Accounting Policies of Cosmo First Ltd. Company
Mar 31, 2022
1. Corporate information, basis of preparation and summary of significant accounting policies
i) Corporate information
Cosmo Films Limited (the âCompany''), manufacturers of Bi-axially Oriented Polypropylene Films (BOPP) was incorporated in India in 1981, under the Companies Act, 1956. The Company is engaged in the production of flexible packaging films. Company''s products majorly comprise of BOPP Films, Thermal Films and Coated Films. In India, the Company is currently having manufacturing facilities at Aurangabad and Shendra in Maharashtra and at Karjan in Gujarat. It also has its subsidiaries operating in different countries. During current financial year Company had made a foray into the Pet Care business with the launch of its platform ZIGLY which will offer pet parents the widest range of pet care products and services to give them an opportunity to choose from an amazing array of pet care options, ranging from pet food and treats to grooming supplies, health care products and much more.
ii) Basis of preparation
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) as notied by Ministry of Corporate Affairs pursuant to Section 133 of the Companies Act, 2013 read with Companies (Indian Accounting Standards) Rules, 2015 as amended from time to time.
These financial statements are separate financial statements of the Company. The Company has also prepared consolidated financial statements for the year ended 31 March 2022 in accordance with Ind AS 110 and the same were also approved for issue by the Board of Directors, along with these financial statements on 9 May 2022.
The financial statements have been prepared on accrual and going concern basis. The accounting policies are applied consistently to all the periods presented in the financial statements. The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value:
⢠Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments).
⢠Dened benet plans - plan assets measured at fair value.
iii) Significant accounting policies
a) Current versus non-current classification
The Company presents assets and liabilities in the Balance Sheet based on current/ non-current classification.
An asset is treated as current when it is:
⢠Expected to be realised or intended to be sold or consumed in normal operating cycle,
⢠Held primarily for the purpose of trading,
⢠Expected to be realised within twelve months after the reporting period, or
⢠Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
⢠It is expected to be settled in normal operating cycle,
⢠It is held primarily for the purpose of trading,
⢠It is due to be settled within twelve months after the reporting period, or
⢠There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Based on the nature of products and the time between 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 or non-current classification of assets and liabilities.
b) Property, plant and equipment
Recognition and initial measurement
Property, plant and equipment are stated at their cost of acquisition. The cost comprises the purchase price, borrowing cost (if capitalisation criteria are met) and any attributable costs of bringing the asset to its working condition for its intended use. Any trade discount and rebates are deducted in arriving at the purchase price. Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benets attributable to such subsequent cost associated with the item will ow to the Company. All other repair and maintenance costs are recognised in statement of prot or loss as incurred.
In case an item of property, plant and equipment is acquired on deferred payment basis, interest expenses included in deferred payment is recognised as interest expense and not included in cost of asset.
Subsequent measurement (depreciation and useful lives)
Depreciation on property, plant and equipment is provided on the straight line method arrived on the basis of the useful life prescribed under Schedule II of the Companies Act, 2013. The following useful life of assets has been taken by the Company:
|
Tangible assets |
Useful life |
|
Building - Factory |
30 years |
|
Building - Non factory |
60 years |
|
Continuous process plant and machinery |
25 years |
|
Plant and Machinery used in generation, transmission and distribution of power |
40 years |
|
Other plant and machinery |
15 years |
|
Furniture and fittings |
10 years |
|
Vehicles |
6-8 years |
|
Office equipment |
3-5 years |
Cost of the leasehold land and leasehold improvements are amortised over the period of the lease.
The residual values, useful lives and method of depreciation of are reviewed at each financial year end and adjusted prospectively, if appropriate.
Where, during any unancial year, any addition has been made to any asset, or where any asset has been sold, discarded, demolished or destroyed, or signicant components replaced; depreciation on such assets is calculated on a pro rata basis as individual assets with specic useful life from the month of such addition or, as the case may be, up to the month on which such asset has been sold, discarded, demolished or destroyed or replaced.
De-recognition
An item of property, plant and equipment and any signicant part initially recognised is de-recognised
upon disposal or when no future economic benets are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.
Recognition and initial measurement
Investment properties are measured initially at cost, including transaction costs and where applicable, borrowing costs. Following initial recognition, investment properties are stated at cost less accumulated depreciation and accumulated impairment loss, if any. The Company measures investment property using cost-based measurement, the fair value of investment property is disclosed in the notes. Fair values are determined based on an annual evaluation performed by an accredited external independent valuer.
Subsequent measurement (depreciation and useful lives)
Subsequent to initial recognition, an 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 Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred.
Investment properties are depreciated over the useful economic life and assessed for impairment whenever there is an indication that the investment properties may be impaired.
De-recognition
Investment properties are de-recognised either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in profit or loss in the period of derecognition.
Recognition and initial measurement
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses, if any.
Subsequent measurement (depreciation and useful lives)
All unite-lived intangible assets, including internally developed intangible assets, are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives. The estimated useful life of an identiable intangible asset is based on a number of factors including the effects of obsolescence, demand, competition, and other economic factors (such as the stability of the industry, and known technological advances), and the level of maintenance expenditures required to obtain the expected future cash ows from the asset.
Residual values and useful lives are reviewed at each reporting date. The following useful lives are applied:
Intangible assets Useful life (in years)
Software Amortised over a period of 6 years De-recognition
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.
e) Impairment of non-financial assets
For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Statement of Profit and Loss. If at the balance sheet date, there is an indication that a previously assessed impairment loss no longer exists then the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost. Impairment losses previously recognised are accordingly reversed in the Statement of Profit and Loss.
To determine value-in-use, management estimates expected future cash flows from each cashgenerating unit and determines a suitable discount rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Company''s latest approved budget, adjusted as necessary to exclude the effects of future re-organisations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect current market assessment of the time value of money and asset-specific risk factors.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest calculated using the effective interest method that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
Inventories are stated at lower of cost or net realisable value. The cost in respect of the various items of inventory is computed as under:
⢠Raw material cost includes direct expenses and is determined on the basis of weighted average method.
⢠Stores and spares cost includes direct expenses and is determined on the basis of weighted average method.
⢠In case of finished goods, cost includes raw material cost plus conversion costs and other overheads incurred to bring the goods to their present location and condition.
Net realisable value is the estimated selling price in the ordinary course of business less any applicable selling expenses. Provision for obsolescence and slow moving inventory is made based on management''s best estimates of net realisable value of such inventories.
h) Foreign currency translation
Functional and presentation currency
The financial statements are presented in Indian Rupees (INR or '' and are rounded to two decimal places of crores, which is also the Company''s functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at its functional currency spot rates at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items as at reporting date are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.
Exchange differences
As per the generally accepted accounting principles followed by the Company till 31 March 2017, exchange differences arising on translation/ settlement of longterm foreign currency monetary items pertaining to the acquisition of a depreciable asset were adjusted to the cost of the asset. Exchange differences arising on other long-term foreign currency monetary items existing as on 31 March 2017 are accumulated in the âForeign Currency Monetary Item Translation Difference Accountâ and amortised over the remaining life of the concerned monetary item. The Company has elected to continue with the said policy on exchange differences arising on long term foreign currency monetary items existing on 31 March 2017, as allowed under Ind AS 101.
For this purpose, the Company treats a foreign monetary item as âlong-term foreign currency monetary itemâ, if it has a term of 12 months or more at the date of its origination.
Effective 1 April 2019, the Company adopted Ind AS 116 âLeasesâ and applied the standard to all lease contracts existing on 1 April 2019 using the modified retrospective method and elected to measure the right-of-use assets at an amount equal to the lease liability adjusted for any prepaid or accrued lease payments that existed at the date of transition.
The Company''s leased asset classes primarily consist of leases for land and buildings. The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognises a right-of-use asset (âROUâ) 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 low value leases. For these short-term and low value leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
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.
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 amortised cost 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 in the country of domicile of these leases. Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed payments) and variable payments based on an index or rate. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise an extension or a termination option.
Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
For operating leases, rental income is recognised on a straight-line basis over the term of the relevant lease.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
⢠In the principal market for the asset or liability, or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial results are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is Unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period or each case.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
k) Revenue recognition - Sale of products and services
Sales (including scrap sales) are recognised when control of products is transferred to the buyer as per the terms of the contract and are accounted for net of returns and rebates. Control of goods refers to the ability to direct the use of and obtain substantially all of the remaining benefits from goods. Sales, as disclosed, are exclusive of goods and services tax.
Income in respect of service contracts, which are generally in the nature of providing job work services, are recognised in Statement of Profit and Loss on completion of performance obligation.
The Company considers the terms of the contract and its customary business practices to determine the transaction price. The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, indirect taxes). The consideration promised in a contract with a customer may include fixed consideration, variable consideration (if reversal is less likely in future), or both. No element of financing is deemed present as the sales are largely made on advance payment terms or with credit term of not more than one year.
The transaction price is allocated by the Company to each performance obligation (or distinct good or service) in an amount that depicts the amount of consideration to which it expects to be entitled in exchange for transferring the promised goods or services to the customer.
For each performance obligation identified, the Company determines at contract inception whether it satisfies the performance obligation over time or satisfies the performance obligation at a point in time. If the Company does not satisfy a performance obligation over time, the performance obligation is satisfied at a point in time. A receivable is recognised when the goods are delivered as this is the case of point in time recognition where consideration is unconditional because only the passage of time is required.
The Company recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as other liabilities in the Balance Sheet. Similarly, if the Company satisfies a performance obligation before it receives the consideration, the Company recognises either a contract asset or a receivable in its Balance Sheet, depending on whether something other than the passage of time is required before the consideration is due.
Financial instruments are recognised when the Company becomes a party to the contractual provisions of the instrument and are measured initially at fair value adjusted for transaction costs, except for those carried at fair value through profit or loss which are measured initially at fair value.
If the Company determines that the fair value at initial recognition differs from the transaction price, the Company accounts for that instrument at that date as follows:
⢠At the measurement basis mentioned above if that fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1 input) or based on a valuation technique that uses only data from observable markets. The Company recognises the difference between the fair value at initial recognition and the transaction price as a gain or loss.
⢠In all other cases, at the measurement basis mentioned above, adjusted to defer the difference between the fair value at initial recognition and the transaction price. After initial recognition, the Company recognises that deferred difference as a gain or loss only to the extent that it arises from a change in a factor (including time) that market participants would take into account when pricing the asset or liability.
Classification and subsequent measurement
For the purpose of subsequent measurement, financial assets are classified into the following categories
upon initial recognition:
i. Financial assets at amortised cost - a financial instrument is measured at amortised cost if both the following conditions are met:
⢠The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
⢠Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest method. Effective interest rate (EIR) is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial assets. The future cash flows include all other transaction costs paid or received, premiums or discounts if any, etc.
ii. Investments in equity instruments of subsidiaries - Investments in equity instruments of subsidiaries existing as at 1 April 2016, the date of transition to Ind AS, are accounted for at fair value at such date, as per the exemptions available in Ind AS 101. Other investments in equity instruments of subsidiaries are accounted for at their cost.
iii. Financial assets at fair value
⢠Investments in equity instruments other than above - All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading are generally classified as at fair value through profit and loss (FVTPL). For all other equity instruments, the Company decides to classify the same either as at fair value through other comprehensive income (FVOCI) or fair value through profit and loss (FVTPL). The Company makes such election on an instrument by instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the other comprehensive income (OCI). There is no recycling of the amounts from OCI to profit or loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity. Dividends on such investments are recognised in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in profit or loss.
⢠Mutual funds - All mutual funds in scope of Ind-AS 109 are measured at fair value through profit and loss (FVTPL).
⢠Bonds - All bonds are in scope of Ind-AS 109 and measured at fair value. Bonds which are held for the purpose of both collecting contractual cash flows and selling financial assets are classified as at fair value through other comprehensive income (FVOCI). Bonds which are held for the purpose of trading are classified as at fair value through profit and loss (FVTPL).
⢠Derivative assets - All derivative assets are measured at fair value through profit and loss (FVTPL).
A financial asset is primarily de-recognised when the rights to receive cash flows from the asset have expired or the Company has transferred its rights to receive cash flows from the asset.
Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
Subsequent measurement
After initial recognition, the financial liabilities, other than derivative liabilities, are subsequently measured at amortised cost using the effective interest method.
Amortised cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The effect of EIR amortisation is included as finance costs in the Statement of Profit and Loss.
All derivative liabilities are measured at fair value through profit and loss (FVTPL).
