Accounting Policies of Titagarh Rail Systems Ltd. Company
Mar 31, 2023
1 Corporate Information
Titagarh Rail Systems Limited (Formerly Titagarh Wagons Limited) (the Company) is a public limited company incorporated and domiciled in India. The registered office of the Company is located at 756, Anandapur, EM. Bypass, Kolkata - 700107 and its manufacturing facilities are located in West Bengal and Rajasthan. The equity shares of the Company are listed on the BSE Limited and the National Stock Exchange of India Limited.
The Company is mainly engaged in the manufacturing and selling of Freight Wagons, Passenger Coaches, Metro Trains, Train Electricals, Steel Castings, Specialised Equipments & Bridges, Ships, etc as detailed under segment information in Note 42. The Company caters to both domestic and export market.
The standalone financial statements were approved and authorised for issue in accordance with the resolution of the Company''s Board of Directors on May 24, 2023.
2 Significant Accounting Policies
This note provides a list of the significant accounting policies adopted in the preparation of the standalone financial statements.
(i) Compliance with Indian Accounting Standards
The standalone financial statements comply in all material respects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the ''Act'') [Companies (Accounting Standards) Rules, 2015] and other provisions of the Act.
(ii) Historical Cost Convention
The standalone financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:
- Certain financial assets and liabilities (including derivative instruments)
- Defined benefits plan- plan assets
- Share based payments
(iii) Current versus Non-current Classification
The Company presents assets and liabilities in the Balance Sheet based on current/non-current classification.
An asset is classified as current when it is:
a) expected to be realised or intended to be sold or consumed in the normal operating cycle,
b) held primarily for the purpose of trading,
c) expected to be realised within twelve months after the reporting period, or
d) cash or cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is classified as current when:
a) it is expected to be settled in the normal operating cycle,
b) it is held primarily for the purpose of trading,
c) it is due to be settled within twelve months after the reporting period, or
d) there is no unconditional right to defer settlement of the liability for at least twelve months after the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as Non-current.
(iv) Rounding of Amounts
All amounts disclosed in the standalone financial statements and notes have been rounded off to the nearest lacs and decimals thereof (Rs. 00,000.00) as per the requirement of Schedule III to the Act, unless otherwise stated.
2.2 Property, Plant and Equipment
All items of property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred. Depreciation Method, Estimated Useful Lives and Residual Values
Depreciation is calculated on pro-rata basis using the straight-line method to allocate their cost, net of their estimated residual value, over their estimated useful lives. The useful lives have been determined based on technical evaluation done by the management''s expert which are different than those specified by Schedule II to Companies Act 2013 in respect of factory buildings / other buildings, plant and equipment and railway sidings, in order to reflect the actual, usage of assets. Each component of an item of property, plant and equipment with a cost that is significant in relation to the cost of that item is depreciated separately if its useful life differs from the other components of the item.
The useful lives of the property, plant and equipment as estimated by the management are as follows:
|
Particulars |
Useful Life |
|
Factory Buildings / Other Buildings |
30 / 35 / 60 / 65 years |
|
Plant and Equipments |
15 / 20 / 30 years |
|
Railway Sidings |
15 / 30 years |
|
Furniture and Fixtures |
10 years |
|
Office Equipments |
5 years |
|
Computers |
8 years |
|
Vehicles |
8 years |
Leasehold land is amortised on straight - line basis over the primary lease period of 99 years or its estimated useful life, whichever is shorter. Leasehold improvement are amortised on straight - line basis over the primary lease period (ranging from 2 to 10 years) or their estimated useful lives, whichever is shorter.
The useful lives, residual values and the method of depreciation of property, plant and equipment are reviewed, and adjusted if appropriate, at the end of each reporting period.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss within ''Other Income''/''Other Expenses''.
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'' and the cost of property, plant and equipment not ready to use are disclosed under ''Capital Work-in-progress''.
Intangible assets have a finite useful life and are stated at cost less accumulated amortisation and accumulated impairment losses, if any.
Computer Software
Computer Software for internal use, which is primarily acquired from third-party vendors is capitalised. Subsequent costs associated with maintaining such software are recognised as expense as incurred. Cost of computer software includes license fees and cost of implementation/system integration services, where applicable.
Brand and Design and Drawings
The Company had acquired the brand name of "Sambre et Meuse" along with all the available designs and drawings for manufacturing of bogies.
Prototype
The Company had developed prototype for tractors which was capitalised.
Amortisation Method and Period
Computer Software and Brand and Design and Drawings are amortised on a pro-rata basis using the straight-line method over its estimated useful life of 5 years.
Prototype are amortised on a pro-rata basis using the straight-line method over its estimated useful life of 10 years (until impaired).
Amortisation method and useful lives are reviewed periodically including at each financial year end.
Research and Development
Research costs are expensed as incurred. Expenditure on development that do not meet the specified criteria under I nd AS 38 on ''Intangible Assets'' are recognised as an expense as incurred.
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Company, is classified as investment property. Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalised to the asset''s carrying amount only when it is probable that future economic benefits associated with expenditure will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.
2.5 Impairment of Non-financial Assets
Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. For the purposes of assessing impairment, assets are compared at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or Company of assets (cash-generating units).
Inventories are stated at the lower of cost and net realisable value. However, material and other items held for use in 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 of inventories comprises cost of purchases and all other costs incurred in bringing the inventories to their present location and condition. Cost of work-in-progress and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost are assigned to individual items of inventory on weighted average basis. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Cost of raw materials and components consumed is a derived figure out of opening stock, closing stock and purchases including adjustment if any during the period.
As a Lessee
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payment:-
a) Fixed payments (including in substance fixed payments) less any lease incentive receivable.
b) Variable lease payment that are based on an index or a rate, initially measured using the index or a rate at the commencement date.
c) Amount expected to be paid by the Company as under residual value guarantees.
d) Exercise price of a purchase option if the Company is reasonably certain to exercise that option.
e) Payment of penalties for terminating the lease, if the lease term reflects the Company exercising that option.
To determine the incremental borrowing rate, the Company:
a) Where possible, use recent third party financing received by the individual lessee as a starting point, adjusted to reflect changes in the financing conditions since third party financing was received
b) use a built up approach that starts with risk free interest rate adjusted for credit risk of leases held by Titagarh Rail Systems Limited (Formerly Titagarh Wagons Limited), which does not have recent third party financing.
Lease payments are allocated between principal and finance cost. The finance cost is charged to Statement profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following :-
i) the amount of the initial measurement of lease liability
ii) any lease payment made at or before the commencement date less any lease incentive received
iii) any initial direct cost and
iv) restoration costs.
Right of use of assets are generally depreciated over the shorter of the asset''s useful life and the lease term on a straight line basis.
Payment associated with short-term leases of equipment and all the leases of low value assets are recognised on a straight line basis as an expenses in the statement of profit and loss. Short term leases are leases with a lease term of less than 12 months or less.
As a Lessor
Lease income from operating leases where the company is a lessor is recognised in income on a straight-line basis over the lease term. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognised as expense over the lease term on the same basis as lease income. The respective leased assets are included in the balance sheet based on their nature. The Company did not need to make any adjustments to the accounting for assets held as lessor as a result of adopting the new leasing standard.
2.8 Investments (other than Investments in Subsidiaries, Associates and Joint Venture) and Other Financial Assets
(i) Classification
The Company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss), and
- those to be measured at amortised cost.
The classification depends on the Company''s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income. The Company reclassifies debt investments when and only when its business model for managing those assets changes.
(ii) Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Debt Instruments
Subsequent measurement of debt instruments depends on the Company''s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:
⢠Amortised Cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt instrument that is subsequently measured at amortised cost is recognised in profit or loss when the asset is derecognised or impaired.
⢠Fair Value through Other Comprehensive Income (FVOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets'' cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in the profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in ''Other Income/Other Expenses''.
⢠Fair Value through Profit or Loss (FVTPL): Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt instrument that is subsequently measured at fair value through profit or loss is recognised in profit or loss and presented net in the Statement of Profit and Loss within ''Other Gain / (Losses)'' in the period in which it arises.
Equity Instruments
The Company subsequently measures all equity investments (other than investments in subsidiaries, associates and joint venture) at fair value. Where the Company''s management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss. Changes in the fair value of financial assets at fair value through profit or loss are recognised in ''Other Gain / (Losses)'' in the Statement of Profit and Loss.
(iii) Impairment of Financial Assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and FVOCI debt instruments, if any. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 45(II) details how the Company determines whether there has been a significant increase in credit risk.
For trade receivables only, the Company applies the simplified approach permitted by Ind AS 109,''Financial Instruments'', which requires expected lifetime losses to be recognised from initial recognition of the receivables.
(iv) Modification of Financial Instruments
The Company if renegotiates or otherwise modifies the contractual cash flows of financial instrument, the Company assesses whether or not the new terms are substantially different to the original terms.
If the terms are substantially different, the original financial instrument is derecognised and recognizes a ''new'' instrument at fair value and recalculates a new effective interest rate for the instrument. Differences in the carrying amount are also recognised in profit or loss as a gain or loss on derecognition.
If the terms are not substantially different, the renegotiation or modification does not result in derecognition, and the management recalculates the gross carrying amount based on the revised cash flows of the financial asset and recognises a modification gain or loss in profit or loss. The new gross carrying amount is recalculated by discounting the modified cash flows at the original effective interest rate.
(v) Derecognition of Financial Assets
A financial asset is derecognised only when
- the Company has transferred the rights to receive cash flows from the financial asset or
- retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised. Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
(vi) Income Recognition Interest Income
Interest income on financial assets at amortised cost is accrued on a time proportion basis using the effective interest rate method and is recognised in the statement of profit and loss as part of other income.
Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for financial assets that subsequently become credit-impaired. For credit impaired financial assets the effective interest rate is applied to the net carrying amount of the financial assets (after deduction of the loss allowance). Dividends
Dividends are recognised in profit or loss only when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the Company, and the amount of the dividend can be measured reliably.
(vii) Fair Value of Financial Instruments
In determining the fair value of financial instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fair value include discounted cash flow analysis and available quoted market prices. All methods of assessing fair value result in general approximation of value, and such value may never actually be realised.
2.9 Investments in Subsidiaries, Associates and Joint Venture
Investments in subsidiaries, associates and joint venture are carried at cost less provision for impairment, if any. Investment in subsidiaries, associates and joint venture are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of investments exceeds its recoverable amount.
Trade receivables are amounts due from customers for goods sold or services rendered in the ordinary course of business.
Trade receivables are recognised initially at the transaction price as they do not contain significant financing components. The Company holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method, less loss allowance.
These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. These are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are removed from the Balance Sheet when the obligation specified in the contract is discharged, cancelled or expired.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of liability for at least 12 months after the reporting period.
2.13 Other Financial Liabilities
Other financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument. Other financial liabilities are initially measured at the fair value and subsequently measured at amortised cost using the effective interest method.
2.14 Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the Balance Sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
2.15 Financial Guarantee Contracts
Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value and subsequently at the higher of the amount determined in accordance with Ind AS 37 and the amount initially recognised less cumulative amortisation, where appropriate.
2.16 Cash and Cash Equivalents
For the purpose of presentation in the Cash Flow Statement, cash and cash equivalents includes cash on hand, deposits held with banks / financial institutions with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the year in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
The Company has applied five step model as per Ind AS 115 ''Revenue from contracts with customers'' to recognise revenue in the financial statements. The Company satisfies a performance obligation and recognises revenue over time, if one of the following criteria is met:
a) The customer simultaneously receives and consumes the benefits provided by the Company''s performance as the Company performs; or
b) The Company''s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or
c) The Company''s performance does not create an asset with an alternative use to the Company and the entity has an
enforceable right to payment for performance completed to date.
For performance obligations where one of the above conditions are not met, revenue is recognised at the point in time at which the performance obligation is satisfied.
Revenue is recognised either at point of time and over a period of time based on various conditions as included in the contracts with customers.
Revenue is measured at transaction price (net of variable consideration, if any). The transaction price is the consideration received or receivable and is reduced by rebates, allowances and taxes and duties collected on behalf of the government. Revenue also includes adjustments made towards liquidated damages, normal product warranty and price variations wherever applicable.
Revenue is recognised in the income statement to the extent that it is probable that the economic benefits will flow to the Company and the revenue and costs, if applicable, can be measured reliably."
Sale of Products
Revenue for sale of products mainly comprises of wagons/locomotive shells and related items, where revenue is recognised at a point in time, when control of the asset is transferred to the customer, which generally occurs on receipts of dispatch memo / inspection certificate from customer as per terms of contract. On receipt of same, the title of goods passes on to the customer basis the laid down criteria under the standard.
Revenue from sale of specialized products
Revenue from specialized products mainly consists of defense related products (i.e Bailey bridge, Shelters etc.), Ship building, Metro Trains, Train Electricals, Mainline electric multiple unit and Electric multiple unit in respect of which revenue is recognised over a period of time as performance obligations are satisfied over time as per criteria laid down under the standard and specified above.
Revenue and costs are recognised by reference to the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs. Profit (contract revenue less contract cost) is recognised when the outcome of the contract can be estimated reliably. When it is probable that the total cost will exceed the total revenue from the contract, the expected loss is recognised immediately. For this purpose, total contract costs are ascertained on the basis of contract costs incurred and cost to completion of contracts which is arrived at by the management based on current technical data, forecast and estimate of net expenditure to be incurred in future including for contingencies etc.
The outcome of a construction contract is considered as estimated reliably when (a) all approvals necessary for commencement of the project have been obtained; (b) the stage of completion of the project reaches reasonable level of development. The stage of completion is determined as a proportion that contract costs incurred for work performed up to the closing date bear to the estimated total costs of respective project. Profit (contract revenue less contract cost) is recognised when the outcome of the contract can be estimated reliably. When it is probable that the total cost will exceed the total revenue from the contract, the expected loss is recognised immediately. For this purpose total contract costs are ascertained on the basis of contract costs incurred and cost to completion of contracts which is arrived at by the management based on current technical data, forecast and estimate of net expenditure to be incurred in future including for contingencies etc. For determining the expected cost to completion of the contracts, cost of steel, labour and other related items are considered at current market price based on fixed cost purchase orders placed or firm commitments received from suppliers / contractors as these purchase orders and future firm commitments are enforceable over the period of the contracts.
When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that is probably recoverable. Contract costs are recognised as expenses in the period in which they are incurred.
When contract costs incurred to date plus recognised profit less recognised losses exceed progress billing, the surplus is shown as unbilled revenue. For contracts where progress billings exceed contract costs incurred to date plus recognised profits less recognised losses, the surplus is shown as liability as advance from customer. Amounts received before the related work is performed are included as a liability as advance from customer. Amounts billed for work performed but not yet paid by customer are included under trade receivables.
Contract assets are recognised when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled revenue when there is unconditional right to receive cash, and only passage of time is required, as per contractual terms.
Contract Liabilities are recognised when there is billing in excess of revenue and advance received from customers. Generally, the Company receives short-term advances from its customers. Using the practical expedient in Ind AS 115, the Company does not adjust the promised amount of consideration for the effects of a significant financing component if it expects, at contract inception, that the period between the transfer of the promised goods or services to the customer and when the customer pays for that goods or services will be one year or less. The Company adjusts the promised amount of
consideration if the contract contains significant financing component.
Sale of Services
Revenue from service contracts are recognised in the accounting period in which the services are rendered. Where the contracts include multiple performance obligations, the transaction price is allocated to each performance obligation based on the standalone selling price and revenue is recognised at point in time on fulfillment of respective performance obligation. In case, the service contracts include one performance obligation revenue is recognised based on the actual service provided to the end of the reporting period as proportion of the total services to be provided. This is determined based on the actual expenditure incurred to the total estimated cost.
Revenue from services rendered is recognised as the services are rendered and is booked based on agreement / arrangements with the concerned parties.
Other Operating Revenues
Export entitlement are recognised when the right to receive credit as per the terms of the schemes is established in respect of the exports made by the Company and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds. Management fees are recognised on an accrual basis as per the terms of the agreement/arrangement with the concerned party.
2.19 Foreign Currency Transactions and Translation
(i) Functional and Presentation Currency
Items included in the standalone financial statements of the Company are measured using the currency of the primary economic environment in which the Company operates (''the functional currency''). The financial statements are presented in Indian Rupee (Rupees or Rs.), which is the Company''s functional and presentation currency.
(ii) Transactions and Balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. At the year-end, monetary assets and liabilities denominated in foreign currencies are restated at the year-end exchange rates. The exchange differences arising from settlement of foreign currency transactions and from the year-end restatement are recognised in profit and loss.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss.
(i) Short-term Employee Benefits
Liabilities for short-term employee benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees'' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled.
(ii) Post-employment Benefits Defined Benefit Plans
The liability recognised in the Balance Sheet in respect of defined benefit plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in ''Employee Benefits Expense'' in the Statement of Profit and Loss. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. These are included in ''Retained Earnings'' in the Statement of Changes in Equity.
Defined Contribution Plans
Contributions under defined contribution plans payable in keeping with the related schemes are recognised as expenses for the period in which the employee has rendered the service.
(iii) Other Long-term Employee Benefits
Long-term compensated absences are provided for based on actuarial valuation, as per projected unit credit method, done at the end of each financial year. Accumulated leave, which is expected to be utilised within the next twelve months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
(iv) Termination Benefits
Termination benefits, in the nature of voluntary retirement benefits, are recognised as expense in the Statement of Profit and Loss if the Company has made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.
Share-based compensation benefits are provided to employees via the Titagarh Rail Systems Limited (Formerly Titagarh Wagons Limited) Employee Stock Option Scheme namely ESOP Scheme 2014.
Employees of the Company receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions).
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model.
