Accounting Policies of SKF India Ltd. Company
Mar 31, 2023
Background
SKF India Limited (the âCompany'') is a company, listed in India on recognised stock exchanges, limited by shares, incorporated and domiciled in India. The Company is a leading supplier of products, solutions & services within rolling bearing, seals, mechatronics, and lubrication systems. The Company''s manufacturing facilities are located at Pune, Bangalore & Haridwar.
1 Significant accounting policies
This note provides a list of the significant accounting policies adopted in the preparation of these financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.
i) Compliance with Ind AS
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.
ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
a) certain financial assets and liabilities that are measured at fair value;
b) assets held for sale - measured at fair value less cost to sell;
c) defined benefit plans - plan assets measured at fair value;
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of segments , has been identified as the Board of Directors .
1.3 Foreign currency translation
i) Functional and presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (âthe functional currency''). The Financial statements are presented in Indian Rupee (INR) which is the Company''s functional and presentation currency.
ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognised in profit or loss.
All other foreign exchange gains and losses are presented in the statement of profit and loss on a net basis within other expenses.
Revenue is recognised when a customer obtains control of a promised good or service and thus has the ability to direct the use and obtain the benefits from the good or service in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.
Revenue recognition policy
The Company has following streams of revenue:
(i) Sale of goods
(ii) Sale of Services
If a contract is separated into more than one performance obligation, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation.
Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of variable consideration) allocated to that performance obligation. The transaction price of goods sold and services rendered is net of variable consideration on account of various discounts and schemes offered by the Company as part of the contract.
The Company assesses for the timing of revenue recognition in case of each distinct performance obligation. The Company first assesses whether the revenue can be recognised over time as it performs if any of the following criteria is met:
(a) The customer simultaneously consumes the benefits as the Company performs, or
(b) The customer controls the work-in-progress, or
(c) The Company''s performance does not create an asset with alternative use to the Company and the Company has right to payment for performance completed till date.
I f none of the criteria above are met, the Company recognised revenue at a point-in-time. The point-intime is determined when the control of the goods or services is transferred which is generally determined based on when the significant risks and rewards of ownership are transferred to the customer. Apart from this, the Company also considers its present right to payment, the legal title to the goods, the physical possession and the customer acceptance in determining the point in time where control has been transferred.
Contracts are modified to account for changes in contract specifications and requirements. The Company considers contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of the contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognised as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.
Revenue recognised at a point-in-time :-For sale of products and sale of services, revenue is recognised at point in time when control of goods is transferred and service is rendered to the customer - based on delivery terms, payment terms, customer acceptance and other indicators of control as mentioned above.
The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences.
The current income tax is calculated on the basis of the tax laws enacted or substantively enacted by the end of the reporting period. Management periodically evaluates position taken in tax return under applicable
tax regulations which is subject to interpretation. It establishes appropriate tax provisions on likely tax liabilities for the accounting period.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are assumed to continue to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The Company holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method, less loss allowance.
Raw materials and stores, work in progress, traded and finished goods are stated at the lower of cost and net realisable value. Cost of raw materials and traded goods comprises cost of purchases. Cost of work-in-progress and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also include all other costs incurred in bringing the inventories to their present location and condition. Costs are assigned to individual items of inventory on the basis of first-in first-out basis. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
1.10 Financial assets and financial liabilities
Financial assets and financial liabilities are recognised in the balance sheets when the Company becomes a party to the contractual provisions of a financial instrument. Financial instruments are initially recorded at fair value, which is normally equal to transaction price. Transaction costs are included in the initial measurement of financial assets and liabilities that are not subsequently measured at fair
value through the income statement.
Financial assets categorised as loans and receivables are measured at amortised cost using the effective interest method. Impairment losses (primarily allowance for doubtful accounts) are recognised if management believes that sufficient objective evidence exists indicating that the asset may not be recovered. For disclosure purposes, fair values have been calculated using valuation techniques, mainly discounted cash flow analyses based on observable market data. For current receivables and liabilities (such as trade receivables and payables) the carrying amount is considered to correspond to fair value.
Where discounted cash flow techniques are used, the future cash flows are determined (if not stated explicit in the contract) based on the best assessment by management and discounted using the market interest rate for similar instruments. Financial liabilities are measured at amortised cost using the effective interest method.
Financial assets are derecognised when the contractual rights to the cash flow have expired or been transferred together with substantially all risks and rewards. Financial liabilities are derecognised when they are extinguished.
Investment in government securities that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment extension, call and similar options) but does not consider the expected credit losses.
1.11 Property, plant and equipment (PPE), Investment Properties and Intangible assets
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any
component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
The Company has adopted deemed cost of Property, plant and equipment (PPE) as its carrying value as per earlier GAAP.
Depreciation is calculated using the straight-line method to allocate the cost of the assets, net of their residual values, over the estimated useful lives.
The useful lives are:
|
Particulars |
Useful Life (in years) |
|
Buildings |
33 |
|
Plant and equipments |
5/10/14/16/20 |
|
Furniture and fixtures |
4 |
|
Office equipments |
3/4 |
|
Vehicles |
5 |
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss within other income.
The useful lives have been determined based on technical evaluation done by the management''s expert which are higher than those specified by Schedule II to the Companies Act, 2013, in order to reflect the actual usage of the assets. The residual values are not more than 5% of the original cost of the asset.
An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Company, is classified as investment property. Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalised to the asset''s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.
Investment properties are depreciated using the straight-line method over their estimated useful lives. Investment properties generally have a useful
life of 33 years. The useful life has been determined based on technical evaluation performed by the management''s expert.
I ntangible assets are stated at initial cost less any accumulated amortisation and any impairment. Amortisation is made on a straight line basis over the estimated useful lives and begins once the asset is ready for its intended use. The useful lives are based to a large extent on historical experience, the expected application, as well as other individual characteristics of the asset. The useful lives are:
⢠Software in use - 3 years
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Company. Contracts may contain both lease and non-lease components. The Company allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of real estate for which the Company is a lessee, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
⢠fixed payments (including in-substance fixed payments), less any lease incentives receivable
⢠variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date
⢠amounts expected to be payable by the Company under residual value guarantees
⢠the exercise price of a purchase option if the Company is reasonably certain to exercise that option, and
⢠payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option.
Lease payments to be made under reasonably certain extension options are also included
in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the lessee''s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Company:
⢠where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received
⢠uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by âSKF India Limited, which does not have recent third party financing, and
⢠makes adjustments specific to the lease, e.g. term, country, currency and security.
I f a readily observable amortising loan rate is available to the individual lessee (through recent financing or market data) which has a similar payment profile to the lease, then the Company use that rate as a starting point to determine the incremental borrowing rate.
The Company is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Variable lease payments that depend on sales are recognised in profit or loss in the period in which the condition that triggers those payments occurs.
Right-of-use assets are measured at cost comprising the following:
⢠the amount of the initial measurement of lease liability.
⢠any lease payments made at or before the commencement date less any lease incentives received
⢠any initial direct costs, and restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset''s useful life and the lease term on a straight-line basis. If the Company is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset''s useful life.
Payments associated with short-term leases of equipment and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
Lease income from operating leases where the Company is a lessor is recognised in income on a straight-line basis over the lease term. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognised as expense over the lease term on the same basis as lease income. The respective leased assets are included in the balance sheet based on their nature.
These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. The amounts are unsecured and are paid as per the terms of payments. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
Provisions for legal claims, service warranties, volume discounts and returns are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of management''s best estimate of the expenditure
required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
1.15 Post employment benefitsEmployee benefits
i) Short-term obligations
Liabilities for wages and salaries, including nonmonetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees'' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
ii) Other long-term employee benefit obligations
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
iii) Post-employment obligations
The Company operates the following postemployment schemes:
a) defined benefit plans such as gratuity and provident fund (for employees who are members of SKF India Limited Provident Fund Scheme)
b) defined contribution plans such as superannuation and provident fund (for other employees who are not members of SKF India Limited Provident Fund Scheme)
The liability or asset recognised in the balance sheet in respect of gratuity and provident fund is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
With respect to employees who are members of SKF India Limited Provident Fund Scheme (âthe Trust'') contribution for provident fund to the Trust is a defined benefit plan as the Company has an obligation to make good the shortfall, if any, between the return from investments made by the Trust and notified interest rate. Both the employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the employee''s salary. The rate at which the annual interest is payable to the beneficiaries by the trust is being administered by the government.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service cost.
Contributions to the Provident Fund and Superannuation Fund which are defined contribution schemes, are recognised as an expense in the Statement of Profit and Loss in the period in which the contribution is due. For employees other than members of SKF India Limited Provident Fund Scheme, both the Company''s and employees'' contribution is paid to Regional Provident Fund Commissioner (RPFC) on a monthly basis. The Company has no further payment obligations once the contributions have been paid.
iv) Bonus Plans
The Company recognises a liability and an expense for bonuses. The Company recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.
v) Employee Stock Awards:
Certain employees of the Company receive remuneration in the form of equity settled instruments given by the ultimate holding company (AB SKF), for rendering services over a defined vesting period. Equity instruments granted are measured by reference to the fair value of the instrument at the date of grant. The expense is recognised in the statement of profit and loss with a corresponding increase to the share based payment reserve, as a component of equity. The fair value determined at the grant date is expensed over the vesting period of the respective tranches of such grants. The stock compensation expense is determined based on the Company''s estimate of equity instruments that will eventually vest.
vi) Termination benefits
Voluntary Retirement Scheme costs are charged off to the Statement of Profit and Loss in the year in which they are incurred.
Equity shares are classified as equity I ncremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Provision is made for the amount of any dividend declared, being appropriately authorised and not paid as at the end of the reporting period.
The basic earnings per share is computed by dividing the net profit attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting period. Diluted EPS is computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity and equivalent diluted equity shares outstanding during the year, except where the result would be anti dilutive.
All amounts disclosed in the financial statements and notes have been rounded off to the nearest million as per the requirement of Schedule III, unless otherwise stated.
2 Significant accounting judgements, estimates and assumptions
The preparation of the Company''s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. This note provide an overview of the areas that involve a higher degree of judgement or complexity and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is mentioned below.
Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances.
2(A) Significant Judgement a) Tax Contingencies
The Company has received orders and notices from tax authorities in respect of direct taxes and indirect taxes. The outcome of these matters may have a material effect on the financial position, results of operations or cash flows. Management regularly analyzes current information about these matters and provides provisions for probable contingent losses including the estimate of legal expense to resolve the matters. In making the decision regarding the
need for loss provisions, management considers the degree of probability of an unfavourable outcome and the ability to make a sufficiently reliable estimate of the amount of loss. The filing of a suit or formal assertion of a claim against the Company or the disclosure of any such suit or assertions, does not automatically indicate that a provision for a loss may be appropriate.
2(B) Significant estimatea) Impairment of financial assets
The impairment provisions for financial assets are based on assumptions about risk of default and expected loss rates and timing of the cash flows. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Company''s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
b) Fair valuation of financial instruments
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See Note 33 for further disclosures.
The cost of the defined benefit gratuity plan, other retirement benefits, the present value of the gratuity obligation and other retirement benefit obligation are determined using 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, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. The parameter most subject to change is the
discount rate. In determining the appropriate discount rate, the management 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 Indian Assured Lives Mortality (2006-08) Ultimate. 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. Further details about gratuity obligations are given in Note 37(II).
d) Fair Valuation of Investment Property
The Company obtains independent valuations for its investment properties at least annually. The Valuation is performed using Income approach-Rent capitalisation method as per Ind AS 113- Fair value measurement
2(C) Recent Accounting Pronouncements
Ministry of Corporate Affairs (âMCAâ) notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. There are no new Standards that became effective during the year. Amendments that became effective during the year did not have any material effect. On March 31, 2023, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2023, as below: Ind AS 1 - Presentation of Financial Statements -
This amendment requires the entities to disclose their material accounting policies rather than their significant accounting policies.
Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors -
This amendment has introduced a definition of âaccounting estimates'' and included amendments to Ind AS 8 to help entities distinguish changes in accounting policies from changes in accounting estimates.
Ind AS 12 - Income Taxes -This amendment has narrowed the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences. The effective date for adoption of these amendments is annual periods beginning on or after April 1, 2023. The Company has evaluated the amendments and the impact of the amendments are insignificant in the financial statements.
Mar 31, 2022
BACKGROUND
SKF India Limited (the âCompany'') is a company, listed in India on recognised stock exchanges, limited by shares, incorporated and domiciled in India. The Company is a leading supplier of products, solutions & services within rolling bearing, seals, mechatronics, and lubrication systems. The Company''s manufacturing facilities are located at Pune, Bangalore & Haridwar.
1 SIGNIFICANT ACCOUNTING POLICIES
This note provides a list of the significant accounting policies adopted in the preparation of these financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.
i) Compliance with Ind AS
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.
ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
a) certain financial assets and liabilities that are measured at fair value;
b) assets held for sale - measured at fair value less cost to sell;
c) defined benefit plans - plan assets measured at fair value;
iii) New Amendments issued but not effective
The Ministry of Corporate Affairs (MCA) has wide notification dated 23 March 2022 notified Companies (Indian Accounting Standards) Amendment Rules, 2022 which amends certain accounting Standards, and are effective 1 April 2022. These amendments are not expected to have a material impact on the Company in the current or future reporting periods and on foreseeable future transactions.
iv) Amendments to Schedule III
The Ministry of Corporate Affairs (MCA) amended the Schedule III of the Companies Act, 2013 on 24 March 2021 to increase the transparency and provide additional disclosures to users of financial
statements. These amendments are effective from April 1, 2021. Consequent to the above, Company has made additional disclosures in these financial statements.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of segments , has been identified as the Board of Directors.
1.3 Foreign currency translation
i) Functional and presentation currency
I tems included in the financial statements of the company are measured using the currency of the primary economic environment in which the entity operates (âthe functional currency''). The Financial statements are presented in Indian Rupee (INR) which is the company''s functional and presentation currency.
ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognised in profit or loss.
All other foreign exchange gains and losses are presented in the statement of profit and loss on a net basis within other expenses.
Revenue is recognized when a customer obtains control of a promised good or service and thus has the ability to direct the use and obtain the benefits from the good or service in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.
Revenue recognition policy
The Company has following streams of revenue:
(i) Sale of goods
(ii) Sale of Services
If a contract is separated into more than one performance obligation, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation.
The Company assesses for the timing of revenue recognition in case of each distinct performance obligation. The Company first assesses whether the revenue can be recognized over time as it performs if any of the following criteria is met:
(a) The customer simultaneously consumes the benefits as the Company performs, or
(b) The customer controls the work-in-progress, or
(c) The Company''s performance does not create an asset with alternative use to the Company and the Company has right to payment for performance completed till date.
I f none of the criteria above are met, the Company recognized revenue at a point-in-time. The point-intime is determined when the control of the goods or services is transferred which is generally determined based on when the significant risks and rewards of ownership are transferred to the customer. Apart from this, the Company also considers its present right to payment, the legal title to the goods, the physical possession and the customer acceptance in determining the point in time where control has been transferred.
Contracts are modified to account for changes in contract specifications and requirements. The Company considers contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of the contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.
Revenue recognized at a point-in-time:-
For sale of products and sale of services, revenue is recognized at point in time when control of goods is transferred and service is rendered to the customer - based on delivery terms, payment terms, customer acceptance and other indicators of control as mentioned above.
The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences.
The current income tax is calculated on the basis of the tax laws enacted or substantively enacted by the end of the reporting period. Management periodically evaluates position taken in tax return under applicable tax regulations which is subject to interpretation. It establishes appropriate tax provisions on likely tax liabilities for the accounting period.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are assumed to continue to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The company holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method, less loss allowance.
Raw materials and stores, work in progress, traded and finished goods are stated at the lower of cost and net realisable value. Cost of raw materials and traded goods comprises cost of purchases. Cost of work-in-progress and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also include all other costs incurred in bringing the inventories to their present location and condition. Costs are assigned to individual items of inventory on the basis of first-in first-out basis. Costs of purchased inventory are determined after deducting rebates and discounts.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
1.10Financial assets and financial liabilities
Financial assets and financial liabilities are recognized in the balance sheets when the Company becomes a party to the contractual provisions of a financial instrument. Financial instruments are initially recorded at fair value, which is normally equal to transaction price. Transaction costs are included in the initial measurement of financial assets and liabilities that are not subsequently measured at fair value through the income statement.
Financial assets categorized as loans and receivables are measured at amortized cost using the effective interest method. Impairment losses (primarily allowance for doubtful accounts) are recognized if management believes that sufficient objective evidence exists indicating that the asset may not be recovered. For disclosure purposes, fair values have been calculated using valuation techniques, mainly discounted cash flow analyses based on observable market data. For current receivables and liabilities (such as trade receivables and payables) the carrying amount is considered to correspond to fair value.
Where discounted cash flow techniques are used, the future cash flows are determined (if not stated explicit in the contract) based on the best assessment by management and discounted using the market interest rate for similar instruments. Financial liabilities are measured at amortized cost using the effective interest method.
Financial assets are derecognized when the contractual rights to the cash flow have expired or been transferred together with substantially all risks and rewards. Financial liabilities are derecognized when they are extinguished.
I nvestment in government securities that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. When calculating the effective interest rate, the company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment extension, call and similar options) but does not consider the expected credit losses.
1.11 Property, plant and equipment (PPE), Investment Properties and Intangible assets
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
The company has adopted deemed cost of Property, plant and equipment (PPE) as its carrying value as per earlier GAAP.
Depreciation is calculated using the straight-line method to allocate the cost of the assets, net of their residual values, over the estimated useful lives.
The useful lives are:
|
Particulars |
Useful Life (in years) |
|
Buildings |
33 |
|
Plant and equipments |
5/ 10/ 14/ 16/ 20 |
|
Furniture and fixtures |
4 |
|
Office equipments |
3/ 4 |
|
Vehicles |
5 |
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss within other income.
The useful lives have been determined based on technical evaluation done by the management''s expert which are higher than those specified by Schedule II to the Companies Act, 2013, in order to reflect the actual usage of the assets. The residual values are not more than 5% of the original cost of the asset.
An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Investment Properties
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied
by the company, is classified as investment property. Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalised to the asset''s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.
Investment properties are depreciated using the straight-line method over their estimated useful lives. Investment properties generally have a useful life of 33 years. The useful life has been determined based on technical evaluation performed by the management''s expert.
Intangible assets
Intangible assets are stated at initial cost less any accumulated amortization and any impairment. Amortization is made on a straight line basis over the estimated useful lives and begins once the asset is ready for its intended use. The useful lives are based to a large extent on historical experience, the expected application, as well as other individual characteristics of the asset. The useful lives are:
⢠Software in use - 3 years
a) As lessee
Leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Company. Contracts may contain both lease and nonlease components. The Company allocates the consideration in the contract to the lease and nonlease components based on their relative standalone prices. However, for leases of real estate for which the Company is a lessee, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
⢠fixed payments (including in-substance fixed payments), less any lease incentives receivable
⢠variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date
⢠amounts expected to be payable by the Company under residual value guarantees
⢠the exercise price of a purchase option if the Company is reasonably certain to exercise that option, and
⢠payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the lessee''s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Company:
⢠where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received
⢠uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by âSKF India Limited, which does not have recent third party financing, and
⢠makes adjustments specific to the lease, e.g. term, country, currency and security.
If a readily observable amortising loan rate is available to the individual lessee (through recent financing or market data) which has a similar payment profile to the lease, then the Company use that rate as a starting point to determine the incremental borrowing rate.
The Company is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take
effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Variable lease payments that depend on sales are recognised in profit or loss in the period in which the condition that triggers those payments occurs.
Right-of-use assets are measured at cost comprising the following:
⢠the amount of the initial measurement of lease liability.
⢠any lease payments made at or before the commencement date less any lease incentives received
⢠any initial direct costs, and restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset''s useful life and the lease term on a straight-line basis. If the Company is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset''s useful life.
Payments associated with short-term leases of equipment and all leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
b) As a lessor
Lease income from operating leases where the Company is a lessor is recognised in income on a straight-line basis over the lease term. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognised as expense over the lease term on the same basis as lease income. The respective leased assets are included in the balance sheet based on their nature.
These amounts represent liabilities for goods and services provided to the company prior to the end of financial year which are unpaid. The amounts are unsecured and are paid as per the terms of payments.
Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income.
Provisions for legal claims, service warranties, volume discounts and returns are recognised when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
Employee benefits
i) Short-term obligations
Liabilities for wages and salaries, including nonmonetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees'' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
ii) Other long-term employee benefit obligations
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
iii) Post-employment obligations
The company operates the following postemployment schemes:
a) defined benefit plans such as gratuity and provident fund (for employees who are members of SKF India Limited Provident Fund Scheme)
b) defined contribution plans such as
superannuation and provident fund (for other employees who are not members of SKF India Limited Provident Fund Scheme)
Defined Benefit Plans
The liability or asset recognised in the balance sheet in respect of gratuity and provident fund is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
With respect to employees who are members of SKF India Limited Provident Fund Scheme (âthe Trust'') contribution for provident fund to the Trust is a defined benefit plan as the Company has an obligation to make good the shortfall, if any, between the return from investments made by the Trust and notified interest rate. Both
the employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the employee''s salary. The rate at which the annual interest is payable to the beneficiaries by the trust is being administered by the government.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service cost.
Defined contribution plans
Contributions to the Provident Fund and Superannuation Fund which are defined contribution schemes, are recognised as an expense in the Statement of Profit and Loss in the period in which the contribution is due. For employees other than members of SKF India Limited Provident Fund Scheme, both the Company''s and employees'' contribution is paid to Regional Provident Fund Commissioner (RPFC) on a monthly basis. The Company has no further payment obligations once the contributions have been paid.
iv) Bonus Plans
The Company recognises a liability and an expense for bonuses. The company recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.
v) Termination benefits
Voluntary Retirement Scheme costs are charged off to the Statement of Profit and Loss in the year in which they are incurred.
Equity shares are classified as equity
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Provision is made for the amount of any dividend declared, being appropriately authorised and not paid as at the end of the reporting period.
The basic earnings per share is computed by dividing the net profit attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting period. Diluted EPS is computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity and equivalent diluted equity shares outstanding during the year, except where the result would be anti dilutive.
Borrowing costs are expensed in the period in which they are incurred.
All amounts disclosed in the financial statements and notes have been rounded off to the nearest million as per the requirement of Schedule III, unless otherwise stated.
2 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND Assumptions
The preparation of the Company''s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. This note provide an overview of the areas that involve a higher degree of judgement or complexity and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is mentioned below.
Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the company and that are believed to be reasonable under the circumstances.
a) Tax Contingencies
The Company has received orders and notices from tax authorities in respect of direct taxes and indirect taxes. The outcome of these matters may have a material effect on the financial position, results of operations or cash flows. Management regularly analyzes current information about these matters and provides provisions for probable contingent losses including the estimate of legal expense to resolve the matters. In making the decision regarding the need for loss provisions, management considers the degree of probability of an unfavourable outcome and the ability to make a sufficiently reliable estimate of the amount of loss. The filing of a suit or formal assertion of a claim against the Company or the disclosure of any such suit or assertions, does not automatically indicate that a provision for a loss may be appropriate.
a) impairment of financial assets
The impairment provisions for financial assets disclosed under note 34C are based on assumptions about risk of default and expected loss rates and timing of the cash flows. The company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the company''s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
b) Fair valuation of financial instruments
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See Note 33 for further disclosures.
c) Defined benefit plan
The cost of the defined benefit gratuity plan, other retirement benefits, the present value of the gratuity obligation and other retirement benefit obligation are determined using 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 longterm nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate, the management considers the interest rates of government bonds in currencies consistent with the currencies of the postemployment benefit obligation.
The mortality rate is based on Indian Assured Lives Mortality (2006-08) Ultimate. 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. Further details about gratuity obligations are given in Note 37(II).
d) Fair Valuation of investment Property
The Company obtains independent valuations for its investment properties at least annually. The Valuation is performed using Income approach-Rent capiltalisation method as per Ind AS 113- Fair value measurement
Mar 31, 2019
1 SIGNIFICANT ACCOUNTING POLICIES
This note provides a list of the significant accounting policies adopted in the preparation of these financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.
1.1 Basis of preparation
i) Compliance with Ind AS
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.
ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
a) certain financial assets and liabilities that are measured at fair value;
b) assets held for sale - measured at fair value less cost to sell;
c) defined benefit plans - plan assets measured at fair value;
1.2 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of segments, has been identified as the Board of Directors
1.3 Foreign currency translation
i) Functional and presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (âthe functional currencyâ). The Financial statements are presented in Indian Rupee (INR) which is the Companyâs functional and presentation currency.
ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognized in profit or loss.
All other foreign exchange gains and losses are presented in the statement of profit and loss on a net basis within other income.
1.4 Revenue recognition
Ind AS 115 - Revenue from Contracts with Customers, mandatory for reporting periods beginning on or after April 1, 2018, replaces existing revenue recognition requirements. Under the modified retrospective approach, there were no material adjustments required to the retained earnings as at April 1, 2018. Also, the applicability of Ind AS 115 did not have any material adjustments on recognition and measurement of revenue and related items in the financial statements of the Company.
The new standard deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entityâs contracts with customers. Revenue is recognized when a customer obtains control of a promised good or service and thus has the ability to direct the use and obtain the benefits from the good or service in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.
A new five-step process must be applied before revenue can be recognized:
(i) identify contracts with customers
(ii) identify the separate performance obligation
(iii) determine the transaction price of the contract
(iv) allocate the transaction price to each of the separate performance obligations, and
(v) recognize the revenue as each performance obligation is satisfied.
Revenue recognition policy
The Company has following streams of revenue:
(i) Sale of goods
(ii) Sale of Services
If a contract is separated into more than one performance obligation, the Company allocates the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation.
