Mar 31, 2015
1.1 BASIS OF ACCOUNTING
The financial statements are prepared in accordance with historical cost convention and on accrual basis, and as per applicable Accounting Standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 2013.
1.2 USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management of the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of these financial statements and the reported amounts of revenues and expenses for the year. The management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialise.
1.3 REVENUE RECOGNITION
i) Sales are recognised at the time of despatches to customers or their respective transporters for onward despatches to customers. Impact of variation in selling price with respect to despatched goods are recognised as and when confirmed. Sales include excise duty, wherever applicable. Sales are recorded net of Trade Discounts, Rebates & Sales Tax. In respect of Toolings developed for the customers to be used for the production of components, sale is recognised on completion of such Toolings.
ii) Incomes from services rendered are booked based on agreements / arrangements with the concerned parties.
1.4 PROVISIONS & CONTINGENT LIABILITIES
A provision is recognized when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
Contingent Liabilities are not recognised in the financial statements but disclosed in the Notes.
1.5 FIXED ASSETS / DEPRECIATION
i) Fixed Assets are stated at cost less accumulated depreciation. Depreciation is provided on a Straight-Line Method based on useful life basis as specified and in the manner prescribed in Schedule II to the Companies Act, 2013, except for the fixed assets mentioned in para (ii) to (v) below. Cost is inclusive of Freight, Duties, Levies and any other directly attributable cost of bringing the assets to their working condition for intended use.
ii) Depreciation on dies manufactured by the Company is charged @ 20%. Depreciation on vehicles (cars) is charged @ 25%.
iii) Intangible Assets (Others than Software) are stated at cost less accumulated amortisation. These are amortised over a period of 6 years, which is the estimated useful life of the asset.
Software expenditure capitalised during the year is amortised over 3 years from the date of its capitalization.
iv) Capital spares are amortised in a systematic manner over the useful life of the assets to which it relates.
v) Assets individually costing up to Rs.5000/- are depreciated at 100% within one year from the date of purchase.
vi) Capital Work in progress includes cost of assets not ready for intended use before the year end.
i) Stores, Spare Parts, Loose Tools, Raw Materials, Components and Packing Materials are valued at material cost determined on the basis of moving weighted average cost method with due provisioning for non useable / obsolete items and impact of provisioning for price variation, if any.
ii) Work-in-progress and Finished goods are valued at lower of cost or net realisable value as certified by Management. Cost includes material cost and an appropriate portion of manufacturing overheads, wherever applicable, incurred in bringing them to their present location and condition. Finished goods include excise duty, wherever applicable.
iii) Scrap / damaged goods value is incorporated in books on the basis of expected realisable value.
1.7 EMPLOYEE BENEFITS
i) Defined contribution plans
The Company's contribution to Provident Fund is considered as defined contribution plan and is charged as an expense to the Statement of Profit and Loss for the year when the contributions are due. The Company contributes to Life Insurance Corporation of India to cover its liability towards its master policies of employees' superannuation and gratuity. Payment of gratuity at the time of retirement is routed through the trust created by the company.
ii) Defined benefit plans
The company operates a defined benefit plan for its employees in the form of gratuity fund. The cost of providing benefit under the plan is determined on the basis of actuarial valuations being carried out at each Balance Sheet date. Actuarial gains and losses for defined benefit plan are recognized in the Statement of Profit and Loss in the period in which they occur. The retirement benefit obligation recognized in the Balance Sheet represents the present value of the defined benefit obligation.
iii) Short term employee benefits
All employee benefits payable within twelve months of receiving the employee services are classified as Short-term employee benefits and benefits payable after twelve months of receiving the employee services are classified as Long-term employee benefits.
The undiscounted amount of short term employee benefits expected to be paid in exchange of services rendered by employees is recognized during the period when the employee renders services. These benefits include salaries, bonus, leave travel allowance and performance incentives.
The employees of the Company are entitled to compensated absences. The Company has a policy for leave encashment, whereby the balance of leave is either availed or encashed in the following year, and hence the same is classified as short term. The short term leave encashment liability has been measured based on the actual leave balance outstanding at the year end.
1.8 RESEARCH & DEVELOPMENT
Expenditure on Research and Development has been classified into Revenue and CWIP/Assets, and accordingly charged to Statement of Profit & Loss and depicted in Balance Sheet.
i) Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of the Income Tax Act 1961. Advance tax and provision for current tax are presented in the balance sheet after off-setting advance tax paid and income tax provisions.
ii) Deferred Tax is recognised, subject to consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred Tax charge or credit is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date.
Deferred Tax liabilities are recognised for all timing differences.
Deferred Tax assets arising from unabsorbed depreciation or carry forward losses are recognised only if there is virtual certainty of that there will be sufficient future taxable income available to realise such assets.
Deferred Tax assets are recognised for timing differences of other items only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised.
Deferred Tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off.
Deferred Tax Assets are reviewed at each balance sheet date for their realisability.
Capital grants received in previous years are allocated to income over the periods and in proportions in which the depreciation on those assets is charged.
1.11 FOREIGN CURRENCY TRANSACTIONS
Foreign currency transactions are recorded at exchange rates prevailing at the date of transaction. Exchange differences, if any, arising on settlement of transactions except those relating to fixed assets are recognized as income or expense in the year in which they arise. In case of fixed assets, the cost is adjusted for exchange differences arising on payment of liabilities incurred for the purpose of acquiring such fixed assets.
1.12 PRODUCT WARRANTY
In respect of warranty given by the Company on sale of agricultural implements - Rice Transplanter and Rotavator, the estimated costs of this warranty are accrued at the time of sale. The estimates for accounting of warranty are reviewed and revisions are made as required.