Accounting Policies of Timken India Ltd. Company
Mar 31, 2023
1. CORPORATE INFORMATION
Timken India Limited (''the Company'') is a public limited company incorporated on 15th June 1987 under the provisions of the erstwhile Companies Act, 1956. The Company''s shares are listed in National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) in India. The registered office of the Company is located at 39-42, Electronics City, Phase II, Hosur Road, Bengaluru - 560 100. The Company is into manufacture, distribution and sale of anti-friction bearings primarily tapered roller bearings, other roller bearings, components, accessories, and mechanical power transmission products for diverse customer base. The Company also provides maintenance contract and refurbishment services. The Company''s manufacturing plants are located at Jamshedpur in Jharkhand & Bharuch in Gujarat and distribution centers are located in various parts of the country.
These financial statements of the Company for the year ended March 31,2023 were authorised for issue in accordance with the resolution of the Board of Directors on May 17, 2023.
2. BASIS OF PREPARATION AND PRESENTATION, SIGNIFICANT ACCOUNTING POLICIES2.1 Statement of compliance
The financial statements have been prepared in all material aspects in accordance with the Indian Accounting Standards (referred to as "Ind AS") prescribed under Section 133 of the Companies Act, 2013 read with Companies (Indian Accounting Standards) Rules, as amended from time to time and other relevant provisions of the Act.
2.2 Basis of preparation and measurement
These financial statements have been prepared on going concern and accrual basis. The accounting policies have been followed consistently across all the periods in the financial statements. All assets and liabilities are classified as current or non-current as per Company''s operating cycle and other criteria defined in the Schedule III of the Companies Act, 2013. The operating cycle of the Company is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. Based on the nature of business and the time between the asset acquisition and their conversion into cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of identification of current or non-current assets and liabilities.
These Ind-AS Financial Statements have been prepared on historical cost basis, except for certain financial instruments and defined benefit plans which have been measured at fair value or amortised cost at the end of each reporting period as explained in accounting policies below.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1,2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
2.3 Functional and Presentation currency
These financial statements are prepared in Indian Rupees (''), the functional currency of the Company, which is the currency of the primary economic environment in which the Company operates (the ''functional currency'').
All amounts presented in the financial statements which also includes accompanying notes have been rounded off to the nearest million as per the requirement of Schedule III to the Companies Act,2013, unless otherwise stated.
Statement of Cash flows is prepared using indirect method as set out in Ind-AS -7 ("Statement of Cash Flows").
2.5 Use of Estimates and Judgments:
The preparation of the Company''s financial statements in conformity with IND AS requires management to make judgements, estimates and assumptions in application of accounting policies that affect the reported amounts of assets, liabilities, income, expenses and accompanying disclosures. Estimates and assumptions are reviewed on an ongoing basis, based on historical experience and other factors including the expectation of the future factors that are believed to be reasonable. Revisions to accounting estimates are recognised in the period in which the estimates are revised, and future periods affected.
Information about critical judgements, estimates and assumptions that have significant effect to the carrying amount of assets and liabilities in the financial statements are included in the following notes below:
|
Sl. No |
Judgement, Estimates, Assumptions |
Accounting Policy Reference |
Note Reference |
|
1 |
Estimation of useful life of tangible, intangible assets and investment property |
2.7.1; 2.7.2 & 2.7.4 |
3,6 & 8 |
|
2 |
Measurement of Right -of- use assets and Lease liability |
2.7.3 |
4 & 18 |
|
3 |
Measurement of defined benefit obligations and key actuarial assumptions |
2.7.11 |
40 |
|
4 |
Recognition of current and deferred taxes |
2.7.12 |
20 A, 25 |
|
5 |
Goodwill Impairment and future cashflow projection |
2.7.6 |
7 |
|
6 |
Impairment of Trade receivables: Expected credit loss |
2.7.9.1 |
14 |
|
7 |
Measurement and likelihood of occurrence of contingencies |
2.7.13 |
34 |
Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On March 31,2023, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2023. The effective date for adoption of the amendments is annual periods beginning on or after April 1,2023. The Company is evaluating the amendments on its financial statements and does not expect to have any significant impact.
2.7 SIGNIFICANT ACCOUNTING POLICIES2.7.1 Property, Plant and equipment
⢠Property, Plant and Equipment held for use in the production and/or supply of goods or services or for administrative purposes, are stated in the Balance Sheet at cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Free hold Land is not depreciated. Property, Plant and Equipment acquired in a business combination are recognised at fair value at the acquisition date. Cost comprises the purchase price including import duties and non-refundable, purchase taxes (net of taxes credits wherever applicable), and erection / commissioning & any incidental expenses which are directly attributable in bringing the asset to its working condition for the intended use. The amount of asset related grants are added to the cost of respective asset with a corresponding recognition of deferred income in respect of Government grant (also refer accounting policy on Government grants in note 2.7.10). Subsequent expenditure related to an item of property, plant & equipment is included in carrying amount of the asset or recognised as a separate asset, as appropriate, only if it is probable that the future economic benefits associated with the asset will flow to the Company and it is reliably measured. All other expenses on existing property plant and equipment, including day-to-day repair and maintenance expenditure, overhaul and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.
⢠Spares which meet the definition of property, plant and equipment are capitalised as on the date of acquisition. The corresponding old spares are de-capitalised on such date with consequent impact on the statement of Profit and Loss.
⢠Property, Plant and Equipment not ready for its intended use at the date of Balance Sheet are disclosed as "Capital Work in progress". Such items are classified to specific sections of the Property, Plant and equipment as and when ready for its intended use.
⢠Advances paid towards the acquisition of property, plant and equipment outstanding at each Balance Sheet date is classified as capital advances under "Other non-current assets". An item of property, plant and equipment is de-recognised upon its disposal or when no future economic benefits are expected from its use. Gains or losses, if any, arising from de-recognition of property, plant & equipment (measured as the difference between the net disposal proceeds and the carrying amount of the asset) are recognised in the statement of profit and loss when the asset is de-recognised. The Company identifies and determines cost of each component of an asset separately, if the component has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the useful life of the principal asset.
⢠Depreciation and useful lives
o Depreciation is charged so as to write off cost or value of assets over their estimated useful lives and are capitalised in the books of accounts, when the assets are ready for its intended use.
o Depreciation for an item in property plant and equipment which are derecognised are provided on proportionate basis up to the date when the asset is derecognised from the financial statement.
o Depreciation on items of property, plant & equipment (Other than free hold land) is calculated on a straight-line basis using the rates based on the useful lives estimated by the management.
o The identified components of an asset are depreciated separately over their useful lives; the remaining components are depreciated over the life of the principal asset.
o The estimated useful life, residual value and the depreciation methods are reviewed at the end of each reporting period, with effect of any changes in estimate accounted on a prospective basis.
o Estimated useful life of the assets are determined based on various technical parameters / assessments and aligned to the prescribed useful life specified under schedule II of the Companies Act, 2013. The useful economic life of buildings and plant and equipment as estimated by the management, is supported by independent assessment by professionals, are lower than those indicated in Schedule II to the Companies Act, 2013. The estimated useful lives are as below:
|
Block of Assets |
Useful life |
|
Factory Buildings |
5 -30 Years |
|
Furniture & Fixtures |
5 -10 Years |
|
Plant & Equipment |
5 -20 Years |
|
Computers |
3 - 6 Years |
|
Vehicles |
8 Years |
|
Office Equipment |
5 Years |
⢠Investment property is held to earn rentals or for capital appreciation or both (including property under construction for such purposes). Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured in accordance with Ind AS 16 requirements. Cost comprises the purchase price including purchase taxes (net of taxes credits wherever applicable), and erection / commissioning & any incidental expenses which are directly attributable in bringing the asset to its working condition for the intended use.
⢠Subsequent expenditure related to investment property is included in carrying amount of the asset, only if it is probable that the future economic benefits associated with the asset will flow to the Company and it is reliably measured. All other expenses on existing investment property, including day-to-day repair and maintenance expenditure are charged to the statement of profit and loss for the period during which such expenses are incurred.
⢠Depreciation on investment property is calculated on a straight-line basis using the rates based on the useful lives estimated by the management. Estimated useful life of Building classified as investment property is 7-30 years. Depreciation are determined based on various technical parameters / assessments and aligned to the prescribed useful life specified under schedule II of the Companies Act, 2013.
⢠Investment properties are de-recognised either upon disposal when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. On disposal of an investment property, the difference between its carrying amount and net disposal proceeds is recognised in the Statement of Profit and Loss in the period in which the property is derecognised.
2.7.3 Leases and Right of use assets
The Company has adopted Ind AS 116 - Leases effective 1st April 2019, using the modified retrospective method. The Company has applied standard to its leases with cumulative impact recognised on the date of initial application (1st April 2019). Accordingly, previous period information has not been restated.
The Company lease asset classes primarily consist of leases for land, buildings, plant and machinery and motor vehicles. The Company, at the inception of a contract, assesses whether the contract is a lease or contain a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a time in exchange for a consideration.
At the date of commencement of lease, the Company recognises a right-of-use asset (ROU) and a corresponding lease liability for all lease arrangements in which it''s a lessee, except for leases with a term of twelve months or less (short term leases) and leases of low value assets. For these short term and leases of low value assets, the Company recognises the lease payment as an operating expense on a straight-line basis over the term of the lease.
The ROU asset is initially recognised at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The ROU asset is subsequently measured at cost less accumulated depreciation and impairment losses if any. The ROU asset is depreciated using the straight-line method from the commencement date over the shorter of lease term and useful life of the underlying asset.
The lease liability is initially measured at the present value of the future lease payments that are not paid at the commencement date, discounted using the discount rate implicit in the lease, if not determinable, discounted with the Company''s incremental borrowing rate. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company''s estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.
Assets or liabilities recognised under IND AS 103 (Business Combinations), relating to favorable or unfavorable terms of an operating lease, acquired during business combination, the same is derecognised and appropriate ROU and lease liability is recognised on the date of transition.
ROU and lease liability are separately presented in the Balance Sheet and lease payments have been classified as financing cashflows. The Company does not have any financial leases at the end of the reporting period.
⢠Intangible assets acquired separately are carried at cost less accumulated amortisation less accumulated impairment losses if any.
⢠Internally generated intangible assets, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in Profit and loss in the period in which the expenditure is incurred.
⢠Intangible assets acquired in a business combination:
o Intangible assets acquired in a business combination are recognised at fair value at the acquisition date
o Subsequent to initial recognition, the intangible assets are reported at cost less accumulated depreciation and accumulated impairment if any
o For all finite life intangibles, amortisation is charged on straight line basis over their estimated useful economic lives.
o The estimated useful economic life and the amortisation method are reviewed at the end of each reporting period, with effect of any changes in estimate accounted on a prospective basis.
o The amortization expense on intangible assets with finite lives is recognized in the statement of profit and loss under the heading "Depreciation and amortisation expense"
o Estimated useful economic life of Intangibles are as follows:
|
Intangibles |
Useful economic life (years) |
|
Computer Software |
3-7 |
|
Tradename and Trademark |
15 |
|
Developed Technology |
15 |
|
Customer Relationship |
20 |
⢠Goodwill represents the cost of acquired business as established at the date of acquisition of the business in excess of the acquirer''s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities less accumulated impairment losses, if any. Goodwill is initially recognised based on the accounting policies on business combinations refer note 2.7.5 and is tested annually for impairment.
2.7.5 Business Combinations and Goodwill
The Company accounts for its business combinations under acquisition method of accounting. The acquiree''s identifiable assets, liabilities and contingent liabilities that meet the condition for recognised at their fair values at the acquisition cost.
Purchase consideration paid in excess of the fair value of net assets acquired is recognised as goodwill. Where the fair value of identifiable assets and liabilities exceed the cost of acquisition, after reassessing the fair values of the net assets and contingent liabilities, the excess is recognised as capital reserve.
The interest of non-controlling shareholders is initially measured either at fair value or at the non-controlling interests'' proportionate share of the acquiree''s identifiable net assets. The choice of measurement basis is made on an acquisition-byacquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests'' share of subsequent changes in equity of subsidiaries.
Business combinations arising from transfers of interests in entities that are under common control are accounted at historical cost. The difference between any consideration given and the aggregate historical carrying amounts of assets and liabilities of the acquired entity is recorded in shareholders'' equity.
Acquisition related costs are recognised in the statement of profit and loss as incurred.
2.7.6 Impairment of Non-Financial assets
⢠The carrying amount of tangible, intangible and other non-financial assets are reviewed at each balance sheet date to determine if there is any indication of impairment based on external or internal factors. If any such indication exists, the recoverable amount of the asset / Cash Generating Units (CGU) is estimated in order to determine the extent of impairment loss (if any).
⢠For Goodwill, an impairment test is performed as at each Balance Sheet date and whenever there is an indication that the asset may be impaired.
⢠An Impairment is recognised in the statement of Profit and loss to the extent the recoverable amount of an asset or CGU is estimated to be less than it''s carrying amount of the asset or CGU.
⢠Recoverable amount represents the higher of fair value less cost to sell and their ''value in use''. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset for which the estimates of future cash flows have not been adjusted.
⢠When an impairment loss subsequently reverses, the carrying amount of the asset or a CGU is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or CGU in prior years. A reversal of an impairment loss is recognised immediately in the statement of Profit and loss.
Inventories are valued at the lower of cost and net realisable value after providing for obsolescence and slow-moving inventory as
follows:
|
Inventory Types |
Valuation methodology |
|
Raw materials, components, stores and spares |
These are valued at lower of cost and net realisable value. Cost includes cost of purchase including duties & taxes (other than the taxes, which can be taken as input tax credit) and other costs incurred in bringing the inventories to their present location and condition. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost is determined on a weighted average basis. |
|
Work-in-progress and finished goods |
These are valued at lower of cost and net realisable value. Cost includes direct materials and labour and an allocated proportion of manufacturing overheads based on normal operating capacity. Cost is determined on a weighted average basis. |
|
Traded goods |
Valued at lower of cost and net realisable value. Cost includes cost of purchase including duties & taxes (other than the taxes, which can be taken as input tax credit) and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on a weighted average basis. |
|
Net realisable value is the estimated selling price estimated costs necessary to make the sale. |
in the ordinary course of business, less estimated costs of completion and |
2.7.8 Cash & Cash Equivalents & Investments
⢠Cash & cash equivalents in the balance sheet comprise cash at banks and short-term deposits with an original maturity of three months or less
⢠Investments comprise of investments made in various liquid funds in mutual funds. These investments are valued at cost less impairment if any
⢠For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits and short-term liquid investments, as defined above.
A Financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Company''s financial assets broadly comprise the following:
(a) Current financial assets: Investments, trade receivables, cash and cash equivalents, loans and advances, other shortterm receivables
(b) Non-current financial assets: Investments, other long-term receivables and deposits
2.7.9.1.1 Initial recognition and measurement:
Financial assets are initially measured at fair value. Transaction costs that are directly attributable to the acquisition of financial assets (other than financial assets at fair value through Profit and loss) are added to the fair value of the financial assets, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets at fair value through Profit and loss are recognised immediately in statement of profit and loss. However, trade receivables that do not contain a significant financing component are measured at transaction price.
2.7.9.1.2 Subsequent measurement:
For the purpose of subsequent measurement, financial assets are classified into following categories:
(a) Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost, if both the below conditions are met:
1. These financial assets are held within a business model whose objective is to hold these assets in order to collect contractual cash flows
2. Contractual terms of financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
After initial recognition, these financial assets are subsequently measured using the effective interest rate (EIR) method, less impairment, if any. The amortisation of EIR and loss arising from impairment, if any, recognised in the statement of Profit and loss. This category generally applies to trade and other receivables. For the impairment policy on financial assets measured at amortised cost, refer note no 2.7.9.1.3
(b) Financial Assets at fair value through other comprehensive Income (FVTOCI)
Financial assets are measured at fair value through other comprehensive income if both the below conditions are met:
1. These financial assets are held within business model whose objective is achieved by both collecting contractual cash flows on specified dates and selling financial assets
2. These assets contractual cash flows represent solely payments of principal and interest on the principal amount outstanding
The Company does not own any financial asset classified at FVTOCI.
(c) Financial assets at fair value through Profit and loss (FVTPL)
This is a residual category. Any financial assets which do not fall under the category of financial assets measured at amortised cost or FVTOCI are classified as FVTPL. Financial assets at FVTPL are measured at fair value at the end of each reporting period, with gain or loss arising on remeasurement recognised in statement of Profit and loss incorporates any dividend or interest earned on the financial assets and is included in other Income line item.
The Company''s investment as presented in note 9A and 9B are valued at FVTPL.
2.7.9.1.3 Impairment of Financial Assets
In accordance with Ind AS 109 "Financial Instruments", the Company applies Expected Credit Loss (ECL) model for measurement and recognition of loss allowance on the following and the basis of its measurement:
⢠Trade Receivable - For Trade receivable and other financial assets that results from transactions that are in scope of Ind AS 115, the Company applies the simplified approach required in Ind AS 109, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
⢠Financial assets measured at amortised cost (other than trade receivable) - In case of other than trade receivable, the Company determines, if there is any significant increase in credit risk of the financial asset since initial recognition. Below methods are followed based on the credit risk changes:
o If there are no significant changes in credit risk since initial recognition, twelve months ECL is used to provide the impairment loss
o If there is a significant change in credit risk, lifetime ECL is measured for making the impairment loss assessment. Subsequently if there is an improvement in credit risk, the Company reverts to recognition of impairment loss based on twelve months ECL.
To make the assessment whether there is any significant change in risk, the Company compares the risk of a default occurring on the financial instrument as at the reporting date with a risk of default occurring on the financial instrument as at the date of initial recognition and consider reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increase in credit risk since its initial recognition.
Lifetime ECL are the expected credit losses resulting from all possible default events, over the expected life of a financial assets. 12 months ECL is a portion of lifetime ECL which result from default events that are possible within 12 months from the reporting period.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate (EIR).
As a practical expedient and as permitted under Ind AS 109, the Company uses a provision matrix to measure lifetime ECL on its portfolio of trade receivables. The provision matrix is prepared based on historically observed default rates over the expected life of trade receivables and is adjusted for forward-looking information available. At each reporting date, the historically observed default rates and changes in the forward-looking information are updated.
ECL allowance recognised (or reversed) during the period is recognised as income or expense in the statement of profit and loss under the head ''Other Expenses''. If the reversal of ECL allowance related to prior financial year, these are accounted as part of other Income in the statement of profit and loss.
2.7.9.1.4 Derecognition of financial assets
⢠The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset in its entirety, the difference between the asset''s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in statement of profit and loss if such gain or loss would have otherwise been recognised in statement of profit and loss on disposal of that financial asset.
⢠On derecognition of a financial assets other than entirely, (when the Company retains an option to repurchase part of a transferred asset), the Company allocates previous carried over amount of financial asset between the part it continues to recognise under continuing involvement , and the part it no longer recognises on the basis of the relative fair values of those parts on the date of transfer.
⢠The difference between the carrying amount allocated to the part that is no longer recognised and the sum of consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in Profit and loss on disposal of that financial asset. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair value of those parts.