De-recognition of financial liabilities
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
The Company enters into certain derivative financial instruments to manage its exposure to risk arising from changes in interest rate and foreign exchange rates which are designated as cash flow hedges. Further, the Company has designated certain non-derivative financial instruments in cash flow hedging relationship to manage its exposure to risk arising from changes in foreign exchange rates.
At the inception of a hedge relationship, the Company documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness
of changes in the hedging instrument''s fair value in offsetting the exposure to changes in the hedged item''s cash flows attributable to the hedged risk.
To qualify for hedge accounting, the hedging relationship must meet all of the following requirements:
⢠There is an economic relationship between the hedged item and the hedging instrument
⢠The effect of credit risk does not dominate the value changes that result from that economic relationship
⢠The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the entity actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge that quantity of hedged item.
For the period under audit, the Company has designated certain forward currency contracts, cross currency swaps and foreign currency risk component of borrowings in foreign currencies as hedging instruments in cash flow hedge relationships. The forward currency contracts and cross currency swaps have been entered into to mitigate foreign currency exchange risk arising from financial liabilities denominated in foreign currencies. Further, foreign currency risk component of borrowings in foreign currencies are designated to hedge the foreign currency risk in certain highly probable sales transactions denominated in foreign currency.
Cash flow hedge reserve is adjusted to the lower of the following (in absolute amounts):
(i) The cumulative gain or loss on the hedging instrument from inception of the hedge; and
(ii) The cumulative change in fair value (present value) of the hedged item (i.e. the present value of the cumulative change in the hedged expected future cash flows) from inception of the hedge.
All derivative financial instruments used for hedge accounting are recognised initially at fair value and reported subsequently at fair value in the Balance Sheet. The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income. Any ineffectiveness in the hedge relationship is recognised immediately in profit or loss.
At the time the hedged item affects profit or loss, any gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss and presented as a reclassification adjustment within other comprehensive income. However, if a non-financial asset or liability is recognised as a result of the hedged transaction, the gains and losses previously recognised in other comprehensive income are included in the initial measurement of the hedged item.
If a forecast transaction is no longer expected to occur, any related gain or loss recognised in other comprehensive income is transferred immediately to profit or loss. If the hedging relationship ceases to meet the effectiveness conditions, hedge accounting is discontinued and the related gain or loss is held in the cash flow hedge reserve until the forecast transaction occurs.
n) Impairment of financial assets
All financial assets except for those at FVTPL are subject to review for impairment at each reporting date to identify whether there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets.
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss for financial assets carried at amortised cost.
ECL is the weighted average of difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive, discounted at the original effective interest rate, with the respective risks of default occurring as the weights. When estimating the cash flows, the Company is required to consider:
⢠All contractual terms of the financial assets (including prepayment and extension) over the expected life of the assets.
⢠Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
Trade receivables
i. For debtors that are not past due - The Company applies approach permitted by Ind AS 109 âFinancial Instruments'', which requires lifetime expected credit losses to be recognised upon initial recognition of receivables. Lifetime expected credit losses are the expected credit losses resulting from all possible default events over the expected life of a financial instrument.
Life time expected credit losses are assessed and accounted based on company''s historical counter party default rates and forecast of macro-economic factors, by dividing receivables that are not considered to be individually significant by reference to the business segment of the counter party and other shared credit risk characteristics to evaluate the expected credit loss. The expected credit loss estimate is then based on recent historical counter party default rates. The Company defines default as an event when the financial asset is past due for more than 365 days. This definition is based on management''s expectation of the time period beyond which if a receivable is outstanding, it is an objective evidence of impairment.
ii. For debtors considered past due - any enhancement in the accrual done for expected credit loss on individually significant receivables is made to recognise any additional expected credit loss on amount recoverable. The Company writes off trade receivables when there is no objective evidence that such amounts would not be recovered. Financial assets that are written-off are still subject to enforcement activity by the Company.
Other financial assets
For recognition of impairment loss on other financial assets and risk exposure, the Company determines whether there has been a significant increase in the credit risk since initial recognition. If the credit risk has not increased significantly since initial recognition, the Company measures the loss allowance at an amount equal to 12 month expected credit losses, else at an amount equal to the lifetime expected credit losses.
o) Post- employment and other employee benefits Defined contribution plan
Provident fund
The Company makes contribution to statutory provident fund in accordance with Employees'' Provident Fund and Miscellaneous Provisions Act, 1952. The plan is a defined contribution plan and contribution paid or payable is recognised as an expense in the period in which services are rendered by the employee.
Superannuation fund
Superannuation is a post-employment benefit defined contribution plan under which the company pays specified contributions to the insurer. The company makes specified quarterly contributions to the superannuation fund. The contribution paid or payable is recognised as an expense in the period in which the services are rendered by the employee.
The Company operates a defined benefit gratuity plan in India. The cost of providing benefits under the defined benefit plan is determined on the basis of actuarial valuation using the projected unit credit method. Gratuity fund is administered through Life Insurance Corporation of India.
Remeasurements, comprising of actuarial gains and losses, excluding amounts included in net interest on the net defined benefit liability are recognised immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Compensated absences
Liability in respect of compensated absences becoming due or expected to be availed within one year from the balance sheet date is recognised on the basis of undiscounted value of estimated amount required to be paid or estimated value of benefit expected to be availed by the employees. Liability in respect of compensated absences becoming due or expected to be availed more than one year after the balance sheet date is estimated on the basis of an actuarial valuation performed by an independent actuary using the projected unit credit method.
Expense in respect of other short-term benefits is recognised on the basis of amount paid or payable for the period during which services are rendered by the employees.
p) Provisions, contingent assets and contingent liabilities
Provisions are recognised only when there is a present obligation, as a result of past events and when a reliable estimate of the amount of obligation can be made at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.
Provisions are discounted to their present values, where the time value of money is material. Contingent liability is disclosed for:
⢠Possible obligations which will be confirmed only by future events not wholly within the control of the Company or
⢠Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.
Contingent assets are neither recognised nor disclosed except when realisation of income is virtually certain, related asset is disclosed.
q) Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events including a bonus issue.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
Potential ordinary shares shall be treated as dilutive when, and only when, their conversion to ordinary shares would decrease earnings per share or increase loss per share from continuing operations.
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Company operates and generates taxable income.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. The carrying amount of deferred tax assets are reviewed at each balance sheet date and derecognised to the extent it is no longer probable that sufficient future taxable profits will be available against which such deferred tax assets can be realised.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Minimum Alternate Tax (âMAT'') credit is recognised as an asset only when and to the extent it is probable that the Company will pay normal income tax during the specified period. In the year in which MAT credit becomes eligible to be recognised as an asset, the said asset is created by way of a credit to the Statement of Profit and Loss and shown as MAT credit entitlement. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT credit entitlement to the extent it is not probable that the Company will pay normal income tax during the specified period.
s) Government grants and subsidies
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with.
When the grant or subsidy relates to revenue, it is recognised as income on a systematic basis in the Statement of Profit and Loss over the periods necessary to match them with the related costs, which they are intended to compensate. Where the grant relates to an asset, it is recognised as deferred income and released to income in equal amounts over the expected useful life of the related asset.
t) Non-current assets held for sale
An entity shall classify a non-current asset as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sale of such asset and its sale is highly probable. Management must be committed to sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Non-current assets classified as held for sale are presented separately and measured at the lower of their carrying amounts immediately prior to their classification as held for sale and their fair value less costs to sell. However, some held for sale assets such as financial assets, assets arising from employee benefits and deferred tax assets, continue to be measured in accordance with the Company''s relevant accounting policy for those assets. Once classified as held for sale, the assets are not subject to depreciation or amortisation.
Treasury shares are presented as a deduction from equity. The original cost of treasury shares and the proceeds of any subsequent sale are presented as movements in equity.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
In accordance with Ind AS 108 - Operating Segment, the operating segments used to present segment information are identified on the basis of information reviewed by the Company''s management to allocate resources to the segments and assess their performance. An operating segment is a component of the Company that engages in business activities from which it earns revenues and incurs expenses, including revenues and expenses that relate to transactions with any of the Company''s other components. Results of the operating segments are reviewed regularly by the management team which has been identified as the chief operating decision maker (CODM), to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available.
Common allocable costs are allocated to each segment accordingly to the relative contribution of each segment to the total common costs.
Unallocated items include general corporate income and expense items which are not allocated to any business segment.
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial results of the Company as a whole.
Cash and cash equivalent in the Balance Sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less.
x) Employee share based payments
The Company has granted stock options/ restricted stock units under Cosmo Films Employees Stock Option Plan 2015/ Share Based Employee Benefit Scheme, 2021 to the employees of the Company and its subsidiaries. The fair value of options granted under Employee Stock Option Plan is recognised as an employee benefits expense with a corresponding increase in share options outstanding account. The total amount to be expensed is determined by reference to the fair value of the options. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to share options outstanding account. Upon exercise of share options, the proceeds received are allocated to share capital up to the par value of the shares issued with any excess being recorded as share premium.
(iv) Significant management judgement in applying accounting policies and estimation uncertainty
The following are the critical judgments and the key estimates concerning the future that management has made in the process of applying the Company''s accounting policies and that may have the most significant effect on the amounts recognised in the financial statements or that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
Allowance for expected credit losses - The allowance for doubtful debts reflects management''s estimate of losses inherent in its credit portfolio. This allowance is based on Company''s estimate of the losses to be incurred, which derives from past experience with similar receivables, current and historical past due amounts, write-offs and collections, the careful monitoring of portfolio credit quality and current and projected economic and market conditions. The Company has also taken into account estimates of possible effect
from the pandemic relating to COVID-19. Should the present economic and financial situation persist or even worsen, there could be a further deterioration in the financial situation of the Company''s debtors compared to that already taken into consideration in calculating the allowances recognised in the financial statements.
Allowance for obsolete and slow-moving inventory - The allowance for obsolete and slow-moving inventory reflects management''s estimate of the expected loss in value, and has been determined on the basis of past experience and historical and expected future trends in the market. A worsening of the economic and financial situation could cause a further deterioration in conditions compared to that taken into consideration in calculating the allowances recognised in the financial statements.
Recognition of deferred tax assets - The extent to which deferred tax assets can be recognised is based on an assessment of the probability of the future taxable income against which the deferred tax assets can be utilised.
Evaluation of indicators for impairment of assets - The evaluation of applicability of indicators of impairment of assets requires assessment of several external and internal factors which could result in deterioration of recoverable amount of the assets.
Provisions - At each balance sheet date basis the management judgment, changes in facts and legal aspects, the Company assesses the requirement of provisions against the outstanding contingent liabilities. However, the actual future outcome may be different from this judgement.
Useful lives of depreciable/ amortisable assets - Management reviews its estimate of the useful lives of depreciable/amortisable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technical and economic obsolescence that may change the utility of assets.
Defined benefit obligation (DBO) - Management''s estimate of the DBO is based on a number of underlying assumptions such as standard rates of inflation, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses.
Fair value measurements - Management applies valuation techniques to determine the fair value of financial instruments (where active market quotes are not available). This involves developing estimates and assumptions consistent with how market participants would price the instrument.
Contingent liabilities - The Company is the subject of legal proceedings and tax issues covering a range of matters, which are pending in various jurisdictions. Due to the uncertainty inherent in such matters, it is difficult to predict the final outcome of such matters. The cases and claims against the Company often raise difficult and complex factual and legal issues, which are subject to many uncertainties, including but not limited to the facts and circumstances of each particular case and claim, the jurisdiction and the differences in applicable law. In the normal course of business management consults with legal counsel and certain other experts on matters related to litigation and taxes. The Company accrues a liability when it is determined that an adverse outcome is probable and the amount of the loss can be reasonably estimated.
(v) Standards issued but not yet effective
Ministry of Corporate Affairs (âMCAâ) notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On 23 March 2022, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2022, applicable from 01 April 2022, as below:
Ind AS 103 - Reference to Conceptual Framework
The amendments specifiy that to qualify for recognition as part of applying the acquisition method, the identifiable assets acquired and liabilities assumed must meet the definitions of assets and liabilities in the Conceptual Framework for Financial Reporting under Indian Accounting Standards (Conceptual Framework)
issued by the Institute of Chartered Accountants of India at the acquisition date. These changes do not significantly change the requirements of Ind A
Mar 31, 2018
i) Significant Accounting Policies
a) Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current when it is:
* Expected to be realised or intended to be sold or consumed in normal operating cycle
* Held primarily for the purpose of trading
* Expected to be realised within twelve months after the reporting period, or
* Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle
- It is held primarily for the purpose of trading
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Based on the nature of products and the time between 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 or non-current classification of assets and liabilities.
b) Property, Plant and Equipment
Recognition and initial measurement
Property, plant and equipment are stated at their cost of acquisition. The cost comprises the purchase price and any attributable costs of bringing the asset to its working condition for its intended use. Any trade discount and rebates are deducted in arriving at the purchase price. Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benets attributable to such subsequent cost associated with the item will flow to the Company. All other repair and maintenance costs are recognised in statement of profit or loss as incurred.
