Accounting Policies of Ador Welding Ltd. Company
Mar 31, 2022
I. Corporate Information
Ador Welding Limited (''the Company'') was incorporated in 1951 and is one of India''s leading player in the field of Welding Products, Technologies and Services. The Company is also engaged in providing customized solutions for multi-disciplinary projects and contracts related to refineries, oil and gas, petrochemicals, fertilizers, steel plants, pharma, water and other chemical process industries. The Company is a public limited company and domiciled in India and its shares are listed on two recognised stock exchanges in India- the Bombay Stock Exchange Limited (BSE) and the National Stock Exchange (India) Limited (NSE). The registered and corporate office of the Company is situated at Ador House, 6, K. Dubash Marg, Fort, Mumbai.
The separate financial statements were authorised for issue in accordance with the resolution of the Board of Directors on 20 May 2022.
II. Significant Accounting Policies followed by the Company
The significant accounting policies applied by the Company in the preparation of its financial statements are listed below. Such accounting policies have been applied consistently to all the periods presented in these financial statements, unless otherwise indicated.
The financial statements have been prepared in accordance with the Indian Accounting Standards (referred to as "Ind AS") prescribed under section 133 of the Companies Act, 2013 read with Companies (Indian Accounting Standards) Rules, 2015, as amended and other relevant provisions of the Act and guidelines issued by the Securities & Exchange Board of India (SEBI).
The financial statements have been prepared on a historical cost convention and accrual basis, except for the certain financial assets and liabilities that are measured at fair value and defined benefit plan assets measured at fair values by Ind AS.
Fair value is the price that would be received on sale of asset or paid on transfer of liability in an ordinary transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.
Current and non-current classification
All assets and liabilities have been classified as current or non-current based on the Company''s normal operating cycle for each of its businesses, as per the criteria set out in the Schedule III to the Act.
(c) Critical estimates and judgments
The preparation of Financial Statements in conformity with Ind AS, which requires management to make estimates, assumptions and exercise judgment in applying the accounting policies that affect the reported amount of assets, liabilities and disclosure of contingent liabilities at the date of financial statements and the reported amounts of income and expenses during the year.
The Management believes that these estimates are prudent and reasonable and are based upon the Management''s best knowledge of current events and actions. Actual results could differ from these estimates and differences between actual results and estimates are recognised in the periods in which the results are known or materialised.
This note provides an overview of the areas that involved a higher degree of judgment or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed.
Useful lives of PPE , investment property and Intangible assets
Property, plant and equipment represent a significant proportion of the asset base of the Company. Depreciation is provided as per the Straight Line Method over the estimated useful lives of assets. The Company depreciates its property, plant and equipment over the useful life in the manner prescribed in Schedule II to the Act. Management believes that useful life of assets are same as those prescribed in Schedule II to the Act. - Refer note 1(II)(d),(e),(f),(g)
Valuation of deferred tax assets / liabilitie
The Company reviews the carrying amount of deferred tax assets at the end of each reporting period. Significant judgment is involved in arriving at the deferred tax assets and liabilities, which is based on the Company''s current operations and projections for the future. - Refer note 1(II)(q)
Defined benefit obligation
The cost of post-employment benefits is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rate of return on assets, future salary increases and mortality rates. Due to the long term nature of these plans such estimates are subject to significant uncertainty. The assumptions used are disclosed in Note 48.
Fair value measurements of financial instruments
When the fair value of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including Discounted Cash Flow Model. The inputs to these models are taken from observable markets wherever possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risks, credit risks and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. - Refer note 1(II)(j).
Other areas involving critical estimates or judgments are :
i) Revenue from Flares and Process Equipment Division - Refer note 1(II)(n)
ii) Estimation of tax expenses and tax payable - Refer note 42
iii) Probable outcomes of matters included under Contingent Liabilities - Refer note 44
iv) Leases - Estimating the incremental borrowing rate - Refer note 1(II)(r)
(d) Property plant and equipment (including Capital Work-in-Progress)
Freehold Land is carried at historical cost. All other items of Property, plant and equipment are stated at cost/deemed cost, less accumulated depreciation and impairment. Cost includes all direct costs and expenditures incurred to bring the asset to its working condition and location for its intended use. Trial run expenses (net of revenue) are capitalised. Borrowing costs incurred during the period of construction are capitalised as part of cost of qualifying asset.
Items of property, plant and equipment that have been retired from active use and are held for disposal are stated at the lower of their net book value or net realisable value and are shown separately in the financial statements. Any expected loss is recognised immediately in the Statement of Profit and Loss. Losses arising from the retirement of, and gains or losses arising from disposal of tangible assets, which are carried at cost, are recognised in the Statement of Profit and Loss.
Depreciation is provided on a pro-rata basis on the straight-line method based on useful life as estimated by the management and aligned to Schedule II to the Companies Act, 2013 in order to reflect the actual usage of assets. Depreciation on assets acquired under finance lease is spread over the lease period or useful life, whichever is shorter.
Assets not yet ready for use are recognised as capital work-in-progress.
(e) Non-current assets classified as held for sale:
Assets that are available for immediate sale and where the sale is highly probable of being completed within one year from the date of classification are considered and classified as assets held for sale. Assets classified as held for sale are measured at the lower of carrying amount or fair value less costs to sell. The determination of fair value less costs to sell includes use of management estimates and assumptions. The fair value of asset held for sale has been estimated using observable inputs such as price quotations.
(f) Intangible Assets (including intangibles under development)
Intangible assets relating to product development are recorded at actual cost incurred on the development of products and are capitalised once the products receive approval from relevant authorities and the same are carried at cost less accumulated amortisation.
Intangible assets are amortised on a straight-line basis over their estimated useful lives. The amortisation period and the amortisation 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 amortisation period is changed accordingly.
Software and implementation costs including users license fees of the Enterprise Resource Planning (ERP) system and other application software costs are amortised over a period of three years.
Gains or losses arising from the retirement or disposal of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Statement of Profit and Loss.
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the entity, is classified as Investment Property. Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalised to the asset''s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the entity and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed, when incurred. When part of an Investment property is replaced, the carrying amount of the replaced part is derecognised.
Depreciation is provided on a pro-rata basis on the straight-line method, based on useful life as estimated by the management and aligned to Schedule II to the Companies Act, 2013 in order to reflect the actual usage of assets.
(h) Investment in subsidiaries
Investments in subsidiaries are accounted at cost less impairment in accordance with Ind AS 27 -Separate financial statements.
Refer to note 8 for the list of investments.
(i) Impairment of non-financial assets
The carrying amount of the non-financial assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal /external factors. An impairment loss is recognised, whenever the carrying amount of an asset or a cash generating unit exceeds its recoverable amount. The recoverable amount of the assets (or where applicable, that of the cash generating unit to which the asset belongs) is estimated as the higher of its net selling price and its value in use. Impairment loss is recognised in the statement of profit and loss. (fair value less disposal cost)
After impairment, depreciation / amortisation is provided on the revised carrying amount of the asset over its remaining useful life.
A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation / amortisation, if there were no impairment.
(j) Investments and financial assets Classification
The Company classifies its financial assets in the following measurement categories:
(i) those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss), and
(ii) those measured at amortised cost.
The classification depends on the entity''s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in statement of profit and loss or other comprehensive income. For investments in debt instruments, this will depend on the business model, in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.
The Company reclassifies debt investments when and only when its business model for managing those assets changes.
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Measurement of debt instruments
Subsequent measurement of debt instruments depends on the Company''s business model for managing the asset and the cash flow characteristics of the asset.
There are three measurement categories into which the Company classifies its debt instruments:
(i) Amortised cost : Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in statement of profit and loss, when the asset is derecognised or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
(ii) Fair value through other comprehensive income (FVTOCI) : Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets'' cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVTOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in statement of profit and loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to statement of profit or loss and recognised in other gains/ (losses). Interest income from these financial assets is included in other income using the effective interest rate method.
(iii) Fair value through profit or loss : Assets that do not meet the criteria for amortised cost or FVTOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in statement of profit and loss and presented net in the statement of profit and loss within other gains/ (losses) in the period in which it arises. Interest income from these financial assets is included in other income.
Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and FVTOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Company applies the simplified approach, permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
De-recognition of financial assets
A financial asset is derecognised only when
(i) The Company has transferred the rights to receive cash flows from the financial asset or,
(ii) retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
(k) Cash and cash equivalents
Cash and cash equivalents for the purpose of the cash flow statement comprise of the cash on hand and at bank and current investments with an original maturity of three months or less. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage."
(l) Borrowings and other financial liabilities
Borrowings and other financial liabilities are initially recognised at fair value (net of transaction costs incurred). Difference between the fair value and the transaction proceeds on initial is recognised as an asset / liability based on the underlying reason for the difference. Subsequently all financial liabilities are measured at amortised cost using the effective interest rate method.
Inventories are stated at lower of cost and net realisable value. Cost is determined using the ''average cost'' method. The cost of finished goods and work in progress comprises raw material, packing materials, direct labour, other direct costs and related production overheads. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
(n) Revenue recognition
Revenue from contracts with customers is recognised when the entity satisfies a performance obligation by transferring a promised good or service to customer at an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Amounts disclosed as revenue are inclusive of excise duty and net of returns, trade allowances, rebates and discounts, value added taxes, goods and service tax and applicable taxes, which are collected on behalf of the government or on behalf of third parties.
Revenue from sale of consumables is recognised at point in time when the control of the asset is transferred to the customer, generally on delivery of the consumables.
ii) Flares & Process Equipment Division (FPED)
Project engineering contracts generally take 1 to 2 years for execution. A contract''s transaction price is allocated to each distinct performance obligation within that contract and recognized as revenue when, or as, the performance obligation is satisfied. The majority of Company''s contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and is, therefore, not distinct. For contracts with distinct performance obligations, Company allocate the contract''s transaction price to each performance obligation using the best estimate of the standalone selling price (i.e. fair value based on market approach) of each distinct goods or service in the contract. Generally, most of the revenue in project engineering segments is recognized over time, because control of the asset is transferred as and when the asset is created or enhanced to customers. The Company monitors estimates of total contract revenue and costs on a regular basis throughout the contract period. The cumulative impact of any change in estimates of the contract value or cost is reflected in the period in which the changes become known. In the event that a loss is anticipated on a particular contract, provision is made for the estimated loss.
Contract assets represent revenue recognized in excess of revenue billed. These amounts are billed after milestones specified in the agreement are achieved. Contract assets are disclosed under Other Current Assets in the Balance sheet.
iv) Benefit on account of entitlement to Import duty
Duty drawback or merchant export from India (MEIS) scheme are accounted in the year of export as export incentives. From, 1 January 2021 onwards, Merchant Export from India (MEIS) Scheme has been abolished by Central Government, and introduced Remission of Duties and Taxes on Export Products (RoDTEP) scheme, under which exporters receive the refunds on the embedded taxes and duties previously non-recoverable. Tax credit as per RoDTEP scheme is accounted on receipt basis.
Interest income for all debt instruments is recognised using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. While 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.
Provident fund: Contribution towards provident fund for employees is made to the regulatory authorities, where the Company has no further obligations. Such benefits are classified as "Defined Contribution Schemes", as the Company does not carry any further obligations, apart from the contributions made on a monthly basis.
Gratuity fund: The Company provides for gratuity, a defined benefit plan (the "Gratuity Plan") covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee''s salary and the tenure of employment. The Company''s liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial gains / losses arising on the measurement of defined benefit obligation are credited / charged to other comprehensive income.
Superannuation fund: Contribution towards superannuation fund for certain employees is made to Ador Welding Employees Superannuation Fund Trust administered by the Company. The benefit is classified as a "Defined Contribution Schemes" as the Company does not carry any further obligation, apart from the contribution made on a monthly basis.
Employees state insurance scheme: The Company makes contribution to state plans namely Employees State Insurance Scheme and has no further obligation beyond making the payment to them. Compensated absences: Accumulated compensated absences, which are expected to be availed or encashed within 12 months from the end of the year are treated as short term employee benefits. The obligation towards the same is measured at the expected cost of accumulating compensated absences as the additional amount expected to be paid as a result of the unused entitlement as at the year end.
Accumulated compensated absences, which are expected to be availed or encashed beyond 12 months from the end of the year are treated as other long term employee benefits. The Company''s liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses / gains are recognised in the statement of profit and loss in the year in which they arise.
Termination benefits: Termination benefits in the nature of voluntary retirement benefits are recognised in the statement of profit and loss, as and when incurred.
