Accounting Policies of Sterling Tools Ltd. Company
Mar 31, 2018
A. Significant accounting policies
A summary of the significant accounting policies applied in the preparation of the financial statements are as given below. These accounting policies have been applied consistently to all periods presented in the standalone financial statements.
(1) Property, plant and equipment
1.1 Initial recognition and measurement
Items of property, plant and equipment are measured at cost, which included, accumulated depreciation and accumulated impairment losses, if any.
Cost of an items of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable cost of bringing the items to its working condition for its intended use and estimated cost of dismantling and removing the item and restoring the site on which it is located.
The cost of a self-constructed property, plant and equipment comprises the cost of materials and direct labour, any other costs directly attributable to bringing the item to working condition for its intended use, and estimated costs of dismantling and removing the item and restoring the site on which it is located.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.
1.2 Subsequent costs
Subsequent expenditure is recognised as an increase in the carrying amount of the asset when it is probable that future economic benefits deriving from the cost incurred will flow to the enterprise and the cost of the item can be measured reliably.
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.
1.3 Decommissioning costs
The present value of the expected cost for the decommissioning of the asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.
1.4 Derecognition
Property, plant and equipment is derecognised when no future economic benefits are expected from their use or upon their disposal. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised in the statement of profit and loss.
1.5 Transition to Ind AS
The Company has elected to avail the option under Ind AS 101 by not applying the provisions of Ind AS 16 retrospectively and continue to use the previous GAAP carrying amount as a deemed cost under Ind AS at the date of transition to Ind AS. Therefore, the carrying amount of property, plant and equipment as per the previous GAAP as at 1 April 2016, i.e. the Companyâs date of transition to Ind AS, was maintained on transition to Ind AS.
(2) Depreciation
Depreciation is recognised in statement of profit and loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment specified in schedule II to the Companies Act, 2013.
Leasehold improvements are amortised over the lease period.
Depreciation on additions to/deductions from property, plant & equipment during the year is charged on pro-rata basis from/up to the date in which the asset is available for use/disposed.
Depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate. Based on technical evaluation and consequent advice, the management believes that its estimates of useful lives as given above best represent the period over which management expects to use these assets.
(3) Intangible assets
3.1 Recognition and measurement
Intangible assets that are acquired by the Company, have finite useful lives, are measured at cost less accumulated amortisation and accumulated impairment losses, if any. Cost includes any directly attributable incidental expenses necessary to make the assets ready for its intended use.
Subsequent expenditure is recognised as an increase in the carrying amount of the asset when it is probable that future economic benefits deriving from the cost incurred will flow to the enterprise and the cost of the item can be measured reliably.
3.2 Derecognition
An intangible asset is derecognised when no future economic benefits are expected from their use or upon their disposal. Gains and losses on disposal of an item of intangible assets are determined by comparing the proceeds from disposal with the carrying amount of intangible assets and are recognised in the statement of profit and loss.
3.3 Amortisation
Cost of software recognised as intangible asset, is amortised on straight line method over a period of legal right to use or 3 years, as estimated by the management.
Amortisation method, useful lives and residual values are reviewed at the end of each financial year and adjusted, if appropriate.
3.4 Transition to Ind AS
The Company has elected to utilise the option under Ind AS 101 by not applying the provisions of Ind AS 38 retrospectively and continue to use the previous GAAP carrying amount as a deemed cost under Ind AS at the date of transition to Ind AS. Therefore, the carrying amount of intangible assets as per the previous GAAP as at 1 April 2016, i.e. the Companyâs date of transition to Ind AS, was maintained on transition to Ind AS.
(4) Borrowing costs
Borrowing costs are interest and other costs incurred in connection with the borrowings of funds. Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalised as part of cost of such asset until such time the assets are substantially ready for their intended use. Qualifying assets are assets which take a substantial period of time to get ready for their intended use or sale.
When the Company borrows funds specifically for the purpose of obtaining a qualifying asset, the borrowing costs incurred are capitalised. When Company borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the capitalisation of the borrowing costs is computed based on the weighted average cost of general borrowing that are outstanding during the period and used for the acquisition or construction of the qualifying asset.
Capitalisation of borrowing costs ceases when substantially all the activities necessary to prepare the qualifying assets for their intended uses are complete. Income earned on temporary investment of the borrowings pending their expenditure on the qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Other borrowing costs are recognised as an expense in the year in which they are incurred.
(5) Impairment of non-financial assets
The carrying amounts of the Companyâs non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment considering the provisions of Ind AS 36 âImpairment of Assetsâ. If any such indication exists, then the assetâs recoverable amount is estimated.
For impairment testing, assets that do not generate independent cash inflows are grouped together into cash-generating units (CGUs). Each CGU represents the smallest group of assets that generate cash inflows that are largely independent of the cash inflows of the other assets or CGUs.
The recoverable amount of an asset or cash-generating unit is the higher of its fair value less costs of disposal and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the âcash-generating unitâ, or âCGUâ).
The Companyâs corporate assets (eg. Central office building for providing support to various CGUs) do not generate independent cash inflows. To determine impairment of a corporate asset, recoverable amount is determined for the CGUs to which the corporate assets belongs.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its estimated recoverable amount. Impairment losses are recognised in the statement of profit or loss. Impairment loss recognised in respect of a CGU is allocated first to reduce the carrying amount of any goodwill allocated to CGU, and then to reduce the carrying amounts of any other assets of the CGUs (or group of CGUs on a pro-rata basis.
(6) Inventories
Inventories are valued at the lower of cost and net realisable value after providing for obsolescence and other losses wherever considered necessary. Cost of inventories comprises of cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. The cost of purchase consists of the purchase price including duties and taxes other than those subsequently recoverable by the enterprise from the taxing authorities, freight inwards and other expenditure directly attributable for its acquisition.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
The comparison of cost and net realisable value is made on an item-by-item basis.
The methods of determining cost of various categories of inventories are as under:
Stock in Transit is valued at lower of cost and net realisable value. Scrap is valued at estimated net realisable value.
(7) Provisions and contingent liabilities and contingent assets
A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
Contingent liabilities are possible obligations that arise from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events not wholly within the control of the Company. Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Contingent liabilities are disclosed on the basis of judgment of the management/independent experts. These are reviewed at each balance sheet date and are adjusted to reflect the current management estimate.
Contingent Assets are neither recognised nor disclosed in the financial statements.
(8) Government grants
Government grants and subsidies are accounted for in the books of account when the ultimate collection of the grant/subsidy is reasonably certain. Grants that compensate the Company for expenses incurred are recognised in profit or loss as other operating revenues on a systematic basis in the periods in which such expenses are recognised.
(9) Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
(10) Foreign currency transactions and translation
Transactions in foreign currencies are initially recorded at the functional currency spot rates at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Exchange differences arising on settlement or translation of monetary items are recognised in profit or loss in the year in which it arises.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
The Company uses derivative financial instruments, such as forward currency contracts to hedge its foreign currency risks in respect of its imports and exports. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. Any gains or losses arising from changes in the fair value of derivatives are taken to statement of profit and loss.
(11) Revenue
Revenue is recognised when the significant risks and rewards of ownership have been transferred to the customer, it is probable that the economic benefits associated with the transactions will flow to the entity, the associated costs can be estimated reliably, there is no continuing management involvement, and the amount of revenue can be measured reliably. The above mentioned factors coincides with dispatch of goods from the factory/ storage area and port (in case of exports). Amount disclosed as revenue are inclusive of excise duty and net of returns, quantity discounts, trade discounts, sales tax and exclusive of goods and service tax.
Income from Export Incentives viz. Duty Drawback and Focus Product Scheme is recognised on accrual basis.
(12) Other income
Interest income is recognised, when no significant uncertainty as to measurability or collectability exists, on a time proportion basis taking into account the amount outstanding and the applicable interest rate, using the effective interest rate method (EIR).
(13) Employee Benefits
13.1 Short term employee benefits
Short- term employee benefit obligations are measured on an undiscounted basis and are expensed as the relative service is provided. A liability is recognised for the amount expected to be paid e.g., under short-term cash bonus, if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the amount of obligation can be estimated reliably.
13.2 Defined contribution plan
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into separate entities and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised as an employee benefits expense in profit or loss in the period during which services are rendered by employees.
The Company pays fixed contribution to government administered provident fund scheme at predetermined rates. The contributions to the fund for the year are recognised as expense and are charged to the profit or loss.
13.3 Defined benefit plan
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Companyâs liability towards gratuity is in the nature of defined benefit plans.
The Companyâs net obligation in respect of defined benefit plan is calculated separately by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognised past service costs are deducted. The discount rate is based on the prevailing market yields of Indian government securities as at the reporting date that have maturity dates approximating the terms of the Companyâs obligations and that are denominated in the same currency in which the benefits are expected to be paid.
The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Company, the recognised asset is limited to the total of any unrecognised past service costs. Any actuarial gains or losses are recognised in other comprehensive income in the period in which they arise.
13.4 Other long term employee benefits
Benefits under the Companyâs leave encashment constitute other long term employee benefit.
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. The benefit is discounted to determine its present value. The discount rate is based on the prevailing market yields of Indian government securities as at the reporting date that have maturity dates approximating the terms of the Companyâs obligations. The obligation is measured on the basis of independent actuarial valuation using the projected unit credit method.