In case an item of property, plant and equipment is acquired on deferred payment basis, interest expenses included in deferred payment is recognised as interest expense and not included in cost of asset.
Subsequent measurement (depreciation and useful lives)
Depreciation on property, plant and equipment is provided on the straight line method arrived on the basis of the useful life prescribed under Schedule II of the Companies Act, 2013. The following useful life of assets has been taken by the Company:
Cost of the leasehold land is amortized over the period of the lease.
The residual values, useful lives and method of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.
Where, during any financial year, any addition has been made to any asset, or where any asset has been sold, discarded, demolished or destroyed, or signicant components replaced; depreciation on such assets is calculated on a pro rata basis as individual assets with specic useful life from the month of such addition or, as the case may be, up to the month on which such asset has been sold, discarded, demolished or destroyed or replaced.
De-recognition
An item of property, plant and equipment and any signicant part initially recognised is de-recognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognized.
c) Intangible Assets
Recognition and initial measurement
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any.
Subsequent measurement (depreciation and useful lives)
All finite-lived intangible assets, including internally developed intangible assets, are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives. The estimated useful life of an identifiable intangible asset is based on a number of factors including the effects of obsolescence, demand, competition, and other economic factors (such as the stability of the industry, and known technological advances), and the level of maintenance expenditures required to obtain the expected future cash flows from the asset. Residual values and useful lives are reviewed at each reporting date. The following useful lives are applied:
Intangible Assets Useful life (in years)
Software Amortised over a period of 6 years De-recognition
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the asset is derecognised.
d) Impairment of non-financial assets
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount.The reduction is treated as an impairment loss and is recognized in the Statement of profit and loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists then the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.
e) Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest calculated using the effective interest method that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
f) Inventory
Inventories are stated at lower of cost or net realisable value. The cost in respect of the various items of inventory is computed as under:
- Raw material: cost includes direct expenses and is determined on the basis of weighted average method.
- Stores and spares: cost includes direct expenses and is determined on the basis of weighted average method.
* In case of finished goods, cost includes raw material cost plus conversion costs and other overheads incurred to bring the goods to their present location and condition. Cost of finished goods also includes excise duty, wherever applicable.
Net realisable value is the estimated selling price in the ordinary course of business less any applicable selling expenses. Provision for obsolescence and slow moving inventory is made based on managementâs best estimates of net realisable value of such inventories.
g) Functional and presentation currency
The financial results are presented in Indian Rupees (INR), which is also the Companyâs functional currency.
Foreign Currencies Transactions and balances
Initial recognition
Transactions in foreign currencies are initially recorded by the Company at its functional currency spot rates of exchange at the date the transaction first qualifies for recognition.
Subsequent measurement
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI or profit or loss, respectively).
Exchange differences
Under previous GAAP, exchange differences arising on translation/ settlement of long term foreign currency monetary items pertaining to the acquisition of a depreciable asset were adjusted to the cost of the asset. Such exchange differences arising on translation/ settlement of long term foreign currency monetary items and pertaining to the acquisition of a depreciable asset were amortised over the remaining useful lives of the assets. The Company has elected to continue with the said policy on exchange differences arising on long term foreign currency monetary items existing on 31 March 2017 as allowed under Ind AS 101.
The Company accounts for exchange differences arising on translation/ settlement of foreign currency monetary items as below:
(i) Exchange differences arising on long-term foreign currency monetary items existing as on 31 March 2017 related to acquisition of a fixed asset are capitalised and depreciated over the remaining useful life of the asset.
(ii) Exchange differences arising on other long-term foreign currency monetary items existing as on 31 March 2017 are accumulated in the âForeign Currency Monetary Item Translation Difference Accountâand amortised over the remaining life of the concerned monetary item.
(iii) All other exchange differences are recognised as income or as expenses in the period in which they arise.
For the purpose of (i) and (ii) above, the Company treats a foreign currency monetary item as âlongterm foreign currency monetary itemâ, if it has a term of 12 months or more at the date of its origination.
h) Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
For arrangements entered into prior to 1 April 2016, the Company has determined whether the arrangement contain lease on the basis of facts and circumstances existing on the date of transition.
Company as a Lessee
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease.
Finance leases are capitalized at the commencement of the lease at the inception date fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the statement of profit and loss. Contingent rentals are recognised as expenses in the periods in which they are incurred. Lease management fees, legal charges and other initial direct costs are capitalized.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the useful life of the asset and the lease term.
Operating lease payments are recognised as an expense in the statement of profit and loss on a straight-line basis over the lease term, except in case where lease rentals are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost.
Company as a Lessor
Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Rental income from operating lease is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.
Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Companyâs net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.
i) Fair Value Measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial results are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognized in the financial statements on a recurring basis, Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period or each case.
For the purpose of fair value disclosures, Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
j) Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
Sales of goods
Revenue from sale of goods is recognized when all the significant risks and rewards of ownership are transferred to the buyer and the Company retains neither effective control of the goods nor retains significant manegerial involvement to the degree usually associated with ownership; and no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of goods. Revenue is measured at fair value of the consideration received or receivable, after deduction of any trade discounts, volume rebates and any taxes or duties collected on behalf of the government which are levied on sales.
Export benefits/incentives
Revenue in respect of duty entitlement pass book scheme, Merchandise export from India scheme, Focus scheme, Export rebate, advance license scheme and duty drawback scheme is recognized when the entitlement to receive the benefit is established.
Dividend income
Dividend income is recognised at the time when right to receive the payment is established. Interest Income:
Interest income is recognized on a time proportion basis taking into account the amount outstanding held and the interest rate applicable.
For all Financial Assets measured at amortised cost, interest income is recorded using the effective interest rate (EIR) i.e. the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial assets. The future cash flows include all other transaction costs paid or received, premiums or discounts if any, etc.
k) Financial Instruments
Financial instruments are recognised when the Company becomes a party to the contractual provisions of the instrument and are measured initially at fair value adjusted for transaction costs, except for those carried at fair value through profit or loss which are measured initially at fair value.
If the Company determines that the fair value at initial recognition differs from the transaction price, the Company accounts for that instrument at that date as follows:
* at the measurement basis mentioned above if that fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1 input) or based on a valuation technique that uses only data from observable markets. The Company recognises the difference between the fair value at initial recognition and the transaction price as a gain or loss.
* in all other cases, at the measurement basis mentioned above, adjusted to defer the difference between the fair value at initial recognition and the transaction price. After initial recognition, the Company recognises that deferred difference as a gain or loss only to the extent that it arises from a change in a factor (including time) that market participants would take into account when pricing the asset or liability.
Subsequent measurement of financial assets and financial liabilities is described below.
Financial assets
Classification and subsequent measurement
For the purpose of subsequent measurement, financial assets are classified into the following categories upon initial recognition:
i. Financial assets at amortised cost - a financial instrument is measured at amortised cost if both the following conditions are met:
* The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
* Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest method.
ii. Investments in equity instruments of subsidiaries - Investments in equity instrument of subsidiaries are accounted for at fair value at the transition date as per the exemptions available in Ind AS 101.
iii. Financial assets at fair value
* Investments in equity instruments other than above - All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading are generally classified as at fair value through profit or loss (FVTPL). For all other equity instruments, the Company decides to classify the same either as at fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVTPL). The Company makes such election on an instrument by instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the other comprehensive income (OCI). There is no recycling of the amounts from OCI to profit or loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity. Dividends on such investments are recognised in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the profit or loss.
- Mutual funds - All mutual funds in scope of Ind-AS 109 are measured at fair value through profit or loss (FVTPL).
- Derivative assets - All derivative assets are measured at fair value through profit and loss (FVTPL).
Accounting of cash flow hedges and derivatives
The Company enters into certain derivative financial instruments to manage its exposure to risk arising from changes in interest rate and foreign exchange rates designated as cash flow hedges. At the inception of a hedge relationship, the Company documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrumentâs fair value in offsetting the exposure to changes in the hedged itemâs cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
Hedges which meet the strict criteria for hedge accounting are accounted for as follows:
Derivatives are recorded at their fair value with changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recorded in a hedging reserve account. The gain or loss relating to the ineffective portion is recognised immediately in statement of profit and loss. Amounts recorded in the hedging reserve account are released to the Statement of profit and loss in the year when the hedged item affects profit or loss. Hedge accounting is discontinued when the Company revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting upon which remaining balance of such hedge in the hedging reserve account is released to the Statement of profit and loss.
Derivatives which are not designated as effective hedge are also recorded at their fair value and change in fair value is recognized immediately in the Statement of profit and loss.
De-recognition of financial assets
A financial asset is primarily de-recognised when the rights to receive cash flows from the asset have expired or the Company has transferred its rights to receive cash flows from the asset.
Financial liabilities
Subsequent measurement
After initial recognition, the financial liabilities, other than derivative liabilities, are subsequently measured at amortised cost using the effective interest method.
Amortised cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The effect of EIR amortisation is included as finance costs in the statement of profit and loss.
Derivative liabilities - All derivative liabilities are measured at fair value through profit and loss (FVTPL).
De-recognition of financial liabilities
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
Impairment of financial assets
All financial assets except for those at FVTPL and investments in equity instruments measured at FVOCI are subject to review for impairment at each reporting date to identify whether there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets.
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss for financial assets carried at amortised cost.
ECL is the weighted average of difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive, discounted at the original effective interest rate, with the respective risks of default occurring as the weights. When estimating the cash flows, the Company is required to consider -
- All contractual terms of the financial assets (including prepayment and extension) over the expected life of the assets.
- Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
Trade receivables
i. For debtors that are not past due - The Company applies approach permitted by Ind AS 109 âFinancial Instrumentsâ, which requires lifetime expected credit losses to be recognised upon initial recognition of receivables. Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument.
Life time expected credit losses are assessed and accounted based on Companyâs historical counter party default rates and forecast of macro-economic factors, by dividing receivables that are not considered to be individually significant by reference to the business segment of the counter party and other shared credit risk characteristics to evaluate the expected credit loss. The expected credit loss estimate is then based on recent historical counter party default rates. The Company defines default as an event when the financial asset is past due for more than 365 days. This definition is based on managementâs expectation of the time period beyond which if a receivable is outstanding, it is an objective evidence of impairment.
ii. For debtors considered past due - any enhancement in the accrual done for expected credit loss on individually significant receivables is made to recognise any additional expected credit loss on amount recoverable. The Company writes off trade receivables when there is no objective evidence that such amounts would not be recovered. Financial assets that are written-off are still subject to enforcement activity by the Company.
Other financial assets
For recognition of impairment loss on other financial assets and risk exposure, the Company determines whether there has been a significant increase in the credit risk since initial recognition. If the credit risk has not increased significantly since initial recognition, the Company measures the loss allowance at an amount equal to 12 month expected credit losses, else at an amount equal to the lifetime expected credit losses.
l) Post-employment and other employee benefits Defined Contribution plan
Provident Fund
The Company makes contribution to statutory provident fund in accordance with EmployeesâProvident Fund and Miscellaneous Provisions Act, 1952. The plan is a defined contribution plan and contribution paid or payable is recognized as an expense in the period in which services are rendered by the employee.
Superannuation fund
Superannuation is a post-employment benefit defined contribution plan under which the Company pays specified contributions to the insurer. The Company makes specified quarterly contributions to the superannuation fund. The contribution paid or payable is recognized as an expense in the period in which the services are rendered by the employee.
Defined benefit plans
The Company operates a defined benefit gratuity plan in India.The cost of providing benefits under the defined benefit plan is determined on the basis of actuarial valuation using the projected unit credit method. Gratuity fund is administered through Life Insurance Corporation of India.
Remeasurements, comprising of actuarial gains and losses, excluding amounts included in net interest on the net defined benefit liability are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Other Employee Benefits
Compensated absences
Liability in respect of compensated absences becoming due or expected to be availed within one year from the balance sheet date is recognised on the basis of undiscounted value of estimated amount required to be paid or estimated value of benefit expected to be availed by the employees. Liability in respect of compensated absences becoming due or expected to be availed more than one year after the balance sheet date is estimated on the basis of an actuarial valuation performed by an independent actuary using the projected unit credit method.
