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Accounting Policies of Timex Group India Ltd. Company

Mar 31, 2016

1. Company overview

Timex Group India Limited (‘TGIL’ or the ‘Company’), a subsidiary of Timex Group Luxury Watches B.V., is a limited liability company incorporated on 4 October 988. The Company is listed on Bombay Stock Exchange in India.

The Company is engaged in the business of manufacturing and trading of watches and rendering of related after sales service. T Company’s manufacturing facilities are located at Baddi, Himachal Pradesh. The Company also provides accounting and information and technology support services to group companies.

2. Significant accounting policies

The accounting policies set out below have been applied consistently to the periods presented in these financial statements.

a. Basis of preparation of financial statements

These financial statements have been prepared and presented under the historical cost convention on a going concern basis, on the accrual basis of accounting and comply with the Generally Accepted Accounting Principles (GAAP) in India. Indian GAAP comprises mandatory accounting standards as specified under the section 133 of the Companies Act, 2013 read with Rule 7 of Companies (Accounts) Rules, 204 and other accounting pronouncements of the Institute of Chartered Accountants of India. The financial statements are presented in Indian rupees rounded off to the nearest lakhs.

b. Use of going concern assumption

The accumulated losses of the company as at 31 March 206 are Rs. 7,84 lakhs, which have resulted in complete erosion of the net worth of the Company. The Company has also incurred losses of Rs 927 lakhs for the year ended 31 March 206 and as a that date, the Company’s current liabilities are in excess of its current assets by Rs. 3,539 lakhs. The Company expects grow in its operations in coming years and is taking measures to improve its operational efficiency. However, the company expects to incur losses during the year 2016-17. As per the business plans approved by the board of directors, the funding requirements of the company will be met through funds from operations and bank borrowings, which have been guaranteed by Timex Group B.V., a fellow subsidiary. Further, preference shares amounting to Rs. 3,500 lakhs, subject to shareholders’ approval, are proposed to be issued to the holding company during the year 20B-17. In view of the above, the use of going concern assumption has been considered appropriate in preparation of financial statements of the Company.

c. Use of estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses and the disclosure of contingent assets and liabilities on the date of th financial statements. Examples of such estimates include estimated provision for doubtful debts, warranties, future obligations under employee retirement benefit plans and estimated useful life of fixed assets, classification of assets/liabilities as current or noncurrent in certain circumstances etc. Differences between actual results and estimates are recognized in the year in which actual results are known or materialized. Any revision to accounting estimates is recognized in accordance with the requirements of the respective accounting standard.

d. Current-non-current classification

All assets and liabilities are classified into current and non-current.

Assets

An asset is classified as current when it satisfies any of the following criteria:

a. it is expected to be realized in, or is intended for sale or consumption in, the company’s normal operating cycle;

b. it is held primarily for the purpose of being traded;

c. it is expected to be realized within 12 months after the reporting date; or

d. it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.

Current assets include the current portion of non-current financial assets.

All other assets are classified as non-current.

Liabilities

A liability is classified as current when it satisfies any of the following criteria:

a. it is expected to be settled in the company’s normal operating cycle;

b. it is held primarily for the purpose of being traded;

c. it is due to be settled within 12 months after the reporting date; or

d. the company does not have an unconditional right to defer settlement of the liability for at least 2 months after the report date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments

do not affect its classification.

Current liabilities include current portion of non-current financial liabilities.

All other liabilities are classified as non-current.

Operating cycle

Operating cycle is the time between the acquisition of assets for processing and their realization in cash or cash equivalents.

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.

e. Fixed assets and depreciation

Fixed assets are carried at cost of acquisition less accumulated depreciation. Cost is inclusive of freight, duties, taxes and any other directly attributable costs to bring the assets to their working condition for intended use.

Depreciation on tangible assets other than leasehold land and leasehold improvements is provided under the straight line method based on management’s assessment of useful economic lives of the asset. Depreciation is provided at the useful lives prescribe! under Part C of Schedule II of The Companies Act, 203, except for the following block of assets:

- Office Equipment (Mobile Phones) 3 years

- Furniture and fixtures 5 years

- Computers 4 years

- Tools and moulds 1 year

For these class of assets, based on internal technical evaluation, the management believes that useful lives given above bees represent the period over which company expects to use these assets.

Depreciation on additions is provided on a pro-rata basis from the date of acquisition/installation.

Depreciation on sale/deduction from fixed assets is provided for up to the date of sale/adjustment, as the case may be.

Leasehold land is amortized over the period of lease.

Leasehold improvements are depreciated under the straight line method over the lowest of the following:

- period of the lease

- useful life as estimated by management

Gain or loss arising from derecognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the assets and are recognized in the Statement of Profit and Loss when assets are derecognized.

f. Intangible assets and amortization

Intangible assets comprising software are carried at cost of acquisition less accumulated amortization. Cost is inclusive of duties, taxes and any other directly attributable costs to bring the assets to their working condition for intended use.

Software is amortized over 5-7 years, depending on its estimated useful life, on a straight-line basis.

Gain or loss arising from derecognition of intangible assets are measured as the difference between the net disposal proceeds a the carrying amount of the assets and are recognized in the Statement of Profit and Loss when assets are derecognized.

g. Impairment

The carrying amounts of assets are reviewed at each balance sheet date in accordance with Accounting Standard -28 on Impairment of Assets ’to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is estimated. An impairment loss is recognized whenever the carrying amount of an asset or cash genera unit exceeds its recoverable amount. Impairment losses are recognized in the Statement of Profit and Loss. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is revere only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined net depreciation or amortization, if no impairment loss had been recognized.

h. Inventories

Inventories are valued at the lower of cost and net realizable value. Cost of inventories includes all costs incurred in bringing inventories to their present location and condition.

In determining the cost, the weighted average cost method is used. Fixed production overheads are allocated on the basis o normal capacity of production facilities. Finished goods and work-in-progress include appropriate share of allocable overheads.

The net realizable value of work-in-progress is determined with reference to the selling prices of related finished products. Raw materials and other supplies held for use in the production of finished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realizable value.

i. Employee benefits

The Company’s obligations towards various employee benefits have been recognized as follows:

Short term employee benefits

All employee benefits payable/available within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and bonus etc. are recognized in the Statement of Profit and Loss in the period in which the employee renders the related service.

Post employment benefits Superannuation:-

In respect of defined contribution plan in the form of Superannuation, the Trustees of the Scheme have entrusted the administration of the Scheme to the Life Insurance Corporation of India (LIC). Annual contribution to the LIC is recognized as an expense in Statement of Profit and Loss.

Gratuity:-

Charge for the year in respect of unfunded defined benefit plan in the form of gratuity has been ascertained based on actuarial valuation carried out by an independent actuary as at the yearend using the Projected Unit Credit Method, which recognizes ei period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured at the present value of the estimated future cash flows. The discount rate used for determining the present value of the obligation under defined benefit plans is based on the market yields on Government securities as at the valuation date having maturity periods approximating to the terms of related obligations. Actuarial gains and losses a recognized immediately in the Statement of Profit and Loss.

Provident Fund:

The Company deposits certain portion of the Provident Fund contribution with the Regional Provident Fund Commissioner a will have no obligation to pay further amounts. Accordingly, this plan is considered as a defined contribution plan.

For the remaining portion of Provident Fund, the Company contributes to the Provident Fund Trust which is administered trustees of an independently constituted Trust recognized by the Income-tax Act, 961 Contributions, including shortfall, if any to the Trust are charged to the Statement of Profit and Loss on an accrual basis. As the provident fund scheme has a guaranteed return linked with that under Employee Provident Fund Scheme, 1952, the same has been considered as a defined benefit plan.

The present value of obligation has been determined based on actuarial valuation done by independent actuary using the Projected Accrued Benefit Method. Under this method, the Defined Benefit Obligation is calculated based on deterministic approach in respect of all accrued and accumulated provident fund contributions as at the valuation date. The cost of interest rate guaranty if any, in respect of future provident fund contributions is not taken into consideration. This approach determines the pres value of the interest rate guarantee under three interest rate scenarios: base case scenario, rising interest rate scenario and i interest rate scenario. The Defined Benefit Obligation of the interest rate guarantee is set equal to the average of the present values determined under these scenarios in respect of accumulated provident fund contributions as at the valuation date.

Gains or losses on the curtailment or settlement of any defined benefit plan are recognized when the curtailment or settlement occurs.

Other long term benefits

Compensated absences are in the nature of other long term employee benefits. Cost of long term benefit by way of accumulating compensated absences that are expected to be availed after a period of 2 months from the year end are recognized when the employees render the service that increases their entitlement to future compensated absences. The liability in respect compensated absences is provided on the basis of an actuarial valuation done by an independent actuary at the yearend using projected unit credit method. Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss. j. Revenue recognition

Revenue from sale of goods is recognized on delivery of goods to the buyer which coincides with transfer of all significant risks and rewards of ownership. The amount recognized as sale is inclusive of excise duty and excludes sales tax and trade and quantity discounts.

Revenue from services is recognized on rendering of services to customers on accrual basis.

Interest income is recognized on a time proportion basis considering the rate of interest and amount invested. k. Foreign currency transactions

Foreign exchange transactions are recorded using the exchange rate prevailing on the date of the transaction. Exchange different arising on foreign exchange transactions settled during the year are recognized in the Statement of Profit and Loss for the year.