The Company assesses for the timing of revenue recognition in case of each distinct performance obligation. The Company first assesses whether the revenue can be recognized over time as it performs if any of the following criteria is met:
(a) The customer simultaneously consumes the benefits as the Company performs, or
(b) The customer controls the work-in-progress, or
(c) The Companyâs performance does not create an asset with alternative use to the Company and the Company has right to payment for performance completed till date.
If none of the criteria above are met, the Company recognized revenue at a point-in-time. The point-in-time is determined when the control of the goods or services is transferred which is generally determined based on when the significant risks and rewards of ownership are transferred to the customer. Apart from this, the Company also considers its present right to payment, the legal title to the goods, the physical possession and the customer acceptance in determining the point in time where control has been transferred.
Contracts are modified to account for changes in contract specifications and requirements. The Company considers contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of the contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.
Revenue recognized at a point-in-time :-
For sale of products and sale of services, revenue is recognized at point in time when control of goods is transferred and service is rendered to the customer - based on delivery terms, payment terms, customer acceptance and other indicators of control as mentioned above.
1.5 Government grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions.
1.6 Income tax
The income tax expense or credit for the period is the tax payable on the current periodâs taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are assumed to continue to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred tax assets are recognized for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Current and deferred tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
1.7 Leases
As a lessee
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases.
As a lessor
Lease income from operating leases where the Company is a lessor is recognized in income on a straight-line basis over the lease term unless the receipts are structured to increase in line with expected general inflation to compensate for the expected inflationary cost increases.
The respective leased assets are included in the balance sheet based on their nature.
1.8 Impairment of assets
Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the assetâs carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assetâs fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
1.9 Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other shortterm, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
1.10 Trade receivables
Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.
1.11 Inventories
Raw materials and stores, work in progress, traded and finished goods are stated at the lower of cost and net realisable value. Cost of raw materials and traded goods comprises cost of purchases. Cost of work-in-progress and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also include all other costs incurred in bringing the inventories to their present location and condition. Costs are assigned to individual items of inventory on the basis of first-in first-out basis. Costs of purchased inventory are determined after deducting rebates and discounts.
1.12 Financial assets and financial liabilities
Financial assets and financial liabilities are recognized in the balance sheets when the Company becomes a party to the contractual provisions of a financial instrument. Financial instruments are initially recorded at fair value, which is normally equal to transaction price. Transaction costs are included in the initial measurement of financial assets and liabilities that are not subsequently measured at fair value through the income statement.
Financial assets categorized as loans and receivables are measured at amortized cost using the effective interest method. Impairment losses (primarily allowance for doubtful accounts) are recognized if management believes that sufficient objective evidence exists indicating that the asset may not be recovered. For disclosure purposes, fair values have been calculated using valuation techniques, mainly discounted cash flow analyses based on observable market data. For current receivables and liabilities (such as trade receivables and payables) the carrying amount is considered to correspond to fair value.
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Where discounted cash flow techniques are used, the future cash flows are determined (if not stated explicit in the contract) based on the best assessment by management and discounted using the market interest rate for similar instruments. Financial liabilities are measured at amortized cost using the effective interest method.
Financial assets are derecognized when the contractual rights to the cash flow have expired or been transferred together with substantially all risks and rewards. Financial liabilities are derecognized when they are extinguished.
Investment in government securities that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Interest income from these financial assets is included in finance income using the effective interest rate method. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment extension, call and similar options) but does not consider the expected credit losses.
1.13 Property, plant and equipment (PPE), Investment Properties and Intangible assets
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the assetâs carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
The Company has adopted deemed cost of Property, plant and equipment (PPE) as its carrying value as per earlier GAAP.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss within other income.
The useful lives are reviewed by the management at each Balance Sheet date and revised, if appropriate. In case of a revision, the unamortized depreciable amount is charged over the revised remaining useful life.
Investment Properties
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Company, is classified as investment property. Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalized to the assetâs carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognized.
Investment properties are depreciated using the straight-line method over their estimated useful lives. Investment properties generally have a useful life of 33 years. The useful life has been determined based on technical evaluation performed by the managementâs expert.
Intangible assets
Intangible assets are stated at initial cost less any accumulated amortization and any impairment.
Amortization is made on a straight line basis over the estimated useful lives and begins once the asset is ready for its intended use. The useful lives are based to a large extent on historical experience, the expected application, as well as other individual characteristics of the asset. The useful lives are:
- Software in use - 3 years
1.14 Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. The amounts are unsecured and are paid as per the terms of payments. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized initially at their fair value and subsequently measured at amortized cost using the effective interest method.
1.15 Borrowings
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss as other income.
1.16 Provisions
Provisions for legal claims, service warranties, volume discounts and returns are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognized for future operating losses.
Provisions are measured at the present value of managementâs best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognized as interest expense.
1.17 Post employment benefits Employee benefits
i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognized in respect of employeesâ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
ii) Other long-term employee benefit obligations
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognized in profit or loss.
iii) Post-employment obligations
The company operates the following post-employment schemes:
a) defined benefit plans such as gratuity and provident fund (for employees who are members of SKF India Limited Provident Fund Scheme)
b) defined contribution plans such as superannuation and provident fund (for other employees who are not members of SKF India Limited Provident Fund Scheme)
Defined Benefit Plans
The liability or asset recognized in the balance sheet in respect of gratuity and provident fund is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
With respect to employees who are members of SKF India Limited Provident Fund Scheme (âthe Trustâ) contribution for provident fund to the Trust is a defined benefit plan as the Company has an obligation to make good the shortfall, if any, between the return from investments made by the Trust and notified interest rate. Both the employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the employeeâs salary. The rate at which the annual interest is payable to the beneficiaries by the trust is being administered by the government.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in profit or loss as past service cost.
Defined contribution plans
Contributions to the Provident Fund and Superannuation Fund which are defined contribution schemes, are recognized as an expense in the Statement of Profit and Loss in the period in which the contribution is due. For employees other than members of SKF India Limited Provident Fund Scheme, both the Companyâs and employeesâ contribution is paid to Regional Provident Fund Commissioner (RPFC) on a monthly basis. The Company has no further payment obligations once the contributions have been paid.
iv) Bonus Plans
The Company recognizes a liability and an expense for bonuses. The company recognizes a provision where contractually obliged or where there is a past practice that has created a constructive obligation.
v) Termination benefits
Voluntary Retirement Scheme costs are charged off to the Statement of Profit and Loss in the year in which they are incurred.
1.18 Contributed Equity
Equity shares are classified as equity Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
1.19 Dividends
Provision is made for the amount of any dividend declared, being appropriately authorized and not paid as at the end of the reporting period.
1.20 Earnings per share
The basic earnings per share is computed by dividing the net profit attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting period. Diluted EPS is computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity and equivalent diluted equity shares outstanding during the year, except where the result would be anti dilutive.
1.21 Rounding of amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest million as per the requirement of Schedule III, unless otherwise stated.
2 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Companyâs financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. This note provide an overview of the areas that involve a higher degree of judgement or complexity and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is mentioned below.
Estimates and judgements are continually evaluated.
They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances.
2(A) Significant Judgement
a) Legal Contingency
The Company has received orders and notices from tax authorities in respect of direct taxes and indirect taxes.
The outcome of these matters may have a material effect on the financial position, results of operations or cash flows. Management regularly analyzes current information about these matters and provides provisions for probable contingent losses including the estimate of legal expense to resolve the matters. In making the decision regarding the need for loss provisions, management considers the degree of probability of an unfavorable outcome and the ability to make a sufficiently reliable estimate of the amount of loss. The filing of a suit or formal assertion of a claim against the Company or the disclosure of any such suit or assertions, does not automatically indicate that a provision of a loss may be appropriate.
2(B) Significant estimate
a) Impairment of financial assets
The impairment provisions for financial assets disclosed under note 34C are based on assumptions about risk of default and expected loss rates and timing of the cash flows. The company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Companyâs past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
b) Fair valuation of financial instruments
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See Note 33 for further disclosures.
c) Defined benefit plan
The cost of the defined benefit gratuity plan, other retirement benefits, the present value of the gratuity obligation and other retirement benefit obligation are determined using 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, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate, the management 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 Indian Assured Lives Mortality (2006-08) Ultimate. 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. Further details about gratuity obligations are given in Note 38(H).
d) Fair Valuation of Investment Property
The Company obtains independent valuations for its investment properties at least annually. The Valuation is performed using Income approach-Rent capiltalization method as per Ind AS 113- Fair value measurement.
Mar 31, 2018
Background
SKF India Limited is a Company, listed in India on recognized stock exchange, limited by shares, incorporated and domiciled in India . The Company is leading supplier of products, solutions & services within rolling bearing, seals, mechatronics, and lubrication system. The Company''s manufacturing facility is located at Pune, Bangalore & Haridwar.
1 Significant accounting policies
This note provides a list of the significant accounting policies adopted in the preparation of these financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.
1.1 Basis of preparation
i) Compliance with Ind AS
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.
ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
a) certain financial assets and liabilities that are measured at fair value;
b) assets held for sale - measured at fair value less cost to sell;
c) defined benefit plans - plan assets measured at fair value;
1.2 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of segments, has been identified as the Board of Directors .
1.3 Foreign currency translation
i) Functional and presentation currency
Items included in the financial statements of the company are measured using the currency of the primary economic environment in which the entity operates (âthe functional currency''). The Financial statements are presented in Indian Rupee (INR) which is the company''s functional and presentation currency.
ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognized in profit or loss.
All other foreign exchange gains and losses are presented in the statement of profit and loss on a net basis within other income.
1.4 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are inclusive of excise duty up to June 30, 2017 and exclusive of Goods and Service Tax and net of returns, trade allowances, rebates.
Revenue consists of sales of products and services in the normal course of business. Service revenues are defined as business activities, billed to a customer, that do not include physical products or where the supply of any product is subsidiary to the fulfillment of the contract. Sales are recorded net of allowances for volume rebates and sales returns. Accruals for such allowances are recorded at the time of revenue recognition.
Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer. Revenue from the sale of goods and services is generally recognized when:
a) the revenue can be measured reliably,
b) the collection of the amounts due is reasonably assured
c) any costs in respect of the sale are identifiable and can be measured reliably.
Collectability is assessed based primarily on the credit worthiness of the customer as determined by credit limit control and approval procedures, as well as the customer''s payment history.
Revenues from service and/or maintenance contracts where the service is delivered to the customer over time is accounted for on a straight-line basis over the duration of the contract or as per the actual level of completion. Any anticipated losses on contracts are recognized in full in the period in which losses become probable and estimable.
1.5 Government grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the company will comply with all attached conditions.
1.6 Income tax
The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are assumed to continue to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred tax assets are recognized for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Current and deferred tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
1.7 Leases
As a lessee
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the company as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the less or) are charged to profit or loss on a straight-line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the less orâs expected inflationary cost increases.
As a less or
Lease income from operating leases where the company is a less or is recognized in income on a straight-line basis over the lease term unless the receipts are structured to increase in line with expected general inflation to compensate for the expected inflationary cost increases. The respective leased assets are included in the balance sheet based on their nature.
1.8 Impairment of assets
Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
1.9 Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
1.10 Trade receivables
Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.
1.11 Inventories
âRaw materials and stores, work in progress, traded and finished goods are stated at the lower of cost and net realizable value. Cost of raw materials and traded goods comprises cost of purchases. Cost of work-in-progress and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also include all other costs incurred in bringing the inventories to their present location and condition. Costs are assigned to individual items of inventory on the basis of first-in first-out basis. Costs of purchased inventory are determined after deducting rebates and discounts.â
1.12 Financial assets and financial liabilities
Financial assets and financial liabilities are recognized in the balance sheets when the Company becomes a party to the contractual provisions of a financial instrument. Financial instruments are initially recorded at fair value, which is normally equal to transaction price. Transaction costs are included in the initial measurement of financial assets and liabilities that are not subsequently measured at fair value through the income statement.
Financial assets categorized as loans and receivables are measured at amortized cost using the effective interest method. Impairment losses (primarily allowance for doubtful accounts) are recognized if management believes that sufficient objective evidence exists indicating that the asset may not be recovered. For disclosure purposes, fair values have been calculated using valuation techniques, mainly discounted cash flow analyses based on observable market data. For current receivables and liabilities (such as trade receivables and payables) the carrying amount is considered to correspond to fair value.
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Where discounted cash flow techniques are used, the future cash flows are determined (if not stated explicit in the contract) based on the best assessment by management and discounted using the market interest rate for similar instruments. Financial liabilities are measured at amortized cost using the effective interest method.
Financial assets are derecognized when the contractual rights to the cash flow have expired or been transferred together with substantially all risks and rewards. Financial liabilities are derecognized when they are extinguished.
Investment in government securities that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Interest income from these financial assets is included in finance income using the effective interest rate method. When calculating the effective interest rate, the company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment extension, call and similar options) but does not consider the expected credit losses.
