Mar 31, 2022
1. CORPORATE INFORMATION
V-Guard Industries Limited (''V-Guard'' or ''the Company'') is a public company domiciled in India with its registered office at Vennala High School Road, Kochi, Kerala. The Company is engaged in the manufacturing, trading and selling of a wide range of products as given below:
Segment |
Products |
Electronics |
Stabilizers, Digital UPS, UPS and Solar Inverters |
Electricals |
PVC Insulated Cables, Switch Gears, Single Phase Pumps, Three Phase Pumps and Modular Switches |
Consumer Durables |
Electric Water Heaters, Solar Water Heaters, Fans, Induction Cooktops, Mixer Grinders, Glass top Gas Stoves, Rice Cookers, Air Coolers, Breakfast Appliances, Kitchen Hoods and Water Purifiers |
The Company''s manufacturing facilities are located at K.G. Chavady, Coimbatore, Tamil Nadu; at Kashipur and Roorkee, Uttarakhand; at Kala Amb, Himachal Pradesh; at SIPCOT Industrial growth center, Perundurai, Tamil Nadu and at Majitar, Rangpo and Mamring in Sikkim. The Company''s shares are listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).
The standalone financial statements were authorized by the Board of Directors for issue in accordance with resolution passed on May 19, 2022.
2. SIGNIFICANT ACCOUNTING POLICIES
This note provides a list of the significant accounting policies adopted in the preparation of these Indian Accounting Standards (Ind AS) financial statements. These policies have been consistently applied to all the years except where newly issued accounting standard is initially adopted.
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) and presentation requirements of
Division II of Schedule III to the Companies Act, 2013, (Ind AS compliant Schedule III), as applicable to the standalone financial statements.
The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities:
(i) Derivative financial instruments
(ii) Certain financial assets and liabilities that are measured at fair value
The financial statements are presented in Indian Rupees (''INR'') and all values are rounded to nearest lakhs upto two decimal places (INR 00,000), except when otherwise indicated.
2.2 Summary of significant accounting policies
a) Current versus non-current classification
The Company presents assets and liabilities in the Balance Sheet based on current / noncurrent classification. An asset is treated as current when it is:
⢠Expected to be realized or intended to be sold or consumed in normal operating cycle
⢠Held primarily for the purpose of trading
⢠Expected to be realized within twelve months after the reporting period, or
⢠Cash or cash equivalent 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 current when:
⢠It is expected to be settled in normal operating cycle
⢠It is held primarily for the purpose of trading
⢠It is due to be settled within twelve months after the reporting period, or
⢠There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments, do not affect its classification.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non- current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
The Company''s financial statements are presented in INR which is also the Company''s functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at their respective functional currency spot rates at the date the transaction first qualifies for recognition. However, for practical reasons, the Company uses an average rate if the average approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Exchange differences arising on settlement or translation of monetary items are recognised in the Statement of Profit and Loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI or Statement of Profit and Loss are also recognised in OCI or Statement of Profit and Loss, respectively).
The Company measures financial instruments at fair value at each Balance Sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
⢠In the principal market for asset or liability, or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non- financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair
value, maximising the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
⢠Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
⢠Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
⢠Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to fair value measurement as a whole) at the end of each reporting period.
The Company has a team comprising of members of senior management that determines the policies and procedures for both recurring fair value measurement, such as derivative instruments and unquoted financial assets measured at fair value, and for nonrecurring measurement, such as assets held for distribution in discontinued operations.
External valuers are involved for valuation of significant assets, such as properties and unquoted investments and financial assets, and significant liabilities, such as contingent consideration. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained.
The team decides, after discussions with the Company''s external valuers, which valuation techniques and inputs to use for each case.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
Revenue from contract with customers
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company has generally concluded that it is the principal in its revenue arrangements because it typically controls the goods or services before transferring them to the customer.
(i) Sale of products and services
Revenue from sale of products is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of the products. Revenue from sale of services is recognized as the service is performed and there are no unfulfilled obligations. The normal credit term is 15 to 90 days upon delivery.
The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated if any. In determining the transaction price for the sale of goods, the Company considers the effects of variable consideration, the existence of significant financing components, noncash consideration, and consideration payable to the customer (if any).
If the consideration in a contract includes
a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved. The contracts for the sale of goods provide customers with a right of return, cash discounts and volume rebates / trade incentives. The rights of return, cash discounts and volume rebates / trade incentives give rise to variable consideration.
As a practice, the Company provides a customer with a right to return in case of any defects or on grounds of quality. The Company uses the expected value method to estimate the goods that will not be returned because this method best predicts the amount of variable consideration to which the Company will be entitled. The requirements in Ind AS 115 on constraining estimates of variable consideration are also applied in order to determine the amount of variable consideration that can be included in the transaction price. For goods that are expected to be returned, instead of revenue, the Company recognises a refund liability. A right of return asset and corresponding adjustment to change in inventory is also recognised for the right to recover products from a customer.
The Company provides retrospective volume rebates / trade incentives to customers once the quantity of products purchased during the period exceeds a threshold specified in the contract. Rebates are offset against amounts payable by the customer. The Company estimates the variable consideration for the expected future rebates / trade incentives based on its experience of the expected value. The Company then applies the requirements on constraining estimates of variable consideration.
(ii) Warranty obligations
The Company typically provides warranties for general repairs of defects that existed at the time of sale. These assurance-type warranties are accounted for under Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets. Refer to the accounting policy on warranty provisions in section (n) Provisions.
(iii) Contract balances Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.
A receivable represents the Company''s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Refer to accounting policies of financial assets in section (q) Financial instruments - initial recognition and subsequent measurement.
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company performs under the contract.
(iv) Assets and liabilities arising from rights of return
Right of return assets
Right of return asset represents the Company''s right to recover the goods expected to be returned by customers. The asset is measured at the former carrying amount of the inventory, less any expected costs to recover the goods, including any potential decreases in the value of the returned goods. The Company updates the measurement of the asset recorded for any revisions to its expected level of returns, as well as any additional decreases in the value of the returned products.
A refund liability is the obligation to refund some or all of the consideration received (or receivable) from the customer and is measured at the amount the Company ultimately expects it will have to return to the customer. The Company updates its estimates of refund liabilities (and the corresponding change in the transaction price) at the end of each reporting period. Refer to above accounting policy on variable consideration.
For all debt instruments measured either at amortised cost or at fair value through other comprehensive income, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortised cost of a financial liability. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual
terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses. Interest income is included in finance income in the Statement of Profit and Loss.
Revenue is recognised when the Company''s right to receive the payment is established, which is generally when shareholders approve the dividend. Investments in mutual funds are mandatorily classified as fair value through statement of profit and loss. Fair value of mutual funds is determined based on the net asset value of the funds.
Government Grants are recognised where there is reasonable assurance that the grant will be received and all the attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.
When the Company receives grants of nonmonetary assets, the asset and grant are recorded at fair value amounts and released to Statement of Profit and Loss over the expected useful life in a pattern of consumption of the benefit of the underlying asset i.e. by equal annual instalments.
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 recognised outside the Statement of Profit and Loss is recognised outside the Statement of Profit and Loss (either in other comprehensive income or equity). Current tax items are recognised in correlation to the underlying transactions either in OCI or directly 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 considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The Company shall reflect the effect of uncertainty for each uncertain tax treatment by using either most likely method or expected value method, depending on which method predicts better resolution of the treatment
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 liabilities are recognised for all taxable temporary differences, except:
⢠When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
⢠In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to
the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:
⢠When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
⢠In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
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 utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
In the situations where the Company is entitled to a tax holiday under the Income-tax Act, 1961 enacted in India, no deferred tax (asset or liability) is recognized in respect of temporary differences which reverse during the tax holiday period, to the extent the concerned entity''s gross total income is subject to the deduction during the tax holiday period. Deferred tax in respect of temporary differences which reverse after the tax holiday period is recognized in the year in which the temporary differences originate. However, the Company restricts recognition of deferred tax assets to the extent it is probable that sufficient future taxable income will be available against which such deferred tax assets can be realized. For recognition of deferred taxes, the temporary differences which originate first are considered to reverse first.
Goods and services taxes paid on acquisition of assets or on incurring expenses
Expenses and assets are recognised net of the amount of goods and services taxes paid, except:
⢠When the tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the tax paid is recognised as part of the cost of acquisition of the asset or as part of the expense item, as applicable.
⢠When receivables and payables are stated with the amount of tax included.
The net amount of tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Balance Sheet.
Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Capital work-in-progress is stated at cost, net of accumulated impairment loss, if any. The cost comprises of purchase price, taxes, duties, freight and other incidental expenses directly attributable and related to acquisition and installation of the concerned assets and are further adjusted by the amount of tax credit availed wherever applicable. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their respective useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in Statement of Profit and Loss as incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.
An item of property, plant and equipment and any significant part initially recognised 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 income statement when the asset is derecognised.
Capital work-in-progress includes cost of property, plant and equipment under installation / under development as at the Balance Sheet date.
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.
Depreciation on property, plant and equipment is calculated on a straight-line basis using the rates
arrived at based on the useful lives estimated by the management. 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 the following useful lives to provide depreciation on its property, plant and equipment:
Asset category |
Useful life estimated by the management (in years) |
Factory buildings |
30 |
Other buildings |
60 |
Plant and equipment* |
5 to 20 |
Computers |
3 to 6 |
Office equipment* |
6 |
Furniture & fixtures |
10 |
Vehicles |
8 to 10 |
* For these classes of assets, where the estimated useful lives are different from lives prescribed under Schedule II of the Companies Act 2013, management has estimated these useful lives after taking into consideration technical assessment, prior asset usage experience and the risk of technological obsolescence.
Property that is held for long term rental yields or for capital appreciation or for 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 cost and where applicable, borrowing costs. Subsequent to initial recognition, investment properties are stated at cost less accumulated depreciation and accumulated impairment loss, if any. Subsequent expenditure is capitalised to assets carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item
can be measured reliably. All other repair and maintenance cost are expensed when incurred. Investment property as at March 31, 2022 and March 31, 2021 comprise of land.
Investment properties are de-recognised either when they have been disposed off or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in Statement of Profit and Loss in the period of de-recognition.
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in the Statement of Profit and Loss in the period in which the expenditure is incurred.
Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use.
The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised over their useful economic lives 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 is 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 is accounted for by changing 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 recognised in the Statement of Profit and Loss.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cashgenerating 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.
An intangible asset is de-recognised upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Gains or losses arising from disposal of the intangible assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the assets are disposed.
Research and development cost
Research costs are expensed as incurred. Development expenditure incurred on an individual project is recognised as an intangible asset when the Company can demonstrate:
⢠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 asset; and
⢠The ability to measure reliably the expenditure during development.
Following the initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be 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 amortised on straight line basis over the estimated useful life. During the period of development, the asset is tested for impairment annually.
Intangible assets with finite useful life are amortised on a straight line basis over their estimated useful life as follows:
Asset Category |
Useful life (in years) |
Software |
5 years |
Trademark |
10 years |
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 period 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 assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Company as a lessee
The Company''s lease asset classes primarily comprise of lease for land, buildings and vehicles. The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has
substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. For these short-term and low-value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets in the nature of buildings are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the underlying asset (i.e. 30 and 60 years). The right-of-use assets comprising of land is depreciated based on the lease term.
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment. Refer to the accounting policies in section (m) Impairment of non-financial assets.
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
The Company''s lease liabilities are included in financial liabilities (refer Note 21).
The Company applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases
that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
Company as a lessor
Leases in which the Company does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.
Inventories are valued at lower of cost and net realizable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows:
⢠Raw materials, packing materials, consumables and stores and spares: 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. The materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost.
⢠Finished goods and work in progress: cost includes cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity, but excluding borrowing costs. Cost is determined on weighted average basis.
⢠Traded goods: 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.
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.
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 asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cashgenerating unit''s (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 Company''s assets. Where 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.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Company''s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five
years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. To estimate cash flow projections beyond periods covered by the most recent budgets / forecasts, the Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified. In any case, this growth rate does not exceed the long-term average growth rate for the products, industries, or country or countries in which the entity operates, or for the market in which the asset is used.
Impairment losses, including impairment on inventories, are recognised in the Statement of Profit and Loss. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Company estimates the asset''s or CGU''s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the Statement of Profit and Loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.
A provision is recognised when the Company has a present obligation (legal or constructive) 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. When the Company expects some or
all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the Statement of Profit and Loss net of any reimbursement. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.
If the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Warranty provision
Provision for assurance type warranty-related costs are recognised when the product is sold or service is provided to customer. Initial recognition is based on historical experience. The Company periodically reviews the adequacy of product warranties and adjust warranty percentage and warranty provisions for actual experience, if necessary. The timing of outflow is expected to be with in one to four years.
Decommissioning liability
Decommissioning costs are provided at the present value of expected costs to settle the obligation using estimated cash flows and are recognised as part of the cost of the particular asset. The cash flows are discounted at a current pre-tax rate that reflects the risks specific to the decommissioning liability. The unwinding of the discount is expensed as incurred and recognised in the Statement of Profit and Loss as a finance cost. The estimated future costs of decommissioning are reviewed annually and adjusted as appropriate. Changes in the estimated future costs or in the discount rate applied are added to or deducted from the cost of the asset.
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 recognised 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 recognised because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements unless the probability of outflow of resources is remote. Provisions, contingent liabilities, contingent assets and commitments are reviewed at each Balance Sheet date.
Contributions to defined contribution schemes such as provident fund, employees'' state insurance, labour welfare fund etc. are charged as an expense based on the amount of contribution required to be made as and when services are rendered by the employees. The Company has no obligation, other than the contribution payable to the fund towards such schemes. The Company recognizes contribution payable as an expense, when an employee renders the related services. If the contribution payable to scheme for service received before the Balance Sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognised as liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the Balance Sheet date, then excess recognised as an asset to the extent that the prepayment will lead to, for example, a reduction in future payment or a cash refund.
Defined benefit scheme
The Company operates a defined benefit gratuity plan in India, which requires contributions to be made to a separately administered fund maintained with Life Insurance Corporation of India. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method.
Re-measurements, 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 recognised immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to Statement of Profit and Loss in subsequent periods.
Past service costs are recognised in Statement of Profit and Loss on the earlier of:
⢠The date of the plan amendment or curtailment, and
⢠The date that the Company recognises related restructuring costs
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the Statement of Profit and Loss:
⢠Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
⢠Net interest expense or income
Compensated absences
Accumulated leave, which is expected to be utilized within the next 12 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.
The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial
valuation using the projected unit credit method at the year-end. Actuarial gains / losses are immediately taken to the Statement of Profit and Loss and are not deferred. The Company presents the leave as a current liability in the Balance Sheet, as the Company believes that it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
Employees (including senior executives) of the Company receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions).
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 Share based payments reserves in equity, over the period in which the performance and / or service conditions are fulfilled in employee benefits 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. The Statement of Profit and Loss expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense.