Income tax expense comprises current tax expenses and net change in the deferred tax assets or liabilities during the year. Current and deferred taxes are recognised in the Statement of profit and loss, except when they relate to item that are recognised in Other comprehensive income or directly in Equity, in which case, the current and deferred tax are also recognised in Other comprehensive income or directly in Equity respectively.
The current income tax includes income tax payable by the Company, computed in accordance with the tax laws applicable in the jurisdiction in which the Company operates. Advance tax and provision for current income tax are presented in the Balance sheet after offsetting the advance tax paid and income tax provision arising in the same jurisdiction and where the relevant tax paying units intends to settle the asset and liability on a net basis.
Deferred income tax is recognised using Balance sheet approach. Deferred income tax assets and liabilities are recognised for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount, except when the deferred income tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of recognition.
Deferred tax assets are recognised to the extent that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred tax assets are 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 or part of deferred income tax assets to be utilised. 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, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled.
The Company''s lease asset classes primarily consist of leases for Land and Buildings. The Company assesses whether a contract is or 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.
At the date of commencement of the lease, the Company recognises a right-of-use asset ("ROu") and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short term leases) and leases of low value assets. For these short term and leases of low value assets, the Company recognises the lease payments as an operating expense on a straightline basis over the term of the lease. The right-of-use assets are initially recognised at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses, if any. Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset.
The lease liability is initially measured at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates. The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made. A lease liability is remeasured upon the occurrence of certain events such as a change in the lease term or a change in an index or rate used to determine lease payments. The remeasurement normally also adjusts the leased assets. Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
Lease income from operating leases where the Company is a lessor is recognised in other income on a straight line basis over the lease term unless the receipts are structured to increase in line with expected general inflation to compensate for the expected inflationary cost increases. The respective leased assets are included in the balance sheet based on their nature
(s) Foreign currency transactions
The functional and presentation currency of the Company is Indian rupee.
Transactions in foreign currency are recorded at exchange rate prevailing on the date of transaction. Foreign currency denominated monetary assets and liabilities are translated at the exchange rate prevailing on the Balance sheet date and exchange gain or loss arising on settlement and restatement are recognised in the Statement of Profit and Loss.
Non-monetary assets and liabilities that are measured in terms of historical cost in foreign currencies are not retranslated.
(t) Provisions, contingent liabilities and contingent assets
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. Provisions are not discounted to their present value and are determined based on management estimate of the amount required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current management estimates.
Contingent liabilities are disclosed in respect of possible obligations that arise from past events, whose existence would be confirmed by the occurrence or non-occurrence of one or more uncertain future events, not wholly within the control of the Company.
Contingent assets are not recognised in the financial statements. However, it is disclosed only when an inflow of economic benefits is probable.
Basic earning per share is computed by dividing net profit after tax (excluding other comprehensive income) by the weighted average number of equity shares outstanding during the year.
Diluted earning per share is computed by dividing net profit after tax (excluding other comprehensive income) 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 shares considered for deriving basic earning per share and the weighted average number of equity shares which could have been issued on 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.
Warranty costs are provided based on a technical estimate of the costs required to be incurred for repairs, replacement, material cost, servicing on the basis of the past experience of the Company. It is expected that this expenditure will be incurred over the contractual warranty period.
Revenue expenditure on research & development (including overheads) are charged out as expense in the year in which they are incurred. Expenditure of a capital nature on research & development is debited to respective fixed assets and depreciation is provided on such assets, as are depreciable.
Mar 31, 2018
I. Significant Accounting Policies followed by the Company
(a) Basis of Preparation
The Company has prepared its separate financial statements to comply in all material respects with the provisions of the Companies Act, 2013 (the Act) and rules framed thereunder. In accordance with the notification issued by the Ministry of Corporate Affairs, the Company has adopted Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 under Section 133 of the Act, with effect from 1 April 2017. Till 31 March 2017, the Company used to prepare its financial statements as per Companies (Accounting Standards) Rules, 2014 (Previous GAAP) read with rule 7 and other relevant provisions of the Act. These are the first Ind AS Financial Statements of the Company. The transition from Previous GAAP to Ind AS has been accounted for in accordance with Ind AS 101 âFirst Time Adoption of Indian Accounting Standardsâ, with 1 April 2016 being the transition date and therefore balances for the comparative period have been restated accordingly. As per Ind AS 101, the Company has presented a reconciliation of its transition from Previous GAAP to Ind AS of its total equity as at 1 April 2016 and 31 March 2017 and reconciliation of total comprehensive income and cash flow for the year ended 31 March 2017. Please refer note 56 for detailed information on the transition.
The financial statements have been prepared on a historical cost convention and accrual basis, except for the certain financial assets and liabilities that are measured at fair value & defined benefit plan assets measured at fair value.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.
(b) Critical estimates and judgements
The preparation of Financial Statements in conformity with Ind AS which requires management to make estimates, assumptions and exercise judgement in applying the accounting policies that affect the reported amount of assets, liabilities and disclosure of contingent liabilities at the date of financial statements and the reported amounts of income and expenses during the year.
The Management believes that these estimates are prudent and reasonable and are based upon the Managementâs best knowledge of current events and actions. Actual results could differ from these estimates and differences between actual results and estimates are recognised in the periods in which the results are known or materialised.
This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed.
Useful lives of property, plant and equipment
Property, Plant and Equipment represent a significant proportion of the asset base of the Company. The charge in respect of periodic depreciation is derived after determining an estimate of an assetâs expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Companyâs assets are determined by the management at the time the asset is acquired and reviewed periodically, including at each financial year end.
Valuation of deferred tax assets
The Company reviews the carrying amount of deferred tax assets at the end of each reporting period. Significant judgement is involved in arriving at the deferred tax assets and liabilities, which is based on the Companyâs current operations and projections for the future.
Defined benefit obligation
The cost of post-employment benefits is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rate of return on assets, future salary increases and mortality rates. Due to the long term nature of these plans such estimates are subject to significant uncertainty. The assumptions used are disclosed in Note 46.
(c) Property, plant and equipment (including Capital Work-in-Progress)
Freehold Land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation. Historical costs are stated at cost of acquisition inclusive of all attributable cost of bringing the assets to their working condition, accumulated depreciation and accumulated impairment losses, if any.
Subsequent expenditure related to an item of tangible asset are added to its book value only if they increase the future benefits from the existing asset beyond its previously assessed standard of performance.
Items of property, plant and equipment that have been retired from active use and are held for disposal are stated at the lower of their net book value and net realisable value and are shown separately in the financial statements. Any expected loss is recognised immediately in the Statement of Profit and Loss. Losses arising from the retirement of, and gains or losses arising from disposal of tangible assets which are carried at cost are recognised in the Statement of Profit and Loss.
Depreciation is provided on a pro-rata basis on the straight-line method based on useful life as estimated by the management and aligned to Schedule II to the Companies Act, 2013 in order to reflect the actual usage of assets. Depreciation on assets acquired under finance lease is spread over the lease period or useful life, whichever is shorter .
Assets not yet ready for use are recognised as capital work in progress.
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment recognised as at 1 April 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment.
(d) Intangible Assets (including intangibles under development)
Intangible assets relating to product development are recorded at actual cost incurred on the development of products and are capitalised once the products receive approval from the relevant authorities and the same are carried at cost less accumulated amortisation.
Intangible assets are amortised on a straight line basis over their estimated useful lives. The amortisation period and the amortisation method are reviewed at end of each financial year. If the expected useful life of the asset is significantly different from previous estimates, the amortisation period is changed accordingly.
Software and implementation costs including users license fees of the Enterprise Resource Planning (ERP) system and other application software costs are amortised over a period of three years.
Gains or losses arising from the retirement or disposal of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Statement of Profit and Loss.
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its intangible assets recognised as at 1 April 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of the intangible assets.
(e) Investment properties
Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the entity, is classified as Investment Property. Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalised to the assetâs carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the entity and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an Investment property is replaced, the carrying amount of the replaced part is derecognised.
Depreciation is provided on a pro-rata basis on the straight-line method based on useful life as estimated by the management and aligned to Schedule II to the Companies Act, 2013 in order to reflect the actual usage of assets.
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its Investment properties recgnised as at 1 April 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of Investment properties.
(f) Investment in subsidiaries
Investments in subsidiaries are accounted at cost less impairment in accordance with Ind AS 27 - Separate financial statements.
Refer to note 6 for the list of investments.
(g) Impairment of non-financial assets
The carrying amount of the non-financial assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal /external factors. An impairment loss is recognised whenever the carrying amount of an asset or a cash generating unit exceeds its recoverable amount. The recoverable amount of the assets (or where applicable, that of the cash generating unit to which the asset belongs) is estimated as the higher of its net selling price and its value in use. Impairment loss is recognised in the statement of profit and loss.
After impairment, depreciation / amortisation is provided on the revised carrying amount of the asset over its remaining useful life.
A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation / amortisation if there were no impairment.
(h) Investments and financial assets Classification
The Company classifies its financial assets in the following measurement categories:
(i) Those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
(ii) those measured at amortised cost.
The classification depends on the entityâs business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.
The Company reclassifies debt investments when and only when its business model for managing those assets changes.
Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in statement of profit & loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Measurement of debt instruments
Subsequent measurement of debt instruments depends on the Companyâs business model for managing the asset and the cash flow characteristics of the asset.
There are three measurement categories into which the Company classifies its debt instruments:
(i) Amortised cost : Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in the statement of profit & loss when the asset is derecognised or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
(ii) Fair value through other comprehensive income (FVTOCI) : Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assetsâ cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVTOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit and loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains / (losses). Interest income from these financial assets is included in other income using the effective interest rate method.
(iii) Fair value through profit or loss : Assets that do not meet the criteria for amortised cost or FVTOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in the statement of profit & loss and presented net in the statement of profit and loss within other gains / (losses) in the period in which it arises. Interest income from these financial assets is included in other income.
Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and FVTOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables only, the Company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
De-recognition of financial assets
A financial asset is derecognised only when
(i) The Company has transferred the rights to receive cash flows from the financial asset or,
(ii) retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Cash and cash equivalents
Cash and cash equivalents for the purpose of the cash flow statement comprise of the cash on hand and at bank and current investments with an original maturity of three months or less. Cash and cash equivalents consists of balances with banks which are unrestricted for withdrawal and usage.
(i) Borrowings and other financial liabilities
Borrowings and other financial liabilities are initially recognised at fair value (net of transaction costs incurred). Difference between the fair value and the transaction proceeds on initial is recognised as an asset / liability based on the underlying reason for the difference. Subsequently all financial liabilities are measured at amortised cost using the effective interest rate method.
(j) Inventories
Inventories are stated at lower of cost and net realisable value. Cost is determined using the âaverage costâ method. The cost of finished goods and work in progress comprises raw materials, packing materials, direct labour, other direct costs and related production overheads. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
(k) Revenue Recognition
Revenue is measured at the value of the consideration received or receivable. Amounts disclosed as revenue are inclusive of excise duty and net of returns, trade allowances, rebates, discounts, value added taxes, goods and service tax and applicable taxes which are collected on behalf of the government or on behalf of third parties. The Company recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Company and specific criteria have been met for each of the Companyâs activities as described below:
(i) Sale of goods is recognised on transfer of significant risks and rewards of ownership to the buyer, which is generally on the dispatch of goods by the Company.
(ii) Benefit on account of entitlement to import duty - free materials under Duty Entitlement Passbook (DEPB) Scheme or duty drawback or merchant export from India scheme (MEIS) are accounted in the year of export as export incentives.
(iii) Sale of services: In contract involving rendering of services revenue is recognised using the proportionate completion method in line with agreements / arrangements with concerned parties and is net of service tax and goods & service tax.
(iv) Revenue from contracts: Revenue from fixed price contracts is recognised using the percentage of completion method. Percentage of completion is determined as a proportion of the cost incurred up to the reporting date of the total estimated contract costs. Proportionate completion is measured based upon the efforts incurred to date in relation to the total estimated efforts to complete the contract. The Company monitors estimates of total contract revenue and costs on a regular basis throughout the delivery period. The cumulative impact of any change in estimates of the contract value or cost is reflected in the period in which the changes become known. In the event that a loss is anticipated on a particular contract, provision is made for the estimated loss.
(l) Other Income
Interest income for all debt instruments is recognised using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.
Dividend is recognised in the statement of profit & loss only when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the Company, and the amount of the dividend can be measured reliably.
(m) Employee Benefits
Provident fund: Contribution towards provident fund for certain employees is made to the regulatory authorities, where the Company has no further obligations. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made on a monthly basis.