Monetary assets and liabilities denominated in foreign currencies remaining unsettled as at the balance sheet date are translate at the exchange rates on that date and the resultant exchange differences are recognized in the Statement of Profit and Loss.

l. Warranties

Warranty costs are estimated for expected warranty claims in respect of products sold during the year on the basis of a tech evaluation and past experience regarding failure trends of products and costs of rectification or replacement. Provision is made for the estimated liability in respect of warranty costs in the year of sale of goods.

m. Provision for sales returns

Provision for sales returns is recognized to the extent of estimated margin on expected returns based on past trends.

n. Provision for unearned margin

Provision for unearned margin relates to certain sales where property in the goods has passed but a significant risk of ownership has not passed to the counterparty by the date of the Balance Sheet.

o. Taxation

Income tax expense comprises current tax (i.e amount of tax for the year determined in accordance with the Income-tax Act, 961 and deferred tax charge or credit (reflecting the tax effects of timing difference between accounting income and taxable income for the period). The deferred tax charge or credit and the corresponding deferred tax liability or deferred tax asset is reclog using the tax rates that have been enacted or substantially enacted as at the balance sheet date. Deferred tax assets are reckon only to the extent there is reasonable certainty of realization. Such assets are reviewed at each balance sheet date to reaps realization. However, where there are carried forward losses or unabsorbed depreciation under taxation laws, deferred tax asset are recognized only if there is virtual certainty of realization of such assets.

The credits arising from Minimum Alternate Tax paid are recognized as receivable only if there is reasonable certainty that Company will have sufficient taxable income in future years in order to utilize such credits.

p. Leases

Lease rentals in respect of assets taken on operating lease are charged on a straight-line basis to the Statement of Profit and Loss.

q. Other Provisions and Contingent Liabilities

A provision arising from claims, litigation, assessment, fines, penalties, etc. is recognized when the Company has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. These are reviewed at each balance she date and adjusted to reflect current management estimates. Contingent liabilities are disclosed in respect of possible obligations that have risen from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise. When there is a possible obligation or pre obligation where the likelihood of an outflow is remote, no disclosure or provision is made.

r. Cash and cash equivalents

Cash and cash equivalents for the purpose of Cash Flow Statement comprise cash at bank and in hand and short term investments with original maturity of less than three months. s. Earnings per share

Basic earnings per share are computed using the weighted average number of equity shares outstanding during the year. Diluted earnings per share are computed using the weighted average number of equity and dilutive potential equity shares outstanding during the year, except where the results would be anti- dilutive.

Rights, preferences and restrictions attached to equity shares

The Company has only one class of equity shares having a par value of Re. 1 per share. Each holder of equity shares is entitled to one vote per share. All equity shareholders rank equally with regard to dividends and share in the Company’s residual assets. The equity shareholders are entitled to receive dividend was declared by the Company subject to payment of dividend to preference shareholders.

In the event of liquidation of the Company, the holders of the 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.

Rights, preferences and restrictions attached to preference shares

0.1% Non-cumulative redeemable non-convertible preference shares shall be entitled to dividend at the rate of 0.1% per annum. In case of insufficiency of profits /no profits, the dividend on preference shares shall not be declared and distributed and the dividend liability on the preference shares for the respective year shall lapse.

7.1% Cumulative redeemable non-convertible preference shares shall be entitled to dividend at the rate of 7.1% per annum. In case of insufficiency of profits /no profits, the dividend on preference shares shall not be declared and distributed in the respective year but the dividend liability on the preference shares for that respective year shall be cumulated and paid to the holders of the prefer shares.

Preference shares of all classes carry a preferential right as to dividend over equity shareholders. Where dividend on cumulative preference shares is not declared for a financial year, the entitlement thereto is carried forward whereas in the case of non-cumulative preference shares, the entitlement for that year lapses. The preference shares are entitled to one vote per share at meetings Company on any resolutions of the Company directly affecting their rights. In the event of liquidation, preference shareholders have a preferential right over equity shareholders to be repaid to the extent of capital paid-up and dividend in arrears on such shares.

Terms of redemption of preference shares

Maturity period for redemption of 0.1% preference shares amounting to Rs. 250 lakhs (previous year Rs. 250 lakhs) is till 24 March 208 . Original maturity was ten years from the date of allotment i.e. 25 March 2003, with an option to the Company of an earlier redemption after 24 March 2005. The shares were due for redemption on 24 March 20® which pursuant to the provisions of section 106 of the Companies Act, 1956 was extended by the Company with the consent of preference shareholders by five years, i.e. till 24 March 208.

Maturity period for redemption of 7.1% preference shares amounting to Rs. 1,570 lakhs (previous year Rs. 1,570 lakhs) is till 26 March 209. Original maturity was ten years from the date of allotment i.e. 27 March 2114, with an option to the Company of an earlier redemption after 27 March 2006. The shares were due for redemption on 26 March 204 which pursuant to the provisions of Section 106 of the Companies Act, 1956 was extended by the Company with the consent of preference shareholders by the five years 1.e. till 26 March 209. (Refer note 32 and note 4)

Maturity period for redemption of 7.1% preference shares amounting to Rs. 2,290 lakhs (previous year Rs. 2,290 lakhs) is till 20 March 2[E1 Original maturity was ten years from the date of allotment i.e. 21 March 2006, with an option to the Company of an earlier redemption after 21 March 2008. The shares were due for redemption on 20 March 206 which pursuant to the provisions of Section 106 of the Companies Act, 1956 was extended by the Company with the consent of preference shareholders by five years i.e. till 20 March 2021 (Refer note 32 and note 4)

Provision for warranties

A provision is estimated for expected warranty claims in respect of products sold during the year on the basis of technical evaluation and past experience regarding failure trends of products and costs of rectification or replacement.

It is expected that most of this cost will be incurred over the next one year as per warranty terms.

Provision for sales returns

Provision for sales returns has been created for estimated loss of margin on expected sales returns in future pe against products sold during the year. The provision has been setup based on management’s estimates and past trends.

Provision for unearned margin

Provision for unearned margin relates to certain sales where property in the goods has passed but a significant risk of ownership has not passed to the counterparty by the date of the balance sheet.

Provision for litigations

This represents provisions made for probable liabilities/ claims arising out of pending disputes/litigations with various regulatory authorities (in respect of excise duty, sales tax and similar matters). Above provisions are affected numerous uncertainties and management has taken all efforts to make a best estimate. Timing of outflow of resources will depend upon timing of decision of cases.


Mar 31, 2015

A. Basis of preparation of financial statements

These financial statements have been prepared and presented historical cost convention on a going concern basis, on the accrual basis of accounting and comply with the Generally Accepted Accounting Principles (GAAP) in India. Indian GAAP comprises mandatory accounting standards as specified under the section 133 of the Companies Act, 2013 read with Rule 7 of Companies (Accounts) Rules, 2014 and other accounting pronouncements of the Institute of Chartered Accountants of India. The financial statements are presented in Indian rupees rounded off to the nearest lakhs.

b. Use of going concern assumption

The accumulated losses of the company as at 31 March 2015 are Rs. 6,887 lakhs, which have resulted in complete erosion of the net worth of the Company. The Company has also incurred losses of Rs 1,098 lakhs for the year ended 31 March 2015 and as at that date, the Company''s current liabilities are in excess of its current assets by Rs. 2,602 lakhs. The Company expects growth in its operations in coming years and is taking measures to improve its operational efficiency. However, the company expects to incur losses during the year 2015-16. As per the business plans approved by the board of directors, the funding requirements of the company will be met through funds from operations and bank borrowings, which have been guaranteed by Timex Group Luxury Watches B.V., the holding company. In view of the above, the use of going concern assumption has been considered appropriate in preparation of financial statements of the Company.

c. Use of estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses and the disclosure of contingent assets and liabilities on the date of the financial statements. Examples of such estimates include estimated provision for doubtful debts, warranties, future obligations under employee retirement benefit plans and estimated useful life of fixed assets, classification of assets/liabilities as current or non current in certain circumstances etc. Differences between actual results and estimates are recognised in the year in which the actual results are known or materialised. Any revision to accounting estimates is recognised in accordance with the requirements of the respective accounting standard.

d. Current-non-current classification

All assets and liabilities are classified into current and non-current.

Assets

An asset is classified as current when it satisfies any of the following criteria:

a. it is expected to be realised in, or is intended for sale or consumption in, the company''s normal operating cycle;

b. it is held primarily for the purpose of being traded;

c. it is expected to be realised within 12 months after the reporting date; or

d. it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.

Current assets include the current portion of non-current financial assets.

All other assets are classified as non-current.

Liabilities

A liability is classified as current when it satisfies any of the following criteria:

a. it is expected to be settled in the company''s normal operating cycle;

b. it is held primarily for the purpose of being traded;

c. it is due to be settled within 12 months after the reporting date; or

d. the company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

Current liabilities include current portion of non-current financial liabilities.

All other liabilities are classified as non-current.

Operating cycle

Operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents.

Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current - non current classification of assets and liabilities.

e. Fixed assets and depreciation

Fixed assets are carried at cost of acquisition less accumulated depreciation. Cost is inclusive of freight, duties, taxes and any other directly attributable costs to bring the assets to their working condition for intended use.

Depreciation on tangible assets other than leasehold land and leasehold improvements is provided under the straight line method based on management''s assessment of useful economic lives of the asset. Depreciation is provided at the useful lives prescribed under Part C of Schedule II of The Companies Act, 2013, except for the following block of assets:

* Office Equipment (Mobile Phones) 3 years

* Furniture and fixtures 5 years

* Computers 6 years

* Tools and moulds 1 year

For these class of assets, based on internal technical evaluation, the management believes that useful lives as given above best represent the period over which company expects to use these assets.