(14) Lease
Accounting for operating 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 lease. Payments made under operating leases are recognised as an expense over the lease term unless the payments are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases. Initial direct costs incurred specifically for an operating lease are deferred and charged to the Statement of Profit and Loss over the lease term.
(15) Taxes on income
Income tax expense comprises current and deferred tax. Current tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in other comprehensive income or equity, in which case it is recognised in other comprehensive income or equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted and as applicable at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority.
Deferred tax is recognised in profit or loss except to the extent that it relates to items recognised directly in other comprehensive income or equity, in which case it is recognised in other comprehensive income or equity.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
(16) Earning per share
Basic earnings per equity share is computed by dividing the net profit or loss attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the financial year.
Diluted earnings per equity share is computed by dividing the net profit or loss attributable to equity shareholders of the Company by the weighted average number of equity shares considered for deriving basic earnings per equity share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares.
(17) Operating segment
In accordance with Ind AS 108, the operating segments used to present segment information are identified on the basis of internal reports used by the Companyâs Management to allocate resources to the segments and assess their performance. The Board of Directors is collectively the Companyâs âChief Operating Decision Makerâ or âCODMâ within the meaning of Ind AS 108. The indicators used for internal reporting purposes may evolve in connection with performance assessment measures put in place.
(18) Equity investment
Equity investments in Joint Venture and subsidiaries are measured at cost. The investments are reviewed at each reporting date to determine whether there is any indication of impairment considering the provisions of Ind AS 36 âImpairment of Assetsâ. If any such indication exists, policy for impairment of non-financial assets is followed.
(19) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
19.1 Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition or issue of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in statement of profit and loss.
Subsequent measurement
i) Financial assets carried at amortised cost
A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
ii) Financial assets at fair value through other comprehensive income (FVOCI)
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(iii) Financial assets at fair value through profit or loss (FVTPL)
A financial asset which is not classified in any of the above categories are subsequently fair valued through statement of profit and loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial assets) is primarily derecognised (i.e. removed from the Companyâs balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
(a) Financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities, deposits, trade receivables and bank balance.
(b) Trade receivables under Ind AS 18.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognising impairment loss allowance based on 12-month ECL.
19.2 financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of borrowings and payables, net of directly attributable transaction costs. The Companyâs financial liabilities include trade and other payables, borrowings and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below: financial liabilities at amortised cost
After initial measurement, such financial liabilities are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the profit or loss. This category generally applies to borrowings, trade payables and other contractual liabilities.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
19.3 Offsetting
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
D. Use of estimates and management judgments
The preparation of financial statements requires management to make judgments, estimates and assumptions that may impact the application of accounting policies and the reported value of assets, liabilities, income, expenses and related disclosures concerning the items involved as well as contingent assets and liabilities at the balance sheet date. The estimates and managementâs judgments are based on previous experience and other factors considered reasonable and prudent in the circumstances. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
In order to enhance understanding of the financial statements, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the standalone financial statements is as under:
(1) Useful life of property, plant and equipment
The estimated useful life of property, plant and equipment is based on a number of factors including the effects of obsolescence, demand, competition and other economic factors (such as the stability of the industry and known technological advances) and the level of maintenance expenditures required to obtain the expected future cash flows from the asset.
The Company reviews at the end of each reporting date the useful life of property, plant and equipment, and are adjusted prospectively, if appropriate.
(2) Recoverable amount of property, plant and equipment
The recoverable amount of plant and equipment is based on estimates and assumptions regarding in particular the expected market outlook and future cash flows. Any changes in these assumptions may have a material impact on the measurement of the recoverable amount and could result in impairment.
3) Employee benefit plans
Employee benefit obligations are measured on the basis of actuarial assumptions which include mortality and withdrawal rates as well as assumptions concerning future developments in discount rates, the rate of salary increases and the inflation rate. The Company considers that the assumptions used to measure its obligations are appropriate and documented. However, any changes in these assumptions may have a material impact on the resulting calculations.
(4) Leases not in legal form of lease
Significant judgment is required to apply lease accounting rules under Appendix C to Ind AS 17 âDetermining whether an arrangement contains a leaseâ. In assessing the applicability to arrangements entered into by the Company, management has exercised judgment to evaluate the right to use the underlying asset, substance of the transactions including legally enforceable agreements and other significant terms and conditions of the arrangements to conclude whether the arrangement needs the criteria under Appendix C to Ind AS 17.
(5) Provisions and contingencies
The assessments undertaken in recognising provisions and contingencies have been made in accordance with Ind AS 37, âProvisions, Contingent Liabilities and Contingent Assetsâ. The evaluation of the likelihood of the contingent events has required best judgment by management regarding the probability of exposure to potential loss. Should circumstances change following unforeseeable developments, this likelihood could alter.
Mar 31, 2017
Sterling Tools Limited (the company) is a public limited company incorporated in the year 1979 under the provisions of the Companies Act, 1956. The shares of the company listed on Bombay Stock Exchange and National Stock Exchange in India. The Company is engaged in the manufacturing and marketing of high tensile cold forged fasteners. It is one of the progressive Original Equipment Manufacturer (OEM) suppliers in India with a client base that spans automotive companies in India, Europe and USA.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Accounting
The financial statements have been prepared in accordance with applicable accounting standards and relevant presentation requirements of the Companies Act, 2013 and are based on the historical cost convention. The financial statements have been prepared on accrual basis and under the historical cost convention. The company has complied in all material respects with Accounting Standards notified under section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rule 2014 and the provisions of the Act (to the extent notified) .The accounting policies adopted in the preparation of the financial statements are consistent with those of previous year except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
b. Uses of Estimates
The preparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. Differences between the actual results and estimates are recognized in the year in which the results are known\materialized. Changes in estimates are reflected in the financial statements in the period in which the changes are made and, if material, their effects are disclosed in the notes to the financial statements.
c. Fixed Assets and Depreciation
Fixed assets are stated at cost of acquisition inclusive of freight, duties & taxes and incidental expenses related to acquisition up to the date of installation. Cost of Fixed assets are further adjusted by the amount of Modvat/Cenvat credit availed and VAT credit wherever applicable. Interest and finance charges incurred are allocated to the respective fixed assets on installation (wherever applicable). Fixed assets under construction, and cost of assets not put to use before year end are shown as capital work in progress while advance paid towards acquisition of fixed assets are shown as capital advance under the head Loans & Advances.
Gain or loss arising on account of sale of fixed assets are measured as the difference between the net proceeds and the carrying amount of assets and are recognized in the statement of Profit and Loss in the year in which the asset is sold.
Software which are not an integral part of related hardware, is treated as intangible asset and amortized over a period of three years or its licensed period, whichever is less. Leasehold Improvements are amortized over the period of lease.
Depreciation on tangible assets is provided on the straight-line method over the useful lives of assets specified in schedule II to the Companies Act, 2013. Depreciation in case of additions is calculated on a pro-rata basis w.e.f. the start of the following month; in which the asset was capitalized. On assets sold, discarded, etc. during the year, depreciation is provided up to the last day of the preceding month vis-a-
vis the actual date of sale. Assets costing up to ''Rs,5,000 are fully depreciated in the year of acquisition. Further, the Schedule II to the Companies Act, 2013 requires that useful life and depreciation for significant components of an asset should be determined separately. The identification of significant components is matter of technical judgment and is decided on case to case basis; wherever applicable.
d. Revenue recognition
Revenue is recognized to the extent that it is probable that economic benefits will flow to the Company and the revenue can be reliably measured. Following are the specific revenue recognition criteria:
i) Revenue relating to sale of goods is recognized on dispatch of goods which coincides with the transfer of significant risks and rewards related to goods and are accounted for net of returns. Net sales, as disclosed, are exclusive of sales tax. Domestic and export sales are recognized on transfer of significant risks and rewards to the customer, which takes place on dispatch of goods from the factory/ storage area and port respectively.
ii) Revenue relating to interest income is recognized on time proportionate basis determined by the amount outstanding and the rate applicable and where no significant uncertainty as to measurability or collectability exists.
iii) Income from Export Incentives viz. Duty Drawback and Focus Product Scheme is recognized at year end on accrual basis.
e. Inventories
Inventories are valued at the lower of cost and net realizable value after providing for obsolescence and other losses were considered necessary. Cost of inventories comprises of cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. The cost of purchase consists of the purchase price including duties and taxes other than those subsequently recoverable by the enterprise from the taxing authorities, freight inwards and other expenditure directly attributable for its acquisition.
Stock in Transit is valued at lower of cost and net realizable value. Scrap is valued at estimated net realizable value.
f. Retirement and Employee Benefits
Expenses and Liabilities in respect of employee benefits are recorded in accordance with Revised Accounting Standard 15 - Employees Benefits (Revised 2005) issued by the Company (Accounting Standard) Rules, 2006.
Short Term Employee Benefits: All employees'' benefits falling due wholly within twelve months of rendering the services are classified as short term employee benefits. The benefits like salaries, wages, short term compensated absences (CL) etc. and the expected cost of bonus, ex-gratia are recognized in the period in which the employee renders the related services at undiscounted amount. Terminal Benefits if any, are recognized as an expense immediately.
Defined Contribution Plan
Contributions payable to recognized Provident Fund, Employee State Insurance scheme and labour welfare fund which are substantially defined contribution plans, are recognized as expense in the Statement of Profit & Loss, as they are incurred.