In respect of certain employees, provident fund contributions were made to Ador Welding Limited Administrative Staff Provident Fund Trust administered by the Company. The Companyâs liability was actuarially determined (using the Projected Unit Credit method) at the end of the year. Actuarial losses / gains were recognised in the statement of other comprehensive income in the year in which they arise. However, with effect from November 2016 the Company had discontinued contribution to Ador Welding Limited Administrative Staff Provident Fund Trust and had started contributing to the regulatory authorities.
Gratuity fund: The Company provides for gratuity, a defined benefit plan (the âGratuity Planâ) covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employeeâs salary and the tenure of employment.
The Companyâs liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial gain / loss arising on the measurement of defined benefit obligation is credited / charged to other comprehensive income.
Superannuation fund: Contribution towards superannuation fund for certain employees is made to Ador Welding Employees Superannuation Fund Trust administered by the Company. The benefit is classified as a âdefined contribution schemeâ as the Company does not carry any further obligation, apart from the contribution made on a monthly basis.
Employees state insurance scheme: The Company makes contribution to state plans namely Employees State Insurance Scheme and has no further obligation beyond making the payment to them.
Compensated absences: Accumulated compensated absences, which are expected to be availed or encashed within 12 months from the end of the year are treated as short term employee benefits. The obligation towards the same is measured at the expected cost of accumulating compensated absences as the additional amount expected to be paid as a result of the unused entitlement as at year end.
Accumulated compensated absences, which are expected to be availed or encashed beyond 12 months from the end of the year are treated as other long term employee benefits. The Companyâs liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses / gains are recognised in the statement of profit & loss in the year in which they arise
Termination benefits: Termination benefits in the nature of voluntary retirement benefits are recognised in the statement of profit & loss as & when incurred.
(n) Income tax
Income tax expense comprises current tax expenses and net change in the deferred tax assets or liabilities during the year. Current and deferred tax are recognised in the Statement of profit and loss, except when they relate to item that are recognised in Other comprehensive income or directly in Equity, in which case, the current and deferred tax are also recognised in Other comprehensive income or directly in Equity respectively.
(i) Current Income tax
The current income tax includes income tax payable by the Company computed in accordance with the tax laws applicable in the jurisdiction in which the Company operates. Advance taxes and provision for current income tax are presented in the Balance sheet after offsetting the advance tax paid and income tax provision arising in the same jurisdiction and where the relevant tax paying units intends to settle the asset and liability on a net basis.
(ii) Deferred income tax
Deferred income tax is recognised using Balance sheet approach. Deferred income tax assets and liabilities are recognised for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount, except when the deferred income tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of recognition.
Deferred tax asset are recognised to the extent that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred tax assets are 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 or part of deferred income tax assets to be utilised. 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, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled.
Deferred tax assets include Minimum Alternate Tax (MAT) paid in accordance with the tax laws in India which is likely to give future economic benefit in the form of availability of setoff against future income tax liability. Accordingly, MAT is recognised as deferred tax assets in the Balance sheet when the assets can be measured reliably and it is probable that the future economic benefit associated with the asset will be realised.
(o) Leases As a Lessee:
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to statement of profit & loss on a straight-line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases.
As a Lessor:
Lease income from operating leases where the Company is a lessor is recognised in other income on a straight line basis over the lease term unless the receipts are structured to increase in line with expected general inflation to compensate for the expected inflationary cost increases. The respective leased assets are included in the balance sheet based on their nature.
(p) Foreign Currency Transactions
The functional and presentation currency of the Company is Indian rupee.
Transactions in foreign currency are recorded at exchange rate prevailing on the date of transaction. Foreign currency denominated monetary assets and liabilities are translated at the exchange rate prevailing on the Balance sheet date and exchange gain or loss arising on restatement are recognised in the Statement of Profit and Loss.
Non-monetary assets and liabilities that are measured in terms of historical cost in foreign currencies are not retranslated.
(q) Provisions, contingent liabilities and contingent assets
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. Provisions are not discounted to their present value and are determined based on management estimate of the amount required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current management estimates.
Contingent liabilities are disclosed in respect of possible obligations that arise from past events, whose existence would be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company.
Contingent assets are not recognised in the financial statements. However, it is disclosed only when an inflow of economic benefits is probable.
(r ) Earnings per share
Basic earning per share is computed by dividing net profit after tax (excluding other comprehensive income) by the weighted average number of equity shares outstanding during the year.
Diluted earning per share is computed by dividing net profit after tax (excluding other comprehensive income) 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 shares considered for deriving basic earning per share and the weighted average number of equity shares which could have been issued on 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.
(s) Provision for warranty
Warranty costs are provided based on a technical estimate of the costs required to be incurred for repairs, replacement, material cost, servicing on the basis of the past experience of the Company. It is expected that this expenditure will be incurred over the contractual warranty period.
(t) Research & Development
Revenue expenditure on research & development (including overheads) are charged out as expense in the year in which they are incurred. Expenditure of a capital nature on research & development is debited to respective fixed assets and depreciation is provided on such assets, as are depreciable.
(u) Standard issued but not yet effective Ind AS 115
On 28 March 2018, the Ministry of Corporate Affairs (MCA), in consultation with the National Advisory Committee on Accounting Standards, has issued Companies (Indian Accounting Standards) Amendment Rules, 2018 to amend the Companies (Indian Accounting Standards) Rules, 2015. This results in introduction of Ind AS 115, Revenue from Contracts with customers, that comprehensively revamps the revenue recognition guidance. Consequently, Ind AS 18 and Ind AS 11 have been withdrawn, and other standards are suitably modified. The amendment is applicable to the Company from 1 April 2018. The Company is currently assessing the potential impact of this amendment.
Appendix B of Ind AS 21
This appendix is for determining the date of transaction where the entity has received / paid any foreign currency advances. This appendix states that the date of transaction shall be the date on which such advance is received or paid. Therefore, these non-monetary advances will not be restated at the time of their adjustment against the particular transaction. The Company is currently assessing the potential impact of this amendment.
Mar 31, 2017
Basis of preparation of financial statements:-
The financial statements which have been prepared under historical cost convention on the accrual basis of accounting, are in accordance with the applicable requirements of the Companies Act, 2013 (the âActâ) and comply in all material aspects with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended).
All assets and liabilities have been classified as current or non-current as per the Companyâs operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current / non- current classification of assets and liabilities.
Use of estimates:-
The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities as at the date of financial statements and the reported amounts of revenues and expenses during the reporting year. Key estimates include estimate of useful lives of fixed assets, income tax and future obligations under employee retirement benefit plans. Although these estimates are based upon managementâs knowledge of current events and actions, actual results could differ from those estimates. Any revisions to accounting estimates are recognised prospectively in the current and future periods.
Inventories:-
Inventories are stated at lower of cost and net realisable value. Cost is determined using the âaverage costâ method. The cost of finished goods and work in progress comprises raw material, packing materials, direct labour, other direct costs and related production overheads. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
Recognition of income and expenditure:-
1. Sale of goods is recognised on transfer of significant risks and rewards of ownership to the buyer, which is generally on the dispatch of goods by the Company and are recognised net of trade discounts, sales tax and excise duty.
2. Service income is recognised on transfer of significant risks and rewards of ownership to the buyer and is accounted based on terms of contract entered into with the respective parties.
3. Benefit on account of entitlement to import duty - free materials under Duty Entitlement Passbook (DEPB) Scheme or duty drawback or merchant export India scheme are accounted in the year of export as export incentives.
4. Other revenue / income and cost / expenditure are generally accounted on accrual as they are earned or incurred.
5. Sale of services: In contract involving rendering of services revenue is recognised using the proportionate completion method in line with agreements / arrangements with concerned parties and is net of service tax.
6. Revenue from contracts: Revenue from fixed price contracts is recognised using the percentage of completion method. Percentage of completion is determined as a proportion of the cost incurred up to the reporting date of the total estimated contract costs. Proportionate completion is measured based upon the efforts incurred to date in relation to the total estimated efforts to complete the contract. The Company monitors estimates of total contract revenue and costs on a regular basis throughout the delivery period. The cumulative impact of any change in estimates of the contract value or cost is reflected in the period in which the changes become known. In the event that a loss is anticipated on a particular contract, provision is made for the estimated loss.
7. Interest: Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.
8. Dividend: Dividend income is recognised when the right to receive dividend is established.
Fixed Assets: -
1. Tangible assets are stated at acquisition cost, net of accumulated depreciation and accumulated impairment losses, if any.
2. Subsequent expenditures related to an item of fixed asset are added to its book value only if they increase the future benefits from the existing asset beyond its previously assessed standard of performance.
3. Items of fixed assets that have been retired from active use and are held for disposal are stated at the lower of their net book value and net realisable value and are shown separately in the financial statements. Any expected loss is recognised immediately in the statement of profit & loss.
4. Losses arising from the retirement of, and gains or losses arising from disposal of fixed assets which are carried at cost, are recognised in the statement of profit & loss.
5. Depreciation is provided on a pro-rata basis on the straight-line method based on useful life as estimated by the management and aligned to Schedule II to the Companies Act, 2013 in order to reflect the actual usage of assets. Depreciation on assets acquired under finance lease is spread over the lease period or useful life, whichever is shorter.
6. Intangible assets are stated at acquisition cost, net of accumulated amortisation and accumulated impairment losses, if any. Intangible assets are amortised on a straight line basis over their estimated useful lives. The amortisation period and the amortisation 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 amortisation period is changed accordingly.
7. Software and implementation costs including users license fees of the Enterprise Resource Planning (ERP) system and other application software costs are amortised over a period of three years.
8. Cost of fixed assets not ready for intended use before such date is disclosed under Capital work-in-progress.
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, on the date of the transaction.
Conversion - Monetary assets and liabilities denominated in foreign currency are converted at the rate of exchange prevailing on the date of the balance sheet.
Exchange differences - Exchange differences arising on the settlement of monetary items or on reporting the Companyâs monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognised as income or as expenses in the year in which they arise.
Translation of foreign operations:-
Foreign operations are classified as either âintegralâ or ânon-integralâ operation. Exchange differences arising on a monetary item that, in substance, forms part of an enterpriseâs net investment in a nonintegral foreign operation are accumulated in the Foreign Currency Translation Reserve until the disposal of the net investment, at which time they are recognised as income or as expenses. The financial statements of an integral foreign operation are translated using the principles & procedures as if the transactions of the foreign operation are those of the Company itself.
Forward exchange contracts:-
Forward contracts are entered into, to hedge the foreign currency risk. The premium or discount on all such contracts arising at the inception of each contract is amortised as income or expense over the life of the contract. Any profit or loss arising on maturity, cancellation or renewal of forward contracts is recognised as income or as expense for the year.
The premium on option contract is recognised as an expense over the life of the contract. Investments:-
Investments that are readily realisable and are intended to be held for not more than one year from the date, on which such investments are made, are classified as current investments. All other investments are classified as long term investments.
On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties.
Current investments are carried in the financial statements at lower of cost and fair value. Non-current investments are carried at cost and provisions recorded to recognise any decline, other than temporary, in the carrying value of each investment.
Profit or loss on sale of investments is recorded on transfer of title from the Company and is determined as the difference between the sale price and the carrying value of the investment.
Employee benefits:-
Provident fund: Contribution towards provident fund for certain employees is made to the regulatory authorities, where the Company has no further obligations. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made on a monthly basis.
In respect of certain employees, provident fund contributions are made to Ador Welding Limited Administrative Staff Provident Fund Trust administered by the Company. The Companyâs liability is actuarially determined (using the Projected Unit Credit method) at the end of the year. Actuarial losses/ gains are recognised in the statement of profit & loss in the year in which they arise. However, with effect from November 2016 the company has discontinued contribution to Ador Welding Limited Administrative Staff Provident Fund Trust and has started contributing to the regulatory authorities.
The contributions made to the trust are recognised as plan assets. The defined benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as reduced by the fair value of plan assets.
Superannuation fund: Contribution towards superannuation fund for certain employees is made to Ador Welding Employees Superannuation Fund Trust administered by the Company. The benefit is classified as a âdefined contribution schemeâ as the Company does not carry any further obligation, apart from the contribution made on a monthly basis.
Employees state insurance scheme: The Company makes contribution to state plans namely Employees State Insurance Scheme and has no further obligation beyond making the payment to them.
Gratuity: The Company provides for gratuity, a defined benefit plan (the âGratuity Planâ) covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employeeâs salary and the tenure of employment. The Companyâs liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses / gains are recognised in the statement of profit and loss in the year in which they arise.
Compensated absences: Accumulated compensated absences, which are expected to be availed or encashed within 12 months from the end of the year are treated as short term employee benefits. The obligation towards the same is measured at the expected cost of accumulating compensated absences as the additional amount expected to be paid as a result of the unused entitlement as at the year end.