2.7.9.2 Financial liabilities and Equity instruments issued by the Company:2.7.9.2.1 Equity Instruments:
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
2.7.9.2.2 Financial liabilities:
Company''s financial liabilities broadly comprises, Short term borrowings, Trade payables, Liabilities for capital expenditure and Other long term/ short term obligations
2.7.9.2.2.1 Initial recognition and measurement:
⢠Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.
⢠All financial liabilities are recognised initially at Fair value. In case of loans, borrowings and payables, net of directly attributable transaction costs.
⢠Financial liabilities are classified, at initial recognition, as financial liabilities at FVTPL or at amortised cost as appropriate.
2.7.9.2.2.2 Subsequent measurement:
⢠Financial Liabilities at amortised cost - The carrying amounts of financial liabilities that are subsequently measured at amortised cost using the effective interest method. All the financial liabilities of the Company fall under this category.
⢠The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
⢠Financial Liabilities at FVTPL - Financial liabilities at fair value through Profit and loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through Profit and loss. The Company does not owe any financial liability which is classified at FVTPL
2.7.9.2.2.3 Derecognition of financial liabilities
The Company de-recognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability de-recognised and the consideration paid and payable is recognised in statement of profit and loss.
2.7.9.3 Offsetting financial asset and financial liability
The Company offsets a financial asset and a financial liability and report this as a net balance in the Balance sheet only when:
⢠There is a legally enforceable right to set off the recognised amounts and
⢠There is an intention to realise the asset and settle the liability simultaneously.
Government grants are recognised when there is a reasonable assurance that the Company will comply with the conditions attached to them and that the grants will be received.
Government grants are recognised in the statement of profit and loss on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Company should purchase, construct or otherwise acquire noncurrent assets are recognised as deferred revenue in the balance sheet and its amortisation re-recognised in the statement of profit and loss on a systematic and rational basis over the useful lives of the related assets.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognised in the statement of profit and loss in the period in which they become receivable.
The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.
2.7.11 Employee benefits2.7.11.1 Short-term employee benefits
Employee benefits payable wholly within twelve months of receiving employee services are classified as short-term employee benefits. These benefits generally include salaries and wages, bonus and ex-gratia. The undiscounted amount of short-term employee benefits to be paid in exchange for employee services is recognised as an expense as the related service is rendered by employees.
2.7.11.2 Other than short term employee benefits:2.7.11.2.1 Defined Contribution schemes:
Contributions to defined contribution scheme such as Employee state insurance, labour welfare fund, superannuation scheme (for specific employee group) are charged as an expense based on the amount of contribution required to be made as and when services are rendered by the employees. Company''s provident fund contribution is made to a government administrated fund and charged as an expense to the statement of profit and loss. The above benefits are classified as Defined Contribution schemes as the Company has no further defined obligations beyond the monthly contribution.
2.7.11.2.2 Defined benefit schemes:
The Company operates the following schemes which are under defined benefit plans:
⢠Gratuity is administered through an approved benefit fund. Gratuity liability is defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method done at the end of each financial year.
⢠The liability on account of long-term compensated absences and death benefit scheme (in respect of certain employees) due to the employees are provided for on the basis of an actuarial valuation on projected unit credit method at the end of each financial year.
2.7.11.2.3 Re-measurements, comprising of actuarial gains and losses excluding amounts included in net interest on the net defined benefit liability and the return on plan assets, are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through Other Comprehensive Income in the period in which they occur. Re-measurements are not reclassified to Statement of profit and loss in subsequent periods.
2.7.11.2.4 Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
a) Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
b) Net interest expense or income
2.7.11.2.5 The current and non-current classification of gratuity, compensated absences, and death benefit scheme liabilities is based on the independent actuarial valuation reports.
Income tax expense comprises current tax and the net change in the deferred tax asset or liability during the year and includes any adjustments related to past periods in current and/or deferred tax adjustments that may become necessary due to certain developments or review during the relevant period. Current and deferred taxes are recognised in statement of profit and loss, except when they relate to items that are recognised in other comprehensive income, in which case, the current and deferred tax are also recognised in other comprehensive income.
Current tax is the expected tax payable/ receivable on the taxable income/ loss for the year using applicable tax rates for the relevant period, and any adjustment to taxes in respect of previous years in accordance with Income Tax Act, 1961 including the relevant transfer price regulations prescribed there under, read with applicable judicial precedents or interpretations wherever relevant.
Interest expenses and penalties, if any, related to income tax are included in finance cost and other expenses respectively. Interest Income, if any, related to Income tax is included in other income.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amount and there is an intention to settle the assets and liabilities on net basis.
Management periodically evaluates contingencies and position taken on uncertain tax positions in tax return with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised using the balance sheet approach. Deferred income tax assets and liabilities are recognised for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount, except when the deferred income tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit and loss at the time of the transaction.
A deferred tax liability is recognised based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted, or substantially enacted, by the end of the reporting period.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be realised or settled.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to income tax levied by the same taxation authority.
2.7.13 Provisions, contingent liabilities and contingent assets2.7.13.1 Provisions
A provision is recognised when the Company has a present obligation as a result of past event, it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance Sheet date.
If the effect of time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used the increase in the provision due to the passage of time is recognised as a finance cost.
2.7.13.2 Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that arises from a past event where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made. Such liabilities are disclosed in notes but are not recognised. Contingent assets are neither recognised nor disclosed in the financial statements.
Revenue is recognised on the basis of approved contracts regarding the transfer of goods or services to a customer for an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
Revenue is recognised upon transfer of control of promised products to customers and when there are no longer any unfulfillment obligations. The performance obligations in our contracts are fulfilled either at the time of dispatch, delivery or upon formal customer acceptance dependent on customer terms agreed in the contract.
Revenue is measured based on the transaction price, which is the consideration received or receivable, adjusted of any discounts, service level credits, performance bonuses, price concessions and incentives, if any, as specified in the contract with the customer. Revenue excludes taxes or duties collected from customers on behalf of Government. The revenue is recognised to the extent that it is highly probable a significant reversal will not occur. No element of financing is deemed present as the sales are made with credit term as per the contract terms agreed with the customers, which is consistent with market practice and the industry norms, that the Company operates.
Income from services rendered is recognised based on agreements/arrangements with the customers as the service is performed and there are no unfulfilled obligations.
Trade Receivable: A trade receivable is recognised when the control is transferred and there is no unfulfilled obligation as this is the point in time that the consideration becomes unconditional because only a passage of time is required before the payment is due.
Contract Assets: Contract assets are recognised when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled receivables (only act of invoicing is pending) when there is unconditional right to receive cash, and only passage of time is required, as per contractual terms. If the unbilled receivable and unbilled revenue are not material numbers, these numbers are included in revenue and trade receivable appropriately.
Contract Liabilities: Contract Liabilities, which is Company''s obligation to transfer goods or services to customers for which the Company has already received the consideration. This relate mainly to advance payments from customers which are disclosed in note no 21. Contract liabilities are recognised as revenue when the Company performs under the contract.
Contracts are subject to modification to account for changes in contract specification and requirements. The Company reviews modification to contract in conjunction with the original contract, basis which the transaction price could be allocated to a new performance obligation, or transaction price of an existing obligation could undergo a change. In the event transaction price is revised for existing obligation, a cumulative adjustment is accounted for.
Export incentives are recognised when the right to receive such incentives as per the applicable terms is established, in respect of the exports made and when there is no significant uncertainty regarding the ultimate realisation / utilisation of such incentives.
Dividend income on investments is recognised when the right to receive dividend is established.
Claim on insurance companies and others, where quantum of accrual cannot be ascertained with reasonable certainty, are accounted for on acceptance basis.
Interest income is recognised on a time proportion basis taking into account the amount outstanding and the applicable effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of a financial liability or a financial asset to their gross carrying amount.
Interest and Dividend income are included under the head "other income" in the Statement of Profit and Loss.
2.7.15 Foreign Currency Translations
In the financial statements of the Company, transactions in foreign currencies are translated into the functional currency at the exchange rates at the date of the transaction. Foreign exchange gains and losses from settlement of these transactions are recognised in the Statement of Profit and Loss at the time of settlement. Foreign currency denominated monetary assets and liabilities are translated into the functional currency at exchange rates prevailing on the reporting date. Exchange differences arising on settlement or translation of monetary items are recognised in the statement of profit and loss. Nonmonetary items are measured at historical cost.
Basic Earnings per share is calculated by dividing the net Profit and loss before OCI attributable to equity shareholders for the year by the weighted average number of equity shares outstanding during the year. Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting period.
For the purpose of calculating diluted earnings per share, the net Profit and loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
Mar 31, 2022
1. CORPORATE INFORMATION
Timken India Limited (''the Company'') is a public limited company incorporated on 15th June 1987 under the provisions of the erstwhile Companies Act, 1956. The Company''s shares are listed in National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) in India. The registered office of the Company is located at 39-42, Electronics City, Phase II, Hosur Road, Bengaluru - 560 100. The Company is into manufacture, distribution and sale of anti-friction bearings primarily tapered roller bearings, other roller bearings, components, accessories, and mechanical power transmission products for diverse customer base. The Company also provides maintenance contract and refurbishment services. The Company''s manufacturing plants are located atJamshedpur in Jharkhand & Bharuch in Gujarat and distribution centers are located in various parts of the country.
These financial statements of the Company for the year ended March 31,2022 were authorised for issue in accordance with the resolution of the Board of Directorson May 27, 2022.
2. BASIS OF PREPARATION AND PRESENTATION, SIGNIFICANT ACCOUNTING POLICIES2.1 Statement of compliance
The financial statements have been prepared in all material aspects in accordance with the Indian Accounting Standards (referred to as "Ind AS") prescribed under Section 133 of the Companies Act, 2013 read with Companies (Indian Accounting Standards) Rules, as amended from time to time and other relevant provisions of the Act.
2.2 Basis of preparation and measurement
These financial statements have been prepared on going concern and accrual basis. The accounting policies have been followed consistently across all the periods in the financial statements. All assets and liabilities are classified as current or non-current as per Company''s operating cycle and other criteria defined in the Schedule III of the Companies Act, 2013. The operating cycle of the Company is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. Based on the nature of business and the time between the asset acquisition and their conversion into cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of identification of current or non-current assets and liabilities.
These Ind-AS Financial Statements have been prepared on historical cost basis, except for certain financial instruments and defined benefit plans which have been measured at fair value or amortised cost at the end of each reporting period as explained in accounting policies below.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1,2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
2.3 Functional and Presentation currency
These financial statements are prepared in Indian Rupees (^), the functional currency of the company, which is the currency of the primary economic environment in which the Company operates (the ''functional currency'').
All amounts presented in the financial statements which also includes accompanying notes have been rounded off to the nearest million as per the requirement of Schedule III to the Companies Act,2013, unless otherwise stated.
Statement of Cash flows is prepared using indirect method as set out in Ind-AS -7 ("Statement of Cash Flows").
2.5 Use of Estimates and Judgments:
The preparation of the Company''s financial statements in conformity with IND AS requires management to make judgements, estimates and assumptions in application of accounting policies that affect the reported amounts of assets, liabilities, income, expenses and accompanying disclosures. Estimates and assumptions are reviewed on an ongoing basis, based on historical experience and other factors including the expectation of the future factors that are believed to be reasonable. Revisions to accounting estimates are recognised in the period in which the estimates are revised, and future periods affected.
Information about critical judgements, estimates and assumptions that have significant effect to the carrying amount of assets and liabilities in the financial statements are included in thefollowing notes below:
|
SI. No |
Judgement, Estimates, Assumptions |
Accounting Policy Reference |
Note Reference |
|
1 |
Estimation of useful life of tangible, intangible assets and investment property |
2.7.1; 2.7.2 & 2.7.4 |
3,6 & 8 |
|
2 |
Measurement of Right -of- use assets and Lease liability |
2.7.3 |
4&18 |
|
3 |
Measurement of defined benefit obligations and keyactuarial assumptions |
2.7.11 |
40 |
|
4 |
Recognition of current and deferred taxes |
2.7.12 |
20 A, 25 |
|
5 |
Goodwill Impairment and future cashflow projection |
2.7.6 |
7 |
|
6 |
Impairment ofTrade receivables: Expected credit loss |
2.7.9.1 |
14 |
|
7 |
Measurement and likelihood of occurrence of contingencies |
2.7.13 |
34 |
Estimation of uncertainties related to COVID-19 impact
The spread of the COVID-19 pandemic severely impacted many economies around the globe including India and severely impacted economic activity during the first quarter of FY 2020-21. The Company''s sales were also adversely affected during the Q1 of FY 2020-21 due to the lockdown restrictions owing to Covid-19 pandemic. The situation started recovering from Q2 onwards.
The uncertainties resurfaced with the emergence of a second wave of the COVID-19 pandemic during March 2021 in some parts of the country, which gradually spread across the country. This did not materially impact the Company''s performance during the period. In early 2022, the country witnessed the outbreak of the third wave, however impact was much lower in comparison to earlier waves and did not materially impact company''s business. The company continues to focus on people''s health & safety, meeting the customer demand through effective supply chain channel, caring for the communities and protecting the business model.
The Company has considered the possible effects that may impact on carrying amount of various assets and liabilities based on internal and external information available such as future volume estimate from business, contract terms, financial strengths of partners etc. The Company has done a sensitivity analysis and having reviewed the underlying data and the related sensitivity analysis, the Company expects, the carrying amount of the assets will be recovered and there is no significant impact to liabilities accrued. The impact of COVID-19 on the Company''s financial statements may differ from that estimated as at the date of approval of these statements and the Company will continue to closely monitor any material changes to future economic conditions.
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On March 23, 2022, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2022, applicable from April 1,2022, as below:
a) lndAS103 Reference to Conceptual Framework
The amendments specify that to qualify for recognition as part of applying the acquisition method, the identifiable assets acquired and liabilities assumed must meet the definitions of assets and liabilities in the Conceptual Framework for Financial Reporting under Indian Accounting Standards (Conceptual Framework) issued by the Institute of Chartered Accountants of India at the acquisition date. These changes do not significantly change the requirements of Ind AS 103. The Company does not expect the amendment to have any significant impact in its financial statements.
b) lndAS16 Proceeds before intended use
The amendments mainly prohibit an entity from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Instead, an entity will recognise such sales proceeds and related cost in profit or loss. The Company does not expect the amendments to have any significant impact in its recognition of its property, plant and equipment in its financial statements.
c) lndAS37 Onerous Contracts - Costs of fulfilling a contract
The amendments specify that that the ''cost of fulfilling'' a contract comprises the ''costs that relate directly to the contract''. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts. The amendment is essentially a clarification and the Company does not expect the amendment to have any significant impact in its financial statements.
d) lndAS109 Annual improvements to lndAS(2021)
The amendment clarifies which fees an entity includes when it applies the ''10 percent'' test of Ind AS 109 in assessing whether to derecognise a financial liability.
The Company does not expect the amendment to have any significant impact in its financial statements.
2.7 SIGNIFICANT ACCOUNTING POLICIES2.7.1 Property, Plant and equipment
⢠⢠Property, Plant and Equipment held for use in the production and/or supply of goods or services or for administrative
purposes, are stated in the Balance Sheet at cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Free hold Land is not depreciated. Property, Plant and Equipment acquired in a business combination are recognised at fair value at the acquisition date. Cost comprises the purchase price including import duties and non-refundable, purchase taxes (net of taxes credits wherever applicable), and erection / commissioning & any incidental expenses which are directly attributable in bringing the asset to its working condition for the intended use. The amount of asset related grants are added to the cost of respective asset with a corresponding recognition of deferred income in respect of Government grant (also refer accounting policy on Government grants in note 2.7.10).Subsequent expenditure related to an item of property, plant & equipment is included in carrying amount of the asset or recognised as a separate asset, as appropriate, only if it is probable that the future economic benefits associated with the asset will flow to the Company and it is reliably measured. All other expenses on existing property plant and equipment, including day-to-day repair and maintenance expenditure, overhaul and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.
⢠Spares which meet the definition of property, plant and equipment are capitalised as on the date of acquisition. The corresponding old spares arede-capitalised on such date with consequent impact on the statement of Profit and Loss.
⢠Property, Plant and Equipment not ready for its intended use at the date of Balance Sheet are disclosed as "Capital Work in progress". Such items are classified to specific sections of the Property, Plant and equipment as and when ready for its intended use.
⢠Advances paid towards the acquisition of property, plant and equipment outstanding at each Balance Sheet date is classified as capital advances under "Other non-current assets". An item of property, plant and equipment is de-recognised upon its disposal or when no future economic benefits are expected from its use. Gains or losses, if any, arising from de-recognition of property, plant & equipment (measured as the difference between the net disposal proceeds and the carrying amount of the asset) are recognised in the statement of profit and loss when the asset is de-recognised. The Company identifies and determines cost of each component of an asset separately, if the component has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the useful life of the principal asset.
⢠Depreciation and useful lives
o Depreciation is charged so as to write off cost or value of assets over their estimated useful lives and are capitalised in the books of accounts, when the assets are ready for its intended use.
o Depreciation for an item in property plant and equipment which are derecognised are provided on proportionate basis up to the date when the asset is derecognised from the financial statement.
o Depreciation on items of property, plant & equipment (Other than free hold land) is calculated on a straight-line basis using the rates based on the useful lives estimated by the management.
o The identified components of an asset are depreciated separately over their useful lives; the remaining components are depreciated overthe life of the principal asset.
o The estimated useful life, residual value and the depreciation methods are reviewed at the end of each reporting period, with effect of any changes in estimate accounted on a prospective basis.
o Estimated useful life of the assets are determined based on various technical parameters/ assessments and aligned to the prescribed useful life specified under schedule II of the Companies Act, 2013. The useful economic life of buildings and plant and equipment as estimated by the management, is supported by independent assessment by professionals, are lower than those indicated in Schedule II to the Companies Act, 2013. The estimated useful lives are as below:
|
Block of Assets |
Useful life |
|
Factory Buildings |
5 -30 Years |
|
Furniture & Fixtures |
5-10 Years |
|
Plant & Equipment |
5 -20 Years |
|
Computers |
3 - 6 Years |
|
Vehicles |
8 Years |
|
Office Equipment |
5 Years |
⢠Investment property is held to earn rentals or for capital appreciation or both (including property under construction for such purposes). Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured in accordance with Ind AS 16 requirements. Cost comprises the purchase price including purchase taxes (net of taxes credits wherever applicable), and erection / commissioning & any incidental expenses which are directly attributable in bringing the asset to its working condition for the intended use.
⢠Subsequent expenditure related to investment property is included in carrying amount of the asset, only if it is probable that the future economic benefits associated with the asset will flow to the Company and it is reliably measured. All other expenses on existing investment property, including day-to-day repair and maintenance expenditure are charged to the statement of profit and loss for the period during which such expenses are incurred.
⢠Depreciation on investment property is calculated on a straight-line basis using the rates based on the useful lives estimated by the management. Estimated useful life of Building classified as investment property is 7-30 years. Depreciation are determined based on various technical parameters/assessments and aligned to the prescribed useful life specified under schedule II of the Companies Act, 2013.