1.13 Property, plant and equipment (PPE), Investment Properties and Intangible assets
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
The Company has adopted deemed cost of Property, plant and equipment (PPE) as its carrying value as per earlier GAAP.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss within other income.
The useful lives are reviewed by the management at each Balance Sheet date and revised, if appropriate. In case of a revision, the unamortized depreciable amount is charged over the revised remaining useful life.
Investment Properties
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the company, is classified as investment property. Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalised to the asset''s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognized.
Investment properties are depreciated using the straight-line method over their estimated useful lives. Investment properties generally have a useful life of 33 years. The useful life has been determined based on technical evaluation performed by the management''s expert.
Intangible assets
Intangible assets are stated at initial cost less any accumulated amortization and any impairment. Amortization is made on a straight line basis over the estimated useful lives and begins once the asset is ready for its intended use. The useful lives are based to a large extent on historical experience, the expected application, as well as other individual characteristics of the asset. The useful lives are:
- Software in use - 3 years
1.14 Trade and other payables
These amounts represent liabilities for goods and services provided to the company prior to the end of financial year which are unpaid. The amounts are unsecured and are paid as per the terms of payments. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized initially at their fair value and subsequently measured at amortized cost using the effective interest method.
1.15 Borrowings
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss as other income.
1.16 Provisions
Provisions for legal claims, service warranties, volume discounts and returns are recognized when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognized for future operating losses.
Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognized as interest expense.
1.17 Post employment benefits Employee benefits
i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognized in respect of employees'' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
ii) Other long-term employee benefit obligations
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognized in profit or loss.
iii) Post-employment obligations
The company operates the following post-employment schemes:
a) defined benefit plans such as gratuity and provident fund (for employees who are members of SKF India Limited Provident Fund Scheme)
b) defined contribution plans such as superannuation and provident fund (for other employees who are not members of SKF India Limited Provident Fund Scheme)
Defined Benefit Plans
The liability or asset recognized in the balance sheet in respect of gratuity and provident fund is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
With respect to employees who are members of SKF India Limited Provident Fund Scheme (âthe Trust'') contribution for provident fund to the Trust is a defined benefit plan as the Company has an obligation to make good the shortfall, if any, between the return from investments made by the Trust and notified interest rate. Both the employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the employee''s salary. The rate at which the annual interest is payable to the beneficiaries by the trust is being administered by the government.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in profit or loss as past service cost.
Defined contribution plans
Contributions to the Provident Fund and Superannuation Fund which are defined contribution schemes, are recognized as an expense in the Statement of Profit and Loss in the period in which the contribution is due. For employees other than members of SKF India Limited Provident Fund Scheme, both the Company''s and employees'' contribution is paid to Regional Provident Fund Commissioner (RPFC) on a monthly basis. The Company has no further payment obligations once the contributions have been paid.
iv) Bonus Plans
The Company recognizes a liability and an expense for bonuses. The company recognizes a provision where contractually obliged or where there is a past practice that has created a constructive obligation.
v) Termination benefits
Voluntary Retirement Scheme costs are charged off to the Statement of Profit and Loss in the year in which they are incurred.
1.18 Contributed Equity
Equity shares are classified as equity
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
1.19 Dividends
Provision is made for the amount of any dividend declared, being appropriately authorized and not paid as at the end of the reporting period.
1.20 Earnings per share
The basic earnings per share is computed by dividing the net profit attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting period. Diluted EPS is computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity and equivalent diluted equity shares outstanding during the year, except where the result would be anti dilutive.
1.21 Rounding of amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest million as per the requirement of Schedule III, unless otherwise stated.
2 Significant accounting judgments, estimates and assumptions
The preparation of the Company''s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. This note provide an overview of the areas that involve a higher degree of judgment or complexity and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgments is mentioned below.
Estimates and judgments are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the company and that are believed to be reasonable under the circumstances.
2(A) Significant Judgment a) Legal Contingency
The Company has received orders and notices from tax authorities in respect of direct taxes and indirect taxes. The outcome of these matters may have a material effect on the financial position, results of operations or cash flows. Management regularly analyzes current information about these matters and provides provisions for probable contingent losses including the estimate of legal expense to resolve the matters. In making the decision regarding the need for loss provisions, management considers the degree of probability of an unfavorable outcome and the ability to make a sufficiently reliable estimate of the amount of loss. The filing of a suit or formal assertion of a claim against the Company or the disclosure of any such suit or assertions, does not automatically indicate that a provision of a loss may be appropriate.
2(B) Significant estimate
a) Impairment of financial assets
The impairment provisions for financial assets disclosed under note 35C are based on assumptions about risk of default and expected loss rates and timing of the cash flows. The company uses judgment in making these assumptions and selecting the inputs to the impairment calculation, based on the company''s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
b) Fair valuation of financial instruments
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See Note 34 for further disclosures.
c) Defined benefit plan
The cost of the defined benefit gratuity plan, other retirement benefits, the present value of the gratuity obligation and other retirement benefit obligation are determined using 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, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. The parameter most subject to change is the discount rate. In determining the appropriate discount rate, the management 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 Indian Assured Lives Mortality (2006-08) Ultimate. 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. Further details about gratuity obligations are given in Note 38(II).
d) Fair Valuation of Investment Property
The Company obtains independent valuations for its investment properties at least annually. The Valuation is performed using Income approach-Rent capitalization method as per Ind AS 113- Fair value measurement.
The Company has only one class of equity shares having a par value of '' 10 per share. Each shareholder is entitled to one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation of the Company, the equity shareholders are eligible to receive remaining assets of the Company, after distribution of all preferential amounts, in the proportion to their shareholding.
Buy Back of shares
Pursuant to the Regulations 29(1)(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and approval of the Board of Directors for buy-back of up to 2,600,000 equity shares of the Company for an aggregate amount not exceeding '' 3900 million, the Company bought back 1,394,575 equity shares which were tendered by eligible shareholders and extinguished the equity shares bought on June 21, 2017.
The Company has not allotted any bonus shares during 5 years immediately preceding March 31, 2018.
(i) Provision for disputed statutory and other matters: This represents provisions made for probable liabilities/ claims arising out of pending disputes/litigations with various regulatory authorities and those arising out of commercial transactions with vendors/ others. Above provisions are affected by numerous uncertainties and management has taken all efforts to make a best estimate. Timing of outflow of resources will depend upon timing of decision of cases.
(ii) Provision for warranties: A provision is estimated for expected warranty claims in respect of products sold during the year on the basis of a technical evaluation and past experience regarding failure trends of products and costs of rectification or replacement. The timing and amount of cash flows that will arise from these matters will be determined at the time of receipt of claims.
(iii) The provision for other obligations is on account of coupons given on products sold by the Company and other retailers and distributors incentive schemes. The provision for coupons is based on the historical data/ estimated figures. The timing and amount of the cash flows that will arise will be determined at the time of receipt of claims from customers, which is generally upto 18 months.
The fair values of all financial instruments carried at amortized cost are not materially different from their carrying amounts since they are either short-term in nature or the interest rate applicable are equal to the current market rate of interest.
There are no financial instruments measured under the category of Fair value through Profit and Loss account and Fair value through OCI.
i) Fair value hierarchy
This section explains the judgments and estimates made in determining the fair values of the financial instruments that are measured at amortized cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level are as follows:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3 - If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
(ii) Valuation processes
The Company performs the valuations of financial assets and liabilities required for financial reporting purposes, including level
3 fair values.
Mar 31, 2017
BACKGROUND
SKF India Limited, listed in India on recognized stock exchange, limited by shares, incorporated and domiciled in India . The Company is leading supplier of products, solutions & services within rolling bearing, seals, mechatronics, and lubrication system. The Company''s manufacturing facility is located at Pune, Bangalore & Haridwar.
1 SIGNIFICANT ACCOUNTING POLICIES
This note provides a list of the significant accounting policies adopted in the preparation of these financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.
1.1 Basis of preparation
i) Compliance with Ind AS
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.
The financial statements up to year ended 31 March 2016 were prepared in accordance with the accounting standards notified under Companies (Accounting Standard) Rules, 2006 (as amended) and other relevant provisions of the Act.
These financial statements are the first financial statements of the company under Ind AS. Refer 40 for an explanation of how the transition from previous GAAP to Ind AS has affected the company''s financial position, financial performance and cash flows.
ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
a) certain financial assets and liabilities that are measured at fair value;
b) assets held for sale - measured at fair value less cost to sell;
c) defined benefit plans - plan assets measured at fair value;
iii) Consequent to change in the financial year of the Company from January - December to April - March with effect from previous year, the previous year''s financial statements are for 15 months from January 1, 2015 to March 31, 2016. The current year''s amounts relate to the 12 months ended March 31, 2017. In view of the above, the current year''s amounts are accordingly not comparable to those of the previous year.
1.2 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of segments , has been identified as the Board of Directors .
1.3 Foreign currency translation
i) Functional and presentation currency
Items included in the financial statements of the company are measured using the currency of the primary economic environment in which the entity operates (âthe functional currency''). The Financial statements are presented in Indian Rupee (INR) which is the company''s functional and presentation currency.
ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognized in profit or loss.
All other foreign exchange gains and losses are presented in the statement of profit and loss on a net basis within other income.
1.4 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are inclusive of excise duty and net of returns, trade allowances, rebates and value added taxes.
Revenue consists of sales of products and services in the normal course of business. Service revenues are defined as business activities, billed to a customer, that do not include physical products or where the supply of any product is subsidiary to the fulfillment of the contract. Sales are recorded net of allowances for volume rebates and sales returns. Accruals for such allowances are recorded at the time of revenue recognition.
Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer. Revenue from the sale of goods and services is generally recognized when:
a) the revenue can be measured reliably,
b) the collection of the amounts due is reasonably assured
c) any costs in respect of the sale are identifiable and can be measured reliably.
Collectability is assessed based primarily on the credit worthiness of the customer as determined by credit limit control and approval procedures, as well as the customer''s payment history.
Revenues from service and/or maintenance contracts where the service is delivered to the customer over time is accounted for on a straight-line basis over the duration of the contract or as per the actual level of completion. Any anticipated losses on contracts are recognized in full in the period in which losses become probable and estimable.
1.5 Government grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the company will comply with all attached conditions.
1.6 Income tax
The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are assumed to continue to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred tax assets are recognized for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Current and deferred tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
1.7 Leases
As a lessee
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the company as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the less or) are charged to profit or loss on a straight-line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the less orâs expected inflationary cost increases.
As a less or
Lease income from operating leases where the company is a less or is recognized in income on a straight-line basis over the lease term unless the receipts are structured to increase in line with expected general inflation to compensate for the expected inflationary cost increases. The respective leased assets are included in the balance sheet based on their nature.
1.8 Impairment of assets
Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
1.9 Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
1.10 Trade receivables
Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.
1.11 Inventories
Raw materials and stores, work in progress, traded and finished goods are stated at the lower of cost and net realizable value. Cost of raw materials and traded goods comprises cost of purchases. Cost of work-in-progress and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also include all other costs incurred in bringing the inventories to their present location and condition. Costs are assigned to individual items of inventory on the basis of first-in first-out basis. Costs of purchased inventory are determined after deducting rebates and discounts.
1.12 Financial assets and financial liabilities
Financial assets and financial liabilities are recognized in the balance sheets when the Company becomes a party to the contractual provisions of a financial instrument. Financial instruments are initially recorded at fair value, which is normally equal to transaction price. Transaction costs are included in the initial measurement of financial assets and liabilities that are not subsequently measured at fair value through the income statement.
Financial assets categorized as loans and receivables are measured at amortized cost using the effective interest method. Impairment losses (primarily allowance for doubtful accounts) are recognized if management believes that sufficient objective evidence exists indicating that the asset may not be recovered. For disclosure purposes, fair values have been calculated using valuation techniques, mainly discounted cash flow analyses based on observable market data. For current receivables and liabilities (such as trade receivables and payables) the carrying amount is considered to correspond to fair value.
Where discounted cash flow techniques are used, the future cash flows are determined (if not stated explicit in the contract) based on the best assessment by management and discounted using the market interest rate for similar instruments. Financial liabilities are measured at amortized cost using the effective interest method.
Financial assets are derecognized when the contractual rights to the cash flow have expired or been transferred together with substantially all risks and rewards. Financial liabilities are derecognized when they are extinguished.
Investment in government securities that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Interest income from these financial assets is included in finance income using the effective interest rate method. When calculating the effective interest rate, the company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment extension, call and similar options) but does not consider the expected credit losses.
1.13 Property, plant and equipment (PPE), Investment Properties and Intangible assets
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
On transition to Ind AS, the company has elected to continue with the carrying value of all of its property, plant and equipment etc recognized as at 1 January 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss within other income.
The useful lives are reviewed by the management at each Balance Sheet date and revised, if appropriate. In case of a revision, the unamortized depreciable amount is charged over the revised remaining useful life.
Investment Properties
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the company, is classified as investment property. Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalized to the asset''s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognized.
Investment properties are depreciated using the straight-line method over their estimated useful lives. Investment properties generally have a useful life of 33 years. The useful life has been determined based on technical evaluation performed by the management''s expert.
