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Accounting Policies of TIL Ltd. Company

Mar 31, 2012

1.1 Basis of preparation

These Financial Statements have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) under the historical cost convention on accrual basis, except for certain tangible assets which are carried at revalued amounts. These Financial Statements have been prepared to comply in all material aspects with the accounting standards notified under section 211 (3C) [Companies (Accounting Standards) Rules 2006, as amended] and the other relevant provisions of the Companies Act, 1956.

All assets and liabilities have been classified as current or non current as per the Company's normal operating cycle and other criteria set out in Schedule VI to the Companies Act, 1956. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current - noncurrent classification of assets and liabilities.

1.2 Use of estimates

The preparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in 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 recognized in the periods in which the results are known / materialize.

1.3 Revenue Recognition

Revenue from sales/services (exclusive of Sales Tax / Value Added Tax) is recognized on accrual basis in keeping with related arrangements with customers and is net of credit notes on account of returns and allowances. Rental income is recognized on prefab basis over the period of the contract

1.4 Other Income

interest income is accounted on accrual basis. Dividend income is accounted for when the right to receive it is established.

1.5 Fixed Assets

Fixed Assets (comprising both tangible and intangible items) are stated at cost except in case of certain items of Land, Buildings and Plant and Machinery which are stated on the basis of revaluation (with corresponding credit to the Revaluation Reserve Account), being inclusive of resultant write ups.

Software is capitalized where it is expected to provide future enduring economic benefit Capitalization costs includes license fees and cost of implementation / system integration services. The costs are capitalized in the year in which the relevant software is implemented for use.

Impairment loss, if any, is recognized wherever the caning amount of fixed assets of a cash generating unit exceeds its recoverable amount i.e. net setting price or value in use, whichever is higher.

1.6 Depreciation

Depreciation (including amortization) is calculated in the following manner:

(a) Leasehold land is amortized over the period of lease.

(b) Depreciation on revalued assets other than land is calculated on their respective revalued amounts at rates considered applicable by the values (being higher that the rates prescribed in Schedule XIV to the Companies Act 1956) on straight line method.

(c) In respect of other assets, at rates prescribed in Schedule XIV to the Companies Act 1956 on 'Straight Line Method' except Plant and Machinery given under operating leases which are depreciated over a period of 6 years, being the useful life as estimated by the management

(d) Technical Know-how fee is mortised under straight line method over total useful lives (currently 5 to 10 years), as estimated by the Management

(e) Software is mortised over a period of three years from the date of capitalization.

1.7 Investments

Investments that are readily realizable and are 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 long term investments. Current investment are earned at cost or fair- value whichever is lower. Long term investments are carried at cost However, provision for diminution is made to recognize a decline, other than temporary in the value of the investments, such reduction being determined and made for each investment individually.

1.8 Inventories

Raw materials, components, stores and spares are valued at lower of cost and net realizable value. However, materials and other items held for use in production in inventories are not written down below cost if the finished products in which they with be incorporated are expected to be sold at or above cost Cost of raw materials, components and stores and spares is determined on a weighted average basis. Work-m-progress and Finished Goods are valued at lower of cost and net realizable value. Cost includes direct materials and labor and a proportion of manufacturing overheads based on normal operating capacity. Cost of Finished Goods includes Excise Duty and is determined on a weighted average basis.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated cost of completion and estimated costs necessary to make the sale.

1.9 Taxation

Current Tax in respect of taxable income is provided for the year based on applicable tax rates and laws. Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment in future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognized as an asset in the Balance Sheet when it is probable that future economic benefit associated with it will flow to the Company. Defined Tax is recognized subject to the consideration of prudence in respect of deferred tax assets, 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 and is measured using tax rates and laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are reviewed at each Balance Sheet date to re-assess realization.