That cost is recognised, together with a corresponding increase in Employee Stock Options Outstanding Account in equity, over the period in which the performance and/or service conditions are fulfilled, in Employee Benefit Expense. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company''s best estimate of the number of equity instruments that will ultimately vest. Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Company''s best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences, unused tax credits and to unused tax losses.
The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns 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 tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the standalone financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss). Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences, tax credits and losses.
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 profits will be available to allow all or part of the asset to be utilised.
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 the same taxation authority. Current tax assets and liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity, if any. In this case, the tax is also recognised in other comprehensive income or directly in equity respectively.
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of past events, it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expenses relating to a provision is recognised in the statement of profit and loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risk 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.
Warranties
Provisions for warranty related costs are recognised when the product is sold. Initial recognition is based on historical experience i.e. claims received up to the year end and the management''s estimate of further liability to be incurred in this regard during the warranty period, computed on the basis of past trend of such claims. The initial estimate of warranty related costs is revised annually.
Liquidated Damages
Liquidated damages on supply of materials are provided based on the contractual obligations, deduction made by the customers, as the case may be based on management''s best estimate of the expenditure required to settle the obligations. Litigations, Claims and Contingencies
The management estimates the provisions for pending litigations, claims and demands based on its assessment of probability for these demands crystalising against the Company in due course. Also refer Note 2.24 Onerous Contract
Provision is recognised for the contract, where unavoidable cost of meeting the obligation under the contract exceeds the economic benefits expected to be received. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it.
A disclosure for contingent liabilities is made when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources embodying economic benefits will be required to settle or a reliable estimate of the amount cannot be made.
2.25 Earnings Per Equity Share
(i) Basic Earnings Per Equity Share
Basic earnings per equity share is calculated by dividing:
⢠the profit attributable to owners of the Company
⢠by the weighted average number of equity shares outstanding during the financial year.
(ii) Diluted Earnings Per Equity Share
Diluted earnings per equity share adjusts the figures used in the determination of basic earnings per equity share to take into account:
⢠the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
⢠the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker, being the Board of Directors.
The chief operating decision maker is responsible for allocating resources and assessing performance of the operating segments and has been identified as the Board of Directors of the Company. Refer Note 42 for segment information presented.
Grants from the Government are recognised at there fair value where there is reasonable assurance that the grant will be received and the Company will comply with all attached conditions.
Government grants relating to purchase of property , plant and equipment are included in non current liabilities as deferred income and are credited to statement of profit and loss on straight line basis over the expected lives of related assets and presented within other income.
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.
When items of income and expenses within statement of profit and loss from ordinary activities are of as such size, nature and or incidence that there disclosure is relevant to explain the performance of the enterprise for the period, the nature and amount of such material items are disclosed separately as exceptional items.
A common control business combination, involving entities or businesses in which all the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination and where the control is not transitory, is accounted for using the pooling of interest method.
Other business combinations, involving entities or businesses are accounted for using acquisition method.
Derivatives embedded in a host contract that is an asset within the scope of Ind AS 109 are not separated. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Derivatives embedded in all other host contract are separated only if the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host and are measured at fair value through profit or loss. Embedded derivatives closely related to the host contracts are not separated.
(b) Derivative Instruments
The Company enters into certain derivative contracts to hedge risks which are not designated as hedges. Derivative instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period, with changes included in ''Other Income'' / ''Other Expenses''.
Cash flow hedges that qualify for hedge accounting
The effective portion of the change in the fair value of the derivative is recognised directly in other comprehensive income and in cash flow hedging reserve within equity. The gain or loss relating to the ineffective portion is recognised immediately in the statement of profit and loss, within other gains/(losses).
When forward contracts are used to hedge forecast transactions, the company generally designates only the change in fair value of the forward contract related to the spot component as the hedging instrument. Gains or losses relating to the effective portion of the change in the spot component of the forward contracts are recognised in other comprehensive income in cash flow hedging reserve within equity.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss, as follows:
- If the cash flow hedge of a forecasted transaction results in the recognition of a non-financial asset or liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of a non-financial asset or a liability, amounts deferred in equity are recognised in the statement of profit and loss in the same period in which the hedged item affects the statement of profit and loss.
In cases where hedge accounting is not applied, changes in the fair value of derivatives are recognised in the statement of profit and loss as and when they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the statement of profit and loss for the period.
2.33 Critical Estimates and Judgements
The preparation of standalone financial statements in conformity with Ind AS requires management to make judgements, estimates and assumptions, that affect the application of accounting policies and the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of these financial statements and the reported amounts of revenues and expenses for the years presented. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed at each Balance Sheet date. Revisions to accounting estimates are recognised in the period in which the estimate is revised and future periods affected.
This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the standalone financial statements.
The areas involving critical estimates or judgements are:
⢠Employee Benefits (Estimation of Defined Benefit Obligations) â Notes 2.20 and 34
Post-employment benefits represent obligations that will be settled in the future and require assumptions to project benefit obligations. Post-employment benefit accounting is intended to reflect the recognition of future benefit costs over the employee''s approximate service period, based on the terms of the plans and the investment and funding decisions made. The accounting requires the Company to make assumptions regarding variables such as discount rate and salary growth rate. Changes in these key assumptions can have a significant impact on the defined benefit obligations.
⢠Impairment of Trade and Other Receivables â Notes 2.8(iii) and 45(N)(c)
The risk of uncollectibility of trade receivables and other receivables is primarily estimated based on prior experience, past due status of doubtful receivables which includes factors such as ability to pay, bankruptcy, payment history etc. The assumptions and estimates applied for determining the provision for impairment are reviewed periodically. The Company uses specific identification method in determining the allowance for credit losses of trade receivable considering historical credit loss experience and is adjusted for forward looking information. Receivables are deemed to be past due or impaired with reference to the Company''s normal terms and conditions of business. These terms and conditions are determined on a case to case basis with reference to the customer''s credit quality and prevailing market conditions. Further, the Company has also applied the simplified approach for expected credit loss on trade receivable and contract assets.
⢠Estimation of Expected Useful Lives of Property, Plant and Equipment, Right of use Assets and Intangible Assetsâ Notes 2.2, 2.3, 3.1, 3.2 and 3.5
Management reviews its estimate of the useful lives of property, plant and equipment and intangible assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technical and economic obsolescence that may change the utility of property, plant and equipment, right of use assets and intangible assets.
⢠Accounting for revenue from contracts wherein company satisfies performance obligation and recognises revenue over time- Notes 2.18 and 23
For contracts wherein performance obligation are satisfied over time, an entity recognises revenue over time by measuring the progress towards complete satisfaction of that performance obligation, in order to depict an entity''s performance in transferring control of goods or services promised to a customer. This method requires estimates of the final revenue and costs of the contract, as well as measurement of progress achieved to date as a proportion of the total work to be performed. This involves determination of margin to be recognised on the contract, which are dependent on the total costs to complete contracts, that is, the cost incurred till date and estimation of future cost to complete the contract and price variations etc. This estimation involves exercise of significant judgement by the management in making cost forecasts considering future activities to be carried out in the contract, and the related assumptions etc. Experience, reduces but does not eliminate the risk that estimates may change significantly.
⢠Litigations, Claims and Conti
Mar 31, 2018
1 Significant Accounting Policies
This note provides a list of the significant accounting policies adopted in the preparation of the standalone financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.
1.1 Basis of Preparation
(i) Compliance with Indian Accounting Standards
The standalone financial statements comply in all material respects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the âActâ) [Companies (Accounting Standards) Rules, 2015] and other provisions of the Act.
(ii) Historical Cost Convention
The standalone financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:
- Certain financial assets and liabilities (including derivative instruments)- Defined benefits plan- plan assets-Share based payments
(iii) Current versus Non-current Classification
The Company presents assets and liabilities in the Balance Sheet based on current/non-current classification. An asset is classified as current when it is:a) expected to be realised or intended to be sold or consumed in the normal operating cycle, b) held primarily for the purpose of trading,c) expected to be realised within twelve months after the reporting period, ord) cash or cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.All other assets are classified as non-current.A liability is classified as current when:a) it is expected to be settled in the normal operating cycle,b) it is held primarily for the purpose of trading,c) it is due to be settled within twelve months after the reporting period, ord) there is no unconditional right to defer settlement of the liability for at least twelve months after the reporting period.All other liabilities are classified as non-current.Deferred tax assets and liabilities are classified as Non-current.
(iv) Rounding of Amounts
All amounts disclosed in the standalone financial statements and notes have been rounded off to the nearest lacs and decimals thereof (Rs. 00,000.00) as per the requirement of Schedule III to the Act, unless otherwise stated.
1.2 Property, Plant and Equipment
All items of property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Depreciation Method, Estimated Useful Lives and Residual Values
Depreciation is calculated on pro-rata basis using the straight-line method to allocate their cost, net of their estimated residual value, over their estimated useful lives in accordance with Schedule II to the Act. Each component of an item of property, plant and equipment with a cost that is significant in relation to the cost of that item is depreciated separately if its useful life differs from the other components of the item.
The useful lives of the property, plant and equipment as estimated by the management are as follows:
Leasehold land is amortised on straight - line basis over the primary lease period of 99 years or its estimated useful life, whichever is shorter.
The useful lives, residual values and the method of depreciation of property, plant and equipment are reviewed, and adjusted if appropriate, at the end of each reporting period.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss within âOther Incomeâ/âOther Expensesâ.
Advances paid towards the acquisition of property, plant and equipment outstanding at each Balance Sheet date is classified as âCapital Advancesâ under âOther Non-current Assetsâ and the cost of property, plant and equipment not ready to use are disclosed under âCapital Work-in-progressâ.
Transition to Ind AS
On transition to Ind AS, the Company had opted to fairvalue its property, plant and equipment as on at April 1, 2015 (date of transition to Ind AS) and had considered the same as deemed cost of property, plant and equipment as at 1st April 2015.
1.3 Intangible Assets
Intangible assets have a finite useful life and are stated at cost less accumulated amortisation and accumulated impairment losses, if any.
Computer Software
ComputerSoftwarefor internal use, which is primarily acquired from third-partyvendors is capitalised. Subsequent costs associated with maintaining such software are recognised as expense as incurred. Cost of computer software includes license fees and cost of implementation/system integration services, where applicable.
Brand and Design and Drawings
The Company had acquired the brand name of âSambre et Meuseâ along with all the available designs and drawings for manufacturing of bogies during the year ended March 31, 2017 which was capitalised.
Amortisation Method and Period
Computer Software, Brand and Design and Drawings are amortised on a pro-rata basis using the straight-line method over its estimated useful life of 5 years , 8 years [Indefinite useful life up to March 31, 2017 - Refer Note 3(b)] and 5/10 years respectively from the date they are available for use. Amortisation method and useful lives are reviewed periodically including at each financial year end.
Research and Development
Research costs are expensed as incurred. Expenditure on development that do not meet the specified criteria under Ind AS 38 on âIntangible Assetsâ are recognised as an expense as incurred.
Transition to Ind AS
On transition to Ind AS, the Company had elected to continue with the carrying value of all of its intangible assets recognised as at April 1, 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of intangible assets as at April 1, 2015.
1.4 Impairment of Non-financial Assets
Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assetâs carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assetâs fair value less costs of disposal and value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash-generating units).
1.5 Inventories
Inventories are stated at the lower of cost and net realisable value. However, material and other items held for use in 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 of inventories comprises cost of purchases and all other costs incurred in bringing the inventories to their present location and condition. Cost of work-in-progress and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost are assigned to individual items of inventory on weighted average basis. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
1.6 Leases As a Lessee
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Payments made under operating leases are charged to profit or loss on a straight-line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases.
1.7 Investments (other than Investments in Subsidiaries and Joint Venture) and Other Financial Assets
(i) Classification
The Company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss), and
- those to be measured at amortised cost.
The classification depends on the Companyâs business model for managing the financial assets and the contractual terms of the cash flows.
The Company reclassifies debt investments when and only when its business model for managing those assets changes.
(ii) Measurement
At initial recognition, the Company measures a financial asset at its fairvalue plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Debt Instruments
Subsequent measurement of debt instruments depends on the Companyâs business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:
- Amortised Cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt instrument that is subsequently measured at amortised cost is recognised in profit or loss when the asset is derecognised or impaired.
- Fair Value through Other Comprehensive Income (FVOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assetsâ cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in the profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in âOther Income/Other Expensesâ.
- Fair Value through Profit or Loss (FVTPL): Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt instrument that is subsequently measured at fair value through profit or loss is recognised in profit or loss and presented net in the Statement of Profit and Loss within âOther Incomeâ/âOther Expensesâ in the period in which it arises.
Equity Instruments
The Company subsequently measures all equity investments (other than investments in subsidiaries and joint venture) at fairvalue. Where the Companyâs management has elected to present fairvalue gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss. Changes in the fair value of financial assets at fair value through profit or loss are recognised in âOther Income/Other Expensesâ in the Statement of Profit and Loss.
(iii) Impairment of Financial Assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and FVOCI debt instruments, if any. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 43(II) details how the Company determines whether there has been a significant increase in credit risk.
For trade receivables only, the Company applies the simplified approach permitted by Ind AS 109,âFinancial Instrumentsâ, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
(iv) Derecognition of Financial Assets
A financial asset is derecognised only when
- the Company has transferred the rights to receive cash flows from the financial asset or
- retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
(v) Income Recognition Interest Income
Interest income from debt instruments is recognised using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument but does not consider the expected credit losses.
Dividends
Dividends are recognised in profit or loss only when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the Company, and the amount of the dividend can be measured reliably.
(vi) Fair Value of Financial Instruments
In determining the fair value of financial instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fairvalue include discounted cash flow analysis and available quoted market prices. All methods of assessing fair value result in general approximation of value, and such value may never actually be realised.
1.8 Investments in Subsidiaries and Joint Venture
Investments in subsidiaries and joint venture are carried at cost less provision for impairment, if any. Investment in subsidiaries and joint venture are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of investments exceeds its recoverable amount.
Transition to Ind AS
On transition to Ind AS, the Company had elected to continue with the previous GAAP carrying value of all its investment in subsidiaries as at April 1, 2015 and use those values as the deemed cost of such investments as at April 1, 2015.
1.9 Trade Receivables
Trade receivables are amounts due from customers for goods sold or services rendered in the ordinary course of business. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
1.10 Trade Payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
1.11 Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are removed from the Balance Sheet when the obligation specified in the contract is discharged, cancelled or expired.
1.12 Other Financial Liabilities
Other financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument. Other financial liabilities are initially measured at the fair value and subsequently measured at amortised cost using the effective interest method.
1.13 Derivative Instruments
The Company enters into certain derivative contracts to hedge risks which are not designated as hedges. Derivative Instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period, with changes included in âOther Incomeâ.
1.14Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the Balance Sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
1.15 Financial Guarantee Contracts
Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value and subsequently at the higher of the amount determined in accordance with Ind AS 37 and the amount initially recognised less cumulative amortisation, where appropriate.
1.16Cash and Cash Equivalents
For the purpose of presentation in the Cash Flow Statement, cash and cash equivalents includes cash on hand, deposits held with banks / financial institutions with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
1.17 Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the year in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
1.18Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Amount disclosed as revenue are inclusive of excise duty and net of returns, trade discounts, rebates, value added taxes, goods and service tax (GST) and amounts collected on behalf of third parties.
The Company recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Company and specific criteria have been met for each of the Companyâs activities as described below. The Company bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.
Sale of Products
Revenue from sale of products and scrap sales is recognised when the significant risk and rewards of ownership of the products have passed to the buyers as per the terms of contract.
Other Operating Revenue
Export entitlement are recognised when the right to receive credit as per the terms of the schemes is established in respect of the exports made by the Company and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds. Management fees are recognised on an accrual basis as per the terms of the agreement/arrangement with the concerned party.
1.19Construction Contracts
Contract revenue is measured at the fair value of the consideration received or receivable. Variations in contract work are included in contract revenue when it is probable that the customer will approve the variation as well as the amount of revenue arising from the variation and the amount of revenue arising from the variation can be reliably measured. Claims are included in contract revenue to the extent that it is probable that the customer will accept the claim and the amount that is probable to be accepted by the customer can be measured reliably.
The Company uses the âpercentage-of-completion methodâ to determine the appropriate amount to recognise in a given period. The stage of completion is measured by reference to the contract costs incurred up to the end of the reporting period as a percentage of total estimated costs for each contract. Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion.
When the outcome of a construction contract can be estimated reliably and it is probable that the contract will be profitable, contract revenue is recognised over the period of the contract by reference to the stage of completion. Contract costs are recognised as expenses by reference to the stage of completion of the contract activity at the end of the reporting period. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable.
1.20 Foreign Currency Transactions and Translation
(i) Functional and Presentation Currency
Items included in the standalone financial statements of the Company are measured using the currency of the primary economic environment in which the Company operates (âthe functional currencyâ). The financial statements are presented in Indian Rupee (Rupees or Rs.), which is the Companyâs functional and presentation currency.
(ii) Transactions and Balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. At the year-end, monetary assets and liabilities denominated in foreign currencies are restated at the year-end exchange rates. The exchange differences arising from settlement of foreign currency transactions and from the year-end restatement are recognised in profit and loss.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss.
1.21 Employee Benefits
(i) Short-term Employee Benefits
Liabilities for short-term employee benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employeesâ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled.
(ii) Post-employment Benefits Defined Benefit Plans
The liability recognised in the Balance Sheet in respect of defined benefit plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in âEmployee Benefits Expenseâ in the Statement of Profit and Loss.
Remeasurementgains and losses arisingfrom experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. These are included in âRetained Earningsâ in the Statement of Changes in Equity.
Defined Contribution Plans
Contributions under defined contribution plans payable in keeping with the related schemes are recognised as expenses for the period in which the employee has rendered the service.