On transition to Ind AS, the company has elected to continue with the carrying value of all of its investment properties recognized as at 1st January 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of investment properties.
Intangible assets
Intangible assets are stated at initial cost less any accumulated amortization and any impairment. Amortization is made on a straight line basis over the estimated useful lives and begins once the asset is ready for its intended use. The useful lives are based to a large extent on historical experience, the expected application, as well as other individual characteristics of the asset. The useful lives are:
- Software in use - 3 years
On transition to Ind AS, the company has elected to continue with the carrying value of all of intangible assets recognized as at 1 Jan 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of intangible assets.
1.14 Trade and other payables
These amounts represent liabilities for goods and services provided to the company prior to the end of financial year which are unpaid. The amounts are unsecured and are paid as per the terms of payments. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized initially at their fair value and subsequently measured at amortized cost using the effective interest method.
1.15 Borrowings
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss as other income.
1.16 Provisions
Provisions for legal claims, service warranties, volume discounts and returns are recognized when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognized for future operating losses.
Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognized as interest expense.
1.17 Post employment benefits Employee benefits
i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognized in respect of employees'' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
ii) Other long-term employee benefit obligations
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognized in profit or loss.
iii) Post-employment obligations
The company operates the following post-employment schemes:
a) defined benefit plans such as gratuity and provident fund (for employees who are members of SKF India Limited Provident Fund Scheme)
b) defined contribution plans such as superannuation and provident fund (for other employees who are not members of SKF India Limited Provident Fund Scheme)
Defined Benefit Plans
The liability or asset recognized in the balance sheet in respect of gratuity and provident fund is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
With respect to employees who are members of SKF India Limited Provident Fund Scheme (âthe Trust'') contribution for provident fund to the Trust is a defined benefit plan as the Company has an obligation to make good the shortfall, if any, between the return from investments made by the Trust and notified interest rate. Both the employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the employee''s salary. The rate at which the annual interest is payable to the beneficiaries by the trust is being administered by the government.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in profit or loss as past service cost.
Defined contribution plans
Contributions to the Provident Fund and Superannuation Fund which are defined contribution schemes, are recognized as an expense in the Statement of Profit and Loss in the period in which the contribution is due. For employees other than members of SKF India Limited Provident Fund Scheme, both the Company''s and employees'' contribution is paid to Regional Provident Fund Commissioner (RPFC) on a monthly basis. The company has no further payment obligations once the contributions have been paid.
iv) Bonus Plans
The company recognizes a liability and an expense for bonuses. The company recognizes a provision where contractually obliged or where there is a past practice that has created a constructive obligation.
v) Termination benefits
Voluntary Retirement Scheme costs are charged off to the Statement of Profit and Loss in the year in which they are incurred.
1.18 Contributed Equity
Equity shares are classified as equity
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
1.19 Dividends
Provision is made for the amount of any dividend declared, being appropriately authorized and not paid as at the end of the reporting period.
1.20 Earnings per share
The basic earnings per share is computed by dividing the net profit attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting period. Diluted EPS is computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity and equivalent diluted equity shares outstanding during the year, except where the result would be anti dilutive.
1.21 Rounding of amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest million as per the requirement of Schedule III, unless otherwise stated.
Dec 31, 2014
The accounting policies set out below have been applied consistently to
the periods presented in these financial statements.
1.1 Basis of preparation of financial statements
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India under the historical
cost convention on accrual basis. Pursuant to circular 15/2013 dated
13.09.2013 read with circular 08/2014 dated 04.04.2014, till the
Standards of Accounting or any addendum thereto are prescribed by
Central Government in consultation and recommendation of the National
Financial Reporting Authority, the existing Accounting Standards
notified under the Companies Act 1956 shall continue to apply.
Consequently, these financial statements have been prepared to comply
all material aspects with the accounting standards notified under
Section 211(3C) [Companies (Accounting Standards) Rules, 2006, as
amended] and other relevant provisions of the Companies Act, 1956.
1.2 Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets,
liabilities, revenue and expenses and disclosure of contingent assets
and liabilities. The estimates and assumptions used in the accompanying
financial statements are based upon management''s evaluation of the
relevant facts and circumstances as of the date of the financial
statements. Actual results may differ from the estimates and
assumptions used in preparing the accompanying financial statements.
Any revisions to accounting estimates are recognised prospectively in
current and future periods.
1.3 Current / Non-Current classification
All assets and liabilities have been classified as current and
non-current as per the Company''s normal operating cycle and other
criteria set out in the Schedule VI to the Companies Act, 1956. Based
on the nature of products and services and the time between the
acquisition of assest 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 and non-current classification of
assets and liabilities.
1.4 Fixed assets and Depreciation/ Amortization Tangible assets
Tangible assets are carried at cost of acquisition or construction less
accumulated depreciation and/or accumulated impairment loss, if any.
The cost of an item of tangible fixed asset comprises its purchase
price, including import duties and other non- refundable taxes or
levies and any directly attributable cost of bringing the asset to its
working condition for its intended use; any trade discounts and rebates
are deducted in arriving at the purchase price.
Subsequent expenditures related to an item of tangible fixed asset are
added to its book value only if they increase the future benefits from
the existing asset beyond its previously assessed standard of
performance.
Exchange differences pertaining to long term foreign currency monetary
items that are related to acquisition of depreciable assets are
recognised as an expense in the Statement of Profit and Loss.
Depreciation is provided on the straight-line method, over the
estimated useful life of each asset as determined by the management.
The rates of depreciation prescribed in Schedule XIV to the Companies
Act, 1956 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 the
useful life/remaining useful life. The rates of depreciation used by
the Company are as follows:
Depreciation is provided on a pro-rata basis i.e. from the date on
which asset is ready for use.
Plant and equipment and furniture and fixtures, costing individually
INR 5,000 or less, are depreciated at 100%
Depreciation for the year is recognised in the Statement of Profit and
Loss.
The useful lives are reviewed by the management at each Balance Sheet
date and revised, if appropriate. In case of a revision, the
unamortised depreciable amount is charged over the revised remaining
useful life.
A fixed asset is eliminated from the financial statement on disposal or
when no further benefit is expected from its use and disposal.
Losses arising from retirement or gains or losses arising from disposal
of fixed assets which are carried at cost are recognised in the
Statement of Profit and Loss.
Intangible assets
Acquired intangible assets representing software is recorded at its
acquisition price and is amortised over its estimated useful life on a
straight line basis, commencing from the date the asset is available
for its use. The management has estimated the useful life for such
software as three years. The useful life of the asset is reviewed by
the management at each Balance Sheet date. After initial recognition,
an intangible asset is carried at its cost less any accumulated
amortisation and any accumulated impairment loss. Subsequent
expenditure is capitalised only when it increases the future economic
benefits from the specific asset to which it relates. An intangible
asset is derecognised on disposal or when no future economic benefits
are expected from its use and disposal. Losses arising from retirement
and gains or losses arising from disposal of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognised in the Statement of
Profit and Loss.
1.5 Impairment of Assets
In accordance with AS 28 - Impairment of Assets, the carrying amounts
of the Company''s assets including intangible assets are reviewed at
each Balance Sheet date to determine whether there is any indication of
impairment. If any such indication exists, the asset''s recoverable
amount is estimated, as the higher of the net selling price and the
value in use. An impairment loss is recognised whenever the carrying
amount of an asset or its cash generating units exceeds its recoverable
amount. 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 assessed at the recoverable
amount subject to a maximum of depreciable historical cost.
1.6 Operating lease
Assets acquired under leases other than finance lease are classified as
operating lease. The total lease rentals (including scheduled rental
increases) in respect of an asset taken on operating lease are charged
to the Statement of Profit and Loss on a straight line basis over the
lease term unless another systematic basis is more representative of
the time pattern of the benefit.
Assets given by the Company under operating lease are included in
tangible fixed assets. Lease income from operating leases is recognised
in the Statement of Profit and Loss on a straight line basis over the
lease term unless another systematic basis is more representative of
the time pattern in which benefit derived from the leased asset is
diminished. Costs, including depreciation, incurred in earning the
lease income are recognised as expenses.
1.7 Inventories
Inventories which comprise raw materials, work-in-progress, finished
goods, stock-in-trade, and stores and spares are carried at the lower
of cost and net realisable value. Cost of inventories comprises all
costs of purchase, costs of conversion and other costs incurred in
bringing the inventories to their present location and condition. Cost
is determined on First-in-First-out (FIFO) basis. In the case of
manufactured inventories and work in progress, fixed production
overheads are allocated on the basis of normal capacity of production
facilities. Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs of completion and
the estimated costs necessary to make the sale. The net realisable
value of work-in-progress is determined with reference to the selling
prices of related finished products. Raw materials and other supplies
held for use in the production of finished products are not written
down below cost except in cases where material prices have declined and
it is estimated that the cost of the finished products will exceed
their net realisable value. The comparison of cost and net realisable
value is made on class of item. Excise duty is included in the value of
Finished Products.
1.8 Employee Benefits
Short term employee benefits
Employee benefits payable wholly within twelve months of receiving
employee services are classified as short-term employee benefits. These
benefits include salaries and wages, bonus and ex-gratia. The
undiscounted amount of short-term employee benefits to be paid in
exchange for employee services is recognised as an expense as the
related service is rendered by employees.
Post employment benefits (defined benefit plans)
The employees'' gratuity scheme is a defined benefit plan. The present
value of the obligation under such defined benefit plan is determined
at each Balance Sheet date based on an actuarial valuation carried out
by an independent actuary using the projected unit credit method. The
liability for gratuity is funded annually to a gratuity fund maintained
with an approved trust managed by the Company. Actuarial gains and
losses and past service costs are recognised immediately in the
Statement of Profit and Loss.
With respect to employees who are members of SKF India Limited
Provident Fund Scheme (''the Trust'') contribution for provident fund
to the Trust is a defined benefit plan as the Company has an obligation
to make good the shortfall, if any, between the return from investments
made by the Trust and notified interest rate. Both the employee and the
Company make monthly contributions to the provident fund plan equal to
a specified percentage of the employee''s salary. The rate at which
the annual interest is payable to the beneficiaries by the trust is
being administered by the government.
Post employment benefits (defined contribution plans)
Contributions to the Provident Fund and Superannuation Fund which are
defined contribution schemes, are recognised as an expense in the
Statement of Profit and Loss in the period in which the contribution is
due.
For employees other than members of SKF India Limited Provident Fund
Scheme, both the Company''s and employees'' contribution is paid to
Regional Provident Fund Commissioner (RPFC) on a monthly basis.
Compensated absences
The employees can carry-forward a portion of the unutilised accrued
compensated absences and utilise it in future service periods or
receive cash compensation on termination of employment. Since the
compensated absences do not fall due wholly within twelve months after
the end of the period in which the employees render the related service
and are also not expected to be utilised wholly within twelve months
after the end of such period, the benefit is classified as a long-term
employee benefit. The Company records an obligation for such
compensated absences in the period in which the employee renders the
services that increase this entitlement. The obligation is measured on
the basis of independent actuarial valuation using the projected unit
credit method at each balance sheet date.
Termination benefits
Voluntary Retirement Scheme costs are charged off to the Statement of
Profit and Loss in the year in which they are incurred.
1.9 Revenue Recognition
Revenue from sale of goods in the course of ordinary activities is
recognised when property in the goods or all significant risks and
rewards of their ownership are transferred to the customer and no
significant uncertainty exists regarding the amount of the
consideration that will be derived from the sale of the goods and
regarding its collection. The amount recognised as revenue is exclusive
of sales tax, value added taxes (VAT) and service tax, and is net of
returns, trade discounts and quantity discounts.
Service Income is recognised on the completion of activity relating to
services.
1.10 Foreign Currency Transactions
Foreign currency transactions are recorded at the rate of exchange
prevailing on the date of the respective transactions. Monetary
foreign currency assets and liabilities remaining unsettled at the
Balance Sheet date are translated at the rates of exchange prevailing
on that date.
Gains / losses arising on account of realisation / settlement of
foreign exchange transactions and on translation of foreign currency
assets and liabilities are recognised in the Statement of Profit and
Loss.
1.11 Provisions
A provision is recognised if, as a result of a past event, the Company
has a present obligation that can be estimated reliably, and it is
probable that an outflow of economic benefits will be required to
settle the obligation. Provisions are recognised at the best estimate
of the expenditure required to settle the present obligation at the
balance sheet date. The provisions are measured on an undiscounted
basis.
Warranties
Warranty costs are estimated by the Management on the basis of a
technical evaluation and past experience. Provision is made for
estimated liability in respect of warranty cost in the year of sale.
Disputed statutory matters
Provision in respect of disputed statutory matters relating to claims,
litigation, assessment, fines, penalties, etc. are recognised when it
is probable that a liability has been incurred, and the amount can be
estimated reliably.
