Home  »  Company  »  Sona Koyo Steer.  »  Quotes  »  Accounting Policy
Enter the first few characters of Company and click 'Go'

Accounting Policies of Sona Koyo Steering Systems Ltd. Company

Mar 31, 2015

I. General information

The Company is primarily engaged in the manufacture of steering systems & other auto components for the passenger car and utility vehicle manufacturers. Automobile manufacturers are its primary customers. The Company is a public limited Company listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).

II. Accounting convention

The financial statements of the company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material respect with the notified accounting standards under Section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014.

III. Basis of accounting

Financial statements have been prepared on accrual basis under the historical cost convention except derivative financial instruments in loss, which are measured at fair value. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year except for the change in accounting policy explained under clause(V) below.

IV. Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

V. Tangible fixed assets and depreciation/amortisation :

Fixed assets are stated at cost of acquisition or construction less accumulated depreciation. Cost comprises of the purchase price, incidental expenses, erection/commissioning expenses and financial charges upto the date the fixed asset is ready for its intended use.

Till the year ended 31st March, 2014, Schedule XIV to the Companies Act, 1956 prescribed requirements concerning depreciation of fixed assets. From the current year, Schedule XIV has been replaced by Schedule II to the Companies Act, 2013. The applicability of Schedule II has resulted in the following changes related to the depreciation of fixed assets. Unless stated otherwise, the impact mentioned for the current year is likely to hold good for future years also.

Considering the applicability of Schedule II, the management has re-estimated residual values of all its fixed assets and have taken useful life of its fixed assets as prescribed by Schedule II to the Companies Act, 2013 and / or useful life estimated by the management supported by technical valuer's independent assessment. The management believes that depreciation rates currently used fairly reflect its estimates of the useful lives and residual values of fixed assets.

Till the year ended 31st March, 2014, to comply with the requirements of Schedule XIV to the Companies Act, 1956, the Company was charging depreciation @ 100% on assets costing less than Rs. 5000/- in the year of purchase. Schedule II to the Companies Act, 2013, applicable from the current year, does not recognize such practice. However considering that the materiality of impact is not significant on the financial statement, the Company continues with the existing policy.

Depreciation on tangible fixed assets has been provided on a pro-rata basis from the month the assets are put to use on the straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on technical advice, taking into account the nature of the assets and estimated usage of the asset, past history of replacement and anticipated technological changes etc.:

- Dies 4 Years

-Vehicles 5.3 Years

Leasehold improvements are depreciated over a period of 5 years or over the period of lease if less than five years.

An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value. An impairment loss is charged to the statement of profit & loss in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

VI. Intangible assets and amortization thereof

Intangible assets comprise of product development expenses and computer software and are stated at cost less accumulated amortization and impairment losses, if any.

Product development costs incurred including technical fees paid to collaborator for the development of new products for which letters of intent have been received from customers are accumulated and recognised as intangible assets (included under fixed assets) and are amortized over a period of six years. Unamortized products development fee in respect of models discontinued during the year is fully charged off in statement of profit & loss.

Software, which is not an integral part of the related computer hardware is classified as an intangible assets and is being amortized over a period of 72 months, being the estimated useful life.

Amortization expenses is charged on a pro-rata basis for assets purchased during the year. The appropriateness of the amortization period and the amortization method is reviewed at each financial year end.

VII. Leases

- Where the Company is the lessee

Leases where the lessor effectively retain substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit & loss on a straight-line basis over the lease term.

- Where the Company is the lessor

Assets subject to operating leases are included in fixed assets. Lease income is recognised in the statement of profit & loss on a straight-line basis over the lease term. Cost, including depreciation are recognised as an expenses in the statement of profit & loss. Initial direct costs such as legal costs, brokerage costs,etc. are recognised immediately in the statement of profit & loss.

VIII. Investments

Non-current Investments are stated at cost. Provision for diminution, other than temporary, is made wherever necessary for each individual non current investments.

IX. Inventory valuation

a) Inventories are value at the lower of weighted average cost and net realisable value.

b) All tools (including loose tools) are written off over their useful life and un-issued tools are valued at lower of weighted average cost and net realisable value.

c) Finished goods and work in progress include all costs of purchases, conversion and other costs incurred in bringing the inventories to their present location and condition. Cost of finished goods includes excise duty.

d) Traded goods are valued at lower of cost and net realisable value. Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on a weighted average basis.