Defined Benefit Plan
The cost of providing defined benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognized in full in the Statement of Profit and Loss for the period in which they occur. Past service cost is recognized immediately to the extent the benefits are already vested, and otherwise is amortized on a straight line basis over the average period until the benefits become vested. The retirement benefit obligation recognized in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the scheme.
Other Long Term Benefits
Long term compensated absences (EL) are provided for on the basis of actuarial valuation, using the Projected Unit Credit method, at the end of each financial year. Actuarial gains/ losses, if any, are recognized immediately in the Statement of Profit and Loss.
g. Borrowing Cost
The borrowing costs which are directly attributable to the acquisition or construction of qualifying fixed assets, which necessarily take a substantial period of time to get ready for their intended use, are capitalized as part of cost of the assets. All other borrowing costs are immediately recognized as an expense in the Statement of Profit and Loss.
h. Foreign Currency Transactions
Initial Recognition: The transactions in foreign currency are initially accounted for at the rate prevailing as on the transaction date.
Conversion: The monetary items denominated in the foreign currency are stated at the exchange rate prevailing at the year end and the overall net gain/ (loss) is adjusted to the Statement of Profit & Loss. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of transaction.
Exchange Difference: The exchange difference arising on the settlement of monetary items or reporting these items at rates different from rates at which these were initially recorded/ reported in previous financial statements are recognized as income/expense in the period in which they arise.
Forward contracts: The Company uses derivative financial instruments such as forward contracts to hedge its risks associated with certain foreign currency transactions. The premium or discount arising at the inception of such a forward exchange contract is amortized as expense or income over the life of the Contract. Any profit or loss arising on cancellation or renewal of such a forward exchange contract is recognized as income or expense for the period.
i. Investments
âInvestments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as Non-Current Investments. Current Investments are carried in the financial statements at lower of cost and fair value.
Non-Current Investments are carried at Cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the Investments.â
j. Taxes on Income: Tax expense comprises current tax and deferred tax Current Tax
Current Tax is measured and expected to be paid to the tax authorities in accordance with the provisions of the Income Tax Act, 1961, and based on the expected outcome of assessment/appeals. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current Income Tax relating to the items recognized directly in equity is recognized in equity and not in the Statement of Profit and Loss. The provisions of current tax is made after considering impact if any, of provisions contained in Income Computation Disclosure Standards (ICDS) issued by CBDT vide Notification S.O. 3079(E) dated September 29, 2016.
Deferred Tax
Deferred tax reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Deferred tax assets subject to consideration of prudence, are recognized and carried forward only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. Such assets are reviewed as at each balance sheet date to re-assess realization.
Minimum Alternate Tax
Minimum Alternate Tax (MAT) paid in the year is charged to the Statement of Profit and Loss as current tax. The Company recognize MAT credit available as an asset only to the extent that there is convincing evidence that the Company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which Company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternate Tax under the Income Tax Act, 1961, the said asset is created by way of credit to the Statement of Profit and Loss and shown as âMAT Credit Entitlement â. The Company reviews the âMAT Credit Entitlementâ asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will pay normal tax during the specified period.
k. Impairment of Assets
The Company assesses at each reporting date whether there is an indication that an asset or Cash Generating Unit (CGU) may be impaired. If any indication exists, the recoverable amount of the same is determined. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life. A previously recognized impairment loss is reversed in Statement of Profit & Loss only if there has been a change in the assumptions used to determine the assetâs recoverable amount since the last impairment loss was recognized.
l. Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognized in the accounts in respect of present probable obligations arising as a result of past events and it is probable that there will be an outflow of resources, the amount of which can be reliably estimated.
Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company.
Contingent Assets are neither recognized nor disclosed in the financial statements.
m. Leases
The Lease under which the Company assumes substantially all the risks and rewards of ownership are classified as Finance leases. Such assets are capitalized at the inception of the lease at the lower of the fair value or the present value of minimum lease payments and a liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost, so as to obtain a constant periodic rate of interest on the outstanding liability for each period. The Assets acquired under leases where a significant portion of the risks and rewards of ownership are retained by the less or are classified as Operating leases. Lease rentals in case of Operating leases are charged to the Statement of Profit & Loss on accrual basis on straight line basis.
n. Earnings Per Share (EPS)
In determining earnings per share, the company considers the net profit after tax and includes the post tax effect of any extra ordinary items.
Basic earning per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.
For the purpose of calculating Diluted Earnings per share, the number of shares comprises of weighted average shares considered for deriving basic earnings per share and also the weighted average number of equity share which could have been issued on the conversion of all dilutive potential equity shares. Dilutive potential equity shares are deemed converted as of the beginning of the period, unless they have been issued at a later date. A transaction is considered to be ant dilutive if its effect is to increase the amount of EPS, either by lowering the share count or increasing the earnings.
o. Cash Flow Statement (CFS)
The cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated as specified in Accounting Standard -3 (AS-3) âCash Flow Statementâ.
p. Segment Reporting
Primary Segment: The Company is engaged in manufacture of high tensile fasteners. The entire operations are governed by same set of risk and returns; hence, the same has been considered representing a single primary segment. The said treatment is in accordance with the guiding principles enunciated in the Accounting Standard-17 on Segment Reporting issued by Company (Accounts) Rules, 2014.
Geographical Segment: Geographical Segment: The Company sells its products mostly within India with insignificant export income and does not have any operations in economic environments with different risks and returns, hence, its considered operating in single geographical segment.
q. Cash and Cash Equivalents
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
r. Classification of Curent/Non Current Assets & Liabilities
All assets & liabilities are presented as Current or Non- current as per the Company''s normal operating cycle and other criteria set out in Schedule III of the Companies Act 2013. Based on the nature of products and the time between acquisition of assets and disposal of liabilities, the Company has ascertained its operating cycle as 12 months for the purpose of Current/ Non-current classification of assets and liabilities.
Mar 31, 2016
NOTE 1: CORPORATE INFORMATION
Sterling Tools Limited (the company) is a public limited company incorporated in the year 1979 under the provisions of the Companies Act, 1956. The shares of the company listed on Bombay Stock Exchange and National Stock Exchange in India. The Company is engaged in the manufacturing and marketing of high tensile cold forged fasteners. It is one of the progressive Original Equipment Manufacturer (OEM) suppliers in India with a client base that spans automotive companies in India, Europe and USA.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Accounting
The financial statements have been prepared in accordance with applicable accounting standards and relevant presentation requirements of the Companies Act, 2013 and are based on the historical cost convention. The financial statements have been prepared on accrual basis and under the historical cost convention. The company has complied in all material respects with Accounting Standards notified under section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rule 2014 and the provisions of the Act (to the extent notified) .The accounting policies adopted in the preparation of the financial statements are consistent with those of previous year except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
b. Uses of Estimates
The preparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the managementâs best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. Differences between the actual results and estimates are recognized in the year in which the results are known\materialized. Changes in estimates are reflected in the financial statements in the period in which the changes are made and, if material, their effects are disclosed in the notes to the financial statements.
c. Fixed Assets and Depreciation
Fixed assets are stated at cost of acquisition inclusive of freight, duties & taxes and incidental expenses related to acquisition up to the date of installation. Cost of Fixed assets is further adjusted by the amount of Motivate/Convert credit availed and VAT credit wherever applicable. Interest and finance charges incurred are allocated to the respective fixed assets on installation (wherever applicable). Fixed assets under construction, and cost of assets not put to use before year end are shown as capital work in progress while advance paid towards acquisition of fixed assets are shown as capital advance under the head Loans & Advances.
Gain or loss arising on account of sale of fixed assets are measured as the difference between the net proceeds and the carrying amount of assets and are recognized in the statement of Profit and Loss in the year in which the asset is sold.
Software which are not an integral part of related hardware, is treated as intangible asset and amortized over a period of three years or its licensed period, whichever is less. Leasehold Improvements are amortized over the period of lease.
Depreciation is provided as per useful life specified in schedule II to the Companies Act, 2013. Depreciation in case of additions is calculated on a pro-rata basis w.e.f. the start of the following month; in which the asset was capitalized. On assets sold, discarded, etc. during the year, depreciation is provided up to
the last day of the preceding month vis-a-vis the actual date of sale. Further, the Schedule II to the Companies Act, 2013 requires that useful life and depreciation for significant components of an asset should be determined separately. The identification of significant components is matter of technical judgment and is decided on case to case basis; wherever applicable.
d. Revenue recognition
Revenue is recognized to the extent that it is probable that economic benefits will flow to the Company and the revenue can be reliably measured. Following are the specific revenue recognition criteria:
i) Revenue relating to sale of goods is recognized on dispatch of goods which coincides with the transfer of significant risks and rewards related to goods and are accounted for net of returns. Net sales, as disclosed, are exclusive of sales tax. Domestic and export sales are recognized on transfer of significant risks and rewards to the customer, which takes place on dispatch of goods from the factory/ storage area and port respectively.
ii) Revenue relating to interest income is recognized on time proportionate basis determined by the amount outstanding and the rate applicable and where no significant uncertainty as to measurability or collectability exists.
iii) Income from Export Incentives viz. Duty Drawback and Focus Product Scheme is recognized at year end on accrual basis.
e. Inventories
Inventories are valued at the lower of cost and net realizable value after providing for obsolescence and other losses were considered necessary. Cost of inventories comprises of cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. The cost of purchase consists of the purchase price including duties and taxes other than those subsequently recoverable by the enterprise from the taxing authorities, freight inwards and other expenditure directly attributable for its acquisition.