(iii) Other Long-term Employee Benefits
Long-term compensated absences are provided for based on actuarial valuation, as per projected unit credit method, done at the end of each financial year. Accumulated leave, which is expected to be utilised within the next twelve months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
(iv) Termination Benefits
Termination benefits, in the nature of voluntary retirement benefits, are recognised as expense in the Statement of Profit and Loss if the Company has made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptancs can be estimated reliably. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.
1.22Share Based Payments
Share-based compensation benefits are provided to employees via the Titagarh Wagons Limited Employee Stock Option Scheme namely ESOP Scheme 2014.
Employees of the Company receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions).The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model.That cost is recognised, together with a corresponding increase in Employee Stock Options Outstanding Account in equity, over the period in which the performance and/or service conditions are fulfilled, in Employee Benefit Expense. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Companyâs best estimate of the number of equity instruments that will ultimately vest.
Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Companyâs best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value.The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
1.23 Income Taxes
The income tax expense for the period is the tax payable on the current periodâs taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences, unused tax credits and to unused tax losses.
The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns 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 tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the standalone financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss). Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences, tax credits and losses.
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 profits will be available to allow all or part of the asset to be utilised.
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 the same taxation authority. Current tax assets and liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity, if any. In this case, the tax is also recognised in other comprehensive income or directly in equity respectively.
1.24 Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expenses relating to a provision is recognised in the statement of profit and loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risk 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.
Warranties
Provisions for warranty related costs are recognised when the product is sold. Initial recognition is based on historical experience i.e. claims received up to the year end and the managementâs estimate of further liability to be incurred in this regard during the warranty period, computed on the basis of past trend of such claims. The initial estimate of warranty related costs is revised annually.
Liquidated Damages
Liquidated damages on supply of materials are provided based on the contractual obligations or deduction made by the customers, as the case may be.
Litigation, Claims and Contingencies
The management estimates the provisions for pending litigations, claims and demands based on its assessment of probability for these demands crystalising against the Company in due course.
Onerous Contract
Provision is recognised for the contract, where unavoidable cost of meeting the obligation under the contract exceeds the economic benefits expected to be received. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it.
1.25 Contingencies
A disclosure for contingent liabilities is made when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources embodying economic benefits will be required to settle or a reliable estimate of the amount cannot be made.
1.26 Earnings Per Equity Share
(i) Basic Earnings Per Equity Share
Basic earnings per equity share is calculated by dividing:
- the profit attributable to owners of the Company
- by the weighted average number of equity shares outstanding during the financial year.
(ii) Diluted Earnings Per Equity Share
Diluted earnings per equity share adjusts the figures used in the determination of basic earnings per equity share to take into account:
- the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
- the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
1.27Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments.
The chief operating decision maker is responsible for allocating resources and assessing performance of the operating segments and has been identified as the Board of Directors of the Company. Refer Note 40 for segment information presented.
1.28Business Combinations
A common control business combination, involving entries or businesses in which all the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination and where the control is not transitory, is accounted for using the pooling of interest method.
Other business combinations, involving entities or businesses are accounted for using acquisition method.
1.29 Recent Accounting Pronouncements Standards Issued but not yet Effective
The Ministry of Corporate Affairs (MCA) notified the Companies (Indian Accounting Standards) Amendment Rules 2018 (the Rules) on March 28, 2018. The rules notify the new revenue standard Ind AS 115, Revenue from Contracts with Customers and also bring in amendments to existing Ind AS. The rules shall be effective from reporting periods beginning on or after April 1, 2018 and cannot be early adopted. The Company intends to adopt these standards, as applicable, when they become effective.
Ind AS 115, Revenue from Contracts with Customers
The Ministry of Corporate Affairs (MCA) has notified Ind AS 115, âRevenue from Contracts with Customersâ, March 28, 2018, which is effective for accounting periods beginning on or after April 1, 2018. The new revenue standard is based on a transferof control model, which fundamentally changes the basis of revenue recognition, presentation and disclosures. The standard could significantly change the amount and timing of revenue recognition. The core principle is described in a five-step model framework.
Appendix B to Ind AS21 Foreign Currency Transactions and Advance Consideration
The MCA has notified Appendix B to Ind AS 21, Foreign currency transactions and advance consideration. The appendix clarifies how to determine the date of transaction for the exchange rate to be used on initial recognition of a related asset, expense or income where an entity pays or receives consideration in advance for foreign currency-denominated contracts.For a single payment or receipt, the date of the transaction should be the date on which the entity initially recognises the non-monetary asset or liability arising from the advance consideration (the prepayment or deferred income/contract liability). If there are multiple payments or receipts for one item, date of transaction should be determined as above for each payment or receipt.
Amendments to Ind AS 12 Income Taxes regarding Recognition of Deferred Tax Assets on Unrealised Losses
The amendments clarify the accounting for deferred taxes where an asset is measured at fair value and that fair value is below the assetâs tax base. They also clarify certain other aspects of accounting for deferred tax assets set out below:
- A temporary difference exists whenever the carrying amount of an asset is less than its tax base at the end of the reporting period.-The estimate of future taxable profit may include the recovery of some of an entityâs assets for more than its carrying amount if it is probable that the entity will achieve this.
- Where the tax law restricts the source of taxable profits against which particular types of deferred tax assets can be recovered, the recoverability of the deferred tax assets can only be assessed in combination with other deferred tax assets of the same type.
- Tax deductions resulting from the reversal of deferred tax assets are excluded from the estimated future taxable profit that is used to evaluate the recoverability of those assets. This is to avoid double counting the deductible temporary differences in such assessment.
The Company is evaluating the requirements of the above amendments and the effect on the standalone financial statements is being evaluated.
1.30Critical Estimates and Judgements
The preparation of standalone financial statements in conformity with Ind AS requires management to make judgements, estimates and assumptions, that affect the application of accounting policies and the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of these financial statements and the reported amounts of revenues and expenses for the years presented. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed at each Balance Sheet date. Revisions to accounting estimates are recognised in the period in which the estimate is revised and future periods affected.
This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the standalone financial statements.
The areas involving critical estimates or judgements are: - Employee Benefits (Estimation of Defined Benefit Obligations) â Notes 2.21 and 31
Post-employment benefits represent obligations that will be settled in the future and require assumptions to project benefit obligations. Post-employment benefit accounting is intended to reflect the recognition of future benefit costs over the employeeâs approximate service period, based on the terms of the plans and the investment and funding decisions made. The accounting requires the Company to make assumptions regarding variables such as discount rate and salary growth rate. Changes in these key assumptions can have a significant impact on the defined benefit obligations.
- Impairment of Trade and Other Receivables â Notes 2.7(iii) and 43(II)
The risk of uncollectability of trade and other receivables is primarily estimated based on prior experience with, and the past due status of, doubtful receivables, based on factors that include ability to pay, bankruptcy and payment history. The assumptions and estimates applied for determining the provision for impairment are reviewed periodically.
- Estimation of Expected Useful Lives of Property, Plant and Equipment and Intangible Assets-Notes 2.2, 2.3 and 3
Management reviews its estimate of the useful lives of property, plant and equipment and intangible assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technical and economic obsolescence that may change the utility of property, plant and equipment and intangible assets.
- Accounting for Construction Contracts under Percentage of Completion - Notes 2.18 and 45
The percentage of completion method is used to account for construction contracts. This method requires estimates of the final revenue and costs of the contract, as well as measurement of progress achieved to date as a proportion of the total work to be performed. The main uncertainty when assessing contract revenue is related to recoverable amounts from variation orders and claims payments which are recognised when, based on managementâs judgement, it is probable that they will result in revenue and are reliably measurable. This assessment is adjusted upon managementâs evaluation of liquidated damages to be imposed by customers typically relating to contractual delivery terms. Cost to complete depends on productivity factors and the cost of inputs, weather conditions, performance of subcontractors, etc. Experience, reduces but does not eliminate the risk that estimates may change significantly.
- Contingencies â Notes 2.24, 2.25 and 36
Legal proceedings covering a range of matters are pending against the Company. Due to the uncertainty inherent in such matters, it is often difficult to predict the final outcome. The cases and claims against the Company often raise factual and legal issues that are subject to uncertainties and complexities, including the facts and circumstances of each particular case/claim, the jurisdiction and the differences in applicable law. The Company consults with legal counsel and other experts on matters related to specific litigations where considered necessary. The Company accrues a liability when it is determined that an adverse outcome is probable and the amount of the loss can be reasonably estimated. In the event an adverse outcome is possible or an estimate is not determinable, the matter is disclosed.
- Valuation of Deferred Tax Assets â Notes 2.23 and 16
Deferred income tax expense is calculated based on the differences between the carrying value of assets and liabilities for financial reporting purposes and their respective tax bases that are considered temporary in nature. Valuation of deferred tax assets is dependent on managementâs assessment of future recoverability of the deferred benefit. Expected recoverability may result from expected taxable income in the future, planned transactions or planned optimising measures. Economic conditions may change and lead to a different conclusion regarding recoverability.
- Warranties and Liquidated Damages - Notes 2.24 and 14
The Companyâs product warranty obligations and estimations thereof are determined using historical information of claims received up to the year end and the managementâs estimate of further liability to be incurred in this regard during the warranty period, computed on the basis of past trend of such claims.Liquidated damages on supply of products are provided based on the contractual obligations or deduction made by the customers, as the case may be. Changes in estimated frequency and amount of future warranty claims, liquidated damages can materially affect warranty / liquidated damage expenses.
- Impairment of Investments in Subsidiaries - Notes 2.8 and 4
Determining whether the investments in subsidiaries are impaired requires an estimate of the value in use of investments. In considering the value in use, the management anticipates the future commodity prices, capacity utilisation of plant, operating margins, discount rates and otherfactors of the underlying businesses/ operations of the subsidiaries.
- Fair Value Measurements - Notes 2.7(vi) , 2.22, 32 and 42
When the fair values of financial assets and financial liabilities recorded in the Balance Sheet cannot be measured based on quoted prices in active markets, their fair values are measured using valuation techniques, including the discounted cash flow model, which involve various judgements and assumptions.
Mar 31, 2017
1 Corporate Information
Titagarh Wagons limited (the Company) is a public company domiciled in India and incorporated under the provisions of the erstwhile Companyâs Act, 1956. Its shares are listed on Bombay Stock Exchange and National Stock Exchange. The Company is engaged in the manufacturing and selling of Freight Wagons, Passenger Coaches, Steel Castings, Specialized Equipments & Bridges, Ships, Heavy Earthmoving and mining equipments etc. The Company caters to both domestic and export market. The registered office of the Company is located at 756, Anandapur, EM-Bypass, Kolkata - 700107.
These Separate financial statements were authorized for issue in accordance with a resolution of the Directors on May 19, 2017.
2 Basis of preparation
For all periods up to and including the year ended 31 March 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 (âInd-ASâ) consequent to the notification of The Companies (Indian Accounting Standards) Rules, 2015 (the Rules) (as amended) issued by the Ministry of Corporate Affairs. These are the first Ind-AS financial statements of the Company, wherein the Company has prepared its Balance Sheet as at 1st April 2015 and financial statements for the year ended and as at 31st March 2016 also as per Ind-AS.
The financial statements have been prepared on a historical cost basis, except for certain items which are measured at fair value such as Employee Stock Options, investment in equity shares covered under IND AS 109 "financial instruments" etc.
2.1 Significant accounting policies
a. Foreign Currency
Transactions in foreign currencies are initially recorded in functional currency by the Company at spot rates at the date of transaction. The Company''s functional currency is Indian Rupees.
Foreign currency monetary items are reported using the closing rate. Foreign currency non-monetary items measured at historical cost are translated using the exchange rates at the dates of the initial transactions. Exchange differences arising on settlement or translation of monetary items are recognized in the statement of profit and loss.
b. Revenue Recognition Sale of goods
Revenue is recognized to the extent that it is probable that economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment for them is made. Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods.
Excise duty is a liability of the manufacturer irrespective of whether the goods are sold or not. Hence, the recovery of excise duty flows to the Company on its own account and accordingly revenue includes excise duty. However, Sales tax/ value added tax (VAT) are collected on behalf of the government and accordingly, it is excluded from revenue.
Construction contracts
Revenue on construction contracts is recognized on percentage completion method based on the stage of completion of the contract. The stage of completion is determined as a proportion that contract costs incurred for work performed up to the reporting date bears to the estimated total costs. When it is probable that the total contract cost will exceed the total contract revenue, the expected loss is recognized immediately.
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.
Dividends
Revenue is recognized when the Companyâs right to receive the payment is established, which is generally when shareholders approve the dividend.
c. Taxes
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. 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 outside profit or loss is recognized outside profit or loss (either in other comprehensive income or in equity). Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax assets are recognized for all deductible temporary differences and carry forwards of unused tax losses. Deferred tax assets are recognized 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 losses can be utilized.
The carrying amount of deferred 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 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.
Deferred tax assets and liabilities are measured at tax rates and tax laws that have been enacted or substantively enacted at the reporting date.
For items recognized in Other Comprehensive Income (OCI) or equity, deferred / current tax is also recognized in OCI or equity.
Minimum alternate tax (MAT) paid in a year is charged to the Statement of Profit and Loss as current tax. The Company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the Company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward.
d. Property, plant and equipment (PPE)
PPE is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Cost comprises of purchase price inclusive of taxes, commissioning expenses, etc. up to the date the asset is ready for its intended use.
Expenditure directly attributable to expansion projects is capitalized. Administrative, general overheads and other indirect expenditure (including borrowing costs) incurred during the project period which are not directly related to the project nor are incidental thereto, are expensed.
Machinery spare which meets the criteria of PPE is capitalized and depreciated over the useful life of the respective assets.
PPE awaiting disposal are valued at the lower of written down value and net realizable value and disclosed separately. Capital work-in-progress includes machinery to be installed and construction & erection materials lying in stock.
The Company, based on technical assessment made by technical expert and management''s estimate, depreciates certain items of building, plant and equipment over useful lives which are different from the useful life prescribed in Schedule II to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used
The Company has considered the residual values of the above assets at 5% of the original cost. It believes that these estimated useful lives and residual values are realistic and reflect fair approximation of the period over which the assets are likely to be used.
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.
An item of PPE and any significant part initially recognized is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognized.
e. 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. Internally generated intangibles, excluding capitalized development costs, are not capitalized and the related expenditure is recognized in profit or loss in the year in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.
Gains or losses arising from derecognition of an intangible asset 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 or loss when the asset is derecognised.
Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognized as an intangible asset when the Company can demonstrate:
(i) The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
(ii) Its intention to complete and its ability and intention to use or sell the asset
(iii) How the asset will generate future economic benefits
(iv) The availability of resources to complete the asset
(v) The ability to measure reliably the expenditure during development
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete and the asset is available for use. It is amortized over the period of expected future benefit and the expense is recognized in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
During the period of development, the asset is tested for impairment annually.
f. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the asset. All other borrowing costs are expensed in the year in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
g. Leases
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.
Company as a lessee
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.
Finance leases are capitalized at the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in finance costs in the statement of profit and loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Companyâs general policy on the borrowing costs. Contingent rentals are recognized as expenses in the periods in which they are incurred.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term.
h. Inventories
Inventories are valued at the lower of cost and net realizable value.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
(i) Raw materials, Components, Stores and Spares: These are valued at lower of cost and net realizable value. However, material and other items held for use in 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 includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
(ii) Finished goods and work in progress: These are valued at lower of cost and net realizable value. Cost includes cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity. Cost of finished goods also includes excise duty. Cost is determined on weighted average basis.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
i. Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or cash-generating unitâs (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
j. Provisions General
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to a provision is recognized in the statement of profit and loss net of any reimbursement.
If the effect of the 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.
Warranty provisions
Provisions for warranty-related costs are recognized when the product is sold. Initial recognition is based on historical experience i.e. claims received up to the year end and the management''s estimate of further liability to be incurred in this regard during the warranty period, computed on the basis of past trend of such claims. The initial estimate of warranty-related costs is revised annually.
Liquidated Damages
Liquidated damages on supply of materials are provided based on the contractual obligations or deduction made by the customers, as the case may be.
Onerous Contract
Provision is recognized for the contract, where unavoidable cost of meeting the obligation under the contract exceeds the economic benefits expected to be received. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfill it.
k. Retirement and other employee benefits
Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service.
Gratuity liability is a defined benefit obligation and is provided for on the basis of actuarial valuation on projected unit credit method done at the end of each financial year.
Long term compensated absences are provided for based on actuarial valuation, as per projected unit credit method, done at the end of each financial year. Accumulated leave, which is expected to be utilized within the next twelve months, is treated as short term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements 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:
(i) Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
(ii) Net interest expense or income
In case of gratuity, current and non current bifurcation is done as per Actuarial report. l. Financial instruments
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, that are not measured at fair value through profit or loss, are added/deducted to the fair value on initial recognition.
Subsequent measurement
(i) Non-derivative financial instruments
(a) Financial assets carried at amortized cost
A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(b) Equity investments
All equity investments in scope of Ind AS 109 are measured at fair value except equity investments in subsidiaries which are measured at cost as per Ind AS 27. For equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
Equity instruments included within the Fair Value Through Profit and Loss (FVTPL) category are measured at fair value with all changes recognized in the Statement of Profit & Loss. Equity investments in Subsidiaries are carried at Cost.
(c) Financial Liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest. For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
(ii) Derivative financial instrument
The Company uses derivative financial instruments, such as forward currency contracts to mitigate its foreign currency risks and interest rate risks. Such derivative financial instruments are recorded at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
The purchase contracts that meet the definition of a derivative under Ind AS 109 are recognized in the statement of profit and loss.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to statement of profit or loss. Derecognition
A financial asset (or, where applicable, a part of a financial asset) is primarily derecognized when the rights to receive cash flows from the asset have expired. A financial liability is de-recognized when obligation under the liability is discharged or cancelled or expired.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
(i) Trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 11 and Ind AS 18.