1.12 Contingent liabilities and contingent assets
A contingent liability exists when there is a possible but not probable
obligation, or a present obligation that may, but probably will not,
require an outflow of resources, or a present obligation whose amount
cannot be estimated reliably. Contingent liabilities do not warrant
provisions, but are disclosed unless the possibility of outflow of
resources is remote. Contingent assets are neither recognised nor
disclosed in the financial statements. However, contingent assets are
assessed continually and if it is virtually certain that an inflow of
economic benefits will arise, the asset and related income are
recognised in the period in which the change occurs.
1.13 Income taxes
Income tax expense comprises current tax (i.e. amount of tax for the
period determined in accordance with the income-tax law) and deferred
tax charge or credit (reflecting the tax effects of timing differences
between accounting income and taxable income for the period).
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are 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 that there is
reasonable certainty that the assets can be realised in future; however
where there is unabsorbed depreciation or carried forward losses under
taxation laws, deferred tax assets are recognised only if there is a
virtual certainty of realisation of such assets. Deferred tax assets
are reviewed at each Balance Sheet date and written down or written-up
to reflect the amount that is reasonably / virtually certain (as the
case may be) to be realised.
1.14 Earnings per share (EPS)
The basic earnings per share is computed by dividing the net profit
attributable to the equity shareholders for the period by the weighted
average number of equity shares outstanding during the reporting
period. Diluted EPS is computed by dividing the net profit attributable
to the equity shareholders for the year by the weighted average number
of equity and equivalent diluted equity shares outstanding during the
year, except where the result would be anti dilutive.
1.15 Other Income
Export Incentives are recognised when the right to receive credit as
per the terms of Incentives is established in respect of the exports
made and when there is no significant uncertainty regarding the
ultimate collection of the relevant export proceeds.
Interest income is recognised on time proportion base taking into
account the amount outstanding and the rate applicable.
1.16 Cash and Cash Equivalents
In the cash flow statement, cash and cash equivalents include cash in
hand, demand deposits with banks, other short-term highly liquid
investments with original maturities of three months or less.
Dec 31, 2013
1.1 Basis of preparation of financial statements
The financial statements are prepared under historical cost convention
as a going concern on accrual basis and to comply in all material
aspects withall the applicable accounting principles in India, the
applicable accounting standards notified under section 211 (3C) of the
Companies Act, 1956 and the relevant provisions of the Companies Act,
1956.
1.2 Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets,
liabilities, revenue and expenses and disclosure of contingent assets
and liabilities. The estimates and assumptions used in the accompanying
financial statements are based upon management''s evaluation of the
relevant facts and circumstances as of the date of the financial
statements. Actual results may differ from the estimates and
assumptions used in preparing the accompanying financial statements.
Any revisions to accounting estimates are recognised prospectively in
current and future periods.
1.3 Current / Non-Current classification
All assets and liabilities have been classified as current and
non-current as per the Company''s normal operating cycle and other
criteria set out in the Schedule VI to the Companies Act, 1956. Based
on the nature of products and services and their realisation in cash
and cash equivalents, the Company has ascertained its operating cycle
as 12 months for the purpose of current and non-current classification
of assets and liabilities.
1.4 Fixed assets and Depreciation/ Amortization Tangible fixed assets
Tangible fixed assets are carried at cost of acquisition or
construction less accumulated depreciation and/or accumulated
impairment loss, if any. The cost of an item of tangible fixed asset
comprises its purchase price, including import duties and other
non-refundable taxes or levies and any directly attributable cost of
bringing the asset to its working condition for its intended use; any
trade discounts and rebates are deducted in arriving at the purchase
price.
Subsequent expenditures related to an item of tangible fixed asset are
added to its book value only if they increase the future benefits from
the existing asset beyond its previously assessed standard of
performance.
Exchange differences pertaining to long term foreign currency monetary
items that are related to acquisition of depreciable assets are
recognised as an expense in the Statement of Profit and Loss.
Freehold land is not depreciated.
Depreciation is provided on a pro-rata basis i.e. from the date on
which asset is ready for use.
Plant and equipment and furniture and fixtures, costing individually
INR 5,000 or less, are depreciated at 100% Depreciation for the year is
recognised in the Statement of Profit and Loss.
The useful lives are reviewed by the management at each Balance Sheet
date and revised, if appropriate. In case of a revision, the
unamortised depreciable amount is charged over the revised remaining
useful life.
A fixed asset is eliminated from the financial statements on disposal
or when no further benefit is expected from its use and disposal.
Losses arising from retirement or gains or losses arising from disposal
of fixed assets which are carried at cost are recognised in the
Statement of Profit and Loss.
Intangible fixed assets
Acquired intangible assets representing software is recorded at its
acquisition price and is amortised over its estimated useful life on a
straight line basis, commencing from the date the asset is available
for its use. The management has estimated the useful life for such
software as three years. The useful life of the asset is reviewed by
the management at each Balance Sheet date. After initial recognition,
an intangible asset is carried at its cost less any accumulated
amortisation and any accumulated impairment loss. Subsequent
expenditure is capitalised only when it increases the future economic
benefits from the specific asset to which it relates. An intangible
asset is derecognised on disposal or when no future economic benefits
are expected from its use and disposal. Losses arising from retirement
and gains or losses arising from disposal of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognised in the Statement of
Profit and Loss.
1.5 Impairment of Assets
In accordance with AS 28 - Impairment of Assets, the carrying amounts
of the Company''s assets including intangible assets are reviewed at
each Balance Sheet date to determine whether there is any indication of
impairment. If any such indications exist, the assets'' recoverable
amount is estimated, as the higher of the net selling price and the
value in use. An impairment loss is recognised whenever the carrying
amount of an asset or its cash generating units exceeds its recoverable
amount. 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 assessed at the recoverable
amount subject to a maximum of depreciable historical cost.
1.6 Operating lease
Assets acquired under leases other than finance lease are classified as
operating lease. The total lease rentals (including scheduled rental
increases) in respect of an asset taken on operating lease are charged
to the Statement of Profit and Loss on a straight line basis over the
lease term unless another systematic basis is more representative of
the time pattern of the benefit.
Assets given by the Company under operating lease are included in
tangible fixed assets. Lease income from operating leases is recognised
in the Statement of Profit and Loss on a straight line basis over the
lease term unless another systematic basis is more representative of
the time pattern in which benefit derived from the leased asset is
diminished. Costs, including depreciation, incurred in earning the
lease income are recognised as expenses.
1.7 Inventories
Inventories which comprise raw materials, work-in-progress, finished
goods, stock-in-trade, and stores and spares are carried at the lower
of cost and net realisable value. Cost of inventories comprises all
costs of purchase, costs of conversion and other costs incurred in
bringing the inventories to their present location and condition. Cost
is determined on First-in-First-out (FIFO) basis. In the case of
manufactured inventories and work in progress, fixed production
overheads are allocated on the basis of normal capacity of production
facilities. Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs of completion and
the estimated costs necessary to make the sale. The net realisable
value of work-in-progress is determined with reference to the selling
prices of related finished products. Raw materials and other supplies
held for use in the production of finished products are not written
down below cost except in cases where material prices have declined and
it is estimated that the cost of the finished products will exceed
their net realisable value. The comparison of cost and net realisable
value is made on class of item. Excise duty is included in the value of
Finished Products.
1.8 Employee Benefits
Short term employee benefits
Employee benefits payable wholly within twelve months of receiving
employee services are classified as short-term employee benefits. These
benefits include salaries and wages, bonus and ex-gratia. The
undiscounted amount of short-term employee benefits to be paid in
exchange for employee services is recognised as an expense as the
related service is rendered by employees.
Post employment benefits (defined benefit plans)
The employees'' gratuity scheme is a defined benefit plan. The present
value of the obligation under such defined benefit plan is determined
at each Balance Sheet date based on an actuarial valuation carried out
by an independent actuary using the projected unit credit method. The
liability for gratuity is funded annually to a gratuity fund maintained
with an approved trust managed by the Company. Actuarial gains and
losses and past service costs are recognised immediately in the
Statement of Profit and Loss. With respect to employees who are
members of SKF India Limited Provident Fund Scheme (''the Trust'')
contribution for provident fund to the Trust is a defined benefit plan
as the Company has an obligation to make good the shortfall, if any,
between the return from investments made by the Trust and notified
interest rate. Both the employee and the Company make monthly
contributions to the provident fund plan equal to a specified
percentage of the employee''s salary. The rate at which the annual
interest is payable to the beneficiaries by the trust is being
administered by the government.
Post employment benefits (defined contribution plans)
Contributions to the Provident Fund and Superannuation Fund which are
defined contribution schemes, are recognised as an expense in the
Statement of Profit and Loss in the period in which the contribution is
due. For employees other than members of SKF India Limited Provident
Fund Scheme, both the Company''s and employees'' contribution is paid to
Regional Provident Fund Commissioner (RPFC) on a monthly basis.
Compensated absences
The employees can carry-forward a portion of the unutilised accrued
compensated absences and utilise it in future service periods or
receive cash compensation on termination of employment. Since the
compensated absences do not fall due wholly within twelve months after
the end of the period in which the employees render the related service
and are also not expected to be utilised wholly within twelve months
after the end of such period, the benefit is classified as a long-term
employee benefit. The Company records an obligation for such
compensated absences in the period in which the employee renders the
services that increase this entitlement. The obligation is measured on
the basis of independent actuarial valuation using the projected unit
credit method at each balance sheet date.
Termination benefits
Voluntary Retirement Scheme costs are charged off to the Statement of
Profit and Loss in the year in which they are incurred.
1.9 Revenue Recognition
Revenue from sale of goods in the course of ordinary activities is
recognised when property in the goods or all significant risks and
rewards of their ownership are transferred to the customer and no
significant uncertainty exists regarding the amount of the
consideration that will be derived from the sale of the goods and
regarding its collection. The amount recognised as revenue is exclusive
of sales tax, value added taxes (VAT) and service tax, and is net of
returns, trade discounts and quantity discounts. Service Income is
recognised on the completion of activity relating to services.
Export Incentives are recognised when the right to receive credit as
per the terms of Incentives is established in respect of the exports
made and when there is no significant uncertainty regarding the
ultimate collection of the relevant export proceeds. Interest income
is recognised on time proportion base taking into account the amount
outstanding and the rate applicable.
1.10 Foreign Currency Transactions
Foreign currency transactions are recorded at the rate of exchange
prevailing on the date of the respective transactions. Monetary
foreign currency assets and liabilities remaining unsettled at the
Balance Sheet date are translated at the rates of exchange prevailing
on that date.
Gains/losses arising on account of realisation/settlement of foreign
exchange transactions and on translation of foreign currency assets and
liabilities are recognised in the Statement of Profit and Loss.
1.11 Provisions
A provision is recognised if, as a result of a past event, the Company
has a present obligation that can be estimated reliably, and it is
probable that an outflow of economic benefits will be required to
settle the obligation. Provisions are recognised at the best estimate
of the expenditure required to settle the present obligation at the
balance sheet date. The provisions are measured on an undiscounted
basis.
Warranties
Warranty costs are estimated by the Management on the basis of a
technical evaluation and past experience. Provision is made for
estimated liability in respect of warranty cost in the year of sale.
Disputed statutory matters
Provision in respect of disputed statutory matters relating to claims,
litigation, assessment, fines, penalties, etc. are recognised when it
is probable that a liability has been incurred, and the amount can be
estimated reliably.
1.12 Contingent liabilities and contingent assets
A contingent liability exists when there is a possible but not probable
obligation, or a present obligation that may, but probably will not,
require an outflow of resources, or a present obligation whose amount
cannot be estimated reliably. Contingent liabilities do not warrant
provisions, but are disclosed unless the possibility of outflow of
resources is remote. Contingent assets are neither recognised nor
disclosed in the financial statements. However, contingent assets are
assessed continually and if it is virtually certain that an inflow of
economic benefits will arise, the asset and related income are
recognised in the period in which the change occurs.
1.13 Income taxes
Income tax expense comprises current tax (i.e. amount of tax for the
period determined in accordance with the income-tax law) and deferred
tax charge or credit (reflecting the tax effects of timing differences
between accounting income and taxable income for the period).
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are 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 that there is
reasonable certainty that the assets can be realised in future; however
where there is unabsorbed depreciation or carried forward losses under
taxation laws, deferred tax assets are recognised only if there is a
virtual certainty of realisation of such assets. Deferred tax assets
are reviewed at each Balance Sheet date and written down or written-up
to reflect the amount that is reasonably / virtually certain (as the
case may be ) to be realised.
1.14 Earnings per share (EPS)
The basic earnings per share is computed by dividing the net profit
attributable to the equity shareholders for the period by the weighted
average number of equity shares outstanding during the reporting
period. Diluted EPS is computed by dividing the net profit attributable
to the equity shareholders for the year by the weighted average number
of equity and equivalent diluted equity shares outstanding during the
year, except where the result would be anti dilutive.
Dec 31, 2012
1.1 Basis of preparation of financial statements
These financial statements have been prepared and presented on the
accrual basis of accounting and comply with the Accounting Standards
prescribed in the Companies (Accounting Standards) Rules, 2006 issued
by the Central Government, the relevant provisions of the Companies
Act, 1956 and other accounting principles generally accepted in India,
to the extent applicable. The financial statements are presented in
Indian rupees rounded off to the nearest million. This is the first
year of application of the revised Schedule VI to the Companies Act,
1956 for the preparation of the financial statements of the Company.