X. Foreign currency transactions

- Initial recognition:

Foreign currency transactions are recorded at the exchange rates prevailing on the date of transaction.

- Conversion:

Foreign currency monetary items are retranslated using the exchange rate prevailing at the reporting date.

- Exchange difference:

A) With respect to long-term foreign currency monetary items, from April 1, 2011 onwards, the Company has adopted the following policy:

* Foreign exchange difference on account of acquisition of depreciable fixed asset, is adjusted in the cost of the depreciable fixed asset, which would be depreciated over the remaining useful life of the asset.

* In other cases, the foreign exchange difference is accumulated in a foreign currency monetary item translation difference account and amortised over the remaining life of the concerned long term monetary item.

A monetary asset or liability is termed as a long-term foreign currency monetary item, if the monetary asset or liability is expressed in a foreign currency and has a term of 12 months or more at the date of its origination.

B) Other gains and losses resulting from the settlement of foreign currency transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of profit & loss.

- Forward exchange contracts:

In case of forward exchange contracts, the premium or discount arising at the inception of forward exchange contracts entered into, to hedge an existing asset / liability, is amortized as expense or income over the life of the contract. Exchange differences on such a contract are recognized in the statement of profit & loss in the reporting period in which the exchange rate changes.

Forward exchange contracts outstanding as at the year end on account of firm commitment / highly probable forecast transactions are marked to market and the losses, if any, are recognized in the statement of profit & loss while gains are ignored.

XI. Excise

Excise duty on finished goods manufactured is accounted on the basis of production of goods.

XII. Research & development

a) Capital expenditure for research & development is capitalised in the year of installation and depreciated accordingly.

b) Revenue expenses incurred for research & development is charged to statement of profit & loss of the year in which it is incurred.

XIII. Income

1) Revenue recognition - Revenue from domestic and export sales are recognised on transfer of all significant risks and rewards or ownership to the buyer as per term of contract.

2) Price escalation claims from customers and discounts from suppliers are accounted in the year under audit, only if they are settled with the customers and suppliers respectively up to the date of finalisation of accounts.

3) Dividend from investments is recognized when the right to receive the payment is established and when no significant uncertainty as to measurability or collectability exists.

4) Interest income is recognised on a time proportion basis taking into account the amount invested and the rate of interest.

5) All export benefits are recognised as income when there is substantial certainty as their readability e.g.

a) Focused Product Scheme are recognized as income on filing the relevant application with the respective authorities.

b) Duty draw back is accounted in the year of export.

XIV. Expenses

a) Discounts to customers and price escalation to suppliers to the extent not settled at the balance sheet date are accounted on the basis of reasonable estimates made after considering negotiations with vendors/customers.

b) Jigs and fixtures costing less than Rs. 5,000/- each are written off in the year of purchase.

c) Goods received are accounted as purchases on satisfactory completion of inspection.

XV. Borrowing cost

Borrowing costs on loans relatable to qualifying assets are capitalized to the extent incurred prior to these assets are ready for their intended use. Other borrowing costs are written off in the year to which they pertain. Borrowing cost include interest, amotisation of ancillary costs incurred and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.

XVI. Employee benefits

- Provident Fund & Employees State Insurance Corporation

Contributions to defined contribution schemes such as Provident Fund & Employees State Insurance Corporation, etc. are charged to the statement of profit & loss as incurred. In respect of certain employees, provident fund contributions are made to a Trust administered by the Company. The interest rate payable to the members of the Trust is mandated not be lower than the statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, is made good by the Company. The remaining contributions are made to a government administered provident fund towards which the Company has no further obligations beyond its monthly contributions.

- Gratuity

The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The Company has an employee gratuity fund managed by LIC. The Company accounts for the liability of gratuity benefits payable in future based on an independent actuarial valuation.

- Leave encashment

The Company provides for the encashment of leave with pay subject to certain rules for certain grade of employees. The eligible employees are entitled to accumulate leave subject to certain limits, for future encashment/availment. The liability is provided based on the number of days of unutilized leave at each balance sheet date on the basis of an independent actuarial valuation.