The methods of determining cost of various categories of inventories are as under:
Stock in Transit is valued at lower of cost and net realizable value. Scrap is valued at estimated net realizable value.
f. Retirement and Employee Benefits
Expenses and Liabilities in respect of employee benefits are recorded in accordance with Revised Accounting Standard 15 - Employees Benefits (Revised 2005) issued by the Company (Accounting Standard) Rules, 2006.
Short Term Employee Benefits: All employees'' benefits falling due wholly within twelve months of rendering the services are classified as short term employee benefits. The benefits like salaries, wages, short term compensated absences (CL) etc. and the expected cost of bonus, ex-gratia are recognized in the period in which the employee renders the related services at undiscounted amount. Terminal Benefits if any, are recognized as an expense immediately.
Defined Contribution Plan
Contributions payable to recognized Provident Fund, Employee State Insurance scheme and labour welfare fund which are substantially defined contribution plans, are recognized as expense in the Statement of Profit & Loss, as they are incurred.
Defined Benefit Plan
The cost of providing defined benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognized in full in the Statement of Profit and Loss for the period in which they occur. Past service cost is recognized immediately to the extent the benefits are already vested, and otherwise is amortized on a straight line basis over the average period until the benefits become vested. The retirement benefit obligation recognized in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the scheme.
Other Long Term Benefits
Long term compensated absences (EL) are provided for on the basis of actuarial valuation, using the Projected Unit Credit method, at the end of each financial year. Actuarial gains/ losses, if any, are recognized immediately in the Statement of Profit and Loss.
g. borrowing Cost
The borrowing costs which are directly attributable to the acquisition or construction of qualifying fixed assets, which necessarily take a substantial period of time to get ready for their intended use, are capitalized as part of cost of the assets. All other borrowing costs are immediately recognized as an expense in the Statement of Profit and Loss.
h. foreign Currency Transactions
Initial Recognition: The transactions in foreign currency are initially accounted for at the rate prevailing as on the transaction date.
Conversion: The monetary items denominated in the foreign currency are stated at the exchange rate prevailing at the year end and the overall net gain/ (loss) is adjusted to the Statement of Profit & Loss. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of transaction.
Exchange Difference: The exchange difference arising on the settlement of monetary items or reporting these items at rates different from rates at which these were initially recorded/ reported in previous financial statements are recognized as income/expense in the period in which they arise.
Forward contracts: The Company uses derivative financial instruments such as forward contracts to hedge its risks associated with certain foreign currency transactions. The premium or discount arising at the inception of such a forward exchange contract is amortized as expense or income over the life of the Contract. Any profit or loss arising on cancellation or renewal of such a forward exchange contract is recognized as income or expense for the period.
i. Investments
Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as Non-Current Investments. Current Investments are carried in the financial statements at lower of cost and fair value.
Non-Current Investments are carried at Cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the Investments.
j. Taxes on Income: Tax expense comprises current tax and deferred tax Current Tax
Current Tax is measured and expected to be paid to the tax authorities in accordance with the provisions of the Income Tax Act, 1961, and based on the expected outcome of assessment/appeals. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current Income Tax relating to the items recognized directly in equity is recognized in equity and not in the Statement of Profit and Loss. The provisions of current tax is made after considering impact if any, of provisions contained in Income Computation Disclosure Standards (ICDS) issued by CBDT vide Notification S.O. 892(E) dated March 31, 2015.
Deferred Tax
Deferred tax reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Deferred tax assets subject to consideration of prudence, are recognized and carried forward only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. Such assets are reviewed as at each balance sheet date to re-assess realization.
Minimum Alternate Tax
Minimum Alternate Tax (MAT) paid in the year is charged to the Statement of Profit and Loss as current tax. The Company recognize MAT credit available as an asset only to the extent that there is convincing evidence that the Company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which Company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternate Tax under the Income Tax Act, 1961, the said asset is created by way of credit to the Statement of Profit and Loss and shown as âMAT Credit Entitlement â. The Company reviews the âMAT Credit Entitlementâ asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will pay normal tax during the specified period.
k. Impairment of Assets
The Company assesses at each reporting date whether there is an indication that an asset or Cash Generating Unit (CGU) may be impaired. If any indication exists, the recoverable amount of the same is determined. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life. A previously recognized impairment loss is reversed in Statement of Profit & Loss only if there has been a change in the assumptions used to determine the assetâs recoverable amount since the last impairment loss was recognized.
l. Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognized in the accounts in respect of present probable obligations arising as a result of past events and it is probable that there will be an outflow of resources, the amount of which can be reliably estimated.
Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company.
Contingent Assets are neither recognized nor disclosed in the financial statements.
m. Leases
The Lease under which the Company assumes substantially all the risks and rewards of ownership are classified as Finance leases. Such assets are capitalized at the inception of the lease at the lower of the fair value or the present value of minimum lease payments and a liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost, so as to obtain a constant periodic rate of interest on the outstanding liability for each period. The Assets acquired under leases where a significant portion of the risks and rewards of ownership are retained by the lesser are classified as Operating leases. Lease rentals in case of Operating leases are charged to the Statement of Profit & Loss on accrual basis on straight line basis.
n. Earnings per Share (EPS)
In determining earnings per share, the company considers the net profit after tax and includes the post tax effect of any extra ordinary items.
Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.
For the purpose of calculating Diluted Earnings per share, the number of shares comprises of weighted average shares considered for deriving basic earnings per share and also the weighted average number of equity share which could have been issued on the conversion of all dilutive potential equity shares. Dilutive potential equity shares are deemed converted as of the beginning of the period, unless they have been issued at a later date. A transaction is considered to be ant dilutive if its effect is to increase the amount of EPS, either by lowering the share count or increasing the earnings.
o. Cash Flow Statement (CFS)
The cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated as specified in Accounting Standard -3 (AS-3) âCash Flow Statementâ.
p. Segment Reporting
Primary Segment: The Company is engaged in manufacture of high tensile fasteners. The entire operations are governed by same set of risk and returns; hence, the same has been considered representing a single primary segment. The said treatment is in accordance with the guiding principles enunciated in the Accounting Standard-17 on Segment Reporting issued by Company (Accounts) Rules, 2014
Geographical Segment: The Company sells its products mostly within India with insignificant export income and does not have any operations in economic environments with different risks and returns; hence, itâs considered operating in single geographical segment.
q. Cash and Cash Equivalents
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
r. Classification of Current/ Non Current Assets & Liabilities
All assets & liabilities are presented as Current or Non- current as per the Company''s normal operating cycle and other criteria set out in Schedule III of the Companies Act 2013. Based on the nature of products and the time between acquisition of assets and disposal of liabilities, the Company has ascertained its operating cycle as 12 months for the purpose of Current/ Non-current classification of assets and liabilities.
Mar 31, 2014
A. Basis of Accounting
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP). The company has prepared these financial statements to
comply in all material respects with accounting standards notified
under the Companies ( Accounting Standards) Rules, 2006 and the
provisions of the Companies Act, 1956 ("the Act") as adopted
consistently by the Company. The financial statements have been
prepared on accrual basis and under the historical cost convention.
b. Use of Estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
c. Fixed Assets and Depreciation
Fixed assets are stated at cost of acquisition inclusive of freight,
duties & taxes and incidental expenses related to acquisition up to the
date of installation. Cost of Fixed assets are further adjusted by the
amount of Modvat/Cenvat credit availed and Vat credit wherever
applicable. Interest and finance charges incurred are allocated to the
respective fixed assets on installation. Fixed assets under
construction, and cost of assets not put to use before year end are
shown as capital work in progress while advance paid towards
acquisition of fixed assets are shown as capital advance under the head
long term loans & Advances.
Software which are not an integral part of related hardware, is treated
as intangible asset and amortized over a period of three years or its
licensed period, whichever is less. Leasehold Improvements are
amortized over period of lease.
Depreciation on fixed assets is provided, on straight line method, at
the rates prescribed in Schedule XIV to the Companies Act, 1956. The
depreciation on assets acquired/sold/discarded during the year is
provided from/up to the month in which the asset is
commissioned/sold/discarded except in case of fixed assets costing up
to Rs. 5,000/- where, depreciation is provided for the whole year.
d. Revenue recognition
Domestic and export sales are recognised on transfer of significant
risks and rewards to the customer, which takes place on dispatch of
goods from the factory/ storage area and port respectively. The sales
are accounted for net of trade discount, sales tax; sale returns but
includes excise duty and price variations.
Income from Export Incentives viz. Duty Drawback and Focus Product
Scheme is recognized at year end on accrual basis.
Interest Income is recognized on time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Dividend Income is recognized when the company''s right to receive
dividend is established by the reporting date.
e. Inventories
Inventories are valued at the lower of cost and net realizable value.
The cost of raw material is determined on the basis of First-in-
First-Out (FIFO) method.
The cost of manufactured finished goods and work-in-progress includes
raw material value determined on the basis of First-in- First-Out
(FIFO) method and includes conversion and other costs incurred in
bringing the inventories to their present location and condition.
Finished manufactured goods also include excise duty.
Provision is made for cost of obsolescence and other anticipated losses
wherever considered necessary.
Stores & Consumables, Packing Materials and Tools & Dies are valued at
lower of net realizable value or cost on the basis of Weighted Average
Method.
Stock in Transit is valued at lower of cost and net realizable value.