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. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and / or performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance and / or service conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and / or service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognised is the expense had the terms had not been modified, if the original terms of the award are met. An additional expense is recognised 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 Statement of Profit and Loss.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset''s contractual cash flow characteristics and the Company''s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient, the Company initially 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. Trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient are measured at the transaction price determined under Ind AS 115. Refer to the accounting policies in section (d) Revenue from contracts with customers.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ''solely payments of principal and interest (SPPI)'' on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.
The Company''s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets classified and measured at amortised cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows while financial assets classified and measured at fair value through OCI are held within a business model with the objective of both holding to collect contractual cash flows and selling.
Purchases or sales of financial assets that
require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement financial assets are classified in following categories:
1. Financial assets at amortised cost (debt instruments)
2. Financial assets at fair value through other comprehensive income (FVTOCI) with recycling of cumulative gains and losses (debt instruments)
3. Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon de-recognition (equity instruments)
4. Financial assets at fair value through profit or loss
Financial assets at amortised cost (debt instruments)
A financial asset is measured at amortised cost if both the following conditions are met:
⢠The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
⢠Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
This category is most relevant to the Company. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of EIR. The EIR amortization is included in finance
income in Statement of Profit and Loss. The losses arising from impairment are recognised in the statement of profit and loss. This category generally applies to loans, deposits, trade and other receivables.
Financial assets at fair value through other comprehensive income (FVTOCI)
A ''financial asset'' is classified as at the FVTOCI if both of the following criteria are met:
a) The objective of the business model is achieved both by collecting
Mar 31, 2019
1. SIGNIFICANT ACCOUNTING POLICIES
1.1 Basis of preparation
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (IND AS) notified under Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) and presentation requirements of Division II of Schedule III to the Companies Act, 2013, (Ind AS compliant Schedule III), as applicable to the standalone financial statement.
The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities:
(i) Derivative financial instruments
(ii) Certain financial assets and liabilities that are measured at fair value
The financial statements are presented in Indian Rupees (âINRâ) and all values are rounded to nearest lakhs (INR 00,000), except when otherwise indicated.
2.2 Summary of significant accounting policies
a) Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current when it is:
- Expected to be realized or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realized within twelve months after the reporting period, or
- Cash or cash equivalent 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 current when:
- It is expected to be settled in normal operating cycle
- It is held primarily for the purpose of trading
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the 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 assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
b) Foreign currencies
The Companyâs financial statements are presented in INR which is also the Companyâs functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at their respective functional currency spot rates at the date the transaction first qualifies for recognition. However, for practical reasons, the Company uses an average rate if the average approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Exchange differences arising on settlement or translation of monetary items are recognised in the Statement of profit and loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI or statement of profit and loss are also recognised in OCI or statement of profit and loss, respectively).
c) Fair value measurement
The Company measures financial instruments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.
A fair value measurement of a non- financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
- Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
- Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to fair value measurement as a whole) at the end of each reporting period.
The Company has a team comprising of members of senior management that determines the policies and procedures for both recurring fair value measurement, such as derivative instruments and unquoted financial assets measured at fair value, and for non-recurring measurement, such as assets held for distribution in discontinued operations.
External valuers are involved for valuation of significant assets, such as properties and unquoted financial assets, and significant liabilities, such as contingent consideration. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The team decides, after discussions with the Companyâs external valuers, which valuation techniques and inputs to use for each case.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
d) Revenue
Revenue from contract with customers
Effective April 1, 2018, the Company has applied Ind AS 115 which establishes a comprehensive framework for determining whether, how much and when revenue is to be recognised. Ind AS 115 replaces Ind AS 18 Revenue. The Company has adopted Ind AS 115 using modified retrospective approach. The effect of initially applying this standard is recognised at the date of initial application (i.e. April 1, 2018). The standard is applied retrospectively only to contracts that are not completed as at the date of initial application and the comparative information in the statement of profit and loss is not restated - i.e. the comparative information continues to be reported under Ind AS 18. Refer note 2.2(d) - Significant accounting policies - Revenue recognition in the Annual report of the Company for the year ended March 31, 2018, for the revenue recognition policy as per Ind AS 18. The impact of the adoption of the standard on the financial statements of the Company is insignificant.
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company has generally concluded that it is the principal in its revenue arrangements because it typically controls the goods or services before transferring them to the customer.
(i) Sale of products and services
Revenue from sale of products is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of the products. Revenue from sale of services is recognized as the service is performed and there are no unfulfilled obligations. The normal credit term is 15 to 90 days upon delivery.
The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated if any. In determining the transaction price for the sale of goods, the Company considers the effects of variable consideration, the existence of significant financing components, noncash consideration, and consideration payable to the customer (if any).
Variable consideration
If the consideration in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved. The contracts for the sale of goods provide customers with a right of return, cash discounts and volume rebates/trade incentives. The right of return, cash discounts and volume rebates/trade incentives give rise to variable consideration.
- Rights of return
As a practice, the Company provides a customer with a right to return in case of any defects or on grounds of quality. The Company uses the expected value method to estimate the goods that will not be returned because this method best predicts the amount of variable consideration to which the Company will be entitled. The requirements in Ind AS 115 on constraining estimates of variable consideration are also applied in order to determine the amount of variable consideration that can be included in the transaction price. For goods that are expected to be returned, instead of revenue, the Company recognises a refund liability. A right of return asset and corresponding adjustment to change in inventory is also recognised for the right to recover products from a customer.
- Volume rebates
The Company provides retrospective volume rebates/trade incentives to customers once the quantity of products purchased during the period exceeds a threshold specified in the contract. Rebates are offset against amounts payable by the customer. The Company estimates the variable consideration for the expected future rebates/trade incentives based on its experience of the expected value. The Company then applies the requirements on constraining estimates of variable consideration.
(ii) Warranty obligations
The Company typically provides warranties for general repairs of defects that existed at the time of sale. These assurance-type warranties are accounted for under Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets. Refer to the accounting policy on warranty provisions in section (n) Provisions.
(iii) contract balances
Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.
Trade receivables
A receivable represents the Companyâs right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Refer to accounting policies of financial assets in section (q) Financial instruments - initial recognition and subsequent measurement.
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company performs under the contract.
(iv) Assets and liabilities arising from rights of return
Right of return assets
Right of return asset represents the Companyâs right to recover the goods expected to be returned by customers. The asset is measured at the former carrying amount of the inventory, less any expected costs to recover the goods, including any potential decreases in the value of the returned goods.. The Company updates the measurement of the asset recorded for any revisions to its expected level of returns, as well as any additional decreases in the value of the returned products.
Refund liabilities
A refund liability is the obligation to refund some or all of the consideration received (or receivable) from the customer and is measured at the amount the Company ultimately expects it will have to return to the customer. The Company updates its estimates of refund liabilities (and the corresponding change in the transaction price) at the end of each reporting period. Refer to above accounting policy on variable consideration.
Iinterest income
For all debt instruments measured either at amortised cost or at fair value through other comprehensive income, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortised cost of a financial liability. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses. Interest income is included in finance income in the statement of profit and loss.
Dividends
Revenue is recognised when the Companyâs right to receive the payment is established, which is generally when shareholders approve the dividend.
e) Government Grants
Government Grants are recognised where there is reasonable assurance that the grant will be received and all the attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.
When the Company receives grants of non-monetary assets, the asset and grant are recorded at fair value amounts and released to statement of profit and loss over the expected useful life in a pattern of consumption of the benefit of the underlying asset i.e. by equal annual instalments.
f) 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 in the countries where the Company operates and generates taxable income.
Current income tax relating to items recognised outside the statement of profit and loss is recognised outside the statement of profit and loss (either in other comprehensive income or equity). Current tax items are recognised in correlation to the underlying transactions either in OCI or directly 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 asset and 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 liabilities are recognised for all taxable temporary differences, except:
- When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
- In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:
- When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss
- In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
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 utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside the statement of profit and loss is recognised outside the statement of profit and loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
In the situations where the Company is entitled to a tax holiday under the Income-tax Act, 1961 enacted in India or tax laws prevailing in the respective tax jurisdictions where the Company operates, no deferred tax (asset or liability) is recognized in respect of temporary differences which reverse during the tax holiday period, to the extent the concerned entityâs gross total income is subject to the deduction during the tax holiday period. Deferred tax in respect of temporary differences which reverse after the tax holiday period is recognized in the year in which the temporary differences originate. However, the Company restricts recognition of deferred tax assets to the extent it is probable that sufficient future taxable income will be available against which such deferred tax assets can be realized. For recognition of deferred taxes, the temporary differences which originate first are considered to reverse first.
Sales/ value added/ goods and services taxes paid on acquisition of assets or on incurring expenses
Expenses and assets are recognised net of the amount of sales/ value added/ goods and services taxes paid, except:
- When the tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the tax paid is recognised as part of the cost of acquisition of the asset or as part of the expense item, as applicable
- When receivables and payables are stated with the amount of tax included
The net amount of tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
g) property, plant and equipment
Property, Plant and equipment including capital work in progress are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises of purchase price, taxes, duties, freight and other incidental expenses directly attributable and related to acquisition and installation of the concerned assets and are further adjusted by the amount of tax credit availed wherever applicable. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their respective useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in statement of profit and loss as incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.
Capital work- in- progress includes cost of property, plant and equipment under installation / under development as at the balance sheet date.
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.
Depreciation on property, plant and equipment is calculated on a straight-line basis using the rates arrived at based on the useful lives estimated by the management. The identified components are depreciated separately over their useful lives; the remaining components are depreciated over the life of the principal asset.
The Company has used the following useful lives to provide depreciation on its fixed assets:
* For these classes of assets, where the estimated useful lives are different from lives prescribed under Schedule II of the Companies Act 2013, management has estimated these useful lives after taking into consideration technical assessment, prior asset usage experience and the risk of technological obsolescence.
Leasehold land is amortized on a straight line basis over the period of lease, i.e., 99 years.
h) investment properties
Property that is held for long term rental yields or for capital appreciation or for 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 cost and where applicable, borrowing costs. Subsequent to initial recognition, investment properties are stated at cost less accumulated depreciation and accumulated impairment loss, if any. Subsequent expenditure is capitalised to assets carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably. All other repair and maintenance cost are expensed when incurred. Investment property as at March 31, 2019 and March 31, 2018 comprise of land.
Investment properties are derecognised either when they have been disposed off or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in statement of profit and loss in the period of de-recognition.
i) intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in the Statement of Profit and Loss in the period in which the expenditure is incurred.
Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use.
The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised over their useful economic lives 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 is 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 is accounted for by changing 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 recognised in the statement of profit and loss in the expense category consistent with the function of the intangible assets.
Intangible assets with indefinite useful lives are not amortised, 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 disposal of the intangible assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the assets are disposed.
Research and development cost
Research costs are expensed as incurred. Development expenditure incurred on an individual project is recognised as an intangible asset when the Company can demonstrate:
- 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 asset; and
- The ability to measure reliably the expenditure during development.
Following the initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be 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 amortised on straight line basis over the estimated useful life. During the period of development, the asset is tested for impairment annually.
Intangible assets with finite useful life are amortised on a straight line basis over their estimated useful life as follows:
j) 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 period 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.
k) 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 fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
For arrangements entered into prior to April 1, 2016, the Company has determined whether the arrangement contain lease on the basis of facts and circumstances existing on the date of transition.
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 capitalised at the commencement of the lease at the inception date at 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 recognised in finance costs in the statement of profit and loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with Companyâs general policy on the borrowing cost.
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 recognised as an expense in the statement of profit and loss account on straight line basis over the lease term, unless the payments are structured to increase in line with the expected general inflation to compensate for the lessor in expected inflationary cost increase.
Company as a lessor
Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Rental income from operating lease is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.
Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Companyâs net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.
l) inventories
Inventories are valued at lower of cost and net realizable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows:
- Raw materials, packing materials, consumables and stores and spares: 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. The materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost.
- Finished goods and work in progress: cost includes cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity, but excluding borrowing costs. Cost is determined on weighted average basis.
- Traded goods: 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.
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.
m) 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 Companyâs assets. Where 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.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Companyâs CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, the Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified. In any case, this growth rate does not exceed the long-term average growth rate for the products, industries, or country or countries in which the entity operates, or for the market in which the asset is used.
Impairment losses, including impairment on inventories, are recognised in the statement of profit and loss. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
n) Provisions
A provision is recognised when the Company has a present obligation (legal or constructive) 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. When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.
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 recognised as a finance cost.
Warranty provision
Provision for warranty-related costs are recognised when the product is sold or service is provided to customer. Initial recognition is based on historical experience. The Company periodically reviews the adequacy of product warranties and adjust warranty percentage and warranty provisions for actual experience, if necessary. The timing of outflow is expected to be within one to four years.
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 recognised 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 recognised because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements unless the probability of outflow of resources is remote. Provisions, contingent liabilities, contingent assets and commitments are reviewed at each balance sheet date.
o) Retirement and other employee benefits
Provident fund
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 through provident fund scheme as an expense, when an employee renders the related services. If the contribution payable to scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognised as liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess recognised as an asset to the extent that the prepayment will lead to, for example, a reduction in future payment or a cash refund.
Gratuity
The Company operates a defined benefit gratuity plan in India, which requires contributions to be made to a separately administered fund maintained with Life Insurance Corporation of India. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method.
Re-measurements, 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 recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to statement of profit and loss in subsequent periods.
Past service costs are recognised in statement of profit and loss on the earlier of:
- The date of the plan amendment or curtailment, and
- The date that the Company recognises related restructuring costs
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
- Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
- Net interest expense or income Compensated Absences
Accumulated leave, which is expected to be utilized within the next 12 months, is treated as shortterm 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.
The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. The Company presents the leave as a current liability in the balance sheet, as the Company believes that it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
p) Share-based payments
Employees (including senior executives) of the Company receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions).
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 Share based payments reserves in equity, over the period in which the performance and/or service conditions are fulfilled in employee benefits 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. The statement of profit and loss expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense.
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. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognised is the expense had the terms had not been modified, if the original terms of the award are met. An additional expense is recognised 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 statement of profit and loss.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
q) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial Assets
Initial recognition and measurement All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement financial assets are classified in following categories:
1. Debt instruments at amortised cost
2. Debt instruments at fair value through other comprehensive income (FVTOCI)
3. Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL)
4. Equity instruments measured at fair value through other comprehensive income (FVTOCI)
The Company does not have any financial assets falling under category 2 and 4 above.
Debt instruments at amortised cost
A Debt instrument is measured at amortised cost if both the following conditions are met:
- The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
- Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
This category is most relevant to the Company. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of EIR. The EIR amortization is included in finance income in statement of profit and loss. The losses arising from impairment are recognised in the statement of profit and loss. This category generally applies to trade and other receivables.
Debt instruments at FVTpL
FVTPL is a residual category for financial instruments. Any financial instrument, which does not meet the criteria for amortised cost or FVTOCI, is classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as âaccounting mismatchâ). The Company has not designated any debt instrument as at FVTPL.
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the statement of profit and loss.
Equity investments
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income all 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.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to the statement of profit and loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the statement of profit and loss.
De-recognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e, removed from the Companyâs Balance Sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement^ and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies the expected credit losses (ECL) model for measurement and recognition of impairment loss.