- Termination benefits

Termination benefits are recognised as an expense as and when incurred or only when the obligation can be reliably estimated.

XVII. Taxation

Taxes on income for the current year are determined on the basis of provisions of Income Tax Act, 1961.

Deferred tax is recognised on timing differences between the accounting income and the taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the balance sheet date.

Deferred tax asset are recognised only to the extent that there is a reasonable certainty that sufficient future income will be available except that deferred tax asset, in case there are taxable unabsorbed depreciation or losses are recognised if there is virtual certainty that sufficient future taxable income will be available to realise the same.

Minimum alternate tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal tax during the specified period.

XVIII. Provisions & contingencies

Loss contingencies arising from claims, litigations, assessments, fines, penalties, etc., are recorded when it is probable that a liability will be incurred, and the amount can be reasonably estimated.

Warranty cost is provided on the basis of cost of warranty claims received from the customers and a reasonable estimate for future claims is made based on empirical data.

XIX. Earning per share

Annualised basic earning per equity share is arrived at based on net profif/(loss) after taxation to the basic/weighted average number of equity shares.

XX. Cash and cash equivalents

Cash and cash equivalents for the purposes of cash flow statements comprise cash at bank and in hand and short-term highly liquid investment with an original maturity of three month or less.


Mar 31, 2014

I. General information

The Company is primarily engaged in the manufacture of steering systems & other auto components for the passenger car and utility vehicle manufacturers. Automobile manufacturers are its primary customers. The Company is a public Company listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).

II. Accounting convention

The financial statements have been prepared in accordance with applicable accounting standards in India notified under section 211 (3C) of the Companies Act, 1956 which as per General Circular 15/2013 dated 13th September, 2013, issued by the Ministry of Corporate Affairs continue to apply under Section 133 of the Companies Act, 2013. Financial statements have also been prepared in accordance with relevant presentation requirements of the Companies Act, 1956 of India.

III. Basis of accounting

The financial statements are prepared under the historical cost convention on an accrual basis.

IV. Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

V. Fixed assets and depreciation/amortisation

Fixed Assets (except freehold land which is carried at cost) are stated at cost of acquisition or construction less accumulated depreciation. Cost comprises of the purchase price, incidental expenses, erection/commissioning expenses and financial charges upto the date the fixed asset is ready for its intended use.

The Company provides depreciation on fixed assets on the straight-line method at the rates specified in Schedule XIV to the Companies Act, 1956 on a pro-rata basis from the month in which the asset is put to use, except for certain fixed assets where, based on management''s estimate of the useful lives of the assets, higher depreciation has been provided on the straight line method as stated below:

Leasehold improvements are depreciated at the rate of 20% per annum or over the period of lease if less than five years.

- Assets situated at employee''s residence are depreciated at the rate of 33.33% per annum.

- Vehicles are depreciated at the rate of 18.75% per annum.

Computers are depreciated at the rate of 25% per annum.

Dies are depreciated at the rate of 25% per annum.

An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value. An impairment loss is charged to the statement of profit & loss in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

VI. Intangible assets and amortization thereof

Intangible assets comprise of product development expenses and computer software and are stated at cost less accumulated amortization and impairment losses, if any.

Product development costs incurred including technical fees paid to collaborator for the development of new products for which letters of intent have been received from customers are accumulated and recognised as intangible assets, (included under fixed assets) and are amortized over a period of six years. Unamortized products development fee in respect of models discontinued during the year is fully charged off in statement of profit & loss.

Software, which is not an integral part of the related computer hardware is classified as an intangible asset and is being amortized over a period of 72 months, being the estimated useful life.

Amortization expenses is charged on a pro-rata basis for assets purchased during the year. The appropriateness of the amortization period and the amortization method is reviewed at each financial year end.

VII. Leases

- Where the Company is the lessee

Leases where the lessor effectively retain substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit & loss on a straight-line basis over the lease term.^

- Where the Company is the lessor

Assets subject to operating leases are included in fixed assets. Lease income is recognised in the statement of profit & loss on a straight-line basis over the lease term. Cost, including depreciation are recognised as expenses in the statement of profit & loss. Initial direct costs such as legal costs, brokerage costs,etc. are recognised immediately in the statement of profit & loss.