The Company follows âsimplified approachâ for recognition of impairment loss allowance on trade and other receivables.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
m. Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprises 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.
n. Earning per share
Earnings per share is calculated by dividing the net profit or loss before OCI for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit or loss before OCI for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
o. Segment reporting
The Company has identified three operating segments viz, Wagons & Coaches, Specialized Equipment''s & Bridges and others consisting of miscellaneous business like heavy earth moving machineries, shipping etc. which comprises of less than 10% revenue on individual basis. The analysis of geographical segments is based on the areas in which customers of the Company are located.
p. 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.
q. Employee Stock Options
Employees (including senior executives) of the Company also receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions).
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model
That cost is recognized, together with a corresponding increase in Employee Stock Option Scheme (ESOP) reserves in equity, over the period in which the performance and/or service conditions are fulfilled in employee benefits expense. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Companyâs best estimate of the number of equity instruments that will ultimately vest. The statement of profit and loss expense or credit for a period represents the movement in cumulative expense recognized as at the beginning and end of that period.
Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Companyâs best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value.
When the terms of an equity-settled award are modified, the minimum expense recognized is the expense had the terms had not been modified, if the original terms of the award are met. An additional expense is recognized for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification. Where an award is cancelled by the entity or by the counterparty, any remaining element of the fair value of the award is expensed immediately through profit or loss.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
r. Business Combination
In accordance with Ind AS 101 provisions related to first time adoption, the Group has elected to apply Ind AS accounting for business combinations prospectively from 1 April 2015. As such, Indian GAAP balances relating to business combinations entered into before that date have been carried forward with minimal adjustment.
Any business combinations involving entities or businesses under common control are accounted for using the pooling of interests method :
- The assets and liabilities of the combining entities are reflected at their carrying amounts.
- No adjustments are made to reflect fair values, or recognize any new assets or liabilities. The only adjustments that are made are to harmonise accounting policies.
s. In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, âStatement of cash flowsâ and IND AS 102 Share Based Payments. 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.
Amendment to Ind AS 102:
The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes. The Company does not have any cash settled awards and hence the amendment has no impact on the Company.
The company will adopt these amendments from their applicability date.
Mar 31, 2016
CORPORATE INFORMATION_
Titograd Wagons limited (the Company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956 and existing under Companies Act 2013. Its shares are listed on Bombay Stock Exchange and National Stock Exchange. The Company is engaged in the manufacturing and selling of Railway Wagons, Steel Castings, Heavy Earthmoving and mining equipments, Bailey Bridges, EMU etc. The Company primarily caters to the domestic market.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES_
a) 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.Thefinancial statements have been prepared on an accrual basis and under the historical cost convention except in case of assets for which revaluation is carried out. The accounting policies adopted in the preparation of financial statements are consistent with those used in the previous year, except for the changes in accounting policy explained below.
b) Changes in accounting policy Component Accounting
The Company has adopted component accounting as required under Schedule II to the Companies Act, 2013from 1 April 2015.The Company was previously not identifying components of fixed asset separately for depreciation purposes; rather, a single useful life/depreciation rate was used to depreciate each item of fixed asset.
Due to application of Schedule II to the Companies Act, 2013, the Company has changed the manner of depreciation for its fixed assets. Now, the Company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is significant to the total cost of the asset having useful life that is materially different from that of the remaining asset. These components are depreciated over their useful lives; the remaining asset is depreciated over the life of the principal asset. The Company has used transitional provisions of Schedule II to adjust the impact of component accounting arising on its first application. If a component has zero remaining useful life on the date of component accounting becoming effective, i.e., 1 April 2015, its carrying amount, after retaining any residual value, is charged to the statement of profit and loss. The carrying amount of other components, i.e., components whose remaining useful life is not nil on 1 April 2015, is depreciated over their remaining useful lives.
Had the Company continued to use the earlier policy of depreciating fixed asset, its financial statements for the period would have been impacted as below:
Depreciation for the current period would have been lower by Rs. 84.26 lacs. Profit after tax for the current period would have been Rs. 715.26 lacs. Fixed asset would correspondingly have been higher by Rs. 84.26 lacs.
On the date of component accounting becoming applicable, i.e., 1 April 2015, there was no component having zero remaining useful life. Hence, no amount has been directly adjusted against retained earnings.
c) Use of estimates
The preparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.
d) Tangible Fixed Assets
Tangible Fixed Assets are stated at cost (or revalued amounts, as the case may be), less accumulated depreciation and impairment, if any. The cost of acquisition comprises of purchase price inclusive of duties (net of Convert/VAT), taxes, incidental expenses, erection/commissioning/trial run expenses and borrowing cost etc, up to the date the assets are ready for intended use.
In case of revaluation of tangible fixed assets, the original cost as written up by the approved values is considered in the accounts and the differential amount is credited to revaluation reserve.
Machinery spares which can be used only in connection with an item of fixed assets and whose use, as per technical assessment, is expected to be irregular, are capitalized and depreciated over the residual life of the respective assets.
Capital work-in-progress includes machinery to be installed and construction & erection materials lying in stock.
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 derecognized.
The Company identifies and determines cost of components significant to the total cost of the asset having useful life that is materially different from that of the remaining life.
e) Intangibles
Research costs are expensed as and when incurred. Development expenditure incurred on an individual project is recognized as an intangible asset when the Company can demonstrate all the following:
-The technical feasibility of completing the intangible asset so that it will be available for use or sale
-Its intention to complete the asset
-Its ability to use or sell the asset
-How the asset will generate future economic benefits
-The availability of adequate resources to complete the development and to use or sell the asset
-The ability to measure reliably the expenditure attributable to the intangible asset during development.
Development expenditure recognized as an intangible asset is amortized on a straight line basis over the period of expected future sales from the related project, not exceeding ten years.
The carrying value of development costs is reviewed for impairment annually when the asset is not yet in use, or otherwise when events or changes in circumstances indicate that the carrying value may not be recoverable.
Computer softwareâs not being part of the hardware operating system are capitalized as intangible fixed assets.
f) Depreciation & Amortization on tangible & intangible fixed assets Tangible Assets
Leasehold land is amortized on a straight line basis over the period of lease, i.e., 99 years.
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 identified components are depreciated over their useful life. The remaining asset is depreciated over the life of principle assets which is in line with the useful lives as mentioned in Schedule II to the Companies Act 2013.The Company has used the following rates to provide depreciation on its fixed assets.
The management has estimated, supported by independent assessment by professionals, the useful lives of certain components of assets to be 1 year to 10years which are lower than those indicated in schedule II.
Intangible Assets
Computer softwareâs are amortized over their useful life of 3 years on a straight line basis.
g) Leases
Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased items, are capitalized at the lower of the air value and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability based on the implicit rate of return. Finance charges are recognized as finance costs in the statement of profit and loss. Lease management fees, legal charges and other initial direct costs are capitalized.
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 Statement of Profit and Loss on a straight-line basis over the lease term.
h) Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur.
i) Impairment of tangible and intangible fixed assets
The carrying amounts of assets are reviewed at each balance sheet date to determine if there is any indication of impairment based on the internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount which is the greater the assets'' net selling price and 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.
Impairment losses are recognized in the statement of profit and loss, except for previously revalued tangible fixed assets, where the revaluation was taken to revaluation reserve. In this case, the impairment is also recognized in the revaluation reserve up to the amount of any previous revaluation.
After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.
A previously recognized impairment loss is increased or reversed depending on the 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.
j) 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. Current investments are carried 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.
k) Inventories
Raw materials Components and Stores spares Parts are valued at lower of cost and net realizable value. However, materials and other items held for use in the production of finished goods 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 include expenses incidental to procurement thereof and determined on a weighted average basis.
Goods under process and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials, labor cost and a proportion of manufacturing overheads based on the normal operating capacity. The cost of Finished goods and goods under process is determined on a weighted average basis. Cost of finished goods also includes excise duty.
Obsolete/damaged stores and saleable scraps are valued at estimated net realizable value.
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.
l) 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
In case of sale of goods, revenue is recognized when the significant risks and rewards of ownership of goods have passed to the buyer. Sales are net of returns, claims, trade discounts etc.
Sales exclude sales tax and value added tax (VAT) which are collected by the Company on behalf of the State Governments and deposited to the credit of the respective State Governments. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year.
The Company is also engaged in manufacturing and supply of rail coaches on which revenue is recognized on percentage completion method based on the stage of completion of the contract. The stage of completion is determined as a proportion that contract costs incurred for work performed up to the reporting date bears to the estimated total costs. When it is probable that the total contract cost will exceed the total contract revenue, the expected loss is recognized immediately. For this purpose, total contract costs are ascertained on the basis of actual costs incurred and costs to be incurred for completion of contracts in progress, which is arrived at by the management based on current technical data, forecasts and estimate of expenditure to be incurred in future including contingencies, which being technical matters have been relied upon by the auditors. Revisions in projected profit or loss arising from change in estimates are reflected in each accounting period which, however, cannot be disclosed separately in the financial statements as the effect thereof cannot be accurately determined. Overhead expenses representing indirect costs that cannot be directly aligned with the jobs, are distributed on a pro-rata basis.
Interest Income
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.
m) Foreign Currency Transactions Initial Recognition
Foreign currency transactions are initially 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.
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. Exchange differences
Exchange differences arising on the settlement of monetary items or on restatement of monetary items 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.
Forward Exchange Contracts not intended for trading or speculation purposes
The premium or discount arising at the inception of the forward exchange contract is amortized as expense or income over the life of the contract. Exchange differences on such contracts are recognized 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 recognized as income or expense for the year.
n) Retirement and other Employee Benefits
Retirement benefits in the form of Provident and Superannuation funds are defined contribution schemes and the contributions are charged to the Statement of Profit and Loss of the year when an employee renders the related service. There are no obligations other than the contribution payable to the respective funds.
Gratuity liability is a defined benefit obligation and is provided for on the basis of actuarial valuation on projected unit credit method done at the end of each financial period.
Long term compensated absences are provided for based on actuarial valuation, as per projected unit credit method, done at the end of each financial period. Accumulated leave, which is expected to be utilized within the next twelve months is treated as short term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.
Actuarial gains/losses are taken to Statement of Profit and Loss and are not deferred. o) Employee stock compensation cost
Employees (including senior executives) of the Company receive remuneration in the form of share based payment transactions, whereby employees render services as consideration for equity instruments (equity-settled transactions).
In accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and the Guidance Note on Accounting for Employee Share-based Payments, the cost of equity-settled transactions is measured using the fair valuation method. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company''s best estimate of the number of equity instruments that will ultimately vest. The expense or credit recognized in the statement of profit and loss for a period represents the movement in cumulative expense recognized as at the beginning and end of that period and is recognized in employee benefits expense.
Where the terms of an equity-settled transaction award are modified, the minimum expense recognized is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognized for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employees measured at the date of modification.
p) Taxes on Income
Tax expense comprises of current and deferred taxes.
Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. 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 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. If the Company has carry forward unabsorbed depreciation and carry forward tax losses, deferred tax assets are recognized only if there is virtual certainty backed by convincing evidence that such deferred tax assets can be realized against future taxable profits.
At each balance sheet date, the Company re-assesses unrecognized deferred tax assets. It recognizes deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets is 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 or virtually certain, as the case may be, 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 or virtually certain, as the case may be, that sufficient future taxable income will be available.
q) Segment Reporting
Identification of segments
The Company''s operating businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The analysis of geographical segments is based on the areas in which major operating divisions of the Company operate.
Inter Segment transfers
The Company accounts for inter segment transfers at prevailing market prices.
Allocation of common costs:
Common allocable costs are allocated to each segment on case to case basis by applying the ratio, appropriate to each relevant case. Unallocated items
Revenue and expenses which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis, are included under the head "Unallocated - Common"
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.
r) Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split (consolidation of shares).
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period, are adjusted for the effects of all dilutive potential equity shares.
s) Provisions
A provision is recognized when the Company has a present obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimate.
Provision for product related warranties cost is based on the claims received up to the year end as well as the management''s estimates of further liability to be incurred in this regard during the warranty period.
Liquidated damages on supply of materials are provided based on the contractual obligations or deduction made by the customers, as the case may be.
Provision is recognized for the contract, where unavoidable cost of meeting the obligation under the contract exceeds the economic benefits expected to be received. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfill it. t) 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.
u) Cash and Cash equivalents
Cash and cash equivalents for the purposes of cash flow statement comprise of cash on hand, cash at bank and fixed deposits with an original maturity of three months or less.
v) Excise duty & custom 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 factories as on the balance sheet date. Similarly, customs duty on imported materials in transit / lying in bonded warehouse is accounted for at the time of import / bonding of materials.
w) Measurement of EBITDA
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 amortization (EBITDA) as separate line item on the face of the statement of profit and loss. The Company measures EBITDA on the basis of profit/ (loss) for the year excluding depreciation &amortization expenses, interest income, finance costs and tax expenses.
Mar 31, 2015
A) 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 except in case of assets for which
revaluation is carried out. The accounting policies adopted in the
preparation of financial statements are consistent with those used in
the previous year, except for the changes in accounting policy
explained below.
b) Changes 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.
(i) 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 rate seven 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 to the Companies Act 2013,
the management has re-estimated useful lives and residual values of all
its fixed assets and accordingly the depreciation charge for the
current year is higher by Rs 202.34 lacs as compared to the previous
year. Further, based on transitional provision provided in Note 7(b) of
Schedule II, an amount of Rs 271.22 lacs (net of deferred tax of Rs.
139.66 lacs) has been adjusted with general reserve. The management
believes that depreciation rates currently used fairly reflect its
estimate of the useful lives and residual values of fixed assets.
(ii) Accounting for additional depreciation on account of revaluation
of fixed assets
On31st March 2009,theCompany had revalued all its land, buildings,
plant and machineries at Titagarh Steels Unit existing as on that date.
Till year ended 31 March 2014, the Guidance Note on Treatment of
Reserve Created on Revaluation of Fixed Assets issued by the ICAI
allowed companies to transfer an amount equivalent to the additional
depreciation arising due to upward revaluation of fixed assets from
revaluation reserve to the statement of profit and loss. Accordingly,
the Company was transferring an amount equivalent to additional
depreciation arising due to upward revaluation of fixed assets from
revaluation reserve to the statement of profit and loss. In contrast,
Schedule II to the Companies Act, 2013 applicable from the current
year, states that depreciable amount of an asset is the cost of an
asset or other amount substituted for cost. Hence, in case of revalued
assets, depreciation computed on the revalued amount needs to be
charged to the statement of profit and loss, without any recoupment
from revaluation reserve. Consequently, to comply with the Schedule II
requirement, the Company has discontinued the practice of recouping the
impact of additional depreciation from revaluation reserve. The
management has decided to apply the revised accounting policy
prospectively from accounting periods commencing on or after 1 April
2014.
On disposal of a previously revalued item of fixed asset, the
difference between net disposal proceeds and the net book value is
charged or credited to the profit and loss statement except that, to
the extent such a loss is related to an increase which was previously
recorded as a credit to revaluation reserve and which has not been
subsequently reversed or utilised, it is charged directly to that
account. The amount standing in revaluation reserve following the
retirement or disposal of an asset which relates to that asset is
transferred to general reserve. Had the Company continued its earlier
policy of recouping the additional depreciation arising due to upward
revaluation of fixed assets from reserve created from revaluation of
fixed assets, profits for the current year would have been higher by Rs
37.34 Lacs. However, the change in accounting policy does not have any
impact on the reserves and surplus balance as at 31 March 2015.
c) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management's best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
d) Tangible Fixed Assets
Tangible Fixed Assets are stated at cost (or revalued amounts, as the
case may be), less accumulated depreciation and impairment, if any. The
cost of acquisition comprises of purchase price inclusive of duties
(net ofCenvat/VAT), taxes, incidental expenses,
erection/commissioning/trial run expenses and borrowing cost etc, up to
the date the assets are ready for intended use.
In case of revaluation of tangible fixed assets, the original cost as
written up by the approved valuers is considered in the accounts and
the differential amount is credited to revaluation reserve.
Machinery spares which can be used only in connection with an item of
fixed assets and whose use, as per technical assessment, is expected to
be irregular, are capitalized and depreciated over the residual life of
the respective assets.
Capital work-in-progress includes machinery to be installed and
construction & erection materials lying in stock.
e) Intangibles
Research costs are expensed as and when incurred. Development
expenditure incurred on an individual project is recognized as an
intangible asset when the Company can demonstrate all the following:
* The technical feasibility of completing the intangible asset so
that it will be available for use or sale
* Its intention to complete the asset
* Its ability to use or sell the asset
* How the asset will generate future economic benefits
* The availability of adequate resources to complete the development
and to use or sell the asset
* The ability to measure reliably the expenditure attributable to the
intangible asset during development.
Development expenditure recognized as an intangible asset is amortized
on a straight line basis over the period of expected future sales from
the related project, not exceeding ten years.
The carrying value of development costs is reviewed for impairment
annually when the asset is not yet in use, or otherwise when events or
changes in circumstances indicate that the carrying value may not be
recoverable.
Computer softwares not being part of the hardware operating system, are
assessed to have a useful life of 3 years and are capitalised as
intangible fixed assets.
f) Depreciation & Amortisation on tangible & intangible fixed assets
Tangible Assets
Leasehold land is amortized on a straight line basis over the period of
lease, i.e., 99 years.
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 which is line with the useful lives as mentioned in Schedule
II to the Companies Act 2013. The Company has used the following rates
to provide depreciation on its fixed assets.