The revised Schedule VI introduces some significant conceptual changes
as well as new disclosures. These include classification of all assets
and liabilities into current and non-current. The previous year figures
have also undergone a major re-classification to comply with the
requirements of the revised Schedule VI.
1.2 Use of estimates
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles (GAAP) requires management to make
judgments, estimates and assumptions that affect the application of
accounting policies and reported amounts of assets, liabilities, income
and expenses and the disclosure of contingent liabilities on the date
of the financial statements. Actual results could differ from those
estimates. Estimates and underlying assumptions are reviewed on an
ongoing basis. Any revision to accounting estimates is recognised
prospectively in current and future periods.
1.3 CurrentÂnon-current classification
All assets and liabilities are classified into current and non-current.
Assets
An asset is classified as current when it satisfies any of the
following criteria:
a. it is expected to be realised in, or is intended for sale or
consumption in, the Company''s normal operating cycle;
b. it is held primarily for the purpose of being traded;
c. it is expected to be realised within 12 months after the reporting
date; or
d. it is cash or cash equivalent unless it is restricted from being
exchanged or used to settle a liability for at least 12 months after
the reporting date
Current assets include the current portion of non-current financial
assets.
All other assets are classified as non-current. Liabilities A
liability is classified as current when it satisfies any of the
following criteria:
a. it is expected to be settled in the Company''s normal operating
cycle;
b. it is held primarily for the purpose of being traded;
c. it is due to be settled within 12 months after the reporting date;
or
d. the Company does not have an unconditional right to defer
settlement of the liability for at least 12 months after the reporting
date. Terms of a liability that could, at the option of the
counterparty, result in its settlement by the issue of equity
instruments do not affect its classification.
Current liabilities include current portion of non-current financial
liabilities.
All other liabilities are classified as non-current.
Operating cycle
Operating cycle is the time between the acquisition of assets for
processing and their realisation in cash or cash equivalents. The
Company''s normal operating cycle is less than 12 months.
1.4 Fixed assets and Depreciation/ Amortization Tangible fixed assets
Tangible fixed assets are carried at cost of acquisition or
construction less accumulated depreciation and/or accumulated
impairment loss, if any. The cost of an item of tangible fixed asset
comprises its purchase price, including import duties and other non-
refundable taxes or levies and any directly attributable cost of
bringing the asset to its working condition for its intended use; any
trade discounts and rebates are deducted in arriving at the purchase
price.
Subsequent expenditures related to an item of tangible fixed asset are
added to its book value only if they increase the future benefits from
the existing asset beyond its previously assessed standard of
performance.
Exchange differences pertaining to long term foreign currency monetary
items that are related to acquisition of depreciable assets are
recognised as an expense in the Statement of Profit and Loss.
Depreciation is provided on the straight-line method, over the
estimated useful life of each asset as determined by the management.
The rates of depreciation prescribed in Schedule XIV to the Companies
Act, 1956 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 the
useful life/remaining useful life. The rates of depreciation used by
the Company are as follows:
Depreciation is provided on a pro-rata basis i.e. from the date on
which asset is ready for use.
Plant & equipment and furniture & fixtures, costing individually INR
5,000 or less, are depreciated fully in the year of purchase.
If the aggregate of such items of plant and equipment constitutes more
than 10 percent of the total actual cost of plant and equipment, the
depreciation rates applicable to such items are applied.
Depreciation for the year is recognised in the Statement of Profit and
Loss.
The useful lives are reviewed by the management at each financial
year-end and revised, if appropriate. In case of a revision, the
unamortised depreciable amount is charged over the revised remaining
useful life.
A fixed asset is eliminated from the financial statements on disposal
or when no further benefit is expected from its use and disposal.
Losses arising from retirement or gains or losses arising from disposal
of fixed assets which are carried at cost are recognised in the
Statement of Profit and Loss.
Intangible fixed assets
Acquired intangible assets representing software is recorded at its
acquisition price and is amortised over its estimated useful life on a
straight line basis, commencing from the date the asset is available
for its use. The management has estimated the useful life for such
software as three years. The useful life of the asset is reviewed by
the management at each Balance Sheet date. After initial recognition,
an intangible asset is carried at its cost less any accumulated
amortisation and any accumulated impairment loss. Subsequent
expenditure is capitalised only when it increases the future economic
benefits from the specific asset to which it relates. An intangible
asset is derecognised on disposal or when no future economic benefits
are expected from its use and disposal. Losses arising from retirement
and gains or losses arising from disposal of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognised in the Statement of
Profit and Loss.
1.5 Impairment of Assets
In accordance with AS 28 - Impairment of Assets, the carrying amounts
of the Company''s assets including intangible assets are reviewed at
each Balance Sheet date to determine whether there is any indication of
impairment. If any such indications exist, the assets recoverable
amount is estimated, as the higher of the net selling price and the
value in use. An impairment loss is recognised whenever the carrying
amount of an asset or its cash generating units exceeds its recoverable
amount. 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 assessed at the recoverable
amount subject to a maximum of depreciable historical cost.
1.6 Operating lease
Assets acquired under leases other than finance leases are classified
as operating leases. The total lease rentals (including scheduled
rental increases) in respect of an asset taken on operating lease are
charged to the Statement of Profit and Loss on a straight line basis
over the lease term unless another systematic basis is more
representative of the time pattern of the benefit.
Assets given by the Company under operating lease are included in fixed
assets. Lease income from operating leases is recognised in the
Statement of Profit and Loss on a straight line basis over the lease
term unless another systematic basis is more representative of the time
pattern in which benefit derived from the leased asset is diminished.
Costs, including depreciation, incurred in earning the lease income are
recognised as expenses.
1.7 Inventories
Inventories which comprise raw materials, work-in-progress, finished
goods, stock-in-trade, and stores and spares are carried at the lower
of cost and net realisable value. Cost of inventories comprises all
costs of purchase, costs of conversion and other costs incurred in
bringing the inventories to their present location and condition. Cost
is determined at Standarad Cost adjusted on a FIFO basis for variances.
In the case of manufactured inventories and work in progress, fixed
production overheads are allocated on the basis of normal capacity of
production facilities. Net realisable value is the estimated selling
price in the ordinary course of business, less the estimated costs of
completion and the estimated costs necessary to make the sale. The net
realisable value of work-in- progress is determined with reference to
the selling prices of related finished products. Raw materials and
other supplies held for use in the production of finished products are
not written down below cost except in cases where material prices have
declined and it is estimated that the cost of the finished products
will exceed their net realisable value. The comparison of cost and net
realisable value is made on class of item. Excise duty is included in
the value of Finished Products.
1.8 Employee Benefits
Short term employee benefits
Employee benefits payable wholly within twelve months of receiving
employee services are classified as short-term employee benefits. These
benefits include salaries and wages, bonus and ex-gratia. The
undiscounted amount of short-term employee benefits to be paid in
exchange for employee services is recognised as an expense as the
related service is rendered by employees.
Post employment benefits (defined benefit plans)
The employees'' gratuity scheme is a defined benefit plan. The present
value of the obligation under such defined benefit plan is determined
at each Balance Sheet date based on an actuarial valuation carried out
by an independent actuary using the projected unit credit method. The
liability for gratuity is funded annually to a gratuity fund maintained
with an approved trust managed by the Company. Actuarial gains and
losses and past service costs are recognised immediately in the
Statement of Profit and Loss. With respect to employees who are
members of SKF India Limited Provident Fund Scheme (''the Trust'')
contribution for provident fund to the Trust is a defined benefit plan
as the Company has an obligation to make good the shortfall, if any,
between the return from investments made by the Trust and notified
interest rate. Both the employee and the Company make monthly
contributions to the provident fund plan equal to a specified
percentage of the employee''s salary. The rate at which the annual
interest is payable to the beneficiaries by the trust is being
administered by the government.
Post employment benefits (defined contribution plans)
Contributions to the Provident Fund and Superannuation Fund which are
defined contribution schemes, are recognised as an expense in the
Statement of Profit and Loss in the period in which the contribution is
due.
For employees other than members of SKF India Limited Provident Fund
Scheme, both the Company''s and employees'' contribution is paid to
Regional Provident Fund Commissioner (RPFC) on a monthly basis
Compensated absences
The employees can carry-forward a portion of the unutilised accrued
compensated absences and utilise it in future service periods or
receive cash compensation on termination of employment. Since the
compensated absences do not fall due wholly within twelve months after
the end of the period in which the employees render the related service
and are also not expected to be utilised wholly within twelve months
after the end of such period, the benefit is classified as a long-term
employee benefit. The Company records an obligation for such
compensated absences in the period in which the employee renders the
services that increase this entitlement. The obligation is measured on
the basis of independent actuarial valuation using the projected unit
credit method.
Termination benefits
Voluntary Retirement Scheme costs are charged off to the Statement of
Profit and Loss in the year in which they are incurred.
1.9 Revenue Recognition
Revenue from sale of goods in the course of ordinary activities is
recognised when property in the goods or all significant risks and
rewards of their ownership are transferred to the customer and no
significant uncertainty exists regarding the amount of the
consideration that will be derived from the sale of the goods and
regarding its collection. The amount recognised as revenue is exclusive
of sales tax, value added taxes (VAT) and service tax, and is net of
returns, trade discounts and quantity discounts.
Service Income is recognised on the completion of activity relating to
services.
Export Incentives are recognised when the right to receive credit as
per the terms of Incentives is established in respect of the exports
made and when there is no significant uncertainty regarding the
ultimate collection of the relevant export proceeds.
Interest income is recognised on time proportion base taking into
account the amount outstanding and the rate applicable.
1.10Foreign Currency Transactions
Foreign currency transactions are recorded at the rate of exchange
prevailing on the date of the respective transactions. Monetary foreign
currency assets and liabilities remaining unsettled at the Balance
Sheet date are translated at the rates of exchange prevailing on that
date.
Gains / losses arising on account of realisation / settlement of
foreign exchange transactions and on translation of foreign currency
assets and liabilities are recognised in the Statement of Profit and
Loss.
1.11Provisions
A provision is recognised if, as a result of a past event, the Company
has a present obligation that can be estimated reliably, and it is
probable that an outflow of economic benefits will be required to
settle the obligation. Provisions are recognised at the best estimate
of the expenditure required to settle the present obligation at the
balance sheet date. The provisions are measured on an undiscounted
basis.
Warranties
Warranty costs are estimated by the Management on the basis of a
technical evaluation and past experience. Provision is made for
estimated liability in respect of warranty cost in the year of sale.
Disputed statutory matters
Provision in respect of disputed statutory matters relating to claims,
litigation, assessment, fines, penalties, etc. are recognised when it
is probable that a liability has been incurred, and the amount can be
estimated reliably.
1.12 Contingent liabilities and contingent assets
A contingent liability exists when there is a possible but not probable
obligation, or a present obligation that may, but probably will not,
require an outflow of resources, or a present obligation whose amount
cannot be estimated reliably. Contingent liabilities do not warrant
provisions, but are disclosed unless the possibility of outflow of
resources is remote. Contingent assets are neither recognised nor
disclosed in the financial statements. However, contingent assets are
assessed continually and if it is virtually certain that an inflow of
economic benefits will arise, the asset and related income are
recognised in the period in which the change occurs.
1.13 Income taxes
Income tax expense comprises current tax (i.e. amount of tax for the
period determined in accordance with the income-tax law) and deferred
tax charge or credit (reflecting the tax effects of timing differences
between accounting income and taxable income for the period).
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are 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 that there is
reasonable certainty that the assets can be realised in future; however
where there is unabsorbed depreciation or carried forward losses under
taxation laws, deferred tax assets are recognised only if there is a
virtual certainty of realisation of such assets. Deferred tax assets
are reviewed at each Balance Sheet date and written down or written-up
to reflect the amount that is reasonably / virtually certain (as the
case may be ) to be realised.
1.14 Earnings per share (EPS)
The basic earnings per share is computed by dividing the net profit
attributable to the equity shareholders for the period by the weighted
average number of equity shares outstanding during the reporting
period. Diluted EPS is computed by dividing the net profit attributable
to the equity shareholders for the year by the weighted average number
of equity and equivalent diluted equity shares outstanding during the
year, except where the result would be anti dilutive.
Dec 31, 2010
The financial statements have been prepared and presented under the
historical cost convention on the accrual basis of accounting in
accordance with the generally accepted accounting principles (GAAP) in
India and comply with the Accounting Standards (AS) prescribed by the
Central Government, in consultation with Naional Advisory Committee on
Accounting Standards, under the Companies (Accounting Standards) Rules,
2006 and with the relevant provisions of the Companies Act, 1956, (the
Act) to the extent applicable. The significant accounting policies are
as follows :
(a) Use of Estimates
The preparation of financial statements in accordance with Generally
Accepted Accounting Principles (ÃGAAP), 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. Acual results could differ from
those esimates. Any revision to the accounting estimates is recognised
prospectively in current and future periods.