VIII. Investments

Long term Investments are valued at their acquisition cost. Provision for diminution, other than temporary, is made wherever necessary.

IX. Inventory valuation

a) Inventories are value at the lower of weighted average cost and net realisable value.

b) All tools (including loose tools) are written off over their useful life and un-issued tools are valued at lower of weighted average cost and net realisable value.

c) Finished goods and work in progress include costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

X. Foreign currency transactions

- Initial recognition:

Foreign Currency Transactions are recorded at the exchange rates prevailing on the date of transactions.

- Conversion:

Foreign currency monetary items are retranslated using the exchange rate prevailing at the reporting date.

- Exchange difference:

A) With respect to long-term foreign currency monetary items, from April 1, 2011 onwards, the Company has adopted the following policy:

- Foreign exchange difference on account of acquisition of depreciable fixed asset, is adjusted in the cost of the depreciable fixed asset, which would be depreciated over the remaining useful life of the asset.

- In other cases, the foreign exchange difference is accumulated in a foreign currency monetary item translation difference account and amortised over the remaining life of the concerned long term monetary item.

A monetary asset or liability is termed as a long-term foreign currency monetary item, if the monetary asset or liability is expressed in a foreign currency and has a term of 12 months or more at the date of its origination.

B) Other gains and losses resulting from the settlement of foreign currency transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of profit & loss.

- Forward exchange contracts:

In case of forward exchange contracts, the premium or discount arising at the inception of forward exchange contracts entered into, to hedge an existing asset / liability, is amortized as expense or income over the life of the contract. Exchange differences on such a contract are recognized in the statement of profit & loss in the reporting period in which the exchange rate changes.

Forward exchange contracts outstanding as at the year end on account of firm commitment / highly probable forecast transactions are marked to market and the losses, if any, are recognized in the statement of profit & loss while gains are ignored.

XI. Excise

Excise duty on finished goods manufactured is accounted on the basis of production of goods.

XII. Research & development

a) Capital Expenditure for Research & Development is capitalised in the year of installation and depreciated accordingly.

b) Revenue expenses incurred for Research & Development is charged to statement of profit & loss of the year in which it is incurred.-

XIII. Income

1) Revenue recognition - Revenue from domestic and export sales^are recognised on transfer of all significant risks and rewards or ownership to the buyer.

2) Price escalation claims from customers and discounts from suppliers are accounted in the year under audit, only--- if they are settled with the customers and suppliers respectively up to the date of finalisation of accounts.

3) Dividend from investments is recognized when the right to receive the payment is established and when no significant uncertainty as to measurability or collectability exists.

4) All export benefits are recognised as income when there is substantial certainty as their realisability e.g.

a) Focused Product Scheme are recognized as income on filing the relevant application with the respective authorities.

b) Duty draw back is accounted in the year of export.

XIV. Expenses

a) Discounts to customers and price escalation to suppliers to the extent not settled at the balance sheet date are accounted on the basis of reasonable estimates made after considering negotiations with vendors/customers.

b) Jigs and fixtures costing less than Rs. 5,000/- each are written off in the year of purchase.

c) Goods received are accounted as purchases on satisfactory completion of inspection.

XV. Borrowing cost

Borrowing costs on loans relatable to qualifying assets are capitalized to the extent incurred prior to these assets are ready for their intended use. Other borrowing costs are written off in the year to which they pertain.

XVI. Employee benefits

- Provident Fund & Employees State Insurance Corporation

Contributions to defined contribution schemes such as Provident Fund & Employees State Insurance Corporation, etc. are charged to the statement of profit & loss as incurred. In respect of certain employees, provident fund contributions are made to a Trust administered by the Company. The interest rate payable to the members of the Trust is mandated not be lower than the statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, is made good by the Company. The remaining contributions are made to a government administered provident fund towards which the Company has no further obligations beyond its monthly contributions.

- Gratuity

The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The Company has an employee gratuity fund managed by LIC. The Company accounts for the liability of gratuity benefits payable in future based on an independent actuarial valuation.

- Leave encashment

The Company provides for the encashment of leave with pay subject to certain rules for certain grade of employees. The eligible employees are entitled to accumulate leave subject to certain limits, for future encashment/availment. The liability is provided based on the number of days of unutilized leave at each balance sheet date on the basis of an independent actuarial valuation.