1.10 Employee Benefits

Short-term Employee benefits (i.e. benefits payable within one year) are recognized in the period in which the employee services are rendered. Contributions towards provident funds are recognized as expense. Provident fund contributions in respect of employees are made to common trust- Tractors India Employees Provident Fund' (being administered by the trustees of the said fund for the benefit of employees of the company and its subsidiary company i.e. Tractors India Private Limited) and such Trust invest funds following a pattern of investment prescribed by the Government The interest rate payable to the members of the Trusts is not lower than the rate of interest declared annually by the Central Government under the Employees' Provident Funds and Miscellaneous Provisions Act,1952 and shortfall, if any, on account of interest, is made good by the Company. Contributions under Employees' Pension Scheme is made as per statutory requirements and charged as expenses for the year.

The Company also contributes to the Central Government administered Employees' State Insurance Scheme for its eligible employees, which is a defined contribution plan.

Provisions for Gratuity for eligible employees (being a defined benefit plan) is made on the basis of year-end actuarial valuation using Projected unit credit method.

In respect of certain eligible employees who have attained 45 years of age as on 1st April 2009, provision for Superannuation under defined benefit plan is made on the basis of year end actuarial valuation using Projected unit credit method.

In respect of certain eligible employees who have not attained 45 years of age as on 1st April 2009 provision for Superannuation is made:-

- under defined contribution scheme in respect of services rendered with effect from 1 st April 2009.

- under defined benefit scheme in respect of services rendered up to 31st March 2009, based on frozen pensionable salary as on 31st March 2009 using Projected unit credit method.

Actuarial gains / losses arising in Defined Benefit Plans are recognized in the Statement of Profit and Loss as income or expenses in the year in which they occur.

Accrued liability towards compensated absence, covering eligible employees, evaluated on the basis of year-end actuarial valuation using Projected unit credit method, is recognized as a charge.

1.11 Foreign Currency Transactions and Translation

Monetary assets and liabilities related to foreign currency transactions remaining unsettled at the yearend are translated at year end rates or at contract rates, covered by forward exchange contracts. The difference in transactions of monetary assets and liabilities and realized gains and losses on foreign exchange transactions are recognized in the Statement of Profit and Loss. In respect of transactions covered by forward exchange contracts, the difference between the contract rate and the spot rate on the date of transaction is charged to the Statement of Profit and Loss over the period of the contract. Profit/(Loss) on cancellation of forward contracts are recognized as income or as expenses for the year. Foreign currency non monetary items carried in terms of historical cost are reported using the exchange rate at the date of transactions.

1.12 Borrowing Costs

Borrowing Cost, if any, that are attributable to the acquisition, construction or production of 'Qualifying Assets' are capitalized as part of cost of such assets. A 'Qualifying Asset' is an asset that necessarily requires a substantial period of time to get ready for its intended use or sale. All other borrowing costs are recognized as expenses in the period in which they are incurred.

1.13 Leases

Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognized as operating leases. Lease rentals under operating leases are recognized in the Statement of Profit and Loss on a straight line basis,

1.14 Provisions and contingencies

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 the 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 disclosed in the Notes.

1.15 Provision for warranty

Provision for warranty related costs are recognized when the product is sold, Provision is based on historical experience. The estimate of such warranty-related costs are reviewed periodically by the management.


Mar 31, 2011

1. The Financial Statements are prepared to comply in all material aspects with all the applicable accounting principles in India, the applicable Accounting Standards notified under section 211(3C) of the Companies Act, 1956 and the relevant provisions of the Companies Act, 1956.

2.1 Sales

Revenue from sales/services (exclusive of Sales Tax/ Value Added Tax) is being recognised on accrual basis in keeping with related arrangements with customers and is net of credit notes on account of returns and allowances.

2.2 Fixed Assets

Fixed Assets (comprising both tangible and intangible items) are stated at cost except in case of certain items of Land , Buildings and Plant and Machinery which are stated on the basis of revaluation (with corresponding credit to the Revaluation Reserve Account), being inclusive of resultant write ups.

Software are capitalised where it is expected to provide future enduring economic benefit. Capitalisation costs includes license fees and cost of implementation/system integration services. The costs are capitalised in the year in which the relevant software is implemented for use.