Accumulated compensated absences, which are expected to be availed or encashed beyond 12 months from the end of the year end are treated as other long term employee benefits. The Companyâs liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses / gains are recognised in the statement of profit & loss in the year in which they arise.
Termination benefits: Termination benefits in the nature of voluntary retirement benefits are recognised in the statement of profit & loss as & when incurred.
Borrowing costs:-
General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in the statement of profit & loss in the period in which they are incurred.
Segment reporting:-
The accounting policies adopted for segment reporting are in conformity with the accounting policies adopted for the Company. Further, inter-segment revenue has been accounted for based on the transaction price agreed to between segments which is primarily market based. Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the Company as a whole and are not allocable to segments on a reasonable basis, have been included under âUnallocated corporate expenses / incomeâ.
Leases:-As a Lessee:
Leases in which a significant portion of the risks and rewards of ownership are retained by the Lessor are classified as operating leases. Payments made under operating leases are charged to the statement of profit & loss on a straight-line basis over the period of the lease.
The Company leases certain tangible assets and such leases, where the Company has substantially all the risks & rewards of ownership, are classified as finance leases.
Assets held under finance leases are recognised as assets of the Company at their fair value at the date of acquisition. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation under secured borrowings. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are charged to the statement of profit & loss over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.
As a Lessor:
The Company has leased certain tangible assets and such leases where the Company has substantially retained all the risks and rewards of ownership are classified as operating leases. Lease income on such operating leases are recognised in the statement of profit & loss on a straight line basis over the lease term which is representative of the time pattern, in which benefit derived from the use of the leased asset is diminished. Initial direct costs are recognised as an expense in the statement of profit & loss in the period in which they are incurred.
Earnings per share:-
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Earnings considered in ascertaining the Companyâs earnings per share is the net profit for the period after deducting preference dividends and any attributable tax thereto for the period. 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 is adjusted for the effects of all dilutive potential equity shares.
Taxes on income:-Current tax
Current tax is computed and provided for in accordance with the applicable provisions of the Income Tax Act, 1961.
Minimum alternate tax:
Minimum alternate tax (MAT) paid in accordance with the tax laws gives rise to future economic benefits in the form of adjustments of future income tax liability. The same is considered as an asset if there is convincing evidence that the Company will pay normal income tax after the specified period. Accordingly, MAT credit is recognised as an asset in the balance sheet when it is probable that the future economic benefits associated with it will flow to the Company and the asset can be measured reliably.
Deferred tax:
Deferred tax assets and liabilities are recognised for the future tax consequences attributable to timing differences between the financial statements carrying amounts of existing assets & liabilities and their respective tax basis. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. If the Company has unabsorbed depreciation or carry forward losses under taxation laws, deferred tax assets are recognised only if there is a virtual certainty supported by convincing evidence that such deferred tax assets can be realised against future taxable profits.
At each balance sheet date the Company re-assesses unrecognised deferred tax assets. It recognises unrecognised deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realised.
Impairment of assets:-
The carrying amounts of the Companyâs assets are reviewed at each balance sheet date if there is any indication of impairment based on internal / external factors. An impairment loss is recognised whenever the carrying amount of an asset or a cash generating unit exceeds its recoverable amount. The recoverable amount of the assets (or where applicable, that of the cash generating unit to which the asset belongs) is estimated as the higher of its net selling price and its value in use. Impairment loss is recognised in the statement of profit & loss or against revaluation surplus, where applicable.
After impairment, depreciation / amortisation is provided on the revised carrying amount of the asset over its remaining useful life.
A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation / amortisation, if there were no impairment.
Provisions and contingent liabilities:-
Provisions: provisions are 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. Provisions are not discounted to its present value and are determined based on management estimate, required to settle the obligation at the balance sheet date.
Contingent liabilities: Contingent liabilities are disclosed in respect of possible obligations or present obligations that arise from past events, whose existence would be confirmed by the occurrence or non occurrence of one or more uncertain future events, not wholly within the control of the Company. When there is a possible obligation or present obligation in respect of which the likelihood of outflow of resources is remote, no provisions or disclosure is made.
Provision for warranty
Warranty costs are provided based on a technical estimate of the costs required to be incurred for repairs, replacement, material cost, servicing on the basis of the past experience of the Company. It is expected that this expenditure will be incurred over the contractual warranty period.
Research & development:-
Revenue expenditure on research & development (including overheads) are charged out as expense through the natural heads of account in the year in which they are incurred.
Expenditure of a capital nature on research & development is debited to respective fixed assets and depreciation is provided on such assets, as are depreciable.
Cash and cash equivalents:-
In the cash flow statement, cash and cash equivalents include cash in hand, cheques in hand, demand deposits with banks, other short-term highly liquid investments with original maturities of three months or less.
Mar 31, 2015
Basis of preparation of financial statements:-
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India under the historical
cost convention on accrual basis. Pursuant to Section 133 of the
Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules,
2014, till the standards of accounting or any addendum thereto are
prescribed by the Central Government in consultation and recommendation
of the National Financial Reporting Authority, the existing Accounting
Standards notified under the Companies Act, 1956 shall continue to
apply. Consequently, these financial statements have been prepared to
comply in all material aspects with the accounting standards notified
under Section 211(3C) [Companies (Accounting Standards) Rules, 2006, as
amended] and other relevant provisions of the Companies Act, 2013.
All the assets and liabilities have been classified as current or
non-current as per the Company's operating cycle and other criteria set
out in the Schedule III to the Companies Act, 2013. Based on the nature
of products and the time between the acquisition of assets for
processing and their realisation in cash and cash equivalents, the
Company has ascertained its operating cycle as 12 months for the
purpose of current, non-current classification of assets and
liabilities.
Use of Estimates:-
The preparation of financial statements in conformity with generally
accepted accounting principles requires estimates and assumptions to be
made that affect the reported amounts of assets and liabilities on the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Differences between actual
results and estimates are recognized in the period in which the results
are known.
Recognition of Income and Expenditure:-
1. Sale of goods is recognized on transfer of significant risks and
rewards of ownership to the buyer, which is generally on the dispatch
of goods by the Company and are recognised net of trade discounts,
sales taxes and excise duties.
2. Service income is recognised on transfer of significant risks and
rewards of ownership to the buyer and is accounted based on terms of
contract entered into with the respective parties.
3. Benefit on account of entitlement to import duty - free materials
under Duty Entitlement Passbook Scheme (DEPB) or Duty Drawback are
accounted in the year of export as Export Incentives.
4. Other Revenue / Income and Cost / Expenditure are generally
accounted on accrual basis as they are earned or incurred.
5. Sale of Services: In contract involving rendering of services,
revenue is recognized using the proportionate completion method in line
with agreements / arrangements with concerned parties and is net of
service tax.
6. Revenue from contracts: Revenue from fixed price contracts is
recognized using the percentage of completion method. Percentage of
completion is determined as a proportion of the cost incurred up to the
reporting date of the total estimated contract costs. Proportionate
completion is measured based upon the efforts incurred to date, in
relation to the total estimated efforts to complete the contract. The
Company monitors estimates of total contract revenue and costs on a
regular basis throughout the delivery period. The cumulative impact of
any change in estimates of the contract value or cost is reflected in
the period in which the changes become known. In the event that a loss
is anticipated on a particular contract, provision is made for the
estimated loss.
7. Interest: Interest income is recognised on a time proportion basis
taking into account the amount outstanding and the rate applicable.
Fixed Assets:-
1. Tangible Assets are stated at acquisition cost, net of accumulated
depreciation and accumulated impairment losses, if any.
2. Subsequent expenditures related to an item of fixed asset are added
to its book value only if they increase the future benefits from the
existing asset beyond its previously assessed standard of performance.
3. Items of fixed assets that have been retired from active use and are
held for disposal are stated at the lower of their net book value and
net realisable value and are shown separately in the financial
statements. Any expected loss is recognised immediately in the
Statement of Profit & Loss.
4. Losses arising from the retirement of, and gains or losses arising
from disposal of fixed assets, which are carried at cost are recognised
in the Statement of Profit & Loss.
5. Depreciation is provided on a pro-rata basis on the straight-line
method based on useful life as estimated by the Management and aligned
to Schedule II to the Companies Act, 2013 in order to reflect the
actual usage of assets. Depreciation on assets acquired under Finance
lease is spread over the lease period or useful life, whichever is
shorter.
6. Intangible assets are stated at acquisition cost, net of accumulated
amortization and accumulated impairment losses, if any. Intangible
assets are amortised on a straight line basis over their estimated
useful lives. The amortisation period and the amortisation 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 amortisation period is changed accordingly.
7. Software and implementation costs including users license fees of
the Enterprise Resource Planning (ERP) system and other application
software costs are amortised over a period of three years.
Change in accounting policy:-
8. The Company has revised its policy of providing depreciation on
fixed assets effective 01st April, 2014. The depreciation is now
provided on Straight Line Method (SLM) based on useful life as
estimated by the Management and aligned to Schedule II to the Companies
Act, 2013, as against Written Down Value (WDV) method followed earlier.
As a result of this change, the effect relating to the period prior to
01st April, 2014, is a net credit of Rs.2,604 lacs (excluding deferred
tax) which has been shown as an 'Exceptional Item' in the financial
result for the year ended 31st March, 2015. Further, based on the
transitional provision of Schedule II to the Companies Act, 2013, an
amount of Rs.108 lacs (net of deferred tax) has been adjusted to
retained earnings. Had the Company continued with the depreciation
under the old WDV method, the depreciation for the year would have been
lower by Rs.12 lacs.
Impairment of Assets:-
Assessment is done at each balance sheet date as to whether there is
any indication that an asset (tangible and intangible) may be impaired.
For the purpose of assessing impairment, the smallest identifiable group
of assets that generates cash inflows from continuing use that are
largely independent of the cash inflows from other assets or groups of
assets, is considered as a cash generating unit. If any such indication
exists, an estimate of the recoverable amount of the asset / cash
generating unit is made. Assets whose carrying value exceeds their
recoverable amount are written down to the recoverable amount.
Recoverable amount is higher of an asset's or cash generating unit's net
selling price and its value in use. Value in use is the present value of
estimated future cash flows expected to arise from the continuing use of
an asset and from its disposal at the end of its useful life. Assessment
is also done at each balance sheet date as to whether there is any
indication that an impairment loss recognised for an asset in prior
accounting periods may no longer exist or may have decreased.
Leases:-
As a lessee:
Leases in which a significant portion of the risks and rewards of
ownership are retained by the Lessor are classified as operating
leases. Payments made under operating leases are charged to the
Statement of Profit & Loss on a straight-line basis over the period of
the lease.
The Company leases certain tangible assets and such leases where the
Company has substantially all the risks and rewards of ownership are
classified as finance leases. Finance leases are capitalised at the
inception of the lease at the lower of the fair value of the leased
asset and the present value of the minimum lease payments.
Each lease payment is apportioned between the finance charge and the
reduction of the outstanding liability. The outstanding liability is
included in other short / long-term borrowings. The finance charge is
charged to the Statement of Profit & Loss over the lease period, so as
to produce a constant periodic rate of interest on the remaining
balance of the liability for each period.
As a Lessor:
The Company has leased certain tangible assets and such leases where
the Company has substantially retained all the risks and rewards of
ownership are classified as operating leases. Lease income on such
operating leases are recognised in the Statement of Profit & Loss on a
straight line basis over the lease term, which is representative of the
time pattern in which benefit derived from the use of the leased asset
is diminished. Initial direct costs are recognised as an expense in the
Statement of Profit & Loss in the period in which they are incurred.
Investments:-
Investments that are readily realisable and are intended to be held for
not more than one year from the date, on which such investments are
made, are classified as current investments. All other investments are
classified as long term investments. Current investments are carried at
cost or fair value, whichever is lower. Long-term investments are
carried at cost. However, provision for diminution is made to recognise
a decline, other than temporary, in the value of the investments, such
reduction being determined and made for each investment individually.
Inventories:-
Inventories are stated at lower of cost and net realisable value. Cost
is determined using the 'average cost' method. The cost of finished
goods and work-in-progress comprises raw materials, packing materials,
direct labour, other direct costs and related production overheads. Net
realisable value is the estimated selling price in the ordinary course
of business, less the estimated costs of completion and the estimated
costs necessary to make the sale.
Foreign Currency Translation:-
Initial Recognition: On initial recognition, all foreign currency
transactions are recorded by applying to the foreign currency amount,
the exchange rate between the reporting currency and the foreign
currency at the date of the transaction.
