Sep 30, 2023
Corporate information
Siemens Limited ("The Company") is a public company domiciled in India with its registered office at Birla Aurora, Level 21, Plot No. 1080 Dr. Annie Besant Road, Worli, Mumbai - 400030. The Company is listed on National Stock Exchange of India Limited (NSE) and BSE Limited (BSE).
The Company offers products, integrated solutions for industrial applications for manufacturing industries, drives for process industries, intelligent infrastructure and buildings, efficient and clean power generation from fossil fuels and oil & gas applications, transmission and distribution of electrical energy for passenger and freight transportation, including rail vehicles, rail automation and rail electrification systems.
1. Significant accounting policies
1.1 Basis of preparation of financial statements
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified pursuant to section 133 of the Companies Act 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Companies Act.
The financial statements have been prepared and presented under the historical cost convention, except for derivative instruments, defined benefit plans and certain other financial assets and liabilities which have been measured at fair value (refer accounting policy regarding financial instruments).
The accounting policies adopted in the preparation of financial statements are consistent for all the periods presented.
The financial statements are presented in INR, which is the functional currency and all values are rounded to the nearest million ('' 1,000,000), except when otherwise indicated.
The financial statements were authorised for issue in accordance with a resolution of Board of directors on 28 November 2023.
1.2 Current versus non-current classification
All assets and liabilities have been classified as current or non-current as per the Company''s operating cycle. Based on the nature of business and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
1.3 Property, plant and equipment
Property, plant and equipment are stated at cost of acquisition less accumulated depreciation and impairment losses, if any. The cost includes taxes, duties, freight and other incidental expenses related to the acquisition and installation of the respective assets. Subsequent expenditure related to an item of property, plant and equipment is added to its book value only if it increases the future economic benefits from the existing assets beyond its previously assessed standard of performance.
Depreciation on property, plant and equipment is provided on a straight-line basis over the useful lives of assets estimated by the management, taking into account the nature of the asset on technical evaluation of the useful life, which may not necessarily be in alignment with the indicative useful lives prescribed by Schedule II to the Companies Act, 2013. The following useful lives are considered:
Assets |
Estimated useful lives |
Buildings |
|
- Factory buildings |
30 years |
- Other buildings |
50 years |
- Roads |
10 years |
- Leasehold improvements |
Over the lease period |
Plant and equipment |
3 - 20 years |
Furniture and fixtures |
5 years |
Office equipments |
|
- Computers |
3 years |
- Hardware, mainframes and servers |
5 years |
- Other office equipments |
3 - 5 years |
Vehicles |
4 years |
If significant parts of property, plant and equipment have different useful lives, then they are accounted as separate items (major components) of property, plant and equipment.
Items of property, plant and equipment that have been retired from active use and are held for disposal are stated at the lower of their carrying value and estimated net realizable value and are disclosed separately in the financial statements. Any gain or loss on disposal of an item of property, plant and equipment is recognised in Statement of Profit and loss.
Capital work-in-progress includes the cost of property, plant and equipment that are not ready for intended use at the balance sheet date.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under "Other Non-Current Assets".
1.4 Intangible assets
Intangible assets comprises of software and technical know-how. Intangible assets are stated at cost of acquisition less accumulated amortisation and impairment losses, if any. These intangible assets are amortised on a straight-line basis based on the following useful lives, which in management''s estimate represents the period during which economic benefits will be derived from their use:
Assets |
Estimated useful lives |
Software |
3 - 5 years |
Technical know-how |
5 - 10 years |
1.5 Investment property
Investments in land or buildings (including property under construction) which are held to earn rentals and/or for capital appreciation are classified as investment property. Investment properties are initially measured at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any.
The cost comprises purchase price and borrowing costs, if capitalisation criteria are met and directly attributable cost of bringing the investment property to its working condition for the intended use.
Depreciation on investment property is provided on a straight-line basis over the useful lives of assets estimated by the management. Such classes of investment properties and their estimated useful lives are as under:
Assets |
Estimated useful lives |
Land |
|
- Freehold land |
- |
Buildings |
30 years |
Investment properties are derecognised either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. On disposal of an investment property, the difference between its carrying amount and net disposal proceeds is recognised in the Statement of Profit and Loss.
1.6 Revenue recognition
Revenue is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Revenue is stated exclusive of Goods and services tax and net of trade and quantity discount.
Revenue from sale of products is recognised on transfer of control of products to the customers, which is usually on dispatch or delivery of goods.
When the outcome of a project contract can be estimated reliably, revenue from project contracts are recognised under the percentage-of-completion method, based on the percentage of costs incurred to date compared to the total estimated contract costs. An expected loss on the project contract is recognised as an expense immediately. Contract revenue earned in excess of billing has been reflected as "Contract assets" and billing in excess of contract revenue has been reflected under "Contract liabilities" in the balance sheet.
Revenue from services represents service income other than from services which are incidental to sale of products and projects. Revenue from services is recognised as per the terms of the contract with the customer using the proportionate completion method. Revenue from services rendered over a period of time, such as annual maintenance contracts, are recognised on straight line basis over the period of the performance obligation.
Commission income is recognised as and when the terms of the contract are fulfilled alongwith the proof of shipment is received from the supplier.
Export incentives receivable are accrued for, when the right to receive the credit is established and there is no significant uncertainty regarding the readability of the incentive.
Rental income arising from operating leases is accounted on a straight-line basis over the lease terms and is included in revenue in the Statement of Profit and Loss due to its operating nature.
1.7 Inventories
Inventories comprise all costs of purchase, conversion and other costs incurred in bringing the inventories to their present location and condition.
Raw materials, work-in-progress, finished goods and traded goods are carried at the lower of cost and net realisable value. Cost is determined on the basis of the weighted average method.
The net realisable value of work-in-progress and finished goods is determined with reference to the estimated selling price less estimated cost of completion and estimated costs necessary to make the sale of related finished goods. Raw materials held for the production of finished goods are not written down below cost except in case where material prices have declined and it is estimated that the cost of the finished product will exceed its net realisable value.
1.8 Leases
The Company''s lease asset classes primarily consist of leases for Land and Buildings, vehicles and technical equipment''s. The Company assesses whether a contract is (or contains) a lease, at inception of a contract. A contract is (or contains), a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:
(i) the contract involves the use of an identified asset
(ii) the Company has substantially all the economic benefits from use of the asset through the period of the lease and
(iii) the Company has the right to direct the use of the asset.
Where the Company is the lessee:
At the date of commencement of the lease, the Company recognises a Right-of-Use asset ("ROU") and a corresponding Lease Liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and leases of low value assets. For these short-term and leases of low value assets, the Company recognises the lease payments as an operating expense on a straight line basis over the term of the lease.
The ROU assets are initially recognised at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less Accumulated depreciation and impairment losses, if any. ROU assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset.
The Lease liability is initially measured at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates. The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made.
A lease liability is remeasured upon the occurrence of certain events such as a change in the lease term or a change in an index or rate used to determine lease payments. The remeasurement normally also adjusts the leased assets.
Lease liability and ROU asset have been separately presented in the Balance Sheet and Lease payments have been classified as financing cash flows.
Where the Company is the lessor
Assets subject to operating leases are included in property, plant and equipment and investment property. Lease income is recognised in the Statement of Profit and Loss on a straight-line basis over the lease term. Costs, including depreciation are recognised as an expense in the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognised immediately in the Statement of Profit and Loss.
1.9 Employee benefits
(a) Short-term employee benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and short-term compensated absences, etc. and the expected cost of ex-gratia are recognised in the period in which the employee renders the related service.
(b) Post-employment and other long-term benefits
(i) Defined Contribution Plans: The Company''s approved superannuation scheme and employee state insurance scheme are defined contribution plans. The Company''s contribution payable under the schemes is recognised as expense in the Statement of Profit and Loss during the period in which the employee renders the related service.
(ii) Defined Benefit Plans and other Long Term Benefits: The Company''s gratuity, pension, medical benefit and and retirement gift schemes are defined benefit plans. Leave wages, retention bonus, silver jubilee and star awards are other long term benefits. The present value of the obligation under such defined benefit plans and other long term benefits are determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. In case of funded plans, the fair value of the plan assets is reduced from the gross obligation under the defined benefit plans to recognize the obligation on a net basis.
Provident fund has been considered as a defined benefit plan since any additional obligations on account of investment risk and interest rate risk are required to be met by the Company.
In case of defined benefit plans, remeasurement comprising of actuarial gains and losses, the return on plan assets (excluding amounts included in net interest on the net defined benefit liability or asset) and any change in the effect of asset ceiling (wherever applicable) is recognised in other comprehensive income (OCI) and is reflected in retained earnings and is not eligible to be reclassified to profit or loss. In case of other long term benefits, all remeasurements including actuarial gain or loss are charged to Statement of Profit and Loss.
The Company recognises following items in the net defined benefit obligation as an expense in Statement of Profit and Loss:
⢠Service cost including current service cost, past service cost and gains and losses on curtailments and settlements; and
⢠Net interest expense or income
Provision for leave wages, pension, medical benefit, retention bonus, silver jubilee and star awards which is expected to be utilized within the next 12 months is treated as short-term employee benefits and beyond 12 months as long term employee benefits. For the purpose of presentation, the allocation between short and long term provisions has been made as determined by an actuary.
The contribution to gratuity trust and provident fund trust is expected to be made within next 12 months. Accordingly, the provision for gratuity and provident fund is classified as current.
1.10 Share-based payments
Share-based payment consists of share awards of the Ultimate Holding Company to the employees of the Company. These awards are predominantly designed as cash-settled transactions. The fair value of the amount payable is remeasured at the end of each reporting period upto the settlement date, with the changes in the fair value recognised as employee benefits expenses with a corresponding increase in liabilities.
1.11 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Initial recognition and measurement
On initial recognition, financial assets are recognised at fair value except trade receivables which are recognized at transaction price as they do not contain a significant financing component. In case of financial assets which are recognised at fair value through profit and loss (FVTPL), its transaction costs are recognised in the statement of profit and loss. In other cases, the transaction costs are attributed to the acquisition value of the financial asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in the below categories:
(a) Financial assets at amortised cost
(b) Financial assets including derivatives at fair value through profit or loss (FVTPL)
(c) Financial assets at fair value through other comprehensive income (FVTOCI)
(d) Equity instruments
(a) Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business where the objective is to hold these assets 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.
After initial measurement, such financial assets are subsequently measured at amortised cost using the Effective Interest Rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss. This category generally applies to trade and other receivables, loans and other financial assets.
(b) Financial Assets including derivatives at fair value through profit or loss (FVTPL)
Financial assets are measured at fair value through profit and loss unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition. The transaction costs directly attributable to the acquisition of financial assets at fair value through profit and loss are immediately recognised in the Statement of Profit and Loss.
(c) Financial Assets at fair value through other comprehensive income (FVTOCI)
Derivative instruments included in FVTOCI category are measured initially as well as at each reporting date at fair value. Movement in fair value is recognised in OCI.
(d) Equity instruments
Equity investment in subsidiary and associate is measured at cost.
Derecognition
A financial asset is primarily derecognised when:
(a) the right to receive cash flows from the asset has expired, or
(b) the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and a) the Company has transferred substantially all the risks and rewards of the asset, or b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
On derecognition of a financial asset in its entirety, the differences between the carrying amounts measured at the date of derecognition and the consideration received is recognised in the Statement of Profit and Loss.
Impairment of financial assets
The Company applies the expected credit loss (ECL) model for measurement and recognition of impairment losses on the following financial assets and credit risk exposure:
(a) Financial assets that are measured at amortised cost e.g. deposits
(b) Trade receivables, contract assets or any another financial asset that result from transactions that are within the scope of Ind AS 115.
The Company follows the simplified approach for recognition of impairment loss allowance on trade receivables (net of billing in excess) and contract assets. The application of the simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, twelve-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognising impairment loss allowance based on twelve-month ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The twelve-month ECL is a portion of the lifetime ECL which results from default events that are possible within twelve months after the reporting date.
ECL is the difference between net of all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR.
When estimating the cash flows, an entity is required to consider:
⢠All contractual terms of the financial instrument (including prepayment, extension, call and similar options) over the expected life of the financial instrument. However, in rare cases when the expected life of the financial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the financial instrument
⢠Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on trade receivables (net of billing in excess) and Contract assets.
The Company does not have any purchased or originated credit-impaired financial assets, i.e., financial assets which are credit impaired on purchase/origination.
ECL impairment loss allowance (or reversal) recognised during the period is recognised in the Statement of Profit and Loss. This amount is reflected under the head ''Other expenses'' in the Statement of Profit and Loss.
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss (FVTPL), payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
On initial recognition, financial liabilities are recognised at fair value. In case of financial liabilities which are recognised at fair value through profit and loss (FVTPL), its transaction costs are recognised in the statement of profit and loss. In other cases, the transaction costs are attributed to the acquisition or issue of the financial liabilities.
The Company''s financial liabilities include trade and other payables and derivative financial instruments.. Subsequent measurement
Financial liabilities, including derivatives and embedded derivatives, which are designated for measurement at FVTPL are subsequently measured at fair value. All other financial liabilities such as deposits are measured at amortised cost using EIR method.
For trade and other payables maturing within one year from the Balance Sheet date, the carrying amount that approximates the fair value is used due to the short maturity of these instruments.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
1.12 Foreign currency transactions
The Company is exposed to currency fluctuations on foreign currency transactions. Transactions denominated in foreign currency are recorded at the exchange rate prevailing on the date of transactions.
Exchange differences arising on foreign exchange transactions settled during the year are recognised in the Statement of Profit and Loss of the year.
Monetary assets and liabilities in foreign currency, which are outstanding as at the year-end, are translated at the year-end at the closing exchange rate and the resultant exchange differences are recognised in the Statement of Profit and Loss. Non monetary items are stated in the balance sheet using the exchange rate at the date of the transaction / date when fair value was determined.
Derivative instruments and hedge accounting
The Company''s exposure to foreign currency fluctuations relates to foreign currency assets, liabilities and forecasted cash flows. The Company limits the effects of foreign exchange rate fluctuations by following established risk management policies including the use of derivatives like forward contracts and options. The Company enters into forward exchange contracts and options, where the counterparty is a bank. The hedging strategy is used for mitigating the currency fluctuation risk and the Company does not use the forward exchange and options contracts for trading or speculative purpose.
The forward exchange and options contracts are re-measured at fair value at each reporting date with the resultant gains/ losses thereon being recorded in Statement of Profit and Loss, except that are designated as hedges.
Commodity risk is mitigated by entering into future contracts to hedge against fluctuation in commodity prices.
The Company designates some of the forward contracts in a cash flow hedging relationship by applying the hedge accounting principles.
These forward contracts are stated at fair value at each reporting date. Changes in the fair value of these forward contracts that are designated as hedges for future cash flows are recognised directly in OCI and reflected in the cash flow hedge reserve, net of applicable deferred income taxes. The ineffective portion is recognised immediately in the Statement of Profit and Loss.
Amounts accumulated in cash flow hedge reserve are reclassified to profit and loss in the period during which the forecasted transaction materialises.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecasted transactions, any cumulative gain or loss on the hedging instrument recognised in cash flow hedge reserve is retained there until the forecasted transaction occurs.
If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss recognised in cash flow hedge reserve is immediately transferred to the Statement of Profit and Loss for the period.
1.13 Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
⢠Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
⢠Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is
directly or indirectly observable.
⢠Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
In determining the fair value of its financial instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fair value includes discounted cash flow analysis, available quoted market prices and dealer quotes. All methods of assessing fair value result from general approximation of value and the same may differ from the actual realised value.
1.14 Taxation
Income-tax expense comprises current tax (i.e. amount of tax for the year determined in accordance with the income-tax law) and deferred tax charge or credit (reflecting the tax effect of temporary differences between accounting income and taxable income for the year) computed in accordance with the relevant provisions of the Income Tax Act, 1961. Current tax and deferred tax are recognised in the Statement of Profit and Loss, except when they relate to items that are recognised in OCI or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively.
The current tax payable is based on taxable profit for the year. The Company''s current tax is calculated using tax rates that have been enacted or substantively enacted, by the end of the reporting period. Advance taxes and provisions for current income taxes are presented in the balance sheet after off-setting advance tax paid and income tax provision arising in the same tax jurisdiction and where the relevant taxpaying units intend to settle the asset and liability on a net basis.
Deferred tax is provided using the balance sheet method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are generally recognised for all deductible temporary differences to the extent it is probable that taxable profits will be available against those deductible temporary differences and can be realised. Deferred tax assets are reviewed as at each balance sheet date and written down to the extent it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
1.15 Earnings per share
Basic earnings per share are computed by dividing the net profit attributable to equity shareholders for the year, by the weighted average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
1.16 Provisions and contingencies
Provisions are recognised when the Company recognises it has a present obligation (legal or constructive) as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are recognised at present value by discounting the expected future cash flows at a pretax rate that reflects current market assessments of the time value of money. When a contract becomes onerous, the present obligation under the contract is recognised as a provision. These are reviewed at each balance sheet date and adjusted to reflect current best estimates.
Disclosures for contingent liability are made when there is a possible and present obligation that arises from past events which is not recognised since it is not probable that there will be an outflow of resources. When there is a possible and present obligation in respect of which the likelihood of outflow of resources is remote, no disclosure is made.
Loss contingencies arising from claims, litigation, assessment, fines, penalties, etc. are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.
Provisions for warranty related cost are recognised when the product is sold or service is provided to the customer. Initial recognition is based on past experience.
Contingent assets are not recognised in the financial statements.
1.17 Cash and Cash equivalents
Cash and cash equivalents include cash, cheques in hand, cash at bank and deposits with banks having maturity of three months or less. Bank deposits with original maturity of up to three months are classified as ''Cash and cash equivalents'' and with original maturity of more than three months are classified as ''Other bank balances''.
1.18 Government grants and subsidies
Grants and subsidies from the government are recognised when there is reasonable assurance that (i) the Company will comply with the conditions attached to them, and (ii) the grant/subsidy will be received.
When the grants or subsidies relate to revenue, they are recognised as income on a systematic basis in the Statement of Profit and Loss over the periods necessary to match them with the related costs for which they are intended to compensate. Where the grants or subsidies relate to an asset, the same are presented in the balance sheet by deducting the grant in arriving at the carrying amount of the asset.
1.19 Non-current assets held for sale and discontinued operations
Non-current assets or disposal groups comprising of assets and liabilities are classified as ''held for sale'' when all the following criteria are met:
(a) decision has been made to sell,
(b) the assets are available for immediate sale in its present condition,
(c) the assets are being actively marketed and
(d) sale has been agreed or is expected to be concluded within 12 months of the Balance Sheet date.
Subsequently, such non-current assets and disposal groups classified as ''held for sale'' are measured at the lower of its carrying value and fair value less costs to sell.
Non-current assets held for sale are not depreciated or amortised.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and represents a separate major line of business or geographical area of operations and is part of a single co-ordinated plan to dispose of such a line of business or area of operations.