⢠Investment properties are de-recognised either upon disposal when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. On disposal of an investment property, the difference between its carrying amount and net disposal proceeds is recognised in the Statement of Profit and Loss in the period in which the property is derecognised.
2.7.3 Leases and Right of use assets
The Company has adopted Ind AS 116 Leases effective 15t April 2019, using the modified retrospective method. The Company has applied standard to its leases with cumulative impact recognised on the date of initial application (15t April 2019). Accordingly, previous period information has not been restated.
The Company lease asset classes primarily consist of leases for land, buildings, plant and machinery and motor vehicles. The Company, at the inception of a contract, assesses whether the contract is a lease or contain a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a time in exchange for a consideration.
At the date of commencement of lease, the Company recognises a right-of-use asset (ROU) and a corresponding lease liability for all lease arrangements in which it''s a lessee, except for leases with a term of twelve months or less (shortterm leases) and leases of low value assets. For these short term and leases of low value assets, the Company recognises the lease payment as an operating expense on a straight-line basis over the term of the lease.
The ROU asset is initially recognised at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The ROU asset is subsequently measured at cost less accumulated depreciation and impairment losses if any. The ROU asset is depreciated using the straight-line method from the commencement date over the shorter of lease term and useful life of the underlying asset.
The lease liability is initially measured at the present value of the future lease payments that are not paid at the commencement date, discounted using the discount rate implicit in the lease, if not determinable, discounted with the Company''s incremental borrowing rate. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company''s estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.
Assets or liabilities recognised under IND AS 103 (Business Combinations), relating to favorable or unfavorable terms of an operating lease, acquired during business combination, the same is derecognised and appropriate ROU and lease liability is recognised on the date of transition.
ROU and lease liability are separately presented in the Balance Sheet and lease payments have been classified as financing cashflows. The Company does not have any financial leases at the end of the reporting period.
⢠Intangible assets acquired separately are carried at cost less accumulated amortisation less accumulated impairment losses if any.
⢠Internally generated intangible assets, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in Profit and loss in the period in which the expenditure is incurred.
⢠Intangible assets acquired in a business combination:
o Intangible assets acquired in a business combination are recognised at fair value at the acquisition date
o Subsequent to initial recognition, the intangible assets are reported at cost less accumulated depreciation and accumulated impairment if any
o For all finite life intangibles, amortisation is charged on straight line basis over their estimated useful economic lives.
o The estimated useful economic life and the amortisation method are reviewed at the end of each reporting period, with effect of any changes in estimate accounted on a prospective basis.
o The amortization expense on intangible assets with finite lives is recognized in the statement of profit and loss under the heading "Depreciation and amortisation expense"
o Estimated useful economic life of Intangibles are as follows:
|
Intangibles |
Useful economic life (years) |
|
Computer Software |
3-7 |
|
Tradename and Trademark |
15 |
|
Developed Technology |
15 |
|
Customer Relationship |
20 |
⢠Goodwill represents the cost of acquired business as established at the date of acquisition of the business in excess of the acquirer''s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities less accumulated impairment losses, if any. Goodwill is initially recognised based on the accounting policies on business combinations refer note2.7.5 and is tested annuallyfor impairment.
2.7.5 Business Combinations and Goodwill
The Company accounts for its business combinations under acquisition method of accounting. The acquiree''s identifiable assets, liabilities and contingent liabilities that meet the condition for recognised at their fair values at the acquisition cost.
Purchase consideration paid in excess of the fair value of net assets acquired is recognised as goodwill. Where the fair value of identifiable assets and liabilities exceed the cost of acquisition, after reassessing the fair values of the net assets and contingent liabilities, the excess is recognised as capital reserve.
The interest of non-controlling shareholders is initially measured either at fair value or at the non-controlling interests'' proportionate share of the acquiree''s identifiable net assets. The choice of measurement basis is made on an acquisition-byacquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests'' share of subsequent changes in equity of subsidiaries.
Business combinations arising from transfers of interests in entities that are under common control are accounted at historical cost. The difference between any consideration given and the aggregate historical carrying amounts of assets and liabilities of the acquired entity is recorded in shareholders'' equity.
Acquisition related costs are recognised in the statement of profit and loss as incurred.
2.7.6 Impairment of Non-Financial assets
⢠The carrying amount of tangible, intangible and other non-financial assets are reviewed at each balance sheet date to determine if there is any indication of impairment based on external or internal factors. If any such indication exists, the recoverable amount of the asset/ Cash Generating Units (CGU) is estimated in order to determine the extent of impairment loss (if any).
⢠For Goodwill, an impairment test is performed as at each Balance Sheet date and whenever there is an indication that the asset may be impaired.
⢠An Impairment is recognised in the statement of Profit and loss to the extent the recoverable amount of an asset or CGU is estimated to be less than it''s carrying amount of the asset or CGU.
⢠Recoverable amount represents the higher of fair value less cost to sell and their''value in use''. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money, and risks specific to the asset for which the estimates of future cash flows have not been adjusted.
⢠When an impairment loss subsequently reverses, the carrying amount of the asset or a CGU is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or CGU in prior years. A reversal of an impairment loss is recognised immediately in the statement of Profit and loss.
Inventories are valued at the lower of cost and net realisable value after providing for obsolescence and slow-moving inventory as follows:
|
Inventory Types |
Valuation methodology |
|
Raw materials, components, stores and spares |
These are valued at lower of cost and net realisable value. Cost includes cost of purchase including duties & taxes (other than the taxes, which can be taken as input tax credit) and other costs incurred in bringing the inventories to their present location and condition. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost is determined on a weighted average basis. |
|
Inventory Types |
Valuation methodology |
|
Work-in-progress and finished goods |
These are valued at lower of cost and net realisable value. Cost includes direct materials and labour and an allocated proportion of manufacturing overheads based on normal operating capacity. Cost is determined on a weighted average basis. |
|
Traded goods |
Valued at lower of cost and net realisable value. Cost includes cost of purchase including duties & taxes (other than the taxes, which can be taken as input tax credit) and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on a weighted average basis. |
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
2.7.8 Cash & Cash Equivalents & Investments
⢠Cash and cash equivalents in the balance sheet comprise cash at banks and short-term deposits with an original maturity of three months or less
⢠Investments comprise of investments made in various liquid funds in mutual funds. These investments are valued at cost less impairment if any
⢠For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits and short-term liquid investments, as defined above.
A Financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Company''s financial assets broadly comprise the following:
(a) Current financial assets: Investments, trade receivables, cash and cash equivalents, loans and advances, other shortterm receivables
(b) Non-current financial assets: Investments, other long-term receivables and deposits
2.7.9.1.1 Initial recognition and measurement:
Financial assets are initially measured at fair value. Transaction costs that are directly attributable to the acquisition of financial assets (other than financial assets at fair value through Profit and loss) are added to the fair value of the financial assets, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets at fair value through Profit and loss are recognised immediately in statement of profit and loss.
2.7.9.1.2 Subsequent measurement:
For the purpose of subsequent measurement, financial assets are classified into following categories:
(a) Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost, if both the below conditions are met:
1. These financial assets are held within a business model whose objective is to hold these assets in order to collect contractual cash flows
2. Contractual terms of financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
After initial recognition, these financial assets are subsequently measured using the effective interest rate (EIR) method, less impairment, if any. The amortisation of EIR and loss arising from impairment, if any, recognised in the statement of Profit and loss. This category generally applies to trade and other receivables. For the impairment policy on financial assets measured at amortised cost, refer note no 2.7.9.1.3
(b) Financial Assets at fair value through other comprehensive Income (FVTOCI)
Financial assets are measured at fair value through other comprehensive income if both the below conditions are met:
1. These financial assets are held within business model whose objective is achieved by both collecting contractual cash flows on specified dates and selling financial assets
2. These assets contractual cash flows represent solely payments of principal and interest on the principal amount outstanding
TheCompanydoes not own anyfinancial asset classified at FVTOCI.
(c) Financial assets at fair value through Profit and loss (FVTPL)
This is a residual category. Any financial assets which do not fall under the category of financial assets measured at amortised cost or FVTOCI are classified as FVTPL. Financial assets at FVTPL are measured at fair value at the end of each reporting period, with gain or loss arising on remeasurement recognised in statement of Profit and loss incorporates any dividend or interest earned on the financial assets and is included in other Income line item.
The Company''s investment as presented in note 9A and 9B are valued at FVTPL.
2.7.9.1.3 Impairment of Financial Assets
In accordance with Ind AS 109 "Financial Instruments", the Company applies Expected Credit Loss (ECL) model for measurement and recognition of loss allowance on the following and the basis of its measurement:
⢠Trade Receivable - For Trade receivable and other financial assets that results from transactions that are in scope of Ind AS 115, the Company applies the simplified approach required in Ind AS 109, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
⢠Financial assets measured at amortised cost (other than trade receivable) - In case of other than trade receivable, the Company determines, if there is any significant increase in credit risk of the financial asset since initial recognition. Below methods are followed based on the credit risk changes:
o If there are no significant changes in credit risk since initial recognition, twelve months ECL is used to provide the impairment loss
o If there is a significant change in credit risk, lifetime ECL is measured for making the impairment loss assessment. Subsequently if there is an improvement in credit risk, the Company reverts to recognition of impairment loss based on twelve months ECL.
To make the assessment whether there is any significant change in risk, the Company compares the risk of a default occurring on the financial instrument as at the reporting date with a risk of default occurring on the financial instrument as at the date of initial recognition and consider reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increase in credit risk since its initial recognition.
Lifetime ECL are the expected credit losses resulting from all possible default events, over the expected life of a financial assets. 12 months ECL is a portion of lifetime ECL which result from default events that are possible within 12 months from the reporting period.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate(EIR).
As a practical expedient and as permitted under Ind AS 109, the Company uses a provision matrix to measure lifetime ECL on its portfolio of trade receivables. The provision matrix is prepared based on historically observed default rates over the expected life of trade receivables and is adjusted for forward-looking information available. At each reporting date, the historically observed default rates and changes in theforward-looking information are updated.
ECL allowance recognised (or reversed) during the period is recognised as income or expense in the statement of profit and loss under the head ''Other Expenses''. If the reversal of ECL allowance related to prior financial year, these are accounted as part of other Income in the statement of profit and loss.
2.7.9.1.4 Derecognition of financial assets
⢠The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset in its entirety, the difference between the asset''s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in statement of profit and loss if such gain or loss would have otherwise been recognised in statement of profit and loss on disposal of that financial asset.
⢠On derecognition of a financial assets other than entirely, (when the Company retains an option to repurchase part of a transferred asset), the Company allocates previous carried over amount of financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of transfer.
⢠The difference between the carrying amount allocated to the part that is no longer recognised and the sum of consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in Profit and loss on disposal of that financial asset. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair value of those parts.
2.7.9.2 Financial liabilities and Equity instruments issued by the Company:2.7.9.2.1 Equity Instruments:
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all its liabilities. Equity instruments issued bythe Company are recognised at the proceeds received, net of direct issue costs.
2.7.9.2.2 Financial liabilities:
Company''s financial liabilities broadly comprises, Short term borrowings, Trade payables, Liabilities for capital expenditure and Other long term/ short term obligations
2.7.9.2.2.1 Initial recognition and measurement:
⢠Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.
⢠All financial liabilities are recognised initially at Fair value. In case of loans, borrowings and payables, net of directly attributable transaction costs.
⢠Financial liabilities are classified, at initial recognition, as financial liabilities at FVTPL or at amortised cost as appropriate.
2.7.9.2.2.2 Subsequent measurement:
⢠Financial Liabilities at amortised cost - The carrying amounts of financial liabilities that are subsequently measured at amortised cost using the effective interest method. All the financial liabilities of the Company fall under this category.
⢠The effective interest method is a method of calculating the amortised costof a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
⢠Financial Liabilities at FVTPL - Financial liabilities at fair value through Profit and loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through Profit and loss. The Company does not owe any financial liability which is classified at FVTPL
2.7.9.2.2.3 Derecognition of financial liabilities
The Company de-recognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability de-recognised and the consideration paid and payable is recognised in statement of profit and loss.
2.7.9.3 Offsetting financial asset and financial liability
The Company offsets a financial asset and a financial liability and report this as a net balance in the Balance sheet only when:
⢠There is a legally enforceable right to set off the recognised amounts and
⢠There is an intention to realise the asset and settle the liability simultaneously.
Government grants are recognised when there is a reasonable assurance that the Company will comply with the conditions attached to them and that the grants will be received.
Government grants are recognised in the statement of profit and loss on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Company should purchase, construct or otherwise acquire noncurrent assets are recognised as deferred revenue in the balance sheet and its amortisation re-recognised in the statement of profit and loss on a systematic and rational basis over the useful lives of the related assets.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognised in the statement of profit and loss in the period in which they become receivable.
The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.
2.7.11 Employee benefits2.7.11.1 Short-term employee benefits
Employee benefits payable wholly within twelve months of receiving employee services are classified as short-term employee benefits. These benefits generally include salaries and wages, bonus and ex-gratia. The undiscounted amount of short-term employee benefits to be paid in exchange for employee services is recognised as an expense as the related service is rendered by employees.
2.7.11.2 Other than shortterm employee benefits:2.7.11.2.1 Defined Contribution schemes:
Contributions to defined contribution scheme such as Employee state insurance, labour welfare fund, superannuation scheme (for specific employee group) are charged as an expense based on the amount of contribution required to be made as and when services are rendered by the employees. Company''s provident fund contribution, in respect of certain employees, is made to a government administrated fund and charged as an expense to the statement of profit and loss. The above benefits are classified as Defined Contribution schemes as the Company has no further defined obligations beyond the monthly contribution.
2.7.11.2.2 Defined benefit schemes:
The Company operates the following schemes which are under defined benefit plans:
⢠Gratuity is administered through an approved benefit fund. Gratuity liability is defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method done at the end of each financial year.
⢠The liability on account of long-term compensated absences and death benefit scheme (in respect of certain employees) due to the employees are provided for on the basis of an actuarial valuation on projected unit credit method at the end of each financial year.
⢠In respect of certain employees, provident fund contributions are made to a trust administrated by the Company. The interest rate payable to the members of the trust shall not be lower than the rate declared by the Central Government under Employee''s Provident Fund & Miscellaneous Provisions Act, 1952 and interest shortfall, if any, on Provident Fund, which is managed through a private trust, shall be made good by the Company. The liability in respect of shortfall is provided for based on year-end actuarial valuation on projected unit credit method.
2.7.11.2.3 Re-measurements, comprising of actuarial gains and losses excluding amounts included in net interest on the net defined benefit liability and the return on plan assets, are recognised immediately in the balance sheet with a corresponding debitor credit to retained earnings through Other Comprehensive Income in the period in which they occur. Re-measurements are not reclassified to Statement of profit and loss in subsequent periods.
2.7.11.2.4 Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
a) Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
b) Net interest expense or income
2.7.11.2.5 The current and non-current classification of gratuity, compensated absences, death benefit scheme and provident fund liabilities is based on the independentactuarial valuation reports.
Income tax expense comprises current tax and the net change in the deferred tax asset or liability during the year and includes any adjustments related to past periods in current and/or deferred tax adjustments that may become necessary due to certain developments or review during the relevant period. Current and deferred taxes are recognised in statement of profit and loss, except when they relate to items that are recognised in other comprehensive income, in which case, the current and deferred tax are also recognised in other comprehensive income.
Current tax is the expected tax payable/ receivable on the taxable income/ loss for the year using applicable tax rates for the relevant period, and any adjustment to taxes in respect of previous years in accordance with Income Tax Act, 1961 including the relevant transfer price regulations prescribed there under, read with applicable judicial precedents or interpretations wherever relevant.
Interest expenses and penalties, if any, related to income tax are included in finance cost and other expenses respectively. Interest Income, if any, related to Income tax is included in other income.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amount and there is an intention to settle the assets and liabilities on net basis.
Management periodically evaluates contingencies and position taken on uncertain tax positions in tax return with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised using the balance sheet approach. Deferred income tax assets and liabilities are recognised for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount, except when the deferred income tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit and loss at the time of the transaction.
A deferred tax liability is recognised based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted, or substantially enacted, by the end of the reporting period.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carryforward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be realised or settled.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to income tax levied by the same taxation authority.
2.7.13 Provisions, contingent liabilities and contingent assets2.7.13.1 Provisions
A provision is recognised when the Company has a present obligation as a result of past event, it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance Sheet date.
If the effect of time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used the increase in the provision due to the passage of time is recognised as a finance cost.
2.7.13.2 Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that arises from a past event where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made. Such liabilities are disclosed in notes but are not recognised. Contingent assets are neither recognised nor disclosed in the financial statements.
Revenue is recognised on the basis of approved contracts regarding the transfer of goods or services to a customer for an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
Revenue is recognised upon transfer of control of promised products to customers and when there are no longer any unfulfillment obligations. The performance obligations in our contracts are fulfilled either at the time of dispatch, delivery or upon formal customer acceptance dependent on customer terms agreed in the contract.
Revenue is measured based on the transaction price, which is the consideration received or receivable, adjusted of any discounts, service level credits, performance bonuses, price concessions and incentives, if any, as specified in the contract with the customer. Revenue excludes taxes or duties collected from customers on behalf of Government. The revenue is recognised to the extent that it is highly probable a significant reversal will not occur. No element of financing is deemed present as the sales are made with credit term as per the contract terms agreed with the customers, which is consistent with market practice and the industry norms, that the Company operates.
Income from services rendered is recognised based on agreements/arrangements with the customers as the service is performed and there are no unfulfilled obligations.
Trade Receivable: A trade receivable is recognised when the control is transferred and there is no unfulfilled obligation as this is the point in time that the consideration becomes unconditional because only a passage of time is required before the payment is due.
Contract Assets: Contract assets are recognised when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled receivables (only act of invoicing is pending) when there is unconditional right to receive cash, and only passage of time is required, as per contractual terms. If the unbilled receivable and unbilled revenue are not material numbers, these numbers are included in revenue and trade receivable appropriately.
Contract Liabilities: Contract Liabilities, which is Company''s obligation to transfer goods or services to customers for which the Company has already received the consideration. This relate mainly to advance payments from customers which are disclosed in note no 21. Contract liabilities are recognised as revenue when the Company performs under the contract.
Contracts are subject to modification to account for changes in contract specification and requirements. The Company reviews modification to contract in conjunction with the original contract, basis which the transaction price could be allocated to a new performance obligation, or transaction price of an existing obligation could undergo a change. In the event transaction price is revised for existing obligation, a cumulative adjustment is accounted for.
Export incentives are recognised when the right to receive such incentives as per the applicable terms is established, in respect of the exports made and when there is no significant uncertainty regarding the ultimate realisation / utilisation of such incentives.
Dividend income on investments is recognised when the right to receive dividend is established.
Claim on insurance companies and others, where quantum of accrual cannot be ascertained with reasonable certainty, are accounted for on acceptance basis.
Interest income is recognised on a time proportion basis taking into account the amount outstanding and the applicable effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of a financial liability or a financial asset to their gross carrying amount.
Interest and Dividend income are included under the head "other income" in the Statement of Profit and Loss.