The Company follows âsimplified approachâ for recognition of impairment loss allowance on Trade receivables. The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the Company reverts to recognizing impairment loss allowance based on 12- months ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR. When estimating the cash flows, an entity is required to consider:
- All contractual terms of the financial instrument (including prepayment, extension, call and similar options) over the expected life of the financial instrument. However, in rare cases when the expected life of the financial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the financial instrument
- Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms
As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on the portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates. At every reporting date, the historically observed default rates are updated and changes in the forward-looking estimates are analysed. On that basis, the Company estimates the following provision matrix at the reporting date:
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the statement of profit and loss (P&L). This amount is reflected under the head âother expensesâ in the statement of profit and loss. For financial assets measured as at amortised cost, contractual revenue receivables and lease receivables ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
Financial liabilities:
Initial recognition and measurement Financial liabilities are classified at initial recognition as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Put Option on the Non-Controlling Interest (âNCIâ) of subsidiary is initially measured at the present value of the amount payable on exercise of the option.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, put option liability and financial guarantee contracts.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in statement of profit and loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of profit and loss.
Put option liability
The subsequent changes in carrying amount of the Put Option on NCI of subsidiary is recognised in the statement of profit and loss.
Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortization.
De-recognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
Embedded derivatives
An embedded derivative is a component of a hybrid (combined) instrument that also includes a nonderivative host contract - with the effect that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative. An embedded derivative causes some or all of the cash flows that otherwise would be required by the contract to be modified according to a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss.
If the hybrid contract contains a host that is a financial asset within the scope of Ind AS 109, the Company does not separate embedded derivatives. Rather, it applies the classification requirements contained in Ind AS 109 to the entire hybrid contract. Derivatives embedded in all other host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value though profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss, unless designated as effective hedging instruments.
Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Companyâs senior management determines change in the business model as a result of external or internal changes which are significant to the Companyâs operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date, which is the first day of the immediately next reporting period, following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
Offsetting of financial instruments
Financials assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
r) investment in subsidiaries, associates and joint ventures
An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not in control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
The investment in subsidiary, associate and Joint venture are carried at cost as per IND AS 27. Investment accounted for at cost is accounted for in accordance with IND AS 105 when they are classified as held for sale and Investment carried at cost is tested for impairment as per IND AS 36 . An investor, regardless of the nature of its involvement with an entity (the investee), shall determine whether it is a parent by assessing whether it controls the investee. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Thus, an investor controls an investee if and only if the investor has all the following:
- power over the investee;
- exposure, or rights, to variable returns from its involvement with the investee and
- the ability to use its power over the investee to affect the amount of the investorâs returns.
On disposal of investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss.
s) Derivative financial instruments
Initial recognition and subsequent measurement
The Company uses derivative financial instruments, such as forward currency contracts to hedge its foreign currency risk. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured 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.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to statement of profit and loss except for the effective portion of cash flow hedges, which is recognised in OCI and later reclassified to statement of profit and loss when the hedge item affects statement of profit and loss or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability.
For the purpose of hedge accounting, hedges are classified as:
- Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment
- Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Companyâs risk
Mar 31, 2018
a) Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current when it is:
- Expected to be realized or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realized within twelve months after the reporting period, or
- Cash or cash equivalent 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 current when:
- It is expected to be settled in normal operating cycle
- Held primarily for the purpose of trading
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the 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 assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
b) Foreign currencies
The Companyâs financial statements are presented in â which is also the Companyâs functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at their respective functional currency spot rates at the date the transaction first qualifies for recognition. However, for practical reasons, the Company uses an average rate if the average approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Exchange differences arising on settlement or translation of monetary items are recognised in the Statement of profit and loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI or statement of profit and loss are also recognised in OCI or statement of profit and loss, respectively).
c) Fair value measurement
The Company measures financial instruments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non- financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
- Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
- Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to fair value measurement as a whole) at the end of each reporting period.
The Company has a team comprising of members of senior management that determines the policies and procedures for both recurring fair value measurement, such as derivative instruments and unquoted financial assets measured at fair value, and for non-recurring measurement, such as assets held for distribution in discontinued operations.
External valuers are involved for valuation of significant assets, such as properties and unquoted financial assets, and significant liabilities, such as contingent consideration. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The team decides, after discussions with the Companyâs external valuers, which valuation techniques and inputs to use for each case.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
d) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government. The Company has concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements as it has pricing latitude and is also exposed to inventory and credit risks.
Based on the Educational Material on Ind AS 18 issued by the Institute of Chartered Accountants of India (âICAIâ), the Company has assumed that recovery of excise duty flows to the Company on its own account. This is the reason that it is a liability of the manufacturer which forms part of the cost of production, irrespective of whether the goods are sold or not. Since the recovery of excise duty flows to the Company on its own account, revenue includes excise duty.
However, sales tax/ value added tax (VAT) / Goods and Service Tax (GST) is not received by the Company on its own account. Rather, it is tax collected on value added to the commodity by the seller on behalf of the government. Accordingly, it is excluded from revenue.
The specific recognition criteria described below must also be met before revenue is recognised:
Sale of goods
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods and is measured at fair value of consideration received/receivable, net of returns and allowances, trade discounts, volume rebates and cash discounts.
Interest income
For all debt instruments measured either at amortised cost or at fair value through other comprehensive income, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortised cost of a financial liability. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses. Interest income is included in finance income in the statement of profit and loss.
Dividends
Revenue is recognised when the Companyâs right to receive the payment is established, which is generally when shareholders approve the dividend.
e) Government Grants
Government Grants are recognised where there is reasonable assurance that the grant will be received and all the attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.
When the Company receives grants of non-monetary assets, the asset and grant are recorded at fair value amounts and released to statement of profit and loss over the expected useful life in a pattern of consumption of the benefit of the underlying asset i.e. by equal annual instalments.
f) 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 in the countries where the Company operates and generates taxable income.
Current income tax relating to items recognised outside the statement of profit and loss is recognised outside the statement of profit and loss (either in other comprehensive income or equity). Current tax items are recognised in correlation to the underlying transactions either in OCI or directly 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 asset and 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 liabilities are recognised for all taxable temporary differences, except:
- When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
- In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:
- When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss
- In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
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 utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside the statement of profit and loss is recognised outside the statement of profit and loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
In the situations where the Company is entitled to a tax holiday under the Income-tax Act, 1961 enacted in India or tax laws prevailing in the respective tax jurisdictions where the Company operates, no deferred tax (asset or liability) is recognized in respect of temporary differences which reverse during the tax holiday period, to the extent the concerned entityâs gross total income is subject to the deduction during the tax holiday period. Deferred tax in respect of temporary differences which reverse after the tax holiday period is recognized in the year in which the temporary differences originate. However, the Company restricts recognition of deferred tax assets to the extent it is probable that sufficient future taxable income will be available against which such deferred tax assets can be realized. For recognition of deferred taxes, the temporary differences which originate first are considered to reverse first.
Sales/ value added/ goods and services taxes paid on acquisition of assets or on incurring expenses
Expenses and assets are recognised net of the amount of sales/ value added/ goods and services taxes paid, except:
- When the tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the tax paid is recognised as part of the cost of acquisition of the asset or as part of the expense item, as applicable
- When receivables and payables are stated with the amount of tax included
The net amount of tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
g) Property, plant and equipment
Property, Plant and equipment including capital work in progress are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises of purchase price, taxes, duties, freight and other incidental expenses directly attributable and related to acquisition and installation of the concerned assets and are further adjusted by the amount of tax credit availed wherever applicable. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their respective useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in statement of profit and loss as incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.
Capital work- in- progress includes cost of property, plant and equipment under installation / under development as at the balance sheet date.
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.
Depreciation on property, plant and equipment is calculated on a straight-line basis using the rates arrived at based on the useful lives estimated by the management. The identified components are depreciated separately over their useful lives; the remaining components are depreciated over the life of the principal asset. The Company has used the following useful lives to provide depreciation on its fixed assets:
* For these classes of assets, where the estimated useful lives are different from lives prescribed under Schedule II of the Companies Act 2013, management has estimated these useful lives after taking into consideration technical assessment, prior asset usage experience and the risk of technological obsolescence.
Leasehold land is amortized on a straight line basis over the period of lease, i.e., 99 years.
h) Investment properties
Property that is held for long term rental yields or for capital appreciation or for 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 cost and where applicable, borrowing costs. Subsequent to initial recognition, investment properties are stated at cost less accumulated depreciation and accumulated impairment loss, if any. Subsequent expenditure is capitalised to assets carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably. All other repair and maintenance cost are expensed when incurred. Investment property as at March 31, 2018 comprise of land.
Investment properties are derecognised either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in statement of profit and loss in the period of derecognition.
i) Intangible assets
I ntangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in the Statement of Profit and Loss in the period in which the expenditure is incurred.
Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use.
The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised over their useful economic lives 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 is 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 is accounted for by changing 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 recognised in the statement of profit and loss in the expense category consistent with the function of the intangible assets.
Intangible assets with indefinite useful lives are not amortised, 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 disposal of the intangible assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the assets are disposed.
Research and development cost
Research costs are expensed as incurred. Development expenditure incurred on an individual project is recognised as an intangible asset when the Company can demonstrate:
- 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 asset; and
- The ability to measure reliably the expenditure during development.
Following the initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be 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 amortised on straight line basis over the estimated useful life. During the period of development, the asset is tested for impairment annually.
Intangible assets with finite useful life are amortised on a straight line basis over their estimated useful life as follows:
j) 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 period 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.
k) 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 fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
For arrangements entered into prior to April 1, 2016, the Company has determined whether the arrangement contain lease on the basis of facts and circumstances existing on the date of transition.
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 capitalised at the commencement of the lease at the inception date at 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 recognised in finance costs in the statement of profit and loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with Companyâs general policy on the borrowing cost.
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 recognised as an expense in the statement of profit and loss account on straight line basis over the lease term, unless the payments are structured to increase in line with the expected general inflation to compensate for the lessor in expected inflationary cost increase.
Company as a lessor
Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Rental income from operating lease is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.
Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Companyâs net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.
l) Inventories
Inventories are valued at lower of cost and net realizable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows:
- Raw materials, packing materials, consumables and stores and spares: 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. The materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost.
- Finished goods and work in progress: cost includes cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity, but excluding borrowing costs. Cost is determined on weighted average basis.
- Traded goods: 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.
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.
m) 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 Companyâs assets. Where 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.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Companyâs CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, the Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified. In any case, this growth rate does not exceed the long-term average growth rate for the products, industries, or country or countries in which the entity operates, or for the market in which the asset is used.
Impairment losses, including impairment on inventories, are recognised in the statement of profit and loss. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
n) Provisions
A provision is recognised when the Company has a present obligation (legal or constructive) 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. When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.
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 recognised as a finance cost.
Warranty provisions
Provision for warranty-related costs are recognised when the product is sold or service is provided to customer. Initial recognition is based on historical experience. The Company periodically reviews the adequacy of product warranties and adjust warranty percentage and warranty provisions for actual experience, if necessary. The timing of outflow is expected to be with in one to four years.
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 recognised 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 recognised because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements unless the probability of outflow of resources is remote. Provisions, contingent liabilities, contingent assets and commitments are reviewed at each balance sheet date.
o) Retirement and other employee benefits provident fund
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 through provident fund scheme as an expense, when an employee renders the related services. If the contribution payable to scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognised as liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess recognised as an asset to the extent that the prepayment will lead to, for example, a reduction in future payment or a cash refund.
Gratuity
The Company operates a defined benefit gratuity plan in India, which requires contributions to be made to a separately administered fund maintained with Life Insurance Corporation of India. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method.
Re-measurements, 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 recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to statement of profit and loss in subsequent periods.
Past service costs are recognised in statement of profit and loss on the earlier of:
- The date of the plan amendment or curtailment, and
- The date that the Company recognises related restructuring costs
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
- Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
- Net interest expense or income compensated Absences
Accumulated leave, which is expected to be utilized within the next 12 months, is treated as shortterm 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.
The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/ losses are immediately taken to the statement of profit and loss and are not deferred. The Company presents the leave as a current liability in the balance sheet, as the Company believes that it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
p) Share-based payments
Employees (including senior executives) of the Company receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions).
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 Share based payments reserves in equity, over the period in which the performance and/or service conditions are fulfilled in employee benefits 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. The statement of profit and loss expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense.
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. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognised is the expense had the terms had not been modified, if the original terms of the award are met. An additional expense is recognised 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 statement of profit and loss.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
q) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement financial assets are classified in following categories:
1. Debt instruments at amortised cost
2. Debt instruments at fair value through other comprehensive income (FVTOCI)
3. Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL)
4. Equity instruments measured at fair value through other comprehensive income (FVTOCI)
The Company does not have any financial assets falling under category 2 and 4 above.
Debt instruments at amortised cost
A Debt instrument is measured at amortised cost if both the following conditions are met:
- The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
- Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
This category is most relevant to the Company. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of EIR. The EIR amortization is included in finance income in statement of profit and loss. The losses arising from impairment are recognised in the statement of profit and loss. This category generally applies to trade and other receivables.
Debt instruments at FVTPL
FVTPL is a residual category for financial instruments. Any financial instrument, which does not meet the criteria for amortised cost or FVTOCI, is classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as âaccounting mismatchâ). The Company has not designated any debt instrument as at FVTPL.
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the statement of profit and loss.
Equity investments
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies are classified as at FVTPL. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income all 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.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to the statement of profit and loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the statement of profit and loss.
De-recognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e, removed from the Companyâs Balance Sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement^ and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies the expected credit losses (ECL) model for measurement and recognition of impairment loss.
The Company follows âsimplified approachâ for recognition of impairment loss allowance on Trade receivables. The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the Company reverts to recognizing impairment loss allowance based on 12- months ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR. When estimating the cash flows, an entity is required to consider:
- All contractual terms of the financial instrument (including prepayment, extension, call and similar options) over the expected life of the financial instrument. However, in rare cases when the expected life of the financial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the financial instrument
- Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms
Financial liabilities:
As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on the portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates. At every reporting date, the historically observed default rates are updated and changes in the forward-looking estimates are analysed. On that basis, the Company estimates the following provision matrix at the reporting date:
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the statement of profit and loss (P&L). This amount is reflected under the head âother expensesâ in the statement of profit and loss For financial assets measured as at amortised cost, contractual revenue receivables and lease receivables ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
Initial recognition and measurement
Financial liabilities are classified at initial recognition as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Put Option on the Non-Controlling Interest (âNCIâ) of subsidiary is initially measured at the present value of the amount payable on exercise of the option.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, put option liability and financial guarantee contracts.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in statement of profit and loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of profit and loss.
Put option liability
The subsequent changes in carrying amount of the Put Option on NCI of subsidiary is recognised in the statement of profit and loss.
Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortization.
De-recognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
Embedded derivatives
An embedded derivative is a component of a hybrid (combined) instrument that also includes a nonderivative host contract - with the effect that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative. An embedded derivative causes some or all of the cash flows that otherwise would be required by the contract to be modified according to a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss.