The results of discontinued operations are presented separately in the Statement of Profit and Loss.
1.20 Business Combinations and Goodwill
Business combinations are accounted using acquisition method. The cost of an acquisition is measured at the fair value of the assets transferred, equity instruments issued and liabilities assumed at their acquisition date i.e. the date on which control is acquired. Contingent consideration to be transferred is recognised at fair value and included as part of cost of acquisition. Transaction related costs are expensed in the period in which the costs are incurred.
At the acquisition date, the identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at their acquisition date fair values. However, certain assets and liabilities i.e. deferred tax assets or liabilities, assets or liabilities related to employee benefit arrangements, liabilities or equity instruments related to share-based payment arrangements, lease liabilities under Ind AS 116 and assets or disposal groups that are classified as held for sale, acquired or assumed in a business combination are measured as per the applicable Ind-AS.
The excess/deficit of the sum of the consideration transferred to the acquired entity over fair value of the net identifiable assets acquired is recognised as goodwill/capital reserve.
Where it is not possible to complete the determination of fair values by the end of the reporting period in which the combination occurs, a provisional assessment of fair values is made and any adjustments required to those provisional values, and the corresponding adjustments to goodwill, are finalised within 12 months of the acquisition date. Measurement period adjustments are adjustments that arise from additional information during the ''measurement period'' (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as the measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at fair value at subsequent reporting dates with the corresponding gain or loss being recognized in profit or loss.
Goodwill is measured at cost, being the excess of the aggregate of the consideration transferred, the amount recognised for non-controlling interests, over the net identifiable assets acquired and liabilities assumed.
After initial recognition, goodwill is tested for impairment annually on 30 September and measured at cost less any accumulated impairment losses if any.
2. Significant accounting judgments, estimates and assumptions
The preparation of financial statements in conformity with Ind AS requires management to make estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively.
The key assumptions concerning the future and other key sources of estimating uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company has based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
2.1 Project revenue and costs
The percentage-of-completion (POC) method places considerable importance on accurate estimates to the extent of progress towards completion and may involve estimates on the scope of deliveries and services required for fulfilling the contractually defined obligations. These significant estimates include total contract costs, total contract revenues, contract risks, including technical, political and regulatory risks, and other judgments. The Company re-assesses these estimates on periodic basis and makes appropriate revisions accordingly.
2.2 Taxes
Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.
2.3 Property, plant and equipment and intangible assets
The charge in respect of periodic depreciation is derived after determining an estimate of an asset''s expected useful life and the expected residual value at the end of its life. The useful lives and residual values of the Company''s assets are determined by management at the time the asset is acquired and reviewed periodically, including at each financial year end. 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 technology.
2.4 Leases
The Company uses estimates and judgements in identification of leases, identification of non-lease component of lease, lease term assessment considering termination and renewal option and the discounting rate used.
The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgement. The Company uses significant judgement in assessing the lease term (including anticipated renewals) and the applicable discount rate. The Company determines the lease term as the non-cancellable period of a lease, together with both periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option. In assessing whether the Company is reasonably certain to exercise an option to extend a lease, or not to exercise an option to terminate a lease, it considers all relevant facts and circumstances that create an economic incentive for the Company to exercise the option to extend the lease, or not to exercise the option to terminate the lease. The Company revises the lease term if there is a change in the non-cancellable period of a lease. The discount rate is generally based on the incremental borrowing rate specific to the lease being evaluated or for a portfolio of leases with similar characteristics.
2.5 Impairment of non-financial assets
The Company assesses at each balance sheet date whether there is any indication that an asset or a group of assets (cash generating unit) may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset or cash generating unit.
The recoverable amount is the greater of the asset''s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to the present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. If such recoverable amount of the asset or the recoverable amount of the cash-generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Statement of Profit and Loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost, had no impairment been recognised.
2.6 Employee benefits
The Company''s obligation for employee benefits is determined based on actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, these liabilities are highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
Refer note 47 for details of the key assumptions used in determining the accounting of these plans.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the Actuary considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation.
The mortality rate is based on publicly available mortality tables for India. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates for the respective countries.
2.7 Impairment of financial assets
The Company assesses impairment on financial assets based on Expected Credit Loss (ECL) model. The provision matrix is based on its historically observed default rates over the expected life of the financial assets and is adjusted for forward looking estimates. At every reporting date, the historical observed default rates are updated and changes in forward looking estimates are analysed.
2.8 Provisions
Significant estimates are involved in the determination of provisions related to liquidated damages, onerous contracts, warranty costs, asset retirement obligations, legal and regulatory proceedings (Legal Proceedings). The Company records a provision for onerous sales contracts when current estimates of total contract costs exceed expected contract revenue. The provision for warranty, liquidated damages and onerous contracts is based on the best estimate required to settle the present obligation at the end of reporting period.
Legal Proceedings often involve complex legal issues and are subject to substantial uncertainties. Accordingly, considerable judgment is part of determining whether it is probable that there is a present obligation as a result of a past event at the end of the reporting period, whether it is probable that such a Legal Proceeding will result in an outflow of resources and whether the amount of the obligation can be reliably estimated. Internal and external counsels are generally part of the determination process.
All the estimates are revised periodically.
Standard issued that are not yet effective
Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On 31 March, 2023, MCA amended the Companies (Indian Accounting Standards) Rules, 2015 by issuing the Companies (Indian Accounting Standards) Amendment Rules, 2023, applicable to the Company for the financial year starting 1 October 2023 as below:
(i) Ind AS 1 - Presentation of Financial Statements
The amendments specify that companies are now required to disclose material accounting policies rather than their significant accounting policies. The Company does not expect the amendment to have any significant impact in its financial statements.
(ii) Ind AS 8 - Accounting policies, Changes in Accounting Estimates and Errors
The amendments specify that definition of "change in accounting estimates" is substituted with the definition of "accounting estimates". Accounting estimates are monetary amounts in financial statements that are subject to measurement uncertainty. The Company does not expect the amendment to have any significant impact in its financial statements.
(iii) Ind AS 12 - Income Taxes
The amendments specify that companies are now required to recognize deferred tax liability for all temporary differences arising from initial recognition of an asset or liability in a transaction that give rise to equal taxable and deductible temporary differences. The Company does not expect the amendment to have any significant impact in its financial statements.
Sep 30, 2022
Corporate information
Siemens Limited ("The Company") is a public company domiciled in India with its registered office at Birla Aurora, Level 21, Plot No. 1080 Dr. Annie Besant Road, Worli Mumbai - 400030. The Company is listed on National Stock Exchange of India Limited (NSE) and BSE Limited (BSE).
The Company offers products, integrated solutions for industrial applications for manufacturing industries, drives for process industries, intelligent infrastructure and buildings, efficient and clean power generation from fossil fuels and oil & gas applications, transmission and distribution of electrical energy for passenger and freight transportation, including rail vehicles, rail automation and rail electrification systems.
1. Significant accounting policies1.1 Basis of preparation of financial statements
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified pursuant to section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Companies Act.
The financial statements have been prepared and presented under the historical cost convention, except for derivative instruments, defined benefit plans and certain other financial assets and liabilities which have been measured at fair value (refer accounting policy regarding financial instruments).
The accounting policies adopted in the preparation of financial statements are consistent for all the periods presented.
The financial statements are presented in INR, which is the functional currency and all values are rounded to the nearest million (INR 1,000,000), except when otherwise indicated.
The financial statements were authorised for issue in accordance with a resolution of Board of directors on 22 November 2022.
1.2 Current versus non-current classification
All assets and liabilities have been classified as current or non-current as per the Company''s operating cycle. Based on the nature of business and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
1.3 Property, plant and equipment
Property, plant and equipment are stated at cost of acquisition less accumulated depreciation and impairment losses, if any. The cost includes taxes, duties, freight and other incidental expenses related to the acquisition and installation of the respective assets. Subsequent expenditure related to an item of property, plant and equipment is added to its book value only if it increases the future economic benefits from the existing assets beyond its previously assessed standard of performance.
Depreciation on property, plant and equipment is provided on a straight-line basis over the useful lives of assets estimated by the management, taking into account the nature of the asset on technical evaluation of the useful life, which may not necessarily be in alignment with the indicative useful lives prescribed by Schedule II to the Companies Act, 2013. The following useful lives are considered:
1.3 |
Property, plant and equipment (Continued) |
|
Assets |
Estimated useful lives |
|
Buildings |
||
- Factory buildings |
30 years |
|
- Other buildings |
50 years |
|
- Roads |
10 years |
|
- Leasehold improvements |
Over the lease period |
|
Plant and equipment |
3 - 20 years |
|
Furniture and fixtures |
5 years |
|
Office equipments |
||
- Computers |
3 years |
|
- Hardware, mainframes and servers |
5 years |
|
- Other office equipments |
3 - 5 years |
|
Vehicles |
4 years |
If significant parts of property, plant and equipment have different useful lives, then they are accounted as separate items (major components) of property, plant and equipment.
Items of property, plant and equipment that have been retired from active use and are held for disposal are stated at the lower of their carrying value and estimated net realizable value and are disclosed separately in the financial statements. Any gain or loss on disposal of an item of property, plant and equipment is recognised in Statement of Profit and loss.
Capital work-in-progress includes the cost of property, plant and equipment that are not ready for intended use at the balance sheet date.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under "Other Non-Current Assets".
Intangible assets comprises of software and technical know-how. Intangible assets are stated at cost of acquisition less accumulated amortisation and impairment losses, if any. These intangible assets are amortised on a straight-line basis based on the following useful lives, which in management''s estimate represents the period during which economic benefits will be derived from their use:
Assets |
Estimated useful lives |
Software |
3 - 5 years |
Technical know-how |
5 - 10 years |
Investments in land or buildings (including property under construction) which are held to earn rentals and/or for capital appreciation are classified as investment property. Investment properties are initially measured at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any.
The cost comprises purchase price and borrowing costs, if capitalisation criteria are met and directly attributable cost of bringing the investment property to its working condition for the intended use.
Depreciation on investment property is provided on a straight-line basis over the useful lives of assets estimated by the management. Such classes of investment properties and their estimated useful lives are as under:
Assets |
Estimated useful lives |
Land |
|
- Freehold land |
- |
Factory Buildings |
30 years |
Investment properties are derecognised either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. On disposal of an investment property, the difference between its carrying amount and net disposal proceeds is recognised in the Statement of Profit and Loss.
Revenue is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. Revenue is stated exclusive of Goods and services tax and net of trade and quantity discount.
Revenue from sale of products is recognised on transfer of control of products to the customers, which is usually on dispatch of goods.
When the outcome of a construction contract can be estimated reliably, revenue from construction contracts are recognised under the percentage-of-completion method, based on the percentage of costs incurred to date compared to the total estimated contract costs. An expected loss on the construction contract is recognised as an expense immediately. Contract revenue earned in excess of billing has been reflected as "Contract assets" and billing in excess of contract revenue has been reflected under "Contract liabilities" in the balance sheet.
Revenue from services represents service income other than from services which are incidental to sale of products and projects. Revenue from services is recognised as per the terms of the contract with the customer using the proportionate completion method. Revenue from services rendered over a period of time, such as annual maintenance contracts, are recognised on straight line basis over the period of the performance obligation.
Commission income is recognised as and when the terms of the contract are fulfilled alongwith the proof of shipment is received from the supplier.
Export incentives receivable are accrued for, when the right to receive the credit is established and there is no significant uncertainty regarding the realisability of the incentive.
Rental income arising from operating leases is accounted on a straight-line basis over the lease terms and is included in revenue in the Statement of Profit and Loss due to its operating nature.
Inventories comprise all costs of purchase, conversion and other costs incurred in bringing the inventories to their present location and condition.
Raw materials, work-in-progress, finished goods and traded goods are carried at the lower of cost and net realisable value. Cost is determined on the basis of the weighted average method.
The net realisable value of work-in-progress is determined with reference to the estimated selling price less estimated cost of completion and estimated costs necessary to make the sale of related finished goods. Raw materials held for the production of finished goods are not written down below cost except in case where material prices have declined and it is estimated that the cost of the finished product will exceed its net realisable value.
The Company''s lease asset classes primarily consist of leases for Land and Buildings, vehicles and technical equipment''s. The Company assesses whether a contract is (or contains) a lease, at inception of a contract. A contract is (or contains), a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:
1.8 Ind AS 116 - Leases (Continued)
(i) the contract involves the use of an identified asset.
(ii) the Company has substantially all the economic benefits from use of the asset through the period of the lease and
(iii) the Company has the right to direct the use of the asset.
Where the Company is the lessee:
At the date of commencement of the lease, the Company recognises a Right-of-Use asset ("ROU") and a corresponding Lease Liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and leases of low value assets. For these short-term and leases of low value assets, the Company recognises the lease payments as an operating expense on a straight line basis over the term of the lease.
The ROU assets are initially recognised at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less Accumulated depreciation and impairment losses, if any. ROU assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset.
The Lease liability is initially measured at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates. The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made.
A lease liability is remeasured upon the occurrence of certain events such as a change in the lease term or a change in an index or rate used to determine lease payments. The remeasurement normally also adjusts the leased assets.
Lease liability and ROU asset have been separately presented in the Balance Sheet and Lease payments have been classified as financing cash flows:
Where the Company is the lessor
Assets subject to operating leases are included in property, plant and equipment and investment property. Lease income is recognised in the Statement of Profit and Loss on a straight-line basis over the lease term. Costs, including depreciation are recognised as an expense in the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognised immediately in the Statement of Profit and Loss.
(a) Short-term employee benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and short-term compensated absences, etc. and the expected cost of ex-gratia are recognised in the period in which the employee renders the related service.
(b) Post-employment and other long-term benefits
(i) Defined Contribution Plans: The Company''s approved superannuation scheme and employee state insurance scheme are defined contribution plans. The Company''s contribution payable under the schemes is recognised as expense in the Statement of Profit and Loss during the period in which the employee renders the related service.
(ii) Defined Benefit Plans and other Long Term Benefits: The Company''s gratuity, pension, medical benefit and retirement gift schemes are defined benefit plans. Leave wages, retention bonus, silver jubilee and star awards are other long term benefits. The present value of the obligation under such defined benefit plans and other long term benefits are determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. In case of funded plans, the fair value of the plan assets is reduced from the gross obligation under the defined benefit plans to recognize the obligation on a net basis.
Provident fund has been considered as a defined benefit plan since any additional obligations on account of investment risk and interest rate risk are required to be met by the Company.
1.9 Employee benefits (Continued)
In case of defined benefit plans, remeasurement comprising of actuarial gains and losses, the return on plan assets (excluding amounts included in net interest on the net defined benefit liability or asset) and any change in the effect of asset ceiling (wherever applicable) is recognised in other comprehensive income (OCI) and is reflected in retained earnings and is not eligible to be reclassified to profit or loss. In case of other long term benefits, all remeasurements including actuarial gain or loss are charged to Statement of Profit and Loss.
The Company recognises following items in the net defined benefit obligation as an expense in Statement of Profit and Loss:
⢠Service cost including current service cost, past service cost and gains and losses on curtailments and settlements; and
⢠Net interest expense or income.
Provision for leave wages, pension, medical benefit, retention bonus, silver jubilee and star awards which is expected to be utilized within the next 12 months is treated as short-term employee benefits and beyond 12 months as long term employee benefits. For the purpose of presentation, the allocation between short and long term provisions has been made as determined by an actuary.
The contribution to gratuity trust is expected to be made within next 12 months. Accordingly, the provision for gratuity is classified as current.
Share-based payment consists of share awards of the Holding Company to the employees of the Company. These awards are predominantly designed as cash-settled transactions. The fair value of the amount payable is remeasured at the end of each reporting period upto the settlement date, with the changes in the fair value recognised as employee benefits expenses with a corresponding increase in liabilities.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement
On initial recognition, financial assets are recognised at fair value. In case of financial assets which are recognised at fair value through profit and loss (FVTPL), its transaction costs are recognised in the statement of profit and loss. In other cases, the transaction costs are attributed to the acquisition value of the financial asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in the below categories:
(a) Financial assets at amortised cost
(b) Financial assets including derivatives at fair value through profit or loss (FVTPL)
(c) Financial assets at fair value through other comprehensive income (FVTOCI)
(d) Equity instruments
(a) Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business where the objective is to hold these assets 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.
After initial measurement, such financial assets are subsequently measured at amortised cost using the Effective Interest Rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss. This category generally applies to trade and other receivables, loans and other financial assets.
(b) Financial Assets including derivatives at fair value through profit or loss (FVTPL)
Financial assets are measured at fair value through profit and loss unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition. The transaction costs directly attributable to the acquisition of financial assets at fair value through profit and loss are immediately recognised in the Statement of Profit and Loss.
(c) Financial Assets at fair value through other comprehensive income (FVTOCI)
Derivative instruments included in FVTOCI category are measured initially as well as at each reporting date at fair value. Movement in fair value is recognised in OCI.
(d) Equity instruments
Equity investment in subsidiary is measured at cost.
Derecognition
A financial asset is primarily derecognised when:
(a) the right to receive cash flows from the asset has expired, or
(b) the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and a) the Company has transferred substantially all the risks and rewards of the asset, or b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
On derecognition of a financial asset in its entirety, the differences between the carrying amounts measured at the date of derecognition and the consideration received is recognised in the Statement of Profit and Loss.
Impairment of financial assets
The Company applies the expected credit loss (ECL) model for measurement and recognition of impairment losses on the following financial assets and credit risk exposure:
(a) Financial assets that are measured at amortised cost e.g. deposits
(b) Trade receivables, contract assets or any another financial asset that result from transactions that are within the scope of Ind AS 115.
The Company follows the simplified approach for recognition of impairment loss allowance on trade receivables (net of billing in excess) and contract assets. The application of the simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, twelve-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognising impairment loss allowance based on twelve-month ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The twelve-month ECL is a portion of the lifetime ECL which results from default events that are possible within twelve months after the reporting date.
ECL is the difference between net of all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR.
When estimating the cash flows, an entity is required to consider:
⢠All contractual terms of the financial instrument (including prepayment, extension, call and similar options) over the expected life of the financial instrument. However, in rare cases when the expected life of the financial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the financial instrument.
⢠Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on trade receivables (net of billing in excess) and Contract assets.
The Company does not have any purchased or originated credit-impaired financial assets, i.e., financial assets which are credit impaired on purchase/origination.
ECL impairment loss allowance (or reversal) recognised during the period is recognised in the Statement of Profit and Loss. This amount is reflected under the head ''Other expenses'' in the Statement of Profit and Loss.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss (FVTPL), payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
On initial recognition, financial liabilities are recognised at fair value. In case of financial liabilities which are recognised at fair value through profit and loss (FVTPL), its transaction costs are recognised in the statement of profit and loss. In other cases, the transaction costs are attributed to the acquisition or issue of the financial liabilities.
The Company''s financial liabilities include trade and other payables and derivative financial instruments. Subsequent measurement
Financial liabilities, including derivatives and embedded derivatives, which are designated for measurement at FVTPL are subsequently measured at fair value. All other financial liabilities such as deposits are measured at amortised cost using EIR method.