2.7.15 Foreign CurrencyTranslations
In the financial statements of the Company, transactions in foreign currencies are translated into the functional currency at the exchange rates at the date of the transaction. Foreign exchange gains and losses from settlement of these transactions are recognised in the Statement of Profit and Loss at the time of settlement. Foreign currency denominated monetary assets and liabilities are translated into the functional currency at exchange rates prevailing on the reporting date. Exchange differences arising on settlement or translation of monetary items are recognised in the statement of profit and loss. Nonmonetary items are measured at historical cost.
Basic Earnings per share is calculated by dividing the net Profit and loss before OCI attributable to equity shareholders for the year by the weighted average number of equity shares outstanding during the year. Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting period.
For the purpose of calculating diluted earnings per s
Mar 31, 2021
1. CORPORATE INFORMATION
Timken India Limited (''the Company'') is a public limited company incorporated on 15th June 1987 under the provisions of the erstwhile Companies Act, 1956. The Company''s shares are listed in National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) in India. The registered office of the Company is located at 39-42, Electronics City, Phase II, Hosur Road, Bengaluru - 560 100. The Company is into manufacture, distribution and sale of anti-friction bearings primarily tapered roller bearings, other roller bearings, components, accessories, and mechanical power transmission products for diverse customer base. The Company also provides maintenance contract and refurbishment services. The Company''s manufacturing plants are located atJamshedpur in Jharkhand & Bharuch in Gujarat and distribution centers are located in various parts of the country.
These financial statements of the Company for the year ended March 31,2021 were authorised for issue in accordance with the resolution of the Board of Directors on June 18, 2021.
2. BASIS OF PREPARATION AND PRESENTATION, SIGNIFICANT ACCOUNTING POLICIES2.1 Statement of compliance
The financial statements have been prepared in all material aspects in accordance with the Indian Accounting Standards (referred to as "Ind AS") prescribed under Section 133 of the Companies Act, 2013 read with Companies (Indian Accounting Standards) Rules, as amended from time to time and other relevant provisions of the Act.
2.2 Basis of preparation and measurement
These financial statements have been prepared on going concern and accrual basis. The accounting policies have been followed consistently across all the periods in the financial statements. All assets and liabilities are classified as current or non-current as per Company''s operating cycle and other criteria defined in the Schedule III of the Companies Act, 2013. The operating cycle of the Company is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. Based on the nature of business and the time between the asset acquisition and their conversion into cash and cash equivalents, the Company has ascertained its operating cycle as twelve months for the purpose of identification of current or non-current assets and liabilities.
These Ind-AS Financial Statements have been prepared on historical cost basis, except for certain financial instruments and defined benefit plans which have been measured at fair value or amortised cost at the end of each reporting period as explained in accounting policies below.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1,2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
2.3 Functional and Presentation currency
These financial statements are prepared in Indian Rupees (^), the functional currency of the company, which is the currency of the primary economic environment in which the Company operates (the ''functional currency'').
All amounts presented in the financial statements which also includes accompanying notes have been rounded off to the nearest million as per the requirement of Schedule III to the Companies Act,2013, unless otherwise stated.
Statement of Cash flows is prepared using indirect method as set out in Ind-AS -7 ("Statement of Cash Flows").
2.5 Use of Estimates and Judgments:
The preparation of the Company''s financial statements in conformity with IND AS requires management to make judgements, estimates and assumptions in application of accounting policies that affect the reported amounts of assets, liabilities, income, expenses and accompanying disclosures. Estimates and assumptions are reviewed on an ongoing basis, based on historical experience and other factors including the expectation of the future factors that are believed to be reasonable. Revisions to accounting estimates are recognised in the period in which the estimates are revised, and future periods affected.
Information about critical judgements, estimates and assumptions that have significant effect to the carrying amount of assets and liabilities in the financial statements are included in thefollowing notes below:
|
SI. No |
Judgement, Estimates, Assumptions |
Accounting Policy Reference |
Note Reference |
|
1 |
Estimation of useful life of tangible, intangible assets and investment property |
2.7.1; 2.7.2 & 2.7.4 |
3,5 & 7 |
|
2 |
Measurement of Right -of- use assets and Lease liability |
2.7.3 |
4&17 |
|
3 |
Measurement of defined benefit obligations and keyactuarial assumptions |
2.7.11 |
39 |
|
4 |
Recognition of current and deferred taxes |
2.7.12 |
19A,24 |
|
5 |
Goodwill Impairment and future cashflow projection |
2.7.6 |
6 |
|
6 |
Impairment ofTrade receivables: Expected credit loss |
2.7.9.1 |
13 |
|
7 |
Measurement and likelihood of occurrence of contingencies |
2.7.13 |
33 |
Estimation of uncertainties related to COVID-19 impact
The spread of the COVID-19 pandemic severely impacted many economies around the globe and brought economic activity to a near-standstill during the first quarter of FY 2020-21. The Company''s sales were also adversely affected during the Q1 of FY 202021 due to the lockdown restrictions owing to Covid-19 pandemic, which started recovering from Q2 onwards.
The uncertainties resurfaced with the emergence of a second wave of the COVID-19 pandemic during March 2021 in some parts of the country, which gradually spread across the country. This did not materially impact the Company''s performance during the period. While the second wave of the pandemic is in the phase out stage the company continues to focus on people''s health & safety, meeting the customer demand through effective supply chain channel, caring for the communities and protecting the business model.
The Company has considered the possible effects that may impact on carrying amount of various assets and liabilities based on internal and external information available such as future volume estimate from business, contract terms, financial strengths of partners etc. The Company has done a sensitivity analysis and having reviewed the underlying data and the related sensitivity analysis, the Company expects, the carrying amount of the assets will be recovered and there is no significant impact to liabilities accrued. The impact of COVID-19 on the Company''s financial statements may differ from that estimated as at the date of approval of these statements and the Company will continue to closely monitor any material changes to future economic conditions.
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards. MCA has notified the Companies (Indian Accounting Standards) Amendment Rules, 2021 on 18th June 2021. These amendments are applicable to the Company for the financial year starting 1st April 2021.
On 24th March 2021, the Ministry of Corporate Affairs (MCA) through a notification, amended Schedule III of the Companies Act, 2013. The amendments revise Division I, II and III of Schedule III and are applicable from 15t April 2021. The Company is evaluating the effect of the amendments on its financial statements.
2.7 SIGNIFICANT ACCOUNTING POLICIES2.7.1 Property, Plant and equipment
⢠⢠Property, Plant and Equipment held for use in the production and/or supply of goods or services or for administrative
purposes, are stated in the Balance Sheet at cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Free hold Land is not depreciated. Property, Plant and Equipment acquired in a business
combination are recognised at fair value at the acquisition date. Cost comprises the purchase price including import duties and non-refundable, purchase taxes (net of taxes credits wherever applicable), and erection / commissioning & any incidental expenses which are directly attributable in bringing the asset to its working condition for the intended use. The amount of asset related grants are added to the cost of respective asset with a corresponding recognition of deferred income in respect of Government grant (also refer accounting policy on Government grants in note 2.7.10).Subsequent expenditure related to an item of property, plant & equipment is included in carrying amount of the asset or recognised as a separate asset, as appropriate, only if it is probable that the future economic benefits associated with the asset will flow to the Company and it is reliably measured. All other expenses on existing property plant and equipment, including day-to-day repair and maintenance expenditure, overhaul and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.
⢠Spares which meet the definition of property, plant and equipment are capitalised as on the date of acquisition. The corresponding old spares arede-capitalised on such date with consequent impact on the statement of Profit and Loss.
⢠Property, Plant and Equipment not ready for its intended use at the date of Balance Sheet are disclosed as "Capital Work in progress". Such items are classified to specific sections of the Property, Plant and equipment as and when ready for its intended use.
⢠Advances paid towards the acquisition of property, plant and equipment outstanding at each Balance Sheet date is classified as capital advances under "Other non-current assets". An item of property, plant and equipment is de-recognised upon its disposal or when no future economic benefits are expected from its use. Gains or losses, if any, arising from de-recognition of property, plant & equipment (measured as the difference between the net disposal proceeds and the carrying amount of the asset) are recognised in the statement of profit and loss when the asset is de-recognised. The Company identifies and determines cost of each component of an asset separately, if the component has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the useful life of the principal asset.
⢠Depreciation and useful lives
o Depreciation is charged so as to write off cost or value of assets over their estimated useful lives and are capitalised in the books of accounts, when the assets are ready for its intended use.
o Depreciation for an item in property plant and equipment which are derecognised are provided on proportionate basis up to the date when the asset is derecognised from the financial statement.
o Depreciation on items of property, plant & equipment (Other than free hold land) is calculated on a straight-line basis using the rates based on the useful lives estimated by the management.
o The identified components of an asset are depreciated separately over their useful lives; the remaining components are depreciated over the life of the principal asset.
o The estimated useful life, residual value and the depreciation methods are reviewed at the end of each reporting period, with effect of any changes in estimate accounted on a prospective basis.
o Estimated useful life of the assets are determined based on various technical parameters/assessments and aligned to the prescribed useful life specified under schedule II of the Companies Act, 2013. The useful economic life of buildings and plant and equipment as estimated by the management, is supported by independent assessment by professionals, are lower than those indicated in Schedule II to the Companies Act, 2013. The estimated useful lives are as below:
|
Block of Assets |
Useful life |
|
Factory Buildings |
5-30 Years |
|
Furniture & Fixtures |
5-10 Years |
|
Plant & Equipment |
5-20 Years |
|
Computers |
3 - 6 Years |
|
Vehicles |
8 Years |
|
Office Equipment |
5 Years |
⢠Investment property is held to earn rentals or for capital appreciation or both (including property under construction for such purposes). Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured in accordance with Ind AS 16 requirements. Cost comprises the purchase price including purchase taxes (net of taxes credits wherever applicable), and erection / commissioning & any incidental expenses which are directly attributable in bringing the asset to its working condition for the intended use.
⢠Subsequent expenditure related to investment property is included in carrying amount of the asset, only if it is probable that the future economic benefits associated with the asset will flow to the Company and it is reliably measured. All other expenses on existing investment property, including day-to-day repair and maintenance expenditure are charged to the statement of profit and loss for the period during which such expenses are incurred.
⢠Depreciation on investment property is calculated on a straight-line basis using the rates based on the useful lives estimated by the management. Estimated useful life of Building classified as investment property is 7-30 years. Depreciation are determined based on various technical parameters/ assessments and aligned to the prescribed useful life specified under schedule II oftheCompaniesAct, 2013.
⢠Investment properties are de-recognised either upon disposal when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. On disposal of an investment property, the difference between its carrying amount and net disposal proceeds is recognised in the Statement of Profit and Loss in the period in which the property is derecognised.
2.7.3 Leases and Right of use assets
The Company has adopted Ind AS 116 - Leases effective 15t April 2019, using the modified retrospective method. The Company has applied standard to its leases with cumulative impact recognised on the date of initial application (15t April 2019). Accordingly, previous period information has not been restated.
The Company lease asset classes primarily consist of leases for land, buildings and motor vehicles. The Company, at the inception of a contract, assesses whether the contract is a lease or contain a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a time in exchange for a consideration.
At the date of commencement of lease, the Company recognises a right-of-use asset (ROU) and a corresponding lease liability for all lease arrangements in which it''s a lessee, except for leases with a term of twelve months or less (shortterm leases) and leases of low value assets. For these short term and leases of low value assets, the Company recognises the lease payment as an operating expense on a straight-line basis over the term of the lease.
The ROU asset is initially recognised at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The ROU asset is subsequently measured at cost less accumulated depreciation and impairment losses if any. The ROU asset is depreciated using the straight-line method from the commencement date over the shorter of lease term and useful life of the underlying asset.
The lease liability is initially measured at the present value of the future lease payments that are not paid at the commencement date, discounted using the discount rate implicit in the lease, if not determinable, discounted with the Company''s incremental borrowing rate. It is remeasured when there is a change in future lease payments arising from a change in an indexor rate, if there is a change in the Company''s estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.
Assets or liabilities recognised under IND AS 103 (Business Combinations), relating to favorable or unfavorable terms of an operating lease, acquired during business combination, the same is derecognised and appropriate ROU and lease liability is recognised on the date of transition.
ROU and lease liability are separately presented in the Balance Sheet and lease payments have been classified as financing cashflows. The Company does not have any financial leases at the end of the reporting period.
⢠Intangible assets acquired separately are carried at cost less accumulated amortisation less accumulated impairment losses if any.
⢠Internally generated intangible assets, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in Profit and loss in the period in which the expenditure is incurred.
⢠Intangible assets acquired in a business combination:
o Intangible assets acquired in a business combination are recognised at fair value at the acquisition date
o Subsequent to initial recognition, the intangible assets are reported at cost less accumulated depreciation and accumulated impairmentif any
⢠Amortisation:
o For all finite life intangibles, amortisation is charged on straight line basis over their estimated useful economic lives.
o The estimated useful economic life and the amortisation method are reviewed at the end of each reporting period, with effect of any changes in estimate accounted on a prospective basis.
o The amortization expense on intangible assets with finite lives is recognized in the statement of profit and loss under the heading "Depreciation and amortisation expense"
o Estimated useful economic life of Intangibles are as follows:
Intangibles Useful economic life (years)
⢠Goodwill represents the cost of acquired business as established at the date of acquisition of the business in excess of the acquirer''s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities less accumulated impairment losses, if any. Goodwill is initially recognised based on the accounting policies on business combinations refer note 2.7.5 and is tested annually for impairment.
2.7.5 BusinessCombinationsandGoodwill
The Company accounts for its business combinations under acquisition method of accounting. The acquiree''s identifiable assets, liabilities and contingent liabilities that meet the condition for recognised at their fair values at the acquisition cost.
Purchase consideration paid in excess of the fair value of net assets acquired is recognised as goodwill. Where the fair value of identifiable assets and liabilities exceed the cost of acquisition, after reassessing the fair values of the net assets and contingent liabilities, the excess is recognised as capital reserve.
The interest of non-controlling shareholders is initially measured either at fair value or at the non-controlling interests'' proportionate share of the acquiree''s identifiable net assets. The choice of measurement basis is made on an acquisition-byacquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests'' share of subsequent changes in equity of subsidiaries.
Business combinations arising from transfers of interests in entities that are under common control are accounted at historical cost. The difference between any consideration given and the aggregate historical carrying amounts of assets and liabilities of the acquired entity is recorded in shareholders'' equity.
Acquisition related costs are recognised in the statement of profit and loss as incurred.
2.7.6 Impairment of Non-Financial assets
⢠The carrying amount of tangible, intangible and other non-financial assets are reviewed at each balance sheet date to determine if there is any indication of impairment based on external or internal factors. If any such indication exists, the recoverable amount of the asset/ Cash Generating Units (CGU) is estimated in order to determine the extent of impairment loss (if any).
⢠For Goodwill, an impairment test is performed as at each Balance Sheet date and whenever there is an indication that the asset may be impaired.
⢠An Impairment is recognised in the Statement of Profit and loss to the extent the recoverable amount of an asset or CGU is estimated to be less than it''s carrying amount of the asset or CGU.
⢠Recoverable amount represents the higher of fair value less cost to sell and their''value in use1. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset for which the estimates of future cash flows have not been adjusted.
⢠When an impairment loss subsequently reverses, the carrying amount of the asset or a CGU is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or CGU in prior years. A reversal of an impairment loss is recognised immediately in the Statement of Profit and loss.
Inventories are valued at the lower of cost and net realisable value after providing for obsolescence and slow-moving inventory as
follows:
|
Inventory Types |
Valuation methodology |
|
Raw materials, components, stores and spares |
These are valued at lower of cost and net realisable value. Cost includes cost of purchase including duties & taxes (other than the taxes, which can be taken as input tax credit) and other costs incurred in bringing the inventories to their present location and condition. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost is determined on a weighted average basis. |
|
Work-in-progress and finished goods |
These are valued at lower of cost and net realisable value. Cost includes direct materials and labour and an allocated proportion of manufacturing overheads based on normal operating capacity. Cost is determined on a weighted average basis. |
|
Traded goods |
Valued at lower of cost and net realisable value. Cost includes cost of purchase including duties & taxes (other than the taxes, which can be taken as input tax credit) and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on a weighted average basis. |
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessaryto makethesale.
2.7.8 Cash & Cash Equivalents & Investments
⢠Cash and cash equivalents in the balance sheet comprise cash at banks and short-term deposits with an original maturity of three months or less
⢠Investments comprise of investments made in various liquid funds in mutual funds. These investments are valued at cost less impairment if any
⢠For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits and short-term liquid investments, as defined above.
A Financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments.
Company''s financial assets broadly comprise the following:
(a) Current financial assets: Investments, trade receivables, cash and cash equivalents, loans and advances, other shortterm receivables
(b) Non-currentfinancial assets: Investments, other long-term receivables and deposits
2.7.9.1.1 Initial recognition and measurement:
Financial assets are initially measured at fair value. Transaction costs that are directly attributable to the acquisition of financial assets (other than financial assets at fair value through Profit and loss) are added to the fair value of the financial assets, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets at fair value through Profit and loss are recognised immediately in Statement of Profit and loss.
2.7.9.1.2 Subsequent measurement:
For the purpose of subsequent measurement, financial assets are classified into following categories:
(a) Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost, if both the below conditions are met:
1. These financial assets are held within a business model whose objective is to hold these assets in order to collect contractual cash flows
2. Contractual terms of financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
After initial recognition, these financial assets are subsequently measured using the effective interest rate (EIR) method, less impairment, if any. The amortisation of EIR and loss arising from impairment, if any, recognised in the Statement of Profit and loss. This category generally applies to trade and other receivables. For the impairment policy on financial assets measured at amortised cost, refer note no 2.7.9.1.3
(b) Financial Assets at fair value through other comprehensive Income (FVTOCI)
Financial assets are measured at fair value through other comprehensive income if both the below conditions are met:
1. These financial assets are held within business model whose objective is achieved by both collecting contractual cash flows on specified dates and selling financial assets
2. These assets contractual cash flows represent solely payments of principal and interest on the principal amount outstanding
The Company does not own any financial asset classified at FVTOCI.
(c) Financial assets at fair value through Profit and loss (FVTPL)
This is a residual category. Any financial assets which do not fall under the category of financial assets measured at amortised cost or FVTOCI are classified as FVTPL. Financial assets at FVTPL are measured at fair value at the end of each reporting period, with gain or loss arising on remeasurement recognised in statement of Profit and loss incorporates any dividend or interest earned on the financial assets and is included in other Income line item.
The Company''s investment as presented in note 8Aand 8B are valued at FVTPL.
2.7.9.1.3 Impairment of Financial Assets
In accordance with Ind AS 109 "Financial Instruments", the Company applies Expected Credit Loss (ECL) model for measurement and recognition of loss allowance on the following and the basis of its measurement:
⢠Trade Receivable - For Trade receivable and other financial assets that results from transactions that are in scope of Ind AS 115, the Company applies the simplified approach required in Ind AS 109, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
⢠Financial assets measured at amortised cost (other than trade receivable) - In case of other than trade receivable, the Company determines, if there is any significant increase in credit risk of the financial asset since initial recognition. Below methods are followed based on the credit risk changes:
o If there are no significant changes in credit risk since initial recognition, twelve months ECL is used to provide the impairment loss
o If there is a significant change in credit risk, lifetime ECL is measured for making the impairment loss assessment. Subsequently if there is an improvement in credit risk, the Company reverts to recognition of impairment loss based on twelve months ECL.