Depreciation on additions is provided on a pro-rata basis from the date of acquisition/installation.

Depreciation on sale/deduction from fixed assets is provided for upto the date of sale/adjustment, as the case may be. Leasehold land is amortised over the period of lease.

Leasehold improvements are depreciated under the straight line method over the lowest of the following:

* period of the lease

* useful life as estimated by management

Gain or loss arising from derecognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the assets and are recognised in the Statement of Profit and Loss when assets are derecognised.

f. Intangible assets and amortisation

Intangible assets comprising software are carried at cost of acquisition less accumulated amortisation. Cost is inclusive of duties, taxes and any other directly attributable costs to bring the assets to their working condition for intended use.

Software is amortised over their estimated useful life of 5 years.

Gain or loss arising from derecognition of intangible assets are measured as the difference between the net disposal proceeds and the carrying amount of the assets and are recognised in the Statement of Profit and Loss when assets are derecognised.

g. Impairment

The carrying amounts of assets are reviewed at each balance sheet date in accordance with Accounting Standard - 28 on ''Impairment of Assets'' to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is estimated. An impairment loss is recognised whenever the carrying amount of an asset or cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the Statement of Profit and Loss. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset''s carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortisation, if no impairment loss had been recognised.

h. Inventories

Inventories are valued at the lower of cost and net realisable value. Cost of inventories includes all costs incurred in bringing the inventories to their present location and condition.

In determining the cost, the weighted average cost method is used. Fixed production overheads are allocated on the basis of normal capacity of production facilities. Finished goods and work-in-progress include appropriate share of allocable overheads.

The net realisable value of work-in-progress is determined with reference to the selling prices of related finished products. Raw materials and other supplies held for use in the production of finished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realisable value.

i. Employee benefits

The Company''s obligations towards various employee benefits have been recognised as follows:

Short term employee benefits

All employee benefits payable/available within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and bonus are recognised in the Statement of Profit and Loss in the period in which the employee renders the related service.

Post employment benefits Superannuation:

In respect of defined contribution plan in the form of Superannuation, the Trustees of the Scheme have entrusted the administration of the Scheme to the Life Insurance Corporation of India (LIC). Annual contribution to the LIC is recognised as an expense in the Statement of Profit and Loss.

Gratuity:

Charge for the year in respect of unfunded defined benefit plan in the form of gratuity has been ascertained based on actuarial valuation carried out by an independent actuary as at the year end using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured at the present value of the estimated future cash flows. The discount rate used for determining the present value of the obligation under defined benefit plans is based on the market yields on Government securities as at the valuation date having maturity periods approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss.

Provident Fund:

The Company deposits certain portion of the Provident Fund contribution with the Regional Provident Fund Commissioner and will have no obligation to pay further amounts. Accordingly, this plan is considered as a defined contribution plan.

For the remaining portion of Provident Fund, the Company contributes to the PF Trust which is administered by trustees of an independently constituted Trust recognised by the Income-tax Act, 1961. Contributions, including shortfall, if any, to the Trust are charged to the Statement of Profit and Loss on an accrual basis. As the provident fund scheme has a guaranteed return linked with that under Employee Provident Fund Scheme, 1952, the same has been considered as a defined benefit plan. The present value of obligation has been determined based on actuarial valuation done by independent actuary using the Projected Accrued Benefit Method. Under this method, the Defined Benefit Obligation is calculated based on deterministic approach in respect of all accrued and accumulated provident fund contributions as at the valuation date. The cost of interest rate guarantee, if any, in respect of future provident fund contributions is not taken into consideration. This approach determines the present value of the interest rate guarantee under three interest rate scenarios: base case scenario, rising interest rate scenario and falling interest rate scenario. The Defined Benefit Obligation of the interest rate guarantee is set equal to the average of the present values determined under these scenarios in respect of accumulated provident fund contributions as at the valuation date.

Gains or losses on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs.

Other long term benefits

Compensated absences are in the nature of other long term employee benefits. Cost of long term benefit by way of accumulating compensated absences that are expected to be availed after a period of 12 months from the year end are recognised when the employees render the service that increases their entitlement to future compensated absences. The liability in respect of compensated absences is provided on the basis of an actuarial valuation done by an independent actuary at the year end. Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss.

f. Revenue recognition

Revenue from sale of goods is recognised on delivery of goods to the buyer which coincides with transfer of all significant risks and rewards of ownership. The amount recognised as sale is inclusive of excise duty and excludes sales tax and trade and quantity discounts.

Revenue from services is recognised on rendering of services to customers on accrual basis.

Interest income is recognised on a time proportion basis considering the rate of interest and amount invested.

k. Foreign currency transactions

Foreign exchange transactions are recorded using the exchange rate prevailing on the date of the transaction. Exchange differences arising on foreign exchange transactions settled during the year are recognised in the Statement of Profit and Loss of the year.

Monetary assets and liabilities denominated in foreign currencies remaining unsettled as at the balance sheet date are translated at the exchange rates on that date and the resultant exchange differences are recognised in the Statement of Profit and Loss.

l. Warranties

Warranty costs are estimated for expected warranty claims in respect of products sold during the year on the basis of a technical evaluation and past experience regarding failure trends of products and costs of rectification or replacement. Provision is made for the estimated liability in respect of warranty costs in the year of sale of goods.

m. Provision for sales returns

Provision for sales returns is recognised to the extent of estimated margin on expected returns based on past trends.

n. Provision for unearned margin

Provision for unearned margin relates to certain sales where property in the goods has passed but a significant risk of ownership has not passed to the counterparty by the date of the balance sheet.

o. Taxation

Income tax expense comprises current tax (i.e amount of tax for the year determined in accordance with the Income-tax Act, 1961) and deferred tax charge or credit (reflecting the tax effects of timing difference between accounting income and taxable income for the period). The deferred tax charge or credit and the corresponding deferred tax liability or deferred tax asset is recognised using the tax rates that have been enacted or substantially enacted as at the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty of realisation. Such assets are reviewed at each balance sheet date to reassess realisation. However, where there are carried forward losses or unabsorbed depreciation under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets.

The credits arising from Minimum Alternate Tax paid are recognised as receivable only if there is reasonable certainty that the Company will have sufficient taxable income in future years in order to utilize such credits.

p. Leases

Lease rentals in respect of assets taken on operating lease are charged on a straight-line basis to the Statement of Profit and Loss.

Lease income from operating leases is recognised in the Statement of Profit and Loss on a straight line basis over the lease term.

q. Other Provisions and Contingent Liabilities

A provision arising from claims, litigation, assessment, fines, penalties, etc. is recognised when the Company has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. These are reviewed at each balance sheet date and adjusted to reflect current management estimates. Contingent liabilities are disclosed in respect of possible obligations that have risen from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise. When there is a possible obligation or present obligation where the likelihood of an outflow is remote, no disclosure or provision is made.

r. Cash and cash equivalents

Cash and cash equivalents for the purpose of Cash Flow Statement comprise cash at bank and in hand and short term investments with original maturity of less than three months.

s. Earnings per share

Basic earnings per share are computed using the weighted average number of equity shares outstanding during the year. Diluted earnings per share are computed using the weighted average number of equity and dilutive potential equity shares outstanding during the year, except where the results would be anti- dilutive.


Mar 31, 2014

The accounting policies set out below have been applied consistently to the periods presented in these financial statements.

a. Basis of preparation of financial statements

These financial statements have been prepared and presented on the accrual basis of accounting and comply with the Accounting Standards prescribed in the Companies (Accounting Standards) Rules, 2006 issued by the Central Government, the relevant provisions of the Companies Act, 1956 and other accounting principles generally accepted in India, to the extent applicable. The financial statements are presented in Indian rupees rounded off to the nearest lakhs.

b. Use of going concern assumption

The accumulated losses of the company as at 31 March 2014 are Rs. 5,722 lakhs, which have resulted in complete erosion of the net worth of the Company. The Company has also incurred losses of Rs 3,298 lakhs for the year ended 31 March 2014 and as at that date, the Company''s current liabilities are in excess of its current assets by Rs. 1,902 lakhs. The Company expects growth in its operations in coming years and is taking measures to improve its operational effciency. However, the company expects to incur losses during the year 2014-15. As per the business plans approved by the board of directors, the funding requirements of the company will be met through funds from operations and bank borrowings, which have been guaranteed by Timex Group Luxury Watches B.V., the holding company. The holding company has also deferred the redemption of preference share capital from 26 March 2014 to 26 March 2019. In view of the above, the use of going concern assumption has been considered appropriate in preparation of financial statements of the Company.

c. Use of estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses and the disclosure of contingent assets and liabilities on the date of the financial statements. Examples of such estimates include estimated provision for doubtful debts, warranties, future obligations under employee retirement benefit plans and estimated useful life of fixed assets, classifcation of assets/liabilities as current or non current in certain circumstances etc. Differences between actual results and estimates are recognised in the year in which the actual results are known or materialised. Any revision to accounting estimates is recognised in accordance with the requirements of the respective accounting standard.

d. Current-non-current classifcation

All assets and liabilities are classifed into current and non-current

Assets

An asset is classifed as current when it satisfes any of the following criteria:

a. it is expected to be realised in, or is intended for sale or consumption in, the company''s normal operating cycle;

b. it is held primarily for the purpose of being traded;

c. it is expected to be realised within 12 months after the reporting date; or

d. it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.