Impairment loss, if any, is recognised wherever the carrying amount of fixed assets of a cash generating unit exceeds its recoverable amount i.e. net selling price or value in use, whichever is higher.

2.3 Depreciation

Depreciation (including amortisation) is calculated in the following manner :

(a) Leasehold land is amortised over the period of lease.

(b) Depreciation on revalued assets other than land is calculated on their respective revalued amounts at rates considered applicable by the valuers on the straight line method. (Also refer Note 3 below)

(c) In respect of other assets, at rates prescribed in Schedule XIV to the Companies Act, 1956 on Straight Line Method except Plant and Machinery given under operating leases which are depreciated over a period of 3 to 6 years, being the useful life as estimated by the management.

(d) Technical Know-how fees are amortised under straight line method over total useful lives ( currently 5 to 10 years), as estimated by the Management.

(e) Software capitalised, are amortised within a period of three years from the date of capitalisation.

2.4 Investments

Long term Investments are stated at cost less provision, if any, for permanent diminution in value .

2.5 Inventories

Inventories, other than Stores are valued at lower of weighted average cost/actual cost (inclusive of conversion expenses and applicable overheads for manufacturing activities) and net realisable value. Stores are valued at weighted average cost less write offs.

Loose Tools acquired prior to 1st September, 2008 are written off over a period up to 5 years, after retaining 10% residual value. Loose Tools acquired on or after 1st September,2008 are fully charged off.

2.6 Taxation

Current Tax in respect of taxable income is provided for the year based on applicable tax rates and laws. Deferred Tax is recognised subject to the consideration of prudence in respect of deferred tax assets, 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 and is measured using tax rates and laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are reviewed at each Balance Sheet date to re-assess realisation.

2.7 Employee Benefits

2.7.1 Short-term Employee benefits (i.e. benefits payable within one year) are recognised in the period in which the employee services are rendered.

Contributions towards provident funds are recognised as expense. Provident fund contributions in respect of employees are made to common trust-Tractors India Employees Provident Fund ( being administered by the trustees of the said fund for the benefit of employees of the company and its subsidary company i.e. Tractors India Private Limited) and such Trust invest funds following a pattern of investment prescribed by the Government. The interest rate payable to the members of the Trusts is not lower than the rate of interest declared annually by the Central Government under the Employees Provident Funds and Miscellaneous Provisions Act,1952 and shortfall, if any, on account of interest, is made good by the Company. (Also refer note 18.2 below) Contributions under Employees Pension Scheme is made as per statutory requirements and charged as expenses for the year.

2.7.3 The Company also contributes to the Central Government administered Employees State Insurance Scheme for its eligible employees, which is a defined contribution plan.

2.7.4 Provisions for Gratuity for eligible employees is (being a defined benefit plan) made on the basis of year-end actuarial valuation using Projected unit credit method.

2.7.5 In respect of certain eligible employees who have attained 45 years of age as on 1st April 2009, provision for Superannuation under defined benefit plan is made on the basis of year end actuarial valuation (Note 18.3 below) using Projected unit credit method.

In respect of certain eligible employees who have not attained 45 years of age as on 1st April 2009 provision for Superannuation is made :-

- under defined contribution scheme in respect of services rendered with effect from 1st April 2009.

- under defined benefit scheme in respect of services rendered up to 31st March 2009, based on frozen pensionable salary as on 31st March 2009 (refer Note 18.3 below) using Projected unit credit method.

2.7.6 Actuarial gains/ losses arising in Defined Benefit Plans are recognised in the Profit and Loss Account as income or expenses in the year in which they occur.

Accrued liability towards Leave Encashment benefits, covering eligible employees, evaluated on the basis of year-end actuarial valuation, using Projected unit credit method, is recognised as a charge.