- Termination benefits

Termination benefits are recognised as an expense as and when incurred or only when the obligation can be reliably estimated.

XVII. Taxation

Taxes on income for the current year are determined on the basis of provisions of Income Tax Act, 1961.

Deferred tax is recognised on timing differences between the accounting income and the taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the balance sheet date.

Deferred tax assets are recognised and carried forward to the extent that there is a virtual certainty that sufficient future taxable income will be available against which such deferred tax asset can be realised.

Minimum alternate tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal tax during the specified period.

XVIII.Provisions & contingencies

Loss contingencies arising from claims, litigations, assessments, fines, penalties, etc., are recorded when it is probable that a liability will be incurred, and the amount can be reasonably estimated.

Warranty cost is provided on the basis of cost of warranty claims received from the customers and a reasonable estimate for future claims is made based on empirical data.

XIX. Earning per share

Annualised Basic earning per equity share is arrived at based on net profit/(loss) after taxation to the basic/weighted- average number of equity shares.

b) Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs. 1/- per share. Each holder of equity shares is entitled to one vote per share. 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, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

1. Indian rupee loans from banks include:

(a) Rupee term loans of Rs. 13073.38 lacs (previous year Rs. 19963.34 lacs) are secured by first pari-passu charge over the entire movable and immovable fixed assets of the Company, both present and future, except the assets exclusively charged. Loans to the extent ofRs. 1085.00 lacs (previous yearRs. 1550.00 lacs) are further secured by way of second charge on current assets, on pari-passu basis. The rate of interest on aforesaid loans are linked to the specific bank''s base rate.

(b) Rupees term loan of Rs. Nil (previous year Rs. 750.00 lacs) from State Bank of India is secured by way of first pari-passu charge on current assets and second parri-passu charge on movable and immovable fixed assets of the Company. The Loan is further secured by way of exclusive mortgage on land situated at Plot No. 19, Dharuhera Industrial Area, Phase II, District Rewari (Haryana). The rate of interest on aforesaid loan is linked to bank''s base rate.

(c) Rupee term loan of Rs. 110.29 lacs (previous yearRs. 138.99 lacs) from Allahabad Bank, secured by way of exclusive charge on the vehicles financed out of the said term loan. The rate of interest on aforesaid loan is linked to bank''s base rate.


Mar 31, 2013

I. General information

The Company is primarily engaged in the manufacture of steering systems & other auto components for the passenger car and utility vehicle manufacturers. Automobile manufacturers are its primary cutomers.The Company is a Public Company listed in the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).

II. Accounting convention

The financial statements have been prepared in accordance with applicable accounting standards in India notified under Section 211 (3C) of the Companies Act, 1956. Financial statements have also been prepared in accordance with relevant presentation requirements of the Companies Act, 1956 of India.

III. Basis of accounting

The financial statements are prepared under the historical cost convention on an accrual basis.

IV. Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

V Fixed assets and depreciation/amortisation

Fixed Assets (except freehold land which is carried at cost) are stated at cost of acquisition or construction less accumulated depreciation. Cost comprises of the purchase price, incidental expenses, erection/commissioning expenses and financial charges upto the date the fixed asset is ready for its intended use.

The Company provides depreciation on fixed assets on the straight-line method at the rates specified in Schedule XIV to the Companies Act, 1956 on a pro-rata basis from the month in which the asset is put to use, except for certain fixed assets where, based on management''s estimate of the useful lives of the assets, higher depreciation has been provided on the straight-line method as stated below:

Leasehold improvements are depreciated at the rate of 20% per annum or over the period of lease if less than five years.

Assets situated at employee''s residence are depreciated at the rate of 33.33% per annum.

Vehicles are depreciated at the rate of 18.75% per annum.

Computers are depreciated at the rate of 25% per annum.

Dies are depreciated at the rate of 25% per annum.

An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value. An impairment loss is charged to the statement of profit & loss in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

VI. Intangible assets and amortization thereof

Intangible assets comprise of product development expenses and computer software and are stated at cost less accumulated amortization and impairment losses, if any.