Other short term benefits
Expense in respect of other short-term benefits is recognized on the basis of amount paid or payable for the period during which services are rendered by the employees.
m) Provisions, contingent assets and contingent liabilities
Provisions are recognized only when there is a present obligation, as a result of past events and when a reliable estimate of the amount of obligation can be made at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.
Provisions are discounted to their present values, where the time value of money is material.
Contingent liability is disclosed for:
* Possible obligations which will be confirmed only by future events not wholly within the control of the Company or
Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.
Contingent assets are neither recognized nor disclosed except when realization of income is virtually certain, related asset is disclosed.
n) Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events including a bonus issue.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
Potential ordinary shares shall be treated as dilutive when, and only when, their conversion to ordinary shares would decrease earnings per share or increase loss per share from continuing operations.
o) Taxes
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Company operates and generates taxable income.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. The carrying amount of deferred tax assets are reviewed at each balance sheet date and derecognized to the extent it is no longer probable that sufficient future taxable profits will be available against which such deferred tax assets can be realized.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity.
Minimum Alternate Tax (âMATâ) credit is recognized as an asset only when and to the extent it is probable that the Company will pay normal income tax during the specified period. In the year in which MAT credit becomes eligible to be recognized as an asset, the said asset is created by way of a credit to the Statement of profit and loss and presented as MAT credit entitlement. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT credit entitlement to the extent it is not probable that the Company will pay normal income tax during the specified period.
p) Government grants and subsidies
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with.
When the grant or subsidy relates to revenue, it is recognised as income on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs, which they are intended to compensate. Where the grant relates to an asset, it is recognised as deferred income and released to income in equal amounts over the expected useful life of the related asset.
q) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
Identification of segments:
In accordance with Ind AS 108- Operating Segment, the operating segments used to present segment information are identified on the basis of information reviewed by the Companyâs management to allocate resources to the segments and assess their performance. An operating segment is a component of the Company that engages in business activities from which it earns revenues and incurs expenses, including revenues and expenses that relate to transactions with any of the Companyâs other components. Results of the operating segments are reviewed regularly by the Board of Directors, which has been identified as the chief operating decision maker (CODM), to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available.
Allocation of common costs:
Common allocable costs are allocated to each segment accordingly to the relative contribution of each segment to the total common costs.
Unallocated items:
Unallocated items include general corporate income and expense items which are not allocated to any business segment.
Segment accounting policies
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial results of the Company as a whole.
r) Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less.
s) Employee Share based payment
The Company has granted stock options under Cosmo Films Employees Stock Option Plan 2015 to the employees of the Company and its subsidiaries. The fair value of options granted under Employee Stock Option Plan is recognized as an employee benefits expense with a corresponding increase in share options outstanding account. The total amount to be expensed is determined by reference to the fair value of the options. The total expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the nonmarket vesting and service conditions. It recognizes the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to share options outstanding account. Upon exercise of share options, the proceeds received are allocated to share capital up to the par value of the shares issued with any excess being recorded as share premium.
Mar 31, 2017
1. Statement on significant accounting policies
a) Background and nature of operations
Cosmo Films Limited (the âCompanyâ), manufacturers of Bi-axially Oriented Polypropylene Films (BOPP) was incorporated in India in 1981, under the Companies Act 1956. The Company is engaged in the production of flexible packaging films. Companyâs product majorly comprises of BOPP Films, Thermal Films and Coated Films. In India, the Company is currently having manufacturing at Aurangabad & Shendra in Maharashtra and at Karjan in Gujarat. It also has its subsidiaries working in different countries.
b) Basis of preparation
The financial statements of the company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The company has prepared these financial statements to comply in all material respects with the accounting standards notified under section 133 of the Companies Act, 2013 read together with paragraph 7 of the company (accounts) rules, 2014. The financial statements have been prepared on an accrual basis and under the historical cost convention. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year.
All assets and liabilities have been classified as current or non-current as per the Companyâs normal operating cycle and other criteria set out in the Schedule III of the Companies Act, 2013.
c) Use of estimates
In preparing the Companyâs financial statements in conformity with the accounting principles generally accepted in India, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Any revision to accounting estimates is recognized prospectively in the current and future periods.
d) Fixed assets
Fixed assets are stated at cost less accumulated depreciation and impairment losses if any. Cost comprises the purchase price and any attributable costs of bringing the asset to its working condition for its intended use. When an asset is scrapped or otherwise disposed off, the cost and related depreciation are removed from the books of account and resultant profit (including capital profit) or loss, if any, is reflected in the Statement of profit and loss. Project under commissioning and other assets under erection/installation are shown under capital work in progress and are carried at cost, comprising of direct cost and related incidental expenses. Spares directly related to plant & machinery are capitalized and depreciated over the remaining life of the original equipment.
Foreign currency loans availed for acquisition of fixed assets are converted at the rate prevailing on the due date for installments repayable during the year and at the rate prevailing on the date of balance sheet for the outstanding loan. The fluctuation is adjusted in the original cost of fixed assets.
The cost of internally constructed assets constructed by Company shall include the cost of all materials used in construction, direct labour employed and an appropriate proportion of variable and fixed overheads.
e) Investments
Investments that are readily realizable and intended to be held for not more than one year are classified as current investments; all other investments are classified as long term investments. Long term investments are carried at cost less provision (if any) for decline in value which is other than temporary in nature. Current investments are carried at lower of cost and fair market value.
f) Inventories
Inventories are valued at cost or net realizable value, whichever is lower. The cost in respect of the various items of inventory is computed as under:
- Raw material cost includes direct expenses and is determined on the basis of weighted average method.
- Stores and spares cost includes direct expenses and is determined on the basis of weighted average method.
- In case of finished goods cost includes raw material cost plus conversion costs and other overheads incurred to bring the goods to their present location and condition. Cost of finished goods also includes excise duty, wherever applicable.
g) Depreciation
Depreciation on fixed assets is provided on straight line method (SLM) at rates which are equal to the corresponding rates in Schedule II to the Companies Act 2013, based on management estimates of useful life as follows:
ii) Cost of the leasehold land is amortized over the period of the lease.
iii) Depreciation on assets costing Rs.5,000/- or below is charged @ 100% per annum in the year of purchase.
h) Research and development
Revenue expenditure incurred on research and development is charged to Statement of profit and loss in the year it is incurred.
Capital expenditure is included in the respective heads under fixed assets and depreciation thereon is charged to depreciation account.
i) Foreign currency transactions Initial recognition
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Conversion
Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
Exchange differences
Exchange differences arising on the settlement of monetary items or on restatement of 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 recognized as income or as expenses in the year in which they arise.
As per the amendment of the Companies (Accounting Standard) Rules, 2006-âAS 11â relating to âThe Effects of Changes in Foreign Exchange Ratesâ exchange difference arising on conversion of long term foreign currency monetary items is recorded under the head âForeign Currency Monetary Item Translation Difference Accountâ and is amortized over period not extending beyond, earlier of March 31, 2020 or maturity date of underlying long term foreign currency monetary items.
j) Accounting of cash flow hedges and derivatives
The Company enters into certain derivative financial instruments to manage its exposure to risk arising from changes in interest rate and foreign exchange rates designated as cash flow hedges. At the inception of a hedge relationship, the Company documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrumentâs fair value in offsetting the exposure to changes in the hedged itemâs cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
Hedges which meet the strict criteria for hedge accounting are accounted for as follows:
Derivatives are recorded at their fair value with changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recorded in a hedging reserve account. The gain or loss relating to the ineffective portion is recognized immediately in Statement of profit and loss. Amounts recorded in the hedging reserve account are released to the Statement of profit and loss in the year when the hedged item affects profit or loss. Hedge accounting is discontinued when the Company revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting upon which remaining balance of such hedge in the hedging reserve account is released to the Statement of profit and loss.
Derivatives which are not designated as effective hedge are also recorded at their fair value and change in fair value is recognized immediately in the Statement of profit and loss.
The company also uses foreign exchange forward contracts to hedge its exposure to movements in foreign exchange rates. The premium or discount arising at the inception of such forward exchange contracts 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 and 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 recognized as income or as expense in the period in which same is cancelled or rolled over.
k) Employees benefits
Provident fund
The Company makes contribution to statutory provident fund in accordance with Employeesâ Provident Fund and Miscellaneous Provisions Act, 1952. The plan is a defined contribution plan and contribution paid or payable is recognized as an expense in the period in which services are rendered by the employee.
Superannuation fund
Superannuation is a post-employment benefit defined contribution plan under which the company pays specified contributions to the insurer. The company makes specified quarterly contributions to the superannuation fund. The contribution paid or payable is recognized as an expense in the period in which the services are rendered by the employee.
Gratuity
Gratuity is a post-employment benefit and is in the nature of defined benefit plan. The liability recognized in the balance sheet in respect of gratuity is the present value of the defined benefit obligation at the balance sheet date together with adjustments for unrecognized actuarial gains or losses and past service costs. The defined benefit obligation is calculated annually by an independent actuary using the projected unit credit method.
Actuarial gains and losses arising from adjustments and changes in actuarial assumptions are charged or credited to the Statement of profit and loss in the year in which such gains or losses arise.
Compensated absences
Provision for compensated absences when determined to be a long term benefit is made on the basis of actuarial valuation as at the end of the year. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to the Statement of profit and loss in the year in which such gains or losses arise. Provision related to short term compensated absences of workers is provided on actual basis.
l) Taxation
The tax expense comprises of current taxes and deferred taxes. Current tax is the amount of income tax determined to be payable in respect of taxable income for a period as per the provisions of Income Tax, 1961. Deferred tax is the effect of timing differences between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. 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 reviewed at each balance sheet date and recognized/derecognized only to the extent that there is reasonable/virtual certainty, depending on the nature of the timing differences, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
Minimum Alternate Tax (âMATâ) 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. In the year in which MAT credit becomes eligible to be recognised as an asset in accordance with the recommendations contained in guidance note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the Statement of profit and loss and shown as MAT credit entitlement. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT credit entitlement to the extent it is not reasonably certain that the Company will pay normal income tax during the specified period.
m) Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
Sales
Revenue from sale of goods is recognized when all the significant risks and rewards of ownership are transferred to the buyer and the Company retains no effective control of the goods transferred to a degree usually associated with ownership; and
No significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of goods.
Interest
Interest income is recognized on a time proportion basis taking into account the amount outstanding held and the interest rate applicable. Such income is recorded by company in other income.
Dividend
Dividend income is recognized as income when the right to receive the payment is established.
Export benefits/incentives
Revenue in respect of duty entitlement pass book scheme and duty drawback scheme is recognized when the entitlement to receive the benefit is established is recorded under operating revenue.
n) Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying asset are capitalized as part of the cost of that asset. Other borrowing costs are recognized as an expense in the period in which they are incurred. Capitalization of borrowing costs ceases when substantially all the activities necessary to prepare the qualifying assets for its intended use are complete.
o) Earnings per share (EPS)
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events of bonus issue and share split.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
p) Impairment of assets
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Statement of profit and loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists then the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.
q) Provisions and contingent liabilities
Provision is recognised when the Company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which reliable estimate can be made. Provisions are not discounted to present value and are determined based on best estimate required to settle the obligation on the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. A disclosure for a contingent liability is made when there is a present obligation that may, but probably will not, require an outflow of resources. Disclosure is also made in respect of a present obligation as a result of past event that probably requires an outflow of resource, where it is not possible to make a reliable estimate of the outflow. Where there is a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.
r) Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and in hand and short-term investments in fixed deposits with an original maturity of three months or less.
s) Employee Share based payment
The stock options granted under Cosmo Films Employees Stock Option Plan 2015 to the employees of the company and its subsidiaries are accounted for as per the accounting treatment prescribed by the Securities and Exchange Board of India whereby the excess if any of the closing market price on the day prior to the day of the grant of the options over the exercise price is amortised on a straight line basis over the vesting period.
Mar 31, 2015
A) Background and nature of operations
Cosmo Films Limited (the 'Company'), manufacturers of Bi-axially
Oriented Polypropylene Films (BOPP) was incorporated in India in 1981,
under the Companies Act 1956. The Company is engaged in the production
of packaging films. Company's product majorly comprises of BOPP Films
and Thermal Films. In India, the Company is currently working at
Aurangabad in Maharashtra and at Karjan in Gujarat. It also has its
subsidiaries working in different countries.
b) Basis of preparation
The financial statements of the company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP). The company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under the Companies (Accounting Standards) Rules, 2006, (as amended)
and the relevant provisions of the Companies Act, 1956 read with the
General Circular 8/2014 dated 4 April 2014 of the Ministry of Corporate
Affairs in respect of section 133 of the Companies Act, 2013. The
financial statements have been prepared on an accrual basis and under
the historical cost convention. The accounting policies have been
consistently applied by the Company and are consistent with those used
in the previous year.
