits other
than its monthly contributions.
ii) Superannuation Fund
This is a defined contribution plan. The Company contributes a sum
equivalent to 15% of eligible employeesà salary towards superannuation
fund administered by Life Insurance Corporation of India (LIC)
effective July 1, 2009.The Company has no further obligations for
future superannuation benefits other than its annual contribution and
recognises such contribution as expense as and when due.
iii) Gratuity
This is a defined benefit plan. The Companys scheme is administered by
LIC. The liability is determined based on the actuarial valuation using
projected unit credit method. Actuarial gains and losses comprising of
experience adjustments and the effects of changes in actuarial
assumptions are recognised immediately in the profit and loss account
as income or expense.
1.10 Revenue Recognition
Revenue from sales is recognised on despatch of goods to customers.
Sales include excise duty but are net of sales returns and trade
discounts and exclude sales tax.
1.11 Taxation
Provision for current tax is made based on the liability computed in
accordance with the relevant tax rates and tax laws. Deferred tax is
accounted for by computing the tax effect of the timing differences,
which arise during the year and reverse out in the subsequent periods.
Deferred tax is calculated at the tax rates enacted or substantively
enacted by the Balance Sheet date. Deferred tax assets are recognised
only if there is a virtual certainty that they will be realised in the
foreseeable future and are reviewed for the appropriateness of their
respective carrying values at each Balance Sheet date.
1.12 Financial instruments
The Company is exposed to foreign currency fluctuations on foreign
currency assets and forecasted cash flows denominated in foreign
currency. The Company limits the effects of foreign exchange rate
fluctuations by following established risk management policies
including the use of derivatives. The Company enters into forward
exchange contracts, where the counter party is a bank.
The forward rate contracts in foreign currencies taken in respect of
highly probable forecast transactions are marked to market and the
resultant losses, if any, are recognised in the profit and loss
account.
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