Subsequent Recognition: As at the reporting date, non-monetary items
which are carried in terms of historical cost denominated in a foreign
currency are reported using the exchange rate at the date of the
transaction. All non-monetary items which are carried at fair value or
other similar valuation denominated in a foreign currency are reported
using the exchange rates that existed when the values were determined.
All monetary assets and liabilities in foreign currency are restated at
the end of the accounting period.
Exchange differences on restatement of all other monetary items are
recognised in the Statement of Profit & Loss.
Translation of foreign operations:-
Foreign operations are classified as either 'integral' or
'non-integral' operation. Exchange differences arising on a monetary
item that, in substance, forms part of an enterprise's net investment
in a non-integral foreign operation are accumulated in the Foreign
Currency Translation Reserve until the disposal of the net investment,
at which time they are recognised as income or as expense. The
financial statements of an integral foreign operation are translated
using the principles and procedures as if the transactions of the
foreign operation are those of the Company itself.
Forward Exchange Contracts:-
The premium or discount arising at the inception of forward exchange
contracts entered into to hedge an existing asset / liability, is
amortised as expense or income over the life of the contract. Exchange
differences on such a contract are recognised in the Statement of
Profit & Loss in the reporting period in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of such a
forward exchange contract is recognised as income or as expense for the
period.
Forward exchange contracts outstanding as at the year end on account of
firm commitment / highly probable forecast transactions are marked to
market and the losses, if any, are recognised in the Statement of
Profit & Loss and gains are ignored in accordance with the Announcement
of Institute of Chartered Accountants of India on 'Accounting for
Derivatives' issued in March 2008.
Research and Development:-
1. Revenue expenditure on Research & Development (including overheads)
are charged out as expense through the natural heads of account, in the
year in which they are incurred.
2. Expenditure of a capital nature on Research & Development is debited
to Fixed Assets and depreciation is provided on such assets as are
depreciable.
Employee Benefits:-
Provident Fund: Contribution towards Provident Fund for certain
employees is made to the regulatory authorities, where the Company has
no further obligations. Such benefits are classified as Defined
Contribution Schemes as the Company does not carry any further
obligations, apart from the contributions made on a monthly basis.
In respect of certain employees, Provident Fund contributions are made
to Ador Welding Employees Provident Fund Trust administered by the
Company. The Company's liability is actuarially determined (using the
Projected Unit Credit method) at the end of the year. Actuarial losses
/ gains are recognised in the Statement of Profit & Loss in the year in
which they arise.
The contributions made to the trust are recognised as plan assets. The
defined benefit obligation recognised in the Balance Sheet represents
the present value of the defined benefit obligation, as reduced by the
fair value of plan assets.
Superannuation Fund: Contribution towards Superannuation Fund for
certain employees is made to the Ador Welding Employees Superannuation
Fund Trust administered by the Company. The benefit is classified as
Defined Contribution scheme, as the Company does not carry any further
obligation, apart from the contribution made on a monthly basis, which
is charged to Statement of Profit & Loss.
Employees State Insurance Scheme: The Company makes contribution to
state plans namely Employees State Insurance Scheme and has no further
obligation beyond making the payment to them.
Gratuity: The Company provides for gratuity, a defined benefit plan
(the 'Gratuity Plan') covering eligible employees in accordance with
the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump
sum payment to vested employees at retirement, death, incapacitation or
termination of employment, of an amount based on the respective
employee's salary and the tenure of employment. The Company's liability
is actuarially determined (using the Projected Unit Credit method) at
the end of each year. Actuarial losses/ gains are recognised in the
Statement of Profit and Loss in the year in which they arise.
Compensated Absences: Accumulated compensated absences, which are
expected to be availed or encashed within 12 months from the end of the
year are treated as short term employee benefits. The obligation
towards the same is measured at the expected cost of accumulating
compensated absences, as the additional amount expected to be paid as a
result of the unused entitlement as at the year end.
Accumulated compensated absences, which are expected to be availed or
encashed beyond 12 months from the end of the year are treated as other
long term employee benefits. The Company's liability is actuarially
determined (using the Projected Unit Credit method) at the end of each
year. Actuarial losses / gains are recognised in the Statement of
Profit & Loss in the year in which they arise.
Termination Benefits: Termination benefits in the nature of voluntary
retirement benefits are recognised in the Statement of Profit & Loss as
and when incurred.
Current and deferred tax:-
Tax expense for the period, comprising current tax and deferred tax,
are included in the determination of the net profit or loss for the
period. Current tax is measured at the amount expected to be paid to
the tax authorities in accordance with the taxation laws prevailing in
the respective jurisdictions.
Deferred tax is recognised for all the timing differences, subject to
the consideration of prudence in respect of deferred tax assets.
Deferred tax assets are recognised and carried forward only to the
extent that there is a reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realized. Deferred tax assets arising mainly on account of
brought forward losses and unabsorbed depreciation under tax laws, are
recognized, only if there is a virtual certainty of its realization,
supported by convincing evidence. Deferred tax assets and liabilities
are measured using the tax rates and tax laws that have been enacted or
substantively enacted by the Balance Sheet date. At each Balance Sheet
date, the Company reassesses unrecognised deferred tax assets, if any.
Minimum Alternate Tax (MAT) credit is recognised as an asset only when
and to the extent there is convincing evidence that the Company will
pay normal income tax during the specified period. Such asset is
reviewed at each Balance Sheet date and the carrying amount of the MAT
credit asset is written down to the extent there is no longer a
convincing evidence to the effect that the Company will pay normal
income tax during the specified period.
Borrowing Costs:-
General and specific borrowing costs directly attributable to the
acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready
for their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially
ready for their intended use or sale. All other borrowing costs are
recognised in the Statement of Profit & Loss in the period in which
they are incurred.
Provisions and Contingent Liabilities:-
Provisions: Provisions are recognised when there is a present
obligation as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation at the Balance
Sheet date and are not discounted to its present value.
Contingent Liabilities: Contingent liabilities are disclosed when there
is a possible obligation arising from past events, the existence of
which will be confirmed only by the occurrence or non-occurrence of one
or more uncertain future events not wholly within the control of the
Company or a present obligation that arises from past events where it
is either not probable that an outflow of resources will be required to
settle or a reliable estimate of the amount cannot be made.
Provision for Warranty:-
Warranty costs are provided based on a technical estimate of the costs
required to be incurred for repairs, replacement, material cost,
servicing on the basis of the past experience of the Company. It is
expected that this expenditure will be incurred over the contractual
warranty period.
Segment Reporting:-
The accounting policies adopted for segment reporting are in conformity
with the accounting policies adopted by the Company. Further,
inter-segment revenue has been accounted for, based on the transaction
price agreed to between segments, which is primarily market based.
Revenue and expenses have been identified to segments on the basis of
their relationship to the operating activities of the segment. Revenue
and expenses, which relate to the Company, as a whole, and are not
allocable to segments on a reasonable basis, have been included under
'Unallocated corporate expenses / income'.
Cash and Cash Equivalents:-
In the Cash Flow Statement, cash and cash equivalents include cash in
hand, demand deposits with banks, other short-term highly liquid
investments with original maturities of three months or less.
Earnings per Share:-
Basic earnings per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. Earnings
considered in ascertaining the Company's earnings per share is the net
profit for the period after deducting preference dividends and any
attributable tax thereto for the period. 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 is adjusted for the effects of all
dilutive potential Equity shares.
Note 3 b - Rights, preferences and restrictions attached to shares
The Company has only one class of shares referred to as equity shares
having a par (face) value of Rs. 10/- per share. Each shareholder is
eligible for one vote per share held. The dividend proposed by the
Board of Directors is subject to the approval of the shareholders in
the Annual General Meeting.
In the event of liquidation of the Company, the equity shareholders
will be entitled to receive the remaining assets of the Company, after
distribution of all the preferential amounts, in proportion to their
shareholding.
@ Dividend proposed to be distributed to equity shareholders is Rs.5/-
(Previous year Rs.5/-) per equity share. Note a) Net written down
value of fixed assets having Nil remaining useful life as on 01st
April,2014, aggregating Rs.108 lacs (net of deferred tax asset
aggregating Rs.55 lacs) has been adjusted above on account of change in
accounting policy for depreciating fixed assets which is based on
transitional provisions as stated in para 7 (b) of Schedule II of the
Act.
(i) Working Capital facilities from Banks are secured by pari passu
charge by way of hypothecation of Company's stocks, other current
assets and other tangible moveable assets of the Company, both present
& future and book debts in favour of Bank of Baroda & HDFC Bank
Limited. HDFC Bank Limited facilities are further secured by first
exclusive charge on the entire plant & machinery and other moveable
fixed assets of the Company and on the land & building at the Company's
Silvassa unit.
(ii) Guarantees given by banks to third parties amounting to Rs.1,365
lacs; (Previous year Rs.2,145 lacs) on behalf of the Company are
secured against securities mentioned in (i) above.
Note: (a) The above loan has been given to the subsidiary entity for
the purpose of carrying business operations.
* Includes an amount of Rs. 304 lacs (Previous year Rs. 340 lacs) on
account of retention money of Project Engineering Business
The amount of excise duty disclosed as deduction from turnover is the
total excise duty for the year except the excise duty related to the
difference between the closing stock and opening stock and excise duty
paid, but not recovered for free goods, breakages / damages and captive
consumption, which has been included under the head 'Other Expenses' as
'Miscellaneous Expenses'.
Mar 31, 2014
Basis of preparation of financial statements:-
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India under the historical
cost convention on accrual basis. Pursuant to circular 15/2013 dated
13.09.2013 read with circular 08/2014 dated 04,04.2014, till the
Standards of Accounting or any addendum thereto are prescribed by
Central Government in consultation and recommendation of the National
Financial Reporting Authority, the existing Accounting Standards
notified under the Companies Act, 1956 shall continue to apply.
Consequently, these financial statements have been prepared to comply
in all material aspects with the accounting standards notified under
Section 211(3C) (Companies (Accounting Standards) Rules, 2006, as
amended) and other relevant provisions of the Companies Act, 1956.
All assets and liabilities have been classified as current or
non-current as per the Company''s normal operating cycle and other
criteria set out in Schedule VI to the Companies Act 1956. Based on the
nature of products and the time between the acquisition of assets for
processing and their realization in cash and cash equivalents, the
Company has ascertained its operating cycle to be 12 months for the
purpose of current and non-current classification of assets and
liabilities.
Use of Estimates: -
The preparation of financial statements in confirmity with generally
accepted accounting principles requires estimates and assumptions to be
made that affect the reported amounts of assets and liabilities on the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Differences between actual
results and estimates are recognized in the period in which the results
are known.
Recognition of Income and Expenditure:-
1. Sale of goods is recognized on transfer of significant risks and
rewards of ownership which is generally on the dispatch of goods by the
Company.
2. Benefit on account of entitlement to import duty - free materials
under Duty Entitlement Passbook Scheme is accounted in the year of
export as Export Incentives.
3. Other Revenue / Income and Cost / Expenditure are generally
accounted on accrual as they are earned or incurred.
4. Sale of Services : In contract involving rendering of services,
revenue is recognized when the service is performed in line with
agreements / arrangements with concerned parties and is net of service
tax.
Fixed Assets:-
1, Fixed Assets are accounted by the Company on the basis of historical
costs. Gains or Losses arising on disposal are recognized in the
Statement of Profit and Loss Account of the relevant financial year.
2. Method of Depreciation / Amortisation:
a) Depreciation on all assets (except Freehold Land and Leased
Vehicles) is provided on the written down value method at the rates and
in the manner specified in the Schedule XIV to the Companies Act, 1956.
Depreciation on assets acquired under finance lease is spread over the
lease period or useful life whichever is shorter.
b) Cost of leasehold land is amortised over the period of lease.
c) Depreciation on additions / deletions is charged on pro-rata basis,
upto the month of purchase / including the month of sale.
d) Intangible Assets are stated at cost, net of accumulated
amortisation. Intangible assets are amortised on a straight line basis
over the estimated useful life, as decided by the management.
3. Software and implementation costs including users license fees of
the Enterprise Resource Planning (ERP) system and other application
software costs are amortised over a period of three years.
Assets taken on Lease: -
For assets taken under operating lease, lease rentals payable are
charged to the Statement of Profit and Loss.
Assets acquired under leases where the Company has substantially all
the risks and rewards of ownership are classified as Finance Leases.
Such assets are capitalized at the inception of the lease at lower of
the fair value and the present value of the minimum lease payments at
the inception of the lease term and disclosed as leased assets. Each
lease rental paid is allocated between the liability of the interest
cost so as to obtain a constant periodic rate of interest on the
outstanding liability for each period.