2.8 Foreign Currency Transactions

Monetary assets and liabilities related to foreign currency transactions remaining unsettled at the year end are translated at year end rates or at contract rates, where covered by forward exchange contracts. The difference in transactions of monetary assets and liabilities and realised gains and losses on foreign exchange transactions are recognised in the Profit and Loss Account. In respect of transactions covered by forward exchange contracts, the difference between the contract rate and the spot rate on the date of transaction is charged to the Profit and Loss Account over the period of the contract. Profit/(Loss) on cancellation of forward contracts are recognised as income or as expenses for the year. Foreign currency non-monetary items carried in terms of historical cost are reported using the exchange rate at the date of transactions.

2.9 Borrowing Cost

Borrowing Cost, if any, that are attributable to the acquisition, construction or production of Qualifying Assets are capitalised as part of cost of such assets. A Qualifying Asset is an asset that necessarily requires a substantial period of time to get ready for its intended use or sale. All other borrowing costs are recognised as expenses in the period in which they are incurred.

2.10 Leases

For assets acquired under Operating Lease, rentals payable are charged to Profit and Loss Account. Assets acquired under Finance Lease are capitalised at lower of the Fair Value and Present Value of Minimum Lease Payments. Assets leased out under operating leases are capitalised. Rental income is recognised on accrual basis over the lease term.

3. Based on the valuation report submitted by the valuers appointed for the purpose, certain items of the Companys fixed assets (viz. Freehold and Leasehold Land, Freehold and Leasehold Buildings and Plant and Machinery) were revalued on 31st March,1993 after considering the following factors :-

- The then estimated current market value pertaining to Leasehold Land and Freehold Land and Buildings thereon.

- Value of Plant and Machinery based on their the then current cost of replacement.

- Adjustments for the then condition, the standard of maintenance, depreciation up to valuation date etc.

The resultant revaluation surplus of Rs. 247,234 thousand, arising from the aforesaid revaluation, were transferred to Revaluation Reserve as reflected in the Companys annual accounts for 1992-93.

Depreciation on these revalued assets as calculated in the manner indicated in Note 2.3(b) above includes an additional charge of Rs. 1,545 thousand (Previous Year Rs. 1,545 thousand)and an amount equivalent to the additional charge has been transferred to the Profit and Loss Account from Revaluation Reserve; such transfer, according to an authoritative professional view being acceptable for the purpose of the Companys annual accounts. In consequence, the effective depreciation rates (other than leasehold land) are as per Schedule XIV to the Companies Act, 1956.


Mar 31, 2010

1.1 Sales

Revenue from sales/services (exclusive of Sales Tax/ Value Added Tax) is being recognised on accrual basis in keeping with related arrangements with customers and is net of credit notes on account of returns and allowances.

1.2 Fixed Assets

Fixed Assets (comprising both tangible and intangible items) are stated at cost except in case of certain items of Land, Buildings and Plant and Machinery which are stated on the basis of revaluation (with corresponding credit to the Revaluation Reserve Account), being inclusive of resultant write ups.

Software are capitalised where it is expected to provide future enduring economic benefit. Capitalisation costs include license fees and cost of implementation/ system integration services. The costs are capitalised in the year in which the relevant software is implemented for use.

Impairment loss, if any, is recognised wherever the carrying amount of fixed assets of a cash generating unit exceeds its recoverable amount i.e. net selling price or value in use, whichever is higher.

1.3 Depreciation

Depreciation (including amortisation) is calculated in the following manner:

(a) Leasehold land is amortised over the period of lease.

(b) Depreciation on revalued assets other than land is calculated on their respective revalued amounts at rates considered applicable by the valuers on the straight line method. (Also refer Note 3 below)

(c) In respect of other assets, at rates prescribed in Schedule XIV to the Companies Act, 1956 on Straight Line Method except Plant and Machinery under operating leases which are depreciated over a period of 3 to 6 years, being the useful life as estimated by the management.

(d) Technical Know-how fees are amortised under straight line method over total useful lives (currently 5 to 10 years), as estimated by the Management.

(e) Software capitalised, are amortised within a period of three years from the date of capitalisation.