Current assets include the current portion of non-current financial assets.

All other assets are classifed as non-current

Liabilities

A liability is classifed as current when it satisfes any of the following criteria:

a. it is expected to be settled in the company''s normal operating cycle;

b. it is held primarily for the purpose of being traded;

c. it is due to be settled within 12 months after the reporting date; or

d. the company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classifcation.

Current liabilities include current portion of non-current financial liabilities.

All other liabilities are classifed as non-current.

Operating cycle

Operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. Based on the criteria set out in revised schedule VI, the Company has ascertained its operating cycle being a period within 12 months for the purposes of classifcation of assets and liabilities as current and non-current

e. Fixed assets and depreciation

Fixed assets are carried at cost of acquisition less accumulated depreciation. Cost is inclusive of freight, duties, taxes and any other directly attributable costs to bring the assets to their working condition for intended use.

Depreciation on tangible assets other than leasehold land and leasehold improvements is provided under the straight line method over the useful life as estimated by the management or the derived useful life as per Schedule XIV of the Companies Act, 1956, whichever is lower. Depreciation on the following categories of fixed assets is provided at rates that are higher than the corresponding rates prescribed in Schedule XIV

- Plant and machinery (including office equipment) at rates ranging from 4.75% per annum to 100% per annum based on technical evaluation.

- Furniture and fixtures at the rate of 20% per annum.

- Tools and moulds are fully depreciated in the year of manufacture / purchase. Depreciation on additions is provided on a pro-rata basis from the date of acquisition/installation.

Depreciation on sale/deduction from fixed assets is provided for upto the date of sale/adjustment, as the case may be.

Leasehold land is amortised over the period of lease.

Leasehold improvements are depreciated under the straight line method over the lowest of the following:

- period of the lease

- useful life as estimated by management

Assets costing upto Rs. 5,000 are fully depreciated in the year of purchase.

Gain or loss arising from derecognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the assets and are recognised in the Statement of profit and Loss when assets are derecognised.

f. Intangible assets and amortisation

Intangible assets comprising software are carried at cost of acquisition less accumulated amortisation. Cost is inclusive of du- ties, taxes and any other directly attributable costs to bring the assets to their working condition for intended use.

Software is amortised over their estimated useful life of 5 years.

Assets costing upto Rs. 5,000 are fully depreciated in the year of purchase.

Gain or loss arising from derecognition of intangible assets are measured as the difference between the net disposal proceeds and the carrying amount of the assets and are recognised in the Statement of profit and Loss when assets are derecognised.

g. Impairment

The carrying amounts of assets are reviewed at each balance sheet date in accordance with Accounting Standard - 28 on ''Impairment of Assets'' to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is estimated. An impairment loss is recognised whenever the carrying amount of an asset or cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the Statement of profit and Loss. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset''s carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortisation, if no impairment loss had been recognised.

h. Inventories

Inventories are valued at the lower of cost and net realisable value. Cost of inventories includes all costs incurred in bringing the inventories to their present location and condition.

In determining the cost, the weighted average cost method is used. Fixed production overheads are allocated on the basis of normal capacity of production facilities. Finished goods and work-in-progress include appropriate share of allocable overheads.

The net realisable value of work-in-progress is determined with reference to the selling prices of related fnished products. Raw materials and other supplies held for use in the production of fnished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the fnished products will exceed their net realisable value.

Finished goods held for the purpose of demonstration are amortised over a period of three years after deducting estimated residual value.

i. Employee benefits

The Company''s obligations towards various employee benefits have been recognised as follows:

Short term employee benefits

All employee benefits payable/available within twelve months of rendering the service are classifed as short-term employee benefits. benefits such as salaries, wages and bonus etc., are recognised in the Statement of profit and Loss in the period in which the employee renders the related service.

Post employment benefits

In respect of Defined contribution plan in the form of Superannuation, the Trustees of the Scheme have entrusted the administration of the Scheme to the Life Insurance Corporation of India (LIC). Annual contribution to the LIC is recognised as an expense in the Statement of profit and Loss.

Charge for the year in respect of unfunded Defined benefit plan in the form of gratuity has been ascertained based on actuarial valuation carried out by an independent actuary as at the year end using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured at the present value of the estimated future cash flows. The discount rate used for determining the present value of the obligation under Defined benefit plans is based on the market yields on Government securities as at the valuation date having maturity periods approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the Statement of profit and Loss.

Provident Fund (PF): The Company deposits certain portion of the Provident Fund contribution with the Regional Provident Fund Commissioner and will have no obligation to pay further amounts. Accordingly, this plan is considered as a Defined contribution plan.

For the remaining portion of Provident Fund, the Company contributes to the PF Trust which is administered by trustees of an independently constituted Trust recognised by the Income-tax Act, 1961. Contributions, including shortfall, if any, to the Trust are charged to the Statement of profit and Loss on an accrual basis. As the provident fund scheme has a guaranteed return linked with that under Employee Provident Fund Scheme, 1952, the same has been considered as a Defined benefit plan. The present value of obligation has been determined based on actuarial valuation done by independent actuary using the Projected Accrued benefit Method. Under this method, the Defined benefit Obligation is calculated based on deterministic approach in respect of all accrued and accumulated provident fund contributions as at the valuation date. The cost of interest rate guarantee, if any, in respect of future provident fund contributions is not taken into consideration. This approach determines the present value of the interest rate guarantee under three interest rate scenarios: base case scenario, rising interest rate scenario and falling interest rate scenario. The Defined benefit Obligation of the interest rate guarantee is set equal to the average of the present values determined under these scenarios in respect of accumulated provident fund contributions as at the valuation date.

Gains or losses on the curtailment or settlement of any Defined benefit plan are recognised when the curtailment or settlement occurs.

Other long term benefits

Compensated absences are in the nature of other long term employee benefits. Cost of long term benefit by way of accumulating compensated absences that are expected to be availed after a period of 12 months from the year end are recognised when the employees render the service that increases their entitlement to future compensated absences. The liability in respect of compensated absences is provided on the basis of an actuarial valuation done by an independent actuary at the year end. Actuarial gains and losses are recognized immediately in the Statement of profit and Loss.

j. Revenue recognition

Revenue from sale of goods is recognised on delivery of goods to the buyer which coincides with transfer of all significant risks and rewards of ownership. The amount recognised as sale is inclusive of excise duty and excludes sales tax and trade and quantity discounts.

Revenue from services is recognised on rendering of services to customers on accrual basis.

Interest income is recognised on a time proportion basis considering the rate of interest and amount invested.

k. Foreign currency transactions

Foreign exchange transactions are recorded using the exchange rate prevailing on the date of the transaction. Exchange differences arising on foreign exchange transactions settled during the year are recognised in the Statement of profit and Loss of the year.

Monetary assets and liabilities denominated in foreign currencies remaining unsettled as at the balance sheet date are translated at the exchange rates on that date and the resultant exchange differences are recognised in the Statement of profit and Loss.

l. Warranties

Warranty costs are estimated for expected warranty claims in respect of products sold during the year on the basis of a technical evaluation and past experience regarding failure trends of products and costs of rectifcation or replacement. Provision is made for the estimated liability in respect of warranty costs in the year of sale of goods.

m. Provision for sales returns

Provision for sales returns is recognised to the extent of estimated margin on expected returns based on past trends.

n. Provision for unearned margin

Provision for unearned margin relates to certain sales where property in the goods has passed but a significant risk of ownership has not passed to the counterparty by the date of the balance sheet.

o. Taxation

Income tax expense comprises current tax (i.e amount of tax for the year determined in accordance with the Income-tax Act 1961) and deferred tax charge or credit (refecting the tax effects of timing difference between accounting income and taxable income for the period). The deferred tax charge or credit and the corresponding deferred tax liability or deferred tax asset is recognised using the tax rates that have been enacted or substantially enacted as at the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty of realisation. Such assets are reviewed at each balance sheet date to reassess realisation. However, where there are carried forward losses or unabsorbed depreciation under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets.

The credits arising from Minimum Alternate Tax paid are recognised as receivable only if there is reasonable certainty that the Company will have suffcient taxable income in future years in order to utilize such credits.

p. Leases

Lease rentals in respect of assets taken on operating lease are charged on a straight-line basis to the Statement of profit and Loss.

Lease income from operating leases is recognised in the Statement of profit and Loss on a straight line basis over the lease term.

q. Other Provisions and Contingent Liabilities

A provision arising from claims, litigation, assessment, fnes, penalties, etc. is recognised when the Company has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. These are reviewed at each balance sheet date and adjusted to refect current management estimates. Contingent liabilities are disclosed in respect of possible obligations that have risen from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise. When there is a possible obligation or present obligation where the likelihood of an outflow is remote, no disclosure or provision is made.

r. Cash and cash equivalents

Cash and cash equivalents for the purpose of Cash Flow Statement comprise cash at bank and in hand and short term investments with original maturity of less than three months.

s. Earnings per share

Basic earnings per share are computed using the weighted average number of equity shares outstanding during the year. Diluted earnings per share are computed using the weighted average number of equity and dilutive potential equity shares outstanding during the year, except where the results would be anti- dilutive.

Rights, preferences and restrictions attached to equity shares

The Company has only one class of equity shares having a par value of Re. 1 per share. Each holder of equity shares is entitled to one vote per share. All equity shareholders rank equally with regard to dividends and share in the Company''s residual assets. The equity shareholders are entitled to receive dividend as declared by the Company subject to payment of dividend to preference shareholders.