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 the Schedule III of the Companies Act, 2013.
c) Use of estimates
In preparing the Company's financial statements in conformity with the
accounting principles generally accepted in India, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent
liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. Any revision to accounting
estimates is recognized prospectively in the current and future
periods.
d) Fixed assets
Fixed assets are stated at cost less accumulated depreciation and
impairment losses if any. Cost comprises the purchase price and any
attributable costs of bringing the asset to its working condition for
its intended use. When an asset is scrapped or otherwise disposed off,
the cost and related depreciation are removed from the books of account
and resultant profit (including capital profit) or loss, if any, is
reflected in the Statement of profit and loss. Project under
commissioning and other assets under erection/installation are shown
under capital work in progress and are carried at cost, comprising of
direct cost and related incidental expenses. Spares directly related to
plant & machinery are capitalized and depreciated over the life of the
original equipment.
Foreign currency loans availed for acquisition of fixed assets are
converted at the rate prevailing on the due date for installments
repayable during the year and at the rate prevailing on the date of
balance sheet for the outstanding loan. The fluctuation is adjusted in
the original cost of fixed assets.
The cost of internally constructed assets constructed by Company shall
include the cost of all materials used in construction, direct labour
employed and an appropriate proportion of variable and fixed overheads.
e) Investments
Investments that are readily realizable and intended to be held for not
more than one year are classified as current investments; all other
investments are classified as long term investments. Long term
investments are carried at cost less provision (if any) for decline in
value which is other than temporary in nature. Current investments are
carried at lower of cost and fair market value.
f) Inventories
Inventories are valued at cost or net realizable value, whichever is
lower. The cost in respect of the various items of inventory is
computed as under:
* Raw material cost includes direct expenses and is determined on the
basis of weighted average method.
* Stores and spares cost includes direct expenses and is determined on
the basis of weighted average method.
* In case of finished goods cost includes raw material cost plus
conversion costs and other overheads incurred to bring the goods to
their present location and condition. Cost of finished goods also
includes excise duty, wherever applicable.
g) Depreciation
Depreciation on fixed assets is provided on straight line method (SLM)
at rates which are equal to the corresponding rates in Schedule II to
the Companies Act 2013, based on management estimates of useful life as
follows:
Block of asset Life (in years)
Factory Buildings 30
Buildings Other than Factory 60
Continuous Process Plant and Machinery 25
Other Plant and Machinery 15
Furniture and fixtures 10
Vehicles 8
Office equipment 5
Computers including software 3 & 6
i) Cost of the leasehold land is amortised over the period of the
lease.
iii) Depreciation on assets costing Rs. 5,000/- or below is charged @
100% per annum in the year of purchase.
h) Research and development
Revenue expenditure incurred on research and development is charged to
Statement of profit and loss in the year it is incurred.
Capital expenditure is included in the respective heads under fixed
assets and depreciation thereon is charged to depreciation account.
i) Foreign currency transactions Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
Exchange differences
Exchange differences arising on the settlement of monetary items or on
restatement of the Company's monetary items at rates different from
those at which they were initially recorded during the year, or
reported in previous financial statements, are recognized as income or
as expenses in the year in which they arise.
As per the amendment of the Companies (Accounting Standard) Rules,
2006-'AS 11' relating to 'The Effects of Changes in Foreign Exchange
Rates' exchange difference arising on conversion of long term foreign
currency monetary items is recorded under the head 'Foreign Currency
Monetary Item Translation Difference Account' and is amortized over
period not extending beyond, earlier of March 31,2020 or maturity date
of underlying long term foreign currency monetary items.
j) Accounting of cash flow hedges and derivatives
The Company enters into certain derivative financial instruments to
manage its exposure to risk arising from changes in interest rate and
foreign exchange rates designated as cash flow hedges. At the inception
of a hedge relationship, the Company documents the hedge relationship
to which the Company wishes to apply hedge accounting and the risk
management objective and strategy for undertaking the hedge. The
documentation includes identification of the hedging instrument, the
hedged item or transaction, the nature of the risk being hedged and how
the entity will assess the effectiveness of changes in the hedging
instrument's fair value in offsetting the exposure to changes in the
hedged item's cash flows attributable to the hedged risk. Such hedges
are expected to be highly effective in achieving offsetting changes in
cash flows and are assessed on an ongoing basis to determine that they
actually have been highly effective throughout the financial reporting
periods for which they were designated.
Hedges which meet the strict criteria for hedge accounting are
accounted for as follows:
Derivatives are recorded at their fair value with changes in the fair
value of derivatives that are designated and qualify as cash flow
hedges are recorded in a hedging reserve account. The gain or loss
relating to the ineffective portion is recognized immediately in
Statement of profit and loss. Amounts recorded in the hedging reserve
account are released to the Statement of profit and loss in the year
when the hedged item affects profit or loss. Hedge accounting is
discontinued when the Company revokes the hedging relationship, the
hedging instrument expires or is sold, terminated, or exercised, or no
longer qualifies for hedge accounting upon which remaining balance of
such hedge in the hedging reserve account is released to the Statement
of profit and loss.
Derivatives which are not designated as effective hedge are also
recorded at their fair value and change in fair value is recognized
immediately in the Statement of profit and loss.
The company also uses foreign exchange forward contracts to hedge its
exposure to movements in foreign exchange rates. The premium or
discount arising at the inception of such forward exchange contracts 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 and 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 recognized as income or as expense in the
period in which same is cancelled or rolled over.
k) Employees benefits
Provident fund
The Company makes contribution to statutory provident fund in
accordance with Employees' Provident Fund and Miscellaneous Provisions
Act, 1952. The plan is a defined contribution plan and contribution
paid or payable is recognized as an expense in the period in which
services are rendered by the employee.
Gratuity
Gratuity is a post-employment benefit and is in the nature of defined
benefit plan. The liability recognized in the balance sheet in respect
of gratuity is the present value of the defined benefit obligation at
the balance sheet date together with adjustments for unrecognized
actuarial gains or losses and past service costs. The defined benefit
obligation is calculated annually by an independent actuary using the
projected unit credit method.
Actuarial gains and losses arising from adjustments and changes in
actuarial assumptions are charged or credited to the Statement of
profit and loss in the year in which such gains or losses arise.
Compensated absences
Provision for compensated absences when determined to be a long term
benefit is made on the basis of actuarial valuation as at the end of
the year. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are charged or
credited to the Statement of profit and loss in the year in which such
gains or losses arise. Provision related to short term compensated
absences of workers is provided on actual basis.
l) Taxation
The tax expense comprises of current taxes and deferred taxes. Current
tax is the amount of income tax determined to be payable in respect of
taxable income for a period as per the provisions of Income Tax, 1961.
Deferred tax is the effect of timing differences between taxable income
and accounting income that originate in one period and are capable of
reversal in one or more subsequent periods. 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 reviewed at
each balance sheet date and recognized/derecognized only to the extent
that there is reasonable/ virtual certainty, depending on the nature of
the timing differences, that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
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. In the year in
which MAT credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in guidance note issued
by the Institute of Chartered Accountants of India, the said asset is
created by way of a credit to the Statement of profit and loss and
shown as MAT credit entitlement. The Company reviews the same at each
balance sheet date and writes down the carrying amount of MAT credit
entitlement to the extent it is not reasonably certain that the Company
will pay normal income tax during the specified period.
m) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Sales
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership are transferred to the buyer and the Company
retains no effective control of the goods transferred to a degree
usually associated with ownership; and
No significant uncertainty exists regarding the amount of the
consideration that will be derived from the sale of goods.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding held and the interest rate applicable.
Such income is recorded by company in other income.
Dividend
Dividend income is recognized as income when the right to receive the
payment is established.
Export benefits/incentives
Revenue in respect of duty entitlement pass book scheme and duty
drawback scheme is recognized when the entitlement to receive the
benefit is established is recorded under operating revenue.
n) Borrowing costs
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying asset are capitalized as part
of the cost of that asset. Other borrowing costs are recognized as an
expense in the period in which they are incurred. Capitalization of
borrowing costs ceases when substantially all the activities necessary
to prepare the qualifying assets for its intended use are complete.
o) Earnings per share (EPS)
Basic earnings per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. The
weighted average number of equity shares outstanding during the period
is adjusted for events of bonus issue and share split.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
p) Impairment of assets
The Company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount. The reduction is treated as an impairment loss and is
recognized in the Statement of profit and loss. If at the balance sheet
date there is an indication that a previously assessed impairment loss
no longer exists then the recoverable amount is reassessed and the
asset is reflected at the recoverable amount subject to a maximum of
depreciated historical cost.
q) Provisions and contingent liabilities
Provision is recognised when the Company has a present obligation as a
result of past event and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which reliable
estimate can be made. Provisions are not discounted to present value
and are determined based on best estimate required to settle the
obligation on the balance sheet date. These are reviewed at each
balance sheet date and adjusted to reflect the current best estimates.
A disclosure for a contingent liability is made when there is a present
obligation that may, but probably will not, require an outflow of
resources. Disclosure is also made in respect of a present obligation
as a result of past event that probably requires an outflow of
resource, where it is not possible to make a reliable estimate of the
outflow. Where there is a present obligation in respect of which the
likelihood of outflow of resources is remote, no provision or
disclosure is made. Contingent assets are not recognised in the
financial statements. However, contingent assets are assessed
continually and if it is virtually certain that an inflow of economic
benefits will arise, the asset and related income are recognised in the
period in which the change occurs.
r) Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments in fixed
deposits with an original maturity of three months or less.
Mar 31, 2014
A) Background and nature of operations
Cosmo Films Limited (the ''Company''), manufacturers of Bi-axially
Oriented Polypropylene Films (BOPP) was incorporated in India in 1981,
under the Companies Act 1956. The Company is engaged in the production
of packaging films. Company''s product majorly comprises of BOPP Films
and Thermal Films. In India, the Company is currently working at
Aurangabad in Maharashtra and at Karjan in Gujarat. It also has its
subsidiaries working in different countries.
b) Basis of preparation
The financial statements of the company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP). The company has prepared these financial statements to
comply in all material respects with the accounting standards notified
under the Companies (Accounting Standards) Rules, 2006, (as amended)
and the relevant provisions of the Companies Act, 1956 read with the
General Circular 15/2013 dated 13 September 2013 of the Ministry of
Corporate Affairs in respect of section 133 of the Companies Act,
2013.The financial statements have been prepared on an accrual basis
and under the historical cost convention. The accounting policies have
been consistently applied by the Company and are consistent with those
used in the previous year.
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 the revised schedule VI to the Act.
c) Use of estimates
In preparing the Company''s financial statements in conformity with the
accounting principles generally accepted in India, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent
liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. Any revision to accounting
estimates is recognized prospectively in the current and future
periods.
d) Fixed assets
Fixed assets are stated at cost less accumulated depreciation and
impairment losses if any. Cost comprises the purchase price and any
attributable costs of bringing the asset to its working condition for
its intended use. When an asset is scrapped or otherwise disposed off,
the cost and related depreciation are removed from the books of account
and resultant profit (including capital profit) or loss, if any, is
reflected in the Statement of profit and loss. Project under
commissioning and other assets under erection/installation are shown
under capital work in progress and are carried at cost, comprising of
direct cost and related incidental expenses. Spares directly related to
plant & machinery are capitalized and depreciated over the life of the
original equipment.
Foreign currency loans availed for acquisition of fixed assets are
converted at the rate prevailing on the due date for installments
repayable during the year and at the rate prevailing on the date of
balance sheet for the outstanding loan. The fluctuation is adjusted in
the original cost of fixed assets.
The cost of internally constructed assets constructed by Company shall
include the cost of all materials used in construction, direct labour
employed and an appropriate proportion of variable and fixed overheads.
e) Investments
Investments that are readily realizable and intended to be held for not
more than one year are classified as current investments; all other
investments are classified as long term investments. Long term
investments are carried at cost less provision (if any) for decline in
value which is other than temporary in nature. Current investments are
carried at lower of cost and fair market value.
f) Inventories
Inventories are valued at cost or net realizable value, whichever is
lower. The cost in respect of the various items of inventory is
computed as under:
. Raw material cost includes direct expenses and is determined on the
basis of weighted average method.