(c) Intangible assets.
Acquired intangible assets representing software is recorded at its
acquisition price and is amorised over is esimated useful life on at
sraight line basis, commencing from the date the asset is available for
its use. The management has esimated the useful life for such software
as three years. The useful life of the assets is reviewed by the
management at each Balance Sheet date.
(d) Impairment of Assets
In accordance wih AS 28 Impairment of Assets, the carrying amounts of
the Companys asset including intangible asset are reviewed a each
Balance Sheet date to detrmine whether there is any indication of
impairment. If any such indications exist, the assest recoverable
amount is esimated, as the higher of the net selling price and the
value in use. An impairment loss is recognised whenever the carrying
amount of an assets or its cash generating units exceeds its
recoverable amount. 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 assessed
at the recoverable amount subject to a maximum of depreciable
historical cost.
(e) Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are charged to Profit and Loss Account.
(f) Inventories
Inventories are valued a the lower of cost and net realisable value.
cost is determined at Standard cost adjusted on a FIFO basis for
variances. cost includes all cost of purchase and cost incurred in
bringing the inventories to their present location and condition.
Excise Duty is included in the value of Finished Products.
(g) Revenue Recognition
(i) Sale of goods is recognised on despach to customers. ÃNet Sales
exclude amounts recovered owards excise duty sales tax, octroi and
freight and is net of discounts.
(ii) Service Income is recognised on the completion of activity
relating to services.
(iii) Export Incentives are recognised when the right to receive credit
as per the terms of Incentives is established in respect of the exports
made and when here is no significant uncertainty regarding the ultimate
collecion of the relevant export proceeds.
(iv) Interest income is recognised on time proportion base taking into
account the amount outstanding and the rate applicable
(h) Warranties
Warranty costs are estimated by the Management on the basis of a
technical evaluation and past experience. Provision is made for
estimated liability in respect of warranty cost in the year of sale.
(i) Employee Benefits
(i) Short term employee benefits
Employee benefits payable wholly within twelve months of rendering the
service are classified as short term employee benefits and are
recognised in the period in which the employee renders the related
service.
(ii) Post employment benefits (defined benefit plans)
The employees grauity scheme is a defined benefit plan. The present
value of the obligation under such defined benefit plan is determined a
each Balance Sheet date based on an actuarial valuation carried out by
an independent actuary using the projected unit credit mehod. The
liability for grauity is funded annually to a grauity fund maintained
with an approved trust managed by the Company. Actuarial gains and
losses and past service costs are recognised immediately in the Profit
and Loss Account.
(iii) Post employment benefits (defined contribution plans)
Conributions to the Provident Fund and Superannuation Fund which are
defined conribution schemes, are recognised as an expense in the Profit
and Loss Account in the period in which the contribution is due.
(iv) Long term employee benefits
Long term employee benefits comprise of compensated absences. These are
measured based on an actuarial valuation carried out by an independent
actuary using the projected until method a each Balance Sheet date
unless they are insignificant. Actuarial gains and losses and pas
service costs are recognised immediately in the Profit and Loss
Account.
(v) The Company pays contribution to recognized Provident Fund (in
respect of employees of Pune unit and Head Office, Mumbai). The
guidance on implementing AS 15, Employee Benefits (Revised 2005) issued
by the Accounting Standards Board CASB1) states that provident funds
set up by the employers, which requires interest shortfall to be met by
the employer, needs to be treated as defined benefit plan. Pending the
issuance of the guidance note from the Actuarial Society of India, the
Companys actuary has expressed his inability to reliably measure the
provident fund liabiliy. Accordingly, the Company is unable to exhibit
the related disclosures.
(vi) Voluntary Retirement Scheme its are charged off to Profit and
Loss Account in the year in which they are incurred.
(j) Foreign Currency Transactions
Foreign currency transacions are recorded at the rate of exchange
prevailing on the date of the respective transactions. Monetary
foreign currency assets and liabilities remaining unsettled at the
Balance Sheet date are translaed at the rates of exchange prevailing on
that date.
Gains / losses arising on account of realisation / selemen of foreign
exchange transacions and on translation of foreign currency assets and
liabilities are recognised in the Profit and Loss Account.
(k) Income Tax
Income tax expense comprises current tax (i.e. amount of tax for the
period deermined in accordance with the incometax law) and deferred tax
charge or credit (reflecting the tax effects of timing differences
beween accounting income and taxable income for the period).
The deferred tax charge or credit and the corresponding deferred tax
liabiliies or assets are recognised using the tax rates that have been
enacted or substantively enacted by the Balance Sheet date.
Deferred tax asses are recognised only to the extent that here is
reasonable cerainty that the assets can be realised in future; however
where here is unabsorbed depreciation or carried forward losses under
taxaion laws, deferred tax assets are recognised only if there is a
virtual cerainty of realisation of such assets. Deferred tax assets are
reviewed a each Balance Sheet date and written down or written up to
reflect the amount that is reasonably / virtually certain (as the case
may be) to be realised.
(l) Provisions and Contingencies
Provision is recognised in the Balance Sheet when, the Company has a
present obligation as a result of a past event; it is probable that an
outflow of economic benefits will be required to settle the obligation;
and a reliable esimate of the amount of the obligation can be made. A
disclosure by way of a contingent liability is made when there is a
possible obligation or a present obligation that may, but probably will
no, require an outflow of resources. Where there is a possible
obligation or a present obligation that the likelihood of outflow of
resources is remote, no provision or disclosure is made.
(m) Earnings per share
The basic earnings per share is computed by dividing the net profit
atributable to the equity shareholders for the period by the weighted
average number of equity shares outstanding during the reporting
period. Diluted EPS is computed by dividing the net profit atributable
to the equity shareholders for the year by the weighted average number
of equity and equivalent diluted equity shares outstanding during the
year, except where the result would be anti dilutive.
Dec 31, 2009
The financial statements have been prepared and presented under the
historical cost convention on the accrual basis of accounting and
comply with the Accounting Standards prescribed by the Central
Government, in consultation with National Advisory Committee on
Accounting Standards, under the Companies (Accounting Standards) Rules,
2006 and the relevant provisions of the Companies Act, 1956, (Ãthe
ActÃ) to the extent applicable. The significant accounting policies are
as follows :
(a) 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 the accounting estimates is
recognised prospectively in current and future periods.
(b) Fixed assets and Depreciation/ Amortization :
Fixed assets are stated at cost of acquisition less accumulated
depreciation/amortisation and provision for impairment. The cost of
acquisition includes inward freight, duties, taxes and other directly
attributable incidental expenses, net of cenvat credit and excluding
foreign exchange fluctuation gains / (loss) on imported assets.
Depreciation is provided on the straight line method, at the rates
specified in Schedule XIV to the Companies Act, 1956 or based on the
estimated useful lives of the assets, whichever is higher. The rates of
depreciation used by the Company are as follows :
Rate per annum (%)
Buildings 1.63 / 3.34
Plant, Machinery and Tools 4.75 / 10.34 / 16.21
Furniture, Fixture and Office
Equipment 4.75 / 6.33
Vehicles 9.50 / 18.00
Intangible Assets 33.33
Assets individually costing less than Rs. 5,000 are depreciated at the
rate of 100% per annum.
(c) Intangible assets
Acquired intangible assets representing software is recorded at its
acquisition price and is amortised over its estimated useful life on a
straight line basis, commencing from the date the asset is available
for its use. The management has estimated the useful life for such
software as three years. The useful life of the asset is reviewed by
the management at each balance sheet date.
(d) Impairment of Assets
Management periodically assesses using external and internal sources
whether there is an indication that an asset may be impaired. An
impairment occurs where the carrying value exceeds the recoverable
amount. The impairment loss to be expensed is determined as the excess
of carrying amount over the higher of the assetÃs net selling price or
present value of future cash flows expected to arise from the
continuing use of the assets and its eventual disposal.
(e) Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are charged to Profit and Loss Account .
(f) Inventories
Inventories are valued at the lower of cost and net realisable value.
Cost is determined at Standard Cost adjusted on a FIFO basis for
variances. Cost includes all cost of purchase and cost incurred in
bringing the inventories to their present location and condition.
Excise Duty is included in the value of Finished Products.
(g) Revenue Recognition
(i) Sale of goods is recognised on despatch to customers. ÃNet SalesÃ
exclude amounts recovered towards excise duty, sales tax, octroi and
freight and is net of discounts.
(ii) Service Income is recognised on the completion of activity
relating to services.
(iii) Export Incentives are recognised when the right to receive credit
as per the terms of Incentives is established in respect of the exports
made and when there is no significant uncertainty regarding the
ultimate collection of the relevant export proceeds.
(h) Warranties
Warranty costs are estimated by the Management on the basis of a
technical evaluation and past experience. Provision is made for
estimated liability in respect of warranty cost in the year of sale.
(i) Employee Benefits
(i) Short term employee benefits
Employee benefits payable wholly within twelve months of rendering the
service are classified as short term employee benefits and are
recognised in the period in which the employee renders the related
service.
(ii) Post employment benefits (defined benefit plans)
The employeesà gratuity scheme is a defined benefit plan. The present
value of the obligation under such defined benefit plan is determined
at each Balance Sheet date based on an actuarial valuation carried out
by an independent actuary using the projected unit credit method.
Actuarial gains and losses and past service costs are recognised
immediately in the Profit and Loss account.
(iii) Post employment benefits (defined contribution plans)
Contributions to the provident fund and Superannuation Fund which are
defined contribution schemes, are recognised as an expense in the
Profit and Loss account in the period in which the contribution is due.
(iv) Long term employee benefits
Long term employee benefits comprise of compensated absences. These are
measured based on an actuarial valuation carried out by an independent
actuary using the projected unit method at each Balance Sheet date
unless they are insignificant. Actuarial gains and losses and past
service costs are recognised immediately in the Profit and Loss
account.
(v) The Company pays contribution to recognized provident fund (in
respect of employees of Pune unit and Head Office, Mumbai). The
guidance on implementing AS 15, Employee Benefits (Revised 2005) issued
by the Accounting Standards Board (ÃASBÃ) states that provident funds
set up by the employers, which requires interest shortfall to be met by
the employer, needs to be treated as defined benefit plan. Pending the
issuance of the guidance note from the Actuarial Society of India, the
CompanyÃs actuary has expressed his inability to reliably measure the
provident fund liability. Accordingly, the Company is unable to
exhibit the related disclosures.
(vi) Voluntary Retirement Scheme costs are charged off to Profit and
Loss account in the year in which they are incurred.
(j) Foreign Currency Transactions
Foreign currency transactions are recorded at the rate of exchange
prevailing on the date of the respective transactions. Monetary
foreign currency assets and liabilities remaining unsettled at the
balance sheet date are translated at the rates of exchange prevailing
on that date.
Gains / losses arising on account of realisation / settlement of
foreign exchange transactions and on translation of foreign currency
assets and liabilities are recognised in the Profit and Loss Account.
The premium or discount that arises on entering into a forward exchange
contract for underlying transactions, is measured by the difference
between the exchange rate at the date of inception of the forward
exchange contract and the forward rate. Forward exchange contract gain
/ loss is the difference between:
(a) the foreign currency amount of the contract translated at the
exchange rate at the reporting date, or the settlement date, where the
transaction is settled during the reporting period, and
(b) the same foreign currency amount translated at the latter of the
date of inception of the forward exchange contract and the last
reporting date. These exchange differences are recognised in the
statement of the profit and loss in the reporting period in which the
exchange rates changes.
The premium or discount arising at the inception of a forward exchange
contract is amortised as expense or income over the life of the
contract.
(k) Income Tax
Income tax expense comprises current tax, fringe benefit tax (i.e.
amount of tax for the period determined in accordance with the
income-tax law) and deferred tax charge or credit (reflecting the tax
effects of timing differences between accounting income and taxable
income for the period).
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are 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 that there is
reasonable certainty that the assets can be realised in future; however
where there is unabsorbed depreciation or carried forward losses under
taxation laws, deferred tax assets are recognised only if there is a
virtual certainty of realisation of such assets. Deferred tax assets
are reviewed at each Balance Sheet date and written down or written-up
to reflect the amount that is reasonably/ virtually certain (as the
case may be ) to be realised.
(l) Provisions and Contingencies
Provisions are recognised when there is a present obligation as a
result of past event and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. These are reviewed at each Balance Sheet
date and adjusted to reflect the current best estimates.
A disclosure for a contingent liability is made when there is a
possible or present obligation that may, but probably will not require
an outflow of resources. When there is a possible obligation in respect
of which the likelihood of outflow of resources is remote, no provision
or disclosure is made.
(m) Earnings per share
The basic earnings per share is computed by dividing the net profit
attributable to the equity shareholders for the period by the weighted
average number of equity shares outstanding during the reporting
period. Diluted EPS is computed by dividing the net profit attributable
to the equity shareholders for the year by the weighted average number
of equity and equivalent diluted equity shares outstanding during the
year, except where the result would be anti dilutive.
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SKF India Ltd. Reports
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