1.4 Investments

Long term Investments are stated at cost less provision, if any, for permanent diminution in value.

1.5 Inventories

Inventories, other than Stores and Loose Tools are valued at lower of weighted average cost (inclusive of conversion expenses and applicable overheads for manufacturing activities) and net realisable value. Stores are valued at weighted average cost less write offs.

Loose Tools acquired prior to 1 st September, 2008 are written off over a period up to 5 years, after retaining 10% residual value. Loose Tools acquired on or after 1st September,2008 are fully charged off.

1.6 Taxation

Current Tax in respect of taxable income is provided for the year based on applicable tax rates and laws. Deferred Tax is recognised subject to the consideration of prudence in respect of deferred tax assets, 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 and is measured using tax rates and laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are reviewed at each Balance Sheet date to re-assess realisation.

1.7 Employee Benefits

1.7.1 Short-term Employee benefits (i.e. benefits payable within one year) are recognised in the period in which the employee services are rendered.

1.7.2 Contributions towards provident funds are recognised as expense. Provident fund contributions in respect of employees are made to Trusts administered by the Company and such Trusts invest funds following a pattern of investments prescribed by the Government. The interest rate payable to the members of the Trusts is not lower than the rate of interest declared annually by the Central Government under the Employees Provident Funds and Miscellaneous Provisions Act,1952 and shortfall, if any, on account of interest, is made good by the Company. (Also refer note 19.2 below) Contributions under Employees Pension Scheme is made as per statutory requirements and charged as expenses for the year.

1.7.3 The Company also contributes to the Central Government administered Employees State Insurance Scheme for its eligible employees, which is a defined contribution plan.

1.7.4 Provisions for Gratuity for eligible employees is (being a defined benefit plan) made on the basis of year-end actuarial valuation.

1.7.5 In respect of certain eligible employees who have attained 45 years of age as on 1st April 2009, provision for Superannuation under defined benefit plan is made on the basis of year end actuarial valuation (Refer Note 19.3 below)

In respect of certain eligible employees who have not attained 45 years of age as on 1st April 2009 provision for Superannuation is made :- under defined contribution scheme in respect of services rendered with effect from 1st April, 2009.

under defined benefit scheme in respect of services rendered up to 31st March, 2009, based on frozen pensionable salary as on 31st March, 2009. (Refer Note 19.3 below)

1.7.6 Actuarial gains / losses arising in Defined Benefit Plans are recognised in the Profit and Loss Account as income or expenses in the year in which they occur.

1.7.7 Accrued liability towards Leave Encashment benefits, covering eligible employees, evaluated on the basis of year-end actuarial valuation, is recognised as a charge.

1.8 Foreign Currency Transactions

Monetary assets and liabilities related to foreign currency transactions remaining unsettled at the year end are translated at year end rates or at contract rates, where covered by forward exchange contracts. The difference in transactions of monetary assets and liabilities and realised gains and losses on foreign exchange transactions are recognised in the Profit and Loss Account, In respect of transactions covered by forward exchange contracts, the difference between the contract rate and the spot rate on the date of transaction is charged to the Profit and Loss Account over the period of the contract. Profit/ (Loss) on cancellation of forward contracts are recognised as income or as expenses for the year. Foreign currency non monetary items carried in terms of historical cost are reported using the exchange rate at the date of transactions.

1.9 Borrowing Cost

Borrowing Cost, if any, that are attributable to the acquisition, construction or production of Qualifying Assets are capitalised as part of cost of such assets. A Qualifying Asset is an asset that necessarily requires a substantial period of time to get ready for its intended use or sale. All other borrowing costs are recognised as expenses in the period in which they are incurred.

1.10 Leases

For assets acquired under Operating Lease, rentals payable are charged to Profit and Loss Account. Assets acquired under Finance Lease are capitalised at lower of the Fair Value and Present Value of Minimum Lease Payments.

Assets leased out under operating leases are capitalised. Rental income is recognised on accrual basis over the lease term.

 
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