In the event of liquidation of the Company, the holders of the 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.

Rights, preferences and restrictions attached to preference shares

0.1% Non-cumulative redeemable non-convertible preference shares shall be entitled to dividend at the rate of 0.1% per annum. In case of insuffciency of profits /no profits, the dividend on preference shares shall not be declared and distributed and the dividend liability on the preference shares for the respective year shall lapse.

7.1% Cumulative redeemable non-convertible preference shares shall be entitled to dividend at the rate of 7.1% per annum. In case of insuffciency of profits /no profits, the dividend on preference shares shall not be declared and distrib- uted in the respective year but the dividend liability on the preference shares for that respective year shall be cumulated and paid to the holders of the preference shares.

Preference shares of all classes carry a preferential right as to dividend over equity shareholders. Where dividend on cumulative preference shares is not declared for a financial year, the entitlement thereto is carried forward whereas in the case of non-cumulative preference shares, the entitlement for that year lapses. The preference shares are entitled to one vote per share at meetings of the Company on any resolutions of the Company directly affecting their rights. In the event of liquidation, preference shareholders have a preferential right over equity shareholders to be repaid to the extent of capital paid-up and dividend in arrears on such shares.

Terms of redemption of preference shares

Maturity period for redemption of 0.1% preference shares amounting to Rs. 250 lakhs (previous year Rs. 250 lakhs) is ten years from the date of allotment i.e. 25 March 2003, with an option to the Company of an earlier redemption after 24 March 2005. The shares were due for redemption on 24 March 2013. The redemption of such shares, pursuant to the provisions of Section 106 of the Companies Act, 1956 has been extended by the preference shareholders by five years i.e. till 24 March 2018 and the Company has completed all formalities related to the same.

Maturity period for redemption of 7.1% preference shares amounting to Rs. 1,570 lakhs (previous year Rs. 1,570 lakhs) is ten years from the date of allotment i.e. 27 March 2004, with an option to the Company of an earlier redemption after 27 March 2006. The shares were due for redemption on 26 March 2014. The Company sought extension for redemption of such shares, pursuant to the provisions of Section 106 of the Companies Act, 1956 by five years i.e. till 26 March 2019. The preference shareholders have agreed to this extension. The Company is in the process of complying with the provisions of the Companies Act, 1956 in relation to the same and has received approval from the Reserve Bank of India vide its letter dated 09 April 2014 for extension of redemption date to 26 March 2019.

Maturity period for redemption of 7.1% preference shares amounting to Rs. 2,290 lakhs (previous year Rs. 2,290 lakhs) is ten years from the date of allotment i.e. 21 March 2006, with an option to the Company of an earlier redemption after 21 March 2008.

Provision for warranties

A provision is estimated for expected warranty claims in respect of products sold during the year on the basis of a technical evaluation and past experience regarding failure trends of products and costs of rectifcation or replacement. It is expected that most of this cost will be incurred over the next one year as per warranty terms.

Provision for sales returns

Provision for sales returns has been created for estimated loss of margin on expected sales returns in future period against products sold during the year. The provision has been created based on management''s estimates and past trends.

Provision for unearned margin

Provision for unearned margin relates to certain sales where property in the goods has passed but a significant risk of ownership has not passed to the counterparty by the date of the balance sheet.

Provision for litigations

This represents provisions made for probable liabilities/ claims arising out of pending disputes/litigations with various regulatory authorities (in respect of excise duty, sales tax and similar matters). Above provisions are affected by numerous uncertainties and management has taken all efforts to make a best estimate. Timing of outflow of resources will depend upon timing of decision of cases.


Mar 31, 2013

The accounting policies set out below have been applied consistently to the periods presented in these fnancial statements.

a. Basis of preparation of fnancial statements

These fnancial statements have been prepared and presented on the accrual basis of accounting and comply with the Accounting Standards prescribed in the Companies (Accounting Standards) Rules, 2006 issued by the Central Government, the relevant provisions of the Companies Act, 1956 and other accounting principles generally accepted in India, to the extent applicable. The fnancial statements are presented in Indian rupees rounded off to the nearest lakhs.

b. Use of estimates

The preparation of fnancial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses and the disclosure of contingent assets and liabilities on the date of the fnancial statements. Examples of such estimates include estimated provision for doubtful debts, warranties, future obligations under employee retirement beneft plans and estimated useful life of fxed assets, classifcation of assets/liabilities as current or non current in certain circumstances etc. Differences between actual results and estimates are recognised in the year in which the actual results are known or materialised. Any revision to accounting estimates is recognised in accordance with the requirements of the respective accounting standard.

c. Current–non-current classifcation

All assets and liabilities are classifed into current and non-current.

Assets

An asset is classifed as current when it satisfes any of the following criteria:

a. it is expected to be realised in, or is intended for sale or consumption in, the company''s normal operating cycle;

b. it is held primarily for the purpose of being traded;

c. it is expected to be realised within 12 months after the reporting date; or

d. it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.

Current assets include the current portion of non-current fnancial assets. All other assets are classifed as non-current.

Liabilities

A liability is classifed as current when it satisfes any of the following criteria:

a. it is expected to be settled in the company''s normal operating cycle;

b. it is held primarily for the purpose of being traded;

c. it is due to be settled within 12 months after the reporting date; or

d. the company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classifcation.

Current liabilities include current portion of non-current fnancial liabilities. All other liabilities are classifed as non-current.

Operating cycle

Operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. Based on the criteria set out in revised schedule VI, the Company has ascertained its operating cycle being a period within 12 months for the purposes of classifcation of assets and liabilities as current and non-current.

d. Fixed assets and depreciation

Fixed assets are carried at cost of acquisition less accumulated depreciation. Cost is inclusive of freight, duties, taxes and any other directly attributable costs to bring the assets to their working condition for intended use.

Depreciation on tangible assets other than leasehold land and leasehold improvements is provided under the straight line method over the useful life as estimated by the management or the derived useful life as per Schedule XIV of the Companies Act, 1956, whichever is lower. Depreciation on the following categories of fxed assets is provided at rates that are higher than the corresponding rates prescribed in Schedule XIV:

- Plant and machinery (including offce equipment) at rates ranging from 4.75% per annum to 100% per annum based on technical evaluation.

- Furniture and fxtures at the rate of 20% per annum.

- Tools and moulds are fully depreciated in the year of manufacture / purchase.

Depreciation on additions is provided on a pro-rata basis from the date of acquisition/installation. Depreciation on sale/deduction from fxed assets is provided for upto the date of sale/adjustment, as the case may be. Leasehold land is amortised over the period of lease. Leasehold improvements are depreciated under the straight line method over the lowest of the following:

- period of the lease

- useful life as estimated by management

Assets costing upto Rs. 5,000 are fully depreciated in the year of purchase.

Gain or loss arising from derecognition of fxed assets are measured as the difference between the net disposal proceeds and the carrying amount of the assets and are recognised in the Statement of Proft and Loss when as- sets are derecognised.

e. Intangible assets and amortisation

Intangible assets comprising software are carried at cost of acquisition less accumulated amortisation. Cost is in- clusive of duties, taxes and any other directly attributable costs to bring the assets to their working condition for intended use.

Software is amortised over their estimated useful life of 5 years. Assets costing upto Rs. 5,000 are fully depreciated in the year of purchase.

Gain or loss arising from derecognition of intangible assets are measured as the difference between the net disposal proceeds and the carrying amount of the assets and are recognised in the Statement of Proft and Loss when assets are derecognised.

f. Impairment

The carrying amounts of assets are reviewed at each balance sheet date in accordance with Accounting Standard – 28 on ''Impairment of Assets'' to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is estimated. An impairment loss is recognised whenever the carrying amount of an asset or cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the Statement of Proft and Loss. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset''s carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortisation, if no impairment loss had been recognised.

g. Inventories

Inventories are valued at the lower of cost and net realisable value. Cost of inventories includes all costs incurred in bringing the inventories to their present location and condition.

In determining the cost, the weighted average cost method is used. Fixed production overheads are allocated on the basis of normal capacity of production facilities. Finished goods and work-in-progress include appropriate share of allocable overheads.

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

Finished goods held for the purpose of demonstration are amortised over a period of three years after deducting estimated residual value.

h. Employee benefts

The Company''s obligations towards various employee benefts have been recognised as follows:

Short term employee benefts

All employee benefts payable/available within twelve months of rendering the service are classifed as short-term employee benefts. Benefts such as salaries, wages and bonus etc., are recognised in the Statement of Proft and Loss in the period in which the employee renders the related service.

Post employment benefts

In respect of defned contribution plan in the form of Superannuation, the Trustees of the Scheme have entrusted the administration of the Scheme to the Life Insurance Corporation of India (LIC). Annual contribution to the LIC is recognised as an expense in the Statement of Proft and Loss.

Charge for the year in respect of unfunded defned beneft plan in the form of gratuity has been ascertained based on actuarial valuation carried out by an independent actuary as at the year end using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee beneft entitlement and measures each unit separately to build up the fnal obligation. The obligation is measured at the present value of the estimated future cash fows. The discount rate used for determining the present value of the obligation under defned beneft plans is based on the market yields on Government securities as at the valuation date having maturity periods approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the Statement of Proft and Loss.

Provident Fund (PF): The Company deposits certain portion of the Provident Fund contribution with the Regional Provident Fund Commissioner and will have no obligation to pay further amounts. Accordingly, this plan is considered as a defned contribution plan.