For trade and other payables maturing within one year from the Balance Sheet date, the carrying amount that approximates the fair value is used due to the short maturity of these instruments.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
1.12 Foreign currency transactions
The Company is exposed to currency fluctuations on foreign currency transactions. Transactions denominated in foreign currency are recorded at the exchange rate prevailing on the date of transactions.
Exchange differences arising on foreign exchange transactions settled during the year are recognised in the Statement of Profit and Loss of the year.
Translation
Monetary assets and liabilities in foreign currency, which are outstanding as at the year-end, are translated at the year-end at the closing exchange rate and the resultant exchange differences are recognised in the Statement of Profit and Loss. Non monetary items are stated in the balance sheet using the exchange rate at the date of the transaction / date when fair value was determined.
Derivative instruments and hedge accounting
The Company''s exposure to foreign currency fluctuations relates to foreign currency assets, liabilities and forecasted cash flows. The Company limits the effects of foreign exchange rate fluctuations by following established risk management policies including the use of derivatives like forward contracts and options. The Company enters into forward exchange contracts and options, where the counterparty is a bank. The hedging strategy is used for mitigating the currency fluctuation risk and the Company does not use the forward exchange and options contracts for trading or speculative purpose.
The forward exchange and options contracts are re-measured at fair value at each reporting date with the resultant gains/ losses thereon being recorded in Statement of Profit and Loss, except that are designated as hedges.
Commodity risk is mitigated by entering into future contracts to hedge against fluctuation in commodity prices
The Company designates some of the forward contracts in a cash flow hedging relationship by applying the hedge accounting principles.
These forward contracts are stated at fair value at each reporting date. Changes in the fair value of these forward contracts that are designated as hedges for future cash flows are recognised directly in OCI and reflected in the cash flow hedge reserve, net of applicable deferred income taxes. The ineffective portion is recognised immediately in the Statement of Profit and Loss.
Amounts accumulated in cash flow hedge reserve are reclassified to profit and loss in the period during which the forecasted transaction materialises.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecasted transactions, any cumulative gain or loss on the hedging instrument recognised in cash flow hedge reserve is retained there until the forecasted transaction occurs.
If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss recognised in cash flow hedge reserve is immediately transferred to the Statement of Profit and Loss for the period.
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 categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
⢠Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
⢠Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
⢠Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re- assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
1.13 Fair value measurement (Continued)
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
In determining the fair value of its financial instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fair value includes discounted cash flow analysis, available quoted market prices and dealer quotes. All methods of assessing fair value result from general approximation of value and the same may differ from the actual realised value.
Income-tax expense comprises current tax (i.e. amount of tax for the year determined in accordance with the income-tax law) and deferred tax charge or credit (reflecting the tax effect of temporary differences between accounting income and taxable income for the year) computed in accordance with the relevant provisions of the Income Tax Act, 1961. Current tax and deferred tax are recognised in the Statement of Profit and Loss, except when they relate to items that are recognised in OCI or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively.
The current tax payable is based on taxable profit for the year. The Company''s current tax is calculated using tax rates that have been enacted or substantively enacted, by the end of the reporting period. Advance taxes and provisions for current income taxes are presented in the balance sheet after off-setting advance tax paid and income tax provision arising in the same tax jurisdiction and where the relevant taxpaying units intend to settle the asset and liability on a net basis.
Deferred tax is provided using the balance sheet method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are generally recognised for all deductible temporary differences to the extent it is probable that taxable profits will be available against those deductible temporary differences and can be realised. Deferred tax assets are reviewed as at each balance sheet date and written down to the extent it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Basic earnings per share are computed by dividing the net profit attributable to equity shareholders for the year, by the weighted average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
1.16 Provisions and contingencies
Provisions are recognised when the Company recognises it has a present obligation (legal or constructive) as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are recognised at present value by discounting the expected future cash flows at a pretax rate that reflects current market assessments of the time value of money. When a contract becomes onerous, the present obligation under the contract is recognised as a provision. These are reviewed at each balance sheet date and adjusted to reflect current best estimates.
Disclosures for contingent liability are made when there is a possible and present obligation that arises from past events which is not recognised since it is not probable that there will be an outflow of resources. When there is a possible and present obligation in respect of which the likelihood of outflow of resources is remote, no disclosure is made.
Loss contingencies arising from claims, litigation, assessment, fines, penalties, etc. are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.
Provisions for warranty related cost are recognised when the product is sold or service is provided to the customer. Initial recognition is based on past experience.
Contingent assets are not recognised in the financial statements.
1.17 Cash and Cash equivalents
Cash and cash equivalents include cash, cheques in hand, cash at bank and deposits with banks having maturity of three months or less. Bank deposits with original maturity of up to three months are classified as ''Cash and cash equivalents'' and with original maturity of more than three months are classified as ''Other bank balances''.
1.18 Government grants and subsidies
Grants and subsidies from the government are recognised when there is reasonable assurance that (i) the company will comply with the conditions attached to them, and (ii) the grant/subsidy will be received.
When the grants or subsidies relate to revenue, they are recognised as income on a systematic basis in the Statement of Profit and Loss over the periods necessary to match them with the related costs for which they are intended to compensate. Where the grants or subsidies relate to an asset, the same are presented in the balance sheet by deducting the grant in arriving at the carrying amount of the asset.
1.19 Non-current assets held for sale and discontinued operations
Non-current assets (including disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable.
Non-current assets classified as held for sale are measured at lower of their carrying amount and fair value less cost to sell.
Property, plant and equipment and intangible assets once classified as held for sale/distribution to owners are not depreciated or amortised.
Non-current assets classified as held for sale and the assets and liabilities of a disposal group classified as held for sale are presented separately from the other assets and liabilities in the Balance Sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and represents a separate major line of business or geographical area of operations and is part of a single co-ordinated plan to dispose of such a line of business or area of operations.
The results of discontinued operations are presented separately in the Statement of Profit and Loss.
2. Significant accounting judgments, estimates and assumptions
The preparation of financial statements in conformity with Ind AS requires management to make estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively.
The key assumptions concerning the future and other key sources of estimating uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company has based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
The percentage-of-completion (POC) method places considerable importance on accurate estimates to the extent of progress towards completion and may involve estimates on the scope of deliveries and services required for fulfilling the contractually defined obligations. These significant estimates include total contract costs, total contract revenues, contract risks, including technical, political and regulatory risks, and other judgments. The Company re-assesses these estimates on periodic basis and makes appropriate revisions accordingly.
Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.
2.3 Property, plant and equipment and intangible assets
The charge in respect of periodic depreciation is derived after determining an estimate of an asset''s expected useful life and the expected residual value at the end of its life. The useful lives and residual values of the Company''s assets are determined by management at the time the asset is acquired and reviewed periodically, including at each financial year end. 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 technology.
The Company uses estimates and judgements in identification of leases, identification of non- lease component of lease, lease term assessment considering termination and renewal option and the discounting rate used.
The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgement. The Company uses significant judgement in assessing the lease term (including anticipated renewals) and the applicable discount rate. The Company determines the lease term as the non-cancellable period of a lease, together with both periods covered by an option to extend the lease if the Group is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option. In assessing whether the Company is reasonably certain to exercise an option to extend a lease, or not to exercise an option to terminate a lease, it considers all relevant facts and circumstances that create an economic incentive for the Company to exercise the option to extend the lease, or not to exercise the option to terminate the lease. The Company revises the lease term if there is a change in the non- cancellable period of a lease. The discount rate is generally based on the incremental borrowing rate specific to the lease being evaluated or for a portfolio of leases with similar characteristics.
2.5 Impairment of non-financial assets
The Company assesses at each balance sheet date whether there is any indication that an asset or a group of assets (cash generating unit) may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset or cash generating unit.
The recoverable amount is the greater of the asset''s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to the present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. If such recoverable amount of the asset or the recoverable amount of the cash-generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Statement of Profit and Loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost, had no impairment been recognised.
The Company''s obligation for employee benefits is determined based on actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, these liabilities are highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
Refer note 50 for details of the key assumptions used in determining the accounting of these plans.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the Actuary considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation.
The mortality rate is based on publicly available mortality tables for India. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates for the respective countries.
2.7 Impairment of financial assets
The Company assesses impairment on financial assets based on Expected Credit Loss (ECL) model. The provision matrix is based on its historically observed default rates over the expected life of the financial assets and is adjusted for forward looking estimates. At every reporting date, the historical observed default rates are updated and changes in forward looking estimates are analysed.
Significant estimates are involved in the determination of provisions related to liquidated damages, onerous contracts, warranty costs, asset retirement obligations, legal and regulatory proceedings (Legal Proceedings). The Company records a provision for onerous sales contracts when current estimates of total contract costs exceed expected contract revenue. The provision for warranty, liquidated damages and onerous contracts is based on the best estimate required to settle the present obligation at the end of reporting period.
Legal Proceedings often involve complex legal issues and are subject to substantial uncertainties. Accordingly, considerable judgment is part of determining whether it is probable that there is a present obligation as a result of a past event at the end of the reporting period, whether it is probable that such a Legal Proceeding will result in an outflow of resources and whether the amount of the obligation can be reliably estimated. Internal and external counsels are generally part of the determination process.
All the estimates are revised periodically.
Standard issued that are not yet effective
Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards. On 23 March, 2022, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2022, applicable to the Company for the financial year starting 1 October 2022 as below:
(i) Ind AS 103 - Business Combination
The amendments specifies that to qualify for recognition as part of applying the acquisition method, the identifiable assets acquired and liabilities assumed must meet the definitions of assets and liabilities in the Conceptual Framework for Financial Reporting under Ind AS (Conceptual Framework), issued by the ICAI at the acquisition date. These changes do not significantly change the requirements of Ind AS 103. The Company does not expect the amendment to have any significant impact in its financial statements.
(ii) Ind AS 16 - Property, Plant and Equipment (PPE)
The amendments clarifies that excess of net sale proceeds of items produced over the cost of testing while preparing the asset for its intended use (if any), shall not be recognised in the profit or loss but deducted from the directly attributable cost considered as part of cost of an item PPE. The Company does not expect the amendment to have any significant impact in its financial statements.
(iii) Ind AS 37 - Provisions, Contingent Liabilities and Contingent Assets
The amendments specify that that the ''cost of fulfilling'' a contract comprises the ''costs that relate directly to the contract''. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract). The amendment is essentially a clarification and the Company does not expect the amendment to have any significant impact in its financial statements.
(iv) Ind AS 109 - Financial Instruments
The amendment clarifies which fees an entity includes when it applies the ''10 percent'' test of Ind AS 109 in assessing whether to derecognise a financial liability or to consider as modification of existing financial liability. The Company does not expect the amendment to have any significant impact in its financial statements.
Sep 30, 2018
1.1 Basis of preparation of financial statements
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified pursuant to section 133 of the Companies Act 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time).
The financial statements have been prepared and presented under the historical cost convention, except for derivative instruments and certain other financial assets and liabilities which have been measured at fair value (refer accounting policy regarding financial instruments).
The accounting policies adopted in the preparation of financial statements are consistent for all the periods presented.
The financial statements are presented in INR, which is the functional currency and all values are rounded to the nearest millions (INR 1,000,000), except when otherwise indicated.
The financial statements were authorised for issue in accordance with a resolution of Board of directors on 18 November 2018.
1.2 Current versus non-current classification
All assets and liabilities have been classified as current or non-current as per the Companyâs operating cycle. Based on the nature of business and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
1.3 Property, plant and equipment
Property, plant and equipment are stated at cost of acquisition less accumulated depreciation and impairment losses, if any. The cost includes taxes, duties, freight and other incidental expenses related to the acquisition and installation of the respective assets. Subsequent expenditure related to an item of property, plant and equipment is added to its book value only if it increases the future economic benefits from the existing assets beyond its previously assessed standard of performance.
Depreciation on property, plant and equipment is provided on a straight-line basis over the useful lives of assets estimated by the management, taking into account the nature of the asset on technical evaluation of the useful life, which may not necessarily be in alignment with the indicative useful lives prescribed by Schedule II to the Companies Act, 2013. The following useful lives are assumed:
Items of property, plant and equipment that have been retired from active use and are held for disposal are stated at the lower of their carrying value and estimated net realizable value and are disclosed separately in the financial statements.
Capital work-in-progress includes the cost of property, plant and equipment that are not ready for intended use at the balance sheet date.
1.4 Intangible assets
Intangible assets comprises of software and technical know-how. Intangible assets are stated at cost of acquisition less accumulated amortisation and impairment losses, if any. These intangible assets are amortised on straight-line basis based on the following useful lives, which in managementâs estimate represents the period during which economic benefits will be derived from their use:
1.5 Investment property
Investments in land or buildings (including property under construction) which are held to earn rentals and/or for capital appreciation are classified as investment property. Investment properties are initially measured at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any.
The cost comprises purchase price and borrowing costs, if capitalisation criteria are met and directly attributable cost of bringing the investment property to its working condition for the intended use.
Depreciation on investment property is provided on a straight-line basis over the useful lives of assets estimated by the management. Such classes of investment properties and their estimated useful lives are as under:
Investment properties are derecognised either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. On disposal of an investment property, the difference between its carrying amount and net disposal proceeds is recognised in the Statement of Profit and Loss.
1.6 Revenue recognition
Revenue is recognised to the extent it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment. Revenue are stated exclusive of sales tax, value added tax, goods and service tax and net of trade and quantity discount.
Revenue from sale of products is recognised on transfer of significant risk and rewards of ownership of the products to the customers, which is usually on dispatch of goods.
When the outcome of a construction contract can be estimated reliably, revenue from construction contracts are recognized under the percentage-of-completion method, based on the percentage of costs incurred to date compared to the total estimated contract costs. An expected loss on the construction contract is recognized as an expense immediately. Contract revenue earned in excess of billing has been refected as âProject excess costâ under âOther financial assetsâ and âBilling in excessâ of contract revenue has been refected under âOther current liabilitiesâ in the balance sheet.
Revenue from services represents service income other than from services which are incidental to sale of products and projects. Revenue from services is recognised as per the terms of the contract with the customer using the proportionate completion method.
Commission income is recognised when proof of shipment is received from the supplier.
Export incentives receivable are accrued for, when the right to receive the credit is established and there is no significant uncertainty regarding the readability of the incentive.
Rental income arising from operating leases is accounted on a straight-line basis over the lease terms and is included in revenue in the Statement of Profit and Loss due to its operating nature.
1.7 Inventories
Inventories comprise all costs of purchase, conversion and other costs incurred in bringing the inventories to their present location and condition.
Raw materials, work-in-progress, finished goods and traded goods are carried at the lower of cost and net realisable value. Cost is determined on the basis of the weighted average method.
The net realisable value of work-in-progress is determined with reference to the estimated selling price less estimated cost of completion and estimated costs necessary to make the sale of related finished goods. Raw materials held for the production of finished goods are not written down below cost except in case where material prices have declined and it is estimated that the cost of the finished product will exceed its net realisable value.
1.8 Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of the specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in arrangement.
Where the Company is the lessee:
Leases where the lessor effectively retains substantially all the risk and benefits of ownership of the leased items are classified as operating leases. Lease payments under an operating lease, are recognised as an expense in the Statement of Profit and Loss on a straight line basis over the lease term. Contingent rentals are recognised as an expense in the period which they are incurred.
Where the Company is the lessor:
Assets subject to operating leases are included in property, plant and equipment and investment property. Lease income is recognised in the Statement of Profit and Loss on a straight-line basis over the lease term. Costs, including depreciation are recognised as an expense in the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognised immediately in the Statement of Profit and Loss.
1.9 Employee benefits
(a) Short term employee benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and short term compensated absences, etc. and the expected cost of ex-gratia are recognised in the period in which the employee renders the related service.
(b) Post-employment and other long-term benefits
(i) Defined Contribution Plans: The Companyâs approved superannuation scheme and employee state insurance scheme are defined contribution plans. The Companyâs contribution payable under the schemes is recognised as expense in the Statement of Profit and Loss during the period in which the employee renders the related service.
(ii) Defined Benefit Plans and other Long Term Benefits: The Companyâs gratuity, pension and medical benefit schemes are defined benefit plans. Leave wages, retention bonus, silver jubilee and star awards are other long term benefits. The present value of the obligation under such defined benefit plans and other long term benefits are determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. In case of funded plans, the fair value of the plan assets is reduced from the gross obligation under the defined benefit plans to recognize the obligation on a net basis.
Provident fund has been considered as a defined benefit plan since any additional obligations on account of investment risk and interest rate risk are required to be met by the Company.
In case of defined benefit plans, remeasurement comprising of actuarial gains and losses, the return on plan assets (excluding amounts included in net interest on the net defined benefit liability or asset) and any change in the effect of asset ceiling (wherever applicable) is recognized in other comprehensive income (OCI) and is refected in retained earnings and is not eligible to be reclassified to profit or loss. In case of other long term benefits, all remeasurements including actuarial gain or loss are charged to Statement of Profit and Loss.
The Company recognises following items in the net defined benefit obligation as an expense in Statement of Profit and Loss:
- Service cost including current service cost, past service cost and gains and losses on curtailments and settlements; and
- Net interest expense or income.
Provision for leave wages, pension, medical benefit, retention bonus, silver jubilee and star awards which is expected to be utilized within the next 12 months is treated as short term employee benefits and beyond 12 months as long term employee benefits. For the purpose of presentation, the allocation between short and long term provisions has been made as determined by an actuary.
The contribution to gratuity trust is expected to be made within next 12 months. Accordingly the provision for gratuity is classified as current.
1.10 Share-based payments
Share-based payment consists of share awards of the Holding Company i.e. Share matching plan (SMP) and Siemens Stock Awards (SSA) to the employees of the Company. These awards are predominantly designed as cash-settled transactions. The fair value of the amount payable is remeasured at the end of each reporting period upto the settlement date, with the changes in the fair value recognised as employee benefits expenses with a corresponding increase in liabilities.
1.11 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement
All financial assets other than investment in subsidiary are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit and loss, transaction costs that are attributable to the acquisition of the financial asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in the below categories:
(a) Financial assets at amortised cost
(b) Financial assets including derivatives at fair value through profit or loss (FVTPL)
(c) Financial assets at fair value through other comprehensive income (FVTOCI)
(d) Equity instruments
(a) Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business where the objective is to hold these assets 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.
After initial measurement, such financial assets are subsequently measured at amortised cost using the EIR method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss. This category generally applies to trade and other receivables, loans and other financial assets.
(b) Financial Assets including derivatives at fair value through profit or loss (FVTPL)
Financial assets are measured at fair value through profit and loss unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition. The transaction costs directly attributable to the acquisition of financial assets at fair value through profit and loss are immediately recognised in the Statement of Profit and Loss.
(c) Financial Assets at fair value through other comprehensive income (FVTOCI)
Derivative instruments included in FVTOCI category are measured initially as well as at each reporting date at fair value. Movement in fair value is recognised in OCI.