Asset Class Useful life (years)
Factory buildings 30
Other buildings 60
Plant and equipments 15
Furniture and fixtures 10
Office equipment 3-5
Vehicles 8
Intangible Assets
Computer softwares capitalized as intangible fixed assets are amortised
over their useful life of3years on a straight line basis.
g) Leases
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased items,
are capitalized at the lower of the fair value and present value of the
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are recognized as finance costs in the
statement of profit and loss. Lease management fees, legal charges and
other initial direct costs are capitalized.
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 Statement of Profit and Loss on a straight-line basis over the
lease term.
h) Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
i) Impairment of tangible and intangible fixed assets
The carrying amounts of assets are reviewed at each balance sheet date
to determine if there is any indication of impairment based on the
internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount which is
the greater of the assets' net selling price and 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.
Impairment losses are recognized in the statement of profit and
loss,exceptfor previously revalued tangible fixed assets, where the
revaluation was taken to revaluation reserve. In this case, the
impairment is also recognized in the revaluation reserve up to the
amount of any previous revaluation.
After impairment, depreciation is provided on the revised carrying
amount of the assets over its remaining useful life.
A previously recognized impairment loss is increased or reversed
depending on the 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.
j) 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. Current investments are carried 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.
k) Inventories
Raw materials&Components and Stores&Spares Parts are valued at lower of
cost and net realizable value. However, materials and other items held
for use in the production of finished goods 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 include expenses incidental
to procurement thereof and determined on a weighted average basis.
Goods under process and finished goods are valued at lower of cost and
net realizable value. Cost includes direct materials, labour cost and a
proportion of manufacturing overheads based on the normal operating
capacity. The cost of Finished goods and goods under process is
determined on a weighted average basis. Cost of finished goods also
includes excise duty.
Obsolete/damaged stores and saleable scraps are valued at estimated net
realizable value.
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.
l) 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
In case of sale of goods, revenue is recognized when the significant
risks and rewards of ownership of goods have passed to the buyer. Sales
are net of returns, claims, trade discounts etc.
Sales exclude sales tax and value added tax (VAT) which are collected
by the Company on behalf of the State Governments and deposited to the
credit of the respective State Governments. Excise duty deducted from
revenue (gross) is the amount that is included in the revenue (gross)
and not the entire amount of liability arising during the year.
Interest Income
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the rate applicable.
m) Foreign Currency Transactions Initial Recognition
Foreign currency transactions are initially 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.
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.
Exchange differences
Exchange differences arising on the settlement of monetary items or on
restatement of monetary items 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.
Forward Exchange Contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of the forward
exchange contract is amortized as expense or income over the life of
the contract. Exchange differences on such contracts are recognized 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 recognized as income or expense for the
year.
n) Retirement and other Employee Benefits
Retirement benefits in the form of Provident and Superannuation funds
are defined contribution schemes and the contributions are charged to
the Statement of Profit and Loss of the year when an employee renders
the related service. There are no obligations other than the
contribution payable to the respective funds.
Gratuity liability is a defined benefit obligation and is provided for
on the basis of actuarial valuation on projected unit credit method
made at the end of each financial period.
Long term compensated absences are provided for based on actuarial
valuation, as per projected unit credit method, made at the end of each
financial period. Accumulated leave, which is expected to be utilized
within the next twelve months is treated as short term employee
benefit. The Company measures the expected cost of such absences as
the additional amount that it expects to pay as a result of the unused
entitlement that has accumulated at the reporting date.
Actuarial gains/losses are taken to Statement of Profit and Loss and
are not deferred.
o) Taxes on Income
Tax expense comprises of current and deferred taxes.
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Indian Income Tax Act. 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 ofearlieryears.
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. If the company
has carry forward unabsorbed depreciation and carry forward tax losses,
deferred tax assets are recognized only if there is virtual certainty
backed by convincing evidence that such deferred tax assets can be
realized against future taxable profits.
At each balance sheet date, the Company re-assesses unrecognized
deferred tax assets. It recognizes deferred tax assets to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized.
The carrying amount of deferred tax assets is 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 or
virtually certain, as the case may be, 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 or virtually certain, as the case may be, that
sufficient future taxable income will be available.
p) Segment Reporting
Identification of segments
The Company's operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Inter Segment transfers
The Company accounts for inter segment transfers at prevailing market
prices.
Allocation of common costs:
Common allocable costs are allocated to each segment on case to case
basis by applying the ratio, appropriate to each relevant case.
Unallocated items
Revenue and expenses which relate to the enterprise as a whole and are
not allocable to segments on a reasonable basis, are included under the
head "Unallocated - Common"
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.
q) Earning per share
Basic earning per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. The
weighted average number of equity shares outstanding during the period
is adjusted for events of bonus issue; bonus element in a rights issue
to existing shareholders; share split; and reverse share split
(consolidation of shares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period,
are adjusted for the effects of all dilutive potential equity shares.
r) Provisions
A provision is recognized when the Company has a present obligation as
a result of past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
balance sheet date. These are reviewed at each balance sheet date and
adjusted to reflect the current best estimate.
Provision for product related warranties cost is based on the claims
received upto the year end as well as the management's estimates of
further liability to be incurred in this regard during the warranty
period.
Liquidated damages on supply of materials are provided based on the
contractual obligations or deduction made by the customers, as the case
may be.
Provision is recognized for the contract, where unavoidable cost of
meeting the obligation under the contract exceeds the economic benefits
expected to be received. The unavoidable costs under a contract reflect
the least net cost of exiting from the contract, which is the lower of
the cost of fulfilling it and any compensation or penalties arising
from failure to fulfill it.
s) 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.
t) Cash and Cash equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise of cash on hand, cash at bank and fixed deposits with an
original maturity of three months or less.
u) Excise duty & Custom 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 factories as on the balance sheet date. Similarly, customs duty
on imported materials in transit / lying in bonded warehouse is
accounted for at the time of import / bonding of materials.
v) Measurement of EBITDA
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 amortization (EBITDA) asa separate line
item on the face of the statement of profit and loss. The Company
measures EBITDA on the basis of profit/ (loss) for the year excluding
depreciation & amortization expenses, interest income, finance costs
and tax expenses.
Mar 31, 2014
A) Basis of preparation
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 4th April,
2014 issued by the Ministry of Corporate Affairs. The financial
statements have been prepared under the historical cost convention on
an accrual basis except in case of assets for which revaluation is
carried out. The accounting policies adopted in the preparation
offinancial statements are consistent with those used in the
previousyear.
b) Use of estimates
The preparation offinancial statements in conformity with Indian GAAP
requires the management to makejudgments, estimates and assumptions
that affect the reported amount of revenues, expenses, assets and
liabilities and disclosure of contingent liabilities, at the end of
reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets and
liabilities in future periods.
c) Tangible Fixed Assets
Tangible Fixed Assets are stated at cost (or revalued amounts, as the
case may be), less accumulated depreciation and impairment, if any. The
cost ofacquisition comprises ofpurchase price inclusiveofduties (net
ofCenvat/VAT), taxes, incidental expenses, erection/commissioning/trial
run expenses and borrowing cost etc, up to the date the assets are
ready for intended use.
In case of revaluation of tangible fixed assets, the original cost as
written up by the approved valuers is considered in the accounts and
the differential amount is credited to revaluation reserve.
Machinery spares which can be used only in connection with an item of
fixed assets and whose use, as per technical assessment, is expected to
be irregular, are capitalized and depreciated over the residual life
ofthe respective assets.
Tangible fixed assets awaiting disposal arevalued at the lower
ofwritten down value and net realizablevalue and disclosed separately.
Capital work-in-progress includes machinery to be installed and
construction & erection materials lying in stock.
d) Intangibles
Research costs are expensed as and when incurred. Development
expenditure incurred on an individual project is recognized as an
intangible asset when the Company can demonstrate all the following :
- The technical feasibility ofcompleting the intangibleasset so that
it will be available for use or sale
- Its intention to complete the asset
- Its ability to use or sell the asset
- How the asset will generate future economic benefits
- The availability of adequate resources to completethe development
and to use or sell the asset
- The ability to measure reliably the expenditure attributable to the
intangible asset during development.
Development expenditure recognized as an intangibleasset is amortized
on a straight line basis over the period ofexpected future sales from
the related project, not exceeding ten years.
The carrying value of development costs is reviewed for impairment
annually when the asset is not yet in use, or otherwise when events or
changes in circumstances indicate that the carrying value may not be
recoverable.
Computer softwares not being part ofthe hardware operating system, are
assessed to have a useful life of 3 years and are capitalised as
intangible fixed assets.
e) Depreciation & Amortisation on tangible & intangible fixed assets
TangibleAssets
Depreciation on fixed fixed assets is provided on straight-line method
at the rates and in the manner prescribed in Schedule XIV to the
Companies Act, 1956 or at the rates determined based on the useful life
ofthe assets estimated by the management, whichever is higher. The
management''s estimate of useful life coincides with the Schedule XIV
rates.
The classification of Plant & Machinery into continuous and
non-continuous process is done as per technical certification and
depreciation thereon is provided accordingly.
Additional depreciation arising due to revaluation offixed assets is
adjusted against Revaluation Reserve.
Leasehold Land is amortized over the period of lease i.e. 99 years.
Depreciation on fixed assets added / disposed offduring theyear, is
provided on pro-rata basis with reference to thedate of
addition/disposal.
Intangible Assets
Computer softwares capitalized as intangible fixed assets are amortised
over their useful life of3years on a straight-line basis.
f) Leases
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased items,
arecapitalized at the lower ofthe fair value and presentvalue ofthe
minimum lease payments at the inception ofthe leaseterm and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction ofthe lease liability based on the implicit rate
of return. Finance charges are recognized as finance costs in the
Statement of Profit and Loss. Lease management fees, legal charges and
other initial direct costs are capitalized.
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership ofthe leased term, 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.
g) Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get readyfor its intended use or sale are capitalized as
part ofthe cost ofthe respective asset. All other borrowing costs
areexpensed in the period they occur.
h) Impairmentoftangibleand intangiblefixedassets
The carrying amounts of assets are reviewed at each balance sheet date
to determine if there is any indication of impairment based on the
internal/external factors. An impairment loss is recognized wherever
the carrying amount ofan asset exceeds its recoverable amount which is
the greateroftheassets''netselling priceand value in use. In assessing
the value in use, the estimated future cash flows are discounted to
their present value using a pre-taxdiscount rate that reflects current
marketassessments ofthetimevalueofmoneyand risks specifictotheasset.
Impairment losses, including impairment on inventories, are recognized
in the Statement of Profit and Loss, except for previously revalued
tangible fixed assets, where the revaluation was taken to revaluation
reserve. In this case, the impairment is also recognized in the
revaluation reserve up to theamount ofany previous revaluation.
After impairment, depreciation is provided on the revised carrying
amount ofthe assets over its remaining useful life.
A previously recognized impairment loss is increased or reversed
depending on the changes in circumstances. However, the carrying value
after reversal is not increased beyond the carrying valuethat would
have prevailed by charging usual depreciation ifthere was no
impairment.
i) 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. Current investments are carried 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 thevalue ofthe investments.
j) Inventories
Raw materials & Components and Stores & Spares Parts are valued at
lower of cost and net realizable value. However, materials and other
items held for use in the production of finished goods 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 include
expenses incidental to procurement thereofand determined on a weighted
average basis. Goods under process and finished goods arevalued at
lower ofcost and net realizablevalue. Cost includes direct materials,
labour cost and a proportion of manufacturing overheads based on the
normal operating capacity. The cost of finished goods and goods under
process is determined on a weighted average basis. Cost offinished
goods also includes excise duty.
Obsolete/damaged stores and saleable scraps are valued at estimated net
realizable value.
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.
k) 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 ofGoods
In case of sale of goods, revenue is recognized when the significant
risks and rewards of ownership of goods have passed to the buyer. Sales
are net of returns, claims, trade discounts etc.
Sales exclude sales tax and value added tax (VAT) which are collected
by the Company on behalf of the State Governments and deposited to the
credit ofthe respective State Governments. Excise duty deducted from
revenue (gross) is the amount that is included in the revenue (gross)
and not the entireamountofliabilityarising during theyear.
Interest Income
Interest income is recognized on a time proportion basis taking into
account theamount outstanding and the rate applicable.
Dividends
Dividend income is recognized when the Company''s right to receive
dividend is established by the balance sheet date.
l) ForeignCurrency Transactions Initial Recognition
Foreign currency transactions are initially 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.
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 currencyare reported using theexchange rateat
thedate ofthe transaction; and non-monetary items which arecarried at
fairvalue or other similar valuation denominated in a foreign
currencyare reported using the exchange rates that existed when the
values were determined. Exchange differences
Exchange differences arising on the settlement of monetary items or on
restatement of monetary items 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.
Forward Exchange Contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception ofthe forward exchange
contract is amortized as expense or income over the life ofthe
contract. Exchange differences on such contracts are recognized 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 offorward
exchange contract is recognized as income or expense for theyear.
m) Retirement and other Employee Benefits
Retirement benefits in the form of Provident and Superannuation funds
are defined contribution schemes and the contributions are charged to
the Statement of Profit and Loss of theyear when an employee renders
the related service. There are no obligations other than the
contribution payable to the respective funds.
Gratuity liability is a defined benefit obligation and is provided for
on the basis ofactuarial valuation on projected unit credit method made
at the end ofeach financial period.
Long term compensated absences are provided for based on actuarial
valuation, as per projected unit credit method, made at the end ofeach
financial period. Accumulated leave, which is expected to be utilized
within the next twelve months is treated as short term employee
benefit. The Company measures the expected cost of such absences as
the additional amount that it expects to pay as a result ofthe unused
entitlement that has accumulated at the reporting date.
Actuarial gains/losses are taken to Statement of Profit and Loss and
are not deferred.
n) Taxes on Income
Tax expense comprises ofcurrent and deferred taxes.
Current income tax is measured at theamount expected to be paid to the
tax authorities in accordance with the Indian Income Tax Act. Deferred
income taxes reflect the impact ofcurrentyear timing differences
between taxable income and accounting incomefor the period and reversal
oftiming differences ofearlier 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. If the Company
has carry forward unabsorbed depreciation and carry forward tax losses,
deferred tax assets are recognized only if there is virtual certainty
backed by convincing evidence that such deferred tax assets can be
realized against future taxable profits. Unrecognized deferred tax
assets ofearlier periods are re-assessed and recognized to the extent
that it has become reasonably certain that future taxable income will
be available against which such deferred tax assets can be realized.
At each balance sheet date, the Company re-assesses unrecognized
deferred tax assets. It recognizes deferred tax assets to the extent
that it has become reasonablycertain or virtually certain, as thecase
may be, that sufficient future taxable income will beavailable against
which such deferred tax assets can be realized.
The carrying amount of deferred tax assets is 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 or
virtually certain, as the case may be, 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 or virtually certain, as the case may be, that
sufficient future taxable income will be available.
o) Segment Reporting Identification of segments
The Company''s operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions ofthe
Company operate.
Inter Segment transfers
The Company accounts for inter segment transfers at prevailing market
prices.
Allocation ofcommon costs
Common allocable costs are allocated to each segment on case to case
basis by applying the ratio, appropriate to each relevant case.
Revenue and expenses which relate to the enterprise as a whole and are
not allocable to segments on a reasonable basis, are included under the
head "Unallocated - Common".
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements ofthe Company as a whole.
p) Earning per share
Basic earning per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. The
weighted average number of equity shares outstanding during the period
is adjusted for events of bonus issue; bonus element in a rights issue
to existing shareholders; share split; and reverse share split
(consolidation ofshares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number ofshares outstanding during the period, are
adjusted for the effects ofall dilutive potential equity shares.
q) Provisions
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources
and a reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
balance sheet date. These are reviewed at each balance sheet date and
adjusted to reflect the current best estimate. Contingent Assets are
neither recognized nor disclosed in the financial statements.
Provision for product related warranties cost is based on the claims
received upto the year end as well as the management''s estimates of
further liability to be incurred in this regard during the warranty
period.
r) 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 ofthe 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.
s) Cash and Cash equivalents
Cash and cash equivalents as indicated in the Cash Flow Statement
comprise of cash on hand, cash at bankand fixed deposits with an
original maturity of three months or less.
t) Liquidated Damages
Liquidated damages on supply of materials are provided based on the
contractual obligations or deduction made by the customers, as the case
may be.
u) Excise duty & custom 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 factories as on the balance sheet date. Similarly, customs duty
on imported materials in transit / lying in bonded warehouse is
accounted for at the time of import / bonding of materials.
v) MeasurementofEBIDTA
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 amortization (EBITDA) as a separate
line item on the face ofthe Statement of Profit and Loss. The Company
measures EBITDA on the basis of profit/ (loss) for the year excluding
depreciation & amortization expenses, finance costs and tax expenses.
a) Reconciliation ofthe shares outstanding at the beginning and at the
end of the reporting period
There is no movement in the share capital during the current year and
previous year.
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 the Board of Directors is subject to
the approval of the shareholders in the ensuing Annual General Meeting.
During theyear ended March 31,2014, the amount ofdividend per share
recognised as distributable to equity shareholders is Rs. 4/- (Rs.4/-).
In theevent ofliquidation oftheCompany, the holders ofequityshareswill
be entitled to receive remaining assets oftheCompany.Thedistribution
will be in proportion to the number ofequity shares held by the
shareholders.