Impairment of Assets:-
The carrying amount of assets are reviewed at each Balance Sheet date
if there is any indication of impairment based on internal / external
factors. An asset is impaired when the carrying amount of the asset
exceeds the recoverable amount. An impairment loss is charged to the
Statement of Profit and Loss in the year in which an asset is
identified as impaired. Impairment losses recognised in prior
accounting periods are reversed if there has been any change in the
estimate of the recoverable amount.
Investments:-
Long Term Investments are stated at ''Cost''. A provision for diminution
is made to recognise a decline, other than temporary in the value of
long-term investments. Current Investments are stated at lower of cost
and fair value.
Valuation of Inventories:-
Inventories of Raw Materials and Components, Work-in-progress, Finished
Goods, Goods for Trade, Stores, Spares and Packing Materials are stated
vat cost or net realisable value, whichever is lower''. Goods in Transit
are stated ''at cost''. Cost comprises all cost of purchase, cost of
conversion and other costs incurred in bringing the inventories to
their present location and condition. The excise duty in respect of
closing inventory of finished goods is included as part of finished
goods.
Cost formula used is Average Cost''. Due allowance is estimated and made
for defective and obsolete items, wherever necessary, based on the past
experience of the Company.
Foreign Currency Translations:-
All transactions in foreign currency, are recorded at the rates of
exchange prevailing on the dates when the relevant transactions take
place;
Monetary items in the form of Current Assets and Current Liabilities in
foreign currency, outstanding at the close of the year, are converted
in Indian Currency at the appropriate rates of exchange prevailing on
the date of the Balance Sheet, Resultant gain or loss is accounted
during the yean- In respect of Forward Exchange contracts entered into
to hedge foreign currency risks, the difference between the forward
rate and exchange rate at the inception of the contract is recognized
as income or expense over the life of the contract. Further, the
exchange differences arising on such contracts are recognised as income
or expense along with the exchange differences on the underlying assets
/ liabilities. Profit or loss on cancellations / renewals of forward
contracts is recognised during the year.
Accounting of foreign office / branches / integral operations:-
a. Monetary items in the form of Current Assets and Current
Liabilities in foreign currency, outstanding at the close of the year,
are converted at the appropriate rates of exchange prevailing on the
date of the Balance Sheet.
b. Fixed assets and depreciation thereon are converted at the exchange
rates prevailing on the date of acquisition of the respective asset.
a Revenue items, excluding depreciation, are converted at the monthly
exchange rates prevailing on the date of the transaction.
Research and Development: -
1, Revenue expenditure on Research & Development (including overheads)
are charged out as expense through the natural heads of account in the
year in which they are incurred.
2. Expenditure of a capital nature on Research & Development is
debited to Fixed Assets and depreciation is provided on such assets as
are depreciable.
Retirement and Other Employee Related Benefits:-
a. Short term employee benefits:- All employee benefits payable within
twelve months of rendering the service are recognised in the period in
which the employee renders the related service.
b. Post Employment / Retirement Benefits:- Defined Contribution Plans
such as Government Pension Fund , Gratuity Fund, Superannuation Fund,
etc. are charged to the Statement of Profit and Loss as incurred.
c. Defined Benefit Obligation Plans:- The present value of the
obligation under such plans is determined based on an actuarial
valuation, using the Projected Unit Credit Method, carried out
(approximately) at the close of the year. Actuarial gains and losses
arising on such valuation are recognised immediately in the Statement
of Profit and Loss. In the case of gratuity, which is funded, the fair
value of the plan assets is reduced from the gross obligation under the
defined benefit plans, to recognise the obligation on net basis.
In respect of certain employees, the monthly contribution for Provident
Fund is made to a Trust administered by the Company. The interest
payable by the Trust is notified by the Government. The Company has an
obligation to make good the shortfall, if any.
The present value of obligation under Interest Rate Guarantee on Exempt
Provident Funds is determined based on an actuarial valuation, using
the Projected Unit Credit Method, carried out at the close of the year.
d. Compensated Absences - Accumulated compensated absences, which are
expected to be availed or encashea within 12 months from the end of the
year are treated as short-term employee benefits. Accumulated
compensated absences, which are expected to be availed or encashed
beyond 12 months from the end of the year are treated as other
long-term employee benefits. The Company''s liability is actuarially
determined (using the Projected Unit Credit Method) at the end of each
year.
Actuarial losses / gains comprise experience adjustments and the
effects of changes in actuarial assumptions are recognised in the
Statement of Profit and Loss in the year in which they arise
e. Termination Benefits are charged to the Statement of Profit and
Loss in the year in which they are incurred.
Taxation:-
Income tax expense comprises Current Tax and Deferred Tax charge or
credit. Provision- for current tax is made on the basis of the
assessable income at the tax rate applicable to the relevant assessment
year. The deferred tax asset and deferred tax liability is calculated
by applying tax rate and laws that have been enacted or substantively
enacted by the Balance Sheet date. Deferred tax assets arising mainly
on account of brought forward losses and unabsorbed depreciation under
tax laws, are recognized, only if there is a virtual certainty of its
realization, supported by convincing evidence. Deferred tax assets on
account of other timing differences are recognized only to the extent
there is a reasonable certainty of its realization. At each Balance
Sheet date, the carrying amount of deferred tax assets are reviewed to
reassure realization.
Borrowing Costs:-
Interests and other borrowing costs attributable to qualifying assets
are capitalised. Other interests and borrowing costs are charged to
revenue.
Provisions, Contingent Liabilities and Contingent Assets:-
Provisions involving a substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognised but are disclosed in the
financial statements. Contingent Assets are neither recognised nor
disclosed in the financial statements.
Provision for Warranty:-
Warranty costs are provided based on a technical estimate of the costs
required to be incurred for repairs, replacement, material cost,
servicing on the basis of the past experience of the Company. It is
expected that this expenditure will be incurred over the contractual
warranty period.
Revenue from contracts: -
Revenue from fixed price contracts is recognized using the percentage
of completion method. Percentage of completion is determined as a
proportion of the cost incurred up to the reporting date of the total
estimated contract costs. Proportionate completion is measured based
upon the efforts incurred to date in relation to the total estimated
efforts to complete the contract. The Company monitors estimates of
total contract revenue and costs on a routine basis throughout the
delivery period. The cumulative impact of any change in estimates of
the contract value or cost is reflected in the period in which the
changes become known. In the event that a loss is anticipated on a
particular contract, provision is made for the estimated loss.
Note 3b- Rights, preferences and restrictions attached to shares
The Company has only one class of shares referred to as equity shares
having a par (face) value of . Rs. 10/- per share. Each shareholder is
eligible for one vote per share held. The dividend proposed by the
Board of Directors is subject to the approval of the shareholders in
the Annual General Meeting, except in case of interim dividend.
In the event of liquidation of the Company, the eauity shareholders
will be entitled to receive the remaining assets of the Company, after
distribution of all the preferential amounts, in proportion to their
shareholding.
Mar 31, 2013
I) Basis of preparation of financial statements :-
The financial statements have been prepared under the historical cost
convention and in compliance, in all material aspects, with the
applicable accounting principles in India, the applicable Accounting
Standards notified under Section 211 (3C) and the other relevant
provisions of the Companies Act, 1956,
All the assets and liabilities have been classified as current or non
current as per the Company''s normal operating cycle and other criteria
set out in the Schedule VI to the Companies Act, 1956. Based on the
nature of products and the time between the acquisition of assets for
processing and their realisation in cash and cash equivalent, the
Company has ascertained its operating cycle to be 12 months for the
purpose of current-non current classification of assets and
liabilities.
II) Use of Estimates :-
The preparation of financial statements, in confirmity with generally
accepted accounting principles requires estimates and assumptions to be
made that affect the reported amounts of assets and liabilities on the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period, Differences between actual
results and estimates are recognised in the period in which the results
are known.
III) Recognition of Income and Expenditure :-
1. Sale of goods is recognized on transfer of significant risks and
rewards of ownership which is generally on the dispatch of goods by the
Company.
2. Benefit on account of entitlement to import duty - free materials
under Duty Entitlement Passbook Scheme is accounted in the year of
export as Export Incentives.
3. Other Revenue / Income and Cost / Expenditure are generally
accounted on accrual, as they are earned or incurred.
IV) Fixed Assets :-
1. Fixed Assets are accounted by the Company on the basis of
historical costs. Gains or Losses arising on disposal are recognised in
the statement of Profit and Loss Account of the relevant financial
year.
2. Method of Depreciation / Amortisation:
a) Depreciation on all assets (except Freehold Land and Leased
Vehicles) is provided on the written down value method at the rates and
in the manner specified in the Schedule XIV to the Companies Act, 1956.
Depreciation on assets acquired under finance lease is spread over the
lease period or useful life, whichever is shorter.
b) Cost of leasehold land is amortised over the period of lease.
c) Depreciation on additions / deletions is charged on pro-rata basis,
upto the month of purchase / including the month of sale,
V) Investments :-
Long Term Investments are stated at ''Cost''. A provision for dimunition
is made to recognise a decline, other than temporary in the value of
long term investments. Current Investments are stated at lower of cost
and fair value.
VI) Valuation of Inventories :-
Inventories of Raw Materials and Components, Work in progress, Finished
Goods, Goods for Trade, Stores, Spares and Packing Materials are stated
''at cost or net realisable value, whichever is lower''. Goods in Transit
are stated ''at cost''. Cost comprises all cost of purchase, cost of
conversion and other costs incurred in bringing the inventories to
their present location and condition. The excise duty in respect of
closing inventory of finished goods is included as part of finished
goods,
Cost formula used is ''Average Cost1. Due allowance is estimated and
made for defective and obsolete items, wherever necessary, based on the
past experience of the Company.
VII) Foreign Currency Translations :-
All transactions in foreign currency, are recorded at the rates of
exchange prevailing on the dates when the relevant transactions take
place;
Monetary items in the form of Current Assets and Current Liabilities in
foreign currency, outstanding at the close of the year, are converted
in Indian Currency at the appropriate rates of exchange prevailing on
the date of the Balance Sheet. Resultant gain or loss is accounted
during the year;
In respect of Forward Exchange contracts entered into to hedge foreign
currency risks, the difference between the forward rate and exchange
rate at the inception of the contract is recognized as income or
expense over the life of the contract. Further, the exchange
differences arising on such contracts are recognised as income or
expense along with the exchange differences on the underlying assets /
liabilities. Profit or loss on cancellations / renewals of forward
contracts is recognised during the year.
Accounting of foreign branches / integral operations:-
a. Monetary items in the form of Current Assets and Current
Liabilities in foreign currency, outstanding at the close of the year,
are converted at the appropriate rates of exchange prevailing on the
date of the Balance Sheet,
b. Fixed assets and depreciation thereon, are converted at the
exchange rates prevailing on the date of acquisition of the respective
asset.
c. Revenue items, excluding depreciation, are converted at the monthly
exchange rates prevailing on the date of the transaction.
VIII) Research and Development :-
1. Revenue expenditure on Research and Development (including
overheads) are charged out as expense through the natural heads of
account in the year in which they are incurred,
2. Expenditure of a capital nature on Research and Development is
debited to Fixed Assets and depreciation is provided on such assets, as
are depreciable.
IX) Retirement and Other Employee Related Benefits :-
a. Short term employee benefits - All employee benefits payable within
twelve months of rendering the service are recognised in the period in
which the employee renders the related service.
b. Post Employment / Retirement Benefits - Defined Contribution Plans
such as Government Pension Fund etc., are charged to the Profit and
Loss Account as incurred.
c. Defined Benefit Obligation Plans - The present value of the
obligation under such plans, is determined based on an actuarial
valuation, using the Projected Unit Credit Method, carried out
(approximately) at the close of the year. Actuarial gains and losses
arising on such valuation are recognised immediately in the Profit and
Loss Account, In the case of giatuity, which is funded, the fair value
of the plan assets is reduced from the gross obligation under the
defined benefit plans, to recognise the obligation on net basis,
In respect of certain employees, the monthly contribution for Provident
Fund is made to a Trust administered by the Company. The interest
payable by the Trust is notified by the Government, The Company has an
obligation to make good the shortfall, if any.
The present value of obligation under Interest Rate Guarantee on Exempt
Provident Funds, is determined based on an actuarial valuation, using
the Projected Unit Credit Method, carried out at the close of the year.
d. Other Long Term Employee Benefits are recognised in the same manner
as Defined Benefit Plans.
e. Termination Benefits are charged to the Profit and Loss Account in
the year in which they are incurred.
X) Assets taken on Lease :-
For assets taken under operating lease, lease rentals payable are
charged to the Profit and Loss Account.