If the hybrid contract contains a host that is a financial asset within the scope of Ind AS 109, the Company does not separate embedded derivatives. Rather, it applies the classification requirements contained in Ind AS 109 to the entire hybrid contract. Derivatives embedded in all other host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value though profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss, unless designated as effective hedging instruments.
Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Companyâs senior management determines change in the business model as a result of external or internal changes which are significant to the Companyâs operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
Offsetting of financial instruments
Financials assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
r) Investment in Subsidiaries, associates and joint ventures
An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not in control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
The investment in subsidiary, associate and joint venture are carried at cost as per Ind AS 27. Investment accounted for at cost is accounted for in accordance with Ind AS 105 when they are classified as held for sale and Investment carried at cost is tested for impairment as per Ind AS 36. An investor, regardless of the nature of its involvement with an entity (the investee), shall determine whether it is a parent by assessing whether it controls the investee. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Thus, an investor controls an investee if and only if the investor has all the following:
- power over the investee;
- exposure, or rights, to variable returns from its involvement with the investee and
- the ability to use its power over the investee to affect the amount of the investorâs returns.
On disposal of investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss.
s) Derivative financial instruments
Initial recognition and subsequent measurement
The Company uses derivative financial instruments, such as forward currency contracts to hedge its foreign currency risk. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured 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.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to statement of profit and loss except for the effective portion of cash flow hedges, which is recognised in OCI and later reclassified to statement of profit and loss when the hedge item affects statement of profit and loss or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability.
For the purpose of hedge accounting, hedges are classified as:
- Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment
- Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Companyâs risk management objective and strategy for undertaking hedge, the hedging/ economic relationship, the hedged item or transaction, the nature of the risk being hedged, hedge ratio and how the entity will assess the effectiveness of changes in the hedging instrumentâs fair value in offsetting the exposure to changes in the hedged itemâs fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
Hedges that meet the strict criteria for hedge accounting are accounted for, as described below:
(i) Fair value hedges
The change in the fair value of a hedging instrument is recognised in the statement of profit and loss as finance costs. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in the statement of profit and loss as finance costs.
For fair value hedges relating to items carried at amortised cost, any adjustment to carrying value is amortised through profit or loss over the remaining term of the hedge using the EIR method. EIR amortisation may begin as soon as an adjustment exists and no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.
If the hedged item is derecognised, the unamortised fair value is recognised immediately in the statement of profit and loss. When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in profit and loss.
The Company does not have any derivative instruments designated as a Fair Value hedge.
(ii) Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised in OCI in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the statement of profit and loss.
The Company uses foreign currency forward contracts as hedges of its exposure to foreign currency risk. The ineffective portion relating to foreign currency forward contracts is recognised in other income or expenses.
Amounts recognised as OCI are transferred to statement of profit and loss when the hedged transaction affects statement of profit and loss, such as when the hedged financial income or financial expense is recognised or when a forecast sale occurs. When the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognised as OCI are transferred to the initial carrying amount of the non-financial asset or liability.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognised in OCI remains separately in equity until the forecast transaction occurs or the foreign currency firm commitment is met.
t) Segment accounting
Operating segments are reported in a manner consistent with the internal reporting provided to the management. The Management monitors the operating results of all strategic business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit and loss and is measured consistently with profit and loss in the financial statements.
The operating segments have been identified on the basis of the nature of products. Further:
- Segment revenue includes sales and other income directly identifiable with / allocable to the segment including inter-segment revenue.
- Expenses that are directly identifiable with / allocable to segments are considered for determining the segment result. Expenses which relate to the Company as a whole and not allocable to segments are included under unallocable expenditure.
- Income which relates to the Company as a whole and not allocable to segments is included in unallocable income.
- Segment results includes margins on intersegment sales which are reduced in arriving at the profit before tax of the Company.
- Segment assets and liabilities include those directly identifiable with the respective segments. Un-allocable assets and liabilities represent the assets and liabilities that relate to the Company as a whole and not allocable to any segment.
- Segment revenue resulting from transactions with other business segments is accounted on the basis of transfer price agreed between the segments. Such transfer prices are either determined to yield a desired margin or agreed on a negotiated business.
u) Cash and Cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to 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.
v) Cash dividend and non-cash distribution
The Company recognizes a liability to make cash or non-cash distributions to equity holders of the Company when the distribution is authorized and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorised when it is approved by the shareholders in case of final dividend and by the board of directors in case of interim dividend. A corresponding amount is recognised directly in equity.
Non-cash distributions are measured at the fair value of the assets to be distributed with fair value remeasurement recognised directly in equity.
Upon distribution of non-cash assets, any difference between the carrying amount of the liability and the carrying amount of the assets distributed is recognised in the statement of profit and loss.
w) Earnings per Share
Basic earnings per share are calculated by dividing the net profit or loss for t
Mar 31, 2017
Note 1: Corporate information
V-Guard Industries Limited (''V-Guard'' or ''the Company'') is a public company domiciled in India and is engaged in the manufacturing, trading and selling of a wide range of products as given below:
V-Guard has its manufacturing facilities located at K.G. Chavady, Coimbatore, Tamil Nadu; at Kashipur, Utharakhand; at Kala Amb, Himachal Pradesh; at SIPCOT Industrial growth center, Perundurai, Tamil Nadu and at Majitar, Sikkim.
The Company''s shares are listed in Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).
Note 2: 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 and Companies (Accounting Standards) Amendment Rules, 2016. The financial statements have been prepared on an accrual basis and under the historical cost convention. The accounting policies adopted in the preparation of financial statements are consistent with those of previous year, except for the change in accounting policy explained below.
2.1 Summary of significant accounting policies
a) Change in Accounting Policy Accounting for Proposed Dividend
As per the requirements of pre-revised Accounting Standard (AS) 4 - Contingencies and Event Occurring After Balance Sheet Date, the Company used to create a liability for dividend proposed/ declared after the balance sheet date if dividend related to periods covered by the financial statements. Going forward, as per Accounting Standard (AS) 4 (Revised), the Company cannot create provision for dividend proposed/ declared after the balance sheet date unless a statute requires otherwise. The Company needs to disclose the same in notes to the financial statements.
Accordingly, the Company has disclosed dividend proposed by board of directors after the balance sheet date in the notes. Had the Company continued with creation of provision for proposed dividend, its surplus in the statement of profit and loss as of March 31, 2017 would have been lower by RS,3,577.74 Lakhs and current provision would have been higher by RS,3,577.74 Lakhs (including dividend distribution tax of RS,605.16 Lakhs). Also refer note 3 (e).
b) 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.
c) Property, plant and equipment
Property, plant and equipment, capital work in progress are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met, directly attributable cost of bringing the asset to its working condition for the intended use and initial estimate of decommissioning, restoring and similar liabilities. Any trade discounts and rebates are deducted in arriving at the purchase price. Such cost includes the cost of replacing part of the plant and equipment. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the fixed assets as a replacement if the recognition criteria are satisfied.
Items of stores and spares that meet the definition of property, plant and equipment are capitalized at cost and depreciated over their useful life. Otherwise, such items are classified as inventories.
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 and has useful life that is materially different from that of the remaining asset. Property, plant and equipment held for sale is valued at lower of their carrying amount and net realizable value. Any write-down is recognized in the statement of profit and loss.
Gains or losses arising from derecognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
d) Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred.
Intangible assets are amortized on a straight line basis over the estimated useful economic life. The Company uses a rebuttable presumption that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use. If the persuasive evidence exists to the affect that useful life of an intangible asset exceeds ten years, the Company amortizes the intangible asset over the best estimate of its useful life. Such intangible assets and intangible assets not yet available for use are tested for impairment annually, either individually or at the cash-generating unit level. All other intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired.
The amortization period and the amortization method are reviewed at least at each financial year end. If the expected useful life of the asset is significantly different from previous estimates, the amortization period is changed accordingly. If there has been a significant change in the expected pattern of economic benefits from the asset, the amortization method is changed to reflect the changed pattern. Such changes are accounted for in accordance with AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies.
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 and loss when the asset is derecognized.
Research and development expenses
Research costs are expensed as incurred. Development expenditure incurred on an individual project is recognized as an intangible asset when the Company can demonstrate all the following:
(i) The technical feasibility of completing the intangible asset so that it will be available for use or sale,
(ii) Its intention to complete the asset,
(iii) Its ability to use or sell the asset,
(iv) How the asset will generate future economic benefits,
(v) The availability of adequate resources to complete the development and to use or sell the asset and
(vi) The ability to measure reliably the expenditure attributable to the intangible asset during development.
Following the initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be 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 on a straight line basis over the period of expected future benefit from the related project, i.e., the estimated useful life of ten years. Amortization is recognized in the statement of profit and loss. During the period of development, the asset is tested for impairment annually.
e) Depreciation and amortisation
Depreciation on property, plant and equipment is calculated on a straight-line basis using the rates arrived at based on the useful lives estimated by the management. The identified components are depreciated separately over their useful lives; the remaining components are depreciated over the life of the principal asset. The Company has used the following rates to provide depreciation on its fixed assets:
* For these classes of assets, where the estimated useful lives are different from lives prescribed under Schedule II, management has estimated these useful lives after taking into consideration technical assessment, prior asset usage experience and the risk of technological obsolescence.
Leasehold land is amortized on a straight line basis over the period of lease, i.e., 99 years.
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.
The estimated useful life of the intangible assets and the amortisation period are reviewed at the end of each financial year and the amortisation method is revised to reflect the changed pattern.
f) Leases
Where the Company is lessee
Leases, where the less or effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term.
g) Borrowing costs
Borrowing cost includes interest and amortization of ancillary costs incurred in connection with the arrangement of borrowings. 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 fixed 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 asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) net selling price and its value in use. The 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. Where 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. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.
The Company bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Company''s cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering a period of five years. For longer periods, a long term growth rate is calculated and applied to project future cash flows after the fifth year.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset''s or cash-generating unit''s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit and loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.
i) Government grants and subsidies
Grants and subsidies from the government are recognized when there is reasonable assurance that (i) the Company will comply with the conditions attached to them, and (ii) the grant/subsidy will be received.
When the grant or subsidy relates to revenue, it is recognized as income on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs, which they are intended to compensate. Government grants whose primary condition is that the Company should purchase, construct or otherwise acquire capital assets are presented by deducting them from the carrying value of the assets. The grant is recognised as income over the life of a depreciable asset by way of a reduced depreciation charge.
Where the Company receives non-monetary grants, the asset is accounted for on the basis of its acquisition cost. In case a nonmonetary asset is given free of cost, it is recognized at a nominal value.
Government grants of the nature of promoters'' contribution are credited to capital reserve and treated as a part of the shareholders'' funds
j) Investments
Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties. If an investment is acquired, or partly acquired, by the issue of shares or other securities, the acquisition cost is the fair value of the securities issued. If an investment is acquired in exchange for another asset, the acquisition is determined by reference to the fair value of the asset given up or by reference to the fair value of the investment acquired, whichever is more clearly evident.
Current investments are carried in the financial statements at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.
On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss.
Investment property
An investment in land or buildings, which is not intended to be occupied substantially for use by, or in the operations of, the Company, is classified as investment property. Investment properties are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any.
The cost comprises purchase price, borrowing costs if capitalization criteria are met and directly attributable cost of bringing the investment property to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
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, packing materials, consumables and stores and spares are valued at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost of raw materials, packing materials, consumables and stores and spares is determined on a weighted average basis. Stores and spares which do not meet the definition of property, plant and equipment are accounted as inventories.
Work-in-progress and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty. Cost is determined on a weighted average basis.
Traded goods are valued at lower of cost and net realizable value. Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on a weighted average basis.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
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. The following specific recognition criteria must also be met before revenue is recognized:
Sale of goods
Revenue from sale of goods is recognized when all the significant risks and rewards of ownership of the goods have been passed to the buyer, net of returns and trade discounts. The Company collects sales taxes and value added taxes (VAT) on behalf of the government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year.
Interest
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head "other incomeâ in the statement of profit and loss.
Dividends
Dividend income is recognized when the Company''s right to receive dividend is established by the reporting date. m) Foreign currency translation 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 retranslated using the exchange rate prevailing at the reporting date. Non-monetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction.
Exchange differences
Exchange differences arising on settlement / conversion of foreign currency monetary assets and liabilities are recognized as income or expense in the statement of profit and loss in the period in which they arise.
Forward exchange contracts entered into to hedge foreign currency risk of an existing asset/ liability
The premium or discount arising at the inception of forward exchange contract is amortized and recognized as an expense/ income over the life of the contract. Exchange differences on such contracts are recognized in the statement of profit and loss in the period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such forward exchange contract is also recognized as income or as expense for the period.
n) Retirement and other employee benefits
Employee benefits include provident fund, gratuity and compensated absences.
Defined contribution plans
Retirement benefit in the form of provident fund is a defined contribution plan. 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 expenditure, when an employee renders the related service.
Defined benefit plans
For defined benefit plan in the form of gratuity, the cost of providing benefits is determined based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains and losses are recognised in the statement of profit and loss in the period in which they occur.
Short-term employee benefits
Accumulated leave, which is expected to be utilized within the next 12 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.
Long-term employee benefits
The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. The Company presents the leave as a current liability in the balance sheet, as the Company believes that it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
o) Income taxes
Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.
Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized for deductible timing differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
In the situations where the Company is entitled to a tax holiday under the Income-tax Act, 1961 enacted in India, no deferred tax (asset or liability) is recognized in respect of timing differences which reverse during the tax holiday period, to the extent the Company''s gross total income is subject to the deduction during the tax holiday period. Deferred tax in respect of timing differences which reverse after the tax holiday period is recognized in the year in which the timing differences originate. However, the Company restricts recognition of 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. For recognition of deferred taxes, the timing differences which originate first are considered to reverse first.
At each reporting date, the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax asset 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 reporting date. The Company writes-down the carrying amount of 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
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set-off current tax assets against current tax liabilities and the deferred tax assets and deferred taxes relate to the same taxable entity and the same taxation authority.
p) 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 intrinsic value 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 intrinsic value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.
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.
Allocation of common costs
Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs.
Unallocated items
Unallocated items include general corporate income and expense items which are not allocated to any business segment. 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 are 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. Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources.
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 and contingent liabilities
A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made 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 estimates.
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) Provision for warranty
The estimated liability for product warranties is recorded when products are sold. These estimates are established using historical information on the nature, frequency and average cost of warranty claims and management estimates regarding possible future incidence based on corrective actions on product failures. The timing of outflows will vary as and when warranty claim will arise. The estimate of such warranty related costs is revised annually.
u) Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and in hand and short-term investments/deposits with an original maturity of three months or less.
Note (i) - Increase in Authorised Share Capital
The Company has increased its Authorised Share Capital from H3,500 lakhs to H4,000 lakhs vide shareholders'' approval at the Annual General Meeting held on 26th July, 2016. In the Extra Ordinary General Meeting (EGM) held on 6th March, 2017 vide shareholders'' approval, the Company further increased the Authorised Share Capital from H4,000 lakhs to H5,000 lakhs.