(d) Equity instruments
Equity investment in subsidiary is measured at cost Derecognition
A financial asset is primarily derecognised when:
(a) the right to receive cash flows from the asset has expired, or
(b) the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and a) the Company has transferred substantially all the risks and rewards of the asset, or b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
On derecognition of a financial asset in its entirety, the differences between the carrying amounts measured at the date of derecognition and the consideration received is recognised in the Statement of Profit and Loss.
Impairment of financial assets
The Company applies the expected credit loss (ECL) model for measurement and recognition of impairment losses on the following financial assets and credit risk exposure:
(a) Financial assets that are measured at amortised cost e.g. deposits
(b) Trade receivables, project excess cost or any another financial asset that result from transactions that are within the scope of Ind AS 11 and Ind AS 18.
The Company follows the simplified approach for recognition of impairment loss allowance on trade receivables (net of billing in excess) and project excess cost. The application of the simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, twelve-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognising impairment loss allowance based on twelvemonth ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The twelve-month ECL is a portion of the lifetime ECL which results from default events that are possible within twelve months after the reporting date.
ECL is the difference between net of all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR.
When estimating the cash flows, an entity is required to consider:
- All contractual terms of the financial instrument (including prepayment, extension, call and similar options) over the expected life of the financial instrument. However, in rare cases when the expected life of the financial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the financial instrument
- Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
As a practical expedient, the Company uses a provision matrixto determine impairment loss allowance on trade receivables (net of billing in excess) and project excess cost.
The Company does not have any purchased or originated credit-impaired financial assets, i.e., financial assets which are credit impaired on purchase/origination.
ECL impairment loss allowance (or reversal) recognized during the period is recognized in the Statement of Profit and Loss. This amount is refected under the head âother expensesâ in the Statement of Profit and Loss.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss (FVTPL), payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and in the case of payables, net of directly attributable transaction costs.
The Companyâs financial liabilities include trade and other payables and derivative financial instruments.
Subsequent measurement
Financial liabilities, including derivatives and embedded derivatives, which are designated for measurement at FVTPL are subsequently measured at fair value. All other financial liabilities such as deposits are measured at amortised cost using EIR method.
For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate fair value is used due to the short maturity of these instruments.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
1.12 Foreign currency transactions
The Company is exposed to currency fluctuations on foreign currency transactions. Transactions denominated in foreign currency are recorded at the exchange rate prevailing on the date of transactions.
Exchange differences arising on foreign exchange transactions settled during the year are recognized in the Statement of Profit and Loss of the year.
Translation
Monetary assets and liabilities in foreign currency, which are outstanding as at the year-end, are translated at the year-end at the closing exchange rate and the resultant exchange differences are recognized in the Statement of Profit and Loss. Non monetary items are stated in the balance sheet using the exchange rate at the date of the transaction.
Derivative instruments and hedge accounting
The Companyâs exposure to foreign currency fluctuations relates to foreign currency assets, liabilities and forecasted cash flows. The Company limits the effects of foreign exchange rate fluctuations by following established risk management policies including the use of derivatives like forward contracts and options. The Company enters into forward exchange contracts and options, where the counterparty is a bank. The hedging strategy is used for mitigating the currency fluctuation risk and the Company does not use the forward exchange and options contracts for trading or speculative purpose.
The forward exchange and options contracts are re-measured at fair value at each reporting date with the resultant gains/ losses thereon being recorded in Statement of Profit and Loss.
Commodity risk is mitigated by entering into future contracts to hedge against fluctuation in commodity prices
The Company designates some of the forward contracts in a cash flow hedging relationship by applying the hedge accounting principles.
These forward contracts are stated at fair value at each reporting date. Changes in the fairvalue of these forward contracts that are designated as hedges for future cash flows are recognised in OCI and refected in the cash flow hedge reserve, net of applicable deferred income taxes. The ineffective portion is recognised immediately in the Statement of Profit and Loss.
Amounts accumulated in cash flow hedge reserve are reclassified to profit and loss in the period during which the forecasted transaction materialises.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecasted transactions, any cumulative gain or loss on the hedging instrument recognised in cash flow hedge reserve is retained there until the forecasted transaction occurs.
If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss recognised in cash flow hedge reserve is immediately transferred to the Statement of Profit and Loss for the period.
1.13 Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
- Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
- Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
In determining the fair value of its financial instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fair value includes discounted cash flow analysis, available quoted market prices and dealer quotes. All methods of assessing fair value result from general approximation of value and the same may differ from the actual realised value.
1.14 Taxation
Income-tax expense comprises current tax (i.e. amount of tax for the year determined in accordance with the income-tax law) and deferred tax charge or credit (refecting the tax effect of temporary differences between accounting income and taxable income for the year) computed in accordance with the relevant provisions of the Income Tax Act, 1961. Current tax and deferred tax are recognised in the Statement of Profit and Loss, except when they relate to items that are recognised in OCI or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively.
The current tax payable is based on taxable profit for the year. The Companyâs current tax is calculated using tax rates that have been enacted or substantively enacted, by the end of the reporting period. Advance taxes and provisions for current income taxes are presented in the balance sheet after off-setting advance tax paid and income tax provision arising in the same tax jurisdiction and where the relevant taxpaying units intend to settle the asset and liability on a net basis.
Deferred tax is provided using the balance sheet method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are generally recognised for all deductible temporary differences to the extent it is probable that taxable profits will be available against those deductible temporary differences can be realised. Deferred tax assets are reviewed as at each balance sheet date and written down to the extent it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
1.15 Earnings per share
Basic earnings per share are computed by dividing the net profit attributable to equity shareholders for the year, by the weighted average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
1.16 Provisions and contingencies
Provisions are recognized when the Company recognises it has a present obligation (legal or constructive) as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are recognised at present value by discounting the expected future cash flows at a pretax rate that refects current market assessments of the time value of money. When a contract becomes onerous, the present obligation under the contract is recognized as a provision. These are reviewed at each balance sheet date and adjusted to refect current best estimates.
Disclosures for contingent liability are made when there is a possible and present obligation that arises from past events which is not recognised since it is not probable that there will be an outflow of resources. When there is a possible and present obligation in respect of which the likelihood of outflow of resources is remote, no disclosure is made.
Loss contingencies arising from claims, litigation, assessment, fines, penalties, etc. are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.
Provisions for warranty related cost are recognised when the product is sold or service is provided to the customer. Initial recognition is based on past experience.
Contingent assets are not recognized in the financial statements.
1.17 Cash and Cash equivalents
Cash and cash equivalents include cash, cheques in hand, cash at bank and deposits with banks having maturity of three months or less. Bank deposits with original maturity of up to three months are classified as âCash and cash equivalentsâ and with original maturity of more than three months are classified as âOther bank balancesâ.
1.18 Government grants and subsidies
Grants and subsidies from the government are recognized when there is reasonable assurance that (i) the company will comply with the conditions attached to them, and (ii) the grant/subsidy will be received.
When the grant or subsidy relates to revenue, it is recognized as income on a systematic basis in the Statement of Profit and Loss over the periods necessary to match them with the related costs for which they are intended to compensate. Where the grant relates to an asset, the same is presented in the balance sheet by deducting the grant in arriving at the carrying amount of the asset.
Sep 30, 2017
1.1 Basis of preparation of financial statements
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified pursuant to section 133 of the Companies Act 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
For all periods up to and including the year ended 30 September 2016, the Company prepared its financial statements in accordance with accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP). These financial statements for the year ended 30 September 2017 are the first such statements the Company has prepared in accordance with Ind AS. Refer to note 52 for information on first time adoption of Ind AS.
The financial statements have been prepared and presented under the historical cost convention, except for derivative instruments and certain other financial assets and liabilities which have been measured at fair value (refer accounting policy regarding financial instruments).
The accounting policies adopted in the preparation of financial statements are consistent for all the periods presented, including the preparation of the opening Ind AS Balance sheet as at 1 October 2015 being the beginning of the earliest period for which the Company has presented full comparative information under Ind AS.
The financial statements are presented in INR, which is the functional currency and all values are rounded to the nearest millions (INR 1,000,000), except when otherwise indicated.
The financial statements were authorised for issue in accordance with a resolution of Board of directors on 24 November 2017.
1.2 Current versus non-current classification
All assets and liabilities have been classified as current or non-current as per the Companyâs operating cycle. Based on the nature of business and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
1.3 Property, plant and equipment
Property, plant and equipment are stated at cost of acquisition less accumulated depreciation and impairment losses, if any. The cost includes taxes, duties, freight and other incidental expenses related to the acquisition and installation of the respective assets. Subsequent expenditure related to an item of property, plant and equipment is added to its book value only if it increases the future economic benefits from the existing assets beyond its previously assessed standard of performance.
Depreciation on property, plant and equipment is provided on a straight-line basis over the useful lives of assets estimated by the management, taking into account the nature of the asset on technical evaluation of the useful life, which may not necessarily be in alignment with the indicative useful lives prescribed by Schedule II to the Companies Act, 2013. The following useful lives are assumed:
Items of property, plant and equipments that have been retired from active use and are held for disposal are stated at the lower of their carrying value and estimated net realizable value and are disclosed separately in the financial statements.
Capital work-in-progress includes the cost of property, plant and equipments that are not ready for intended use at the balance sheet date.
1.4 Intangible assets
Intangible assets comprises of software and technical know-how. Intangible assets are stated at cost of acquisition less accumulated amortisation and impairment losses, if any. These intangible assets are amortised on straight-line basis based on the following useful lives, which in managementâs estimate represents the period during which economic benefits will be derived from their use:
1.5 Investment property
Investments in land or buildings (including property under construction) which are held to earn rentals and/or for capital appreciation are classified as investment property. Investment properties are initially measured at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any.
The cost comprises purchase price and borrowing costs, if capitalisation criteria are met and directly attributable cost of bringing the investment property to its working condition for the intended use.
Depreciation on investment property is provided on a straight-line basis over the useful lives of assets estimated by the management. Such classes of investment properties and their estimated useful lives are as under:
Investment properties are derecognised either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. On disposal of an investment property, the difference between its carrying amount and net disposal proceeds is recognised in the Statement of Profit and Loss.
1.6 Revenue recognition
Revenue is recognised to the extent it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment. Revenue are stated exclusive of sales tax, value added tax, goods and service tax and net of trade and quantity discount. Revenue is inclusive of excise duty.
Revenue from sale of products is recognised on transfer of significant risk and rewards of ownership of the products to the customers, which is generally on dispatch of goods.
When the outcome of a construction contract can be estimated reliably, revenue from construction contracts are recognized under the percentage-of-completion method, based on the percentage of costs incurred to date compared to the total estimated contract costs. An expected loss on the construction contract is recognized as an expense immediately. Contract revenue earned in excess of billing has been reflected as âProject excess costâ under âOther financial assetsâ and âBilling in excessâ of contract revenue has been reflected under âOther current liabilitiesâ in the balance sheet.
Revenue from services represents service income other than from services which are incidental to sale of products and projects. Revenue from services is recognised as per the terms of the contract with the customer using the proportionate completion method.
Commission income is recognised when proof of shipment is received from the supplier.
Interest income is recognised using the effective interest rate method (âEIRâ).
Export incentives receivable are accrued for, when the right to receive the credit is established and there is no significant uncertainty regarding the ultimate collection of export proceeds.
Rental income arising from operating leases is accounted on a straight-line basis over the lease terms and is included in revenue in the Statement of Profit and Loss due to its operating nature.
1.7 Inventories
Inventories comprise all costs of purchase, conversion and other costs incurred in bringing the inventories to their present location and condition.
Raw materials, work-in-progress, finished goods and traded goods are carried at the lower of cost and net realisable value. Cost is determined on the basis of the weighted average method.
The net realisable value of work-in-progress is determined with reference to the estimated selling price less estimated cost of completion and estimated costs necessary to make the sale of related finished goods. Raw materials held for the production of finished goods are not written down below cost except in case where material prices have declined and it is estimated that the cost of the finished product will exceed its net realisable value.
1.8 Leases
Where the Company is the lessee:
Leases where the lessor effectively retains substantially all the risk and benefits of ownership of the leased items are classified as operating leases. Lease payments under an operating lease, are recognised as an expense in the Statement of Profit and Loss on a straight line basis over the lease term.
Where the Company is the lessor:
Assets subject to operating leases are included in property, plant and equipment and investment property. Lease income is recognised in the Statement of Profit and Loss on a straight-line basis over the lease term. Costs, including depreciation are recognised as an expense in the Statement of Profit and Loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognised immediately in the Statement of Profit and Loss.
1.9 Employee benefits
(a) Short term employee benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and short term compensated absences, etc. and the expected cost of ex-gratia are recognised in the period in which the employee renders the related service.
(b) Post-employment and other long-term benefits
(i) Defined Contribution Plans: The Companyâs approved superannuation scheme and employee state insurance scheme are defined contribution plans. The Companyâs contribution paid/payable under the schemes is recognised as expense in the Statement of Profit and Loss during the period in which the employee renders the related service.
(ii) Defined Benefit Plans and other Long Term Benefits: The Companyâs gratuity, pension and medical benefit schemes are defined benefit plans. Leave wages, retention bonus, silver jubilee and star awards are other long term benefits. The present value of the obligation under such defined benefit plans and other long term benefits are determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. In case of funded plans, the fair value of the plan assets is reduced from the gross obligation under the defined benefit plans to recognize the obligation on a net basis.
Incase of defined benefit plans, remeasurement comprising of actuarial gains and losses, the return on plan assets (excluding amounts included in net interest on the net defined benefit liability or asset) and any change in the effect of asset ceiling (wherever applicable) is recognized in other comprehensive income (OCI) and is reflected in retained earnings and is not eligible to be reclassified to profit or loss.
The Company recognises the following changes in the net defined benefit obligation as an expense in Statement of Profit and Loss:
- Service cost including current service cost, past service cost and gains and losses on curtailments and settlements; and
- Net interest expense or income.
Provision for leave wages, pension, medical benefit, retention bonus, silver jubilee and star awards which is expected to be utilized within the next 12 months is treated as short term employee benefits and beyond 12 months as long term employee benefits. For the purpose of presentation, the allocation between short and long term provisions has been made as determined by an actuary.
Provident fund has been considered as a defined benefit plan since any additional obligations on account of investment risk and interest rate risk are required to be met by the Company.
1.10 Share-based payments
Share-based payment of the Company is predominantly designed as cash-settled transactions. The fair value of the amount payable is remeasured at the end of each reporting period upto the settlement date, with the changes in the fair value recognised as employee benefits expenses with a corresponding increase in liabilities.
1.11 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit and loss, transaction costs that are attributable to the acquisition of the financial asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in the below categories:
(a) Financial assets at amortised cost
(b) Financial assets including derivatives at fair value through profit or loss (FVTPL)
(c) Financial assets at fair value through other comprehensive income (FVTOCI)
(a) Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business where the objective is to hold these assets 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.
After initial measurement, such financial assets are subsequently measured at amortised cost using the EIR method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss. This category generally applies to trade and other receivables, loans and other financial assets.
(b) Financial Assets including derivatives at fair value through profit or loss (FVTPL)
Financial assets are measured at fair value through profit and loss unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition. The transaction costs directly attributable to the acquisition of financial assets at fair value through profit and loss are immediately recognised in the Statement of Profit and Loss.
(c) Financial Assets at fair value through other comprehensive income (FVTOCI)
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business whose objective is achieved by both collecting contractual cash flows and selling financial assets 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. Derivative instruments included in FVTOCI category are measured initially as well as at each reporting date at fair value. Movement in fair value is recognised in oCi.
Derecognition
A financial asset is primarily derecognised when:
(a) the right to receive cash flows from the asset has expired, or
(b) the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and a) the Company has transferred substantially all the risks and rewards of the asset, or b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
On derecognition of a financial asset in its entirety, the differences between the carrying amounts measured at the date of derecognition and the consideration received is recognised in the Statement of Profit and Loss.
Impairment of financial assets
The Company applies the expected credit loss (ECL) model for measurement and recognition of impairment losses on the following financial assets and credit risk exposure:
(a) Financial assets that are measured at amortised cost e.g. deposits
(b) Trade receivables, project excess cost or any another financial asset that result from transactions that are within the scope of Ind AS 11 and Ind AS 18.
The Company follows the simplified approach for recognition of impairment loss allowance on trade receivables (net of billing in excess) and project excess cost. The application of the simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, twelve-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognising impairment loss allowance based on twelvemonth ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The twelve-month ECL is a portion of the lifetime ECL which results from default events that are possible within twelve months after the reporting date.
ECL is the difference between net of all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR.
When estimating the cash flows, an entity is required to consider:
- All contractual terms of the financial instrument (including prepayment, extension, call and similar options) over the expected life of the financial instrument. However, in rare cases when the expected life of the financial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the financial instrument
- Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on trade receivables (net of billing in excess) and project excess cost.
The Company does not have any purchased or originated credit-impaired financial assets, i.e., financial assets which are credit impaired on purchase/origination.
ECL impairment loss allowance (or reversal) recognized during the period is recognized in the Statement of Profit and Loss. This amount is reflected under the head âother expensesâ in the Statement of Profit and Loss.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss (FVTPL), payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and in the case of payables, net of directly attributable transaction costs.
The Companyâs financial liabilities include trade and other payables and derivative financial instruments.
Subsequent measurement
Financial liabilities, including derivatives and embedded derivatives, which are designated for measurement at FVTPL are subsequently measured at fair value. All other financial liabilities such as deposits are measured at amortised cost using EIR method.
For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate fair value is used due to the short maturity of these instruments.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
1.12 Foreign currency transactions
The Company is exposed to currency fluctuations on foreign currency transactions. Transactions denominated in foreign currency are recorded at the exchange rate prevailing on the date of transactions.
Exchange differences arising on foreign exchange transactions settled during the year are recognized in the Statement of Profit and Loss of the year.
Translation
Monetary assets and liabilities in foreign currency, which are outstanding as at the year-end, are translated at the year-end at the closing exchange rate and the resultant exchange differences are recognized in the Statement of Profit and Loss. Non monetary items are stated in the balance sheet using the exchange rate at the date of the transaction.
Derivative instruments
The Companyâs exposure to foreign currency fluctuations relates to foreign currency assets, liabilities and forecasted cash flows. The Company limits the effects of foreign exchange rate fluctuations by following established risk management policies including the use of derivatives like forward contracts and options. The Company enters into forward exchange contracts and options, where the counterparty is a bank. The hedging strategy is used for mitigating the currency fluctuation risk and the Company does not use the forward exchange and options contracts for trading or speculative purpose.
The forward exchange and options contracts are re-measured at fair value at each reporting date with the resultant gains/ losses thereon being recorded in Statement of Profit and Loss.
Commodity risk is mitigated by entering into future contracts to hedge against fluctuation in commodity prices
Cash flow hedges
The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to highly probable forecast transactions. The Company designates some of the forward contracts in a cash flow hedging relationship by applying the hedge accounting principles.