Scrap is valued at estimated net realizable value.
f. Employee''s Benefits
Expenses and Liabilities in respect of employee benefits are recorded
in accordance with Revised Accounting Standard 15 Â Employees Benefits
(Revised 2005) issued by the Company (Accounting Standard) Rules, 2006.
Short Term Employee Benefits: All employees'' benefits falling due
wholly within twelve months of rendering the services are classified as
short term employee benefits. The benefits like salaries, wages, short
term compensated absences etc. and the expected cost of bonus,
ex-gratia are recognized in the period in which the employee renders
the related services at undiscounted amount.
Post Employment Benefit Plans: Payments to Defined Contribution
Retirements Benefit Schemes are charged as an expense as they fall due.
For Defined Benefit Schemes, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at each balance sheet date. Actuarial
gains and losses are recognized in full in the statement profit and
loss for the period in which they occur. Past service cost is
recognized immediately to the extent that the benefits are already
vested, and otherwise is amortized on a straight line basis over the
average period until the benefit become vested. The retirement benefit
obligation recognized in the balance sheet represents the present value
of the defined benefit obligation as adjusted for unrecognized past
service cost and as reduced by the fair value of scheme assets.
Terminal Benefits are recognized as an expense immediately.
g. Borrowing Cost
Borrowing costs that are attributable to the acquisition for
construction of qualifying asset are capitalized as part of the cost of
such asset. 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 revenue. Borrowing Cost includes
interest, amortization of ancillary costs incurred in connection with
the arrangement of borrowings to the extent they are regarded as an
adjustment to the interest cost.
h. Foreign Currency Transactions
Initial Recognition: The transactions in foreign currency are initially
accounted for at the rate prevailing as on the transaction date.
Conversion: The monetary items denominated in the foreign currency are
stated at the exchange rate prevailing at the year end and the overall
net gain/ (loss) is adjusted to the statement of profit & loss .
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of transaction.
Exchange Difference: The Exchange difference arising on the settlement
of monetary items or reporting these items at rates different from
rates at which these were initially recorded/ reported in previous
financial statements are recognized as income/expense in the period in
which they arise.
Forward contracts, other than those entered into hedge currency risk on
unexpected firm commitments or highly probable forecast transactions,
are treated as foreign currency transactions and accounted accordingly
as per Accounting Standard (AS) 11 ["The Effects of Changes in Foreign
Exchange Rates"}.
i. Investments
Investments , which are readily realizable and intended to be held for
more than one year from the date on which such investments are made,
are classified as current investments. All other investments are
classified as Non-Current Investments. Current Investments are carried
in the financial statements at lower of cost and fair value.
Non-Current Investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the Investments
j. Taxes on Income
Tax expense comprises current and deffered tax
Current income-tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Income-tax Act, 1961 enacted in
India and tax laws prevailing in the respective tax jurisdictions where
the company operates. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted, at the
reporting date. Current income tax relating to items recognized
directly in equity is recognized in equity and not in the statement of
profit and loss.
Deferred income taxes (asset/ liability) reflect the impact of timing
differences between taxable income and accounting income originating
during the current year and reversal of timing differences for the
earlier years. Deferred tax is measured using the tax rates and the tax
laws enacted or substantively enacted at the reporting date. Deferred
income tax relating to items recognized directly in equity is
recognized in equity and not in the statement of profit and loss.
Deferred taxassets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
k. Impairment of Assets
The Company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount and the reduction is treated as an impairment loss and is
recognized in the statement of profit and loss . If at the balance
sheet date there is an indication that a previously assessed impairment
loss no longer exists, the recoverable amount is reassessed and the
asset is reflected at the recoverable amount subject to the maximum of
depreciated historical cost and is accordingly reversed in the
statement of profit and loss.
l. Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognized in the accounts in respect of present
probable obligations arising as a result of past events and it is
probable that there will be an outflow of resources, the amount of
which can be reliably estimated.
Contingent liabilities are disclosed in respect of possible obligations
that arise from past events but their existence is confirmed by the
occurrence or non occurrence of one or more uncertain future events not
wholly within the control of the Company.
Contingent Assets are neither recognized nor disclosed in the financial
statements.
m. Leases
Lease arrangements where the risks and rewards incident to the
ownership of assets substantially vests with the lessor, are recognized
as operating leases. Lease rent under operating leases are recognized
under statment of profit and loss on a straight line basis over the
lease term.
n. Earning per share
Basic earning per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting attributable taxes) by the weighted average number of equity
shares outstanding during the year. For the purpose of calculating
Diluted Earning per share, the net profit or loss for the period
attributable to equity shareholders and the weighted average number of
shares outstanding during the year are adjusted for the effects of all
dilutive potential equity shares.
o. Cash Flow Statement
Cash flows are reported using the indirect method as specified in
Accounting Standard (AS-3) "Cash Flow Statement".
p. Segmental Reporting
Primary Segment: The Company is engaged in manufacture of high tensile
fasteners. The entire operations are governed by same set of risk and
returns; hence, the same has been considered representing a single
primary segment. The said treatment is in accordance with the guiding
principles enunciated in the Accounting Standard-17 on Segment
Reporting issued by Company (Accounting Standard) Rules, 2006.
Geographical Segment: The Company sells its products mostly within
India with insignificant export income and does not have any operations
in economic environments with different risks and returns, hence, its
considered operating in single geographical segment.
(b) Terms/rights attached to Equity shares
The company has only one class of equity shares having a par value of Rs.
10 per share. Each holder of Equity shares is entitled to one vote per
share. The company declares and pays dividends in Indian rupees. In the
event of liquidation of the company, the holders of equity shares will
be entitled to receive remaining assets of the company, after
distribution of all preferential amounts. The distribution will be in
proportion to the number of equity shares held by the shareholders.
Mar 31, 2013
A. Basis of Accounting
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP). The company has prepared these financial statements to
comply in all material respects with accounting standards notified
under the Companies ( Accounting Standards) Rules, 2006 and the
provisions of the Companies Act, 1956 ("the Act") as adopted
consistently by the Company. The financial statements have been
prepared on accrual basis and under the historical cost convention.
b. Use of Estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
c. Fixed Assets and Depreciation
Fixed assets are stated at cost of acquisition inclusive of freight,
duties & taxes and incidental expenses related to acquisition up to the
date of installation. Cost of Fixed assets are further adjusted by the
amount of Modvat/Cenvat credit availed and Vat credit wherever
applicable. Interest and finance charges incurred are allocated to the
respective fixed assets on installation. Fixed assets under
construction, and cost of assets not put to use before year end are
shown as capital work in progress while advance paid towards
acquisition of fixed assets are shown as capital advance under the head
long term loans & Advances.
Software which are not an integral part of related hardware, is treated
as intangible asset and amortized over a period of three years or its
licensed period, whichever is less. Leasehold Improvements are
amortized over period of lease.
Depreciation on fixed assets is provided, on straight line method, at
the rates prescribed in Schedule XIV to the Companies Act, 1956. The
depreciation on assets acquired/sold/discarded during the year is
provided from/up to the month in which the asset is
commissioned/sold/discarded except in case of fixed assets costing up
to Rs. 5,000/- where, depreciation is provided for the whole year.
d. Revenue recognition
Domestic and export sales are recognised on transfer of significant
risks and rewards to the customer, which takes place on dispatch of
goods from the factory/ storage area and port respectively. The sales
are accounted for net of trade discount, sales tax; sale returns but
includes excise duty and price variations.
Income from Export Incentives viz. Duty Drawback and Focus Product
Scheme is recognized at year end on accrual basis.
Interest Income is recognized on time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Dividend Income is recognized when the company''s right to receive
dividend is established by the reporting date.
e. Inventories
Inventories are valued at the lower of cost and net realizable value.
The cost of raw material is determined on the basis of
First-in-First-Out (FIFO) method.
The cost of manufactured finished goods and work-in-progress includes
raw material value determined on the basis of First-in-First-Out (FIFO)
method and includes conversion and other costs incurred in bringing the
inventories to their present location and condition. Finished
manufactured goods also include excise duty.
Provision is made for cost of obsolescence and other anticipated losses
wherever considered necessary.
Stores & Consumables, Packing Materials and Tools & Dies are valued at
lower of net realizable value or cost on the basis of Weighted Average
Method.
Stock in Transit is valued at lower of cost and net realizable value.
Scrap is valued at estimated net realizable value.
f. Employee''s Benefits
Expenses and Liabilities in respect of employee benefits are recorded
in accordance with Revised Accounting Standard 15 - Employees Benefits
(Revised 2005) issued by the''Company (Accounting Standard) Rules, 2006.
Short Term Employee Benefits: All employees'' benefits falling due
wholly within twelve months of rendering the services are classified as
short term employee benefits. The benefits like salaries, wages, short
term compensated absences etc. and the expected cost of bonus,
ex-gratia are recognized in the period in which the employee renders
the related services at undiscounted amount.
Post Employment Benefit Plans: Payments to Defined Contribution
Retirements Benefit Schemes are charged as an expense as they fall due.
For Defined Benefit Schemes, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at each balance sheet date. Actuarial
gains and losses are recognized in full in the statement profit and
loss for the period in which they occur. Past service cost is
recognized immediately to the extent that the benefits are already
vested, and otherwise is amortized on a straight line basis over the
average period until the benefit become vested. The retirement benefit
obligation recognized in the balance sheet represents the present value
of the defined benefit obligation as adjusted for unrecognized past
service cost and as reduced by the fair value of scheme assets.