Note (ii) - Sub division of equity shares
Pursuant to shareholders'' approval at the Annual General Meeting held on 26th July 2016, the Company sub-divided the face value of equity shares of H10 each into ten equity shares of H1 each on the record date of 31st August, 2016.
Note (iii) - Issue of Bonus shares
The Company has allotted 12,13,29,846 fully paid up equity shares of H1 each on 17th March, 2017 pursuant to 2:5 bonus share issue approved by the shareholders in the Extra Ordinary General Meeting (EGM) held on 6th March, 2017, by capitalising the Surplus in the statement of profit and loss amounting to H1,213.30 lakhs.
(b) Terms/rights attached to equity shares:
The Company has issued only one class of equity shares having a face value of H1 per share (31st March 2016: H10 per share). Each holder of equity share 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.
The amount of final dividend recommended for distribution to equity shareholders as at 31st March, 2017 is H0.70 per share (face value: H1 each) (31st March, 2016: H2.50 per share (face value: H10 each)). During the previous year ended 31st March, 2016, the Company had declared and paid interim dividend of H4.50 per share (face value: H10 each).
In the event of liquidation of the Company, the equity share holders will be entitled to receive remaining assets of the Company, after settling the dues of preferential and other creditors as per priority. The distribution will be in proportion to the number of equity shares held by the shareholders.
*adjusted for sub division of shares and issue of bonus shares
As per records of the Company, including its register of shareholders/members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.
In addition, the Company has issued 237,724 shares of face value of H10 each (31st March 2016: 125,621 shares of face value of H10 each) during the period of five years immediately preceding the reporting date on exercise of options granted under the employee stock option plan (ESOP) wherein part consideration was received in form of employee services.
For the period up to 31st March 2016, the Company has treated dividend proposed/ declared after the Balance Sheet date as an adjusting event. However, from the financial year 2016-17 onwards, it is treated as a non-adjusting event. For details refer note 2.1 (a).
(f) Shares reserved for issue under options
For details of shares reserved for issue under the employee stock option (ESOP) plan of the Company, refer note 28.5.
Mar 31, 2015
A) Change in Accounting Policies/Estimates
(i) Depreciation on fixed assets - Component accounting and useful
lives.
Due to application of Schedule II to the Act with effect from April 01,
2014, the management has re- estimated useful lives and residual values
of all its fixed assets and determined separate useful life for each
major component of the fixed asset, if they have useful life that is
materially different from that of the remaining asset. The management
believes that depreciation rates currently used fairly reflect its
estimate of the useful lives and residual values of fixed assets,
though these rates in certain cases are different from lives prescribed
under Schedule II.
The Company has used transitional provisions of Schedule II to adjust
the impact arising from first time application of Schedule II. If a
fixed asset has zero remaining useful life on the date of Schedule II
becoming effective, i.e., April 01, 2014, its carrying amount, after
retaining any residual value, is charged to the opening balance of
retained earnings.
The carrying amount of fixed assets whose remaining useful life is not
nil on April 01, 2014, is depreciated over their remaining useful life.
Accordingly, depreciation of Rs. 106.32 lakhs (net of deferred tax
impact) has been adjusted to the opening balance of retained earnings,
with corresponding adjustment to net book value of fixed assets, in
accordance with the transitional provisions of Schedule II of the Act.
The management has concluded that the impact of such change on the
results for the year ended March 31,2015 is not material and the same
is likely to hold good for future years also.
(ii) Employee stock compensation cost
Till 27th October 2014, the SEBI (Employee Stock Option Scheme and
Employee Stock Purchase Scheme) Guidelines, 1999, dealt with the grant
of share-based payments to employees. Among other matter, these
guidelines prescribed accounting for grant of share- based payments to
employees. Hence, the company being a listed entity was required to
comply with these Guidelines as well as the Guidance Note on Accounting
for Employee Share-based Payments with regard to accounting for
employee share-based payments. Particularly, in case of conflict
between the two requirements, the SEBI guidelines were prevailing over
the ICAI Guidance Note. For example, in case of equity settled option
expiring unexercised after vesting, the SEBI guidelines required
expense to be reversed through the statement of Profit and Loss whereas
the reversal of expense through the statement of profit and loss is
prohibited under the ICAI Guidance Note. In these cases, the company
was previously complying with the requirement of SEBI guidelines.
From 28th October 2014, the SEBI (Employee Stock Option Scheme and
Employee Stock Purchase Scheme) Guidelines, 1999 have been replaced by
the SEBI (Share Based Employee Benefits) Regulations, 2014. The new
regulations don't contain any specific accounting treatment; rather,
they require ICAI Guidance Note to be followed. Consequent to the
application of the new regulations, the company has changed its
accounting for equity settled option expiring unexercised after vesting
in line with accounting prescribed in the Guidance Note, i.e., expense
is not reversed through the statement of profit and loss. The
management has decided to apply the revised accounting policy
prospectively from the date of notification of new regulation, i.e.,
28th October 2014.
Since there are no equity settled options expiring unexercised after
28th October 2014, the change in accounting policy did not have any
impact on financial statements of the company for the current year.
However due to application of the regulation, the manner of
presentation of "Employee Stock Option Outstanding Account" under the
head "Reserves and Surplus" has changed. The company has changed this
presentation for the current as well as previous year.
b) 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.
c) Tangible fixed assets
Fixed assets, are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any. The cost comprises purchase
price, borrowing costs if capitalization criteria are met and directly
attributable cost of bringing the asset to its working condition for
the intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price.Each part of an item of property, plant
and equipment with a cost that is significant in relation to the total
cost of the item is depreciated separately. This applies mainly to
components for machinery. When significant parts of fixed assets are
required to be replaced at intervals, the Company recognizes such parts
as individual assets with specific useful lives and depreciates them
accordingly. Likewise, when a major inspection is performed, its cost
is recognized in the carrying amount of the fixed assets as a
replacement if the recognition criteria are satisfied.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
Capital work-in-progress:
Fixed assets which are not ready for their intended use are carried at
cost, comprising direct cost, related incidental expenses and
attributable interest on borrowings.
d) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
Intangible assets are amortized on a straight line basis over the
estimated useful economic life. The Company uses a rebuttable
presumption that the useful life of an intangible asset will not exceed
ten years from the date when the asset is available for use. If the
persuasive evidence exists to the affect that useful life of an
intangible asset exceeds ten years, the Company amortizes the
intangible asset over the best estimate of its useful life. Such
intangible assets and intangible assets not yet available for use are
tested for impairment annually, either individually or at the
cash-generating unit level. All other intangible assets are assessed
for impairment whenever there is an indication that the intangible
asset may be impaired.
The amortization period and the amortization method are reviewed at
least at each Financial Year end. If the expected useful life of the
asset is significantly different from previous estimates, the
amortization period is changed accordingly. If there has been a
significant change in the expected pattern of economic benefits from
the asset, the amortization method is changed to reflect the changed
pattern. Such changes are accounted for in accordance with AS 5 Net
Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies.
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 and loss when the asset is derecognized.
Research and development expenses
Research costs are expensed as incurred. Development expenditure
incurred on an individual project is recognized as an intangible asset
when the Company can demonstrate all the following:
(i) The technical feasibility of completing the intangible asset so
that it will be available for use or sale,
(ii) Its intention to complete the asset,
(iii) Its ability to use or sell the asset,
(iv) How the asset will generate future economic benefits,
(v) The availability of adequate resources to complete the development
and to use or sell the asset and
(vi) The ability to measure reliably the expenditure attributable to
the intangible asset during development.
Following the initial recognition of the development expenditure as an
asset, the cost model is applied requiring the asset to be 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 on a straight line
basis over the period of expected future benefit from the related
project, i.e., the estimated useful life of ten years. Amortization is
recognized in the statement of profit and loss. During the period of
development, the asset is tested for impairment annually.
e) Depreciation and amortisation
Depreciation on fixed assets is calculated on a straight-line basis
using the rates arrived at based on the useful lives estimated by the
management. The Company has used the following rates to provide
depreciation on its fixed assets.
Useful life estimated by the
Asset Category
management (in years)
Factory buildings 30
Other buildings 60
Plant and Equipments* 5 to 20
Computers 3 to 6
Office equipment* 6
Furniture & Fixtures 10
Vehicles 8
* For these classes of assets, where the estimated useful lives are
different from lives prescribed under Schedule II, management has
estimated these useful lives after taking into consideration technical
assessment, prior asset usage experience and the risk of technological
obsolescence.
Leasehold land is amortized on a straight line basis over the period of
lease, i.e., 99 years.
Intangible assets are amortised over their estimated useful life as
follows:
Asset Category Useful life (in years)
Software 5 years
Trademark 10 years
The estimated useful life of the intangible assets and the amortisation
period are reviewed at the end of each Financial Year and the
amortisation method is revised to reflect the changed pattern.
f) Leases
Where the Company is lessee
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
g) Borrowing costs
Borrowing cost includes interest and amortization of ancillary costs
incurred in connection with the arrangement of borrowings.
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 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 asset's recoverable amount. An asset's recoverable amount
is the higher of an asset's or cash-generating unit's (CGU) net selling
price and its value in use. The 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.
Where 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. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. In determining net
selling price, recent market transactions are taken into account, if
available. If no such transactions can be identified, an appropriate
valuation model is used.
The Company bases its impairment calculation on detailed budgets and
forecast calculations which are prepared separately for each of the
Company's cash- generating units to which the individual assets are
allocated. These budgets and forecast calculations are generally
covering a period of five years. For longer periods, a long term growth
rate is calculated and applied to project future cash flows after the
fifth year.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer
exist or may have decreased. If such indication exists, the Company
estimates the asset's or cash-generating unit's recoverable amount. A
previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset's
recoverable amount since the last impairment loss was recognized. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss
been recognized for the asset in prior years. Such reversal is
recognized in the statement of profit and loss
unless the asset is carried at a revalued amount, in which case the
reversal is treated as a revaluation increase.
i) Government grants and subsidies
Government grants and subsidies relating to revenue are recognised when
there is reasonable assurance that the Company will comply with the
conditions attached to them and the grants / subsidy will be received.
Government grants whose primary condition is that the Company should
purchase, construct or otherwise acquire capital assets are presented
by deducting them from the carrying value of the assets. The grant is
recognised as income over the life of a depreciable asset by way of a
reduced depreciation charge.
Other government grants and subsidies are recognised as income over the
periods necessary to match them with the costs for which they are
intended to compensate, on a systematic basis.
j) Inventories
Raw materials, packing materials, consumables and stores and spares are
valued at lower of cost and net realizable value. However, materials
and other items held for use in the production of inventories are not
written down below cost if the finished products in which they will be
incorporated are expected to be sold at or above cost. Cost of raw
materials, components and stores and spares is determined on a weighted
average basis.
Work-in-progress and finished goods are valued at lower of cost and net
realizable value. Cost includes direct materials and labour and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of finished goods includes excise duty. Cost is
determined on a weighted average basis.
Traded goods are valued at lower of cost and net realizable value. Cost
includes cost of purchase and other costs incurred in bringing the
inventories to their present location and condition. Cost is determined
on a weighted average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
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. The following specific recognition criteria must
also be met before revenue is recognized:
Sale of goods
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership of the goods have been passed to the buyer,
net of returns and trade discounts. The Company collects sales taxes
and value added taxes (VAT) on behalf of the government and, therefore,
these are not economic benefits flowing to the Company. Hence, they are
excluded from revenue. Excise duty deducted from revenue (gross) is the
amount that is included in the revenue (gross) and not the entire
amount of liability arising during the year.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
l) Foreign currency translation
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 retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Exchange differences
Exchange differences arising on settlement / conversion of foreign
currency monetary assets and liabilities are recognized as income or
expense in the Statement of Profit and Loss in the period in which they
arise.
Forward exchange contracts entered into to hedge foreign currency risk
of an existing asset/ liability
The premium or discount arising at the inception of forward exchange
contract is amortized and recognized as an expense/ income over the
life of the contract. Exchange differences on such contracts are
recognized in the statement of profit and loss in the period in which
the exchange rates change. Any profit or loss arising on cancellation
or renewal of such forward exchange contract is also recognized as
income or as expense for the period.
m) Retirement and other employee benefits
Employee benefits include provident fund, gratuity and compensated
absences.
Defined contribution plans
Retirement benefit in the form of provident fund is a defined
contribution plan. 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 expenditure,
when an employee renders the related service. The Company has no
obligation, other than the contribution payable to the provident fund.
Defined benefit plans
For defined benefit plan in the form of gratuity, the cost of providing
benefits is determined based on the actuarial valuation using the
projected unit credit method at the year-end. Actuarial gains and
losses are recognised in the Statement of Profit and Loss in the period
in which they occur.
Short-term employee benefits
Accumulated leave, which is expected to be utilized within the next 12
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.
Long-term employee benefits
The Company treats accumulated leave expected to be carried forward
beyond twelve months, as long-term employee benefit for measurement
purposes. Such long-term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
year-end. Actuarial gains/losses are immediately taken to the
statement of profit and loss and are not deferred. The Company
presents the leave as a current liability in the balance sheet, as the
Company believes that it does not have an unconditional right to defer
its settlement for 12 months after the reporting date.
n) Income taxes
Tax expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India. The tax
rates and tax laws used to compute the amount are those that are
enacted or substantively enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years.
Deferred tax is measured using the tax rates and the tax laws enacted
or substantively enacted at the reporting date. Deferred income tax
relating to items recognized directly in equity is recognized in equity
and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
In the situations where the Company is entitled to a tax holiday under
the Income-tax Act, 1961 enacted in India, no deferred tax (asset or
liability) is recognized in respect of timing differences which reverse
during the tax holiday period, to the extent the Company's gross total
income is subject to the deduction during the tax holiday period.
Deferred tax in respect of timing differences which reverse after the
tax holiday period is recognized in the year in which the timing
differences originate. However, the Company restricts recognition of
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. For recognition of deferred taxes, the timing
differences which originate first are considered to reverse first.
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset 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
reporting date. The Company writes-down the carrying amount of 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
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
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 intrinsic value
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 intrinsic value of the share-based payment transaction, or is
otherwise beneficial to the employee as measured at the date of
modification.
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.
Allocation of common costs
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Unallocated items
Unallocated items include general corporate income and expense items
which are not allocated to any business segment.
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) Earnings Per Share
Basic earnings per share are 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. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they are entitled to participate in dividends relative to a
fully paid equity share during the reporting period. The weighted
average number of equity shares outstanding during the period is
adjusted for events such as bonus issue, bonus element in a rights
issue, share split, and reverse share split (consolidation of shares)
that have changed the number of equity shares outstanding, without a
corresponding change in resources.
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 and contingent liabilities
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made 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 estimates.
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) Provision for warranty
The estimated liability for product warranties is recorded when
products are sold. These estimates are established using historical
information on the nature, frequency and average cost of warranty
claims and management estimates regarding possible future incidence
based on corrective actions on product failures. The timing of outflows
will vary as and when warranty claim will arise. The estimate of such
warranty related costs is revised annually.
t) Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments/deposits
with an original maturity of three months or less.