For the remaining portion of Provident Fund, the Company contributes to the PF Trust which is administered by trustees of an independently constituted Trust recognised by the Income-tax Act, 1961. Contributions, including shortfall, if any, to the Trust are charged to the Statement of Proft and Loss on an accrual basis. As the provident fund scheme has a guaranteed return linked with that under Employee Provident Fund Scheme, 1952, the same has been considered as a defned beneft plan. The present value of obligation has been determined based on actuarial valuation done by independent actuary using the Projected Accrued Beneft Method. Under this method, the Defned Beneft Obligation is calculated based on deterministic approach in respect of all accrued and accumulated provident fund contributions as at the valuation date. The cost of interest rate guarantee, if any, in respect of future provident fund contributions is not taken into consideration. This approach determines the present value of the interest rate guarantee under three interest rate scenarios: base case scenario, rising interest rate scenario and falling interest rate scenario. The Defned Beneft Obligation of the interest rate guarantee is set equal to the average of the present values determined under these scenarios in respect of accumulated provident fund contributions as at the valuation date. Gains or losses on the curtailment or settlement of any defned beneft plan are recognised when the curtailment or settlement occurs.

Other long term benefts

Compensated absences are in the nature of other long term employee benefts. Cost of long term beneft by way of accumulating compensated absences that are expected to be availed after a period of 12 months from the year end are recognised when the employees render the service that increases their entitlement to future compensated absences. The liability in respect of compensated absences is provided on the basis of an actuarial valuation done by an independent actuary at the year end. Actuarial gains and losses are recognized immediately in the Statement of Proft and Loss.

i. Revenue recognition

Revenue from sale of goods is recognised on delivery of goods to the buyer which coincides with transfer of all signifcant risks and rewards of ownership. The amount recognised as sale is inclusive of excise duty and excludes sales tax and trade and quantity discounts.

Revenue from services is recognised on rendering of services to customers on accrual basis.

Interest income is recognised on a time proportion basis considering the rate of interest and amount invested.

j. Foreign currency transactions

Foreign exchange transactions are recorded using the exchange rate prevailing on the date of the transaction. Exchange differences arising on foreign exchange transactions settled during the year are recognised in the Statement of Proft and Loss of the year.

Monetary assets and liabilities denominated in foreign currencies remaining unsettled as at the balance sheet date are translated at the exchange rates on that date and the resultant exchange differences are recognised in the Statement of Proft and Loss.

k. Warranties

Warranty costs are estimated for expected warranty claims in respect of products sold during the year on the basis of a technical evaluation and past experience regarding failure trends of products and costs of rectifcation or replacement. Provision is made for the estimated liability in respect of warranty costs in the year of sale of goods.

l. Provision for sales returns

Provision for sales returns is recognised to the extent of estimated margin on expected returns based on past trends.

m. Provision for unearned margin

Provision for unearned margin relates to certain sales where property in the goods has passed but a signifcant risk of ownership has not passed to the counterparty by the date of the balance sheet.

n. Taxation

Income tax expense comprises current tax (i.e amount of tax for the year determined in accordance with the Income- tax Act, 1961) and deferred tax charge or credit (refecting the tax effects of timing difference between accounting income and taxable income for the period). The deferred tax charge or credit and the corresponding deferred tax liability or deferred tax asset is recognised using the tax rates that have been enacted or substantially enacted as at the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty of realisation. Such assets are reviewed at each balance sheet date to reassess realisation. However, where there are carried forward losses or unabsorbed depreciation under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets.

The credits arising from Minimum Alternate Tax paid are recognised as receivable only if there is reasonable certainty that the Company will have suffcient taxable income in future years in order to utilize such credits.

o. Leases

Lease rentals in respect of assets taken on operating lease are charged on a straight-line basis to the Statement of Proft and Loss.

Lease income from operating leases is recognised in the Statement of Proft and Loss on a straight line basis over the lease term.

p. Other Provisions and Contingent Liabilities

A provision arising from claims, litigation, assessment, fnes, penalties, etc. is recognised when the Company has a present obligation as a result of a past event and it is probable that an outfow of resources embodying economic benefts will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. These are reviewed at each balance sheet date and adjusted to refect current management estimates. Contingent liabilities are disclosed in respect of possible obligations that have risen from past events and the existence of which will be confrmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise. When there is a possible obligation or present obligation where the likelihood of an outfow is remote, no disclosure or provision is made.

q. Cash and cash equivalents

Cash and cash equivalents for the purpose of Cash Flow Statement comprise cash at bank and in hand and short term investments with original maturity of less than three months.

r. Earnings per share

Basic earnings per share are computed using the weighted average number of equity shares outstanding during the year. Diluted earnings per share are computed using the weighted average number of equity and dilutive potential equity shares outstanding during the year, except where the results would be anti- dilutive.


Mar 31, 2012

A. 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 on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Examples of such estimates include estimated provision for doubtful debts, warranties, future obligations under employee retirement benefit plans and estimated useful life of fixed assets, classification of assets/liabilities as current or non current in certain circumstances etc. Differences between actual results and estimates are recognized in the year in which the actual results are known or materialized. Any revision to accounting estimates is recognized in accordance with the requirements of the respective accounting standard.

b. Fixed assets and depreciation

Fixed assets are carried at cost of acquisition less accumulated depreciation. Cost is inclusive of freight, duties, taxes and any other directly attributable costs to bring the assets to their working condition for intended use. Depreciation on tangible assets other than leasehold land and leasehold improvements is provided under the straight line method over the useful life as estimated by the management or the derived useful life as per Schedule XIV of the Companies Act, 1956, whichever is lower. Depreciation on the following categories of fixed assets is provided at rates that are higher than the corresponding rates prescribed in Schedule XIV:

- Plant and machinery (including office equipment) at rates ranging from 4.75% per annum to 100% per annum based on technical evaluation.

- Furniture and fixtures at the rate of 20% per annum.

- Tools and moulds are fully depreciated in the year of manufacture / purchase.

Depreciation on additions is provided on a pro-rata basis from the date of acquisition/installation. Depreciation on sale/deduction from fixed assets is provided for up to the date of sale/adjustment, as the case may be.

Leasehold land is a mortised over the period of lease.

Leasehold improvements are depreciated under the straight line method over the lowest of the following:

- period of the lease

- useful life as estimated by management

- derived useful life as per Schedule XIV

Assets costing up to Rs. 5,000 are fully depreciated in the year of purchase.

Gain or loss arising from deracination of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the assets and are recognized in the Statement of Profit and Loss when assets are derecognized.

Fixed assets under construction are disclosed as capital work in progress.

c. Intangible assets and amortization

Intangible assets comprising software are carried at cost of acquisition less accumulated amortization. Cost is inclusive of freight, duties, taxes and any other directly attributable costs to bring the assets to their working condition for intended use.

Software is amortized over their estimated useful life of 5 years.

Assets costing up to Rs. 5,000 are fully depreciated in the year of purchase.

Gain or loss arising from derecognizing of intangible assets are measured as the difference between the net disposal proceeds and the carrying amount of the assets and are recognized in the Statement of Profit and Loss when assets are derecognized.

d. Impairment

The carrying amounts of assets are reviewed at each balance sheet date in accordance with Accounting Standard

- 28 on ‘Impairment of Assets' to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is estimated. An impairment loss is recognized whenever the carrying amount of an asset or cash generating unit exceeds its recoverable amount. Impairment losses are recognized in the Statement of Profit and Loss. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortization, if no impairment loss had been recognized.

e. Inventories

Inventories are valued at the lower of cost and net realizable value. Cost of inventories includes all costs incurred in bringing the inventories to their present location and condition.

In determining the cost, the weighted average cost method is used. Fixed production overheads are allocated on the basis of normal capacity of production facilities. Finished goods and work-in-progress include appropriate share of allocable overheads.

Finished goods held for the purpose of demonstration are a mortised over a period of three years after deducting estimated residual value.

f. Employee benefits

The Company's obligations towards various employee benefits have been recognised as follows:

Short term benefits

All employee benefits payable/available within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and bonus etc., are recognized in the Statement of Profit and Loss in the period in which the employee renders the related service.

Post employment benefits

In respect of the defined contribution plan in the form of Superannuation, the Trustees of the Scheme have entrusted the administration of the Scheme to the Life Insurance Corporation of India (LIC). Annual contribution to the LIC is recognized as an expense in the Statement of Profit and Loss.

Charge for the year in respect of unfunded defined benefit plan in the form of gratuity has been ascertained based on actuarial valuation carried out by an independent actuary as at the year end using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured at the present value of the estimated future cash flows. The discount rate used for determining the present value of the obligation under defined benefit plans, is based on the market yields on Government securities as at the valuation date having maturity periods approximating to the terms of related obligations. Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss.

Provident Fund (PF): The Company deposits certain portion of the Provident Fund contribution with the Regional Provident Fund Commissioner and will have no obligation to pay further amounts. Accordingly, this plan is considered as a defined contribution plan.