These forward contracts are stated at fair value at each reporting date. Changes in the fair value of these forward contracts that are designated and effective as hedges of future cash flows are recognised directly in cash flow hedge reserve under OCI, net of applicable deferred income taxes and the ineffective portion is recognised immediately in the Statement of Profit and Loss.
Amounts accumulated in cash flow hedge reserve are reclassified to profit and loss in the same periods during which the forecasted transaction materialises.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecasted transactions, any cumulative gain or loss on the hedging instrument recognised in cash flow hedge reserve is retained there until the forecasted transaction occurs.
If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss recognised in cash flow hedge reserve is immediately transferred to the Statement of Profit and Loss for the period.
1.13 Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
- Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
- Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
In determining the fair value of its financial instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fair value includes discounted cash flow analysis, available quoted market prices and dealer quotes. All methods of assessing fair value result from general approximation of value and the same may differ from the actual realised value.
1.14 Taxation
Income-tax expense comprises current tax (i.e. amount of tax for the year determined in accordance with the income-tax law) and deferred tax charge or credit (reflecting the tax effect of temporary differences between accounting income and taxable income for the year) computed in accordance with the relevant provisions of the Income Tax Act, 1961. Current tax and deferred tax are recognised in the Statement of Profit and Loss, except when they relate to items that are recognised in OCI or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively.
The current tax payable is based on taxable profit for the year. The Companyâs current tax is calculated using tax rates that have been enacted or substantively enacted, by the end of the reporting period. Advance taxes and provisions for current income taxes are presented in the balance sheet after off-setting advance tax paid and income tax provision arising in the same tax jurisdiction and where the relevant taxpaying units intend to settle the asset and liability on a net basis.
Deferred tax is provided using the balance sheet method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax is recognised for all taxable temporary differences, except:
When the deferred tax asset / liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
In respect of taxable temporary differences associated with investments in subsidiaries, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are generally recognised for all deductible temporary differences to the extent it is probable that taxable profits will be available against those deductible temporary differences can be realised. Deferred tax assets are reviewed as at each balance sheet date and written down to the extent it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis.
1.15 Earnings per share
Basic earnings per share are computed by dividing the net profit attributable to equity shareholders for the year, by the weighted average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
1.16 Provisions and contingencies
Provisions are recognized when the Company recognises it has a present obligation (legal or constructive) as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are recognised at present value by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money. When a contract becomes onerous, the present obligation under the contract is recognized as a provision. These are reviewed at each balance sheet date and adjusted to reflect current best estimates.
Disclosures for contingent liability are made when there is a possible and present obligation that arises from past events which is not recognised since it is not probable that there will be an outflow of resources. When there is a possible and present obligation in respect of which the likelihood of outflow of resources is remote, no disclosure is made.
Loss contingencies arising from claims, litigation, assessment, fines, penalties, etc. are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.
Contingent assets are not recognized in the financial statements.
1.17 Cash and Cash equivalents
Cash and cash equivalents include cash, cheques in hand, cash at bank and deposits with banks having maturity of three months or less. The bank deposits with original maturity of up to three months are classified as cash and cash equivalents and bank deposits with original maturity of more than three months are classified as other bank balances.
1.18 Government grants and subsidies
Grants and subsidies from the government are recognized when there is reasonable assurance that (i) the company will comply with the conditions attached to them, and (ii) the grant/subsidy will be received.
When the grant or subsidy relates to revenue, it is recognized as income on a systematic basis in the Statement of Profit and Loss over the periods necessary to match them with the related costs for which they are intended to compensate. Where the grant relates to an asset, it is recognized as deferred income and transferred to income in equal amounts over the expected useful life of the related asset.
Sep 30, 2016
Notes to the financial statements for the year ended 30 September 2016 (Currency: Indian rupees millions)
Basis of preparation of financial statements
The financial statements are prepared and presented under the historical cost convention, on the accrual basis of accounting except for certain derivative instruments which are measured at fair value in accordance with generally accepted accounting principles in India ("Indian GAAP"). The Company has prepared these financial statements to comply in all material respects with the accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014. The accounting policies adopted in the preparation of financial statements are consistent with those of previous year.
1. Significant accounting policies
1.1 Use of estimates
The preparation of financial statements in conformity with Indian GAAP requires management to make estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements. Actual results could differ from those estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.
1.2 Tangible fixed assets and depreciation
Fixed assets are stated at cost of acquisition or revalued amounts less accumulated depreciation and impairment losses, if any. The cost of fixed assets includes taxes, duties, freight and other incidental expenses related to the acquisition and installation of the respective assets.
Diagnostics equipments are being treated as traded items of inventory when they are received. However, if these instruments are issued from inventory to customers under placement agreement, these are treated as capital asset in the period of such issue and are stated at cost less accumulated depreciation.
Depreciation on tangible assets is provided on a straight-line basis over the useful lives of assets estimated by the management, taking into account the nature of the asset on technical evaluation of the useful life, which may not necessarily be in alignment with the indicative useful lives prescribed by Schedule II to the Companies Act, 2013. Such class of assets and their estimated useful lives are as under:
Items of fixed assets that have been retired from active use and are held for disposal are stated at the lower of their net book value and estimated net realizable value and are disclosed separately in the financial statements.
Capital work-in-progress includes the cost of fixed assets that are not ready to use at the balance sheet date.
1.3 Intangible assets
Intangible assets comprise goodwill, software and technical know-how. Intangible assets are stated at cost of acquisition less accumulated amortization and impairment losses, if any. These intangible assets are amortized on straight-line basis based on the following useful lives, which in management''s estimate represents the period during which economic benefits will be derived from their use:
Assets Estimated useful lives
Goodwill 3 - 5 years
Software 3 - 5 years
Technical know-how 5 - 10 years
1.4 Impairment of assets
The Company assesses at each balance sheet date whether there is any indication that an asset or a group of assets (cash generating unit) may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset or cash generating unit.
The recoverable amount is the greater of the asset''s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to the present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. If such recoverable amount of the asset or the recoverable amount of the cash-generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost, had no impairment been recognized.
1.5 Investments
Investments that are readily realizable and intended to be held for not more than a year from the date on which such investments were made are classified as current investments. All other investments are classified as long term investments.
Long-term investments are carried at cost. Provision for diminution is made to recognize a decline, other than temporary in value of long-term investments and is determined separately for each individual investment.
Investment property
An investment in land or buildings, which is not intended to be occupied substantially for use by or in the operations of the Company, is classified as an investment property. Investment properties are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any.
The cost comprises purchase price and borrowing costs, if capitalization criteria are met and directly attributable cost of bringing the investment property to its working condition for the intended use.
Depreciation on investment property is provided on a straight-line basis over the useful lives of assets estimated by the management. Such classes of investment properties and their estimated useful lives are as under:
Assets Estimated useful lives Land
- Freehold land -
- Leasehold land Over the lease period Buildings
30 years
On disposal of an investment property, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss.
1.6 Revenue recognition
Revenue is recognized to the extent it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
Revenue from sale of products is recognized on transfer of significant risk and rewards of ownership of the products to the customers, which is generally on dispatch of goods other than revenue from sale of healthcare equipments which is recognized upon installation at customer premises. Sales are stated exclusive of sales tax and net of trade and quantity discount.
Revenue recognized in respect of extended warranty offered to customers relating to healthcare equipment is deferred and is recognized on a straight line basis over the period of the extended warranty contract. Deferred revenue is classified as other liabilities.
Revenue from services is recognized as per the terms of the contract with the customer using the proportionate completion method.
Revenue from services represents service income other than from services which are incidental to sale of products and projects.
Income from fixed price construction contracts is recognized by reference to the estimated overall profitability of the contract under the percentage of completion method. Percentage of completion is determined as a proportion of the costs incurred up to the reporting date to the total estimated contract costs. Contract revenue earned in excess of billing has been reflected as "Project excess cost" under "Other current assets " and "Billing in excess" of contract revenue has been reflected under "Other current liabilities" in the balance sheet. Provision for expected loss is recognized immediately when it is probable that the total estimated contract costs will exceed total contract revenue.
Commission income is recognized when proof of shipment is received from the supplier.
Interest income is recognized on the time proportion basis.
Export incentives receivable are accrued for when the right to receive the credit is established and there is no significant uncertainty regarding the ultimate collection of export proceeds.
1.7 Inventories
Inventories comprise all costs of purchase, conversion and other costs incurred in bringing the inventories to their present location and condition.
Raw materials are carried at the lower of cost and net realizable value. Cost is determined on the basis of the weighted average method.
Work-in-progress, finished goods and traded goods are carried at the lower of cost and net realizable value. Excise duty is included in the value of finished goods inventory. Cost is determined on a weighted average basis.
The net realizable value of work-in-progress is determined with reference to the estimated selling price less estimated cost of completion and estimated costs necessary to make the sale of related finished goods. Raw materials held for the production of finished goods are not written down below cost except in case where material prices have declined and it is estimated that the cost of the finished product will exceed its net realizable value.
1.8 Leases
Where the Company is the lessee:
Leases where the lessor effectively retains substantially all the risk and benefits of ownership of the leased items are classified as operating leases. Lease payments under an operating lease, are recognized as an expense in the statement of profit and loss on a straight line basis over the lease term.
Where the Company is the lessor:
Assets subject to operating leases are included in fixed assets and investment property. Lease income is recognized in the statement of profit and loss on a straight-line basis over the lease term. Costs, including depreciation are recognized as an expense in the statement of profit and loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the statement of profit and loss.
1.9 Employee benefits
(a) Short term employee benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and short term compensated absences, etc. and the expected cost of ex-gratia are recognized in the period in which the employee renders the related service.
(b) Post-employment benefits
(i) Defined Contribution Plans: The Company''s approved superannuation scheme and employee state insurance scheme are defined contribution plans. The Company''s contribution paid/payable under the schemes is recognized as expense in the statement of profit and loss during the period in which the employee renders the related service.
(ii) Defined Benefit Plans and other Long Term Benefits: The Company''s provident fund, gratuity, pension and medical benefit schemes are defined benefit plans. Leave wages, retention bonus, silver jubilee and star awards are other long term benefits. The present value of the obligation under such defined benefit plans and other long term benefits are determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
Provision for leave wages, pension, medical benefit, retention bonus, silver jubilee and star awards which is expected to be utilized within the next 12 months is treated as short term employee benefits and beyond 12 months as long term employee benefits. For the purpose of presentation, the allocation between short and long term provisions has been made as determined by an actuary.
Actuarial gains and losses are recognized immediately in the statement of profit and loss.
1.10 Foreign currency transactions
The Company is exposed to currency fluctuations on foreign currency transactions. Transactions denominated in foreign currency are recorded at the exchange rate prevailing on the date of transactions.
Exchange differences arising on foreign exchange transactions settled during the year are recognized in the statement of profit and loss of the year.
Translation
Monetary assets and liabilities in foreign currency, which are outstanding as at the year-end, are translated at the year-end at the closing exchange rate and the resultant exchange differences are recognized in the statement of profit and loss. Non monetary items are stated in the balance sheet using the exchange rate at the date of the transaction.
Derivative instruments
The Company''s exposure to foreign currency fluctuations relates to foreign currency assets, liabilities and forecasted cash flows. 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 counterparty is a bank.
As per Accounting Standard (''AS'') 11 - ''The Effects of Changes in Foreign Exchange Rates'', the premium or the discount on forward exchange contracts not relating to firm commitments or highly probable forecast transactions and not intended for trading or speculation purpose is amortized as expense or income over the life of the contract. All other derivatives except cash flow hedges, which are not covered by AS 11, are measured using the mark-to-market principle with the resulting gains / losses thereon being recorded in the statement of profit and loss.
Hedge Accounting
The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to highly probable forecast transactions. The Company designates some of the forward contracts in a cash flow hedging relationship by applying the hedge accounting principles.
These forward contracts are stated at fair value at each reporting date. Changes in the fair value of these forward contracts that are designated and effective as hedges of future cash flows are recognized directly in Cash Flow Hedge Reserve under Reserves and Surplus, net of applicable deferred income taxes and the ineffective portion is recognized immediately in the statement of profit and loss.
Amounts accumulated in Cash Flow Hedge Reserve are reclassified to profit and loss in the same periods during which the forecasted transaction materializes.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecasted transactions, any cumulative gain or loss on the hedging instrument recognized in Cash Flow Hedge Reserve is retained there until the forecasted transaction occurs.
If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss recognized in Cash Flow Hedge Reserve is immediately transferred to the statement of profit and loss for the period.
1.11 Taxation
Income-tax expense comprises current tax (i.e. amount of tax for the year determined in accordance with the income-tax law), deferred tax charge or credit (reflecting the tax effect of timing differences between accounting income and taxable income for the year) computed in accordance with the relevant provisions of the Income Tax Act, 1961. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the asset can be realized in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, all deferred tax assets are recognized only if there is a virtual certainty supported by convincing evidence of realization of the assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written-up to reflect the amount that is reasonable/virtually certain (as the case may be) to be realized.
1.12 Earnings per share
Basic earnings per share are computed by dividing the net profit attributable to equity shareholders for the year, by the weighted average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
1.13 Provisions and Contingencies
Provisions are recognized when the Company recognizes it has a present obligation as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect current best estimates.
Disclosures for contingent liability are made when there is a possible or present obligation which arises from past events which is not recognized since it is not probable that there will be an outflow of resources. When there is a possible or present obligation in respect of which the likelihood of outflow of resources is remote, no disclosure is made.
Loss contingencies arising from claims, litigation, assessment, fines, penalties, etc. are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.
Contingent assets are neither recognized nor disclosed in the financial statements.
1.14 Cash and Cash equivalents
Cash and cash equivalents include cash, cheques in hand, cash at bank and deposits with banks having maturity of three months or less. The bank deposits with original maturity of up to three months are classified as cash and cash equivalents and bank deposits with original maturity of more than three months are classified as other bank balances.
1.15 Government grants and subsidies
Grants and subsidies from the government are recognized when there is reasonable assurance that (i) the company will comply with the conditions attached to them, and (ii) the grant/subsidy will be received.
When the grant or subsidy relates to revenue, it is recognized as income on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs, which they are intended to compensate. Where the grant relates to an asset, it is recognized as deferred income and released to income in equal amounts over the expected useful life of the related asset.
1.16 Operating cycle
All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in Schedule III to the Companies Act, 2013. The Company has ascertained its operating cycle as twelve months for the purpose of current or non-current classification of assets and liabilities.
Sep 30, 2015
Basis of preparation of financial statements
The financial statements are prepared and presented under the
historical cost convention, on the accrual basis of accounting except
for certain derivative instruments which are measured at fair value in
accordance with generally accepted accounting principles in India
("Indian GAAP")- The Company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under section 133 of the Companies Act 2013, read together with
paragraph 7 of the Companies (Accounts) Rules 2014. The accounting
policies adopted in the preparation of financial statements are
consistent with those of previous year other than note 43.
1.1 Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent liabilities on the date of the financial statements. Actual
results could differ from those estimates. Any revision to accounting
estimates is recognised prospectively in current and future periods.
1.2 Tangible fixed assets and depreciation
Fixed assets are stated at cost of acquisition or revalued amounts less
accumulated depreciation and impairment losses, if any. The cost of
fixed assets includes taxes, duties, freight and other incidental
expenses related to the acquisition and installation of the respective
assets.
Diagnostics equipments are being treated as traded items of inventory
when they are received. However, if these instruments are issued from
inventory to customers under placement agreement, these are treated as
capital asset in the period of such issue and are stated at cost less
accumulated depreciation.
Depreciation on tangible assets is provided on a straight-line basis
over the useful lives of assets estimated by the management. The useful
life has been assessed based on internal technical advice, taking into
account the nature of the asset, the estimated usage of the assets on
the basis of managements' best estimation of getting economic benefits
from those classes of assets and the management believes that these
useful lives do not vary with the number of shifts the asset operates.
The Company uses its technical expertise along with historical and
industry trends for arriving the economic life of an asset, which may
not necessarily be in alignment with the indicative useful lives
prescribed by Schedule II to the Companies Act, 2013. Such class of
assets and their estimated useful lives are as under:
Vehicles 4 years
Items of fixed assets that have been retired from active use and are
held for disposal are stated at the lower of their net book value and
estimated net realizable value and are disclosed separately in the
financial statements.
Capital work-in-progress includes the cost of fixed assets that are not
ready to use at the balance sheet date.
1.3 Intangible assets
Intangible assets comprise goodwill, software and technical know-how.
Intangible assets are stated at cost of acquisition less accumulated
amortization and impairment losses, if any. These intangible assets are
amortized on straight-line basis based on the following useful lives,
which in management's estimate represents the period during which
economic benefits will be derived from their use:
1.4 Impairment of assets
The Company assesses at each balance sheet date whether there is any
indication that an asset or a group of assets (cash generating unit)
may be impaired. If any such indication exists, the Company estimates
the recoverable amount of the asset or cash generating unit.
The recoverable amount is the greater of the asset's net selling price
and value in use. In assessing value in use, the estimated future cash
flows are discounted to the present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and
the risks specific to the asset. In determining net selling price,
recent market transactions are taken into account, if available. If no
such transactions can be identified, an appropriate valuation model is
used. If such recoverable amount of the asset or the recoverable amount
of the cash-generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount. The reduction is treated as an impairment loss and is
recognized in the statement of profit and loss. If at the balance sheet
date there is an indication that a previously assessed impairment loss
no longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount subject to a maximum of depreciable
historical cost, had no impairment been recognized.
7.5 Investments
Investments that are readily realizable and intended to be held for not
more than a year from the date on which such investments are classified
as current investments. All other investments are classified as long
term investments.
Long-term investments are carried at cost. Provision for diminution is
made to recognize a decline, other than temporary in value of long-term
investments and is determined separately for each individual
investment.
Investment property
An investment in land or buildings, which is not intended to be
occupied substantially for use by or in the operations of the Company,
is classified as an investment property. Investment properties are
stated at cost, net of accumulated depreciation and accumulated
impairment losses, if any.
The cost comprise purchase price, borrowing costs if capitalization
criteria are met and directly attributable cost of bringing the
investment property to its working condition for the intended use.
Depreciation on investment property is provided on a straight-line
basis over the useful lives of assets estimated by the management. The
useful life has been assessed based on internal technical advice,
taking into account the nature of the asset, the estimated usage of the
assets on the basis of managements' best estimation of getting economic
benefits from those classes of assets and the management believes that
these useful lives do not vary with the number of shifts the asset
operates. The Company uses its technical expertise along with
historical and industry trends for arriving the economic life of an
asset, which may not necessarily be in alignment with the indicative
useful lives prescribed by Schedule II to the Companies Act, 2013. Such
class of investment property and their estimated useful lives are as
under:
On disposal of an investment property, the difference between its
carrying amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
1.6 Revenue recognition
Revenue is recognized to the extent it is probable that the economic
benefits will flow to the Company and the revenue can be reliably
measured.