To make the assessment whether there is any significant change in risk, the Company compares the risk of a default occurring on the financial instrument as at the reporting date with a risk of default occurring on the financial instrument as at the date of initial recognition and consider reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increase in credit risk since its initial recognition.
Lifetime ECL are the expected credit losses resulting from all possible default events, over the expected life of a financial assets. 12 months ECL is a portion of lifetime ECL which result from default events that are possible within 12 months from the reporting period.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate(EIR).
As a practical expedient and as permitted under Ind AS 109, the Company uses a provision matrix to measure lifetime ECL on its portfolio of trade receivables. The provision matrix is prepared based on historically observed default rates over the expected life of trade receivables and is adjusted for forward-looking information available. At each reporting date, the historically observed default rates and changes in theforward-looking information are updated.
ECL allowance recognised (or reversed) during the period is recognised as income or expense in the statement of profit and loss under the head ''Other Expenses''. If the reversal of ECL allowance related to prior financial year, these are accounted as part of other Income in the statement of profit and loss.
2.7.9.1.4 Derecognition of financial assets
⢠The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset in its entirety, the difference between the asset''s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in statement of profit and loss if such gain or loss would have otherwise been recognised in statement of profit and loss on disposal ofthatfinancial asset.
⢠On derecognition of a financial assets other than entirely, (when the Company retains an option to repurchase part of a transferred asset), the Company allocates previous carried over amount of financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of transfer.
⢠The difference between the carrying amount allocated to the part that is no longer recognised and the sum of consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in Profit and loss on disposal of that financial asset. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair value of those parts.
2.7.9.2 Financial liabilities and Equity instruments issued by the Company:2.7.9.2.1 Equity Instruments:
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all its liabilities. Equity instruments issued bythe Company are recognised at the proceeds received, net of direct issue costs.
2.7.9.2.2 Financial liabilities:
Company''s financial liabilities broadly comprises, Short term borrowings, Trade payables, Liabilities for capital expenditure and Other long term/ short term obligations
2.7.9.2.2.1.1 Initial recognition and measurement:
⢠Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.
⢠All financial liabilities are recognised initially at Fair value. In case of loans, borrowings and payables, net of directly attributabletransaction costs.
⢠Financial liabilities are classified, at initial recognition, as financial liabilities at FVTPL or at amortised cost as appropriate.
2.7.9.2.2.1.2 Subsequent measurement:
⢠Financial Liabilities at amortised cost - The carrying amounts of financial liabilities that are subsequently measured at amortised cost using the effective interest method. All the financial liabilities of the Company fall under this category.
⢠The effective interest method is a method of calculating the amortised costof a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
⢠Financial Liabilities at FVTPL - Financial liabilities at fair value through Profit and loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through Profit and loss. The Company does not owe any financial liability which is classified at FVTPL
2.7.9.2.2.1.3 Derecognition of financial liabilities
The Company de-recognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability de-recognised and the consideration paid and payable is recognised in Statement of Profit and loss.
2.7.9.3 Offsetting financial asset and financial liability
The Company offsets a financial asset and a financial liability and report this as a net balance in the Balance sheet only when:
⢠There is a legally enforceable right to set off the recognised amounts and
⢠There is an intention to realise the asset and settle the liability simultaneously.
Government grants are recognised when there is a reasonable assurance that the Company will comply with the conditions attached to them and that the grants will be received.
Government grants are recognised in the statement of profit and loss on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Company should purchase, construct or otherwise acquire noncurrent assets are recognised as deferred revenue in the balance sheet and its amortisation re-recognised in the Statement of Profit and loss on a systematic and rational basis over the useful lives of the related assets.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognised in the Statement of Profit and loss in the period in which they become receivable.
The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.
2.7.11 Employee benefits2.7.11.1 Short-term employee benefits
Employee benefits payable wholly within twelve months of receiving employee services are classified as short-term employee benefits. These benefits generally include salaries and wages, bonus and ex-gratia. The undiscounted amount of short-term employee benefits to be paid in exchange for employee services is recognised as an expense as the related service is rendered by employees.
2.7.11.2 Other than short term employee benefits:2.7.11.2.1 Defined Contribution schemes:
Contributions to defined contribution scheme such as Employee state insurance, labour welfare fund, superannuation scheme (for specific employee group) are charged as an expense based on the amount of contribution required to be made as and when services are rendered by the employees. Company''s provident fund contribution, in respect of certain employees, is made to a government administrated fund and charged as an expense to the statement of profit and loss. The above benefits are classified as Defined Contribution schemes as the Company has no further defined obligations beyond the monthly contribution.
2.7.11.2.2 Defined benefit schemes:
The Company operates the following schemes which are under defined benefit plans:
⢠Gratuity is administered through an approved benefit fund. Gratuity liability is defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method done at the end of each financial year.
⢠The liability on account of long-term compensated absences and death benefit scheme (in respect of certain employees) due to the employees are provided for on the basis of an actuarial valuation on projected unit credit method attheend of each financial year.
⢠In respect of certain employees, provident fund contributions are made to a trust administrated by the Company. The interest rate payable to the members of the trust shall not be lower than the rate declared by the Central Government under Employee''s Provident Fund & Miscellaneous Provisions Act, 1952 and interest shortfall, if any, on Provident Fund, which is managed through a private trust, shall be made good by the Company. The liability in respect of shortfall is provided for based on year-end actuarial valuation on projected unit credit method.
2.7.11.2.3 Re-measurements, comprising of actuarial gains and losses excluding amounts included in net interest on the net defined benefit liability and the return on plan assets, are recognised immediately in the balance sheet with a corresponding debitor credit to retained earnings through Other Comprehensive Income in the period in which they occur. Re-measurements are not reclassified to statement of profit and loss in subsequent periods.
2.7.11.2.4 Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
a) Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
b) Net interest expense or income
2.7.11.2.5 The current and non-current classification of gratuity, compensated absences, death benefit scheme and provident fund liabilities is based on the independent actuarial valuation reports.
Income tax expense comprises current tax and the net change in the deferred tax asset or liability during the year and includes any adjustments related to past periods in current and/or deferred tax adjustments that may become necessary due to certain developments or review during the relevant period. Current and deferred taxes are recognised in statement of profit and loss, except when they relate to items that are recognised in other comprehensive income, in which case, the current and deferred tax are also recognised in other comprehensive income.
Current tax is the expected tax payable/ receivable on the taxable income/ loss for the year using applicable tax rates for the relevant period, and any adjustment to taxes in respect of previous years in accordance with Income Tax Act, 1961 including the relevant transfer price regulations prescribed there under, read with applicable judicial precedents or interpretations wherever relevant.
Interest expenses and penalties, if any, related to income tax are included in finance cost and other expenses respectively. Interest Income, if any, related to Income tax is included in other income.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amount and there is an intention to settle the assets and liabilities on net basis.
Management periodically evaluates contingencies and position taken on uncertain tax positions in tax return with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised using the balance sheet approach. Deferred income tax assets and liabilities are recognised for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount, except when the deferred income tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable Profit and loss at the time of the transaction.
A deferred tax liability is recognised based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted, or substantially enacted, by the end of the reporting period.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be realised or settled.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to income tax levied bythe same taxation authority.
2.7.13 Provisions, contingent liabilities and contingent assets2.7.13.1 Provisions
A provision is recognised when the Company has a present obligation as a result of past event, it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance Sheet date.
If the effect of time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used the increase in the provision due to the passage of time is recognised as a finance cost.
2.7.13.2 Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that arises from a past event where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made. Such liabilities are disclosed in notes but are not recognised. Contingent assets are neither recognised nor disclosed in the financial statements.
Revenue is recognised on the basis of approved contracts regarding the transfer of goods or services to a customer for an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
Revenue is recognised upon transfer of control of promised products to customers and when there are no longer any unfulfillment obligations. The performance obligations in our contracts are fulfilled either at the time of dispatch, delivery or upon formal customer acceptance dependent on customer terms agreed in the contract.
Revenue is measured based on the transaction price, which is the consideration received or receivable, adjusted of any discounts, service level credits, performance bonuses, price concessions and incentives, if any, as specified in the contract with the customer. Revenue excludes taxes or duties collected from customers on behalf of Government. The revenue is recognised to the extent that it is highly probable a significant reversal will not occur. No element of financing is deemed to be present as the sales are made with credit term as per the contract terms agreed with the customers, which is consistent with market practice and the industry norms, that the Company operates.
Income from services rendered is recognised based on agreements/arrangements with the customers as the service is performed and there are no unfulfilled obligations.
Trade Receivable: A trade receivable is recognised when the control is transferred and there is no unfulfilled obligation as this is the point in time that the consideration becomes unconditional because only a passage of time is required before the payment is due.
Contract Assets: Contract assets are recognised when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled receivables (only act of invoicing is pending) when there is unconditional right to receive cash, and only passage of time is required, as per contractual terms. If the unbilled receivable and unbilled revenue are not material numbers, these numbers are included in revenue and trade receivable appropriately.
Contract Liabilities: Contract Liabilities, which is Company''s obligation to transfer goods or services to customers for which the Company has already received the consideration. This relate mainly to advance payments from customers which are disclosed in note no 20. Contract liabilities are recognised as revenue when the Company performs under the contract.
Contracts are subject to modification to account for changes in contract specification and requirements. The Company reviews modification to contract in conjunction with the original contract, basis which the transaction price could be allocated to a new performance obligation, or transaction price of an existing obligation could undergo a change. In the event transaction price is revised for existing obligation, a cumulative adjustment is accounted for.
Export incentives are recognised when the right to receive such incentives as per the applicable terms is established, in respect of the exports made and when there is no significant uncertainty regarding the ultimate realisation / utilisation of such incentives.
Dividend income on investments is recognised when the right to receive dividend is established.
Claim on insurance companies and others, where quantum of accrual cannot be ascertained with reasonable certainty, are accounted for on acceptance basis.
Interest income is recognised on a time proportion basis taking into account the amount outstanding and the applicable effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of a financial liability or a financial asset to their gross carrying amount.
Interest and Dividend income are included under the head "other income" in the Statement of Profit and Loss.
2.7.15 Foreign CurrencyTranslations
In the financial statements of the Company, transactions in foreign currencies are translated into the functional currency at the exchange rates at the date of the transaction. Foreign exchange gains and losses from settlement of these transactions are recognised in the Statement of Profit and Loss atthe time of settlement. Foreign currency denominated monetary assets and liabilities are translated into the functional currency at exchange rates prevailing on the reporting date. Exchange differences arising on settlement or translation of monetary items are recognised in the statement of profit and loss. Nonmonetary items are measured at historical cost.
Basic Earnings per share is calculated by dividing the net profit or loss before OCI attributable to equity shareholders for the year by the weighted average number of equity shares outstanding during the year. Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting period.
For the purpose of calculating diluted earnings per share, the net Profit and loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
Mar 31, 2018
a) Property, Plant and equipment
Property, Plant and Equipment is stated at cost of acquisition less accumulated depreciation and impairment losses, if any.
Cost comprises the purchase price, duties (net of cenvat), taxes, incidental expenses and erection / commissioning expenses which are directly attributable in bringing the asset to its working condition for the intended use. The amount of asset related grants are added to the cost of respective asset with a corresponding recognition of deferred income in respect of Government grant (also refer accounting policy on Government grants).
Subsequent expenditure related to an item of property, plant & equipment is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing property plant and equipment, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and lossforthe period during which such expenses are incurred.
Gains or losses arising from de-recognition of property, plant & equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
The Company identifies and determines cost of each component of an asset separately, if the component has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the useful life of the principal asset.
Depreciation and useful lives
Depreciation on items of Property, Plant & Equipment is calculated on a straight-line basis using the rates arrived at based on the useful lives estimated by the management. The identified components of an asset are depreciated separately over their useful lives; the remaining components are depreciated over the life of the principal asset.
The Company has used the following useful economic lives to provide depreciation on its property, plant & equipment.
Useful economic life (years)
The useful economic life of buildings and plant and equipment as estimated by the management, is supported by independent assessment by professionals, are lower than those indicated in Schedule II to the Companies Act, 2013. The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
(b) Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses, if any.
The Companyâs intangible assets constitutes software which has finite useful economic lives and these are amortised on a straight line basis, over their useful life of 3 years. The amortisation period and the amortisation method are reviewed at the end of each reporting period.
(c) Impairment of property, plant and equipment and intangible assets
The carrying amount of assets are reviewed at each balance sheet date to determine if there is any indication of impairment based on external or internal factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount which represents the greater of the net selling price of assets and their âvalue in useâ. The estimated future cash flows are discounted to their present value using pre-tax discount rates and risks specific to the asset.
(d) Government Grants
Government grants are not recognised until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the balance sheet and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognised in profit or loss in the period in which they become receivable.
The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.
Under Ind-AS, import duty waivers for capital assets purchased under Export Promotion Credit Guarantee (EPCG) schemes are recorded as deferred revenue and recognized in Statement of Profit and Loss on a systematic basis over the periods in which the related performance obligations are fulfilled.
(e) Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable, net of discounts, volume rebates, sales taxes and other indirect taxes, excluding excise duty. Excise duty is a liability of the manufacturer which forms part of the cost of production, irrespective of whether the goods are sold or not. Since the recovery of excise duty flows to Company on its own account, revenue includes excise duty.
However, sales tax/ value added tax (VAT) / goods and service tax (GST) are not received by the Company on its own account; rather, these are taxes collected on sales or value added to the commodity, by the seller, on behalf of the Government. Similarly, the Company collects service tax / GST on rendering of services, on behalf of the Government and therefore, it is not an economic benefit flowing to the Company. Hence, these are excluded from revenue.
Sale of Goods
Revenue from sale of goods is recognized when all the significant risks and rewards of ownership of the goods have passed to the buyer, which generally coincides with delivery to the customers.
Income from Services
Revenue from agency commission and maintenance and service contracts are recognized pro-rata over the period of the contract as and when services are rendered, in terms of the relevant contracts.
Export Incentive Income
Export incentives are recognized when the right to receive such incentives as per the applicable terms is established, in respect of the exports made and when there is no significant uncertainty regarding the ultimate realization / utilization of such incentives.
Dividends
Revenue for dividend income is recognized when the right to receive payment is established by the reporting date.
Interest income
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of a financial liability or a financial asset to their gross carrying amount.
Interest and Dividend income are included under the head âother incomeâ in the Statement of Profit and Loss.
f) Foreign Currency Translations
In the financial statements of the Company, transactions in foreign currencies are translated into the functional currency at the exchange rates ruling at the date of the transaction. Foreign currency monetary items are translated into the functional currency at exchange rates prevailing on the reporting date. Exchange differences arising on settlement or transaction of monetary items are recognised in statement of profit and loss.
g) Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
h) Employee benefits
(A) Short-term employee benefits
Employee benefits payable wholly within twelve months of receiving employee services are classified as short-term employee benefits. These benefits include salaries and wages, bonus and ex-gratia. The undiscounted amount of short-term employee benefits to be paid in exchange for employee services is recognized as an expense as the related service is rendered by employees.
(B) Post-employment benefits
The Company operates the following post-employment schemes:
i) Gratuity is administered through an approved benefit fund. Gratuity liability is defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method done at the end of each financial year.
ii) The liability on account of long term compensated absences and death benefit scheme due to the employees are provided for on the basis of an actuarial valuation on projected unit credit method at the end of each financial year.
iii) Retirement benefits in the form of Provident Fund and Superannuation / Pension Schemes are charged to the statement of profit & loss of the year when an employee renders the related service. Interest shortfall, if any, on Provident Fund, which is managed through a private trust, is provided for based on year-end actuarial valuation on projected unit credit method.
iv) Re-measurements, comprising of actuarial gains and losses excluding amounts included in net interest on the net defined benefit liability and the return on plan assets, are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through Other Comprehensive Income in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
a) Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non routine settlements; and
b) Net interest expense or income
v) The long-term and short term classification of gratuity, death benefit scheme and provident fund liabilities is based on the actuarial valuations. The obligation for compensated absences are classified as current liabilities in the balance sheet as the Company does not have an unconditional legal and contractual right to defer settlement for a period beyond twelve months after the reporting date.
i) Leases
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease. All other leases are operating lease.
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Operating lease payments are recognised as an expense in the statement of profit and loss on a straight-line basis over the lease term, unless the payments are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases.
j) Taxes Current income tax
Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with Indian Income Tax Act. Management periodically evaluates positions taken in the tax returns vis-a-vis position taken in books of account which are subject to interpretation and creates provisions where appropriate.
Deferred tax
Deferred tax is recognised on temporary differences between the tax bases and accounting bases of assets and liabilities at the tax rates and laws that have been enacted or substantively enacted at the Balance Sheet date.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each Balance Sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
For items recognised in OCI or equity, deferred/current tax is also recognised in OCI or equity,
k) Provisions
A provision is recognized when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made.
If the effect of time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used the increase in the provision due to the passage of time is recognised as a finance cost.
I) Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
m) Earnings Per Share
Basic Earnings per share is calculated by dividing the net profit or loss before OCI for the year by the weighted average number of equity shares outstanding during the year. Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
n) Cash Flow Statement
Cash flows are reported using indirect method as set out in Ind AS -7 âStatement of Cash Flowsâ, whereby profit/(loss) before tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
o) Cash & Cash Equivalents
Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value. For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above.
p) Financial Instruments
Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instruments.
Initial recognition and measurement:
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in statement of profit and loss.
Subsequent measurement:
Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business model whose objective is to hold these assets in order to collect contractual cash flows and contractual terms of financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial Assets at fair value through other comprehensive Income
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within business model whose objective is achieved by both collecting contractual cash flows on specified dates that are solely payments of principal and interest on the principal amount outstanding and selling financial assets.
Financial assets at fair value through profit or loss
Financial assets are measured at fair value through profit or loss unless it measured at amortised cost or fair value through other comprehensive income on initial recognition. The transaction cost directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are immediately recognised in the statement of profit and loss.
Derecognition of financial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
On derecognition of a financial asset in its entirety, the difference between the assetâs carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in statement of profit and loss if such gain or loss would have otherwise been recognised in statement of profit and loss on disposal of that financial asset.
Financial liabilities
Financial liabilities are measured at amortised cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised costare determined based on the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
Offsetting financial asset and financial liability
The company offsets a financial asset and a financial liability when the Company:
(a) currently has a legally enforceable right to setoff the recognised amounts and
(b) intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in statement of profit and loss.
q) The Ministry of Corporate Affairs (MCA), on 28 March 2018, notified Ind AS 115 âRevenue from Contracts with Customersâas part of the Companies (Indian Accounting Standards) Amendment Rules, 2018. The said standard is applicable for the accounting periods beginning on or after April 1, 2018. The company is in the process of assessing the impact of the said standard on its financial statements.