Mar 31, 2014
A) 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.
b) Tangible fixed assets
Fixed assets, are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any. The cost comprises purchase
price, borrowing costs if capitalization criteria are met and directly
attributable cost of bringing the asset to its working condition for
the intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
Machinery spares which can be used only in connection with an item of
fixed asset and whose use is expected to be irregular are capitalised
and depreciated over the useful life of the principal item of the
relevant assets. All other expenses on existing fixed assets, including
day-to- day repair and maintenance expenditure and cost of replacing
parts, are charged to the statement of profit and loss for the period
during which such expenses are incurred.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
Capital work-in-progress:
Fixed assets which are not ready for their intended use are carried at
cost, comprising direct cost, related incidental expenses and
attributable interest on borrowings.
c) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the Statement of Profit and Loss in the
year in which the expenditure is incurred.
Intangible assets are amortized on a straight line basis over the
estimated useful economic life. The Company uses a rebuttable
presumption that the useful life of an intangible asset will not exceed
ten years from the date when the asset is available for use. If the
persuasive evidence exists to the affect that useful life of an
intangible asset exceeds ten years, the Company amortizes the
intangible asset over the best estimate of its useful life. Such
intangible assets and intangible assets not yet available for use are
tested for impairment annually, either individually or at the
cash-generating unit level. All other intangible assets are assessed
for impairment whenever there is an indication that the intangible
asset may be impaired.
The amortization period and the amortization method are reviewed at
least at each financial year end. If the expected useful life of the
asset is significantly different from previous estimates, the
amortization period is changed accordingly. If there has been a
significant change in the expected pattern of economic benefits from
the asset, the amortization method is changed to reflect the changed
pattern. Such changes are accounted for in accordance with AS 5 Net
Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies.
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 and loss when the asset is derecognized.
Research and development expenses
Research costs are expensed as incurred. Development expenditure
incurred on an individual project is recognized as an intangible asset
when the Company can demonstrate all the following:
(i) The technical feasibility of completing the intangible asset so
that it will be available for use or sale,
(ii) Its intention to complete the asset,
(iii) Its ability to use or sell the asset,
(iv) How the asset will generate future economic benefits,
(v) The availability of adequate resources to complete the development
and to use or sell the asset and
(vi) The ability to measure reliably the expenditure attributable to
the intangible asset during development.
Following the initial recognition of the development expenditure as an
asset, the cost model is applied requiring the asset to be 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 on a straight line
basis over the period of expected future benefit from the related
project, i.e., the estimated useful life of ten years. Amortization is
recognized in the statement of profit and loss. During the period of
development, the asset is tested for impairment annually.
d) Depreciation and amortisation
Depreciation has been provided under the straight-line method as per
the rates prescribed in Schedule XIV to the Companies Act, 1956 which
approximates the useful lives of the assets estimated by the management
except in respect of Moulds, Patterns and Dies, which are depreciated
over their useful of 5 years, as estimated by the Management. The
Company has used the following rates to provide depreciation on its
fixed assets.
e) Leases
Where the Company is lessee
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
f) Borrowing costs
Borrowing cost includes interest and amortization of ancillary costs
incurred in connection with the arrangement of borrowings.
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.
g) Impairment of tangible and intangible 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 asset''s recoverable amount. An asset''s recoverable amount
is the higher of an asset''s or cash-generating unit''s (CGU) net selling
price and its value in use. The 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.
Where 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. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. In determining net
selling price, recent market transactions are taken into account, if
available. If no such transactions can be identified, an appropriate
valuation model is used.
An assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer
exist or may have decreased. If such indication exists, the Company
estimates the asset''s or cash-generating unit''s recoverable amount. A
previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset''s
recoverable amount since the last impairment loss was recognized. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss
been recognized for the asset in prior years. Such reversal is
recognized in the statement of profit and loss unless the asset is
carried at a revalued amount, in which case the reversal is treated as
a revaluation increase.
h) Government grants and subsidies
Government grants and subsidies relating to revenue are recognised when
there is reasonable assurance that the Company will comply with the
conditions attached to them and the grants / subsidy will be received.
Government grants whose primary condition is that the Company should
purchase, construct or otherwise acquire capital assets are presented
by deducting them from the carrying value of the assets. The grant is
recognised as income over the life of a depreciable asset by way of a
reduced depreciation charge.
Other government grants and subsidies are recognised as income over the
periods necessary to match them with the costs for which they are
intended to compensate, on a systematic basis.
i) Inventories
Raw materials, packing materials and stores and spares are valued at
lower of cost and net realizable value. However, materials and other
items held for use in the production of inventories are not written
down below cost if the finished products in which they will be
incorporated are expected to be sold at or above cost. Cost of raw
materials, components and stores and spares is determined on a weighted
average basis.
Work-in-progress and finished goods are valued at lower of cost and net
realizable value. Cost includes direct materials and labour and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of finished goods includes excise duty. Cost is
determined on a weighted average basis.
Traded goods are valued at lower of cost and net realizable value. Cost
includes cost of purchase and other costs incurred in bringing the
inventories to their present location and condition. Cost is determined
on a weighted average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
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. The following specific recognition criteria must
also be met before revenue is recognized:
Sale of goods
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership of the goods have been passed to the buyer,
net of returns and trade discounts. The Company collects sales taxes
and value added taxes (VAT) on behalf of the government and, therefore,
these are not economic benefits flowing to the Company. Hence, they are
excluded from revenue. Excise duty deducted from revenue (gross) is the
amount that is included in the revenue (gross) and not the entire
amount of liability arising during the year.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
k) Foreign currency translation
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 retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Exchange differences
Exchange differences arising on settlement / conversion of foreign
currency monetary assets and liabilities are recognized as income or
expense in the Statement of Profit and Loss in the period in which they
arise.
Forward exchange contracts entered into to hedge foreign currency risk
of an existing asset / liability
The premium or discount arising at the inception of forward exchange
contract is amortized and recognized as an expense / income over the
life of the contract. Exchange differences on such contracts are
recognized in the Statement of Profit and Loss in the period in which
the exchange rates change. Any profit or loss arising on cancellation
or renewal of such forward exchange contract is also recognized as
income or as expense for the period.
l) Retirement and other employee benefits
Employee benefits include provident fund, gratuity and compensated
absences.
Defined contribution plans
Retirement benefit in the form of provident fund is a defined
contribution plan. 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 expenditure,
when an employee renders the related service.
Defined benefit plans
For defined benefit plan in the form of gratuity, the cost of providing
benefits is determined based on the actuarial valuation using the
projected unit credit method at the year-end. Actuarial gains and
losses are recognised in the Statement of Profit and Loss in the period
in which they occur.
Short-term employee benefits
Accumulated leave, which is expected to be utilized within the next 12
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.
Long-term employee benefits
The Company treats accumulated leave expected to be carried forward
beyond twelve months, as long-term employee benefit for measurement
purposes. Such long-term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
year-end. Actuarial gains / losses are immediately taken to the
statement of profit and loss and are not deferred. The Company presents
the leave as a current liability in the balance sheet, as the Company
believes that it does not have an unconditional right to defer its
settlement for 12 months after the reporting date.
m) Income taxes
Tax expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India. The tax
rates and tax laws used to compute the amount are those that are
enacted or substantively enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
In the situations where the Company is entitled to a tax holiday under
the Income-tax Act, 1961 enacted in India, no deferred tax (asset or
liability) is recognized in respect of timing differences which reverse
during the tax holiday period, to the extent the Company''s gross total
income is subject to the deduction during the tax holiday period.
Deferred tax in respect of timing differences which reverse after the
tax holiday period is recognized in the year in which the timing
differences originate. However, the Company restricts recognition of
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. For recognition of deferred taxes, the timing
differences which originate first are considered to reverse first.
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset 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
reporting date. The Company writes-down the carrying amount of 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.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
n) 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 SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
Accounting for Employee Share-based Payments, the cost of
equity-settled transactions is measured using the intrinsic value
method and recognized, together with a corresponding increase in the
"Employee Stock options outstanding account" in reserves. 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.
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.
Allocation of common costs
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Unallocated items
Unallocated items include general corporate income and expense items
which are not allocated to any business segment.
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.
p) Earnings Per Share
Basic earnings per share are 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. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they are entitled to participate in dividends relative to a
fully paid equity share during the reporting period. The weighted
average number of equity shares outstanding during the period is
adjusted for events such as bonus issue, bonus element in a rights
issue, share split, and reverse share split (consolidation of shares)
that have changed the number of equity shares outstanding, without a
corresponding change in resources.
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 and contingent liabilities
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made 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 estimates.
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.
r) Provision for warranty
The estimated liability for product warranties is recorded when
products are sold. These estimates are established using historical
information on the nature, frequency and average cost of warranty
claims and management estimates regarding possible future incidence
based on corrective actions on product failures. The timing of outflows
will vary as and when warranty claim will arise. The estimate of such
warranty related costs is revised annually.
s) Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments/deposits
with an original maturity of three months or less.
Mar 31, 2013
A) 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.
b) Tangible fixed assets
Fixed assets, are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any. The cost comprises purchase
price, borrowing costs if capitalization criteria are met and directly
attributable cost of bringing the asset to its working condition for
the intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
Machinery spares which can be used only in connection with an item of
fixed asset and whose use is expected to be irregular are capitalised
and depreciated over the useful life of the principal item of the
relevant assets.All other expenses on existing fixed assets, including
day-to-day repair and maintenance expenditure and cost of replacing
parts, are charged to the statement of profit and loss for the period
during which such expenses are incurred.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
Capital work-in-progress:
Fixed assets which are not ready for their intended use are carried at
cost, comprising direct cost, related incidental expenses and
attributable interest on borrowings.
c) Depreciation and amortisation
Depreciation has been provided under the straight-line method as per
the rates prescribed in Schedule XIV to the Companies Act, 1956 which
approximates the useful lives of the assets estimated by the management
except in respect of Moulds, Patterns and Dies, which are depreciated
over their useful life of 5 years, as estimated by the Management. The
Company has used the following rates to provide depreciation on its
fixed assets.
Assets costing less than Rs. 5,000 each are fully depreciated in the
year of capitalisation.
Leasehold land is amortised over the duration of the lease, i.e., 99
years, on a straight line basis. Leasehold improvements and leased
assets are depreciated over the lease term or the estimated useful
life, whichever is shorter.
The estimated useful life of the intangible assets and the amortisation
period are reviewed at the end of each financial year and the
amortisation method is revised to reflect the changed pattern.
d) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
Intangible assets are amortized on a straight line basis over the
estimated useful economic life. The Company uses a rebuttable
presumption that the useful life of an intangible asset will not exceed
ten years from the date when the asset is available for use. If the
persuasive evidence exists to the affect that useful life of an
intangible asset exceeds ten years, the Company amortizes the
intangible asset over the best estimate of its useful life. Such
intangible assets not yet available for use are tested for impairment
annually, either individually or at the cash-generating unit level. All
other intangible assets are assessed for impairment whenever there is
an indication that the intangible asset may be impaired.
The amortization period and the amortization method are reviewed at
least at each financial year end. If the expected useful life of the
asset is significantly different from previous estimates, the
amortization period is changed accordingly. If there has been a
significant change in the expected pattern of economic benefits from
the asset, the amortization method is changed to reflect the changed
pattern. Such changes are accounted for in accordance with AS 5 Net
Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies.
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 and loss when the asset is derecognized.
Research and development expenses
Research costs are expensed as incurred. Development expenditure
incurred on an individual project is recognized as an intangible asset
when the Company can demonstrate all the following:
(i) The technical feasibility of completing the intangible asset so
that it will be available for use or sale,
(ii) Its intention to complete the asset,
(iii) Its ability to use or sell the asset,
(iv) How the asset will generate future economic benefits,
(v) The availability of adequate resources to complete the development
and to use or sell the asset and
(vi) The ability to measure reliably the expenditure attributable to
the intangible asset during development.
Following the initial recognition of the development expenditure as an
asset, the cost model is applied requiring the asset to be 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 on a straight line
basis over the period of expected future benefit from the related
project, i.e., the estimated useful life of ten years. Amortization is
recognized in the statement of profit and loss. During the period of
development, the asset is tested for impairment annually.
e) Leases
Where the Company is lessee
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
f) Borrowing costs
Borrowing cost includes interest and amortization of ancillary costs
incurred in connection with the arrangement of borrowings.
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.
g) Impairment of tangible and intangible 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 asset''s recoverable amount. An asset''s recoverable
amount is the higher of an asset''s or cash-generating unit''s (CGU)
net selling price and its value in use. The 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. Where 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. In assessing value in use, the
estimated future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. In determining
net selling price, recent market transactions are taken into account,
if available. If no such transactions can be identified, an appropriate
valuation model is used.
An assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer
exist or may have decreased. If such indication exists, the Company
estimates the asset''s or cash-generating unit''s recoverable amount.
A previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset''s
recoverable amount since the last impairment loss was recognized. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss
been recognized for the asset in prior years. Such reversal is
recognized in the statement of profit and loss unless the asset is
carried at a revalued amount, in which case the reversal is treated as
a revaluation increase.
h) Government grants and subsidies
Government grants and subsidies are recognised when there is reasonable
assurance that the Company will comply with the conditions attached to
them and the grants / subsidy will be received. Government grants whose
primary condition is that the Company should purchase, construct or
otherwise acquire capital assets are presented by deducting them from
the carrying value of the assets. The grant is recognised as income
over the life of a depreciable asset by way of a reduced depreciation
charge.
Other government grants and subsidies are recognised as income over the
periods necessary to match them with the costs for which they are
intended to compensate, on a systematic basis.
i) Inventories
Raw materials, packing materials and stores and spares are valued at
lower of cost and net realizable value. However, materials and other
items held for use in the production of inventories are not written
down below cost if the finished products in which they will be
incorporated are expected to be sold at or above cost. Cost of raw
materials, components and stores and spares is determined on a weighted
average basis.
Work-in-progress and finished goods are valued at lower of cost and net
realizable value. Cost includes direct materials and labour and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of finished goods includes excise duty. Cost is
determined on a weighted average basis.
Traded goods are valued at lower of cost and net realizable value. Cost
includes cost of purchase and other costs incurred in bringing the
inventories to their present location and condition. Cost is determined
on a weighted average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
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. The following specific recognition criteria must
also be met before revenue is recognized:
Sale of goods
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership of the goods have been passed to the buyer,
usually on delivery of the goods, net of returns and trade discounts.
The Company collects sales taxes and value added taxes (VAT) on behalf
of the government and, therefore, these are not economic benefits
flowing to the Company. Hence, they are excluded from revenue. Excise
duty deducted from revenue (gross) is the amount that is included in
the revenue (gross) and not the entire amount of liability arising
during the year.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
k) Foreign currency translation
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.
Measurement of foreign currency monetary items at the Balance Sheet
date
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Treatment of exchange
differences
Exchange differences arising on settlement / restatement of foreign
currency monetary assets and liabilities are recognised as income or
expense in the Statement of Profit and Loss in the period in which they
arise.
l) Retirement and other employee benefits
Employee benefits include provident fund, gratuity fund and compensated
absences.