Revenue from sale of products is recognized on transfer of significant
risk and rewards of ownership of the products to the customers, which
is generally on dispatch of goods other than revenue from sale of
healthcare equipments which is recognized upon installation at customer
premises. Sales are stated exclusive of sales tax and net of trade and
quantity discount.
Revenue from services is recognized as per the terms of the contract
with the customer using the proportionate completion method.
Revenue from services represents service income other than from
services which are incidental to sale of products and projects.
Income from fixed price construction contracts is recognized by
reference to the estimated overall profitability of the contract under
the percentage of completion method. Percentage of completion is
determined as a proportion of the costs incurred up to the reporting
date to the total estimated contract costs. Contract revenue earned in
excess of billing has been reflected as "Project excess cost" under
"Other current assets " and "Billing in excess" of contract revenue has
been reflected under "Other current liabilities" in the balance sheet.
Provision for expected loss is recognized immediately when it is
probable that the total estimated contract costs will exceed total
contract revenue.
Commission income is recognized when proof of shipment is received from
the supplier.
Interest income is recognized on the time proportion basis.
Export incentives receivable are accrued for when the right to receive
the credit is established and there is no significant uncertainty
regarding the ultimate collection of export proceeds.
1.7 Inventories
Inventories comprise all costs of purchase, conversion and other costs
incurred in bringing the inventories to their present location and
condition.
Raw materials are valued at the lower of cost and net realizable value.
Cost is determined on the basis of the weighted average method.
Work-in-progress, finished goods and traded goods are valued at the
lower of cost and net realizable value. Excise duty is included in the
value of finished goods inventory. Cost is determined on a weighted
average basis.
The net realizable value of work-in-progress is determined with
reference to the estimated selling price less estimated cost of
completion and estimated costs necessary to make the sale of related
finished goods. Raw materials held for the production of finished goods
are not written down below cost except in case where material prices
have declined and it is estimated that the cost of the finished product
will exceed its net realizable value.
1.8 Leases
Where the Company is the lessee:
Leases where the less or effectively retains substantially all the risk
and benefits of ownership of the leased items are classified as
operating leases. Lease payments under an operating lease, are
recognized as an expense in the statement of profit and loss on a
straight line basis over the lease term.
Where the Company is the less or:
Assets subject to operating leases are included in fixed assets and
investment property. Lease income is recognized in the statement of
profit and loss on a straight-line basis over the lease term. Costs,
including depreciation are recognized as an expense in the statement of
profit and loss. Initial direct costs such as legal costs, brokerage
costs, etc. are recognized immediately in the statement of profit and
loss.
1.9 Employee benefits
(a) Short term employee benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short-term employee benefits. Benefits
such as salaries, wages and short term compensated absences, etc. and
the expected cost of ex-gratia is recognized in the period in which the
employee renders the related service.
(b) Post-employment benefits
(i) Defined Contribution Plans: The Company's approved superannuation
scheme and employee state insurance scheme are defined contribution
plans. The Company's contribution paid/payable under the schemes is
recognized as expense in the statement of profit and loss during the
period in which the employee renders the related service.
(ii) Defined Benefit Plans and other Long Term Benefits: The Company's
provident fund, gratuity, pension and medical benefit schemes are
defined benefit plans. Leave wages, retention bonus, silver jubilee and
star awards are other long term benefits. The present value of the
obligation under such defined benefit plans and other long term
benefits are determined based on actuarial valuation using the
Projected Unit Credit Method, which recognizes each period of service
as giving rise to additional unit of employee benefit entitlement and
measures each unit separately to build up the final obligation.
Provision for leave wages, pension, medical benefit, retention bonus,
silver jubilee and star awards which is expected to be utilized within
the next 12 months is treated as short term employee benefits and
beyond 12 months as long term employee benefits. For the purpose of
presentation, the allocation between short and long term provisions has
been made as determined by an actuary.
Actuarial gains and losses are recognized immediately in the statement
of profit and loss.
1.10 Foreign currency transactions
The Company is exposed to currency fluctuations on foreign currency
transactions. Transactions denominated in foreign currency are recorded
at the exchange rate prevailing on the date of transactions.
Exchange differences arising on foreign exchange transactions settled
during the year are recognized in the statement of profit and loss of
the year.
Translation
Monetary assets and liabilities in foreign currency, which are
outstanding as at the year-end, are translated at the year-end at the
closing exchange rate and the resultant exchange differences are
recognized in the statement of profit and loss. Non monetary items are
stated in the balance sheet using the exchange rate at the date of the
transaction.
Derivative instruments
The Company's exposure to foreign currency fluctuations relates to
foreign currency assets, liabilities and forecasted cash flows. 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 counterparty is a bank.
As per Accounting Standard ('AS') 11 -The Effects of Changes in Foreign
Exchange Rates', the premium or the discount on forward exchange
contracts not relating to firm commitments or highly probable forecast
transactions and not intended for trading or speculation purpose is
amortized as expense or income over the life of the contract. All other
derivatives except cash flow hedges, which are not covered by AS 11,
are measured using the mark-to-market principle with the resulting
gains / losses thereon being recorded in the statement of profit and
loss.
Hedge Accounting
The Company uses foreign currency forward contracts to hedge its risks
associated with foreign currency fluctuations relating to highly
probable forecast transactions. The Company designates some of the
forward contracts in a cash flow hedging relationship by applying the
hedge accounting principles.
These forward contracts are stated at fair value at each reporting
date. Changes in the fair value of these forward contracts that are
designated and effective as hedges of future cash flows are recognized
directly in Cash Flow Hedge Reserve under Reserves and Surplus, net of
applicable deferred income taxes and the ineffective portion is
recognized immediately in the statement of profit and loss.
1.10 Foreign currency transactions (Continued)
Amounts accumulated in Cash Flow Hedge Reserve are reclassified to
profit and loss in the same periods during which the forecasted
transaction materializes.
Hedge accounting is discontinued when the hedging instrument expires or
is sold, terminated, or exercised, or no longer qualifies for hedge
accounting. For forecasted transactions, any cumulative gain or loss on
the hedging instrument recognized in Cash Flow Hedge Reserve is
retained there until the forecasted transaction occurs.
If the forecasted transaction is no longer expected to occur, the net
cumulative gain or loss recognized in Cash Flow Hedge Reserve is
immediately transferred to the statement of profit and loss for the
period.
1.11 Taxation
Income-tax expense comprises current tax (i.e. amount of tax for the
year determined in accordance with the income-tax law), deferred tax
charge or credit (reflecting the tax effect of timing differences
between accounting income and taxable income for the year) computed in
accordance with the relevant provisions of the Income Tax Act, 1961.
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognized using the tax rates that have been
enacted or substantively enacted by the balance sheet date. Deferred
tax assets are recognized only to the extent there is reasonable
certainty that the asset can be realized in future; however, where
there is unabsorbed depreciation or carried forward loss under taxation
laws, all deferred tax assets are recognized only if there is a virtual
certainty supported by convincing evidence of realization of the
assets. Deferred tax assets are reviewed as at each balance sheet date
and written down or written-up to reflect the amount that is
reasonable/virtually certain (as the case may be) to be realized.
1.12 Earnings per share
Basic earnings per share are computed by dividing the net profit
attributable to equity shareholders for the year, by the weighted
average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
1.13 Provisions and Contingencies
Provisions are recognized when the Company recognizes it has a present
obligation as a result of past events and it is probable that an
outflow of resources embodying economic benefits will be required to
settle the obligation and a reliable estimate can be made of the amount
of the obligation. Provisions are not discounted to its present value
and are determined based on best estimate required to settle the
obligation at the balance sheet date. These are reviewed at each
balance sheet date and adjusted to reflect current best estimates.
Disclosures for contingent liability are made when there is a possible
or present obligation which arises from past events which is not
recognized since it is not probable that there will be an outflow of
resources. When there is a possible or present obligation in respect of
which the likelihood of outflow of resources is remote, no disclosure
is made.
Loss contingencies arising from claims, litigation, assessment, fines,
penalties, etc. are recorded when it is probable that a liability has
been incurred and the amount can be reasonably estimated.
Contingent assets are neither recognized nor disclosed in the financial
statements.
1.14 Cash and Cash equivalents
Cash and cash equivalents include cash, cherubs in hand, cash at bank
and short term deposits with banks having maturity of three months or
less.
1.15 Operating cycle
All assets and liabilities have been classified as current or
non-current as per the Company's normal operating cycle and other
criteria set out in Schedule III to the Companies Act, 2013. The
Company has ascertained its operating cycle as twelve months for the
purpose of current or non-current classification of assets and
liabilities.
Sep 30, 2014
1.1 Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent liabilities on the date of the financial statements. Actual
results could differ from those estimates. Any revision to accounting
estimates is recognised prospectively in current and future periods.
1.2 Tangible fixed assets and depreciation
Fixed assets are stated at cost of acquisition or revalued amounts less
accumulated depreciation and impairment losses, if any. The cost of
fixed assets includes taxes, duties, freight and other incidental
expenses related to the acquisition and installation of the respective
assets.
Depreciation is provided on the straight-line method (''SLM''). The
depreciation rates prescribed in Schedule XIV to the Act are considered
as the minimum rates. 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 shorter than that
envisaged in the aforesaid Schedule, depreciation is provided at a
higher rate based on the management''s estimate of useful life/remaining
life.
Diagnostics equipments are being treated as traded items of inventory
when they are received. However, if these instruments are issued from
inventory to customers under placement agreement, these are treated as
capital asset in the period of such issue and are stated at cost less
accumulated depreciation.
The key fixed asset blocks and related annual depreciation rates, which
in management''s opinion reflect the estimated useful economic lives of
the fixed assets, are:
Asset Rate
Land
* Freehold -
* Leasehold Over the lease period
Buildings
* Factory buildings 3.33 - 6.66%
* Other buildings 2 - 2.5%
* Leasehold improvements Over the lease period
Plant and equipments
* Assets specific to a project Over the life of the project
* Special machine tools 10 - 20%
* Other plant and equipments 8.33 - 25%
Furniture, fixtures and office
equipments 10 - 33.33%
Vehicles 12.5 - 25%
1.2 Tangible fixed assets and depreciation (Continued)
Where depreciable assets are revalued, depreciation is provided on the
revalued amount and the additional depreciation on accretion to assets
on revaluation is transferred from revaluation reserve to the statement
of profit and loss.
Assets costing Rs. 5,000 or less are fully charged to the statement of
profit and loss in the year of acquisition.
Items of fixed assets that have been retired from active use and are
held for disposal are stated at the lower of their net book value and
estimated net realizable value and are disclosed separately in the
financial statements.
Capital work-in-progress includes the cost of fixed assets that are not
ready to use at the balance sheet date.
1.3 Intangible assets
Intangible assets comprise goodwill, software and technical know-how.
Intangible assets are stated at cost of acquisition less accumulated
amortisation and impairment losses, if any. These intangible assets are
amortised on straight-line basis based on the following useful lives,
which in management''s estimate represents the period during which
economic benefits will be derived from their use:
Asset Useful life
Goodwill 36 - 60 months
Software 36 - 60 months
Technical know-how 60 - 120 months
1.4 Impairment of assets
The Company assesses at each balance sheet date whether there is any
indication that an asset or a group of assets (cash generating unit)
may be impaired. If any such indication exists, the Company estimates
the recoverable amount of the asset or cash generating unit.
The recoverable amount is the greater of the asset''s net selling price
and value in use. In assessing value in use, the estimated future cash
flows are discounted to the present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and
the risks specific to the asset. In determining net selling price,
recent market transactions are taken into account, if available. If no
such transactions can be identified, an appropriate valuation model is
used. If such recoverable amount of the asset or the recoverable amount
of the cash-generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount. The reduction is treated as an impairment loss and is
recognized in the statement of profit and loss. If at the balance sheet
date there is an indication that a previously assessed impairment loss
no longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount subject to a maximum of depreciable
historical cost, had no impairment been recognised.
1.5 Investments
Investments that are readily realizable and intended to be held for not
more than a year from the date on which such investments are classified
as current investments. All other investments are classified as long
term investments.
Long-term investments are carried at cost. Provision for diminution is
made to recognize a decline, other than temporary in value of long-term
investments and is determined separately for each individual
investment.
Investment property
An investment in land or buildings, which is not intended to be
occupied substantially for use by or in the operations of the Company,
is classified as an investment property. Investment properties are
stated at cost, net of accumulated depreciation and accumulated
impairment losses, if any.
1.5 Investments (Continued)
The cost comprise purchase price, borrowing costs if capitalisation
criteria are met and directly attributable cost of bringing the
investment property to its working condition for the intended use.
Depreciation on investment property is calculated on a straight line
basis as per the rates arrived at based on the useful lives estimated
by the management or that prescribed under the Schedule XIV to the Act,
whichever is higher. The Company has used depreciation rate of 1.39% -
3.45%.
On disposal of an investment property, the difference between its
carrying amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
1.6 Revenue recognition
Revenue is recognised to the extent it is probable that the economic
benefits will flow to the Company and the revenue can be reliably
measured.
Revenue from sale of products is recognised on transfer of significant
risk and rewards of ownership of the products to the customers, which
is generally on dispatch of goods. Sales are stated exclusive of sales
tax and net of trade and quantity discount.
Revenue from services is recognised as per the terms of the contract
with the customer using the proportionate completion method.
Revenue from services represents service income other than from
services which are incidental to sale of products and projects.
Income from fixed price construction contracts is recognised by
reference to the estimated overall profitability of the contract under
the percentage of completion method. Percentage of completion is
determined as a proportion of the costs incurred upto the reporting
date to the total estimated contract costs. Contract revenue earned in
excess of billing has been reflected as "Project excess cost" under
"Other current assets " and "Billing in excess" of contract revenue has
been reflected under "Other current liabilities" in the balance sheet.
Provision for expected loss is recognized immediately when it is
probable that the total estimated contract costs will exceed total
contract revenue.
Commission income is recognised when proof of shipment is received from
the supplier.
Interest income is recognised on the time proportion basis.
Export incentives receivable are accrued for when the right to receive
the credit is established and there is no significant uncertainty
regarding the ultimate collection of export proceeds.
1.7 Inventories
Inventories comprise all costs of purchase, conversion and other costs
incurred in bringing the inventories to their present location and
condition.
Raw materials are valued at the lower of cost and net realisable value.
Cost is determined on the basis of the weighted average method.
Work-in-progress, finished goods and traded goods are valued at the
lower of cost and net realisable value. Excise duty is included in the
value of finished goods inventory. Cost is determined on a weighted
average basis.
The net realisable value of work-in-progress is determined with
reference to the estimated selling price less estimated cost of
completion and estimated costs necessary to make the sale of related
finished goods. Raw materials held for the production of finished goods
are not written down below cost except in case where material prices
have declined and it is estimated that the cost of the finished product
will exceed its net realisable value.
1.8 Leases
Where the Company is the lessee:
Leases where the lessor effectively retains substantially all the risk
and benefits of ownership of the leased items are classified as
operating leases. Lease payments under an operating lease, are
recognised as an expense in the statement of profit and loss on a
straight line basis over the lease term.
Where the Company is the lessor:
Assets subject to operating leases are included in fixed assets. Lease
income is recognised in the statement of profit and loss on a
straight-line basis over the lease term. Costs, including depreciation
are recognised as an expense in the statement of profit and loss.
Initial direct costs such as legal costs, brokerage costs, etc. are
recognised immediately in the statement of profit and loss.
1.9 Employee benefits
(a) Short term employee benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short-term employee benefits. Benefits
such as salaries, wages and short term compensated absences, etc. and
the expected cost of ex-gratia is recognised in the period in which the
employee renders the related service.
(b) Post-employment benefits
(i) Defined Contribution Plans: The Company''s approved superannuation
scheme and employee state insurance scheme are defined contribution
plans. The Company''s contribution paid/payable under the schemes is
recognised as expense in the statement of profit and loss during the
period in which the employee renders the related service.
(ii) Defined Benefit Plans and other Long Term Benefits: The Company''s
provident fund, gratuity, pension and medical benefit schemes are
defined benefit plans. Leave wages, retention bonus, silver jubilee and
star awards are other long term benefits. The present value of the
obligation under such defined benefit plans and other long term
benefits are determined based on actuarial valuation using the
Projected Unit Credit Method, which recognises each period of service
as giving rise to additional unit of employee benefit entitlement and
measures each unit separately to build up the final obligation.
Provision for leave wages, pension, medical benefit, retention bonus,
silver jubilee and star awards which is expected to be utilized within
the next 12 months is treated as short term employee benefits and
beyond 12 months as long term employee benefits. For the purpose of
presentation, the allocation between short and long term provisions has
been made as determined by an actuary.
Actuarial gains and losses are recognised immediately in the statement
of profit and loss.
1.10 Foreign currency transactions
The Company is exposed to currency fluctuations on foreign currency
transactions. Transactions denominated in foreign currency are recorded
at the exchange rate prevailing on the date of transactions.
Exchange differences arising on foreign exchange transactions settled
during the year are recognized in the statement of profit and loss of
the year.
1.10 Foreign currency transactions (Continued)
Translation
Monetary assets and liabilities in foreign currency, which are
outstanding as at the year-end, are translated at the year-end at the
closing exchange rate and the resultant exchange differences are
recognized in the statement of profit and loss. Non monetary items are
stated in the balance sheet using the exchange rate at the date of the
transaction.
Derivative instruments
The Company''s exposure to foreign currency fluctuations relates to
foreign currency assets, liabilities and forecasted cash flows. 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 counterparty is a bank.
As per Accounting Standard (''AS'') 11 - ''The Effects of Changes in
Foreign Exchange Rates'', the premium or the discount on forward
exchange contracts not relating to firm commitments or highly probable
forecast transactions and not intended for trading or speculation
purpose is amortized as expense or income over the life of the
contract. All other derivatives except cash flow hedges, which are not
covered by AS 11, are measured using the mark-to-market principle with
the resulting gains / losses thereon being recorded in the statement of
profit and loss.
Hedge Accounting
The Company uses foreign currency forward contracts to hedge its risks
associated with foreign currency fluctuations relating to highly
probable forecast transactions. The Company designates some of the
forward contracts in a cash flow hedging relationship by applying the
hedge accounting principles.
These forward contracts are stated at fair value at each reporting
date. Changes in the fair value of these forward contracts that are
designated and effective as hedges of future cash flows are recognised
directly in Cash Flow Hedge Reserve under Reserves and Surplus, net of
applicable deferred income taxes and the ineffective portion is
recognised immediately in the statement of profit and loss.
Amounts accumulated in Cash Flow Hedge Reserve are reclassified to
profit and loss in the same periods during which the forecasted
transaction materialises.
Hedge accounting is discontinued when the hedging instrument expires or
is sold, terminated, or exercised, or no longer qualifies for hedge
accounting. For forecasted transactions, any cumulative gain or loss on
the hedging instrument recognised in Hedging Reserve Account is
retained there until the forecasted transaction occurs.
If the forecasted transaction is no longer expected to occur, the net
cumulative gain or loss recognised in Cash Flow Hedge Reserve is
immediately transferred to the statement of profit and loss for the
period.