Product development costs incurred including technical fees paid to collaborator for the development of new products for which letters of intent have been received from customers are accumulated and recognised as intangible assets, (included under fixed assets) and are amortized over a period of six years. Unamortized products development fee in respect of models discontinued during the year is fully charged off in statement of profit & loss.

Software, which is not an integral part of the related computer hardware is classified as an intangible asset and is being amortized over a period of 72 months, being the estimated useful life.

Amortization expenses is charged on a pro-rata basis for assets purchased during the year. The appropriateness of the amortization period and the amortization method is reviewed at each financial year end.

VII. Leases

- Operating lease :

Lease arrangements, where the risks and rewards incidental to ownership of an asset substantially vest with the lessor, are recognised as operating lease.

Operating lease payments are recognised as an expense in the statement of profit and loss on a straight-line°basis ~over the lease term._

VIII. Investments

Long term Investments are valued at their acquisition cost. Provision for diminution, other than temporary, is made wherever necessary.

IX. Inventory valuation

a) Inventories are valued at the lower of weighted average cost and net realisable value.

b) All tools (including loose tools) are written off over their useful life and un-issued tools are valued at lower of weighted average cost and net realisable value.

c) Finished goods and work in progress include costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

X. Foreign currency transactions

- Initial recognition:

Foreign currency transactions are recorded at the exchange rates prevailing on the date of transactions.

- Conversion:

Foreign currency monetary items are retranslated using the exchange rate prevailing at the reporting date.

- Exchange difference:

A) With respect to long-term foreign currency monetary items, from April 1, 2011 onwards, the Company has adopted the following policy:

- Foreign exchange difference on account of acquisition of depreciable fixed asset, is adjusted in the cost of the depreciable fixed asset, which would be depreciated over the remaining useful life of the asset.

- In other cases, the foreign exchange difference is accumulated in a foreign currency monetary item translation difference account and amortised over the remaining life of the concerned long term monetary item.

A monetary asset or liability is termed as a long-term foreign currency monetary item, if the monetary asset or liability is expressed in a foreign currency and has a term of 12 months or more at the date of its origination.

B) Other gains and losses resulting from the settlement of foreign currency transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of profit and loss.

- Forward exchange contracts:

In case of forward exchange contracts, the premium or discount arising at the inception of forward exchange contracts entered into to hedge an existing asset / liability, is amortized as expense or income over the life of the contract. Exchange differences on such a contract are recognized in the statement of profit & loss in the reporting period in which the exchange rate changes.

Forward exchange contracts outstanding as at the year end on account of firm commitment / highly probable forecast transactions are marked to market and the losses, if any, are recognized in the statement of profit & loss while gains are ignored.

XI. Excise

Excise duty on finished goods manufactured is accounted on the basis of production of goods.

XII. Research & development

a) Capital expenditure for Research & Development is capitalised in the year of installation and depreciated accordingly.

b) Revenue expenses incurred for Research & Development is charged to statement of profit & loss of the year in which it is incurred.

XIII. Income

1) Revenue recognition - Revenue from domestic and export sales are recognised on transfer of all significant risks and rewards or ownership to the buyer, which generally coincides with dispatch of goods from factory / port respectively.

2) Price escalation claims from customers and discounts from suppliers are accounted in the year under audit, only if they are settled with the customers and suppliers respectively up to the date of finalisation of accounts.

3) Dividend from investments is recognized when the right to receive the payment is established and when no --significant uncertainty as to measurability or collectability exists.

4) All export benefits are recognised as income when there is substantial certainty as their realisability e.g.

a) DEPB license & focused product scheme are recognized as income on filing the relevant application with the respective authorities.

b) Duty draw back is accounted in the year of export.

XIV. Expenses

a) Discounts to customers and price escalation to suppliers to the extent not settled at the balance sheet date are accounted on the basis of reasonable estimates made after considering negotiations with vendors/customers.

b) Jigs and fixtures costing less than Rs. 5000/- each are written off in the year of purchase.

c) Goods received are accounted as purchases on satisfactory completion of inspection.

XV. Borrowing cost

Borrowing costs on loans relatable to qualifying assets are capitalized to the extent incurred prior to these assets are ready for their intended use. Other borrowing costs are written off in the year to which they pertain.