Notes:
a) Cash Credits and Buyers'' Credit aresecured by first charge on the
Company''s current assets, present and future and by way of collateral
charge on fixed assets ofthe Company, both present and future. All the
mortgages and charges created in favour ofthe above lenders rank pari
passu with consortium member banks.
b) Cash credits carry interest at base rate ranging from 10.00% to
12.00% plus spread ranging between 0% to 2.50% p.a. and are repayable
on demand.
c) Buyers'' Credit carries interest at Libor plus spread ranging between
0.60% to 1.50% and is repayable by 2nd January, 2015.
a) Deed ofconveyance in respect offreehold land amounting to Rs 1164.08
lacs (Rs 1164.08 lacs) is pending registration.
b) Land, Buildings, Plant & Machineries ofTitagarh Steels Unit
aggregating to Rs. 3,246.54 lacs (Gross block) as on 31st March 2009
were revalued by approved valuers on Replacement Cost basis and the net
increase of Rs. 1,345.49 lacs was transferred to Revaluation Reserve.
In accordance with the option given in the Guidance Note on Accounting
for Depreciation in Companies, the Company recoups such additional
depreciation out of revaluation reserve.
Notes:
(a) Valued at exchange rate prevailing on thedate oftransaction.
(b) Subsidiary by virtue of the Company''s control over the composition
of its Board of Directors.
(c) The shares are convertible into equity shares on or before August
27, 2022 at par.
(d) Cease to be an associate company w.e.f.January 7, 2014.
(e) During theyear, the Board ofDirectorsvide its resolution dated
January 28, 2014, has approved theconversion ofloan of Rs 3,166.50 lacs
given toTitagarh Marine Limited into 0.1% optionally fully convertible
debentures. The aforesaid debentures are convertible into equityshares
at the option ofthe Company on or before March 31,2021 at par.
As at the balancesheetdate, the Company has total investment ofRs
455.06 lacs in the equityshares and Rs 3,166.50 lacs in the Optionally
Fully Convertible Debentures (OFCD) in Titagarh Marine Limited (TML),
its wholly owned subsidiary Company. As at the balance sheet date, the
accumulated losses in the books of TML is Rs. 285.76 lacs. Considering
the long term business plan, profitability projection, the Company is
of the view that the diminution in the value of investment is temporary
in nature and accordingly, no provision is considered necessary in
these financial statements.
(f) The Company has investment in the equity and preference capital
aggregating to Rs. 4,042.57 lacs in its subsidiary company "Titagarh
Capital Private Limited" (TCPL).The subsidiary has accumulated losses
of Rs. 1,290.66 lacs as at March 31, 2014. However, certain fixed
assets ofTCPL having net block of Rs 59.23 lacs represents 687 wagons,
which are in possession of Indian Railways as lease since 1998. These
wagons are having total estimated useful life of 25 years and
significant residual value. Considering the above, the Company is of
the view that the diminution in the value of investment is temporary in
nature and accordingly, no provision is considered necessary in these
financial statements.
(g) The Company also has investment in the equity shares and Optionally
Fully Convertible Debentures aggregating to Rs. 6,450 lacs in a Joint
Venture Company "Cimco Equity Holdings Private Limited" (CEHPL).
Subsequent to the balance sheet date, on 15th April 2014, the Company
has exercised its option for the conversion of the optionally fully
convertible debentures into equity shares at par. Consequent to such
conversion, theCompany''s holding in CEHPL has increased to 99.23%. On
April 16, 2014, theCompany has also purchased 5,00,000 equityshares of
Rs.10/- each held by the other shareholder in CEHPL thereby acquiring
100% stake; as a result of which CEHPL has become wholly owned
subsidiary of the Company post the balance sheet date.
CEHPL has accumulated losses of Rs. 2,129.77 lacs as at March 31, 2014.
However, CEHPL is holding certain strategic long term investments of
Rs. 4,313.35 lacs in its listed subsidiary Company "Cimmco Ltd".
Considering the long term business plan, profitability projection and
fair value ofthe freehold and leasehold land held by Cimmco Ltd,the
Company is ofthe viewthat the diminution in the valueofinvestment is
temporary in nature and accordingly, no provision is considered
necessary in these financial statements.
2.1 Sale of finished goods for the current year is net of sales return
of Rs 2019.60 lacs relating to sales of earlier year which has been
effected due to non-fulfilmentoftermsand conditions bytheCustomer.
2.2 RETIREMENT AND OTHER EMPLOYEE BENEFIT PLANS_
The Company has a defined benefit gratuity plan which is unfunded
(except forTitagarh Steels unit where it is administered through a
trust. Every employee who has completed fiveyears or more ofservice is
entitled to gratuity on terms not less favorable than the provisions
ofthe Payment of GratuityAct, 1972.
The following tables summarises the components ofemployee benefit
expenses recognised in the Statement of Profit and Loss and Balance
Sheet for the Gratuity plans.
Mar 31, 2013
A) Basis of preparation
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 under the historical cost convention on
an accrual basis except in case of assets for which revaluation is
carried out. The accounting policies adopted in the preparation of
financial statements are consistent with those used in the previous
year.
b) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to makejudgments, estimates and assumptions
that affect the reported amount of revenues, expenses, assets and
liabilities and disclosure of contingent liabilities, at the end of
reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets and
liabilities in future periods.
c) Tangible Fixed Assets
Tangible Fixed Assets are stated at cost (or revalued amounts, as the
case may be), less accumulated depreciation and impairment, if any. The
cost of acquisition comprises of purchase price inclusive of duties
(net of Cenvat/VAT), taxes, incidental expenses,
erection/commissioning/trial run expenses and borrowing cost etc, up to
the date the assets are ready for intended use. In case of revaluation
of tangible fixed assets, the original cost as written up by the
approved valuers is considered in the accounts and the differential
amount is credited to revaluation reserve. Machinery spares which can
be used only in connection with an item of fixed assets and whose use,
as per technical assessment, is expected to be irregular, are
capitalized and depreciated over the residual life of the respective
assets. Tangible fixed assets awaiting disposal are valued at the
lower of written down value and net realizable value and disclosed
separately. Capital work-in-progress includes machinery to be
installed and construction & erection materials lying in stock.
d) Intangibles
Research costs are expensed as and when incurred. Development
expenditure incurred on an individual project is recognized as an
intangible asset when the Company can demonstrate all the following :
The technical feasibility of completing the intangible asset so that it
will be available for use or sale
Its intention to complete the asset
Its ability to use or sell the asset
How the asset will generate future economic benefits
The availability of adequate resources to complete the development and
to use or sell the asset
The ability to measure reliably the expenditure attributable to the
intangible asset during development. Development expenditure
recognized as an intangible asset is amortized on a straight line basis
over the period of expected future sales from the related project, not
exceeding ten years.
The carrying value of development costs is reviewed for impairment
annually when the asset is not yet in use, or otherwise when events or
changes in circumstances indicate that the carrying value may not be
ecoverable.
Computer softwares not being part of the hardware operating system, are
assessed to have a useful life of 3 years and are capitalised as
intangible fixed assets.
e) Depreciation & Amortisation on tangible & intangible fixed assets
Tangible Assets
Depreciation is provided using the straight line method as per the
useful lives of the fixed assets estimated by the management, or at the
rates prescribed under Schedule XIV of the Companies Act, 1956
whichever is higher. Depreciation on revalued assets is provided at
the rates specified in Section 205(2) (b) of The Companies Act, 1956.
However, in case of fixed assets whose life is determined by the valuer
to be less than their useful life under Section 205, depreciation is
provided at the higher rate, to ensure the amortisation of these assets
over their life determined by the valuer.
Additional depreciation arising due to revaluation of fixed assets is
adjusted against Revaluation Reserve. Leasehold Land is amortized over
the period of lease.
Depreciation on fixed assets added /disposed off during the year, is
provided on pro-rata basis with reference to the date of addition
/disposal.
Intangible Assets
Computer softwares capitalized as intangible fixed assets are amortised
over their useful life of 3 years.
f) Leases
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased items,
are capitalized at the lower of the fair value and present value of the
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are recognized as finance costs in the
Statement of Profit and Loss. Lease management fees, legal charges and
other initial direct costs are capitalized.
If there is no reasonable certainty that the Company will obtain the
ownership by the end of the lease term, capitalized leased assets are
depreciated over the shorter of the estimated useful life of the asset
or the lease term. 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 Statement of Profit and Loss on a
straight-line basis over the lease term.
g) Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost. Borrowing costs
directly attributable to the acquisition, construction or production of
an asset that necessarily takes a substantial period of time to get
ready for its intended use or sale are capitalized as part of the cost
of the respective asset. All other borrowing costs are expensed in the
period they occur.
h) Impairment of tangible and intangible fixed assets
The carrying amounts of assets are reviewed at each balance sheet date
to determine if there is any indication of impairment based on the
internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount which is
the greater of the assets''net selling price and value in use. In
assessing the value in use, the estimated futurecash flows
arediscounted 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. Impairment losses of continuing
operations, including impairment on inventories, are recognized in the
Statement of Profit and Loss, except for previously revalued tangible
fixed assets, where the revaluation was taken to revaluation reserve.
In this case, the impairment is also recognized in the revaluation
reserve up to the amount of any previous revaluation. After
impairment, depreciation is provided on the revised carrying amount of
the assets over its remaining useful life. A previously recognized
impairment loss is increased or reversed depending on the 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.
i) 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. Current investments are carried 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.
j) Inventories
Raw materials & Components and Stores & Spares Parts are valued at
lower of cost and net realizable value. However, materials and other
items held for use in the production of finished goods 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 include
expenses incidental to procurement thereof and determined on a weighted
average basis. Goods under process and finished goods are valued at
lower of cost and net realizable value. Cost includes direct materials,
labour cost and a proportion of manufacturing overheads based on the
normal operating capacity. Cost of finished goods includes excise duty
and is determined on a weighted average basis. Obsolete/damaged stores
and saleable scraps are valued at estimated net realizable value.
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.
k) 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
In case of sale of goods, revenue is recognized when the significant
risks and rewards of ownership of goods have passed to the buyer. Sales
are net of returns, claims, trade discounts etc.
Sales exclude sales tax and value added tax (VAT) which are collected
by the Company on behalf of the State Governments and deposited to the
credit of the respective State Governments. Excise duty deducted from
revenue (gross) is the amount that is included in the revenue (gross)
and not the entire amount of liability arising during the year.
Interest Income
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the rate applicable.
Dividends
Dividend income is recognized when the Company''s right to receive
dividend is established by the balance sheet date.
I) Foreign Currency Transactions
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.
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.
Exchange differences
Exchange differences arising on the settlement of monetary items or on
restatement of monetary items 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.
Forward Exchange Contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of the forward
exchange contract is amortized as expense or income over the life of
the contract. Exchange differences on such contracts are recognized 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 recognized as income or expense for the
year.
m) Retirement and other Employee Benefits
Retirement benefits in the form of Provident and Superannuation funds
are defined contribution schemes and the contributions are charged to
the Statement of Profit and Loss of the year when an employee renders
the related service. There are no obligations other than the
contribution payable to the respective funds.
Gratuity liability is a defined benefit obligation and is provided for
on the basis of actuarial valuation on projected unit credit method
made at the end of each financial period. Long term compensated
absences are provided for based on actuarial valuation, as per
projected unit credit method, made at the end of each financial period.
Accumulated leave, which is expected to be utilized within the next
twelve months is treated as short term employee benefit. The Company
measures the expected cost of such absences as the additional amount
that it expects to pay as a result of the unused entitlement that has
accumulated at the reporting date. Actuarial gains/losses are taken to
Statement of Profit and Loss and are not deferred.
n) Taxes on Income
Tax expense comprises of current, deferred and prior year tax expenses,
if any. Current income tax is measured at the amount expected to be
paid to the tax authorities in accordance with the Indian Income Tax
Act. Deferred income taxes reflect the impact of current year timing
differences between taxable income and accounting income for the period
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. If the Company has carry
forward unabsorbed depreciation and carry forward tax losses, deferred
tax assets are recognized only if there is virtual certainty backed by
convincing evidence that such deferred tax assets can be realized
against future taxable profits. Unrecognized deferred tax assets of
earlier periods are re-assessed and recognized to the extent that it
has become reasonably certain that future taxable income will be
available against which such deferred tax assets can be realized. At
each balance sheet date, the Company re-assesses unrecognized deferred
tax assets. It recognizes deferred tax assets to the extent that it has
become reasonably certain or virtually certain, as the case may be,
that sufficient future taxable income will be available against which
such deferred tax assets can be realized. The carrying amount of
deferred tax assets is 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 or virtually certain, as the
case may be, 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 or
virtually certain, as the case may be, that sufficient future taxable
income will be available.
o) Segment Reporting
Identification of segments
The Company''s operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Inter Segment transfers
The Company accounts for inter segment transfers at prevailing market
prices.
Allocation of common costs
Common allocable costs are allocated to each segment on case to case
basis by applying the ratio, appropriate to each relevant case.
Revenue and expenses which relate to the enterprise as a whole and are
not allocable to segments on a reasonable basis, are included under the
head "Unallocated-Common".
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.
p) Earning per share
Basic earning per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. The
weighted average number of equity shares outstanding during the period
is adjusted for events of bonus issue; bonus element in a rights issue
to existing shareholders; share split; and reverse share split
(consolidation of shares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period,
are adjusted for the effects of all dilutive potential equity shares.
q) Provisions
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources
and a reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
balance sheet date. These are reviewed at each balance sheet date and
adjusted to reflect the current best estimate. Contingent Assets are
neither recognized nor disclosed in the financial statements.
Provision for product related warranties cost is based on the claims
received upto the year end as well as the management''s estimates of
further liability to be incurred in this regard during the warranty
period.
r) 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.
s) Cash and Cash equivalents
Cash and cash equivalents as indicated in the Cash Flow Statement
comprise of cash on hand, cash at bank and fixed deposits with an
original maturity of three months or less.
t) Liquidated Damages
Liquidated damages on supply of materials are provided based on the
contractual obligations or deduction made by the customers, as the case
may be.
u) Excise duty & custom 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 factories as on the balance sheet date. Similarly, customs duty
on imported materials in transit / lying in bonded warehouse is
accounted for at the time of import / bonding of materials.
v) Measurement of EBIDTA
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 amortization (EBITDA) as a separate
line item on the face of the Statement of Profit and Loss. The Company
measures EBITDA on the basis of profit/ (loss) for the year excluding
depreciation & amortization expenses, finance costs and tax expenses.
Mar 31, 2012
A) Basis of preparation
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 under the historical cost convention on
an accrual basis except in case of assets for which revaluation is
carried out. The accounting policies adopted in the preparation of
financial statements are consistent with those used in the previous
year, except for 'b' below.
b) Change in accounting policy Presentation and disclosure of financial
statements
During the year ended March 31, 2012, 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
year figures in accordance with the Revised Schedule VI requirements
applicable in the current year.
Dividend on investment in subsidiary companies
As per requirements of Accounting Standard AS9 Revenue Recognition and
revised schedule VI, the Company has changed its accounting policy for
recognition of dividend income from subsidiary companies. In accordance
with the revised policy, the company recognizes dividend as income only
when the right to receive the same is established by the reporting
date. The above change has no impact on the profit of the Company
during the year.
c) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amount of revenues, expenses, assets and
liabilities and disclosure of contingent liabilities, at the end of
reporting period. Although these estimates are based on the
management's best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets and
liabilities in future periods.
d) Tangible Fixed Assets
Tangible Fixed Assets are stated at cost (or revalued amounts, as the
case may be), less accumulated depreciation and impairment, if any. The
cost of acquisition comprises of purchase price inclusive of duties
(net of Cenvat/VAT), taxes, incidental expenses,
erection/commissioning/trial run expenses and borrowing cost etc, up to
the date the assets are ready for intended use.
In case of revaluation of tangible fixed assets, the original cost as
written up by the approved valuers is considered in the accounts and
the differential amount is credited to revaluation reserve.
Machinery spares which can be used only in connection with an item of
fixed assets and whose use, as per technical assessment, is expected to
be irregular, are capitalized and depreciated over the residual life
ofthe respective assets.
Tangible fixed assets awaiting disposal are valued at the lower of
written down value and net realizable value and disclosed separately.
Capital work-in-progress includes machineryto be installed and
construction & erection materials lying in stock.
e) Intangibles
Research costs are expensed as and when incurred. Development
expenditure incurred on an individual project are carried forward when
its future recoverability can reasonably be regarded as assured. Any
expenditure carried forward is amortized over the period of expected
future sales from the related project, not exceeding ten years.
The carrying value of development costs is reviewed for impairment
annually when the asset is not yet in use, or otherwise when events or
changes in circumstances indicate that the carrying value may not be
recoverable.
Computer softwares not being part of the hardware operating system, are
assessed to have a useful life of 3 years and are capitalised as
intangible fixed assets.
f) Depreciation & Amortisation on tangible & intangible fixed assets
Tangible Assets
Depreciation is provided using the straight line method as per the
useful lives of the fixed assets estimated by the management, or at the
rates prescribed under schedule XIV of the Companies Act, 1956
whichever is higher.
Depreciation on revalued assets is provided at the rates specified in
Section 205(2) (b) of the Companies Act, 1956. However in case of fixed
assets whose life is determined by the valuer to be less than their
useful life under Section 205, depreciation is provided at the higher
rate, to ensure the amortisation of these assets over their life
determined by the valuer.
Additional depreciation arising due to revaluation of fixed assets is
adjusted against Revaluation Reserve.
Leasehold Land is amortized over the period of lease.
Depreciation on fixed assets added/disposed off during the year, is
provided on pro-rata basis with reference to the date of
addition/disposal.
Intangible Assets
Computer softwares capitalized as intangible fixed assets are amortised
over their useful life of 3 years.
g) Leases
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased items,
are capitalized at the lower of the fair value and present value of the
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are recognized as finance costs in the
Statement of Profit and Loss. Lease management fees, legal charges and
other initial direct costs are capitalized.
If there is no reasonable certainty that the Company will obtain the
ownership by the end of the lease term, capitalized leased assets are
depreciated over the shorter of the estimated useful life of the asset
or the lease term.