Terminal Benefits are recognized as an expense immediately.
g. Borrowing Cost
Borrowing costs that are attributable to the acquisition for
construction of qualifying asset are capitalized as part of the cost of
such asset. 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 revenue. Borrowing Cost includes
interest, amortization of ancillary costs incurred in connection with
the arrangement of borrowings to the extent they are regarded as an
adjustment to the interest cost.
h. Foreign Currency Transactions
Initial Recognition: The transactions in foreign currency are initially
accounted for at the rate prevailing as on the transaction date.
Conversion: The monetary items denominated in the foreign currency are
stated at the exchange rate prevailing at the year end and the overall
net gain/ (loss) is adjusted to the statement of profit & loss .
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of transaction.
Exchange Difference: The Exchange difference arising on the settlement
of monetary items or reporting these items at rates different from
rates at which these were initially recorded/ reported in previous
financial statements are recognized as income/ expense in the period in
which they arise.
Forward contracts, other than those entered into hedge currency risk on
unexpected firm commitments or highly probable forecast transactions,
are treated as foreign currency transactions and accounted accordingly
as per Accounting Standard (AS) 11 ["The Effects of Changes in Foreign
Exchange Rates"}.
i. Investments
Investments , which are readily realizable and intended to be held for
more than one year from the date on which sujh investments are made,
are classified as current investments. All other investments are
classified as Non-Current Investments. Current Investments are carried
in the financial statements at lower of cost and fair value.
Non-Current Investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the Investments.
j. Taxes on Income
Tax expense comprises current and deffered tax
Current income-tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Income-tax Act, 1961 enacted in
India and tax laws prevailing in the respective tax jurisdictions where
the company operates. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted, at the
reporting date. Current income tax relating to items recognized
directly in equity is recognized in equity and not in the statement of
profit and loss.
Deferred income taxes (asset/ liability) reflect the impact of timing
differences between taxable income and accounting income originating
during the current year and reversal of timing differences for the
earlier years. Deferred tax is measured using the tax rates and the tax
laws enacted or substantively enacted at the reporting date. Deferred
income tax relating to items recognized directly in equity is
recognized in equity and not in the statement of profit and loss.
Deferred taxassets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
k. Impairment of Assets
The Company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount and the reduction is treated as an impairment loss and is
recognized in the statement of profit and loss . If at the balance
sheet date there is an indication that a previously assessed impairment
loss no longer exists, the recoverable amount is reassessed and the
asset is reflected at the recoverable amount subject to the maximum of
depreciated historical cost and is accordingly reversed in the
statement of profit and loss.
I. Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognized in the accounts in respect of present
probable obligations arising as a result of past events and it is
probable that there will be an outflow of resources, the amount of
which can be reliably estimated.
Contingent liabilities are disclosed in respect of possible obligations
that arise from past events but their existence is confirmed by the
occurrence or non occurrence of one or more uncertain future events not
wholly within the control of the Company.
Contingent Assets are neither recognized nor disclosed in the financial
statements.
m. Leases
Lease arrangements where the risks and rewards incident to the
ownership of assets substantially vests with the lessor, are recognized
as operating leases. Lease rent under operating leases are recognized
under statment of profit and loss on a straight line basis over the
lease term.
n. Earning per share
Basic earning per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting attributable taxes) by the weighted average number of equity
shares outstanding during the year. For the purpose of calculating
Diluted Earning per share, the net profit or loss for the period
attributable to equity shareholders and the weighted average number of
shares outstanding during the year are adjusted for the effects of all
dilutive potential equity shares.
o. Cash Flow Statement
Cash flows are reported using the indirect method as specified in
Accounting Standard (AS-3) "Cash Flow Statement".
p. Segmental Reporting
Primary Segment: The Company is engaged in manufacture of high tensile
fasteners. The entire operations are governed by same set of risk and
returns; hence, the same has been considered representing a single
primary segment. The said treatment is in accordance with the guiding
principles enunciated in the Accounting Standard-17 on Segment
Reporting issued by Company (Accounting Standard) Rules, 2006.
Geographical Segment: The Company sells its products mostly within
India with insignificant export income and does not have any operations
in economic environments with different risks and returns, hence, its
considered operating in single geographical segment.
Mar 31, 2012
A. Basis of Accounting
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP). The company has prepared these financial statements to
comply in all material respects with accounting standards notified
under the Companies (Accounting Standards) Rules, 2006 and the
provisions of the Companies Act, 1956 ("the Act") as adopted
consistently by the Company. The financial statements have been
prepared on accrual basis and under the historical cost convention.
b. Use of Estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management's best knowledge of current events and actions,
uncertainty about these assumptions and estimates could result in the
outcomes requiring a material adjustment to the carrying amounts of
assets or liabilities in future periods.
c. Fixed Assets and Depreciation
Fixed assets are stated at cost of acquisition inclusive of freight,
duties & taxes and incidental expenses related to acquisition up to the
date of installation. Cost of Fixed assets are further adjusted by the
amount of Modvat/Cenvat credit availed and Vat credit wherever
applicable. Interest and finance charges incurred are allocated to the
respective fixed assets on installation. Fixed assets under
construction, advance paid towards acquisition of fixed assets and cost
of assets not put to use before year end, are shown as long term loans
& Advances.
Software which are not an integral part of related hardware, is treated
as intangible asset and amortized over a period of three years or its
licensed period, whichever is less. Leasehold Improvements are
amortized over period of lease.
Depreciation on fixed assets is provided, on straight line method, at
the rates prescribed in Schedule XIV to the Companies Act, 1956. The
depreciation on assets acquired/sold/discarded during the year is
provided from/up to the month in which the asset is
commissioned/sold/discarded except in case of fixed assets costing up
to Rs. 5,000/- where, depreciation is provided for the whole year.
d. Revenue recognition
Domestic and export sales are recognised on transfer of significant
risks and rewards to the customer, which takes place on dispatch of
goods from the factory/ storage area and port respectively. The sales
are accounted for net of trade discount, sales tax; sale returns but
includes excise duty and price variations.
Income from Export Incentives viz. Duty Drawback and Focus Product
Scheme is recognized on accrual basis.
Interest Income is recognized on time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Dividend Income is recognized when the company's right to receive
dividend is established by the reporting date.
e. Inventories
Inventories are valued at the lower of cost and net realizable value.
The cost of raw material is determined on the basis of First-in-
First-Out (FIFO) method.
The cost of manufactured finished goods and work-in-progress includes
raw material value determined on the basis of First-in- First-Out
(FIFO) method and includes conversion and other costs incurred in
bringing the inventories to their present location and condition.
Finished manufactured goods also include excise duty.
Provision is made for cost of obsolescence and other anticipated losses
wherever considered necessary.
Stores & Consumables, Packing Materials and Tools & Dies are valued at
lower of net realizable value or cost on the basis of
First-in-First-Out (FIFO) method.
Stock in Transit is valued at lower of cost and net realizable value.
Scrap is valued at estimated net realizable value.
f. Employee's Benefits
Expenses and Liabilities in respect of employee benefits are recorded
in accordance with Revised Accounting Standard 15 - Employees Benefits
(Revised 2005) issued by the Company (Accounting Standard) Rules, 2006.
Short Term Employee Benefits: All employees' benefits falling due
wholly within twelve months of rendering the services are classified as
short term employee benefits. The benefits like salaries, wages, short
term compensated absences etc. and the expected cost of bonus,
ex-gratia are recognized in the period in which the employee renders
the related services at undiscounted amount.
Post Employment Benefit Plans: Payments to Defined Contribution
Retirements Benefit Schemes are charged as an expense as they fall due.
For Defined Benefit Schemes, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at each balance sheet date. Actuarial
gains and losses are recognized in full in the profit and loss account
for the period in which they occur. Past service cost is recognized
immediately to the extent that the benefits are already vested, and
otherwise is amortized on a straight line basis over the average period
until the benefit become vested. The retirement benefit obligation
recognized in the balance sheet represents the present value of the
defined benefit obligation as adjusted for unrecognized past service
cost and as reduced by the fair value of scheme assets.
Terminal Benefits are recognized as an expense immediately.
g. Borrowing Cost
Borrowing costs that are attributable to the acquisition for
construction of qualifying asset are capitalized as part of the cost of
such asset. 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 revenue. Borrowing Cost includes
interest, amortization of ancillary costs incurred in connection with
the arrangement of borrowings to the extent they are regarded as an
adjustment to the interest cost.
h. Foreign Currency Transactions
Initial Recognition: The transactions in foreign currency are initially
accounted for at the rate prevailing as on the transaction date.
Conversion: The monetary items denominated in the foreign currency are
stated at the exchange rate prevailing at the year end and the overall
net gain/ (loss) is adjusted to the profit & loss account. Non-monetary
items which are carried in terms of historical cost denominated in a
foreign currency are reported using the exchange rate at the date of
transaction.
Exchange Difference: The Exchange difference arising on the settlement
of monetary items or reporting these items at rates different from
rates at which these were initially recorded/ reported in previous
financial statements are recognized as income/expense in the period in
which they arise.
Forward contracts, other than those entered into hedge currency risk on
unexpected firm commitments or highly probable forecast transactions,
are treated as foreign currency transactions and accounted accordingly
as per Accounting Standard (AS) 11 ["The Effects of Changes in Foreign
Exchange Rates"}.
i. Investments
Investments , which are readily realizable and intended to be held for
more than one year from the date on which such investments are made,
are classified as current investments. All other investments are
classified as Non-Current Investments. Current Investments are carried
in the financial statements at lower of cost and fair value.