XVI. Employee benefits

- Provident Fund & Employees State Insurance Corporation

Contributions to defined contribution schemes such as Provident Fund & Employees State Insurance Corporation, etc. are charged to the statement of profit & loss as incurred. In respect of certain employees, provident fund contributions are made to a Trust administered by the Company. The interest rate payable to the members of the Trust is mandated not be lower than the statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, is made good by the Company. The remaining contributions are made to a government administered provident fund towards which the Company has no further obligations beyond its monthly contributions.

- Gratuity

The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The Company has an employee gratuity Fund managed by LIC. The Company accounts for the liability of Gratuity Benefits payable in future based on an independent actuarial valuation.

- Leave encashment

The Company provides for the encashment of leave with pay subject to certain rules for certain grade of employees. The eligible employees are entitled to accumulate leave subject to certain limits, for future encashment/availment. The liability is provided based on the number of days of unutilized leave at each balance sheet date on the basis of an independent actuarial valuation.

- Termination benefits

Termination benefits are recognised as an expense as and when incurred or only when the obligation can be reliably estimated.

XVII. Taxation

Taxes on income for the current year are determined on the basis of provisions of Income Tax Act, 1961.

Deferred tax is recognised on timing differences between the accounting income and the taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the balance sheet date.

Deferred tax assets are recognised and carried forward to the extent that there is a virtual certainty that sufficient future taxable income will be available against which such deferred tax asset can be realised.

Minimum alternate tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal tax during the specified period.

XVIII. Provisions & contingencies

Loss contingencies arising from claims, litigations, assessments, fines, penalties, etc., are recorded when it is probable that a liability will be incurred, and the amount can be reasonably estimated.

Warranty cost is provided on the basis of cost of warranty claims received from the customers and a reasonable estimate for future claims is made based on empirical data.

XIX. Earning per share

Annualised basic earning per equity share is arrived at based on net profit/(loss) after taxation to the basic/weighted average number of equity shares.


Mar 31, 2011

I. Accounting Convention

The financial statements have been prepared in accordance with applicable accounting standards in India notified under Section 211 (3C) of the Companies Act, 1956. Financial statements have also been prepared in accordance with relevant presentation requirements of the Companies Act, 1956 of India

II. Basis of Accounting :

The financial statements are prepared under the historical cost convention on an accrual basis.

III. Use of Estimates :

The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods

IV. Fixed Assets and Depreciation :

Fixed Assets are stated at cost of acquisition or construction less accumulated depreciation. Cost comprises of the purchase price, incidental expenses, erection/commissioning expenses and financial charges upto the date the fixed asset is ready for its intended use

The Company provides depreciation on fixed assets on the straight-line method at the rates specified in Schedule XIV to the Companies Act, 1956 on a pro-rata basis from the month in which the asset is put to use, except as stated below.

- Leasehold improvements are depreciated at the rate of 20% per annum or over the period of lease if less than five years

- Assets situated at employees residence are depreciated at the rate of 33.33% per annum

- Vehicles are depreciated at the rate of 12% per annum from April, 2003

An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value. An impairment loss is charged to the Profit & Loss Account in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

V. Intangible Assets and Amortization thereof :

intangible assets comprise new product development expenses and computer software and are stated at cost less accumulated amortization and impairment losses, if any.

Product development costs incurred including technical fees paid to collaborator for the development of new products for which letters of intent have been received from customers are accumulated and recognised as intangible assets (included under fixed assets) and are amortised over a period of six years. Un-amortized products development fee in respect of models discontinued during the year is fully charged off in Profit & Loss Account.

Software, which is not an integral part of the related computer hardware is classified as an intangible asset and is being amortised over a period of 72 months, being the estimated useful life.

Amortization expenses is charged on a pro-rata basis for assets purchased during the year. The appropriateness of the amortization period and the amortization method is reviewed at each financial year end.

VI. Leases :

Operating Lease :

Lease arrangements, where the risks and rewards incidental to ownership of an asset substantially vest with the lessor, are recognised as operating lease.

Operating lease payments are recognised as an expense in the Profit & Loss Account on a straight line basis over the lease term.

VII. Investments :

Long term investments are valued at their acquisition cost. Provision for diminution, other than temporary, is made wherever necessary.