. Stores and spares cost includes direct expenses and is determined
on the basis of weighted average method.
. In case of finished goods cost includes raw material cost plus
conversion costs and other overheads incurred to bring the goods to
their present location and condition. Cost of finished goods also
includes excise duty, wherever applicable.
g) Depreciation
Depreciation on fixed assets is provided on straight line method (SLM)
at rates which are either greater than or equal to the corresponding
rates in Schedule XIV to the Act, based on management estimates of
useful life as follows:
Block of asset Life (in years)
Buildings 30
Plant and machinery (Including computers) 6-21
Furniture and fixtures 16
Vehicles 11
Office equipment 20
Intangible - software 6
ii) Cost of the leasehold land is amortised over the period of the
lease.
iii) Depreciation on assets costing Rs. 5,000/- or below is charged @
100% per annum in the year of purchase.
h) Research and development
Revenue expenditure incurred on research and development is charged to
Statement of profit and loss in the year it is incurred.
Capital expenditure is included in the respective heads under fixed
assets and depreciation thereon is charged to depreciation account.
i) Foreign currency transactions
Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
Exchange differences
Exchange differences arising on the settlement of monetary items or on
restatement of the Company''s monetary items at rates different from
those at which they were initially recorded during the year, or
reported in previous financial statements, are recognized as income or
as expenses in the year in which they arise.
As per the amendment of the Companies (Accounting Standard) Rules,
2006-ÂAS 11'' relating to ÂThe Effects of Changes in Foreign
Exchange Rates'' exchange difference arising on conversion of long term
foreign currency monetary items is recorded under the head ÂForeign
Currency Monetary Item Translation Difference Account'' and is amortized
over period not extending beyond, earlier of March 31, 2020 or maturity
date of underlying long term foreign currency monetary items.
j) Accounting of cash flow hedges and derivatives
The Company enters into certain derivative financial instruments to
manage its exposure to risk arising from changes in interest rate and
foreign exchange rates designated as cash flow hedges. At the inception
of a hedge relationship, the Company documents the hedge relationship
to which the Company wishes to apply hedge accounting and the risk
management objective and strategy for undertaking the hedge. The
documentation includes identification of the hedging instrument, the
hedged item or transaction, the nature of the risk being hedged and how
the entity will assess the effectiveness of changes in the hedging
instrument''s fair value in offsetting the exposure to changes in the
hedged item''s cash flows attributable to the hedged risk. Such hedges
are expected to be highly effective in achieving offsetting changes in
cash flows and are assessed on an ongoing basis to determine that they
actually have been highly effective throughout the financial reporting
periods for which they were designated.
Hedges which meet the strict criteria for hedge accounting are
accounted for as follows:
Derivatives are recorded at their fair value with changes in the fair
value of derivatives that are designated and qualify as cash flow
hedges are recorded in a hedging reserve account. The gain or loss
relating to the ineffective portion is recognized immediately in
Statement of profit and loss. Amounts recorded in the hedging reserve
account are released to the Statement of profit and loss in the year
when the hedged item affects profit or loss. Hedge accounting is
discontinued when the Company revokes the hedging relationship, the
hedging instrument expires or is sold, terminated, or exercised, or no
longer qualifies for hedge accounting upon which remaining balance of
such hedge in the hedging reserve account is released to the Statement
of profit and loss.
Derivatives which are not designated as effective hedge are also
recorded at their fair value and change in fair value is recognized
immediately in the Statement of profit and loss.
The company also uses foreign exchange forward contracts to hedge its
exposure to movements in foreign exchange rates. The premium or
discount arising at the inception of such forward exchange contracts 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 and 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 recognized as income or as expense in the
period in which same is cancelled or rolled over.
k) Employees benefits
Provident fund
The Company makes contribution to statutory provident fund in
accordance with Employees'' Provident Fund and Miscellaneous Provisions
Act, 1952. The plan is a defined contribution plan and contribution
paid or payable is recognized as an expense in the period in which
services are rendered by the employee.
Gratuity
Gratuity is a post-employment benefit and is in the nature of defined
benefit plan. The liability recognized in the balance sheet in respect
of gratuity is the present value of the defined benefit obligation at
the balance sheet date together with adjustments for unrecognized
actuarial gains or losses and past service costs. The defined benefit
obligation is calculated annually by an independent actuary using the
projected unit credit method.
Actuarial gains and losses arising from adjustments and changes in
actuarial assumptions are charged or credited to the Statement of
profit and loss in the year in which such gains or losses arise.
Compensated absences
Provision for compensated absences when determined to be a long term
benefit is made on the basis of actuarial valuation as at the end of
the year. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are charged or
credited to the Statement of profit and loss in the year in which such
gains or losses arise. Provision related to short term compensated
absences of workers is provided on actual basis.
l) Taxation
The tax expense comprises of current taxes and deferred taxes. Current
tax is the amount of income tax determined to be payable in respect of
taxable income for a period as per the provisions of Income Tax, 1961.
Deferred tax is the effect of timing differences between taxable income
and accounting income that originate in one period and are capable of
reversal in one or more subsequent periods. 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 reviewed at
each balance sheet date and recognized/derecognized only to the extent
that there is reasonable/ virtual certainty, depending on the nature of
the timing differences, that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
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. In the year in
which MAT credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in guidance note issued
by the Institute of Chartered Accountants of India, the said asset is
created by way of a credit to the Statement of profit and loss and
shown as MAT credit entitlement. The Company reviews the same at each
balance sheet date and writes down the carrying amount of MAT credit
entitlement to the extent it is not reasonably certain that the Company
will pay normal income tax during the specified period.
m) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Sales
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership are transferred to the buyer and the Company
retains no effective control of the goods transferred to a degree
usually associated with ownership; and
No significant uncertainty exists regarding the amount of the
consideration that will be derived from the sale of goods.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding held and the interest rate applicable.
Such income is recorded by company in other income.
Dividend
Dividend income is recognized as income when the right to receive the
payment is established.
Export benefits/incentives
Revenue in respect of duty entitlement pass book scheme and duty
drawback scheme is recognized when the entitlement to receive the
benefit is established is recorded under operating revenue.
n) Borrowing costs
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying asset are capitalized as part
of the cost of that asset. Other borrowing costs are recognized as an
expense in the period in which they are incurred. Capitalization of
borrowing costs ceases when substantially all the activities necessary
to prepare the qualifying assets for its intended use are complete.
o) Earnings per share (EPS)
Basic earnings per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. The
weighted average number of equity shares outstanding during the period
is adjusted for events of bonus issue and share split.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
p) Impairment of assets
The Company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount. The reduction is treated as an impairment loss and is
recognized in the Statement of profit and loss. If at the balance sheet
date there is an indication that a previously assessed impairment loss
no longer exists then the recoverable amount is reassessed and the
asset is reflected at the recoverable amount subject to a maximum of
depreciated historical cost.
q) Provisions and contingent liabilities
Provision is recognised when the Company has a present obligation as a
result of past event and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which reliable
estimate can be made. Provisions are not discounted to present value
and are determined based on best estimate required to settle the
obligation on the balance sheet date. These are reviewed at each
balance sheet date and adjusted to reflect the current best estimates.
A disclosure for a contingent liability is made when there is a present
obligation that may, but probably will not, require an outflow of
resources. Disclosure is also made in respect of a present obligation
as a result of past event that probably requires an outflow of
resource, where it is not possible to make a reliable estimate of the
outflow. Where there is a present obligation in respect of which the
likelihood of outflow of resources is remote, no provision or
disclosure is made. Contingent assets are not recognised in the
financial statements. However, contingent assets are assessed
continually and if it is virtually certain that an inflow of economic
benefits will arise, the asset and related income are recognised in the
period in which the change occurs.
r) Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short- term investments in fixed
deposits with an original maturity of three months or less.
Mar 31, 2013
A) Background and nature of operations
Cosmo Films Limited (the ''Company''), manufacturers of Bi-axially
Oriented Polypropylene Films (BOPP) was incorporated in India in 1981,
under the Companies Act 1956. The Company is engaged in the production
of packaging films. Company''s product majorly comprises of BOPP Films
and Thermal Films. In India, the Company is currently working at
Aurangabad in Maharashtra and at Karjan in Gujarat. It also has its
subsidiaries working in different countries.
b) Basis of preparation
The financial statements have been prepared to comply with the
Accounting Standards referred to in the Companies (Accounting
Standards) Rule 2006 issued by the Central Government in exercise of
the power conferred under sub- section ( I ) (a) of section 642 and the
relevant provisions of the Companies Act, 1956 (the ''Act''). The
financial statements have been prepared under the historical cost
convention on the accrual basis. The accounting policies have been
consistently applied by the Company and are consistent with those used
in the previous year.
c) Use of estimates
In preparing the Company''s financial statements in conformity with the
accounting principles generally accepted in India, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent
liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. Any revision to accounting
estimates is recognized prospectively in the current and future
periods.
d) Fixed assets
Fixed Assets are stated at cost less accumulated depreciation and
impairment losses if any. Cost comprises the purchase price and any
attributable costs of bringing the asset to its working condition for
its intended use. When an asset is scrapped or otherwise disposed off,
the cost and related depreciation are removed from the books of account
and resultant profit (including capital profit) or loss, if any, is
reflected in the Statement of profit and loss. Project under
commissioning and other assets under erection/installation are shown
under capital work in progress and are carried at cost, comprising of
direct cost and related incidental expenses. Spares directly related to
Plant & Machinery are capitalized and depreciated over the life of the
original equipment.
Foreign currency loans availed for acquisition of fixed assets are
converted at the rate prevailing on the due date for installments
repayable during the year and at the rate prevailing on the date of
balance sheet for the outstanding loan. The fluctuation is adjusted in
the original cost of fixed assets.
The cost of internally constructed assets constructed by Company shall
include the cost of all materials used in construction, direct labour
employed and an appropriate proportion of variable and fixed overheads.
e) Investments
Investments that are readily realizable and intended to be held for not
more than one year are classified as current investments; all other
investments are classified as long term investments. Long term
investments are carried at cost less provision (if any) for decline in
value which is other than temporary in nature. Current investments are
carried at lower of cost and fair market value.
f) Inventories
Inventories are valued at cost or net realizable value, whichever is
lower. The cost in respect of the various items of inventory is
computed as under:
- Raw material cost includes direct expenses and is determined on the
basis of weighted average method.
- Stores and spares cost includes direct expenses and is determined on
the basis of weighted average method.
- In case of finished goods cost includes raw material cost plus
conversion costs and other overheads incurred to bring the goods to
their present location and condition. Cost of finished goods also
includes excise duty, wherever applicable.
g) Depreciation
Depreciation on fixed assets is provided on straight line method (SLM)
at rates which are either greater than or equal to the corresponding
rates in Schedule XIV to the Act, based on management estimates of
useful life as follows:
ii) Cost of the leasehold land is amortised over the period of the
lease.
iii) Depreciation on assets costing Rs 5,000/- or below is charged @
100% per annum in the year of purchase.
h) Research and development
Revenue expenditure incurred on research and development is charged to
statement of profit and loss in the year it is incurred.
Capital expenditure is included in the respective heads under fixed
assets and depreciation thereon is charged to depreciation account.
i) Foreign currency transactions
Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
Exchange differences
Exchange differences arising on the settlement of monetary items or on
restatement of the Company''s monetary items at rates different from
those at which they were initially recorded during the year, or
reported in previous financial statements, are recognized as income or
as expenses in the year in which they arise.
As per the amendment of the Companies (Accounting Standard) Rules,
2006-''AS 11'' relating to ''The Effects of Changes in Foreign Exchange
Rates'' exchange difference arising on conversion of long term foreign
currency monetary items is recorded under the head ''Foreign Currency
Monetary Item Translation Difference Account'' and is amortized over
period not extending beyond, earlier of March 31, 2020 or maturity date
of underlying long term foreign currency monetary items.
j) Accounting of cash flow hedges and derivatives
The Company enters into certain derivative financial instruments to
manage its exposure to risk arising from changes in interest rate and
foreign exchange rates designated as cash flow hedges. At the inception
of a hedge relationship, the Company documents the hedge relationship
to which the Company wishes to apply hedge accounting and the risk
management objective and strategy for undertaking the hedge. The
documentation includes identification of the hedging instrument, the
hedged item or transaction, the nature of the risk being hedged and how
the entity will assess the effectiveness of changes in the hedging
instrument''s fair value in offsetting the exposure to changes in the
hedged item''s cash flows attributable to the hedged risk. Such hedges
are expected to be highly effective in achieving offsetting changes in
cash flows and are assessed on an ongoing basis to determine that they
actually have been highly effective throughout the financial reporting
periods for which they were designated.