1.11 Taxation
Income-tax expense comprises current tax (i.e. amount of tax for the
year determined in accordance with the income-tax law), deferred tax
charge or credit (reflecting the tax effect of timing differences
between accounting income and taxable income for the year) computed in
accordance with the relevant provisions of the Income Tax Act, 1961.
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the balance sheet date. Deferred
tax assets are recognised only to the extent there is reasonable
certainty that the asset can be realised in future; however, where
there is unabsorbed depreciation or carried forward loss under taxation
laws, all deferred tax assets are recognised only if there is a virtual
certainty supported by convincing evidence of realisation of the
assets. Deferred tax assets are reviewed as at each balance sheet date
and written down or written-up to reflect the amount that is
reasonable/virtually certain (as the case may be) to be realised.
1.12 Earnings per share
Basic and diluted earnings per share is computed by dividing the net
profit attributable to equity shareholders for the year, by the
weighted average number of equity shares outstanding during the year.
1.13 Provision
Provisions are recognized when the Company recognises it has a present
obligation as a result of past events and it is probable that an
outflow of resources embodying economic benefits will be required to
settle the obligation and a reliable estimate can be made of the amount
of the obligation. Provisions are not discounted to its present value
and are determined based on best estimate required to settle the
obligation at the balance sheet date. These are reviewed at each
balance sheet date and adjusted to reflect current best estimates.
Disclosures for contingent liability are made when there is a possible
or present obligation which arises from past events which is not
recognised since it is not probable that there will be an outflow of
resources. When there is a possible or present obligation in respect of
which the likelihood of outflow of resources is remote, no disclosure
is made.
Loss contingencies arising from claims, litigation, assessment, fines,
penalties, etc. are recorded when it is probable that a liability has
been incurred and the amount can be reasonably estimated.
Contingent assets are neither recognized nor disclosed in the financial
statements.
1.14 Cash and cash equivalents
Cash and cash equivalents include cash, cheques in hand, cash at bank
and short term deposits with banks having maturity of three months or
less.
1.15 Insurance claims
Amounts by way of insurance claims are recognised as assets when it is
reasonably certain that the claim is receivable and is recorded as a
reduction in the expense where the corresponding loss has been debited.
1.16 Operating cycle
All assets and liabilities have been classified as current or
non-current as per the Company''s normal operating cycle and other
criteria set out in Revised Schedule VI to the Companies Act, 1956. The
Company has ascertained its operating cycle as twelve months for the
purpose of current or non-current classification of assets and
liabilities.
Sep 30, 2013
1.1 Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent liabilities on the date of the financial statements. Actual
results could differ from those estimates. Any revision to accounting
estimates is recognised prospectively in current and future periods.
1.2 Tangible fixed assets and depreciation
Fixed assets are stated at cost of acquisition or revalued amounts less
accumulated depreciation and impairment losses, if any. The cost of
fixed assets includes taxes, duties, freight and other incidental
expenses related to the acquisition and installation of the respective
assets.
Depreciation is provided on the straight-line method (''SLM''). The
depreciation rates prescribed in Schedule XIV to the Act are considered
as the minimum rates. 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 shorter than that
envisaged in the aforesaid Schedule, depreciation is provided at a
higher rate based on the management''s estimate of useful life/remaining
life.
Diagnostics equipments are being treated as traded items of inventory
when they are received. However, if these instruments are issued from
inventory to customers under placement agreement, these are treated as
capital asset in the period of such issue and are stated at cost less
accumulated depreciation.
The key fixed asset blocks and related annual depreciation rates, which
in management''s opinion reflect the estimated useful economic lives of
the fixed assets, are:
1.2 Tangible fixed assets and depreciation (Continued)
Where depreciable assets are revalued, depreciation is provided on the
revalued amount and the additional depreciation on accretion to assets
on revaluation is transferred from revaluation reserve to the statement
of profit and loss.
Assets costing Rs. 5,000 or less are fully charged to the statement of
profit and loss in the year of acquisition.
Items of fixed assets that have been retired from active use and are
held for disposal are stated at the lower of their net book value and
estimated net realizable value and are disclosed separately in the
financial statements.
Capital work-in-progress includes the cost of fixed assets that are not
ready to use at the balance sheet date.
1.3 Intangible assets
Intangible assets comprise goodwill, software and technical know-how.
These intangible assets are amortised on straight- line basis based on
the following useful lives, which in management''s estimate represents
the period during which economic benefits will be derived from their
use:
1.4 Impairment of assets
The Company assesses at each balance sheet date whether there is any
indication that an asset or a group of assets (cash generating unit)
may be impaired. If any such indication exists, the Company estimates
the recoverable amount of the asset or cash generating unit.
The recoverable amount is the greater of the asset''s net selling price
and value in use. In assessing value in use, the estimated future cash
flows are discounted to the present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and
the risks specific to the asset. In determining net selling price,
recent market transactions are taken into account, if available. If no
such transactions can be identified, an appropriate valuation model is
used. If such recoverable amount of the asset or the recoverable amount
of the cash-generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount. The reduction is treated as an impairment loss and is
recognized in the statement of profit and loss. If at the balance sheet
date there is an indication that a previously assessed impairment loss
no longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount subject to a maximum of depreciable
historical cost, had no impairment been recognised.
1.5 Investments
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long term investments.
Long-term investments are carried at cost. Provision for diminution is
made to recognize a decline, other than temporary in value of long-term
investments and is determined separately for each individual
investment.
Investment property
An investment in land or buildings, which is not intended to be
occupied substantially for use by or in the operation of the Company,
is classified as investment property. Investment properties are stated
at cost, net of accumulated depreciation and accumulated impairment
losses, if any.
The cost comprise purchase price, borrowing costs if capitalisation
criteria are met and directly attributable cost of bringing the
investment property to its working condition for the intended use.
1.5 Investments (Continued)
Investment property (Continued)
Depreciation on investment property is calculated on a straight line
basis based on the useful lives estimated by the management or that
prescribed under the Schedule XIV to the Act, whichever is higher. The
Company has used depreciation rate of 1.39% - 3.45%.
On disposal of an investment property, the difference between its
carrying amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
1.6 Revenue recognition
Revenue is recognised to the extent it is probable that the economic
benefits will flow to the Company and the revenue can be reliably
measured.
Revenue from sale of products is recognised on transfer of significant
risk and rewards of ownership of the products to the customers, which
is generally on dispatch of goods. Sales are stated exclusive of sales
tax and net of trade and quantity discount.
Revenue from services is recognised as per the terms of the contract
with the customer using the proportionate completion method.
Revenue from services represents service income other than from
services which are incidental to sale of products and projects.
Income from fixed price construction contracts is recognised by
reference to the estimated overall profitability of the contract under
the percentage of completion method. Percentage of completion is
determined as a proportion of the costs incurred upto the reporting
date to the total estimated contract costs. Contract revenue earned in
excess of billing has been reflected as "Project Excess Cost" under
"Other current assets" and "Billing in excess" of contract revenue has
been reflected under "Current Liabilities" in the balance sheet.
Provision for expected loss is recognized immediately when it is
probable that the total estimated contract costs will exceed total
contract revenue.
Commission income is recognised when proof of shipment is received from
the supplier.
Interest income is recognised on the time proportion basis.
Export incentives receivable are accrued for when the right to receive
the credit is established and there is no significant uncertainty
regarding the ultimate collection of export proceeds.
1.7 Inventories
Inventories comprise all costs of purchase, conversion and other costs
incurred in bringing the inventories to their present location and
condition.
Raw materials are valued at the lower of cost and net realisable value.
Cost is determined on the basis of the weighted average method.
Work-in-progress, finished goods and traded goods are valued at the
lower of cost and net realisable value. Excise duty is included in the
value of finished goods inventory. Cost is determined on a weighted
average basis.
The net realisable value of work-in-progress is determined with
reference to the estimated selling price less estimated cost of
completion and estimated costs necessary to make the sale of related
finished goods. Raw materials held for the production of finished goods
are not written down below cost except in case where material prices
have declined and it is estimated that the cost of the finished product
will exceed its net realisable value.
1.8 Leases
Where the Company is the lessee:
Leases where the lessor effectively retains substantially all the risk
and benefits of ownership of the leased items are classified as
operating leases. Lease payments under an operating lease, are
recognised as an expense in the statement of profit and loss on a
straight line basis over the lease term.
Where the Company is the lessor:
Assets subject to operating leases are included in fixed assets. Lease
income is recognised in the statement of profit and loss on a
straight-line basis over the lease term. Costs, including depreciation
are recognised as an expense in the statement of profit and loss.
Initial direct costs such as legal costs, brokerage costs, etc. are
recognised immediately in the statement of profit and loss.
1.9 Employee benefits
(a) Short term employee benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short-term employee benefits. Benefits
such as salaries, wages and short term compensated absences, etc. and
the expected cost of ex-gratia is recognised in the period in which the
employee renders the related service.
(b) Post-employment benefits
(i) Defined Contribution Plans: The Company''s approved superannuation
scheme and employee state insurance scheme are defined contribution
plans. The Company''s contribution paid/payable under the schemes is
recognised as expense in the statement of profit and loss during the
period in which the employee renders the related service.
(ii) Defined Benefit Plans and other Long Term Benefits: The Company''s
provident fund, gratuity, pension and medical benefit schemes are
defined benefit plans. Leave wages, retention bonus, silver jubilee and
star awards are other long term benefits. The present value of the
obligation under such defined benefit plans and other long term
benefits are determined based on actuarial valuation using the
Projected Unit Credit Method, which recognises each period of service
as giving rise to additional unit of employee benefit entitlement and
measures each unit separately to build up the final obligation.
Provision for leave wages, pension, medical benefit, retention bonus,
silver jubilee and star awards which is expected to be utilized within
the next 12 months is treated as short term employee benefits and
beyond 12 months as long term employee benefits. For the purpose of
presentation, the allocation between short and long term provisions has
been made as determined by an actuary.
Actuarial gains and losses are recognised immediately in the statement
of profit and loss.
1.10 Foreign currency transactions
The Company is exposed to currency fluctuations on foreign currency
transactions. Transactions denominated in foreign currency are recorded
at the exchange rate prevailing on the date of transactions.
Exchange differences arising on foreign exchange transactions settled
during the year are recognized in the statement of profit and loss of
the year.
Translation
Monetary assets and liabilities in foreign currency, which are
outstanding as at the year-end, are translated at the year-end at the
closing exchange rate and the resultant exchange differences are
recognized in the statement of profit and loss. Non monetary items are
stated in the balance sheet using the exchange rate at the date of the
transaction.
Derivative instruments
The Company''s exposure to foreign currency fluctuations relates to
foreign currency assets, liabilities and forecasted cash flows. 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 counterparty is a bank.
As per Accounting Standard (''AS'') 11 - ''The Effects of Changes in
Foreign Exchange Rates'', the premium or the discount on forward
exchange contracts not relating to firm commitments or highly probable
forecast transactions and not intended for trading or speculation
purpose is amortized as expense or income over the life of the
contract. All other derivatives except cash flow hedges, which are not
covered by AS 11, are measured using the mark-to-market principle with
the resulting gains / losses thereon being recorded in the statement of
profit and loss.
Hedge Accounting
The Company uses foreign currency forward contracts to hedge its risks
associated with foreign currency fluctuations relating to highly
probable forecast transactions. The Company designates some of the
forward contracts in a cash flow hedging relationship by applying the
hedge accounting principles.
These forward contracts are stated at fair value at each reporting
date. Changes in the fair value of these forward contracts that are
designated and effective as hedges of future cash flows are recognised
directly in Cash Flow Hedge Reserve under Reserves and Surplus, net of
applicable deferred income taxes and the ineffective portion is
recognised immediately in the statement of profit and loss.
Amounts accumulated in Cash Flow Hedge Reserve are reclassified to
profit and loss in the same periods during which the forecasted
transaction materialises.
Hedge accounting is discontinued when the hedging instrument expires or
is sold, terminated, or exercised, or no longer qualifies for hedge
accounting. For forecasted transactions, any cumulative gain or loss on
the hedging instrument recognised in Hedging Reserve Account is
retained there until the forecasted transaction occurs.
If the forecasted transaction is no longer expected to occur, the net
cumulative gain or loss recognised in Cash Flow Hedge Reserve is
immediately transferred to the statement of profit and loss for the
period.
1.11 Taxation
Income-tax expense comprises current tax (i.e. amount of tax for the
year determined in accordance with the income-tax law), deferred tax
charge or credit (reflecting the tax effect of timing differences
between accounting income and taxable income for the year) computed in
accordance with the relevant provisions of the Income Tax Act, 1961.
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the balance sheet date. Deferred
tax assets are recognised only to the extent there is reasonable
certainty that the asset can be realised in future; however, where
there is unabsorbed depreciation or carried forward loss under taxation
laws, all deferred tax assets are recognised only if there is a virtual
certainty supported by convincing evidence of realisation of the
assets. Deferred tax assets are reviewed as at each balance sheet date
and written down or written-up to reflect the amount that is
reasonable/virtually certain (as the case may be) to be realised.
1.12 Earnings per share
Basic and diluted earnings per share is computed by dividing the net
profit attributable to equity shareholders for the year, by the
weighted average number of equity shares outstanding during the year.
1.13 Provision
Provisions are recognized when the Company recognises it has a present
obligation as a result of past events and it is probable that an
outflow of resources embodying economic benefits will be required to
settle the obligation and a reliable estimate can be made of the amount
of the obligation. Provisions are not discounted to its present value
and are determined based on best estimate required to settle the
obligation at the balance sheet date. These are reviewed at each
balance sheet date and adjusted to reflect current best estimates.
Disclosures for contingent liability are made when there is a possible
or present obligation which arises from past events which is not
recognised since it is not probable that there will be an outflow of
resources. When there is a possible or present obligation in respect of
which the likelihood of outflow of resources is remote, no disclosure
is made.
Loss contingencies arising from claims, litigation, assessment, fines,
penalties, etc. are recorded when it is probable that a liability has
been incurred and the amount can be reasonably estimated.
Contingent assets are neither recognized nor disclosed in the financial
statements.
1.14 Cash and Cash equivalents
Cash and cash equivalents include cash, cheques in hand, cash at bank
and short term deposits with banks having maturity of three months or
less.
1.15 Insurance claims
Amounts by way of insurance claims are recognised as assets when it is
reasonably certain that the claim is receivable and is recorded as a
reduction in the expense where the corresponding loss has been debited.
1.16 Operating cycle
All assets and liabilities have been classified as current or
non-current as per the Company''s normal operating cycle and other
criteria set out in Revised Schedule VI to the Companies Act, 1956. The
Company has ascertained its operating cycle as twelve months for the
purpose of current or non-current classification of assets and
liabilities.
Sep 30, 2010
1.1 Basis of preparation of financial statements
The financial statements are prepared and presented under the historical
cost convention, on the accrual basis of accounting in accordance with
the accounting principles generally accepted in India and comply with
the accounting standards notifed in the Companies (Accounting
Standards) Rules 2006, (as amended) issued by the Central Government,
in consultation with National Advisory Committee on Accounting
Standards (NACAS) and relevant provisions of Companies Act, 1956
(the Act), to the extent applicable.
1.2 Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent liabilities on the
date of the financial statements. Actual results could differ from those
estimates. Any revision to accounting estimates is recognised
prospectively in current and future periods.
1.3 Fixed assets and depreciation
Fixed assets are stated at acquisition or revalued amounts less
accumulated depreciation. The cost of fixed assets includes taxes,
duties, freight and other incidental expenses related to the
acquisition and installation of the respective assets.
Depreciation is provided on the straight-line method (SLM). The
depreciation rates prescribed in Schedule XIV to the Act are considered
as the minimum rates. If the managements estimate of the useful life
of a fxed 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 managements estimate of useful life/remaining
life.
Where depreciable assets are revalued, depreciation is provided on the
revalued amount and the additional depreciation on accretion to assets
on revaluation is transferred from revaluation reserve to the Profit and
loss account.
Assets costing less than Rs. 5,000 are fully charged to the Profit and
loss account in the year of acquisition.
Items of fixed assets that have been retired from active use and are
held for disposal are stated at the lower of their net book value and
estimated net realisable value and are disclosed separately in the
financial statements. Any expected loss is recognised in the Profit and
loss account through an accelerated depreciation charge.
Capital work-in-progress includes the cost of fxed assets that are not
ready to use at the balance sheet date and advances paid to acquire
capital assets before the balance sheet date.
1.4 Intangible assets
Intangible assets comprise goodwill and technical know-how. These
intangible assets are amortised on straight-line basis based on the
following useful lives, which in managements estimate represents the
period during which economic benefits will be derived from their use:
1.4 Intangible assets (Continued)
Asset Useful life
Goodwill 60 months
Technical know-how 60 Ã 84 months
1.5 Impairment of assets
The Company assesses at each balance sheet date whether there is any
indication that an asset or a group of assets (cash generating unit)
may be impaired. If any such indication exists, the Company estimates
the recoverable amount of the asset or cash generating unit. The
recoverable amount is the greater of the assets net selling price and
value in use. In assessing value in use , the estimated future cash
fows are discounted to the present value at the weighted average cost
of capital. If such recoverable amount of the asset or the recoverable
amount of the cash-generating unit to which the asset belongs is less
than its carrying amount, the carrying amount is reduced to its
recoverable amount. The reduction is treated as an impairment loss and
is recognised in the Profit and loss account. If at the balance sheet
date there is an indication that a previously assessed impairment loss
no longer exists, the recoverable amount is reassessed and the asset is
refected at the recoverable amount subject to a maximum of depreciable
historical cost, had no impairment been recognised.
1.6 Investments
Investments that are readily realisable and intended to be held but not
more than a year are classifed as current investments. All other
investments are classifed as long term investments.
Long-term investments are carried at cost. Provision for diminution is
made to recognise a decline, other than temporary in value of long-term
investments and is determined separately for each individual
investment. Current investments are carried at lower of cost and fair
value, computed separately in respect of each category of investment.
1.7 Revenue recognition
Revenue from sale of products is recognised on transfer of all
significant risk and rewards of ownership of the products on to the
customers, which is generally on dispatch of goods. Sales are stated
exclusive of sales tax and net of trade and quantity discount.
Revenue from services is recognised as per the terms of the contract
with the customer using the proportionate completion method.
Income from fxed price construction contracts is recognised by
reference to the estimated overall Profitability of the contract under
the percentage of completion method. Percentage of completion is
determined as a proportion of the costs incurred upto the reporting
date to the total estimated contract costs. Contract revenue earned in
excess of billing has been refected as "Project Work-in-progress net of
amounts billed there against" under "Inventories" and "Billing in
excess" of contract revenue has been refected under "Current
Liabilities" in the balance sheet. Provision for expected loss is
recognised immediately when it is probable that the total estimated
contract costs will exceed total contract revenue.
Commission income is recognised when proof of shipment is received from
the supplier.
Dividend income is recognised when the right to receive the dividend is
established.