Non-Current Investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the Investments
j. Taxes on Income: Tax expense comprises current and deferred tax.
Current income-tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Income-taxAct, 1961 enacted in
India and tax laws prevailing in the respective tax jurisdictions where
the company operates. The tax rates and
tax laws used to compute the amount are those that are enacted or
substantively enacted, at the reporting date. Current income tax
relating to items recognized directly in equity is recognized in equity
and not in the statement of profit and loss.
Deferred income taxes (asset/ liability) reflect the impact of timing
differences between taxable income and accounting income originating
during the current year and reversal of timing differences for the
earlier years. Deferred tax is measured using the tax rates and the tax
laws enacted or substantively enacted at the reporting date. Deferred
income tax relating to items recognized directly in equity is
recognized in equity and not in the statement of profit and loss.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
k. impairment of Assets
The Company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount and the reduction is treated as an impairment loss and is
recognized in the profit and loss account. If at the balance sheet date
there is an indication that a previously assessed impairment loss no
longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount subject to the maximum of
depreciated historical cost and is accordingly reversed in the profit
and loss account.
I. Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognized in the accounts in respect of present
probable obligations arising as a result of past events and it is
probable that there will be an outflow of resources, the amount of
which can be reliably estimated.
Contingent liabilities are disclosed in respect of possible obligations
that arise from past events but their existence is confirmed by the
occurrence or non occurrence of one or more uncertain future events not
wholly within the control of the Company.
Contingent Assets are neither recognized nor disclosed in the financial
statements, m. Leases
Lease arrangements where the risks and rewards incident to the
ownership of assets substantially vests with the lessor, are recognized
as operating leases. Lease rent under operating leases are recognized
under profit and loss account on a straight line basis over the lease
term.
n. Earning per share
Basic earning per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting attributable taxes) by the weighted average number of equity
shares outstanding during the year. For the purpose of calculating
Diluted Earning per share, the net profit or loss for the period
attributable to equity shareholders and the weighted average number of
shares outstanding during the year are adjusted for the effects of all
dilutive potential equity shares.
o. Cash Flow Statement
Cash flows are reported using the indirect method as specified in
Accounting Standard (AS-3) "Cash Flow Statement", p. Segmental
Reporting
Primary Segment: The Company is engaged in manufacture of high tensile
fasteners. The entire operations are governed by same set of risk and
returns; hence, the same has been considered representing a single
primary segment. The said treatment is in accordance with the guiding
principles enunciated in the Accounting Standard-17 on Segment
Reporting issued by Company (Accounting Standard) Rules, 2006.
Geographical Segment: The Company sells its products mostly within
India with insignificant export income and does not have any operations
in economic environments with different risks and returns, hence, its
considered operating in single geographical segment.
Mar 31, 2011
A. Basis of Accounting
The financial statements of Sterling Tools Limited ("the Company") have
been prepared under the historical cost convention in accordance with
the Indian Generally Accepted Accounting Principles ("GAAP"), mandatory
accounting standards and the provisions of the Companies Act, 1956
("the Act") as adopted consistently by the Company. All income and
expenditure having a material bearing on the financial statement are
recognized on accrual basis.
b. Use of Estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported period.
Examples of such estimates include estimated provision for doubtful
debts, future obligations under employee retirement benefit plans and
estimated useful life of fixed assets. Actual results could differ from
these estimates. Difference between the actual results and estimates
are recognized in the year in which the results are known /
materialized.
c. Fixed Assets and Depreciation
Fixed assets are stated at cost of acquisition inclusive of freight,
duties & taxes and incidental expenses related to acquisition up to the
date of installation. Cost of Fixed assets are further adjusted by the
amount of Modvat/Cenvat credit availed and VAT credit wherever
applicable. Fixed assets under construction, advance paid towards
acquisition of fixed assets and cost of assets not put to use before
year end, are shown as capital work in progress. Interest and finance
charges incurred are allocated to the respective fixed assets on
installation. Software which are not an integral part of related
hardware, is treated as intangible asset and amortized over a period of
three years or its licensed period, whichever is less.
Depreciation on fixed assets is provided, on straight line method, at
the rates prescribed in Schedule XIV to the Companies Act, 1956. The
depreciation on assets acquired/sold/discarded during the year is
provided from/up to the month in which the asset is
commissioned/sold/discarded except in case of fixed assets costing up
to Rs. 5,000/- where, depreciation is provided for whole year.
d. Revenue recognition
Domestic and export sales are recognised on transfer of significant
risks and rewards to the customer, which takes place on dispatch of
goods form the factory/ storage area and port respectively. The sales
are accounted for net of trade discount, sales tax, sale returns but
includes excise duty and price variations.
e. Purchases
Purchases are recognized upon receipt of such goods by the Company.
Purchases of imported goods are recognised after completion of custom
clearance formalities and upon receipt of such goods by the Company at
the factory.
f. Inventories
Inventories are valued at the lower of cost and net realizable value.
The cost of raw material is determined on the basis of
First-in-First-Out (FIFO) method.
The cost of manufactured finished goods and work-in-progress includes
raw material value determined on the basis of First-in-First-Out (FIFO)
method and includes conversion and other costs incurred in bringing the
inventories to their present location and condition. Finished
manufactured goods also include excise duty.
Provision is made for cost of obsolescence and other anticipated losses
wherever considered necessary.
Stores & Consumables, Packing Materials and Tools & Dies are valued at
lower of net realizable value or cost on the basis of
First-in-First-Out (FIFO) method.
Stock in Transit is valued at lower of cost and net realizable
value.Scrap is valued at estimated net realizable value.
g. Employees Benefits
Expenses and Liabilities in respect of employee benefits are recorded
in accordance with Revised Accounting Standard 15 - Employees Benefits
(Revised 2005) issued by the Company (Accounting Standard) Rules, 2006.
Post Employment Benefit Plans
Payments to Defined Contribution Retirements Benefit Schemes are
charged as an expense as they fall due.
For Defined Benefit Schemes, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at each balance sheet date. Actuarial
gains and losses are recognized in full in the profit and loss account
for the period in which they occur. Past service cost is recognized
immediately to the extent that the benefits are already vested, and
otherwise is amortized on a straight line basis over the average period
until the benefit become vested.
The retirement benefit obligation recognized in the balance sheet
represents the present value of the defined benefit obligation as
adjusted for unrecognized past service cost and as reduced by the fair
value of scheme assets. Any asset resulting from this calculation is
limited to past service cost, plus the present value of available
refunds and reductions in future contributions to the scheme.
Short Term Employee Benefits
All employees benefits falling due wholly within twelve months of
rendering the services are classified as short term employee benefits.
The benefits like salaries, wages, short term compensated absences etc.
and the expected cost of bonus, ex-gratia are recognized in the period
in which the employee renders the related services.
h. Borrowing Cost
Borrowing costs that are attributable to the acquisition for
construction of qualifying asset are capitalized as part of the cost of
such asset. 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 revenue.
i. Modvat Claim
Modvat claim on raw material purchased is credited to cost of material.
In case of capital goods it is reduced from the cost of assets.
j. Foreign Currency Transactions
The transactions in foreign currency are initially accounted for at the
rate prevailing as on the transaction date. Gain / (Loss) arising out
of fluctuation in rate between transaction date and settlement date are
recognized in the profit & loss account.
The monetary items denominated in the foreign currency are stated at
the exchange rate prevailing at the year end and the overall net gain/
(loss) is adjusted to the profit & loss account.
Forward contracts, other than those entered into hedge currency risk on
unexpected firm commitments or highly probable forecast transactions,
are treated as foreign currency transactions and accounted accordingly
as per Accounting Standard (AS) 11 ["The Effects of Changes in Foreign
Exchange Rates"].Premium paid on foreign currency forward contract is
accounted as expense over the period of the contract.
k. Investments
Long term investments are stated at cost unless there is a diminution
of permanent nature, if any. Current Investments are carried at lower
of cost or fair value.
l. Taxes on Income
Income taxes are accrued in the same period in which the related
revenue and expenses arise. The differences that result between the
taxable profit and the profit as per the financial statement are
identified and thereafter deferred tax assets or deferred tax
liabilities are recorded as timing differences, namely the differences
that originate in one accounting period and reverse in another, based
on the tax effect of the aggregate amount being considered. The tax
effect is calculated on the accumulated timing differences at the end
of an accounting period based on tax rates that have been enacted or
substantially enacted by the balance sheet date. Deferred tax assets
are recognised only if there is reasonable certainty that they will be
realized in future. Where there are unabsorbed depreciation or carry
forward losses, deferred tax assets are recognised only to the extent
there is virtual certainty of such assets. Such assets are reviewed for
appropriateness of their respective carrying values at each balance
sheet date.
Advance taxes and provisions for current income taxes are presented in
the balance sheet after offsetting advance taxes paid and income tax
provisions.
m. Impairment of Assets
The Company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the asset belong is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount and the reduction is treated as an impairment loss and is
recognized in the profit and loss account. If at the balance sheet date
there is an indication that a previously assessed impairment loss no
longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount subject to the maximum of
depreciated historical cost and is accordingly reversed in the profit
and loss account.
n. Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognized in the accounts in respect of present
probable obligations arising as a result of past events and it is
probable that there will be an outflow of resources, the amount of
which can be reliably estimated.