Assets acquired under leases where the Company has substantially all
the risks and rewards of ownership are classified as Finance Leases.
Such assets are capitalized at the inception of the lease at the lower
of the fair value and the present value of the minimum lease payments
at the inception of the lease term and disclosed as leased assets. Each
lease rental paid is allocated between the liability of the interest
cost so as to obtain a constant periodic rate of interest on the
outstanding liability for each period,
XI) Taxation :-
Income tax expense comprises Current Tax and Deferred Tax charge or
credit. Provision for current tax is made on the basis of the
assessable income at the tax rate applicable to the relevant assessment
year. The deferred tax asset and deferred tax liability is calculated
by applying tax rate and laws that have been enacted or substantively
enacted by the Balance Sheet date. Deferred tax assets arising mainly
on account of brought forward losses and unabsorbed depreciation under
tax laws, are recognized, only if there is a virtual certainty of its
realization, supported by convincing evidence. Deferred tax assets on
account of other timing differences are recognized only to the extent
there is a reasonable certainty of its realization. At each Balance
Sheet date, the carrying amount of deferred tax assets are reviewed to
reassure realization.
XII) Impairment of Assets :-
The carrying amount of assets are reviewed at each Balance Sheet date
if there is any indication of impairment based on internal / external
factors. An asset is impaired when the carrying amount of the asset
exceeds the recoverable amount. An impairment loss is charged to the
Profit and Loss Account in the year in which an asset is identified as
impaired, Impairment losses recognised in prior accounting periods are
reversed if there has been any change in the estimate of the
recoverable amount,
XIII) Borrowing Costs :-
Interests and other borrowing costs attributable to qualifying assets
are capitalised. Other interests and borrowing costs are charged to
revenue.
XIV) Provisions, Contingent Liabilities and Contingent Assets :-
Provisions involving a substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources,
Contingent Liabilities are not recognised but are disclosed in the
financial statements. Contingent Assets are neither recognised nor
disclosed in the financial statements.
XV) Provision for Warranty :-
Warranty costs are provided based on a technical estimate of the costs
required to be incurred for repairs, replacement, material cost,
servicing on the basis of the past experience of the Company. It is
expected that this expenditure will be incurred over the contractual
warranty period.
XVI) Revenue from contracts :-
Revenue from fixed price contracts is recognized using the percentage
of completion method, Percentage of completion is determined as a
proportion of the cost incurred up to the reporting date of the total
estimated contract costs, Proportionate completion is measured based
upon the efforts incurred to date in relation to the total estimated
efforts to complete the contract. The Company monitors estimates of
total contract revenue and costs on a routine basis throughout the
delivery period. The cumulative impact of any change in estimates of
the contract value or cost is reflected in the period in which the
changes become known. In the event that a loss is anticipated on a
particular contract, provision is made for the estimated loss.
Mar 31, 2012
I) Basis of preparation of financial statements:-
The financial statements have been prepared under the historical cost
convention and in compliance, in all material aspects, with the
applicable accounting principles in India, the applicable accounting
standards notified under Section 211 (3C) and the other relevant
provisions of the Companies Act, 1956.
All the assets and liabilities have been classified as current or
non-current as per the Company's normal operating cycle and other
criteria set out in the Schedule VI to the Companies Act, 1956. Based
on the nature of products and the time between the acquisition of
assets for processing and their realisation in cash and cash
equivalent, the Company has ascertained its operating cycle to be less
than 12 months.
II) Use of Estimates:-
The preparation of financial statements in confirmity with generally
accepted accounting principles requires estimates and assumptions to be
made that affect the reported amounts of assets and liabilities on the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Differences between actual
results and estimates are recognised in the period in which the results
are known.
III) Recognition of Income and Expenditure:-
1. Sale of goods is recognized on transfer of significant risks and
rewards of ownership which is generally on the dispatch of goods by the
Company.
2. Benefit on account of entitlement to import duty - free materials
under Duty Entitlement Passbook Scheme is accounted in the year of
export as Export Incentives.
3. Other Revenue / Income and Cost / Expenditure are generally
accounted on accrual as they are earned or incurred.
IV) Fixed Assets:-
1. Fixed Assets are accounted by the Company on the basis of
historical costs. Gains or Losses arising on disposal are recognised in
the statement of Profit and Loss Account of the relevant financial
year.
2. Method of Depreciation / Amortisation:
a) Depreciation on all assets (except Freehold Land and Leased
Vehicles) is provided on the written down value method at the rates and
in the manner specified in the Schedule XIV to the Companies Act, 1956.
Depreciation on assets acquired under finance lease is spread over the
lease period or useful life whichever is shorter.
b) Cost of leasehold land is amortised over the period of lease.
c) Depreciation on additions / deletions is charged on pro-rata basis,
upto the month of purchase / including the month of sale.
V) Investments:-
Long Term Investments are stated at 'Cost'. A provision for dimunition
is made to recognise a decline, other than temporary in the value of
long-term investments. Current Investments are stated at lower of cost
or fair value.
VI) Valuation of Inventories:-
Inventories of Raw Materials and Components, Work-in-progress, Finished
Goods, Goods for Trade, Stores, Spares and Packing Materials are stated
'at cost or net realisable value, whichever is lower'. Goods in Transit
are stated 'at cost'. Cost comprises all cost of purchase, cost of
conversion and other costs incurred in bringing the inventories to
their present location and condition. The excise duty in respect of
closing inventory of finished goods is included as part of finished
goods.
Cost formula used is 'Average Cost'. Due allowance is estimated and
made for defective and obsolete items, wherever necessary, based on the
past experience of the Company.
VII) Foreign Currency Translations:-
All transactions in foreign currency, are recorded at the rates of
exchange prevailing on the dates when the relevant transactions take
place;
Monetary items in the form of Current Assets and Current Liabilities in
foreign currency, outstanding at the close of the year, are converted
in Indian Currency at the appropriate rates of exchange prevailing on
the date of the Balance Sheet. Resultant gain or loss is accounted
during the year;
In respect of Forward Exchange contracts, entered into, to hedge
foreign currency risks, the difference between the forward rate and
exchange rate at the inception of the contract is recognized as income
or expense over the life of the contract. Further, the exchange
differences arising on such contracts are recognised as income or
expense along with the exchange differences on the underlying assets /
liabilities. Profit or loss on cancellations / renewals of forward
contracts is recognised during the year.
Accounting of foreign branches / integral operations:-
a. Monetary items in the form of Current Assets and Current
Liabilities in foreign currency, outstanding at the close of the year,
are converted at the appropriate rates of exchange, prevailing on the
date of the Balance Sheet.
b. Fixed assets and depreciation thereon, are converted at the
exchange rates, prevailing on the date of acquisition of the respective
asset.
c. Revenue items, excluding depreciation, are converted at the monthly
exchange rates prevailing on the date of the transaction
VIII) Research and Development:-
1. Revenue expenditure on Research and Development (including
overheads) are charged out as expense through the natural heads of
account in the year in which they are incurred.
2. Expenditure of a capital nature on Research and Development is
debited to Fixed Assets and depreciation is provided on such assets, as
are depreciable.
IX) Retirement and Other Employee Related Benefits:-
a. Short term employee benefits - All employee benefits payable within
twelve months of rendering the service are recognised in the period in
which the employee renders the related service
b. Post Employment / Retirement Benefits - Defined Contribution Plans
such as Government Pension Fund etc., are charged to the Profit and
Loss Account, as incurred.
c. Defined Benefit Obligation Plans - The present value of the
obligation under such plans, is determined based on an actuarial
valuation, using the Projected Unit Credit Method, carried out
(approximately) at the close of the year. Actuarial gains and losses
arising on such valuation are recognised immediately in the Profit and
Loss Account. In the case of gratuity, which is funded, the fair value
of the plan assets is reduced from the gross obligation under the
defined benefit plans, to recognise the obligation on net basis.
In respect of certain employees, the monthly contribution for provident
fund is made to a Trust administered by the Company. The interest
payable by the Trust is notified by the Government. The Company has an
obligation to make good the shortfall, if any.
The present value of obligation under Interest Rate Guarantee on Exempt
Provident Funds, is determined based on an actuarial valuation, using
the Projected Accrued Benefit Method, carried out at the close of the
year.
d. Other Long Term Employee Benefits are recognised in the same manner
as Defined Benefit Plans.
e. Termination Benefits are charged to the Profit and Loss Account in
the year in which they are incurred.
X) Assets taken on Lease:-
For assets taken under operating lease, lease rentals payable are
charged to Profit and Loss Account.
Assets acquired under leases where the Company has substantially all
the risks and rewards of ownership are classified as Finance Leases.
Such assets are capitalized at the inception of the lease at the lower
of the fair value and the present value of the minimum lease payments
at the inception of the lease term and disclosed as leased assets. Each
lease rental paid is allocated between the liability of the interest
cost so as to obtain a constant periodic rate of interest on the
outstanding liability for each period.
XI) Taxation:-
Income tax expense comprises Current Tax and Deferred Tax charge or
credit. Provision for current tax is made on the basis of the
assessable income at the tax rate applicable to the relevant assessment
year. The deferred tax asset and deferred tax liability is calculated by
applying tax rate and laws that have been enacted or substantively
enacted by the Balance Sheet date. Deferred tax assets arising mainly
on account of brought forward losses and unabsorbed depreciation under
tax laws, are recognized, only if there is a virtual certainty of its
realization, supported by convincing evidence. Deferred tax assets on
account of other timing differences are recognized only to the extent
there is a reasonable certainty of its realization. At each Balance
Sheet date, the carrying amount of deferred tax assets are reviewed to
reassure realization.
XII) Impairment of Assets:-
The carrying amount of assets are reviewed at each Balance Sheet date
if there is any indication of impairment based on internal / external
factors. An asset is impaired when the carrying amount of the asset
exceeds the recoverable amount. An impairment loss is charged to the
Profit and Loss Account in the year in which an asset is identified as
impaired. Impairment losses recognised in prior accounting periods are
reversed if there has been any change in the estimate of the
recoverable amount.
XIII) Borrowing Costs:-
Interests and other borrowing costs attributable to qualifying assets
are capitalised. Other interests and borrowing costs are charged to
revenue.
XIV) Provisions, Contingent Liabilities and Contingent Assets:-
Provisions involving a substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognised but are disclosed in the
financial statements. Contingent Assets are neither recognised nor
disclosed in the financial statements.
XV) Provision for Warranty:-
Warranty costs are provided based on a technical estimate of the costs
required to be incurred for repairs, replacement, material cost,
servicing on the basis of the past experience of the Company. It is
expected that this expenditure will be incurred over the contractual
warranty period.
XVI) Revenue from contracts:-
Revenue from fixed price contracts is recognized using the percentage
of completion method. Percentage of completion is determined as a
proportion of the cost incurred up to the reporting date of the total
estimated contract costs. Proportionate completion is measured based
upon the efforts incurred to date in relation to the total estimated
efforts to complete the contract. The Company monitors estimates of
total contract revenue and costs on a routine basis throughout the
delivery period. The cumulative impact of any change in estimates of
the contract value or cost is reflected in the period in which the
changes become known. In the event that a loss is anticipated on a
particular contract, provision is made for the estimated loss.
Mar 31, 2011
I) Basis of preparation of financial statements :-
The financial statements are prepared under the historical cost
convention in accordance with the generally accepted accounting
principles, the applicable mandatory accounting standards and the
relevant provisions of the Companies Act, 1956.
II) Use of Estimates :- The preparation of financial statements in
confirmity with generally accepted accounting principles requires
estimates and assumptions to be made that affect the reported amounts
of assets and liabilities on the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Differences between actual results and estimates are recognised
in the period in which the results are known.
III) Recognition of Income and Expenditure :- 1. Sale of goods is
recognized on transfer of significant risks and rewards of ownership
which is generally on the dispatch of goods by the Company.
2. Benefit on account of entitlement to import duty - free materials
under Duty Entitlement Passbook Scheme is accounted in the year of
export as Export Incentives.
3. Other Revenue / Income and Cost / Expenditure are generally
accounted on accrual as they are earned or incurred.
IV) Fixed Assets :-
1. Fixed Assets are accounted by the Company on the basis of
historical costs. Gains or Losses arising on disposal are recognised in
the Profit and Loss Account of the relevant financial year.
2. Method of Depreciation / Amortisation:
a) Depreciation on all assets (except Freehold Land and Leased
Vehicles) is provided on the written down value method at the rates and
in the manner specified in the Schedule XIV to the Companies Act, 1956.
Depreciation on assets acquired under finance lease is spread over the
lease period or useful life whichever is shorter.
b) Cost of leasehold land is amortised over the period of lease.
c) Depreciation on additions / deletions is charged on pro-rata basis,
upto the month of purchase / including the month of sale.