Defined contribution plans
Retirement benefit in the form of provident fund is a defined
contribution plan. 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 expenditure,
when an employee renders the related service. The Company has no
obligation, other than the contribution payable to the provident fund.
Defined benefit plans
For defined benefit plan in the form of gratuity, the cost of providing
benefits is determined based on the actuarial valuation using the
projected unit credit method at the year-end. Actuarial gains and
losses are recognised in the Statement of Profit and Loss in the period
in which they occur.
Short-term employee benefits
Accumulated leave, which is expected to be utilized within the next 12
months, is treated as short-term em- ployee 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.
Long-term employee benefits
The company treats accumulated leave expected to be carried forward
beyond twelve months, as long-term employee benefit for measurement
purposes. Such long-term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
year-end. Actuarial gains/losses are immediately taken to the statement
of profit and loss and are not deferred. The company presents the leave
as a current liability in the balance sheet, as the Company believes
that it does not have an unconditional right to defer its settlement
for 12 months after the reporting date.
m) Income taxes
Tax expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India. The tax
rates and tax laws used to compute the amount are those that are
enacted or substantively enacted, at the reporting date.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
In the situations where the Company is entitled to a tax holiday under
the Income-tax Act, 1961 enacted in India, no deferred tax (asset or
liability) is recognized in respect of timing differences which reverse
during the tax holiday period, to the extent the Company''s gross
total income is subject to the deduction during the tax holiday period.
Deferred tax in respect of timing differences which reverse after the
tax holiday period is recognized in the year in which the timing
differences originate. However, the Company restricts recognition of
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. For recognition of deferred taxes, the timing
differences which originate first are considered to reverse first.
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset 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
reporting date. The Company writes-down the carrying amount of 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.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
n) 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.
Allocation of common costs
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Unallocated items
Unallocated items include general corporate income and expense items
which are not allocated to any business segment.
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.
o) Earnings Per Share
Basic earnings per share are 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. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they are entitled to participate in dividends relative to a
fully paid equity share during the reporting period. The weighted
average number of equity shares outstanding during the period is
adjusted for events such as bonus issue, bonus element in a rights
issue, share split, and reverse share split (consolidation of shares)
that have changed the number of equity shares outstanding, without a
corresponding change in resources.
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.
p) Provisions and contingent liabilities
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made 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 estimates.
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.
q) Provision for warranty
The estimated liability for product warranties is recorded when
products are sold. These estimates are established using historical
information on the nature, frequency and average cost of warranty
claims and management estimates regarding possible future incidence
based on corrective actions on product failures. The timing of
outflows will vary as and when warranty claim will arise. The estimate
of such warranty related costs is revised annually.
r) Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments/deposits
with an original maturity of three months or less.
Mar 31, 2012
1.1 Basis of accounting and preparation of financial statements
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
the Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared on accrual basis under the historical
cost convention. The accounting policies adopted in the preparation of
the financial statements are consistent with those followed in the
previous year.
1.2 Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the Management to make estimates and assumptions considered in
the reported amounts of assets and liabilities (including contingent
liabilities) and the reported income and expenses during the year. The
Management believes that the estimates used in preparation of the
financial statements are prudent and reasonable. Future results could
differ due to these estimates and the differences between the actual
results and the estimates are recognized in the periods in which the
results are known / materialize.
1.3 Inventories
Inventories are valued at the lower of cost determined on weighted
average basis and the net realizable value after providing for
obsolescence and other losses, where considered necessary. Cost
includes all charges in bringing the goods to the point of sale,
including octopi and other levies, transit insurance and receiving
charges. Work-in-progress and finished goods include appropriate
proportion of overheads and, where applicable, excise duty.
1.4 Cash and cash equivalents (for purpose of Cash Flow Statement)
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short-term balances (with an original maturity of three
months or less from the date of acquisition), highly liquid investments
that are readily convertible into known amounts of cash and which are
subject to insignificant risk of changes in value.
1.5 Cash flow statement
Cash flows are reported using the indirect method, whereby profit /
(loss) before extraordinary items and tax is adjusted for the effects
of transactions of non-cash nature and any deferrals or accruals of
past or future cash receipts or payments. The cash flows from
operating, investing and financing activities of the Company are
segregated based on the available information.
1.6 Depreciation and amortization
Depreciation has been provided under the straight-line method as per
the rates prescribed in Schedule XIV to the Companies Act, 1956 except
in respect of Moulds, Patterns and Dies, which are depreciated over
their useful life of 5 years, as estimated by the Management. Leasehold
land is amortized over the duration of the lease.
Assets costing less than ' 5,000 each are fully depreciated in the year
of capitalization.
Intangible assets are amortized over their estimated useful life as
follows:
Trademark - 10 years
Computer software - 5 years
The estimated useful life of the intangible assets and the amortization
period are reviewed at the end of each financial year and the
amortization method is revised to reflect the changed pattern.
1.7 Revenue recognition
Sale of goods
Sales are recognized, net of returns and trade discounts, on transfer
of significant risks and rewards of ownership to the buyer, which
generally coincide with the delivery of goods to customers. Sales
include excise duty but exclude sales tax and value added tax.
1.8 Other income
Interest income is accounted on accrual basis. Dividend income is
accounted for when the right to receive it is established.
1.9 Tangible fixed assets
Fixed assets are carried at cost less accumulated depreciation and
impairment losses, if any. The cost of fixed assets includes interest
on borrowings attributable to acquisition of qualifying fixed assets up
to the date the asset is ready for its intended use and other
incidental expenses incurred up to that date. Machinery spares which
can be used only in connection with an item of fixed asset and whose
use is expected to be irregular are capitalized and depreciated over
the useful life of the principal item of the relevant assets.
Subsequent expenditure relating to fixed assets is capitalised only if
such expenditure results in an increase in the future benefits from
such asset beyond its previously assessed standard of performance.
Fixed assets retired from active use and held for sale are stated at
the lower of their net book value and net realizable value and are
disclosed separately in the Balance Sheet.
Capital work-in-progress:
Projects under which assets are not ready for their intended use and
other capital work-in- progress are carried at cost, comprising direct
cost, related incidental expenses and attributable interest.
1.10 Intangible assets
Intangible assets are carried at cost less accumulated amortisation and
impairment losses, if any. The cost of an intangible asset comprises
its purchase price, including any import duties and other taxes (other
than those subsequently recoverable from the taxing authorities), and
any directly attributable expenditure on making the asset ready for its
intended use and net of any trade discounts and rebates. Subsequent
expenditure on an intangible asset after its purchase / completion is
recognized as an expense when incurred unless it is probable that such
expenditure will enable the asset to generate future economic benefits
in excess of its originally assessed standards of performance and such
expenditure can be measured and attributed to the asset reliably, in
which case such expenditure is added to the cost of the asset.
Refer Note 2.20 for accounting for Research and Development Expenses.
1.11 Foreign currency transactions and translations Initial recognition
Transactions in foreign currencies entered into by the Company are
accounted at the exchange rates prevailing on the date of the
transaction or at rates that closely approximate the rate at the date
of the transaction.
Measurement of foreign currency monetary items at the Balance Sheet
date
Foreign currency monetary items outstanding at the Balance Sheet date
are restated at the year-end rates.
Treatment of exchange differences
Exchange differences arising on settlement / restatement of foreign
currency monetary assets and liabilities are recognized as income or
expense in the Statement of Profit and Loss.
1.12 Government grants, subsidies and export incentives
Government grants and subsidies are recognized when there is reasonable
assurance that the Company will comply with the conditions attached to
them and the grants / subsidy will be received. Government grants whose
primary condition is that the Company should purchase, construct or
otherwise acquire capital assets are presented by deducting them from
the carrying value of the assets. The grant is recognized as income
over the life of a depreciable asset by way of a reduced depreciation
charge.
Export benefits are accounted for in the year of exports based on
eligibility and when there is no uncertainty in receiving the same.
Government grants in the nature of promoters contribution like
investment subsidy, where no repayment is ordinarily expected in
respect thereof, are treated as capital reserve. Government grants in
the form of non-monetary assets, given at a concessional rate, are
recorded on the basis of their acquisition cost. In case the
non-monetary asset is given free of cost, the grant is recorded at a
nominal value.
Other Government grants and subsidies are recognized as income over the
periods necessary to match them with the costs for which they are
intended to compensate, on a systematic basis.
1.13 Investments
Long-term investments are carried individually at cost less provision
for diminution, other than temporary, in the value of such investments.
Current investments are carried individually, at the lower of cost and
fair value. Cost of investments include acquisition charges such as
brokerage, fees and duties.
1.14 Employee benefits
Employee benefits include provident fund, gratuity fund and compensated
absences. Defined contribution plans
The Company's contribution to provident fund is considered as defined
contribution plan and is charged as an expense as it falls due based on
the amount of contribution required to be made.
Defined benefit plans
For defined benefit plan in the form of gratuity fund, the cost of
providing benefits is determined using the Projected Unit Credit
method, with actuarial valuations being carried out at each Balance
Sheet date. Actuarial gains and losses are recognized in the Statement
of Profit and Loss in the period in which they occur. Past service cost
is recognized immediately to the extent that the benefits are already
vested and otherwise is amortized on a straight-line basis over the
average period until the benefits become vested. The retirement benefit
obligation recognized in the Balance Sheet represents the present value
of the defined benefit obligation as adjusted for unrecognized past
service cost, as reduced by the fair value of scheme assets. Any asset
resulting from this calculation is limited to past service cost, plus
the present value of available refunds and reductions in future
contributions to the scheme.
Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees are recognized
during the year when the employees render the service. These benefits
include performance incentive and compensated absences which are
expected to occur within twelve months after the end of the period in
which the employee renders the related service. The cost of such
compensated absences is accounted as under :
(a) in case of accumulated compensated absences, when employees render
the services that increase their entitlement of future compensated
absences; and
(b) in case of non-accumulating compensated absences, when the absences
occur. Long-term employee benefits Compensated absences which are not
expected to occur within twelve months after the end of the period in
which the employee renders the related service are recognized as a
liability at the present value of the defined benefit obligation as at
the Balance Sheet date.
1.15 Borrowing costs
Borrowing costs include interest, amortization of ancillary costs
incurred and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost. Costs in connection with the borrowing of funds to the
extent not directly related to the acquisition of qualifying assets are
charged to the Statement of Profit and Loss over the tenure of the
loan. Borrowing costs, allocated to and utilized for qualifying assets,
pertaining to the period from commencement of activities relating to
construction / development of the qualifying asset up to the date of
capitalization of such asset is added to the cost of the assets.
Capitalization of borrowing costs is suspended and charged to the
Statement of Profit and Loss during extended periods when active
development activity on the qualifying assets is interrupted.
1.16 Segment reporting
The Company identifies primary segments based on the dominant source,
nature of risks and returns and the internal organization and
management structure. The operating segments are the segments for which
separate financial information is available and for which operating
profit / loss amounts are evaluated regularly by the Executive
Management in deciding how to allocate resources and in assessing
performance.
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company. Segment revenue, segment
expenses, segment assets and segment liabilities have been identified
to segments on the basis of their relationship to the operating
activities of the segment.
Inter-segment revenue is accounted on the basis of transactions which
are primarily determined based on market / fair value factors.
Revenues, expenses, assets and liabilities which relate to the Company
as a whole and are not allocable to segments on reasonable basis have
been included under unallocated revenue / expenses / assets /
liabilities.
1.17 Leases
Where the Company as a lessor leases assets under finance leases, such
amounts are recognized as receivables at an amount equal to the net
investment in the lease and the finance income is recognized based on a
constant rate of return on the outstanding net investment.
Assets leased by the Company in its capacity as lessee where
substantially all the risks and rewards of ownership vest in the
Company are classified as finance leases. Such leases are capitalized
at the inception of the lease at the lower of the fair value and the
present value of the minimum lease payments and a liability is created
for an equivalent amount. Each lease rental paid is allocated between
the liability and the interest cost so as to obtain a constant periodic
rate of interest on the outstanding liability for each year.
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognized as
operating leases. Lease rentals under operating leases are recognized
in the Statement of Profit and Loss on a straight-line basis.
1.18 Earnings per share
Basic earnings per share is computed by dividing the profit / (loss)
after tax (including the post tax effect of extraordinary items, if
any) by the weighted average number of equity shares outstanding during
the year. Diluted earnings per share is computed by dividing the profit
/ (loss) after tax (including the post tax effect of extraordinary
items, if any) as adjusted for dividend, interest and other charges to
expense or income relating to the dilutive potential equity shares, by
the weighted average number of equity shares considered for deriving
basic earnings per share and the weighted average number of equity
shares which could have been issued on the conversion of all dilutive
potential equity shares. Potential equity shares are deemed to be
dilutive only if their conversion to equity shares would decrease the
net profit per share from continuing ordinary operations. Potential
dilutive equity shares are deemed to be converted as at the beginning
of the period, unless they have been issued at a later date. The
dilutive potential equity shares are adjusted for the proceeds
receivable, had the shares been actually issued at fair value (i.e.
average market value of the outstanding shares). Dilutive potential
equity shares are determined independently for each period presented.
The number of equity shares and potentially dilutive equity shares are
adjusted for share splits / reverse share splits and bonus shares, as
appropriate.
1.19 Taxes on income
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Act, 1961.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which
gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognized as an asset in the Balance Sheet when it is probable that
future economic benefit associated with it will flow to the Company.
Deferred tax is recognized on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax is measured using the tax rates and the tax laws
enacted or substantially enacted as at the reporting date. Deferred tax
liabilities are recognized for all timing differences. Deferred tax
assets in respect of unabsorbed depreciation and carry forward of
losses are recognized only if there is virtual certainty that there
will be sufficient future taxable income available to realize such
assets. Deferred tax assets are recognized for timing differences of
other items only to the extent that reasonable certainty exists that
sufficient future taxable income will be available against which these
can be realised. Deferred tax assets and liabilities are offset if such
items relate to taxes on income levied by the same governing tax laws
and the Company has a legally enforceable right for such set off.
Deferred tax assets are reviewed at each Balance Sheet date for their
reliability.
Current and deferred tax relating to items directly recognized in
equity are recognized in equity and not in the Statement of Profit and
Loss.
1.20 Research and development expenses
Revenue expenditure pertaining to research is charged to the Statement
of Profit and Loss. Development costs of products are also charged to
the Statement of Profit and Loss unless a product's technological
feasibility has been established, in which case such expenditure is
capitalized. The amount capitalized comprises expenditure that can be
directly attributed or allocated on a reasonable and consistent basis
to creating, producing and making the asset ready for its intended use.
Fixed assets utilized for research and development are capitalized and
depreciated in accordance with the policies stated for Tangible Fixed
Assets and Intangible Assets.
1.21 Impairment of assets
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment. If any indication of impairment
exists, the recoverable amount of such assets is estimated and
impairment is recognised, if the carrying amount of these assets
exceeds their recoverable amount. The recoverable amount is the greater
of the net selling price and their value in use. Value in use is
arrived at by discounting the future cash flows to their present value
based on an appropriate discount factor. When there is indication that
an impairment loss recognized for an asset in earlier accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognized in the Statement of Profit and Loss,
except in case of revalued assets.