Contingent liabilities are disclosed in respect of possible obligations
that arise from past events but their existence is confirmed by the
occurrence or non occurrence of one or more uncertain future events not
wholly within the control of the Company.
Contingent Assets are neither recognized nor disclosed in the financial
statements.
o. Leases
Lease arrangements where the risks and rewards incident to the
ownership of assets substantially vests with the lessor, are recognized
as operating leases. Lease rent under operating leases are recognized
under profit and loss account on a straight line basis over the lease
term.
p. Earning per share
Basic earning per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting attributable taxes) by the weighted average number of equity
shares outstanding during the year.
For the purpose of calculating Diluted Earning per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
q. Cash Flow Statement
Cash flows are reported using the indirect method as specified in
Accounting Standard (AS-3) "Cash Flow Statement".
r. Segmental Reporting
i. The Company is engaged in manufacture of high tensile fasteners. The
entire operations are governed by same set of risk and returns, hence,
the same has been considered representing a single primary segment. The
said treatment is in accordance with the guiding principles enunciated
in the Accounting Standard-17 on Segment Reporting issued by Company
(Accounting Standard) Rules, 2006.
ii. The Company sells its products mostly within India with
insignificant export income and does not have any operations in
economic environments with different risks and returns, hence, its
considered operating in single geographical segment.
Mar 31, 2010
A. Basis of Accounting
The financial statements of Sterling Tools Limited ("the Company") have
been prepared under the historical cost convention in accordance with
the Indian Generally Accepted Accounting Principles ("GAAP"), mandatory
accounting standards and the provisions of the Companies Act, 1956
("the Act") as adopted consistently by the Company. All income and
expenditure having a material bearing on the financial statement are
recognized on accrual basis.
b. Use of Estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported period.
Examples of such estimates include estimated provision for doubtful
debts, future obligations under employee retirement benefit plans and
estimated useful life of fixed assets. Actual results could differ from
these estimates. Difference between the actual results and estimates
are recognized in the year in which the results are known /
materialized.
c. Fixed Assets and Depreciation
Fixed assets are stated at cost of acquisition inclusive of freight,
duties & taxes and incidental expenses related to acquisition up to the
date of installation. Cost of Fixed assets are further adjusted by the
amount of Modvat/Cenvat credit availed and Vat credit wherever
applicable. Fixed assets under construction, advance paid towards
acquisition of fixed assets and cost of assets not put to use before
year end, are shown as capital work in progress. Interest and finance
charges incurred are allocated to the respective fixed assets on
installation.
Depreciation on fixed assets is provided, on straight line method, at
the rates prescribed in Schedule XIV to the Companies Act, 1956. The
depreciation on assets acquired/sold/discarded during the year is
provided from/up to the month in which the asset is
commissioned/sold/discarded except in case of fixed assets costing up
to Rs. 5,000/- where, depreciation is provided for whole year.
d. Revenue recognition
Domestic Sales are recognised at the point of dispatch of goods to the
customers. The sales are accounted for net of trade discount, sales
tax, sale returns but includes excise duty. Export Sales are recognized
at the time of the clearance of goods and approval of excise
authorities. Other income is accounted for on accrual basis.
e. Purchases
Purchases are recognized upon receipt of such goods by the Company.
Purchases of imported goods are recognised after completion of custom
clearance formalities and upon receipt of such goods by the Company.
f. Inventories
Inventories are valued at the lower of cost and net realizable value.
The cost of raw material is determined on the basis of
First-in-First-Out (FIFO) method.
The cost of manufactured finished goods and work-in-progress includes
raw material value determined on the basis of First-in-First-Out (FIFO)
method and includes conversion and other costs incurred in bringing the
inventories to their present location and condition. Finished
manufactured goods also include excise duty.
Provision is made for cost of obsolescence and other anticipated loses
wherever considered necessary.
Stock of Tools & dies is considered to be of last one month purchase
and is valued at lower of cost and net realizable value.
Stores & Consumables, Packing Materials and are valued at lower of cost
and net realizable value.
Stock in Transit is valued at lower of cost and net realizable value.
Scrap is valued at estimated net realizable value.
g. Employees Benefits
Expenses and Liabilities in respect of employee benefits are recorded
in accordance with Revised Accounting Standard 15 Ã Employees Benefits
(Revised 2005) issued by the Company (Accounting Standard) Rules, 2006.
Post Employment Benefit Plans
Payments to Defined Contribution Retirements Benefit Schemes are
charged as an expense as they fall due.
For Defined Benefit Schemes, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at each balance sheet date. Actuarial
gains and losses are recognized in full in the profit and loss account
for the period in which they occur. Past service cost is recognized
immediately to the extent that the benefits are already vested, and
otherwise is amortized on a straight line basis over the average period
until the benefit become vested.
The retirement benefit obligation recognized in the balance sheet
represents the present value of the defined benefit obligation as
adjusted for unrecognized past service cost and as reduced by the fair
value of scheme assets. Any asset resulting from this calculation is
limited to past service cost, plus the present value of available
refunds and reductions in future contributions to the scheme.
Short Term Employee Benefits
The undiscounted amount of short term employee benefits expected to be
paid in exchange for the services rendered by employees is recognized
during the period when the employee renders the service.
h. Borrowing Cost
Borrowing costs that are attributable to the acquisition for
construction of qualifying asset are capitalized as part of the cost of
such asset. 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 revenue.
i. Modvat Claim
Modvat claim on raw material purchased is credited to cost of material.
In case of capital goods it is reduced from the cost of assets.
j. Foreign Currency Transactions
The transactions in foreign currency are initially accounted for at the
rate prevailing as on the transaction date. Gain / (Loss) arising out
of fluctuation in rate between transaction date and settlement date are
recognized in the profit & loss account.
The monetary items denominated in the foreign currency are stated at
the exchange rate prevailing at the year end and the overall net gain/
(loss) is adjusted to the profit & loss account.
In case of forward exchange contracts, the premium or discount arising
at the inception of such contracts, is amortized as income or expense
over the life of the contract and exchange difference on such contracts
i.e. difference between the exchange rates at the reporting/settlement
date and the exchange rate on the date of inception of contract/the
last reporting date, is recognized as income/expense for the period.
k. Taxes on Income
Income taxes are accrued in the same period the related revenue and
expenses arise. The differences that result between the taxable profit
and the profit as per the financial statement are identified and
thereafter deferred tax assets or deferred tax liabilities are recorded
as timing differences, namely the differences that originate in one
accounting period and reverse in another, based on the tax effect of
the aggregate amount being considered. The tax effect is calculated on
the accumulated timing differences at the end of an accounting period
based on tax rates that have been enacted or substantially enacted by
the balance sheet date. Deferred tax assets are recognised only if
there is reasonable certainty that they will be realized in future.
Where there are unabsorbed depreciation or carry forward losses,
deferred tax assets are recognised only to the extent there is virtual
certainty of such assets. Such assets are reviewed for appropriateness
of their respective carrying values at each balance sheet date
Advance taxes and provisions for current income taxes are presented in
the balance sheet after offsetting advance taxes paid and income tax
provisions.
l. Impairment of Assets
The Company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount and the reduction is treated as an impairment loss and is
recognized in the profit and loss account. If at the balance sheet date
there is an indication that a previously assessed impairment loss no
longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount subject to the maximum of
depreciated historical cost and is accordingly reversed in the profit
and loss account.
m. Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognized in the accounts in respect of present
probable obligations arising as a result of past events and it is
probable that there will be an outflow of resources, the amount of
which can be reliably estimated.
Contingent liabilities are disclosed in respect of possible obligations
that arise from past events but their existence is confirmed by the
occurrence or non occurrence of one or more uncertain future events not
wholly within the control of the Company.
Contingent Assets are neither recognized nor disclosed in the financial
statements.
n. Leases
Lease arrangements where the risks and rewards incident to the
ownership of assets substantially vests with the lessor, are recognized
as operating leases. Lease rent under operating leases are recognized
under profit and loss account on a straight line basis over the lease
term.
o. Earning per share
Basic earning per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting attributable taxes) by the weighted average number of equity
shares outstanding during the year.
For the purpose of calculating Diluted Earning per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
p. Cash Flow Statement
Cash flows are reported using the indirect method as specified in
Accounting Standard (AS-3) "Cash Flow Statement".
q. Segmental Reporting
i. The Company is engaged in manufacture of high tensile fasteners. The
entire operations are governed by same set of risk and returns, hence,
the same has been considered representing a single primary segment. The
said treatment is in accordance with the guiding principles enunciated
in the Accounting Standard-17 on Segment Reporting issued by Company
(Accounting Standard) Rules, 2006.
ii. The Company sells its products mostly within India with
insignificant export income and does not have any operations in
economic environments with different risks and returns, hence, its
considered operating in single geographical segment.
r. Financial reporting of interest in Joint Venture
The Companys interests in its joint ventures are accounted for using
the equity method of accounting. These are entities over which the
Company has entered into a contractual agreement with a third party to
share control. The reporting dates of the joint ventures and the
Company are identical and the accounts are prepared on the basis of the
Companys accounting policies.
Under the equity method, the income statement reflects the share of the
results of operations of the joint ventures. Where there has been a
change recognised directly in the joint ventures equity, the Company
recognises its share of any changes.
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