Mar 31, 2017
1. CORPORATE INFORMATION
Timken India Limited (''the Company'') is a public company domiciled in India. It was incorporated on 15thJune 1987 under the provisions of the erstwhile Company''s Act, 1956. Its shares are listed on two recognized stock exchanges in India. The registered office of the Company is located at 39-42, Electronic City, Phase II, Hosur Road, Bangalore - 560 100. The Company is primarily into manufacture and distribution of tapered roller bearings, components and accessories for the automotive sector and the railway industry. It also provides maintenance contract services and refurbishment services. The Company''s primary bearing and components manufacturing plant is located at Jamshedpur in Jharkhand. It also has a gear box repairing facility at Raipur, where it provides repair and maintenance services of industrial gear boxes.
These financial statements were authorized for issue in accordance with a resolution of the Directors on May 24,2017.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Preparation and compliance with Ind AS
(i) For all periods up to and including the year ended March 31, 2016, the Company prepared its financial statements in accordance with accounting standards notified under the section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).
These financial statements for the year ended March 31, 2017 have been prepared in accordance with Indian Accounting Standards ("Ind-AS") consequent to the notification of The Companies (Indian Accounting Standards) Rules, 2015 (the Rules) issued by the MCA. These are the first Ind-AS financial statements of the Company, wherein the Company has restated its Balance Sheet as at April 1,2015 (the date of transition) and financial statements for the year ended and as at March 31, 2016 also as per Ind-AS.
(ii) The estimates at April 1, 2015 and at March 31, 2016 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies). The estimates used by the Company to present these amounts in accordance with Ind-AS reflect conditions at April 1, 2015 and as of March 31, 2016.
(iii) In accordance with Ind-AS 101, the Company has presented reconciliations of Shareholders'' equity under Previous GAAP and Ind-AS as at March 31, 2016, and April 1, 2015 and of the Profit after Tax as per Previous GAAP and Total Comprehensive Income under Ind-AS for the year ended March 31, 2016.
Basis of measurement
These Ind-AS Financial Statements have been prepared on a going concern basis using historical cost convention, except for certain investments measured at fair value and defined benefit plans which have been measured at actuarial valuation as required by relevant Ind-AS (refer accounting policies for financial instruments and employee benefits).
Functional and presentation currency
These Ind-AS Financial Statements are prepared in Indian Rupee which is the Company''s functional and presentation currency.
2.1 Summary of significant accounting policies
a) Property, Plant and equipment
Property, Plant and Equipment is stated at cost of acquisition less accumulated depreciation and impairment losses, if any.
Cost comprises the purchase price, duties (net of cenvat), taxes, incidental expenses and erection/ commissioning expenses which are directly attributable in bringing the asset to its working condition for the intended use. The amount of asset related grants are added to the cost of respective asset with a corresponding recognition of deferred income in respect of Government grant(also refer accounting policy on Government grants).
Subsequent expenditure related to an item of property, plant & equipment is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing property plant and equipment, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.
Gains or losses arising from de-recognition of property, plant & equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
The Company identifies and determines cost of each component of an asset separately, if the component has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the useful life of the principal asset.
Depreciation and useful lives
Depreciation on items of Property, Plant & Equipment is calculated on a straight-line basis using the rates arrived at based on the useful lives estimated by the management. The identified components of an asset are depreciated separately over their useful lives; the remaining components are depreciated over the life of the principle asset.
The Company has used the following useful economic lives to provide depreciation on its property, plant & equipment.
The useful economic life of buildings and plant and equipment as estimated by the management, is supported by independent assessment by professionals, are lower than those indicated in Schedule II to the Companies Act, 2013.The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
(b) Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any.
The Company''s intangible assets constitutes software which has finite useful economic lives and these are amortized on a straight line basis, over their useful life of 3 years. The amortization period and the amortization method are reviewed at the end of each reporting period.
(c) Impairment of property, plant and equipment and intangible assets
The carrying amounts of assets are reviewed at each balance sheet date to determine if there is any indication of impairment based on external or internal factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount which represents the greater of the net selling price of assets and their ''value in use''. The estimated future cash flows are discounted to their present value using pre-tax discount rates and risks specific to the asset.
(d) Government Grants
Government grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. Asset related Government grants are treated as deferred income and released to the statement of profit and loss over the expected useful lives of the assets concerned.
(e) Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable, net of discounts, volume rebates, sales taxes and other indirect taxes, excluding excise duty. Excise duty is a liability of the manufacturer which forms part of the cost of production, irrespective of whether the goods are sold or not. Since the recovery of excise duty flows to Company on its own account, revenue includes excise duty.
However, sales tax/ value added tax (VAT) are not received by the Company on its own account; rather, these are taxes collected on sales or value added to the commodity, by the seller, on behalf of the Government. Similarly, the Company collects service tax on rendering of services, on behalf of the Government and therefore, it is not an economic benefit flowing to the Company. Hence, these are excluded from revenue.
Sale of Goods
Revenue from sale of goods is recognized when all the significant risks and rewards of ownership of the goods have passed to the buyer, which generally coincides with delivery to the customers.
Income from Services
Revenue from agency commission and maintenance and service contracts are recognized pro-rata over the period of the contract as and when services are rendered, in terms of the relevant contracts.
Export Incentive Income
Export incentives are recognized when the right to receive such incentives as per the applicable terms is established, in respect of the exports made and when there is no significant uncertainty regarding the ultimate realization / utilization of such incentives.
Dividends
Revenue for dividend income is recognized when the right to receive payment is established by the reporting date.
Interest income
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial liability or a financial asset to their gross carrying amount.
Interest and Dividend income are included under the head "other income" in the Statement of Profit and Loss.
f) Foreign Currency Translations
In the financial statements of the Company, transactions in foreign currencies are translated into the functional currency at the exchange rates ruling at the date of the transaction. Foreign currency monetary items are translated into the functional currency at exchange rates prevailing on the reporting date. Exchange differences arising on settlement or translation of monetary items are recognized in statement of profit and loss.
g) Inventories
Inventories are valued at the lower of cost and net realizable value.
h) Employee benefits
(A) Short-term employee benefits
Employee benefits payable wholly within twelve months of receiving employee services are classified as short-term employee benefits. These benefits include salaries and wages, bonus and ex-gratia. The undiscounted amount of short-term employee benefits to be paid in exchange for employee services is recognized as an expense as the related service is rendered by employees.
(B) Post-employment benefits
The Company operates the following post-employment schemes:
i) Gratuity is administered through an approved benefit fund. Gratuity liability is defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method done at the end of each financial year.
ii) The liability on account of long term compensated absences and death benefit scheme due to the employees are provided for on the basis of an actuarial valuation on projected unit credit method at the end of each financial year.
iii) Retirement benefits in the form of Provident Fund and Superannuation / Pension Schemes are charged to the statement of profit & loss of the year when an employee renders the related service. Interest shortfall, if any, on Provident Fund, which is managed through a private trust, is provided for based on year-end actuarial valuation on projected unit credit method.
iv) Re-measurements, comprising of actuarial gains and losses excluding amounts included in net interest on the net defined benefit liability and the return on plan assets, are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through Other Comprehensive Income in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognizes the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
a) Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non routine settlements; and
b) Net interest expense or income
v) The long-term and short term classification of gratuity, death benefit scheme and provident fund liabilities is based on the actuarial valuations. The obligation for compensated absences are classified as current liabilities in the balance sheet as the Company does not have an unconditional legal and contractual right to defer settlement for a period beyond twelve months after the reporting date.
i) Leases
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease. All other leases are operating lease.
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement. For arrangements entered into prior to 1 April 2015, the Company has determined whether the arrangement contains lease on the basis of facts and circumstances existing on the date of transition.
Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term, unless the payments are structured to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases.
j) Taxes
Current income tax
Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with Indian Income Tax Act. Management periodically evaluates positions taken in the tax returns with vis-a-vis position taken in books of account which are subject to interpretation and creates provisions where appropriate.
Deferred tax
Deferred tax is recognized on temporary differences between the tax bases and accounting bases of assets and liabilities at the tax rates and laws that have been enacted or substantively enacted at the Balance Sheet date.
Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilized. The carrying amount of deferred tax assets is reviewed at each Balance Sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
For items recognized in OCI or equity, deferred/ current tax is also recognized in OCI or equity.
k) Provisions
A provision is recognized when an enterprise has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made.
If the effect of time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used the increase in the provision due to the passage of time is recognized as a finance cost.
I) Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
m) Earnings Per Share
Basic Earnings per share is calculated by dividing the net profit or loss before OCI for the year by the weighted average number of equity shares outstanding during the year. Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
n) Segment Reporting
The Company is in the business of manufacturing, trading and providing services for Anti-friction bearings and mechanical power transmission products for mobile (automobile & railways) and process industries. The Company reviews its performance with reference to the above industry sectors. As per Ind-AS 108: Operating Segments, due to similar nature of products, production process and distribution process these have been aggregated as single operating segment of anti-friction bearings and mechanical power transmission products.
o) Cash Flow Statement
Cash flows are reported using indirect method as set out in Ind AS -7 "Statement of Cash Flows", whereby profit/ (loss) before tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
p) Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value measured on initial recognition of financial asset or financial liability.
Cash & Cash Equivalents
Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value. For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above.
Financial assets at amortized cost
Financial assets are subsequently measured at amortized cost if they are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at fair value through profit or loss
Financial assets comprising investments are measured at fair value through profit or loss.
Impairment of financial assets
In accordance with Ind AS 109: Financial Instruments, the Company recognizes impairment loss allowance on trade receivables based on historically observed default rates. Impairment loss allowance recognized during the year is charged to Statement of Profit and Loss.
Financial liabilities
Financial liabilities are measured at amortized cost using the effective interest method.
Offsetting of financial instruments
The Company offsets a financial asset and a financial liability when it currently has a legally enforceable right to set off the recognized amounts and the company intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
q) Standards issued but not yet effective
In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind-AS 7, ''Statement of cash flows''. These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS-7, ''Statement of cash flows''. The amendments are applicable from April 1, 2017.
Amendment to Ind-AS 7:
The amendment to Ind-AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.
The Company is evaluating the requirements of the amendment and their effect on the financial statements.
Mar 31, 2015
(i) Basis of Preparation
The financial statements of the company have been prepared in
accordance with the generally accepted accounting principles in India
(Indian GAAP). The company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under section 133 of the Companies Act 2013, read together with
paragraph 7 of the Companies (Accounts) Rules 2014. The financial
statements have been prepared on an accrual basis and under the
historical cost convention.
The accounting policies adopted in the preparation of financial
statements are consistent with those of the previous year except for
the change in accounting policy explained below.
Change in accounting policy
Depreciation on fixed assets
Till the year ended 31 March 2014, Schedule XIV to the Companies Act,
1956, prescribed requirements concerning depreciation of fixed assets.
From the current year, Schedule XIV has been replaced by Schedule II to
the Companies Act, 2013. The applicability of Schedule II has resulted
in the following changes related to depreciation of fixed assets.
Unless stated otherwise, the impact mentioned for the current year is
likely to hold good for future years also.
(a) Useful lives/ depreciation rates
Till the year ended 31 March 2014, depreciation rates prescribed under
Schedule XIV were treated as minimum rates and the company was not
allowed to charge depreciation at lower rates even if such lower rates
were justified by the estimated useful life of the asset. Schedule II
to the Companies Act 2013 prescribes useful lives for fixed assets
which, in many cases, are different from lives prescribed under the
erstwhile Schedule XIV However, Schedule II allows companies to use
higher/ lower useful lives and residual values if such useful lives and
residual values can be technically supported and justification for
difference is disclosed in the financial statements.
Considering the applicability of Schedule II, the management has
re-estimated useful lives and residual values of all its fixed assets.
The management believes that depreciation rates currently used fairly
reflect its estimate of the useful lives and residual values of fixed
assets.
Had the company continued its earlier policy of charging depreciation
based on earlier useful lives / lives determined by Schedule XIV of the
Companies Act, 1956 rates as the case may be, profits for the current
year would have been lower by Rs.7,544,819/-
(b) Depreciation on assets costing less than Rs. 5,000/-
Till year ended 31 March 2014, to comply with the requirements of
Schedule XIV to the Companies Act, 1956, the company was charging 100%
depreciation on assets costing less than Rs.5,000/- in the year of
purchase. However, Schedule II to the Companies Act 2013, applicable
from the current year, does not recognize such practice. Hence, to
comply with the requirement of Schedule II to the Companies Act, 2013,
the company has changed its accounting policy for depreciations of
assets costing less than Rs.5,000/-. As per the revised policy, the
company is depreciating such assets over their useful life as assessed
by the management. The management has decided to apply the revised
accounting policy prospectively from accounting periods commencing on
or after 1 April 2014.
The change in accounting for depreciation of assets costing less than
Rs. 5,000/- did not have any material impact on financial statements of
the company for the current year.
(ii) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon management's best
knowledge of current events and actions, actual results could differ
from these estimates.
(iii) Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the company and the revenue can be
reliably measured.
Sale of Goods
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership of the goods have passed to the buyer, which
generally coincides with delivery to the customers. The company
collects sales taxes and value added taxes (VAT) on behalf of the
government and, therefore, these are not economic benefits flowing to
the company. Hence, they are excluded from revenue. Excise Duty
deducted from turnover (gross) is the amount that is included in the
amount of turnover (gross) and not the entire amount of liability
arisen during the year.
Income from Services
Revenue from agency commission and maintenance and service contracts
are recognized pro-rata over the period of the contract as and when
services are rendered. The company collects service tax on behalf of
the government and, therefore, it is not an economic benefit flowing to
the company. Hence, it is excluded from revenue.
Export Incentive Income
Export incentives are recognized when the right to receive such
incentives as per the applicable terms is established, in respect of
the exports made and when there is no significant uncertainty regarding
the ultimate realization / utilization of such incentives.
Dividends
Revenue for dividend income is recognized when the right to receive
payment is established by the reporting date.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
Statement of Profit and Loss.
(iv) Tangible and Intangible Assets
Tangible Assets are stated at cost of acquisition less accumulated
depreciation and impairment loss (if any). Cost of acquisition includes
the purchase price, duties (net of Cenvat), taxes, incidental expenses
and erection / commissioning expenses which are directly attributable
in bringing the asset to its working condition for the intended use.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from de-recognition of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is de-recognized.
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the Statement of Profit and Loss in the
year in which the expenditure is incurred.
(v) Cash & Cash Equivalents
Cash and cash equivalents for the purpose of cash flow statement
comprise cash at bank and in hand, cheques in hand, remittances in
transit and short-term investments with an original maturity of three
months or less.
(vi) Depreciation/ Amortization
Depreciation on fixed assets is calculated on a straight-line basis
using the rates arrived at based on the useful lives estimated by the
management. The company has used the following rates to provide
depreciation on its fixed assets.
(vii) Foreign Currency Translations
(a) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(b) Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non- monetary items which are
carried in terms of historical cost denominated in a foreign currency
are reported using the exchange rate at the date of the transaction;
and non-monetary items which are carried at fair value or other similar
valuation denominated in a foreign currency are reported using the
exchange rates that existed when the values were determined.
(c) Exchange differences
All other exchange differences are recognized as income or as expenses
in the period in which they arise.
(viii) Inventories
Inventories are valued as follows :
Raw materials, components, stores and spares
Lower of cost and net realizable value. However, materials and other
items held for use in the production of inventories are not written
down below cost if the finished products in which they will be
incorporated are expected to be sold at or above cost. Cost is
determined on a weighted average basis.
Work-in-progress and finished goods
Lower of cost and net realizable value. Cost includes direct materials
and labour and a proportion of manufacturing overheads based on normal
operating capacity. Cost of finished goods includes excise duty. Cost
is determined on a weighted average basis.
Trading goods
Lower of cost and net realizable value. Cost includes cost of purchase
and other costs incurred in bringing the inventories to their present
location and condition. Cost is determined on a weighted average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
Excise Duty is accounted for at the point of manufacture of goods and
accordingly, is considered for valuation of finished goods stock lying
at the manufacturing locations as on the balance sheet date.
(ix) Retirement and other Employees Benefits
a) Gratuity is administered through an approved benefit fund. Gratuity
liability is defined benefit obligation and is provided for on the
basis of an actuarial valuation on projected unit credit method made at
the end of each financial year.
b) The liability on account of long term compensated absences and death
benefit scheme due to the employees are provided for on the basis of an
actuarial valuation on projected unit credit method at the end of each
financial year.
c) Retirement benefits in the form of Provident Fund and Superannuation
/ Pension Schemes are charged to the statement of profit & loss of the
year when an employee renders the related service. Interest shortfall,
if any, on Provident Fund, which is managed through a private trust,
are provided for based on year-end actuarial valuation on projected
unit credit method.
d) Actuarial gains/losses are immediately taken to the Statement of
Profit and Loss and are not deferred.
e) The long-term and short term classification of gratuity, death
benefit scheme, provident fund and compensated absence liabilities is
based on the actuarial valuations.
(x) Leases
Assets taken on lease
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Statement of Profit and Loss on a straight- line basis over the
lease term.
Assets given on lease
Leases in which the company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income is recognized in the Statement of Profit and
Loss on a straight-line basis over the lease term. Costs, including
depreciation are recognized as an expense in the Statement of Profit
and Loss. An initial direct cost such as legal and professional cost
etc.are recognized immediately in the Statement of Profit and Loss.
(xi) Income Taxes
Tax expense comprises current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act, 1961 enacted in India. The
tax rates and tax laws used to compute the amount are those that are
enacted or substantively enacted, at the reporting date.Current income
tax relating to items recognized directly in equity is recognized in
equity and not in the statement of profit and loss.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. Deferred tax
liabilities are recognized for all taxable timing differences. Deferred
tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. In situations
where the company has unabsorbed depreciation or carry forward tax
losses, all deferred tax assets are recognized only if there is virtual
certainty supported by convincing evidence that they can be realized
against future taxable profits. The carrying amount of deferred tax
assets are reviewed at each balance sheet date. The company writes-down
the carrying amount of a deferred tax asset to the extent that it is no
longer reasonably certain that sufficient future taxable income will be
available against which deferred tax asset can be realized. Any such
write-down is reversed to the extent that it becomes reasonably certain
that sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
(xii) Investments
Investments that are readily realizable and intended to be held for not
more than a year from the date on which such investments are made, are
classified as current Investments. All other investments are classified
as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.On disposal of an investment, the
difference between its carrying amount and net disposal proceeds is
charged or credited to the Statement of Profit and Loss.
(xiii) Borrowing Costs
a) Borrowing cost includes interest and amortization of ancillary costs
incurred in connection with the arrangement of borrowings.
b) Borrowing costs that are directly attributable to the acquisition /
construction or production of a qualifying asset are capitalized as
part of the cost of that asset till the time it is ready to put to use.
c) All other borrowing costs are recognized as expenditure during the
period in which these are incurred.
(xiv) Provisions
A provision is recognized when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
(xv) Contingent Liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The company does not
recognize a contingent liability but discloses its existence in the
financial statements.
(xvi) Impairment
a) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the assets net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of
money and risks specific to the asset. In determining net selling
price, recent market transactions are taken into account, if available.
If no such transactions can be identified, an appropriate valuation
model is used.
b) After impairment, depreciation is provided on the revised carrying
amount of the assets over its remaining useful life.
c) A previously recognized impairment loss is increased or reversed
depending on changes in circumstances. However the carrying value after
reversal is not increased beyond the carrying value that would have
prevailed by charging usual depreciation if there was no impairment.