1.22 Provisions and contingencies
A provision is recognized when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
Balance Sheet date. These are reviewed at each Balance Sheet date and
adjusted to reflect the current best estimates. Contingent liabilities
are disclosed in the Notes.
1.23 Provision for warranty
The estimated liability for product warranties is recorded when
products are sold. These estimates are established using historical
information on the nature, frequency and average cost of warranty
claims and management estimates regarding possible future incidence
based on corrective actions on product failures. The timing of outflows
will vary as and when warranty claim will arise.
1.24 Service tax input credit
Service tax input credit is accounted for in the books in the period in
which the underlying service received is accounted and when there is no
uncertainty in availing / utilizing the credits.
As per records of the Company, including its register of shareholders /
members and other declarations received from shareholders regarding
beneficial interest, the above shareholding represents both legal and
beneficial ownership of shares.
Mar 31, 2011
The financial statements are prepared under historical cost convention
on accrual basis and in accordance with the requirements of Companies
Act, 1956 and Accounting Standards specified in Rule 3 of the Companies
(Accounting Standards) Rules, 2006.
Use of Estimates
The preparation of the financial statements in conformity with the
accounting standards generally accepted in India requires the
management to make estimates that affect the reported amount of assets
and liabilities, disclosure of contingent liabilities as at the date of
the financial statement and reported amounts of revenues and expenses
for the year. Actual results could differ from these estimates.
Fixed Assets
Fixed assets are stated at cost less accumulated depreciation. Cost of
assets comprises of purchase cost (net of cenvat credit, if any) and
other costs attributable to bringing the assets to working condition
for the intended use.
Intangible Assets
Trademark and computer software are classified as intangible assets.
Acquisition cost of trademark comprises of purchase cost and other
expenses incurred in connection with its registration. Cost of software
comprises of purchase cost (net of cenvat credit, if any) and other
costs attributable to bringing the assets to working condition for the
intended use.
Impairment of Assets
Impairment is ascertained at each Balance Sheet date in respect of the
Company's fixed assets. An impairment loss is recognised whenever the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the net selling price and value in
use. In assessing the value in use, the estimated future cash flows are
discounted to their present value, based on an appropriate discount
factor. Reversal of impairment loss is recognised as income in the
Profit and Loss Account.
Borrowings Costs
Borrowing costs attributable to acquisition or construction of
qualifying assets are capitalised as part of the cost of assets up to
the date such assets are ready for their intended use. Other borrowing
costs are recognized as expense in the period in which they are
incurred.
Depreciation/Amortisation
Depreciation on fixed assets, other than moulds and patterns & dies, is
provided under Straight Line Method at the rates specified in Schedule
XIV of the Companies Act, 1956. Moulds and Patterns & Dies are
depreciated over their useful life of 5 years, as estimated by the
Management. Depreciation on addition is provided from the month the
asset is put to commercial use and on deletion upto the month of sale.
Assets costing less than Rs.5,000/- are fully depreciated in the year
of purchase.
Trademark and Computer Software are amortized over a period of ten
years and five years respectively. Leasehold land is amortized under
straight-line method over the period of lease.
Investments
Long term investments are stated at cost less provision for diminution,
other than temporary, in their value. Current Investments are stated at
lower of cost and market/fair value.
Inventories
Manufactured goods are valued at lower of cost, including excise duty
payable at the time of removal of goods wherever applicable, and net
realizable value. Cost is computed under weighted average method and
includes attributable direct costs and production overheads.
Traded goods are valued at lower of cost and net realizable value. Cost
is computed at weighted average purchase price including applicable
taxes and freight directly attributable to the purchase of traded
goods.
Stock-in-process is valued at lower of cost and net realizable value.
Cost includes attributable direct costs and production overheads
incurred up to the respective stage of completion.
Other items of inventory are valued at lower of cost, computed under
weighted average method, and net realizable value.
Excise Duty
Excise duty is accounted on removal of finished goods from the factory
and provision is made for excise duty payable on stock of finished
goods in hand at the balance sheet date.
Employee Benefits
Post-employment Benefit Plans
Contributions to defined contribution retirement benefit schemes are
recognised as expense when employees have rendered services entitling
them to contributions.
For defined benefit schemes, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
valuation being carried out at each balance sheet date. Actuarial gains
and losses are recognised in full in the profit and loss account of the
period in which they occur. Past service cost is recognized immediately
to the extent that the benefits are already vested,and otherwise is
amortised on a straight-line basis over the average period until the
benefits become vested.
The retirement benefit obligation recognised in the balance sheet
represents the present value of the defined benefit obligation as
adjusted for unrecognised past service cost, and as reduced by the fair
value of plan assets. Any asset resulting from this calculation is
limited to the present value of available refunds and reductions in
future contributions to the scheme.
Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees is recognised
during the period when the employees render the service. These benefits
include compensated absences such as paid annual leave and performance
incentives.
Long-term employee benefits
Compensated absences which are not expected to occur within the twelve
months after the end of the period in which the employee renders the
related services are recognised as liability at the present value of
the defined benefit obligation at the balance sheet date.
Research & Development
Expenditure on research and development is charged to profit and loss
account. Assets acquired for research and development are capitalised
and depreciated in the same manner as other fixed assets.
Revenue Recognition
Sales revenue is recognised on transfer of title to the goods to the
buyer. Dividend income is accounted for when right to receive dividend
is established. Interest income is accounted on time proportion basis.
Foreign Exchange Transactions
Foreign exchange transactions are recorded at the rate of exchange
prevailing on the date of transaction. Monetary assets and liabilities
denominated in foreign currency are translated at year-end rates.
Exchange gain/loss, if any, is credited / charged to the profit and
loss account.
Segment Reporting
The accounting policies used for segment reporting are in line with the
accounting policies of the Company. Revenues, expenses, assets and
liabilities have been identified to segments on the basis of their
relationship to the operating activities of the segment. Revenues,
expenses, assets and liabilities, which relate to the enterprise as a
whole, and are not allocable to segments on a reasonable basis, have
been included under 'Unallocated Corporate Revenues, Expenses, Assets
and Liabilities' respectively.
Earnings Per Share
Basic and diluted earnings per share is computed in accordance with
Accounting Standard 20 Ã 'Earnings Per Share', specified in rule 3 of
the Companies (Accounting Standards) Rules, 2006. Basic earnings per
share is computed by dividing the net profit after tax by the weighted
average number of equity shares outstanding during the year. Diluted
earnings per share reflect the potential dilution that could occur if
securities or contracts to issue equity shares were exercised or
converted during the year. Diluted earnings per share is computed using
the weighted average number of equity shares outstanding during the
year and dilutive potential equity shares outstanding at year end.
Taxes on Income
Current tax is determined as the amount of tax payable in respect of
taxable income for the period as per the provisions of the Income Tax
Act, 1961.
Deferred tax is recognised, subject to the consideration of prudence,
on timing differences, being the difference between taxable income and
accounting income that originate in one period and are capable of
reversal in one or more subsequent periods. Deferred tax assets are
recognised and carried forward only to the extent there is reasonable
certainty that sufficient future taxable income will be available
against which such asset items can be realised.
Provisions, Contingent Liabilities and Contingent Assets
A Provision is recognized, in terms of Accounting Standard 29 Ã
'Provisions, Contingent Liabilities and Contingent Assets', specified
in Companies (Accounting Standards) Rules, 2006, when there is a
present obligation as a result of a past event, and it is probable that
an outflow of resources will be required to settle the obligation,
which can be reliably estimated. Provision is not discounted to its
present value and is determined based on the best estimate required to
settle the obligation at the balance sheet date. Provisions are
reviewed at each balance sheet date and adjusted to reflect the best
current estimate.
Contingent Liabilities are recognised only when there is a possible
obligation arising from past events, due to occurrence or
non-occurrence of one or more uncertain future events, not wholly
within the control of the Company, or where any present obligation
cannot be measured in terms of future outflow of resources, or where a
reliable estimate of the obligation cannot be made. Obligations are
assessed on an ongoing basis and only those having a largely probable
outflow of resources are provided for.
Contingent Assets are not recognised in the financial statements.
Mar 31, 2010
Accounting Convention
The financial statements are prepared under historical cost convention
on accrual basis and in accordance with the requirements of Companies
Act, 1956 and Accounting Standards specified in Rule 3 of the Companies
(Accounting Standards) Rules, 2006.
Use of Estimates
The preparation of the financial statements in conformity with the
accounting standards generally accepted in India, requires the
management to make estimates that affect the reported amount of assets
and liabilities, disclosure of contingent liabilities as at the date of
the financial statement and reported amounts of revenues and expenses
for the year. Actual results could differ from these estimates.
Fixed Assets
Fixed Assets are stated at cost less accumulated depreciation. Cost of
assets comprises of purchase value (net of cenvat credit) and other
costs attributable to bringing the assets to working condition for the
intended use.
Intangible Assets
Trademark and computer software are classified as intangible assets.
Acquisition cost of trademark comprises of purchase cost and other
expenses incurred in connection with its acquisition.
Impairment of Assets
Impairment is ascertained at each Balance Sheet date in respect of the
CompanyÃs fixed assets. An impairment loss is recognised whenever the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the net selling price and value in
use. In assessing the value in use, the estimated future cash flows are
discounted to their present value, based on an appropriate discount
factor. Reversal of impairment loss is recognised as income in the
Profit and Loss Account.
Borrowings Costs
Borrowing costs attributable to acquisition or construction of
qualifying assets are capitalised as part of the cost of assets up to
the date such assets are ready for their intended use. Other borrowing
costs are recognized as expense in the period in which they are
incurred.
Depreciation/Amortisation
Depreciation on fixed assets, other than moulds and patterns & dies, is
provided under Straight Line Method at the rates specified in Schedule
XIV of the Companies Act, 1956. Moulds and Patterns & Dies are
depreciated over their useful life of 5 years, as estimated by the
Management. Depreciation on addition is provided from the month the
asset is put to commercial use and on deletion upto the month of sale.
Assets costing less than Rs.5,000/- are fully depreciated in the year
of addition.
Trademark and Computer Software are amortized over a period of ten
years and five years respectively.
Investments
Long term investments are stated at cost less provision for diminution,
other than temporary, in their value. Current Investments are stated at
lower of cost and market/fair value.
Inventories
Manufactured goods are valued at lower of cost, including excise duty
payable at the time of removal of goods wherever applicable, and net
realizable value. Cost is computed under weighted average method and
includes attributable direct costs and production overheads.
Traded goods are valued at lower of cost and net realizable value. Cost
is computed at weighted average purchase price including applicable
taxes and freight directly attributable to the acquisition.
Stock-in-process is valued at lower of cost and net realizable value.
Cost includes attributable direct costs and production overheads
incurred up to the respective stage of completion.
Other items of inventory are valued at lower of cost and net realizable
value. Cost is computed under weighted average method.
Excise Duty
Excise duty is accounted on removal of finished goods from the factory
and provision is made for excise duty payable on stock of finished
goods in hand at the balance sheet date.
Employee Benefits
Post-employment Benefit Plans
Contributions to defined contribution retirement benefit schemes are
recognised as expense when employees have rendered services entitling
them to contributions.
For defined benefit schemes, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
valuation being carried out at each balance sheet date. Actuarial gains
and losses are recognised in full in the profit and loss account of the
period in which they occur. Past service cost is recognized immediately
to the extent that the benefits are already vested, and otherwise is
amortised on a straight-line basis over the average period until the
benefits become vested.
The retirement benefit obligation recognised in the balance sheet
represents the present value of the defined benefit obligation as
adjusted for unrecognised past service cost, and as reduced by the fair
value of plan assets. Any asset resulting from this calculation is
limited to the present value of available refunds and reductions in
future contributions to the scheme.
Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees is recognised
during the period when the employees render the service. These benefits
include compensated absences such as paid annual leave and performance
incentives.
Long-term employee benefits
Compensated absences which are not expected to occur within the twelve
months after the end of the period in which the employee renders the
related services are recognised as a liability at the present value of
the defined benefit obligation at the balance sheet date.
Research & Development
Expenditure on research and development is charged to profit and loss
account. Assets acquired for research and development are capitalised
and depreciated in the same manner as other assets.
Revenue Recognition
Revenue from sales is recognised on transfer of title to goods to the
buyer. Dividend income is accounted for when right to receive dividend
is established. Interest income is accounted on time proportion basis.
Foreign Exchange Transactions
Foreign exchange transactions are recorded at the rate of exchange
prevailing on the date of transaction. Monetary assets and liabilities
denominated in foreign currency are translated at year-end rates.
Exchange loss/gain, if any, is charged / credited to the profit and
loss account.
Segment Reporting
The accounting policies used for segment reporting are in line with the
accounting policies of the Company. Revenues, expenses, assets and
liabilities have been identified to segments on the basis of their
relationship to the operating activities of the segment. Revenues,
expenses, assets and liabilities, which relate to the enterprise as a
whole, and are not allocable to segments on a reasonable basis, have
been included under ÃUnallocated corporate revenues, expenses, assets
and liabilities respectively.
Earnings Per Share
Basic and diluted earnings per share is computed in accordance with
Accounting Standard 20 ÃÃEarnings per shareÃ. Basic earnings per share
is computed by dividing the net profit after tax by the weighted
average number of equity shares outstanding during the year.
Diluted earnings per share reflect the potential dilution that could
occur if securities or contracts to issue equity shares were exercised
or converted during the year. Diluted earnings per share is computed
using the weighted average number of equity shares outstanding during
the year and dilutive potential equity shares outstanding at year end.
Taxes on Income
Current tax is determined as the amount of tax payable in respect of
taxable income for the period as per the provisions of the Income Tax
Act, 1961.
Deferred tax is recognised, subject to the consideration of prudence,
on timing differences, being the difference between taxable income and
accounting income that originate in one period and are capable of
reversal in one or more subsequent periods. Deferred tax assets are
recognised and carried forward only to the extent there is reasonable
certainty that sufficient future taxable income will be available
against which such asset items can be realised.
Provisions, Contingent Liabilities and Contingent Assets
A Provision is recognized, in terms of Accounting Standard 29 Ã
ÃProvisions, Contingent Liabilities and Contingent Assetsà notified by
the Companies (Accounting Standards) Rules, 2006, when there is a
present obligation as a result of a past event, and it is probable that
an outflow of resources will be required to settle the obligation,
which can be reliably estimated. Provision is not discounted to its
present value and is determined based on the best estimate required to
settle the obligation at the balance sheet date. Provisions are
reviewed at each balance sheet date and adjusted to reflect the best
current estimate.
Contingent Liabilities are recognised only when there is a possible
obligation arising from past events, due to occurrence or
non-occurrence of one or more uncertain future events, not wholly
within the control of the Company, or where any present obligation
cannot be measured in terms of future outflow of resources, or where a
reliable estimate of the obligation cannot be made. Obligations are
assessed on an ongoing basis and only those having a largely probable
outflow of resources are provided for.
Contingent Assets are not recognised in the financial statements.
Disclaimer: This is 3rd Party content/feed, viewers are requested to use their discretion and conduct proper diligence before investing, GoodReturns does not take any liability on the genuineness and correctness of the information in this article