For the remaining portion of Provident Fund, the Company contributes to the PF Trust which is administered by trustees of an independently constituted Trust recognized by the Income-tax Act, 1961. Contributions, including shortfall, if any, to the Trust are charged to the Statement of Profit and Loss on an accrual basis. As the provident fund scheme has a guaranteed return linked with that under EPF Scheme, 1952, the same has been considered as a defined benefit plan. The present value of obligation has been determined based on actuarial valuation done by independent actuary using the Projected Accrued Benefit Method. Under this method, the Defined Benefit Obligation is calculated based on deterministic approach in respect of all accrued and accumulated provident fund contributions as at the valuation date. The cost of interest rate guarantee, if any, in respect of future provident fund contributions is not taken into consideration. This approach determines the present value of the interest rate guarantee under three interest rate scenarios: base case scenario, rising interest rate scenario and falling interest rate scenario. The Defined Benefit Obligation of the interest rate guarantee is set equal to the average of the present values determined under these scenarios in respect of accumulated provident fund contributions as at the valuation date.

Gains or losses on the curtailment or settlement of any defined benefit plan are recognized when the curtailment or settlement occurs.

Other long term benefits

Compensated absences are in the nature of other long term employee benefits. Cost of long term benefit by way of accumulating compensated absences that are expected to be availed after a period of 12 months from the year end are recognized when the employees render the service that increases their entitlement to future compensated absences. The liability in respect of compensated absences is provided on the basis of an actuarial valuation done by an independent actuary at the year end. Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss.

g. Revenue recognition

Revenue from sale of goods is recognized on delivery of goods to the buyer which coincides with transfer of all significant risks and rewards of ownership. The amount recognized as sale is inclusive of excise duty and excludes sales tax and trade and quantity discounts.

Revenue from services is recognized on rendering of services to customers on accrual basis.

Interest income is recognized on a time proportion basis considering the rate of interest and amount invested.

h. Foreign currency transactions

Foreign exchange transactions are recorded using the exchange rate prevailing on the date of the transaction. Exchange differences arising on foreign exchange transactions settled during the year are recognized in the Statement of Profit and Loss of the year.

Monetary assets and liabilities denominated in foreign currencies remaining unsettled as at the balance sheet date are translated at the exchange rates on that date and the resultant exchange differences are recognised in the Statement of Profit and Loss.

i. Warranties

Warranty costs are estimated by the management on the basis of past experience. Provision is made for the estimated liability in respect of warranty costs in the year of sale of goods. j. Taxation

Income tax expense comprises current tax (i.e amount of tax for the year determined in accordance with the Income- tax Act, 1961) and deferred tax charge or credit (reflecting the tax effects of timing difference between accounting income and taxable income for the period). The deferred tax charge or credit and the corresponding deferred tax liability or deferred tax asset is recognized using the tax rates that have been enacted or substantially enacted as at the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty of realization. Such assets are reviewed at each balance sheet date to reassess realization. However, where there are carried forward losses or unabsorbed depreciation under taxation laws, deferred tax assets are recognized only if there is virtual certainty of realization of such assets.

The credits arising from Minimum Alternate Tax paid are recognized as receivable only if there is reasonable certainty that the Company will have sufficient taxable income in future years in order to utilize such credits.

k. Leases

Lease rentals in respect of assets taken on operating lease are charged on a straight-line basis to the Statement of Profit and Loss.

Lease income from operating leases is recognized in the Statement of Profit and Loss on a straight line basis over the lease term.

l. Other Provisions and Contingent Liabilities

A provision arising from claims, litigation, assessment, fines, penalties, etc. is recognized when the Company has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. These are reviewed at each balance sheet date and adjusted to reflect current management estimates. Contingent liabilities are disclosed in respect of possible obligations that have risen from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise. When there is a possible obligation or present obligation where the likelihood of an outflow is remote, no disclosure or provision is made.

m. Provision for sales returns Provision for sales returns is recognized to the extent of estimated margin on expected returns based on past trends.

n. Cash and cash equivalents

Cash and cash equivalents for the purpose of Cash Flow Statement comprise cash at bank and in hand and short term investments with original maturity of less than three months.

o. Earnings per share

Basic earnings per share are computed using the weighted average number of equity shares outstanding during the year. Diluted earnings per share are computed using the weighted average number of equity and dilutive potential equity shares outstanding during the year, except where the results would be anti- dilutive.


Mar 31, 2011

1. Background

Timex Group India Limited (TGIL or the Company), a subsidiary of Timex Group Luxury Watches B.V. (formerly Timex Watches B.V.), is a limited liability Company incorporated on 4 October 1988 under the provisions of the Companies Act, 1956. The Company is listed on Bombay Stock Exchange in India.

The Company's business consists of manufacture and trade of watches and rendering of related after sales service. The Company also provides accounting and information and technology support to group companies.

2. Basis of preparation of financial statements

The financial statements are prepared and presented under the historical cost convention, on accrual basis of accounting in accordance with the Generally Accepted Accounting Principles ('GAAP') in India and comply with the accounting standards prescribed by the Companies (Accounting Standards) Rules, 2006 and the presentational requirements of the Companies Act, 1956, to the extent applicable.

3. 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 liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Examples of such estimates include estimated provision for doubtful debts, warranties, future obligations under employee retirement benefit plans and estimated useful life of fixed assets. Differences between actual results and estimates are recognised in the year in which the actual results are known or materialised. Any revision to accounting estimates is recognised in accordance with the requirements of the respective accounting standard.

4. Fixed assets and depreciation

Fixed assets are carried at cost of acquisition less accumulated depreciation/amortisation. Cost is inclusive of freight, duties, taxes and any other directly attributable costs to bring the assets to their working condition for intended use.

Depreciation on tangible assets other than leasehold land and leasehold improvements is provided under the straight line method over the useful life as estimated by the management or the derived useful life as per Schedule XIV of the Companies Act, 1956, whichever is lower. Depreciation on the following categories of fixed assets is provided at rates that are higher than the corresponding rates prescribed in Schedule XIV:

- Plant and machinery (including office equipment) at rates ranging from 4.75% per annum to 100% per annum based on technical evaluation.

- Furniture and fixtures at the rate of 20% per annum.

- Tools and moulds are fully depreciated in the year of manufacture / purchase.

Depreciation on additions is provided on a pro-rata basis from the date of acquisition/installation.

Depreciation on sale/deduction from fixed assets is provided for upto the date of sale/adjustment, as the case may be.

Leasehold land is amortised over the period of lease.

Leasehold improvements are depreciated under the straight line method over the lowest of the following:

(i) period of the lease

(ii) useful life as estimated by management

(iii) derived useful life as per Schedule XIV.

Intangible assets are amortised over their estimated useful life of 5 years.

Assets costing upto Rs. 5,000 are fully depreciated in the year of purchase.

During the previous year, the Company had revised its estimate of residual values of certain items of office equipment, leasehold improvement, IT equipment and furniture and fixture and had provided accelerated depreciation thereon amounting to Rs. 3,230 thousand.

5. Impairment

The carrying amounts of assets are reviewed at each balance sheet date in accordance with Accounting Standard - 28 on 'Impairment of Assets' to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is estimated. An impairment loss is recognised whenever the carrying amount of an asset or cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the profit and loss account. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortisation, if no impairment loss had been recognised.

6. Inventories

Inventories are valued at the lower of cost and net realisable value. Cost of inventories includes all costs incurred in bringing the inventories to their present location and condition.

In determining the cost, the weighted average cost method is used. Fixed production overheads are allocated on the basis of normal capacity of production facilities. Finished goods and work-in-progress include appropriate share of allocable overheads.

Finished goods held for the purpose of demonstration are amortised over a period of three years after deducting residual value.

7. Employee benefits

The Company's obligations towards various employee benefits have been recognised as follows:

Short term benefit

All employee benefits payable/available within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and bonus etc., are recognised in the profit and loss account in the period in which the employee renders the related service.

Post employment benefits

In respect of the defined contribution plan in the form of Superannuation, the Trustees of the Scheme have entrusted the administration of the Scheme to the Life Insurance Corporation of India (LIC). Annual contribution to the LIC is recognised as an expense in the profit and loss account.

Charge for the year in respect of unfunded defined benefit plan in the form of gratuity has been ascertained based on actuarial valuation at the year end using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured at the present value of the estimated future cash flows. The discount rate used for determining the present value of the obligation under defined benefit plans, is based on the market yields on Government securities, as at the valuation date having maturity periods approximating to the terms of related obligations. Actuarial gains and losses are recognised immediately in the profit and loss account.

Provident Fund (PF): In respect of certain employees, the Company deposits contribution with the Regional Provident Fund Commissioner and will have no obligation to pay further amounts. Accordingly, this plan is considered as a defined contribution plan.

For other employees, the Company contributes to the PF Trust which is administered by trustees of an independently constituted Trust recognised by the Income-tax Act, 1961. Contributions, including shortfall, if any, to the Trust are charged to the profit and loss account on an accrual basis. As the provident fund scheme has a guaranteed return linked with that under EPF Scheme, 1952, the same has been considered as a defined benefit plan.

Gains or losses on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs.

Other long term benefits

Compensated absences are in the nature of other long term employee benefits. Cost of long term benefit by way of accumulating compensated absences that are expected to be availed after a period of 12 months from the year end are recognised when the employees render the service that increases their entitlement to future compensated absences.

The liability in respect of compensated absences is provided on the basis of an actuarial valuation done by an independent actuary at the year end. Actuarial gains and losses are recognized immediately in the Profit and Loss Account.

8. Revenue recognition

Revenue from sale of goods is recognised on delivery of goods to the buyer which coincides with transfer of all significant risks and rewards of ownership. The amount recognised as sale is inclusive of excise duty and excludes sales tax and trade and quantity discounts.

Revenue from services is recognised on rendering of services to customers on accrual basis.

Interest income is recognised on a time proportion basis.