(xvii) Earnings Per Share
Basic Earnings per share is calculated by dividing the net profit for
the year attributable to equity shareholders by the weighted average
number of equity shares outstanding during the year.Partly paid equity
shares are treated as a fraction of an equity share to the extent that
they are entitled to participate in dividends relative to a fully paid
equity share during the reporting period.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
(xviii) Segment Reporting Policies Identification of segments:
The Company's business includes manufacture and sale of bearings and
related components and providing services in connection with or
incidental to such sales.
The Company also provides repair and maintenance services of industrial
gear boxes.
There is only reportable business segment which is also the primary
reportable segment.
Secondary reportable segments are based on geographical location of
customers. The geographical segments have been disclosed based on
revenues within India and outside India.
Allocation of common costs:
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Segment Accounting Policies:
The company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the company as a whole.
(xix) As permitted by the Guidance Note on the Revised Schedule VI to
the erstwhile Companies Act, 1956, the Company has elected to present
earnings before interest, tax, depreciation and amortisation (EBITDA)
as a separate line item on the face of the Statement of Profit and
Loss. In its measurement, the Company does not include depreciation and
amortisation expense, finance costs and tax expense.
Notes:
*(i) Calls in arrears have been computed on the basis of information
certified by the Registrar & Share Transfer Agent of the Company.
(ii) No Equity shares have been allotted during the year ended March
31,2015 out of 15,150 shares of Rs. 10/- each kept in abeyance as at
31st March, 1998.
Mar 31, 2014
1. CORPORATE INFORMATION
Timken India Limited (''the Company'') was incorporated on 15th June
1987. The Company is primarily into manufacture and distribution of
tapered roller bearings, components and accessories for the automotive
sector and the railway industry. It also provides maintenance contract
services and refurbishment services. The Company has also commissioned
a new gear box repairing facility at Raipur where it provides repair
and maintenance of industrial gear boxes.
2. SIGNIFICANT ACCOUNTING POLICIES
(i) Basis of Preparation
The financial statements of the company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP). The company has prepared these financial statements to
comply in all material respects with the Accounting Standards notified
under the Companies Act, 1956, read with General Circular 8/2014 dated
4 April 2014 issued by the Ministry of Corporate Affairs. The financial
statements have been prepared on an accrual basis and under the
historical cost convention.
The accounting policies adopted in the preparation of financial
statements are consistent with those of the previous year.
(ii) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires management to make judgments, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based upon
management''s best knowledge of current events and actions, actual
results could differ from these estimates.
(iii) Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the company and the revenue can be
reliably measured.
Sale of Goods
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership of the goods have passed to the buyer, which
generally coincides with delivery to the customers. The company
collects sales taxes and value added taxes (VAT) on behalf of the
government and, therefore, these are not economic benefits flowing to
the company. Hence, they are excluded from revenue. Excise Duty
deducted from turnover (gross) is the amount that is included in the
amount of turnover (gross) and not the entire amount of liability
arisen during the year.
Income from Services
Revenue from agency commission and maintenance and service contracts
are recognized as and when services are rendered. The company collects
service tax on behalf of the government and, therefore, it is not an
economic benefit flowing to the company. Hence, it is excluded from
revenue.
Export incentives are recognized when the right to receive such
incentives as per the applicable terms is established, in respect of
the exports made and when there is no significant uncertainty regarding
the ultimate realization / utilization of such incentives.
Revenue for dividend income is recognized when the right to receive
payment is established by the balance sheet date.
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
Statement of Profit and Loss.
(iv) Tangible and Intangible Assets
Tangible Assets are stated at cost of acquisition less accumulated
depreciation and impairment loss (if any). Cost of acquisition includes
the purchase price, duties (net of Cenvat), taxes, incidental expenses
and erection / commissioning expenses which are directly attributable
in bringing the asset to its working condition for the intended use.
Borrowing costs relating to acquisition of fixed assets which takes
substantial period of time to get ready for its intended use are also
included to the extent they relate to the period till such assets are
ready to be put to use.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the Statement of Profit and Loss in the
year in which the expenditure is incurred.
(v) Cash & Cash Equivalents
Cash and cash equivalents for the purpose of cash flow statement
comprise cash at bank, in hand, cheques in hand, remittances in transit
and short-term investments with an original maturity of three months or
less.
Additions / deletions during the year are depreciated pro-rata from the
date of such addition / deletion except assets costing below Rs.5,000
which are fully depreciated in the year they are put to use. Extra
shift depreciation is calculated on actual shift basis in respect of
each operating department.
Computer software is amortized in a straight line basis over a period
of three years. The amortization period and the amortization method are
reviewed at least at each financial year end.
(vii) Foreign Currency Translations
(a) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(b) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(c) Exchange differences
All other exchange differences are recognized as income or as expenses
in the period in which they arise.
Excise Duty is accounted for at the point of manufacture of goods and
accordingly, is considered for valuation of finished goods stock lying
at the manufacturing locations as on the balance sheet date.
(ix) Retirement Benefits
a) Gratuity is administered through an approved benefit fund. Gratuity
liability is defined benefit obligation and is provided for on the
basis of an actuarial valuation on projected unit credit method made at
the end of each financial year.
b) The liability on account of long term compensated absences and death
benefit scheme due to the employees are provided for on the basis of an
actuarial valuation on projected unit credit method at the end of each
financial year.
c) Retirement benefits in the form of Provident Fund and Superannuation
/ Pension Schemes are charged to the statement of profit & loss of the
year when an employee renders the related service. Interest shortfall,
if any, on Provident Fund, which is managed through a private trust,
are provided for based on year-end actuarial valuation on projected
unit credit method.
d) Actuarial gains / losses are immediately taken to the Statement of
Profit and Loss and are not deferred.
e) The long-term and short term classification of gratuity, death
benefit scheme, provident fund and compensated absence liabilities is
based on the actuarial valuations.
(x) Leases
Assets taken on lease
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Statement of Profit and Loss on a straight- line basis over the
lease term.
Assets given on lease
Leases in which the company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income is recognized in the Statement of Profit and
Loss on a straight-line basis over the lease term. Costs, including
depreciation are recognized as an expense in the Statement of Profit
and Loss. An initial direct cost such as legal and professional cost is
recognized immediately in the Statement of Profit and Loss.
(xi) Income Taxes
Tax expense comprises current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act, 1961 enacted in India. The
tax rates and tax laws used to compute the amount are those that are
enacted or substantively enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. Deferred tax
liabilities are recognized for all taxable timing differences. Deferred
tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. The carrying
amount of deferred tax assets are reviewed at each balance sheet date.
The company writes-down the carrying amount of a deferred tax asset to
the extent that it is no longer reasonably certain that sufficient
future taxable income will be available against which deferred tax
asset can be realized. Any such write-down is reversed to the extent
that it becomes reasonably certain that sufficient future taxable
income will be available.
(xii) Investments
Investments that are readily realizable and intended to be held for not
more than a year from the date on which such investments are made, are
classified as current Investments. All other investments are classified
as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments. On disposal of an investment, the
difference between its carrying amount and net disposal proceeds is
charged or credited to the Statement of Profit and Loss.
(xiii) Borrowing Costs
a) Borrowing cost includes interest and amortization of ancillary costs
incurred in connection with the arrangement of borrowings.
b) Borrowing costs that are directly attributable to the acquisition /
construction of a qualifying asset are capitalized as part of the cost
of that asset till the time it is ready to put to use.
c) All other borrowing costs are recognized as expenditure during the
period in which these are incurred.
(xiv) Provisions
A provision is recognized when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
(xv) Contingent Liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The company does not
recognize a contingent liability but discloses its existence in the
financial statements.
(xvi) Impairment
a) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the assets net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of
money and risks specific to the asset.
b) After impairment, depreciation is provided on the revised carrying
amount of the assets over its remaining useful life.
c) A previously recognized impairment loss is increased or reversed
depending on changes in circumstances. However the carrying value after
reversal is not increased beyond the carrying value that would have
prevailed by charging usual depreciation if there was no impairment.
(xvii) Earnings Per Share
Basic Earnings per share is calculated by dividing the net profit for
the year attributable to equity shareholders by the weighted average
number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
(xviii) Segment Reporting Policies
Identification of segments:
The Company''s business includes manufacture and sale of bearings and
related components and providing services in connection with or
incidental to such sales. This is the only reportable business segment
which is also the primary reportable segment. The Company has also
commissioned a new gear box repairing facility at Raipur where it
provides repair and maintenance services of industrial gear boxes.
Secondary reportable segments are based on geographical location of
customers. The geographical segments have been disclosed based on
revenues within India and outside India.
Allocation of common costs:
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Segment Policies:
The company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the company as a whole.
(xix) As permitted by the Guidance Note on the Revised Schedule VI to
the Companies Act, 1956, the Company has elected to present earnings
before interest, tax, depreciation and amortisation (EBITDA) as a
separate line item on the face of the Statement of Profit and Loss. In
its measurement, the Company does not include depreciation and
amortisation expense, finance costs and tax expense.
b Terms/rights attached to equity shares
The Company has only one class of equity shares having a par value of
Rs. 10 per share. Each holder of equity shares is entitled to one vote
per share.
The Company declares and pays dividends in Indian rupees. The dividend
proposed by Board of Directors is subject to the approval of the
shareholders in the ensuing Annual General Meeting.
The Company has paid, subject to approval of the shareholders at the
next Annual General Meeting, interim dividend of Rs.6.5 (31 March 2013
-final dividend of Rs.2/- ) per equity share of Rs.10 each fully paid.
This dividend was paid to all the eligible shareholders whose names
appeared on the Register of Members of the Company as on November 21,
2013 (being the record date fixed for the purpose) on November 29,
2013.
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive remaining assets of the Company,
after distribution of all preferential amounts. The distribution will
be in proportion to the number of equity shares held by the
shareholders.
a) During the year, the company has issued 4,265,134 equity shares of
Rs.10/- each through an Institutional Placement Programme (IPP) to
qualified institutional buyers at a premium of Rs.110/- per share to
generate funds for long term capital requirements, working capital
requirements and general corporate purposes. The total sum received
aggregated Rs.511,816,080 (including Rs.469,164,740 towards securities
premium).
b) During the year, the Company has utilised funds amounting to
Rs.300,161,149 towards procurement of fixed assets. Pending full
utilization of funds for the purpose for which these funds have been
raised, the unspent funds have been temporarily parked in debt based
schemes offered by various mutual funds after adjusting share issue
expenses of Rs.33,640,394 (including auditors remuneration of
Rs.5,485,000).
Mar 31, 2013
(i) Basis of Preparation
The financial statements of the company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP). The company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under the Companies (Accounting Standards) Rules, 2006, (as amended)
and the relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on an accrual basis and under the
historical cost convention.
The accounting policies adopted in the preparation of financial
statements are consistent with those of the previous period, except for
the change in accounting policy explained below.
(ii) Change in Accounting Policy
Presentation and disclosure of financial statements
During the year ended 31 March 2013, the revised Schedule VI notified
under the Companies Act 1956, has become applicable to the Company, for
preparation and presentation of its financial statements. The adoption
of revised Schedule VI does not impact recognition and measurement
principles followed for preparation of financial statements. However,
it has significant impact on presentation and disclosures made in the
financial statements. The Company has also reclassified the previous
period figures in accordance with the requirements applicable in the
current year.
(iii) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires management to make judgments, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based upon
management''s best knowledge of current events and actions, actual
results could differ from these estimates.
(iv) Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the company and the revenue can be
reliably measured.
Sale of Goods
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership of the goods have passed to the buyer, which
generally coincides with delivery to the customers. Excise Duty
deducted from turnover (gross) is the amount that is included in the
amount of turnover (gross) and not the entire amount of liability
arisen during the year.
Income from Services
Revenue from agency commission and maintenance and service contracts
are recognized as and when services are rendered.
Export incentives are recognized when the right to receive such
incentives as per the applicable terms is established, in respect of
the exports made and when there is no significant uncertainty regarding
the ultimate realization / utilization of such incentives.
Revenue for dividend income is recognized when the right to receive
payment is established by the balance sheet date.
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
(v) Tangible and Intangible Assets
Tangible Assets are stated at cost of acquisition less accumulated
depreciation and impairment loss (if any). Cost of acquisition includes
duties (net of Cenvat), taxes, incidental expenses and erection /
commissioning expenses. Borrowing costs relating to acquisition of
fixed assets which takes substantial period of time to get ready for
its intended use are also included to the extent they relate to the
period till such assets are ready to be put to use.
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
(vi) Cash & Cash Equivalents
Cash and cash equivalents for the purpose of cash flow statement
comprise cash at bank, in hand, cheques in hand, remittances in transit
and short-term investments with an original maturity of three months or
less.
(vii) Depreciation/ Amortization
Depreciation / amortization is provided under straight line method as
per the useful life of the assets estimated by the management, or at
the rates prescribed under Schedule XIV of the Companies Act, 1956,
whichever is higher.
Additions / deletions during the year are depreciated pro-rata from the
date of such addition / deletion except assets costing below Rs. 5000
which are fully depreciated in the year they are put to use. Extra
shift depreciation is calculated on actual shift basis in respect of
each operating department.
Computer software is amortised in a straight line basis over a period
of three years.
(viii) Foreign Currency Translations
(a) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(b) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(ix) Inventories
Inventories are valued as follows :
Raw materials, components, stores and spares Lower of cost and net
realizable value. However, materials and other items held for use in
the production of inventories are not written down below cost if the
finished products in which they will be incorporated are expected to be
sold at or above cost. Cost is determined on a weighted average basis.
Work-in-progress and finished goods Lower of cost and net realizable
value. Cost includes direct materials and labour and a proportion of
manufacturing overheads based on normal operating capacity. Cost of
finished goods includes excise duty.
Cost is determined on a weighted average basis.
Trading goods Lower of cost and net realizable value. Cost includes
cost of purchase and other costs incurred in bringing the inventories
to their present location and condition. Cost is determined on a
weighted average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
Excise Duty is accounted for at the point of manufacture of goods and
accordingly, is considered for valuation of finished goods stock lying
at the manufacturing locations as on the balance sheet date.
(x) Retirement Benefits
a) Gratuity is administered through an approved benefit fund. Gratuity
liability is defined benefit obligation and is provided for on the
basis of an actuarial valuation on projected unit credit method made at
the end of each financial year.
b) The liability on account of long term compensated absences and death
benefit scheme due to the employees are provided for on the basis of an
actuarial valuation on projected unit credit method at the end of each
financial year.
c) Retirement benefits in the form of Provident Fund and Superannuation
/ Pension Schemes are charged to the statement of profit & loss of the
year when the contribution to the respective funds are accrued.
Interest shortfall, if any, on Provident Fund, which is managed through
a private trust, are provided for based on year-end actuarial valuation
on projected unit credit method.
d) Actuarial gains/losses are immediately taken to the statement of
profit and loss and are not deferred.
e) The long-term and short term classification of gratuity, death
benefit scheme, provident fund and compensated absence liabilities is
based on the actuarial valuations.
(xi) Leases
Assets taken on lease
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Statement of Profit and Loss on a straight-line basis over the
lease term.
Assets given on lease
Leases in which the company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income is recognized in the statement of profit and
loss on a straight-line basis over the lease term. Costs, including
depreciation are recognized as an expense in the Statement of Profit
and Loss. An initial direct cost such as legal and professional cost is
recognized immediately in the statement of profit and loss.
(xii) Income Taxes
Tax expense comprises current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act, 1961 enacted in India.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. Deferred tax
liabilities are recognized for all taxable timing differences. Deferred
tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. The carrying
amount of deferred tax assets are reviewed at each balance sheet date.
The company writes-down the carrying amount of a deferred tax asset to
the extent that it is no longer reasonably certain that sufficient
future taxable income will be available against which deferred tax
asset can be realized. Any such write-down is reversed to the extent
that it becomes reasonably certain that sufficient future taxable
income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
(xiii) Investments
Investments that are readily realizable and intended to be held for not
more than a year from the date on which such investments are made, are
classified as current Investments. All other investments are classified
as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments. On disposal of an investment, the
difference between its carrying amount and net disposal proceeds is
charged or credited to the statement of profit and loss.
(xiv) Borrowing Costs
a) Borrowing cost includes interest and amortization of ancillary costs
incurred in connection with the arrangement of borrowings.
b) Borrowing costs that are directly attributable to the acquisition /
construction of a qualifying asset are capitalized as part of the cost
of that asset till the time it is ready to put to use.
c) All other borrowing costs are recognized as expenditure during the
period in which these are incurred.
(xv) Provisions
A provision is recognized when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
(xvi) Contingent Liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The company does not
recognize a contingent liability but discloses its existence in the
financial statements.
(xvii) Impairment
a) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the assets net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of
money and risks specific to the asset.
b) After impairment, depreciation is provided on the revised carrying
amount of the assets over its remaining useful life.
c) A previously recognized impairment loss is increased or reversed
depending on changes in circumstances. However the carrying value after
reversal is not increased beyond the carrying value that would have
prevailed by charging usual depreciation if there was no impairment.
(xviii) Earnings Per Share
Basic Earnings per share is calculated by dividing the net profit for
the year attributable to equity shareholders by the weighted average
number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
(xix) Segment Reporting Policies Identification of segments:
The Company''s business includes manufacture and sale of bearings and
related components and providing services in connection with or
incidental to such sales. This is the only reportable business segment
which is also the primary reportable segment. Secondary reportable
segments are based on geographical location of customers. The
geographical segments have been disclosed based on revenues within
India and outside India.
Allocation of common costs:
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Segment Policies:
The company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the company as a whole.
(xx) As permitted by the Guidance Note on the Revised Schedule VI to
the Companies Act, 1956, the Company has elected to present earnings
before interest, tax, depreciation and amortisation (EBITDA) as a
separate line item on the face of the statement of profit and loss. In
its measurement, the Company does not include depreciation and
amortisation expense, finance costs and tax expense.
Mar 31, 2012
(i) Nature of Operations
Timken India Limited is into manufacture and distribution of Tapered
Roller Bearings, Components & accessories for the Automotive Sector and
the Railway Industry. It also provides maintenance contract services.
(ii) Basis of Preparation
The financial statements have been prepared to comply in all material
respects with the accounting standards notified by the Companies'
(Accounting Standards) Rules, 2006,(as amended) and the relevant
provisions of the Companies Act, 1956. The financial statements have
been prepared under the historical cost convention on an accrual basis.
The accounting policies are consistent with those used in the previous
year, unless otherwise stated.
(iii) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon management's best
knowledge of current events and actions, actual results could differ
from these estimates.
(iv) Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the company and the revenue can be
reliably measured.
Sale of Goods
Revenue from sale of goods is recognized when the significant risks and
rewards of ownership of the goods have passed to the buyer, which
generally coincides with delivery to the customers. Excise Duty
deducted from turnover (gross) is the amount that is included in the
amount of turnover (gross) and not the entire amount of liability
arisen during the year.
Income from Services
Revenue from Agency Commission and Maintenance and Service Contracts
are recognized as and when services are rendered.