Interest income is recognised on the time proportion basis.
Export incentives receivable are accrued for when the right to receive
the credit is established and there is no significant uncertainty
regarding the ultimate collection of export proceeds.
1.8 Inventories
Inventories comprise all costs of purchase, conversion and other costs
incurred in bringing the inventories to their present location and
condition.
Raw materials are valued at the lower of cost and net realisable value.
Cost is determined on the basis of the weighted average method.
Work-in-progress and fnished goods are valued at the lower of cost and
net realisable value. Excise duty is included in the value of fnished
goods inventory. Cost is determined on a weighted average basis.
Custom duty on goods where title has passed to the Company is included
in the value of inventory.
The net realisable value of work-in-progress is determined with
reference to the estimated selling price less estimated cost of
completion and estimated costs necessary to make the sale of related
fnished goods. Raw materials held for the production of fnished goods
are not written down below cost except in case where material prices
have declined and it is estimated that the cost of the fnished product
will exceed its net realisable value.
Project Work-in-progress net of amounts billed is valued at cost
incurred on the contract with the Profit taken thereon, in accordance
with the Percentage of Completion method followed by the Company for
Revenue Recognition, and reduced by progressive billings
1.9 Leases
Where the Company is the lessee:
Leases where the lessor effectively retains substantially all the risk
and benefits of ownership of the leased items are classifed as operating
leases. Lease payments under an operating lease, are recognised as an
expense in the statement of Profit and loss on a straight line basis
over the lease term.
Where the Company is the lessor:
Assets subject to operating leases are included in fxed assets. Lease
income is recognised in the Profit and Loss Account on a straight-line
basis over the lease term. Costs, including depreciation are recognised
as an expense in the Profit and Loss Account. Initial direct costs such
as legal costs, brokerage costs, etc. are recognised immediately in the
Profit and Loss Account.
1.10 Employee benefits
(a) Short term employee benefits
All employee benefits payable wholly within twelve months of rendering
the service are classifed as short-term employee benefits. benefits such
as salaries, wages and short term compensated absences, etc. and the
expected cost of ex-gratia is recognised in the period in which the
employee renders the related service.
(b) Post-employment benefits
(i) defined Contribution Plans: The Companys approved superannuation
scheme and employee state insurance scheme are defined contribution
plans. The Companys contribution paid/payable under the schemes is
recognised as expense in the Profit and loss account during the period
in which the employee renders the related service.
(ii) defined Benefit Plans: The Companys provident fund, gratuity,
pension, leave and medical benefit schemes are defined benefit plans. The
present value of the obligation under such defined benefit plans is
determined based on actuarial valuation using the Projected Unit Credit
Method, which recognises each period of service as giving rise to
additional unit of employee benefit entitlement and measures each unit
separately to build up the fnal obligation.
The obligation is measured at the present value of the estimated future
cash fows. The discount rates used for determining the present value of
the obligation under defined benefit plans, is based on the market yields
on Government securities as at the balance sheet date.
Actuarial gains and losses are recognised immediately in the Profit and
loss account.
1.11 Foreign currency transactions
The Company is exposed to currency fuctuations on foreign currency
transactions. Transactions denominated in foreign currency are recorded
at the exchange rate prevailing on the date of transactions.
Exchange differences arising on foreign exchange transactions settled
during the year are recognised in the Profit and loss account of the
year.
Translation
Monetary assets and liabilities in foreign currency, which are
outstanding as at the year-end, are translated at the year-end at the
closing exchange rate and the resultant exchange differences are
recognised in the Profit and loss account. Non monetary items are stated
in the balance sheet using the exchange rate at the date of the
transaction.
Derivative instruments
The Companys exposure to foreign currency fuctuations relates to
foreign currency assets, liabilities and forecasted cash flows. The
Company limits the effects of foreign exchange rate fuctuations by
following established risk management policies including the use of
derivatives. The Company enters into forward exchange contracts, where
the counterparty is a bank.
As per Accounting Standard (AS) 11 Ã The Effects of Changes in
Foreign Exchange Rates, the premium or the discount on forward
exchange contracts not relating to frm commitments or highly probable
forecast transactions and not intended for trading or speculation
purpose is amortized as expense or income over the life of the
contract. All other derivatives, which are not covered by AS 11, are
measured using the mark-to-market principle with the resulting gains /
losses thereon being recorded in the Profit and loss account.
1.12 Taxation
Income-tax expense comprises current tax (i.e. amount of tax for the
year determined in accordance with the income-tax law), deferred tax
charge or credit (refecting the tax effect of timing differences
between accounting income and taxable income for the year) computed in
accordance with the relevant provisions of the Income Tax Act, 1961.
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the balance sheet date. Deferred
tax assets are recognised only to the extent
1.12 Taxation (Continued)
there is reasonable certainty that the asset can be realised in future;
however, where there is unabsorbed depreciation or carried forward loss
under taxation laws, deferred tax assets are recognised only if there
is a virtual certainty supported by convincing evidence of realisation
of the assets. Deferred tax assets are reviewed as at each balance
sheet date and written down or written-up to refect the amount that is
reasonable/virtually certain (as the case may be) to be realised.
1.13 Earnings per share
Basic and diluted earnings per share is computed by dividing the net
Profit attributable to equity shareholders for the year, by the weighted
average number of equity shares outstanding during the year.
1.14 Provision
Provisions comprise liabilities of uncertain timing or amount.
Provisions are recognised when the Company recognises it has a present
obligation as a result of past events, it is probable that an outfow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation. Provisions are not discounted to its present value and are
determined based on best estimate required to settle the obligation at
the balance sheet date. These are reviewed at each balance sheet date
and adjusted to refect current best estimates.
Disclosures for contingent liability are made when there is a possible
or present obligation for which it is not probable that there will be
an outfow of resources. When there is a possible obligation or a
present obligation in respect of which the likelihood of outfow of
resources is remote, no disclosure is made.
Loss contingencies arising from claims, litigation, assessment, fnes,
penalties, etc. are recorded when it is probable that a liability has
been incurred and the amount can be reasonably estimated.
Contingent assets are neither recognised nor disclosed in the financial
statements.
1.15 Cash and Cash equivalents
Cash and cash equivalents include cash, cheques in hand, cash at bank
and short term deposits with banks having maturity of three months or
less.
2. Amalgamation
2.1 Amalgamation of Flender Limited, Kolkata
Pursuant to the scheme of amalgamation (the scheme) of the erstwhile
Flender Limited with the Company under sections 391 to 394 of "The
Companies Act" as approved in the Board Meeting held on 23 July 2009
and subsequently sanctioned by the Honorable High Court of Kolkata on
19 April 2010, the assets and liabilities of the erstwhile Flender
Limited were transferred to and vested in the Company with effect from
1 October 2009. Accordingly, the scheme has been given effect to in
these accounts.
The operations of Flender Limited include manufacturing of gear boxes,
coupling and spares.
The amalgamation has been accounted for under the "pooling of
interests" method as prescribed by AS - 14 Accounting for
Amalgamations. Accordingly, the accounting treatment has been given as
under- i. The assets, liabilities, reserves and credit balance in the
Profit and loss account of Flender Limited as at 1 October 2009 have
been incorporated at their book values in the financial statements of
the Company.
ii. 4,320,000 equity shares of Rs. 10 each fully paid up of Flender
Limited and investments in such equity shares held by the Company
stands cancelled and the excess amount of Rs. 1,544,315 of the book
value of the investment in the equity share capital of Flender Limited
over the face value of such share capital has been debited to the
General Reserves of the Company.
Consequently, the financial statements for the year ended 30 September
2010 include the financial statements of Flender which, however are not
material in relation to the financial statements of the Company.
2.2 Proposed Amalgamations
The Board of Directors approved the amalgamation of Siemens Rolling
Stock Private Ltd. (SRSPL), a wholly owned subsidiary and Siemens
Healthcare Diagnostics Ltd. (SHDL) with the Company on 7 June 2010 and
30 November 2009, respectively. The amalgamation schemes were fled
with the Honorable High Courts. In terms of the scheme, the appointed
date is 1 October 2009. Pending approval of the aforesaid High Courts,
no effect of the above mentioned proposed amalgamation schemes have
been recognised in these financial statements.
Further, during the year , the Board of Directors of the Company had
approved the scheme of amalgamation of its wholly owned subsidiaries
Siemens Building Technologies Private Limited (SBTPL) and Vista
Security Technics Private Limited (Vista) with the Company. The
amalgamation scheme was fled with the Honorable High Court of Madras
and the relevant High court orders have been received on 3 September
2010 (read with order dated 5 October 2010).The appointed date for the
amalgamation is 1 October 2010.
Sep 30, 2009
1.1 Basis of preparation of financial statements
The financial statements are prepared and presented under the
historical cost convention, on the accrual basis of accounting in
accordance with the accounting principles generally accepted in India
and comply with the accounting standards specified in the Companies
(Accounting Standards) Rules 2006, issued by the Central Government, in
consultation with National Advisory Committee on Accounting Standards
(ÃNACASÃ) and relevant provisions of Companies Act, 1956 (Ãthe ActÃ),
to the extent applicable.
1.2 Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles (ÃGAAPÃ) requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent liabilities on the
date of the financial statements. Actual results could differ from
those estimates. Any revision to accounting estimates is recognised
prospectively in current and future periods.
1.3 Fixed assets and depreciation
Fixed assets are stated at acquisition or revalued amounts less
accumulated depreciation. The cost of fixed assets includes taxes,
duties, freight and other incidental expenses related to the
acquisition and installation of the respective assets.
Depreciation is provided on the straight-line method (ÃSLMÃ). The
depreciation rates prescribed in Schedule XIV to the Act are considered
as the minimum rates. If the managementÃs 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 shorter than that
envisaged in the aforesaid Schedule, depreciation is provided at a
higher rate based on the managementÃs estimate of useful life/
remaining life.
The key fixed asset blocks and related annual depreciation rates, which
in managementÃs opinion refl ect the estimated useful economic lives of
the fixed assets, are:
Asset Rate
Land -
- Freehold land -
- Lease hold Over the lease period
Buildings
- Factory buildings 3.34%
- Other buildings 2-2.5%
Plant and machinery
- Assets at project sites Over the life of the project
- Special machine tools 10%
- Other plant and
machinery 10-25%
Furniture, fittings and
office equipment 20%-33.33%
Vehicles 25%
Where depreciable assets are revalued, depreciation is provided on the
revalued amount and the additional depreciation on accretion to assets
on revaluation is transferred from revaluation reserve to the profit
and loss account.
Assets costing less than Rs 5,000 are fully charged to the profit and
loss account in the year of acquisition.
Items of fixed assets that have been retired from active use and are
held for disposal are stated at the lower of their net book value and
estimated net realizable value and are disclosed separately in the
financial statements. Any expected loss is recognised in the profit and
loss account through an accelerated depreciation charge.
Capital work-in-progress includes the cost of fixed assets that are not
ready to use at the balance sheet date and advances paid to acquire
capital assets before the balance sheet date.
1.4 Intangible assets
Intangible assets comprise goodwill and technical know-how. These
intangible assets are amortised on straight-line basis based on the
following useful lives, which in managementÃs estimate represents the
period during which economic benefits will be derived from their use:
Asset Useful life
Goodwill 60 months
Technical know-how 60 - 84 months
1.5 Impairment of assets
The Company assesses at each balance sheet date whether there is any
indication that an asset or a group of assets (cash generating unit)
may be impaired. If any such indication exists, the Company estimates
the recoverable amount of the asset or cash generating unit. The
recoverable amount is the greater of the assetÃs net selling price and
value in use. In assessing value in use, the estimated future cash fl
ows are discounted to the present value at the weighted average cost of
capital. If such recoverable amount of the asset or the recoverable
amount of the cash-generating unit to which the asset belongs is less
than its carrying amount, the carrying amount is reduced to its
recoverable amount. The reduction is treated as an impairment loss and
is recognized in the profit and loss account. If at the balance sheet
date there is an indication that a previously assessed impairment loss
no longer exists, the recoverable amount is reassessed and the asset is
refl ected at the recoverable amount subject to a maximum of
depreciable historical cost had no impairment been recognised.
1.6 Investments
Investments that are readily realizable and intended to be held but not
more than a year are classified as current investments. All other
investments are classified as long term investments.
Long-term investments are carried at cost. Provision for diminution is
made to recognize a decline, other than temporary in value of long-term
investments and is determined separately for each individual
investment. Current investments are carried at lower of cost and fair
value, computed separately in respect of each category of investment.
1.7 Inventories
Inventories comprise all costs of purchase, conversion and other costs
incurred in bringing the inventories to their present location and
condition.
Raw materials are valued at the lower of cost and net realisable value.
Cost is determined on the basis of the weighted average method.
Work-in-progress and finished goods are valued at the lower of cost and
net realisable value. Excise duty is included in the value of finished
goods inventory. Cost is determined on a weighted average basis.
Custom duty on goods where title has passed to the Company is included
in the value of inventory.
The net realisable value of work-in-progress is determined with
reference to the selling price of related finished goods. Raw
materials held for the production of finished goods are not written
down below cost except in case where material prices have declined and
it is estimated that the cost of the finished product will exceed its
net realisable value.
1.8 Revenue recognition
Revenue from sale of products is recognised on transfer of all
significant risk and rewards of ownership of the products on to the
customers, which is generally on dispatch of goods. Sales are stated
exclusive of sales tax and net of trade and quantity discount.
Revenue from services is recognised as per the terms of the contract
with the customer using the proportionate completion method.
Income from fixed price construction contracts is recognised by
reference to the estimated overall profitability of the contract under
the percentage of completion method. Percentage of completion is
determined as a proportion of the costs incurred upto the reporting
date to the total estimated contract costs. Provision for expected loss
is recognized immediately when it is probable that the total estimated
contract costs will exceed total contract revenue.
Commission income is recognised when proof of shipment is received from
the supplier.
Dividend income is recognised when the right to receive the dividend is
established.
Interest income is recognised on the time proportion basis.
Export incentives receivable are accrued for when the right to receive
the credit is established and there is no significant uncertainty
regarding the ultimate collection of export proceeds.
1.9 Leases
Where the Company is the lessee:
Leases where the lessor effectively retains substantially all the risk
and benefits of ownership of the leased items are classified as
operating leases. Lease payments under an operating lease, are
recognised as an expense in the statement of profit and loss on a
straight line basis over the lease term.
1.9 Leases (Continued)
Where the Company is the lessor:
Assets subject to operating leases are included in fixed assets. Lease
income is recognised in the Profit and Loss Account on a straight-line
basis over the lease term. Costs, including depreciation are recognised
as an expense in the Profit and Loss Account. Initial direct costs such
as legal costs, brokerage costs, etc. are recognised immediately in the
Profit and Loss Account.
1.10 Employee benefits
(a) Short term employee benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short-term employee benefits. Benefits
such as salaries, wages and short term compensated absences, etc. and
the expected cost of ex-gratia is recognised in the period in which the
employee renders the related service.
(b) Post-employment benefits
(i) Defined Contribution Plans: The CompanyÃs approved superannuation
scheme and employee state insurance scheme are defined contribution
plans. The CompanyÃs contribution paid/ payable under the schemes is
recognised as expense in the profit and loss account during the period
in which the employee renders the related service.
(ii) Defined Benefit Plans: The CompanyÃs provident fund, gratuity,
pension and medical benefits schemes are defined benefit plans. The
present value of the obligation under such defined benefit plans is
determined based on actuarial valuation using the Projected Unit Credit
Method, which recognises each period of service as giving rise to
additional unit of employee benefit entitlement and measures each unit
separately to build up the final obligation.
The obligation is measured at the present value of the estimated future
cash fl ows. The discount rates used for determining the present value
of the obligation under defined benefit plans, is based on the market
yields on Government securities as at the balance sheet date.
Actuarial gains and losses are recognised immediately in the profit and
loss account.
1.11 Foreign currency transactions
The Company is exposed to currency fl uctuations on foreign currency
transactions. Transactions denominated in foreign currency are recorded
at the exchange rate prevailing on the date of transactions.
Exchange differences arising on foreign exchange transactions settled
during the year are recognized in the profit and loss account of the
year.
Translation
Monetary assets and liabilities in foreign currency, which are
outstanding as at the year-end, are translated at the year-end at the
closing exchange rate and the resultant exchange differences are
recognized in the profit and loss account. Non monetary items are
stated in the balance sheet using the exchange rate at the date of the
transaction.
Derivative instruments
The CompanyÃs exposure to foreign currency fluctuations relates to
foreign currency assets, liabilities and forecasted cash flows. 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 counterparty is a bank.
As per Accounting Standard (ÃASÃ) 11 Ã ÃThe Effects of Changes in
Foreign Exchange RatesÃ, the premium or the discount on forward
exchange contracts not relating to firm commitments or highly probable
forecast transactions and not intended for trading or speculation
purpose is amortized as expense or income over the life of the
contract. All other derivatives, which are not covered by AS 11, are
measured using the mark-to-market principle with the resulting gains/
losses thereon being recorded in the profit and loss account.
1.12 Taxation
Income-tax expense comprises current tax (i.e. amount of tax for the
year determined in accordance with the income- tax law), deferred tax
charge or credit (refl ecting the tax effect of timing differences
between accounting income and
1.12 Taxation (Continued)
taxable income for the year) and fringe benefit tax computed in
accordance with the relevant provisions of the Income Tax Act, 1961.
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the balance sheet date. Deferred
tax assets are recognised only to the extent there is reasonable
certainty that the asset can be realised in future; however, where
there is unabsorbed depreciation or carried forward loss under taxation
laws, deferred tax assets are recognised only if there is a virtual
certainty supported by convincing evidence of realisation of the
assets. Deferred tax assets are reviewed as at each balance sheet date
and written down or written-up to refl ect the amount that is
reasonable/virtually certain (as the case may be) to be realised.
Provision for fringe benefit tax (FBT) is made on the basis of
applicable FBT on the taxable value of specified expenses of the
Company as prescribed under the Income Tax Act, 1961.
1.13 Earnings per share
Basic and diluted earnings per share is computed by dividing the net
profit attributable to equity shareholders for the year, by the
weighted average number of equity shares outstanding during the year.
1.14 Provision
Provisions comprise liabilities of uncertain timing or amount.
Provisions are recognized when the Company recognizes it has a present
obligation as a result of past events, it is probable that an outfl ow
of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation.
Disclosures for contingent liability are made when there is a possible
or present obligation for which it is not probable that there will be
an outfl ow of resources. When there is a possible obligation or a
present obligation in respect of which the likelihood of outfl ow of
resources is remote, no disclosure is made.
Loss contingencies arising from claims, litigation, assessment, fines,
penalties, etc. are recorded when it is probable that a liability has
been incurred and the amount can be reasonably estimated.
Contingent assets are neither recognized nor disclosed in the financial
statements.
1.15 Cash and cash equivalents
Cash and cash equivalents include cash, cheques in hand, cash at bank
and short-term deposits with banks having maturity of three months or
less.