Hedges which meet the strict criteria for hedge accounting are
accounted for as follows:
Derivatives are recorded at their fair value with changes in the fair
value of derivatives that are designated and qualify as cash flow
hedges are recorded in a Hedging Reserve Account. The gain or loss
relating to the ineffective portion is recognized immediately in
Statement of profit and loss. Amounts recorded in the Hedging Reserve
Account are released to the Statement of profit and loss in the year
when the hedged item affects profit or loss. Hedge accounting is
discontinued when the Company revokes the hedging relationship, the
hedging instrument expires or is sold, terminated, or exercised, or no
longer qualifies for hedge accounting upon which remaining balance of
such hedge in the Hedging Reserve Account is released to the Statement
of profit and loss.
Derivatives which are not designated as effective hedge are also
recorded at their fair value and change in fair value is recognized
immediately in the Statement of profit and loss.
k) Employees benefits
Provident fund
The Company makes contribution to statutory provident fund in
accordance with Employees'' Provident Fund and Miscellaneous Provisions
Act, 1952. The plan is a defined contribution plan and contribution
paid or payable is recognized as an expense in the period in which
services are rendered by the employee.
Gratuity
Gratuity is a post-employment benefit and is in the nature of defined
benefit plan. The liability recognized in the balance sheet in respect
of gratuity is the present value of the defined benefit obligation at
the balance sheet date together with adjustments for unrecognized
actuarial gains or losses and past service costs. The defined benefit
obligation is calculated annually by an independent actuary using the
projected unit credit method.
Actuarial gains and losses arising from adjustments and changes in
actuarial assumptions are charged or credited to the Statement of
profit and loss in the year in which such gains or losses arise.
Compensated absences
Provision for compensated absences when determined to be a long term
benefit is made on the basis of actuarial valuation as at the end of
the year. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are charged or
credited to the Statement of profit and loss in the year in which such
gains or losses arise. Provision related to short term compensated
absences of workers is provided on actual basis.
l) Taxation
The tax expense comprises of current taxes and deferred taxes. Current
Tax is the amount of income tax determined to be payable in respect of
taxable income for a period as per the provisions of Income Tax, 1961.
Deferred tax is the effect of timing differences between taxable income
and accounting income that originate in one period and are capable of
reversal in one or more subsequent periods. 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 reviewed at
each balance sheet date and recognized/derecognized only to the extent
that there is reasonable/virtual certainty, depending on the nature of
the timing differences, that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
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. In the year in
which MAT credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in guidance note issued
by the Institute of Chartered Accountants of India, the said asset is
created by way of a credit to the Statement of profit and loss and
shown as MAT credit entitlement. The Company reviews the same at each
balance sheet date and writes down the carrying amount of MAT credit
entitlement to the extent it is not reasonably certain that the Company
will pay normal income tax during the specified period.
m) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Sales
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership are transferred to the buyer and the Company
retains no effective control of the goods transferred to a degree
usually associated with ownership; and
No significant uncertainty exists regarding the amount of the
consideration that will be derived from the sale of goods.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding held and the interest rate applicable.
Such income is recorded by company in other income.
Dividend
Dividend income is recognized as income when the right to receive the
payment is established.
Benefit under duty entitlement pass book scheme / duty drawback scheme
Revenue in respect of duty entitlement pass book scheme and duty
drawback scheme is recognized when the entitlement to receive the
benefit is established is recorded under Operating revenue
n) Borrowing costs
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying asset are capitalized as part
of the cost of that asset. Other borrowing costs are recognized as an
expense in the period in which they are incurred. Capitalization of
borrowing costs ceases when substantially all the activities necessary
to prepare the qualifying assets for its intended use are complete.
o) Earnings per share (EPS)
Basic earnings per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. The
weighted average number of equity shares outstanding during the period
is adjusted for events of bonus issue and share split.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
p) Impairment of assets
The Company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount. The reduction is treated as an impairment loss and is
recognized in the Statement of profit and loss. If at the balance sheet
date there is an indication that a previously assessed impairment loss
no longer exists then the recoverable amount is reassessed and the
asset is reflected at the recoverable amount subject to a maximum of
depreciated historical cost.
q) Provisions and contingent liabilities
Provision is recognised when the Company has a present obligation as a
result of past event and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which reliable
estimate can be made. Provisions are not discounted to present value
and are determined based on best estimate required to settle the
obligation on the Balance Sheet date. These are reviewed at each
Balance Sheet date and adjusted to reflect the current best estimates.
A disclosure for a contingent liability is made when there is a present
obligation that may, but probably will not, require an outflow of
resources. Disclosure is also made in respect of a present obligation
as a result of past event that probably requires an outflow of
resource, where it is not possible to make a reliable estimate of the
outflow. Where there is a present obligation in respect of which the
likelihood of outflow of resources is remote, no provision or
disclosure is made. Contingent assets are not recognised in the
financial statements. However, contingent assets are assessed
continually and if it is virtually certain that an inflow of economic
benefits will arise, the asset and related income are recognised in the
period in which the change occurs.
Mar 31, 2012
A) Background and nature of operations
Cosmo Films Limited (the 'Company'), manufacturers of Bi-axially
Oriented Polypropylene Films (BOPP) was incorporated in India in 1981,
under the Companies Act 1956. The Company is engaged in the production
of packaging films. Companies product majorly comprises of BOPP Films
and Thermal Films. This product has its different varieties based on
the specific micron. In India, the Company is currently working at
Aurangabad in Maharashtra and at Karjan in Gujrat. It also has its
subsidiaries working in different countries.
b) Basis of preparation
The financial statements have been prepared to comply with the
Accounting Standards referred to in the Companies (Accounting
Standards) Rule 2006 issued by the Central Government in exercise of
the power conferred under sub-section ( I ) (a) of section 642 and the
relevant provisions of the Companies Act, 1956 (the 'Act'). The
financial statements have been prepared under the historical cost
convention on the accrual basis. The accounting policies have been
consistently applied by the Company and are consistent with those used
in the previous year.
c) Use of estimates
In preparing the Company's financial statements in conformity with the
accounting principles generally accepted in India, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent
liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. Any revision to accounting
estimates is recognized prospectively in the current and future
periods.
d) Fixed assets
Fixed Assets are stated at cost less accumulated depreciation and
impairment losses if any. Cost comprises the purchase price and any
attributable costs of bringing the asset to its working condition for
its intended use. When an asset is scrapped or otherwise disposed off,
the cost and related depreciation are removed from the books of account
and resultant profit (including capital profit) or loss, if any, is
reflected in the Profit and Loss account. Project under commissioning
and other assets under erection/installation are shown under capital
work in progress and are carried at cost, comprising of direct cost and
related incidental expenses.
Foreign currency loans availed for acquisition of fixed assets are
converted at the rate prevailing on the due date for installments
repayable during the year and at the rate prevailing on the date of
balance sheet for the outstanding loan. The fluctuation is adjusted in
the original cost of fixed assets.
The cost of internally constructed assets constructed by Company shall
include the cost of all materials used in construction, direct labour
employed and an appropriate proportion of variable and fixed overheads.
e) Investments
Investments that are readily realizable and intended to be held for not
more than one year are classified as current investments; all other
investments are classified as long term investments. Long term
Investment is carried at cost less provision (if any) for decline in
value which is other than temporary in nature. Current investments are
carried at lower of cost and fair market value.
f) Inventories
Inventories are valued at cost or net realizable value, whichever is
lower. The cost in respect of the various items of inventory is
computed as under:
- Raw material cost includes direct expenses and is determined on the
basis of weighted average method.
- Stores and spares cost includes direct expenses and is determined
on the basis of weighted average method.
- In case of finished goods cost includes raw material cost plus
conversion costs and other overheads incurred to bring the goods to
their present location and condition. Cost of finished goods also
includes excise duty, wherever applicable.
g) Depreciation
Depreciation on fixed assets is provided on straight line method (SLM)
at rates which are either greater than or equal to the corresponding
rates in Schedule XIV to the Companies Act 1956, based on management
estimates of useful life as follows:
ii) Cost of the leasehold land is amortised over the period of the
lease.
iii) Depreciation on assets costing Rs 5,000/- or below is charged @
100% per annum in the year of purchase.
h) Research and development
Revenue expenditure incurred on research and development is charged to
profit and loss account in the year it is incurred. Capital
expenditure is included in the respective heads under fixed assets and
depreciation thereon is charged to depreciation account.
i) Foreign currency transactions
Initial recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
Exchange differences
Exchange differences arising on the settlement of monetary items or on
restatement of the Company's monetary items at rates different from
those at which they were initially recorded during the year, or
reported in previous financial statements, are recognized as income or
as expenses in the year in which they arise.
As per the amendment of the Companies (Accounting Standard) Rules,
2006-'AS 11' relating to 'The Effects of Changes in Foreign Exchange
Rates' exchange difference arising on conversion of long term foreign
currency monetary items is recorded under the head 'Foreign Currency
Monetary Item Translation Difference Account' and is amortized over
period not extending beyond, earlier of March 31, 2020 or maturity date
of underlying long term foreign currency monetary items.
j) Derivatives
The Company enters into certain derivative financial instruments to
manage its exposure to risk arising from changes in interest rate and
foreign exchange rates.
At the inception of a hedge relationship, the Company formally
designates and documents the hedge relationship to which the Company
wishes to apply hedge accounting and the risk management objective and
strategy for undertaking the hedge. The documentation includes
identification of the hedging instrument, the hedged item or
transaction, the nature of the risk being hedged and how the entity
will assess the effectiveness of changes in the hedging instrument's
fair value in offsetting the exposure to changes in the hedged item's
fair value or cash flows attributable to the hedged risk. Such hedges
are expected to be highly effective in achieving offsetting changes in
fair value or cash flows and are assessed on an ongoing basis to
determine that they actually have been highly effective throughout the
financial reporting periods for which they were designated.
Hedges which meet the strict criteria for hedge accounting are
accounted for as follows:
Changes in the fair value of derivatives that are designated and
qualify as cash flow hedges are deferred in a Hedging Reserve Account.
The gain or loss relating to the ineffective portion is recognized
immediately in profit and loss account.
Amounts deferred in the Hedging Reserve Account are recycled in the
profit and loss account in the periods and released to the income
statement in the year when the hedged commitment affects profit or
loss. Hedge accounting is discontinued when the Company revokes the
hedging relationship, the hedging instrument expires or is sold,
terminated, or exercised, or no longer qualifies for hedge accounting.
Derivatives which are not designated as effective hedge are is
recognized immediately in the income statement
k) Excise & other duties
Excise duty in respect of finished goods lying in factory premises and
custom duty on imported goods lying in custom bonded warehouse are
provided and included in the valuation of inventory. CENVAT benefit is
accounted for by reducing the purchase cost of the materials/fixed
assets. Import duty benefits on exports made by the company are
accounted for as export incentives. These accounting treatments have no
impact on the profit/loss for the year.
l) Employees benefits
Provident fund
The Company makes contribution to statutory provident fund in
accordance with Employees' Provident Fund and Miscellaneous Provisions
Act, 1952. The plan is a defined contribution plan and contribution
paid or payable is recognized as an expense in the period in which
services are rendered by the employee.
Gratuity
Gratuity is a post-employment benefit and is in the nature of defined
benefit plan. The liability recognized in the balance sheet in respect
of gratuity is the present value of the defined benefit obligation at
the balance sheet date together with adjustments for unrecognized
actuarial gains or losses and past service costs. The defined benefit
obligation is calculated annually by an independent actuary using the
projected unit credit method.
Actuarial gains and losses arising from adjustments and changes in
actuarial assumptions are charged or credited to the Profit and loss
account in the year in which such gains or losses arise.
Compensated absences
Provision for compensated absences when determined to be a long term
benefit is made on the basis of actuarial valuation as at the end of
the year. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are charged or
credited to the Profit and loss account in the year in which such gains
or losses arise. Provision related to short term compensated absences
of workers is provided on actual basis.
m) Taxation
The tax expense comprises of current taxes and deferred taxes. Current
Tax is the amount of income tax determined to be payable in respect of
taxable income for a period as per the provisions of Income Tax, 1961.