V) Investments :- Long Term Investments are stated at ÃCost. A
provision for diminution is made to recognise a decline, other than
temporary in the value of long term investments. Current Investments
are stated at lower of cost and fair value.
VI) Valuation of Inventories :- Inventories of Raw Materials and
Components, Goods in Process, Finished Goods, Goods for Trade, Stores,
Spares and Packing Materials are stated Ãat cost or net realisable
value, whichever is lower. Goods in Transit are stated Ãat cost. Cost
comprises all cost of purchase, cost of conversion and other costs
incurred in bringing the inventories to their present location and
condition. The excise duty in respect of closing inventory of finished
goods is included as part of finished goods.
Cost formula used is Average Cost. Due allowance is estimated and
made for defective and obsolete items, wherever necessary, based on the
past experience of the Company.
VII) Foreign Currency Translations
:- All transactions in foreign currency, are recorded at the rates of
exchange prevailing on the dates when the relevant transactions take
place;
Monetary items in the form of Current Assets and Current Liabilities in
foreign currency, outstanding at the close of the year, are converted
in Indian Currency at the appropriate rates of exchange prevailing on
the date of the Balance Sheet. Resultant gain or loss is accounted
during the year;
In respect of Forward Exchange contracts entered into to hedge foreign
currency risks, the difference between the forward rate and exchange
rate at the inception of the contract is recognized as income or
expense over the life of the contract. Further, the exchange
differences arising on such contracts are recognised as income or
expense along with the exchange differences on the underlying assets /
liabilities. Profit or loss on cancellations / renewals of forward
contracts is recognised during the year. Accounting of foreign
branches / integral operations:- a. Monetary items in the form of
Current Assets and Current Liabilities in foreign currency, outstanding
at the close of the year, are converted at the appropriate rates of
exchange prevailing on the date of the Balance Sheet.
b. Fixed assets and depreciation thereon, are converted at the
exchange rates prevailing on the date of acquisition of the respective
asset.
c. Revenue items, excluding depreciation, are converted at the monthly
exchange rates prevailing on the date of the transaction
VIII) Research and Development :-
1. Revenue expenditure on Research and Development (including
overheads) are charged out as expense through the natural heads of
account in the year in which they are incurred.
2. Expenditure of a capital nature on Research and Development is
debited to Fixed Assets and depreciation is provided on such assets as
are depreciable.
IX) Retirement and Other Employee Related Benefits :- a. Short term
employee benefits - All employee benefits payable within twelve months
of rendering the service are recognised in the period in which the
employee renders the related service
b. Post Employment / Retirement Benefits - Defined Contribution Plans
such as Government Pension Fund etc., are charged to the Profit and
Loss Account as incurred.
c. Defined Benefit Obligation Plans - The present value of the
obligation under such plans, is determined based on an actuarial
valuation, using the Projected Unit Credit Method, carried out
(approximately) at the close of the year. Actuarial gains and losses
arising on such valuation are recognised immediately in the Profit and
Loss Account. In the case of gratuity, which is funded, the fair value
of the plan assets is reduced from the gross obligation under the
defined benefit plans, to recognise the obligation on net basis.
d. Other Long Term Employee Benefits are recognised in the same manner
as Defined Benefit Plans.
e. Termination Benefits are charged to the Profit and Loss Account in
the year in which they are incurred.
X) Assets taken on Lease :- For assets taken under operating lease,
lease rentals payable are charged to Profit and Loss Account. Assets
acquired under leases where the Company has substantially all the risks
and rewards of ownership are classified as Finance Leases. Such assets
are capitalized at the inception of the lease at the lower of the fair
value and the present value of the minimum lease payments at the
inception of the lease term and disclosed as leased assets. Each lease
rental paid is allocated between the liability of the interest cost so
as to obtain a constant periodic rate of interest on the outstanding
liability for each period.
XI) Taxation :- Income tax expense comprises Current Tax and Deferred
Tax charge or credit. Provision for current tax is made on the basis of
the assessable income at the tax rate applicable to the relevant
assessment year. The deferred tax asset and deferred tax liability is
calculated by applying tax rate and laws that have been enacted or
substantively enacted by the Balance Sheet date. Deferred tax assets
arising mainly on account of brought forward losses and unabsorbed
depreciation under tax laws, are recognized, only if there is a virtual
certainty of its realization, supported by convincing evidence.
Deferred tax assets on account of other timing differences are
recognized only to the extent there is a reasonable certainty of its
realization. At each Balance Sheet date, the carrying amount of
deferred tax assets are reviewed to reassure realization.
XII) Impairment of Assets :- The carrying amount of assets are reviewed
at each Balance Sheet date if there is any indication of impairment
based on internal / external factors. An asset is impaired when the
carrying amount of the asset exceeds the recoverable amount. An
impairment loss is charged to the Profit and Loss Account in the year
in which an asset is identified as impaired. Impairment losses
recognised in prior accounting periods are reversed if there has been
any change in the estimate of the recoverable amount.
XIII) Borrowing Costs :- Interests and other borrowing costs
attributable to qualifying assets are capitalised. Other interests and
borrowing costs are charged to revenue.
XIV) Provisions, Contingent Liabilities and Contingent Assets :-
Provisions involving a substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognised but are disclosed in the
financial statements. Contingent Assets are neither recognised nor
disclosed in the financial statements.
XV) Provision for Warranty :- Warranty costs are provided based on a
technical estimate of the costs required to be incurred for repairs,
replacement, material cost, servicing on the basis of the past
experience of the Company. It is expected that this expenditure will be
incurred over the contractual warranty period.
XVI) Revenue from contracts :- Revenue from fixed price contracts is
recognized using the percentage of completion method. Percentage of
completion is determined as a proportion of the cost incurred up to the
reporting date of the total estimated contract costs. Proportionate
completion is measured based upon the efforts incurred to date in
relation to the total estimated efforts to complete the contract. The
Company monitors estimates of total contract revenue and costs on a
routine basis throughout the delivery period. The cumulative impact of
any change in estimates of the contract value or cost is reflected in
the period in which the changes become known. In the event that a loss
is anticipated on a particular contract, provision is made for the
estimated loss.
Mar 31, 2010
I) Basis of preparation of financial statements :- The financial
statements are prepared under the historical cost convention in
accordance with the generally accepted accounting principles, the
applicable mandatory accounting standards and the relevant provisions
of the Companies Act, 1956.
II) Use of Estimates :- The preparation of financial statements in
confirmity with generally accepted accounting principles requires
estimates and assumptions to be made that affect the reported amounts
of assets and liabilities on the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Differences between actual results and estimates are recognised
in the period in which the results are known.
III) Recognition of Income and Expenditure :- 1. Sale of goods is
recognized on transfer of significant risks and rewards of ownership
which is generally on the dispatch of goods by the Company.
2. Benefit on account of entitlement to import duty - free materials
under Duty Entitlement Passbook Scheme is accounted in the year of
export as Export Incentives.
3. Compensation paid to employees, is fully charged to the Profit and
Loss Account in the year in which it is incurred.
4. Other Revenue/Income and Cost/Expenditure are generally accounted
on accrual as they are earned or incurred.
IV) Fixed Assets : -
1. Fixed Assets are accounted by the Company on the basis of
historical costs. Gains or Losses arising on disposal are recognised in
the Profit and Loss Account of the relevant financial year.
2. Method of Depreciation / Amortisation:
a) Depreciation for the year is provided on the written down value
method based on estimated useful life or at the rates and in the manner
specified in the Schedule XIV to the Companies Act, 1956.
b) Cost of leasehold land is amortised over the period of lease.
c) Depreciation on additions/deletions is charged on pro-rata basis,
upto the month of purchase/ including the month of sale.
V) Investments :- Long Term Investments are stated at ÃCostÃ. A
provision for diminution is made to recognise a decline, other than
temporary in the value of long term investments. Current Investments
are stated at lower of cost and fair value.
VI) Valuation of Inventories :- Inventories of Raw Materials and
Components, Goods in Process, Finished Goods, Goods for Trade, Stores,
Spares and Packing Materials are stated Ãat cost or net realisable
value, whichever is lowerÃ. Goods in Transit are stated Ãat costÃ. Cost
comprises all cost of purchase, cost of conversion and other costs
incurred in bringing the inventories to their present location and
condition. The excise duty in respect of closing inventory of finished
goods is included as part of finished goods.
Cost formula used is ÃAverage CostÃ. Due allowance is estimated and
made for defective and obsolete items, wherever necessary, based on the
past experience of the Company.
VII) Foreign Currency Translations :- All transactions in foreign
currency, are recorded at the rates of exchange prevailing on the dates
when the relevant transactions take place;
Monetary items in the form of Current Assets and Current Liabilities in
foreign currency, outstanding at the close of the year, are converted
in Indian Currency at the appropriate rates of exchange prevailing on
the date of the Balance Sheet. Resultant gain or loss is accounted
during the year;
In respect of Forward Exchange contracts entered into to hedge foreign
currency risks, the difference between the forward rate and exchange
rate at the inception of the contract is recognized as income or
expense over the life of the contract. Further, the exchange
differences arising on such contracts are recognised as income or
expense along with the exchange differences on the underlying assets /
liabilities. Profit or loss on cancellations renewals of forward
contracts is recognised during the year.
Accounting of foreign branches / integral operations:- a. Monetary
items in the form of Current Assets and Current Liabilities in foreign
currency, outstanding at
the close of the year, are converted at the appropriate rates of
exchange prevailing on the date of the Balance Sheet.
b. Fixed assets and depreciation thereon, are converted at the
exchange rates prevailing on the date of acquisition of the respective
asset.
c. Revenue items, excluding depreciation, are converted at the monthly
exchange rates prevailing on the date of the transaction
VIII) Research and Development :- 1. Revenue expenditure on Research
and Development (including overheads) are charged out as expense
through the natural heads of account in the year in which they are
incurred.
2. Expenditure of a capital nature on Research and Development is
debited to Fixed Assets and depreciation is provided on such assets as
are depreciable.
IX) Retirement and Other Employee Related Benefits :- a. Short term
employee benefits - All employee benefits payable within twelve months
of rendering the service are recognised in the period in which the
employee renders the related service
b. Post Employment / Retirement Benefits - Defined Contribution Plans
such as Government Pension Fund etc., are charged to the Profit and
Loss Account as incurred.
c. Defined Benefit Obligation Plans à The present value of the
obligation under such plans, is determined based on an actuarial
valuation, using the Projected Unit Credit Method, carried out
(approximately) at the close of the year. Actuarial gains and losses
arising on such valuation are recognised immediately in the Profit and
Loss Account. In the case of gratuity, which is funded, the fair value
of the plan assets is reduced from the gross obligation under the
defined benefit plans, to recognise the obligation on net basis.
d. Other Long Term Employee Benefits are recognised in the same manner
as Defined Benefit Plans.
e. Termination Benefits are charged to the Profit and Loss Account in
the year in which they are incurred.
X) Assets taken on Lease :- For assets taken under operating lease,
lease rentals payable are charged to Profit and Loss Account.
XI) Taxation :- Income tax expense comprises Current Tax and Deferred
Tax charge or credit. Provision for current tax is made on the basis of
the assessable income at the tax rate applicable to the relevant
assessment year.The deferred tax asset and deferred tax liability is
calculated by applying tax rate and laws that have been enacted or
substantively enacted by the Balance Sheet date. Deferred tax assets
arising mainly on account of brought forward losses and unabsorbed
depreciation under tax laws, are recognized, only if there is a virtual
certainty of its realization, supported by convincing evidence.
Deferred tax assets on account of other timing differences are
recognized only to the extent there is a reasonable certainty of its
realization. At each Balance Sheet date, the carrying amount of
deferred tax assets are reviewed to reassure realization.
XII) Impairment of Assets :- The carrying amount of assets are reviewed
at each Balance Sheet date if there is any indication of impairment
based on internal / external factors. An asset is impaired when the
carrying amount of the asset exceeds the recoverable amount. An
impairment loss is charged to the Profit and Loss Account in the year
in which an asset is identified as impaired. Impairment losses
recognised in prior accounting periods are reversed if there has been
any change in the estimate of the recoverable amount.
XIII) Borrowing Costs :- Interests and other borrowing costs
attributable to qualifying assets are capitalised. Other interests and
borrowing costs are charged to revenue.
XIV) Provisions, Contingent Liabilities and Contingent Assets :-
Provisions involving a substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognised but are disclosed in the
financial statements. Contingent Assets are neither recognised nor
disclosed in the financial statements.
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