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 Statement of Profit and Loss on a straight- line basis over the
lease term.
h) Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
i) Impairment of tangible and intangible fixed assets
The carrying amounts of assets are reviewed at each balance sheet date
to determine if there is any indication of impairment based on the
internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount which is
the greater of the assets' net selling price and 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.
After impairment, depreciation is provided on the revised carrying
amount of the assets over its remaining useful life.
A previously recognized impairment loss is increased or reversed
depending on the 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.
j) 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. Current investments are carried 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.
k) Inventories
Raw materials & Components and Stores & spares parts are valued at
lower of cost and net realizable value. However, materials and other
items held for use in the production of finished goods 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 include
expenses incidental to procurement there of and determined on a weighted
average basis.
Goods under process and finished goods are valued at lower of cost and
net realizable value. Cost includes direct materials, labour cost and a
proportion of manufacturing overheads based on the normal operating
capacity. Cost of finished goods includes excise duty and is determined
on a weighted average basis.
Obsolete/damaged stores and saleable scraps are valued at estimated net
realizable value.
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.
I) 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
In case of sale of goods, revenue is recognized when the significant
risks and rewards of ownership of goods have passed to the buyer. Sales
are net of returns, claims, discounts etc.
Interest Income
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the rate applicable. Dividends
Dividend income is recognized when the company's right to receive
dividend is established by the balance sheet date.
m) Foreign Currency Transactions 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.
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.
Exchange differences
Exchange differences arising on the settlement of monetary items or on
restatement of monetary items 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.
Forward Exchange Contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of the forward
exchange contract is amortized as expense or income over the life of the
contract. Exchange differences on such contracts are recognized 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 recognized as income or expense for the
year.
n) Retirement and other Employee Benefits
Retirement benefits in the form of Provident and Superannuation funds
are defined contribution schemes and the contributions are charged to
the Profit and Loss Account of the year when the contributions to the
respective funds are due. There are no obligations other than the
contribution payable to the respective funds.
Gratuity liability is a defined benefit obligation and is provided for
on the basis of actuarial valuation on projected unit credit method
made at the end of each financial period.
Short term compensated absences are provided for based on estimates.
Long term compensated absences are provided for based on actuarial
valuation, as per projected unit credit method, made at the end of each
financial period.
Actuarial gains/losses are taken to Statement of Profit and Loss and
are not deferred.
o) Taxes on Income
Tax expense comprises of current, deferred and prior year tax expenses,
if any.
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Indian Income Tax Act. Deferred
income taxes reflect the impact of current year timing differences
between taxable income and accounting income for the period 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. If the company
has carry forward unabsorbed depreciation and carry forward tax losses,
deferred tax assets are recognized only if there is virtual certainty
backed by convincing evidence that such deferred tax assets can be
realized against future taxable profits. Unrecognized deferred tax
assets of earlier periods are re-assessed and recognized to the extent
that it has become reasonably certain that future taxable income will
be available against which such deferred tax assets can be realized.
At each balance sheet date, the Company re-assesses unrecognized
deferred tax assets. It recognizes deferred tax assets to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized.
The carrying amount of deferred tax assets is 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 or
virtually certain, as the case may be, 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 or virtually certain, as the case may be, that
sufficient future taxable income will be available.
p) Segment Reporting
Identification of segments
The Company's operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Inter Segment transfers
The Company accounts for inter segment transfers at prevailing market
prices.
Allocation of common costs
Common allocable costs are allocated to each segment on case to case
basis by applying the ratio, appropriate to each relevant case.
Revenue and expenses which relate to the enterprise as a whole and are
not allocable to segments on a reasonable basis, are included under the
head "Unallocated - Common".
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.
q) Earning pershare
Basic earning per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. The
weighted average number of equity shares outstanding during the period
is adjusted for events of bonus issue; bonus element in a rights issue
to existing shareholders; share split; and reverse share split
(consolidation of shares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period,
are adjusted for the effects of all dilutive potential equity shares.
r) Provisions
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources
and a reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
balance sheet date. These are reviewed at each balance sheet date and
adjusted to reflect the current best estimate. Contingent Assets are
neither recognized nor disclosed in the financial statements.
Contingent liabilities are not provided for and are disclosed by way of
notes.
Provision for product related warranties cost is based on the claims
received upto the year end as well as the management's estimates of
further liability to be incurred in this regard during the warranty
period.
s) Cash and Cash equivalents
Cash and cash equivalents as indicated in the cash flow statement
comprise of cash on hand, cash at bank and fixed deposits with an
original maturity of three months or less.
t) Liquidated Damages
Liquidated damages on supply of materials are provided based on the
contractual obligations or deduction made by the customers, as the case
may be.
u) Excise duty & custom 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 factories as on the balance sheet date. Similarly, customs duty
on imported materials in transit/lying in bonded warehouse is accounted
for at the time of import/bonding of materials.
v) Measurement of EBIDTA
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 amortization (EBITDA) as a separate
line item on the face of the Statement of Profit and Loss. The company
measures EBITDA on the basis of profit/(loss) for the year excluding
depreciation and amortization expense, finance costs and tax expense.
Mar 31, 2011
A) 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
except in case of assets for which revaluation is carried out. The
accounting policies applied by the Company are consistent with those
used in the previous year.
b) 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 amount 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 end. Although these estimates are based upon managements best
knowledge of current events and actions, actual results could differ
from these estimates.
c) Fixed Assets
1. Fixed Assets are stated at cost (or revalued amounts, as the case
may be), less accumulated depreciation and impairment, if any. The cost
of acquisition comprises purchase price inclusive of duties (net of
Cenvat/VAT), taxes, incidental expenses, erection/ commissioning/ trial
run expenses and interest etc, up to the date the assets are ready for
intended use.
2. In case of revaluation of fixed assets, the original cost as
written up by the approved valuers is considered in the accounts and
the differential amount is credited to revaluation reserve.
3. Machinery spares which can be used only in connection with an item
of fixed assets and whose use, as per technical assessment, is expected
to be irregular are capitalized and depreciated over the residual life
of the respective assets.
4. Borrowing costs relating to acquisition of fixed assets which take
substantial period of time to get ready for its intended use are
capitalised, to the extent they relate to the period till such assets
are ready to be put to use.
5. Assets awaiting disposal are valued at the lower of written down
value and net realizable value and disclosed separately.
6. Capital work-in-progress includes machinery to be installed,
construction & erection materials and capital advances.
d) Intangibles
Research and Development Costs
Research costs are expensed as and when incurred. Development
expenditure incurred on an individual project are carried forward when
its future recoverability can reasonably be regarded as assured. Any
expenditure carried forward is amortized over the period of expected
future sales from the related project, not exceeding ten years.
The carrying value of development costs is reviewed for impairment
annually when the asset is not yet in use, or otherwise when events or
changes in circumstances indicate that the carrying value may not be
recoverable.
Computer software not being part of the hardware operating system are
capitalized as intangible assets.
e) Depreciation / Amortisation
1) Depreciation is provided using the Straight Line Method as per the
useful lives of the fixed assets estimated by the management, or at the
rates prescribed under schedule XIV of the Companies Act, 1956
whichever is higher.
2) Depreciation on revalued assets is provided at the rates specified
in Section 205(2) (b) of the Companies Act, 1956. However in case of
fixed assets whose life is determined by the valuer to be less than
their useful life under Section 205, depreciation is provided at the
higher rate, to ensure the amortisation of these assets over their life
determined by the valuer.
3) Additional depreciation arising due to revaluation of fixed assets
is adjusted against Revaluation Reserve.
4) Leasehold Land is amortized over the period of lease.
5) Depreciation on fixed assets added / disposed off during the year,
is provided on pro-rata basis with reference to the date of addition/
disposal.
6) Computer software are amortised using the straight line method over
a period of three years.
f) Impairment of Fixed Assets
1) The carrying amounts of assets are reviewed at each Balance Sheet
date to determine if there is any indication of impairment based on the
internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount which is
the greater of the assets net selling price and 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.
2) After impairment, depreciation is provided on the revised carrying
amount of the assets over its remaining useful life.
3) A previously recognized impairment loss is increased or reversed
depending on the 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.
g) Leases
`Finance leases, which effectively transfer to the Company
substantially all the risks and benefits incidental to ownership of the
leased items, are capitalized at the lower of the fair value and
present value of the minimum lease payments at the inception of the
lease term and disclosed as leased assets. Lease payments are
apportioned between the finance charges and reduction of the lease
liability based on the implicit rate of return. Finance charges are
charged directly against income. Lease management fees, legal charges
and other initial direct costs are capitalized.
If there is no reasonable certainty that the Company will obtain the
ownership by the end of the lease term, capitalized leased assets are
depreciated over the shorter of the estimated useful life of the asset
or the lease term.
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.
h) 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 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.
i) Inventories
1) Raw materials & Components and Stores & spares Parts are valued at
lower of cost and net realizable value. However, materials and other
items held for use in the production of finished goods 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 include
expenses incidental to procurement thereof and determined on a weighted
average basis.
2) Goods under process and finished goods are valued at lower of cost
and net realizable value. Cost includes direct materials, labour cost
and a proportion of manufacturing overheads based on normal operating
capacity. Cost of finished goods includes excise duty.
3) Obsolete/damaged stores and saleable scrap are valued at estimated
net realizable value.
4) 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.
j) 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
In case of sale of goods, revenue is recognized when the significant
risks and rewards of ownership of goods have passed to the buyer.
Revenue is recognized inclusive of excise duty and exclusive of value
added tax (VAT).
Interest Income
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the rate applicable.
Dividends
Revenue is recognised when the shareholders right to receive payment
is established by the Balance Sheet date. Dividend from subsidiaries is
recognised even if same are declared after the Balance Sheet date but
pertains to period on or before the date of Balance Sheet as per the
requirement of schedule VI of the Companies Act, 1956.
k) Liquidated Damages
Liquidated damages on supply of materials are provided based on the
contractual obligations or deduction made by the customers, as the case
may be.
l) Retirement and other Employee Benefits
1) Retirement benefits in the form of Provident and Superannuation
funds are defined contribution schemes and the contributions are
charged to the Profit and Loss Account of the year when the
contributions to the respective funds are due. There are no obligations
other than the contribution payable to the respective funds.
2) Gratuity liability is a defined benefit obligation and is provided
for on the basis of actuarial valuation on projected unit credit method
made at the end of each financial period.
3) Short term compensated absences are provided for based on estimates.
Long term compensated absences are provided for based on actuarial
valuation, as per projected unit credit method, made at the end of each
financial period.
4) Actuarial gains/losses are taken to Profit and Loss Account and are
not deferred.
m) Taxes on Income
Tax expense comprises of current, deferred and prior year tax expenses,
if any.
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Indian Income Tax Act. Deferred
income taxes reflect the impact of current year timing differences
between taxable income and accounting income for the period 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. If the company
has carry forward unabsorbed depreciation and carry forward tax losses,
deferred tax assets are recognized only if there is virtual certainty
backed by convincing evidence that such deferred tax assets can be
realized against future taxable profits. Unrecognized deferred tax
assets of earlier periods are re-assessed and recognized to the extent
that it has become reasonably certain that future taxable income will
be available against which such deferred tax assets can be realized.
At each Balance Sheet date, the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be, 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 or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realised. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
n) Provisions
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources
and a reliable estimate can be made of the amount of the obligation.
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 estimate. Contingent Assets are neither
recognized nor disclosed in the financial statements. Contingent
liabilities are not provided for and are disclosed by way of notes.
Provision for product related warranties cost is based on the claims
received upto the year end as well as the managements estimates of
further liability to be incurred in this regard during the warranty
period.
o) Foreign Currency Transactions
1) 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.
2) 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.
3) Exchange differences
Exchange differences arising on the settlement of monetary items or on
restatement of monetary items 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.
4) Forward Exchange Contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of the forward
exchange contract is amortized as expense or income over the life of
the contract. Exchange differences on such contracts are recognized 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 recognized as income or expense for the
year.
p) Segment Reporting
Identification of segments
The Companys operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Inter Segment transfers
The Company accounts for inter segment transfers at prevailing market
prices.
Allocation of common costs:
Common allocable costs are allocated to each segment on case to case
basis by applying the ratio, appropriate to each relevant case.
Revenue and expenses which relate to the enterprise as a whole and are
not allocable to segments on a reasonable basis, are included under the
head "Unallocated à Common".
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.
q) Earning per share
Basic earning per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes) by the weighted
average number of equity shares outstanding during the period. The
weighted average number of equity shares outstanding during the period
is adjusted for events of bonus issue; bonus element in a rights issue
to existing shareholders; share split; and reverse share split
(consolidation of shares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period,
are adjusted for the effects of all dilutive potential equity shares.
r) Excise duty & custom 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 factories as on the Balance Sheet date. Similarly, customs duty
on imported materials in transit / lying in bonded warehouse is
accounted for at the time of import / bonding of materials.
s) Cash and Cash equivalents
Cash and cash equivalents as indicated in the Cash Flow Statement
comprise cash on hand, cash at bank and short-term investments with an
original maturity of three months or less.
Mar 31, 2010
A) Basis of preparation
The financial statements have been prepared to comply in all material
respects with the Accounting Standards notified by the CompaniesÃ
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
except in case of assets for which revaluation is carried out. The
accounting policies applied by the Company are consistent with those
used in the previous year.
b) 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 amount 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 end. Although these estimates are based upon managementÃs best
knowledge of current events and actions, actual results could differ
from these estimates.
c) Fixed Assets
Fixed Assets are stated at cost less accumulated depreciation and
impairment losses, if any. Cost comprises the purchase price inclusive
of duties (net of CENVAT/ VAT), taxes, incidental expenses and any
attributable cost of bringing the asset to its working condition for
its intended use. In case of revaluation of fixed assets, the original
cost as written up by the valuer is considered in the accounts and the
differential amount is transferred to revaluation reserve. Borrowing
costs relating to acquisition of fixed assets which take substantial
period of time to get ready for its intended use are also capitalised,
to the extent they relate to the period till such assets are ready to
be put to use.
Capital work-in-progress includes machinery to be installed,
construction and erection materials and capital advances.
Machinary spares which can be used only in connection with an item of
fixed assets and whose use as per technical assessment is expected to
be irregular, are capitalised and depreciated over the residual life of
the respective assets.
d) Intangibles
Research and Development Costs
Research costs are expensed as and when incurred. Development
expenditure incurred on an individual project are carried forward when
its future recoverability can reasonably be regarded as assured. Any
expenditure carried forward is amortized over the period of expected
future sales from the related project, not exceeding ten years.
The carrying value of development costs is reviewed for impairment
annually when the asset is not yet in use, and otherwise when events or
changes in circumstances indicate that the carrying value may not be
recoverable.
e) Depreciation / Amortisation
Depreciation on fixed assets is provided on straight-line method at the
rates and in the manner prescribed in Schedule XIV to the Companies
Act, 1956 or as per the useful lives of the assets estimated by the
management, whichever is higher. In case of fixed assets which are
devalued, the provision for depreciation is based on the revalued
amount on the estimate of the remaining useful life of such assets.
Depreciation on fixed assets added / disposed off during the year, is
provided on pro-rata basis with reference to the date of addition /
disposal.
Leasehold Land is amortised over the period of lease.
Intangible assets (specialised software) are amortised using the
straight line method over a period of three years.
f) Impairment of Fixed Assets
i. The carrying amounts of assets are reviewed at each balance sheet
date to determine if there is any indication of impairment based on the
internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount which is
the greater of the assetsà net selling price and value in use. In
assessing the value in use, the estimated future cash flows are
discounted to their present value at the weighted average cost of
capital.
ii. After impairment, depreciation is provided on the revised carrying
amount of the assets over its remaining useful life.
iii. A previously recognized impairment loss is increased or reversed
depending on the 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.
g) Leases
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased items,
are capitalized at the lower of the fair value and present value of the
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are charged directly against income. Lease
management fees, legal charges and other initial direct costs are
capitalized.
If there is no reasonable certainty that the Company will obtain the
ownership by the end of the lease term, capitalized leased assets are
depreciated over the shorter of the estimated useful life of the asset
or the lease term.
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.
h) 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 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.
i) Inventories
Closing stock of stores and spares, raw materials, finished and
semi-finished goods are valued at lower of cost and net realizable
value. Cost of inventories is ascertained on First In First OutÃ
basis. Materials and other supplies 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 in respect of raw materials and stores and spares include expenses
incidental to procurement thereof.
Cost in respect of finished goods represents prime cost and includes
appropriate portion of overhead cost and excise duty.
Cost in respect of work in progress represents costs (includes prime
cost and appropriate portion of overhead cost ) upto the stage of
completion.
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.
j) 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. In case of sale of goods, revenue is recognized when
the significant risks and rewards of ownership of goods have passed to
the buyer. Revenue is recognized inclusive of excise duty and exclusive
of value added tax (VAT).
Interest Income
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the rate applicable.
Dividends
Revenue is recognised when the shareholdersà right to receive payment
is established by the balance sheet date.
k) Liquidated Damages
Liquidated damages on supply to Railway and other Public undertakings
are provided in the accounts based on the contractual obligations or
deduction by the customers as the case may be.
l) Retirement and other Employee Benefits
Contributions to Provident, Pension and Superannuation Funds are
defined contribution plans and are paid to appropriate authorities and
charged to Profit and Loss Account on accrual basis. There are no other
obligations other than the contribution payable to respective
authorities.
Gratuity, a defined benefit plan is unfunded (except for Titagarh steel
unit where it is administered through a trust and funded) and is
provided for based on actuarial valuation made at the end of each
financial year using the projected unit credit method. Actuarial gains
and losses are recognised immediately in the statement of profit and
loss account as income or expenses.