Deferred tax is the effect of timing differences between taxable income
and accounting income that originate in one period and are capable of
reversal in one or more subsequent periods. 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 reviewed at
each balance sheet date and recognized/ derecognized only to the extent
that there is reasonable/virtual certainty, depending on the nature of
the timing differences, that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
n) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Sales
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership are transferred to the buyer and the Company
retains no effective control of the goods transferred to a degree
usually associated with ownership; and No significant uncertainty
exists regarding the amount of the consideration that will be derived
from the sale of goods.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding held and the interest rate applicable.
Dividend
Dividend income is recognized as income when the right to receive the
payment is established.
Benefit under duty entitlement pass book scheme / duty drawback scheme
Revenue in respect of duty entitlement pass book scheme and duty
drawback scheme is recognized when the entitlement to receive the
benefit is established.
Insurance and other claims
Revenue in respect of claims is recognized when no significant
uncertainty exists with regard to the amount to be realized and the
ultimate collection thereof.
o) Borrowing costs
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying asset are capitalized as part
of the cost of that asset. Other borrowing costs are recognized as an
expense in the period in which they are incurred. Capitalization of
borrowing costs ceases when substantially all the activities necessary
to prepare the qualifying assets for its intended use are complete.
p) Earnings per share (EPS)
Basic earnings per share is calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. The
weighted average number of equity shares outstanding during the period
is adjusted for events of bonus issue and share split.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
q) Impairment of assets
The Company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount. The reduction is treated as an impairment loss and is
recognized in the profit and loss account. If at the balance sheet date
there is an indication that a previously assessed impairment loss no
longer exists then the recoverable amount is reassessed and the asset
is reflected at the recoverable amount subject to a maximum of
depreciated historical cost.
r) Provisions and contingent liabilities
The Company creates a provision when there is a present obligation as a
result of a past event that probably requires an outflow of resources
and a reliable estimate can be made of the amount of obligation. A
disclosure for a contingent liability is made where there is a possible
obligation that arises from past events and the existence of which will
be confirmed only by the occurrence or non-occurrence of one or more
uncertain future events not wholly within the control of the Company or
where reliable estimate of the obligation cannot be made.
Mar 31, 2011
A. METHOD OF ACCOUNTING
The accounts of the company are prepared under the historical cost
convention using the accrual method of accounting unless otherwise
stated hereafter. Accounting policies not specifically referred to are
consistent with generally accepted accounting principles.
b. FIXED ASSETS
Fixed assets are stated at cost of acquisition, inclusive of inward
freight, duties & taxes and incidental expenses related to acquisition
and are net of CENVAT credit. In respect of major projects involving
construction, related preoperational expenses form part of the value of
the assets capitalized.
c. INVESTMENTS
Long-term investments are stated at cost of acquisition. Provision for
diminution in the value of long-term investment is made only if; such a
decline is other than temporary in the opinion of the management.
d. INVENTORIES
Inventories are valued at lower of cost or net realizable value after
providing for cost of obsolescence and other anticipated losses
wherever considered necessary. Cost is determined on weighted average
basis. Finished goods include cost of conversion and other costs
incurred in bringing the inventories to their present location and
condition.
e. DEPRECIATION
Depreciation is calculated on leased and other fixed assets on
straight-line method in accordance with schedule XIV of Companies Act,
1956 as amended.
Leasehold land is also being depreciated over the lease period.
In respect of land and building, where no separate valuation is
available, depreciation has been provided on the total value of land
and building.
f. RESEARCH AND DEVELOPMENT
Revenue expenditure on research and development is charged against the
profit of the year in which it is incurred. Capital expenditure on
research and development is shown as an addition to fixed assets.
g. FOREIGN CURRENCY TRANSACTIONS
Foreign currency loans availed for acquisition of fixed assets are
converted at the rate prevailing on the due date for installments
repayable during the year and at the rate prevailing on the date of
balance sheet for the outstanding loan. The fluctuation is adjusted in
the original cost of fixed assets.
Foreign currency current assets and liabilities are converted into
rupee at the exchange rate prevailing on the balance sheet date and the
resultant gains/ losses are reflected in the profit and loss account.
Wherever forward contracts have been taken the exchange conversion is
made at the contracted rate. Gains/losses arising out of cancellation
of forward contracts are treated as a revenue item.
h. EXCISE & OTHER DUTIES
Excise duty in respect of finished goods lying in factory premises and
custom duty on imported goods lying in custom bonded warehouse are
provided and included in the valuation of inventory. CENVAT benefit is
accounted for by reducing the purchase cost of the materials/fixed
assets. Import duty benefits on exports made by the company are
accounted for as export incentives. These accounting treatments have no
impact on the profit/ loss for the year.
i. EMPLOYEES
Companys contribution to defined contribution plans and state plans
are charged to revenue every year. Liability of obligation under
defined benefit plans is determined on the basis of an actuarial
valuation at the end of the year. Actuarial gains and losses comprises
of experience adjustments and the effects of changes in actuarial
assumptions and are recognized immediately in the profit and loss
account as income or expense.
Liability towards additional payment in respect of salary, wages and
bonus, if any, is debited to Profit & Loss Account in the year in which
the agreement is finalized with employees.
j. TAXATION
Provision for Income Tax is based on assessable profits of the company
as determined under the Income Tax Act, 1961.
k. DEFERRED TAXATION
Deferred taxation is provided using the liability method in respect of
the taxation effect arising from all material timing differences
between the accounting and tax treatment of income and expenditure
which are expected with reasonable probability to crystallize in
foreseeable future.
Deferred tax benefits are recognized in the financial statements only
to the extent of any deferred tax liability or when such benefits are
reasonably expected to be realizable in the near future.
l. INCOME FROM SALES
Exports are accounted for on the basis of the date of bill of
lading/airways bill. Domestic sales are accounted for on dispatch from
factory.
Sales are inclusive of export incentives/ benefits and are net of
rebates, discounts and commission.
m. INCOME FROM INVESTMENTS/DEPOSITS
Income from investments is credited to revenue in the year in which it
accrues. Income is stated in full with the tax thereon being accounted
for under advance tax.
n. CLAIMS AND BENEFITS
Claims receivable and export benefits are accounted on accrual basis to
the extent considered receivable and likely to be availed.
o. BORROWING COSTS
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying asset are capitalized as part
of the cost of that asset. Other borrowing costs are recognized as an
expense in the period in which they are incurred. Capitalization of
borrowing costs ceases when substantially all the activities necessary
to prepare the qualifying assets for its intended use are complete.
p. EARNING PER SHARE
Basic earning per share is calculated by dividing the net profit for
the year attributable to equity shareholders by the weighted average
number of equity shares outstanding during the year.
Diluted earning per share is calculated by dividing the net profit
attributable to equity shareholders by the weighted average number of
equity shares outstanding during the year (adjusted for the effects of
dilutive options)
q. IMPAIRMENT OF ASSETS
Impairment loss is provided to the extent the carrying amount of assets
exceeds their recoverable amount. Recoverable amount is the higher of
an assets net selling price and its value in use. Value in use is the
present value of estimated further cash flows expected to arise from
the continuing use of an asset and from its disposal at the end of its
useful life.
r. CONTINGENT LIABILITIES
Un-provided contingent liabilities are disclosed in the accounts by way
of notes giving nature and quantum of such liabilities.
Mar 31, 2010
A. METHOD OF ACCOUNTING
The accounts of the company are prepared under the historical cost
convention using the accrual method of accounting unless otherwise
stated hereafter. Accounting policies not specifically referred to are
consistent with generally accepted accounting principles.
b. FIXED ASSETS
Fixed assets are stated at cost of acquisition, inclusive of inward
freight, duties & taxes and incidental expenses related to acquisition
and are net of CENVAT credit. In respect of major projects involving
construction, related preoperational expenses form part of the value of
the assets capitalized.
c. INVESTMENTS
Long-term investments are stated at cost of acquisition. Provision for
diminution in the value of long-term investment is made only if; such a
decline is other than temporary in the opinion of the management.
d. INVENTORIES
Inventories are valued at lower of cost or net realizable value after
providing for cost of obsolescence and other anticipated losses
wherever considered necessary. Cost is determined on weighted average
basis. Finished goods include cost of conversion and other costs
incurred in bringing the inventories to their present location and
condition.
e. DEPRECIATION
Depreciation is calculated on leased and other fixed assets on
straight-line method in accordance with schedule XIV of Companies Act,
1956 as amended.
Leasehold land is also being depreciated over the lease period.
In respect of land and building, where no separate valuation is
available, depreciation has been provided on the total value of land
and building.
f. RESEARCH AND DEVELOPMENT
Revenue expenditure on research and development
is charged against the profit of the year in which it is incurred.
Capital expenditure on research and development is shown as an addition
to fixed assets.
g. FOREIGN CURRENCY TRANSACTIONS
Foreign currency loans availed for acquisition of fixed assets are
converted at the rate prevailing on the due date for installments
repayable during the year and at the rate prevailing on the date of
balance sheet for the outstanding loan. The fluctuation is adjusted in
the original cost of fixed assets.
Foreign currency current assets and liabilities are converted into
rupee at the exchange rate prevailing on the balance sheet date and the
resultant gains/ losses are reflected in the profit and loss account.
Wherever forward contracts have been taken the exchange conversion is
made at the contracted rate. Gains/losses arising out of cancellation
of forward contracts are treated as a revenue item.
h. EXCISE & OTHER DUTIES
Excise duty in respect of finished goods lying in factory premises and
custom duty on imported goods lying in custom bonded warehouse are
provided and included in the valuation of inventory. CENVAT benefit is
accounted for by reducing the purchase cost of the materials/fixed
assets. Import duty benefits on exports made by the company are
accounted for as export incentives. These accounting treatments have no
impact on the profit/ loss for the year.
i. EMPLOYEES
Companys contribution to defined contribution plans and state plans
are charged to revenue every year. Liability of obligation under
defined benefit plans is determined on the basis of an actuarial
valuation at the end of the year. Actuarial gains and losses comprises
of experience adjustments and the effects of changes in actuarial
assumptions and are recognized immediately in the profit and loss
account as income or expense.
Liability towards additional payment in respect of salary, wages and
bonus, if any, is debited to Profit & Loss Account in the year in which
the agreement is finalized with employees.
j. TAXATION
Provision for Income Tax is based on assessable profits of the company
as determined under the Income Tax Act, 1961.
k. DEFERRED TAXATION
Deferred taxation is provided using the liability method in respect of
the taxation effect arising from all material timing differences
between the accounting and tax treatment of income and expenditure
which are expected with reasonable probability to crystallize in
foreseeable future.
Deferred tax benefits are recognized in the financial statements only
to the extent of any deferred tax liability or when such benefits are
reasonably expected to be realizable in the near future.
l. MISCELLANEOUS EXPENDITURE
Share/debenture issue expenses and preliminary expenses are being
proportionately written off over a period of ten years.
m. INCOME FROM SALES
Exports are accounted for on the basis of the date of bill of
lading/airways bill. Domestic sales are accounted for on dispatch from
factory.
Sales are inclusive of export incentives/ benefits and are net of
rebates and discounts.
n. INCOME FROM INVESTMENTS/DEPOSITS
Income from investments is credited to revenue in the year in which it
accrues. Income is stated in full with the tax thereon being accounted
for under advance tax.
o. CLAIMS AND BENEFITS
Claims receivable and export benefits are accounted on accrual basis to
the extent considered receivable.
p. BORROWING COSTS
Borrowing costs that are directly attributable to the acquisition,
construction or production of qualifying asset are capitalized as part
of the cost of that asset. Other borrowing costs are recognized as an
expense in the period in which they are incurred. Capitalization of
borrowing costs ceases when substantially all the activities necessary
to prepare the qualifying assets for its intended use are complete.
q. EARNING PER SHARE
Basic earning per share is calculated by dividing the net profit for
the year attributable to equity shareholders by the weighted average
number of equity shares outstanding during the year.
Diluted earning per share is calculated by dividing the net profit
attributable to equity shareholders by the weighted average number of
equity shares outstanding during the year (adjusted for the effects of
dilutive options)
r. IMPAIRMENT OF ASSETS
Impairment loss is provided to the extent the carrying amount of assets
exceeds their recoverable amount. Recoverable amount is the higher of
an assets net selling price and its value in use. Value in use is the
present value of estimated further cash flows expected to arise from
the continuing use of an asset and from its disposal at the end of its
useful life.
s. CONTINGENT LIABILITIES
Un-provided contingent liabilities are disclosed in the accounts by way
of notes giving nature and quantum of such liabilities.
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