9. Foreign currency transactions

Foreign exchange transactions are recorded using the exchange rate prevailing on the date of the transaction. Exchange differences arising on foreign exchange transactions settled during the year are recognised in the Profit and Loss Account of the year.

Monetary assets and liabilities denominated in foreign currencies remaining unsettled as at the balance sheet date are translated at the exchange rates on that date and the resultant exchange differences are recognised in the Profit and Loss Account.

10. Warranties

Warranty costs are estimated by the management on the basis of past experience. Provision is made for the estimated liability in respect of warranty costs in the year of sale of goods.

11. Taxation

Income tax expense comprises current tax/fringe benefit tax (that is amount of tax for the year determined in accordance with the Income-tax Act, 1961) and deferred tax charge or credit (reflecting the tax effects of timing difference between accounting income and taxable income for the period). The deferred tax charge or credit and the corresponding deferred tax liability or deferred tax asset is recognised using the tax rates that have been enacted or substantially enacted as at the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty of realisation. Such assets are reviewed at each balance sheet date to reassess realisation. However, where there are carried forward losses or unabsorbed depreciation under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets.

The credits arising from Minimum Alternate Tax paid are recognised as receivable only if there is reasonable certainty that the Company will have sufficient taxable income in future years in order to utilize such credits.

12. Leases

Lease rentals in respect of assets taken on operating lease are charged on a straight-line basis to the Profit and Loss Account. Lease income from operating leases is recognised in the Profit and Loss Account on a straight line basis over the lease term.

13. Other Provisions and Contingent Liabilities

A provision arising from claims, litigation, assessment, fines, penalties, etc. is recognised when the Company has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. These are reviewed at each balance sheet date and adjusted to reflect current management estimates. Contingent liabilities are disclosed in respect of possible obligations that have risen from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise. When there is a possible obligation or present obligation where the likelihood of an outflow is remote, no disclosure or provision is made.

Provision for sales returns is recognised to the extent of estimated margin on expected returns based on past trends.

14. Earnings per share

Basic earnings per share are computed using the weighted average number of equity shares outstanding during the year. Diluted earnings per share are computed using the weighted average number of equity and dilutive potential equity shares outstanding during the year, except where the results would be anti-dilutive.


Mar 31, 2010

1. Basis of preparation of financial statements

The financial statements are prepared and presented under the historical cost convention, on accrual basis of accounting in accordance with the Generally Accepted Accounting Principles (GAAP) in India and comply with the accounting standards prescribed by the Companies (Accounting Standards) Rules, 2006, to the extent applicable, and the presentational requirements of the Companies Act, 1956.

2. 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 liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Examples of such estimates include estimated provision for doubtful debts, warranties, future obligations under employee retirement benefit plans and estimated useful life of fixed assets. Differences between actual results and estimates are recognised prospectively in the year in which the actual results are known or materialised. Any revision to accounting estimates is recognised in accordance with the requirements of the respective accounting standards.

3. Fixed assets and depreciation

Fixed assets are carried at cost of acquisition less accumulated depreciation/amortisation. Cost is inclusive of freight, duties, taxes and any other directly attributable costs to bring the assets to their working condition for intended use.

Depreciation on tangible assets, other than leasehold improvements, is provided under the straight line method over the useful life as estimated by the management or the derived useful life as per Schedule XIV of the Companies

Act, 1956, whichever is shorter. Depreciation on the following categories of fixed assets is provided at rates that are higher than the corresponding rates prescribed in Schedule XIV:

- Plant and machinery (including office equipment) at rates ranging from 4.75% per annum to 100% per annum based on technical evaluation.

- Furniture and fixtures at the rate of 20% per annum.

- Tools and moulds are fully depreciated in the year of manufacture / purchase.

Depreciation on additions is provided on a pro-rata basis from the date of acquisition/installation.

Depreciation on sale/deduction from fixed assets is provided for upto the date of sale/adjustment, as the case may be.

Leasehold improvements are depreciated under the Straight Line method over the lowest of the following:

(i) period of the lease

(ii) useful life as estimated by management

(iii) derived useful life as per Schedule XIV.

Intangible assets are amortised over their estimated useful life of 5 years.

Assets costing upto Rs. 5,000 are fully depreciated in the year of purchase.

During the year, the Company has revised its estimate of residual values of certain items of office equipment, leasehold improvement, IT equipment and furniture and fixture and provided accelerated depreciation thereon amounting to Rs. 3,230 thousand (previous year Rs. 281 thousand).

4. Impairment

The carrying amounts of assets are reviewed at each balance sheet date in accordance with Accounting Standard - 28 on Impairment of Assets to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is estimated. An impairment loss is recognised whenever the carrying amount of an asset or cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the profit and loss account. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortisation, if no impairment loss had been recognised.

5. Inventories

Inventories are valued at the lower of cost and net realisable value. Cost of inventories includes all costs incurred in bringing the inventories to their present location and condition.

In determining the cost, the weighted average cost method is used. Fixed production overheads are allocated on the basis of normal capacity of production facilities. Finished goods and work-in-progress include appropriate share of allocable overheads.

Finished goods held for the purpose of demonstration are amortised over a period of three years after deducting 10% residual value.

6. Employee benefits

The Companys obligations towards various employee benefits have been recognised as follows:

Short term benefit

All employee benefits payable/available within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and bonus, etc. are recognised in the profit and loss account in the period in which the employee renders the related service.

Cost of accumulating compensated absences that are expected to be availed within a period of 12 months from the year-end are recognised when the employees render the service that increases their entitlement to future compensated absences. Cost is computed based on past trends and is not discounted.

Cost of non-accurnulating compensated absences continues to be recognised when absences occur. Cost of other short term employee benefits continues to be recognised on accrual basis based on the terms of employment contract and other relevant compensation policies followed by the company.

Post employment benefits

In respect of the defined contribution plan in the form of Superannuation, the Trustees of the Scheme have entrusted the administration of the Scheme to the Life Insurance Corporation of India (LIC). Annual contribution to the LIC is recognised as an expense in the profit and loss account.

Charge for the year in respect of unfunded defined benefit plan in the form of gratuity has been ascertained based on actuarial valuation at the year end using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured at the present value of the estimated future cash flows. Actuarial gains and losses are recognised immediately in the profit and loss account.

The Provident Fund is administered by trustees of an independently constituted Trust recognised by the Income-tax Act, 1961. Contributions, including shortfall, if any, to the Trust are charged to the profit and loss account on an accrual basis. As the provident fund scheme has a guaranteed return linked with that under EPF Scheme, 1952, the same has been considered as a defined benefit plan. (Also refer to note 25 of schedule 17)

Other long term benefits

Cost of long term benefit by way of accumulating compensated absences that are expected to be availed after a period of 12 months from the year end are recognised when the employees render the service that increases their entitlement to future compensated absences.

7. Revenue recognition

Revenue from sale of goods is recognised on transfer of all significant risks and rewards of ownership to the buyer. The amount recognised as sale is inclusive of excise duty and excludes sales tax and trade and quantity discounts. Revenue from services is recognised on rendering of services to customers, on an accrual basis.

Interest income is recognised on a time proportion basis.

8. Foreign currency transactions

The Company accounts for effects of differences in foreign exchange rates in accordance with Accounting Standard -11, "The Effects of Changes in Foreign Exchange Rates", notified by the Companies (Accounting Standards) Rules, 2006. Foreign exchange transactions are recorded using the exchange rate prevailing on the date of the transaction. Exchange differences arising on foreign exchange transactions settled during the year are recognised in the profit and loss account of the year.

Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the exchange rates on that date and the resultant exchange differences are recognised in the profit and loss account.

9. Warranties

Warranty costs are estimated by the management on the basis of past experience. Provision is made for the estimated liability in respect of warranty costs in the year of sale of goods.

10. Taxation

Income tax expense comprises current tax/fringe benefit tax (that is amount of tax for the year determined in accordance with the Income-tax Act, 1961) and deferred tax charge or credit (reflecting the ta* effects of timing difference between accounting income and taxable income for the period). The deferred tax charge or credit and the corresponding deferred tax liability or deferred tax asset is recognised using the tax rates that have been enacted or substantially enacted as at the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty of realisation. Such assets are reviewed at each balance sheet date to reassess realisation. However, where there are carried forward losses or unabsorbed depreciation under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. (Also refer to note 20 of schedule 17).

The credits arising from Minimum Alternate Tax paid are recognised as receivable only if there is virtual certainty that the Company will have sufficient taxable income in future years in order to utilize such credits.

11. Leases

Lease rentals in respect of assets taken on operating lease are charged on a straight-line basis to the profit and loss account.

12. Other Provisions and Contingent Liabilities

The Company recognises a provision when there is a present obligation as a result of a past event and it is probable that it would involve an outflow of resources and a reliable estimate can be made of the amount of such obligation. Such provisions are not discounted to their present value and are determined based on the managements estimation of the obligation required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect managements current estimates.

Provision for sales returns is recognised to the extent of estimated margin on expected returns based on past trends.

A disclosure for a contingent liability is made where it is more likely than not that a present obligation or possible obligation may result in or involve an outflow of resources. When no present or possible obligation exists and the possibility of an outflow of resources is remote, no disclosure is made.

13. Earnings per share

Basic earnings per share are computed using the weighted average number of equity shares outstanding during the year. Diluted earnings per share are computed using the weighted average number of equity and dilutive potential equity shares outstanding during the year, except where the results would be anti-dilutive.

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