VIII. Inventory Valuation :

a) Stores and spare parts are valued at lower of weighted average cost and net realisable value

b) All tools (including loose tools) are written off over their useful life and un-issued tools are valued at lower of weighted average cost and market value

c) Raw materials, Components and Work-in-Process are valued at lower of weighted average cost and net realisable value

d) Finished Goods are valued at lower of weighted average cost and net realisable value

Finished Goods and Work in Process include costs of conversion and other costs incurred in bringing the inventories to their present location and condition

IX. Foreign Currency Transactions :

Foreign currency transactions are recorded on the basis of average of the exchange rates in force during the relevant week of each month. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the Profit & Loss Account. In case of transaction covered by forward contracts, the difference between the contract rate and exchange rate prevailing on the date of transaction is charged to Profit & Loss Account, proportionately over the contract period All assets and liabilities denominated in foreign currency are restated at relevant year end rates

X. Excise :

Excise duty on finished goods manufactured is accounted on the basis of production of goods XI . Research & Development :

a) Capital Expenditure for Research & Development is capitalised in the year of installation

b) Revenue expenses incurred for Research & Development for existing products are charged to Profit & Loss Account of the year.

XII. Income :

1) Revenue recognition - Revenue from domestic and export sales are recognised on transfer of all significant risks and rewards or ownership to the buyer, which generally coincides with dispatch of goods from factory / port respectively.

2) Price escalation claims from customers and discounts from suppliers are accounted in the year under audit, only if they are settled with the customers and suppliers respectively up to the date of finalisation of accounts.

3) Dividend on investment is accounted in the year in which it is declared

4) All export benefits are recognised as income when there is substantial certainty as to their realisability e.g.

a) DEPB license and FPS are recognized as income on the relevant application being filed

b) Duty draw back is accounted in the year of export.

XIII. Expenses :

a) Discounts to customers and price escalation to suppliers to the extent not settled at the Balance Sheet date are accounted on the basis of reasonable estimates made after considering negotiations with vendors/customers.

b) Jigs and fixtures costing less than Rs. 5,000/- each are written off in the year of purchase

c) Goods received are accounted as purchases on satisfactory completion of inspection.

XIV. Borrowing Cost :

Borrowing costs on loans relatable to qualifying assets are capitalized to the extent incurred prior to these assets being put to use. Other borrowing costs are written off in the year to which they pertain.

XV. Employees Benefits :

Provident Fund

Contributions to defined contribution schemes such as Provident Fund, etc. are charged to the Profit & Loss account as incurred. In respect of certain employees, Provident Fund contributions are made to a Trust administered by the Company. The interest rate payable to the members of the Trust shall not be lower than the statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, shall be made good by the Company. The remaining contributions are made to a government administered Provident Fund towards which the Company has no further obligations beyond its monthly contributions.

Gratuity

The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The Company has an Employee Gratuity Fund managed by LIC. The Company accounts for the liability of Gratuity Benefits payable in future based on an independent actuarial valuation

Leave Encashment

The Company provides for the encashment of leave with pay subject to certain rules for certain grade of employees. The eligible employees are entitled to accumulate leave subject to certain limits, for future encashment/availment. The liability is provided based on the number of days of unutilized leave at each balance sheet date on the basis of an independent actuarial valuation

Termination Benefits

Termination benefits are recognised as an expense as and when incurred or only when the obligation can be reliably estimated

XVI. Taxation :

Taxes on income for the current year are determined on the basis of provisions of Income Tax Act, 1961

Deferred Tax is recognised on timing differences between the accounting income and the taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date

Deferred Tax assets are recognised and carried forward to the extent that there is a virtual certainity that sufficient future taxable income will be available against which such deferred tax asset can be realised

XVII. Contingencies :

Loss contingencies arising from claims, litigations, assessments, fines, penalties, etc., are recorded when it is probable that a liability will be incurred, and the amount can be reasonably estimated

Warranty cost is provided on the basis of cost of warranty claims received from the customers and a reasonable estimate for future claims is made based on empirical data

XVIII. Earning Per Share :

Annualised basic earning per equity share is arrived at based on net profit/(loss) after taxation to the basic/ weighted average number of equity shares.

 
Subscribe now to get personal finance updates in your inbox!