Export Incentives under the Duty Entitlement Pass Book (DEPB) / Duty
drawback scheme are recognized when such incentive accrues upon export
of goods, in applicable cases.
Dividend Income
Revenue for dividend income is recognized when the right to receive
payment is established by the balance sheet date.
(v) Fixed Assets
Fixed Assets are stated at cost of acquisition less accumulated
depreciation and impairment loss (if any). Cost of acquisition includes
duties (net of Cenvat), taxes, incidental expenses, erection /
commissioning expenses. Borrowing costs relating to acquisition of
fixed assets which takes substantial period of time to get ready for
its intended use are also included to the extent they relate to the
period till such assets are ready to be put to use.
(vi) Cash & Cash Equivalents
Cash and cash equivalents for the purpose of cash flow statement
comprise cash at bank, in hand, cheques in hand and short- term
investments with an original maturity of three months or less.
(vii) Depreciation
Depreciation is provided under straight line method as per the useful
lives of the assets estimated by the management, or at the rates
prescribed under Schedule XIV of the Companies Act, 1956, whichever is
higher.
Additions / deletions during the year are depreciated pro-rata from the
date of such addition / deletion except assets costing below Rs. 5000
which are fully depreciated in the year they are put to use. Extra
shift depreciation is calculated on actual shift basis in respect of
each operating department.
(viii) Foreign Currency Translations
(a) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(b) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(c) Exchange Differences
Exchange differences arising on the settlement of monetary items not
covered above, or on reporting such monetary items of company at rates
different from those at which they were initially recorded during the
year, or reported in previous financial statements, are recognized as
income or as expenses in the year in which they arise.
(d) Forward Exchange Contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognised in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognised as income or as expense for the
year.
(ix) Inventories
Inventories are valued as follows :
Raw materials, Lower of cost and net realizable value. However,
materials and other items held for use in the components, production of
inventories are not written down below cost if the finished products in
which they will stores and be incorporated are expected to be sold at
or above cost. Cost is determined on a weighted average spares basis.
Work-in-progress Lower of cost and net realizable value. Cost includes
direct materials and labour and a proportion of and finished
manufacturing overheads based on normal operating capacity. Cost of
finished goods includes goods excise duty. Cost is determined on a
weighted average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
(x) Retirement Benefits
a) Gratuity is administered through an approved benefit fund. Gratuity
liability is defined benefit obligation and is provided for on the
basis of an actuarial valuation on projected unit credit method made at
the end of each financial year.
b) The liability on account of long term compensated absences and death
benefit scheme due to the employees are provided for on the basis of an
actuarial valuation on projected unit credit method at the end of each
financial year.
c) Retirement benefits in the form of Provident Fund and Superannuation
/ Pension Schemes are charged to the Profit & Loss Account of the year
when the contribution to the respective funds are accrued. Interest
shortfall, if any, on Provident Fund are provided for based on year-end
actuarial valuation on projected unit credit method.
d) Actuarial gains/losses are immediately taken to profit and loss
account and are not deferred.
(xi) Excise Duty
Excise Duty is accounted for at the point of manufacture of goods and
accordingly, is considered for valuation of finished goods stock lying
in the manufactu ring locations as on the balance sheet date.
(xii) Leases
Assets taken on Lease
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss Account on a straight-line basis over the lease
term.
Assets given on Lease
Assets subject to operating leases are included in fixed assets. Lease
income is recognized in the profit and loss account on a straight line
basis over the lease term. Costs, including depreciation are recognized
as an expense in the profit and loss account. An initial direct cost
such as legal and professional cost is recognised immediately in the
profit and loss account.
(xiii) Income Taxes
Tax expense comprises current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act, 1961 enacted in India.
Deferred income tax reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. The carrying
amount of deferred tax assets are reviewed at each balance sheet date.
The company writes-down the carrying amount of a deferred tax asset to
the extent that it is no longer reasonably certain that sufficient
future taxable income will be available against which deferred tax
asset can be realized. Any such write-down is reversed to the extent
that it becomes reasonably certain that sufficient future taxable
income will be available.
(xiv) Investments
Investments that are readily realizable and intended to be held for not
more than a year are classified as current Investments. All other
investments are classified as long-term investments.
Current investments are carried at lower of cost or fair market value
determined on an individual investment basis. Long-term investments are
carried at cost. However, provision for diminution in value is made to
recognize a decline other than temporary in the value of long-term
investments.
(xv) Borrowing Costs
a) Borrowing costs that are directly attributable to the acquisition /
construction of a qualifying asset are capitalized as part of the cost
of that asset till the time it is ready to put to use.
b) All other borrowing costs are recognized as expenditure during the
period in which these are incurred. Borrowing costs consist of interest
and other cost that an entity incurs in connection with the borrowing
of funds.
(xvi) Provisions
A provision is recognized when an enterprise has a present obligation
as a result of past events and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted to
their present value and are determined based on best estimate required
to settle the obligation at the balance sheet date. These are reviewed
at each balance sheet date and adjusted to reflect the current best
estimates.
(xvii) Contingent Liabilities
No provision is made for liabilities which are contingent in nature,
unless it is probable that future events will confirm that a liability
is incurred as at the balance sheet date and a reasonable estimate of
the resulting loss can be made. However, all known, material contingent
liabilities are disclosed by way of separate notes.
(xviii) Impairment
a) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the assets net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount
rate that reflects cu rrent market assessments of the time value of
money and risks specific to the asset.
b) After impairment, depreciation is provided on the revised carrying
amount of the assets over its remaining useful life.
c) A previously recognized impairment loss is increased or reversed
depending on changes in circumstances. However the carrying value after
reversal is not increased beyond the carrying value that would have
prevailed by charging usual depreciation if there was no impairment.
(xix) Earnings Per Share
Basic Earnings per share is calculated by dividing the net profit for
the year attributable to equity shareholders by the weighted average
number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
(xx) Segment Reporting Policies Identification of segments:
The Company's business includes manufacture and sale of bearings and
related components and providing services in connection with or
incidental to such sales. This is the only reportable business segment
which is also the primary reportable segment.
Secondary reportable segments are based on geographical location of
customers. The geographical segments have been disclosed based on
revenues within India and outside India.
Allocation of common costs:
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Segment Policies:
The company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the company as a whole.
Dec 31, 2010
(i) Nature of Operations
Timken India Limited is into manufacture and distribution of Tapered
Roller Bearings, Components & accessories for the Automotive Sector and
the Railway Industry. It also provides maintenance contract services.
(ii) Basis of Preparation
The financial statements have been prepared to comply in all material
respects with the accounting standards notified by the Companies
(Accounting Standards) Rules, 2006,(as amended) and the relevant
provisions of the Companies Act, 1956. The financial statements have
been prepared under the historical cost convention on an accrual basis.
The accounting policies are consistent with those used in previous
year.
(iii) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon managements best
knowledge of current events and actions, actual results could differ
from these estimates.
(iv) Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the company and the revenue can be
reliably measured.
Sale of Goods
Revenue from sale of goods is recognized when the significant risks and
rewards of ownership of the goods have passed to the buyer, which
generally coincides with delivery to the customers. Excise Duty
deducted from turnover (gross) is the amount that is included in the
amount of turnover (gross) and not the entire amount of liability
arisen during the year.
Income from Services
Revenue from Agency Commission and Maintenance and Service Contracts
are recognized as and when services are rendered.
Export Incentives under the Duty Entitlement Pass Book (DEPB) scheme
are recognized when such incentive accrues upon export of goods, in
applicable cases.
Revenue for dividend income is recognized when the right to receive
payment is established by the balance sheet date.
(v) Fixed Assets
Fixed Assets are stated at cost of acquisition less accumulated
depreciation and impairment loss (if any). Cost of acquisition includes
duties (net of Cenvat), taxes, incidental expenses, erection /
commissioning expenses. Borrowing costs relating to acquisition of
fixed assets which takes substantial period of time to get ready for
its intended use are also included to the extent they relate to the
period till such assets are ready to be put to use.
(vi) Cash & Cash Equivalents
Cash and cash equivalents in the balance sheet comprise of cash at bank
and in hand, cheques in hand and remittances in transit.
(viii) Foreign Currency Translations
Foreign currency transactions
(a) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(b) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(c) Exchange Differences
Exchange differences arising on the settlement of monetary items not
covered above, or on reporting such monetary items of company at rates
different from those at which they were initially recorded during the
year, or reported in previous financial statements, are recognized as
income or as expenses in the year in which they arise.
(d) Forward Exchange Contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognised in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognised as income or as expense for the
year.
(ix) Inventories
Inventories are valued as follows:
Raw materials, Lower of cost and net realizable value. However,
materials and other items held for use in the components, production of
inventories are not written down below cost if the finished products in
which they will stores and be incorporated are expected to be sold at
or above cost. Cost is determined on a weighted average spares basis.
Work-in-progress Lower of cost and net realizable value. Cost includes
direct materials and labour and a proportion of and finished
manufacturing overheads based on normal operating capacity. Cost of
finished goods includes goods excise duty. Cost is determined on a
weighted average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
(x) Retirement Benefits
a) Gratuity is administered through an approved benefit fund,
contributions to which are made in accordance with year-end actuarial
valuation on projected unit credit method and charged to the Profit &
Loss Account of the relevant period.
The liability on account of unutilised leave and death benefit scheme
due to the employees is charged to the Profit & Loss Account, on the
basis of year-end actuarial valuation on projected unit credit method.
b) Retirement benefits in the form of Provident Fund and Superannuation
/ Pension Schemes are charged to the Profit & Loss Account of the year
when the contribution to the respective funds are accrued. Interest
shortfall, if any, on Provident Fund are provided for based on year-end
actuarial valuation on projected unit credit method.
c) Actuarial gains/losses are immediately taken to profit and loss
account and are not deferred.
(xi) Excise Duty
Excise Duty is accounted for at the point of manufacture of goods and
accordingly, is considered for valuation of finished goods stock lying
in the factory as on the balance sheet date.
(xii) Leases
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss Account on a straight-line basis over the lease
term.
(xiii) Income Taxes
Tax expense comprises current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act, 1961 enacted in India.
Deferred income tax reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. The carrying
amount of deferred tax assets are reviewed at each balance sheet date.
The company writes-down the carrying amount of a deferred tax asset to
the extent that it is no longer reasonably certain that sufficient
future taxable income will be available against which deferred tax
asset can be realized. Any such write-down is reversed to the extent
that it becomes reasonably certain that sufficient future taxable
income will be available.
(xiv) Investments
Investments that are readily realizable and intended to be held for not
more than a year are classified as current Investments. All other
investments are classified as long-term investments.
Current investments are carried at lower of cost or fair market value
determined on an individual investment basis. Long-term investments are
carried at cost. However, provision for diminution in value is made to
recognize a decline other than temporary in the value of long-term
investments.
(xv) Borrowing Costs
a) Borrowing costs that are directly attributable to the acquisition /
construction of a qualifying asset are capitalized as part of the cost
of that asset till the time it is ready to put to use.
b) All other borrowing costs are recognized as expenditure during the
period in which these are incurred. Borrowing costs consist of interest
and other cost that an entity incurs in connection with the borrowing
of funds.
(xvi) Provisions
A provision is recognized when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
(xvii) Contingent Liabilities
No provision is made for liabilities which are contingent in nature,
unless it is probable that future events will confirm that an asset has
been impaired or a liability incurred as at the balance sheet date and
a reasonable estimate of the resulting loss can be made. However, all
known, material contingent liabilities are disclosed by way of separate
notes.
(xviii) Impairment
a) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the assets net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of
money and risks specific to the asset.
b) After impairment, depreciation is provided on the revised carrying
amount of the assets over its remaining useful life.
c) A previously recognized impairment loss is increased or reversed
depending on changes in circumstances. However the carrying value after
reversal is not increased beyond the carrying value that would have
prevailed by charging usual depreciation if there was no impairment.
(xix) Earnings Per Share
Basic Earnings per share is calculated by dividing the net profit for
the year attributable to equity shareholders by the weighted average
number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
(xx) Segment Reporting Policies
Identification of segments:
The Companys business includes manufacture and sale of bearings and
related components and providing services in connection with or
incidental to such sales. This is the only reportable business segment.
Secondary reportable segments are based on geographical location of
customers. The geographical segments have been disclosed based on
revenues within India and outside India.
Allocation of common costs:
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Segment Policies:
The company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the company as a whole.
Dec 31, 2009
(i) Nature of Operations
Timken India Limited is into manufacture and distribution of Tapered
Roller Bearings, Components & accessories for the Automotive Sector and
the Railway Industry. It also provides maintenance contract services.
(ii) Basis of Preparation
The financial statements have been prepared to comply in all material
respects with the accounting standards notified by the Companies
(Accounting Standards) Rules, 2006,(as amended) and the relevant
provisions of the Companies Act, 1956. The financial statements have
been prepared under the historical cost convention on an accrual basis.
The accounting policies are consistent with those used in previous
year.
(iii) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon managements best
knowledge of current events and actions, actual results could differ
from these estimates.
(iv) Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the company and the revenue can be
reliably measured.
Sale of Goods
Revenue from sale of goods including manufactured products is
recognized when the significant risks and rewards of ownership of the
goods have passed to the buyer, which generally coincides with delivery
to the customers. Excise Duty deducted from turnover (gross) is the
amount that is included in the amount of turnover (gross) and not the
entire amount of liability arisen during the year.
Income from Services
Revenue from Agency Commission and Maintenance and Service Contracts
are recognized as and when services are rendered.
Export Incentives under the Duty Entitlement Pass Book (DEPB) scheme
are recognized when such incentive accrues upon export of goods, in
applicable cases.
Revenue for dividend income is recognized when the right to receive
payment is established by the balance sheet date.
(v) Fixed Assets
Fixed Assets are stated at cost of acquisition less accumulated
depreciation and impairment loss (if any). Cost of acquisition includes
duties (net of Cenvat), taxes, incidental expenses, erection /
commissioning expenses. Borrowing costs relating to acquisition of
fixed assets which takes substantial period of time to get ready for
its intended use are also included to the extent they relate to the
period till such assets are ready to be put to use.
(vi) Cash & Cash Equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank
and in hand, cheques in hand, remittances in transit and short-term
investments with an original maturity of three months or less.
(viii) Foreign Currency Translations
Foreign currency transactions
(i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(iii) Exchange Differences
Exchange differences arising on a monetary item that, in substance,
form part of the companys net investment in a nonintegral foreign
operation is accumulated in a foreign currency translation reserve in
the financial statements until the disposal of the net investment, at
which time they are recognised as income or as expenses.
Exchange differences arising on the settlement of monetary items not
covered above, or on reporting such monetary items of company at rates
different from those at which they were initially recorded during the
year, or reported in previous financial statements, are recognized as
income or as expenses in the year in which they arise.
(iv) Forward Exchange Contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognised in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognised as income or as expense for the
year.
(ix) Inventories
Inventories are valued as follows:
Raw materials, components, stores and spares
Lower of cost and net realizable value. However, materials and other
items held for use in the production of inventories are not written
down below cost if the finished products in which they will be
incorporated are expected to be sold at or above cost. Cost is
determined on a weighted average basis.
Work-in-progress and finished goods
Lower of cost and net realizable value. Cost includes direct materials
and labour and a proportion of manufacturing overheads based on normal
operating capacity. Cost of finished goods includes excise duty. Cost
is determined on a weighted average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
(x) Retirement Benefits
a) Gratuity is administered through an approved benefit fund,
contributions to which are made in accordance with year-end actuarial
valuation on projected unit credit method and charged to the Profit &
Loss Account of the relevant period.
The liability on account of unutilised leave and death benefit scheme
due to the employees is charged to the Profit & Loss Account, on the
basis of year-end actuarial valuation on projected unit credit method.
b) Retirement benefits in the form of Provident Fund and Superannuation
/ Pension Schemes are charged to the Profit & Loss Account of the year
when the contribution to the respective funds are accrued. Interest
shortfall, if any, on Provident Fund are provided for based on year-end
actuarial valuation on projected unit credit method.
c) Actuarial gains/losses are immediately taken to profit and loss
account and are not deferred.
(xi) Excise Duty
Excise Duty is accounted for at the point of manufacture of goods and
accordingly, is considered for valuation of finished goods stock lying
in the factory as on the balance sheet date.
(xii) Leases
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased term, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss Account on a straight-line basis over the lease
term.
(xiii) Income Taxes
Tax expense comprises current, deferred and fringe benefit tax. Current
income tax and fringe benefit tax is measured at the amount expected to
be paid to the tax authorities in accordance with the Indian Income Tax
Act, 1961 enacted in India. Deferred income tax reflects the impact of
current year timing differences between taxable income and accounting
income for the year and reversal of timing differences of earlier
years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets and deferred tax liabilities are offset, if a legally
enforceable right exists to set off current tax assets against current
tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on income levied by same governing
taxation laws. Deferred tax assets (including unrecognized deferred tax
assets of earlier years) are recognized only to the extent that there
is reasonable certainty that sufficient future taxable income will be
available against which such deferred tax assets can be realized. The
carrying amount of deferred tax assets are reviewed at each balance
sheet date. The company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain that
sufficient future taxable income will be available against which
deferred tax asset can be realized. Any such write-down is reversed to
the extent that it becomes reasonably certain that sufficient future
taxable income will be available.
(xiv) Investments
Investments that are readily realizable and intended to be held for not
more than a year are classified as current Investments. All other
investments are classified as long-term investments.
Current investments are carried at lower of cost or fair market value
determined on an individual investment basis. Long-term investments are
carried at cost. However, provision for diminution in value is made to
recognize a decline other than temporary in the value of long-term
investments.
(xv) Borrowing Costs
a) Borrowing costs that are directly attributable to the acquisition /
construction of a qualifying asset are capitalized as part of the cost
of that asset till the time it is ready to put to use.
b) All other borrowing costs are recognized as expenditure during the
period in which these are incurred.
(xvi) Provisions
A provision is recognized when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates.
(xvii) Contingent Liabilities
No provision is made for liabilities which are contingent in nature,
unless it is probable that future events will confirm that an asset has
been impaired or a liability incurred as at the balance sheet date and
a reasonable estimate of the resulting loss can be made. However, all
known, material contingent liabilities are disclosed by way of separate
notes.
(xviii) Impairment
a) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the assets net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value at the weighted average
cost of capital.
b) After impairment, depreciation is provided on the revised carrying
amount of the assets over its remaining useful life.
c) A previously recognized impairment loss is increased or reversed
depending on changes in circumstances. However the carrying value after
reversal is not increased beyond the carrying value that would have
prevailed by charging usual depreciation if there was no impairment.
(xix) Earning Per Share
Earning per share is calculated by dividing the net profit for the year
attributable to equity shareholders by the weighted average number of
equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
(xx) Segment Reporting Policies
Identification of segments:
The Companys business includes manufacture and sale of bearings and
related components and providing services in connection with or
incidental to such sales. This is the only reportable business segment.
Secondary reportable segments are based on geographical location of
customers. The geographical segments have been disclosed based on
revenues within India and outside India.
Allocation of common costs:
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Segment Policies:
The company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the company as a whole.
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