Long term compensated absences are provided for based on actuarial
valuation made at the year end using the projected unit credit method.
Actuarial gains and losses are recognised immediately in the statement
of profit and loss account as income or expenses.
Expenditure in respect of early retirement scheme are written off as a
period cost over a period of 5 years.
m) Taxes on Income
Tax expense comprises of 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. Deferred income taxes reflect 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. Unrecognized
deferred tax assets of earlier years are re-assessed and recognized to
the extent that it has become reasonably or virtually certain that
future taxable income will be available against which such deferred tax
assets can be realized.
At each balance sheet, date, the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
n) Provisions
Provisions involving substantial degree of estimation in measurement
(without being discounted to its present value) are recognized when
there is a present obligation as a result of past events and it is
probable that there will be an outflow of resources
and a reliable estimate can be made of the amount of the obligation.
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 estimate. Contingent Assets are neither
recognized nor disclosed in the financial statements. Contingent
liabilities are not provided for and are disclosed by way of notes.
Provision for product related warranties cost is based on the claims
received upto the year end as well as the management estimates of
further liability to be incurred in this regard during the warranty
period.
o) 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 the settlement/conversion of monetary
items are recognized as income or 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 amortized as expense or income over the life of the
contract. Exchange differences on such contracts are recognized 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 recognized as income or expense for the
year.
p) Segment Reporting
Identification of segments
The Company has identified its business segments as the primary
segments. The CompanyÃs businesses are organized and managed separately
according to the nature of products, with each segment representing a
strategic business unit that offers different products and serves
different markets. The analysis of geographical segments is based on
the areas in which major operating divisions of the Company operate.
Inter Segment transfers
The Company accounts for inter segment transfers at prevailing market
prices.
Allocation of common costs
Common allocable costs are allocated to each segment on case to case
basis by applying the ratio, appropriate to each relevant case. Revenue
and expenses, which relate to the enterprise as a whole and are not
allocable to segments on a reasonable basis, are included under the
head "Unallocated ÃCommon".
The accounting policies adopted for segment reporting are in line with
those of the Company.
q) Expenditure on expansion project
Expenditure directly relating to construction activity are capitalized.
Indirect expenditure incurred during construction period are
capitalized as part of the indirect construction cost to the extent to
which the expenditure are indirectly related to construction or are
incidental thereto. Other indirect expenditure (including borrowing
costs) incurred during the construction period which are not related to
the construction activity nor are incidental thereto are charged to the
Profit and Loss Account.
All direct capital expenditures on expansion are capitalized. As
regards indirect expenditures on expansion, only that portion is
capitalized which represent the marginal increase in such expenditure
involved as a result of capital expansion. Both direct and indirect
expenditures are capitalized only if they increase the value of the
asset beyond its original standard of performance.
r) Earning per share
Basic earning per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes) by the weighted
average number of equity shares outstanding during the period. The
weighted average number of equity shares outstanding during the period
is adjusted for events of bonus issue; bonus element in a rights issue
to existing shareholders; share split; and reverse share split
(consolidation of shares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period,
are adjusted for the effects of all dilutive potential equity shares.
s) Utilization of securities premium
Share issue expenses are written off against securities premium
account.
t) Cash and Cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank
and in hand and short-term investments with an original maturity of
three months or less.
Mar 31, 2009
A) Basis of preparation
The financial statements have been prepared to comply in all material
respects with the Accounting Standards notified by the
CompaniesAccounting 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 applied by the Company are
consistent with those used in the previous year.
b) 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 amount 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 end. Although these estimates are based upon managements best
knowledge of current events and actions, actual results could differ
from these estimates.
c) Fixed Assets
Fixed Assets are stated at cost less accumulated depreciation and
impairment, if any. Cost comprises the purchase price inclusive of
duties (net of CENVAT/ VAT), taxes, incidental expenses and any
attributable cost of bringing the asset to its working condition and
intended use. Borrowing costs relating to acquisition of fixed assets
which take substantial period of time to get ready for its intended use
are also capitalised, to the extent they relate to the period till such
assets are ready to put to use.
Capital work-in-progress includes machinery to be installed,
construction and erection materials and capital advances.
Machinary spares which can be used only in connection with an item of
fixed assets and whose use as per technical assessment is expected to
be irregular, are capitalised and depreciated over the residual life of
the respective assets.
d) Intangibles
Research and Development Costs
Research costs are expensed as and when incurred. Development
expenditure incurred on an individual project are carried forward when
its future recoverability can reasonably be regarded as assured. Any
expenditure carried forward is amortized over the period of expected
future sales from the related project, not exceeding ten years.
The carrying value of development costs is reviewed for impairment
annually when the asset is not yet in use, and otherwise when events or
changes in circumstances indicate that the carrying value may not be
recoverable.
e) Depreciation
Depreciation on fixed assets is provided on straight-line method at the
rates and in the manner prescribed in Schedule XIV to the Companies
Act, 1956.
Depreciation on fixed assets added/disposed of during the year, is
provided on pro-rata basis with reference to the date of
addition/disposal.
Leasehold Land is amortised over the period of lease.
Intangible assets (specialised software) are amortised over a period of
3 years.
f) Impairment of Fixed Assets
i. The carrying amounts of assets are reviewed at each balance sheet
date to determine 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 which is
the greater of the assets net selling price and value in use. In
assessing the value in use, the estimated future cash flows are
discounted to their present value at the weighted average cost of
capital.
ii. After impairment, depreciation is provided on the revised carrying
amount of the assets over its remaining useful life.
iii. A previously recognized impairment loss is increased or reversed
depending on the 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.
g) Leases
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased items,
are capitalized at the lower of the fair value and present value of the
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are charged directly against income. Lease
management fees, legal charges and other initial direct costs are
capitalized.
If there is no reasonable certainty that the Company will obtain the
ownership by the end of the lease term, capitalized leased assets are
depreciated over the shorter of the estimated useful life of the asset
or the lease term.
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.
h) 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 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.
i) Inventories
Closing stock of stores and spares, raw materials, finished and
semi-finished goods are valued at lower of cost and net realizable
value. Cost of inventories is ascertained on First In First Out
basis. Materials and other supplies 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 in respect of raw materials and stores and spares include expenses
incidental to procurement thereof.
Cost in respect of finished goods represents prime cost and includes
appropriate portion of overhead cost and excise duty.
Cost in respect of work in progress represents costs (includes prime
cost and appropriate portion of overhead cost) upto the stage of
completion.
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.
j) 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. In case of sale of goods, revenue is recognized when
the significant risks and rewards of ownership of goods have passed to
the buyer. Revenue is recognized inclusive of excise duty and exclusive
of value added tax (VAT).
Interest Income
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the rate applicable.
Dividends
Revenue is recognised when the shareholders right to receive payment
is established by the balance sheet date.
k) Liquidated Damages
Liquidated damages on supply to Railway and other Public undertakings
are provided in the accounts based on the contractual obligations or
deduction by the customers as the case may be.
I) Retirement and other Employee Benefits
Contributions to Provident, Pension and Superannuation Funds are
defined contribution plans and are paid to appropriate authorities and
charged to Profit and Loss Account on accrual basis. There are no other
obligations other than the contribution payable to respective
authorities.
Gratuity, a defined benefit plan, is provided for based on actuarial
valuation made at the end of each financial year using the projected
unit credit method. Actuarial gain and losses are recognised
immediately in the statement of profit and loss account as income or
expenses.
Long term compensated absences are provided for based on the actuarial
valuation made at the year end using the projected unit credit method.
Actuarial gain and losses are recognised immediately in the statement
of profit and loss account as income or expenses.
Expenditure in respect of early retirement scheme are written off as a
period cost over a period of 5 years till March 31,2010.
m) Taxes on Income
Tax expense comprises of 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. Deferred income taxes reflect 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. Unrecognized
deferred tax assets of earlier years are re-assessed and recognized to
the extent that it has become reasonably or virtually certain that
future taxable income will be available against which such deferred tax
assets can be realized.
At each balance sheet date, the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
n) Provisions
Provisions involving substantial degree of estimation in measurement
(without being discounted to its present value) are recognized when
there is a present obligation as a result of past events and it is
probable that there will be an outflow of resources and a reliable
estimate can be made of the amount of the obligation. These are
reviewed at each balance sheet date and adjusted to reflect the current
best estimate. Contingent Assets are neither recognized nor disclosed
in the financial statements. Contingent liabilities are not provided
for and are disclosed by way of notes.
Provision for product related warranties cost is based on the claims
received upto the year end as well as the management estimates of
further liability to be incurred in this regard during the warranty
period.
o) 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 the settlement/conversion of monetary
items are recognized as income or expenses in the year in which they
arise.
iv) Forward Exchange Contracts not intended for trading or speculation
purpose
The premium or discount arising at the inception of forward exchange
contracts is amortized as expense or income over the life of the
contract. Exchange differences on such contracts are recognized 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 recognized as income or expense for the
year.
p) Segment Reporting
Identification of segments
The Company has identified its business segments as the primary
segments. The Companys businesses are organized and managed separately
according to the nature of products, with each segment representing a
strategic business unit that offers different products and serves
different markets. The analysis of geographical segments is based on
the areas in which major operating divisions of the Company operate.
Inter Segment transfers
The Company accounts for inter segment transfers at prevailing market
prices.
Allocation of common costs
Common allocable costs are allocated to each segment on case to case
basis by applying the ratio, appropriate to each relevant case. Revenue
and expenses, which relate to the enterprise as a whole and are not
allocable to segments on a reasonable basis, are included under the
head "Unallocated -Common".
The accounting policies adopted for segment reporting are in line with
those of the Company.
q) Expenditure on expansion project
Expenditure directly relating to construction activity are capitalised.
Indirect expenditure incurred during construction period are
capitalised as part of the indirect construction cost to the extent to
which the expenditure is indirectly related to construction or are
incidental thereto. Other indirect expenditure (including borrowing
costs) incurred during the construction period which are not related to
the construction activity nor are incidental thereto are charged to the
Profit and Loss Account.
All direct capital expenditure on expansion are capitalised. As regards
indirect expenditure on expansion, only that portion is capitalised
which represents the marginal increase in such expenditure involved as
a result of capital expansion. Both direct and indirect expenditure are
capitalised only if they increase the value of the asset beyond its
original standard of performance.
r) Earnings per share
Basic earnings per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes) by the weighted
average number of equity shares outstanding during the period. The
weighted average number of equity shares outstanding during the period
is adjusted for events of bonus issue; bonus element in a rights issue
to existing shareholders; share split; and reverse share split
(consolidation of shares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period,
are adjusted for the effects of all dilutive potential equity shares.
s) Utilization of securities premium
Share issue expenses are written off against securities premium
account.
t) Cash and Cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank
and in hand and short-term investments with an original maturity of
three months or less.
Mar 31, 2008
(a) Basis of preparation
The financial statements have been prepared to comply in all material
aspect with the Accounting Standards notified by the Companies
Accounting Standards Rules, 2006 and the relevant provisions of the
Companies Act, 1956. Except otherwise mentioned, the accounting
policies have been consistently applied by the Company and are
consistent with those used in the previous year.
(b) Fixed Assets
Fixed Assets are stated at cost less accumulated depreciation and
impairment, if any. Cost comprises the purchase price inclusive of
duties (net of CENVAT7 VAT), taxes, incidental expenses and any
attributable cost of bringing the asset to its working condition and
intended use. Borrowing cost 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 put to use.
Capital work-in-progress includes machinery to be installed,
construction and erection materials and capital advances.
(c) Depreciation
Depreciation on fixed assets is provided on straight-line method at the
rates and in the manner prescribed in Schedule XIV to the Companies
Act, 1956.
Depreciation on fixed assets added/disposed off during the year, is
provided on pro-rata basis with reference to the date of
addition/disposal.
Leasehold Land is being amortised over the period of lease.
(d) Impairment of Fixed Assets
i. 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 the value in use, the estimated future cash
flows are discounted to their present value at the weighted average
cost of capital.
ii. After impairment, depreciation is provided on the revised carrying
amount of the assets over its remaining useful life.
iii. A previously recognized impairment loss is increased or reversed
depending on the 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.
(e) Intangibles
Research and Development Costs
Research costs are expensed as and when incurred. Development
expenditure incurred on an individual project are carried forward when
its future recoverability can reasonably be regarded as assured. Any
expenditure carried forward is amortized over the period of expected
future sales from the related project, not exceeding ten years.
The carrying value of development costs is reviewed for impairment
annually when the asset is not yet in use, and otherwise when events or
changes in circumstances indicate that the carrying value may not be
recoverable.
(f) Leases
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased items,
are capitalized at the lower of the fair value and present value of the
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are charged directly against income. Lease
management fees, legal charges and other initial direct costs are
capitalized.
If there is no reasonable certainty that the Company will obtain the
ownership by the end of the lease term, capitalized leased assets are
depreciated over the shorter of the estimated useful life of the asset
or the lease term.
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.
(g) 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 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
(h) Inventories
Closing stock of stores and spares, raw materials & components,
finished and work-in-progress are valued at lower of cost and net
realizable value. Cost of inventories is ascertained on First In First
Out1 basis. Materials and other supplies 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 in respect of raw materials & components and stores and spares
include expenses incidental to procurement thereof.
Cost in respect of finished goods represents prime cost and includes
appropriate portion of overhead cost and excise duty.
Cost in respect of work in progress represents costs upto the stage of
completion.
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.
(i) 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. In case of sale of goods, revenue is recognized when
the significant risks and rewards of ownership of goods have passed to
the buyer. Revenue is recognized inclusive of excise duty and exclusive
of value added tax (VAT).
(j) Interest Income
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the rate applicable.
(k) Liquidated Damages
Liquidated damages on supply to Railway and other Public undertakings
are provided in the accounts based on the contractual obligations or
deduction by the customers as the case may be.
(I) Retirement and other Employee Benefits
Provident Fund and Superannuation
Contributions to Provident and Superannuation Funds are defined
contribution plans and are paid to appropriate authorities and charged
to Profit and Loss Account on accrual basis. There are no other
obligations other than the contribution payable to respective
authorities.
Gratuity
The Company provides for gratuity, a defined benefit retirement plan
(the "Gratuity Plan") covering eligible employees. In accordance with
the Payment of Gratuity Act, 1972, the Gratuity Plan provides a lump
sum payment to vested employees at retirement, death, incapacitation or
termination of employment, of an amount based on the respective
employees salary and the tenure of employment. Liabilities with regard
to the Gratuity Plan are determined by actuarial valuation as of the
balance sheet date. Actuarial gains and losses are adjusted to the
profit and loss account in the period in which it arises.
Early Retirement Scheme
Expenditure in respect of early retirement scheme are written off as a
period cost over a period of 5 years till March 31,2010.
Leave Encashment Plan
The Company provides for leave encashment on actuarial basis as of
balance sheet date.
(m)Taxes on Income
Tax expense comprises of 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. Deferred income taxes reflect 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. Unrecognized
deferred tax assets of earlier years are re-assessed and recognized to
the extent that it has become reasonably or virtually certain that
future taxable income will be available against which such deferred tax
assets can be realized.
(n) Provisions
Provisions involving substantial degree of estimation in measurement
(without discounted to its present value) are recognized when there is
a present obligation as a result of past events and it is probable that
there will be an outflow of resources and a reliable estimate can be
made of the amount of the obligation. These are reviewed at each
balance sheet date and adjusted to reflect the current best estimate.
Contingent Assets are neither recognized nor disclosed in the financial
statements. Contingent liabilities are not provided for and are
disclosed by way of notes.
Provision for product related warranties cost is based on the claims
received upto the year end as well as the management estimates of
further liability to be incurred in this regard during the warranty
period.
(0) 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 the settlement/conversion of monetary
items are recognized as income or expenses in the year in which they
arise.
(P) Segment Reporting
Identification of segments
The Company has identified its business segments as the primary
segments. The Companys businesses are organized and managed separately
according to the nature of products, with each segment representing a
strategic business unit that offers different products and serves
different markets. The analysis of geographical segments is based on
the areas in which the customers of the Company are located.
Inter Segment transfers
The Company accounts for inter segment transfers at prevailing market
prices.
Allocation of common costs
Common allocable costs are allocated to each segment on case to case
basis by applying the ratio, appropriate to each relevant case. Revenue
and expenses, which relate to the enterprise as a whole and are not
allocable to segments on a reasonable basis, are included under the
head "Unallocated -Common".
The accounting policies adopted for segment reporting are in line with
those of the Company.
(q) Expenditure on expansion project
Expenditure directly relating to construction activity are capitalised.
Indirect expenditure incurred during construction period are
capitalised as part of the indirect construction cost to the extent to
which the expenditure is indirectly related to construction or are
incidental thereto. Other indirect expenditure (including borrowing
costs) incurred during the construction period which are not related to
the construction activity nor are incidental thereto is charged to the
Profit and Loss Account.
All direct capital expenditure on expansion are capitalised. As regards
indirect expenditure on expansion, only that portion is capitalised
which represents the marginal increase in such expenditure involved as
a result of capital expansion. Both direct and indirect expenditure are
capitalised only if they increase the value of the asset beyond its
original standard of performance.
(r) Earning per share
Basic earning per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes) by the weighted
average number of equity shares outstanding during the period. The
weighted average number of equity shares outstanding during the period
is adjusted for events of bonus issue; bonus element in a rights issue
to existing shareholders; share split; and reverse share split
(consolidation of shares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
(s) Utilization of securities premium
Share issue expenses are written off against securities premium
account.
(t) Derivative Instruments
The Company uses derivative financial instruments such as forward
exchange contracts to hedge its risks associated with foreign currency
fluctuations.
The premium or discount arising at the inception of forward exchange
contracts is amortized 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.
(u) Cash and Cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank
and in hand and short-term investments with an original maturity of
three months or less.
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