Mar 31, 2018
1 Significant accounting policies
a) property, plant and equipment:
Items of property, plant and equipment are measured at cost less accumulated depreciation (which includes capitalised borrowing costs, if any) and accumulated impairment losses, if any.
Cost of an item of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable costs of bringing an asset to working condition for its intended use and estimated cost of dismantling and removing the item and restoring the site on which it is located. Costs directly attributable to acquisition are capitalized until the property, plant and equipment are ready for use, as intended by management.
The cost of a self-constructed item of property, plant and equipment comprises the cost of materials, direct labour and any other costs directly attributable to bringing the item to its intended working condition and estimated costs of dismantling, removing and restoring the site on which it is located, wherever applicable.
Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in the statement of profit and loss when incurred. The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gains or losses are recognized in the statement of profit and loss. Assets to be disposed off are reported at the lower of the carrying value or the fair value less cost to sell.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.
Borrowing cost directly attributable to acquisition of property, plant and equipment which take substantial period of time to get ready for its intended use are capitalized to the extent they relate to the period till such assets are ready to be put to use.
Transition to ind AS
On transition to Ind AS, the Company has elected to fair value certain items of property, plant and equipment and uses that fair value as its deemed cost at the date of transition, viz., 1 April 2016 (refer note 56). The remaining item of property, plant and equipment are valued in accordance with Ind AS 16 - Property, plant and equipment.
Depreciation methods, estimated useful lives and residual value
Depreciation is provided on a Straight Line Method (âSLMâ) over estimated useful life of the property, plant and equipment less their estimated residual value by the Management. Depreciation for assets purchased / sold during the year is proportionately charged.
The range of estimated useful lives of items of property, plant and equipment are as follows:
Freehold land is not depreciated.
* The Management believes that the useful lives as given above best represent the period over which Management expects to use these assets based on an internal assessment and technical evaluation where necessary. Hence, the useful lives for these assets is different from the useful lives as prescribed under Part C of Schedule II of the Companies Act ,2013.
The assets residual value and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An assetâs carrying amount is written down immediately to its recoverable amount if the assetâs carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposal are determined by comparing proceeds with carrying amount. These are included in profit or loss within other gains / losses.
Advance paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date classified as capital advances under other non current assets and the cost of the assets not put to use before such date are disclosed under Capital work in progress.
b) Intangible assets
Acquired intangible assets
Intangible assets that are acquired by the Company are measured initially at cost. After initial recognition, an intangible asset is carried at its cost less any accumulated amortization and any accumulated impairment loss.
Internally generated intangible assets
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in statement of profit and loss as incurred.
Development activities involve a plan or design for the production of new or substantially improved products or processes. Development expenditure is capitalized only if:
- It is technically feasible to complete the product or process so that it will be available for use
- Management intends to complete the development and use or sell it
- It can be demonstrated how the product or process will generate probable future economic benefits
- Adequate technical, financial and other resources to complete the development and to use or sell the product or process are available, and
- The expenditure attributable to the product or process during its development can be reliably measured.
The expenditure capitalized includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and directly attributable borrowing costs (in the same manner as in the case of tangible fixed assets). Other development expenditure is recognized in the statement of profit and loss as incurred
Subsequent measurement
Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including on internally generated software is recognized in profit and loss as and when incurred.
Transition to Ind AS
On transition to Ind AS, the Company has elected to fair value certain items of intangible assets and uses that fair value as its deemed cost at the date of transition, viz., 1 April 2016 (refer note 56). The remaining item of intangible assets are valued in accordance with Ind AS 38 - Intangible Assets.
Amortisation
The Company amortizes intangible assets with a finite useful life using the straight-line method.
The estimated useful lives of intangibles are as follows:
The assets residual value and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
c) Impairment
(i) Financial assets
The Company recognises loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised is recognised as an impairment gain or loss in profit or loss.
(ii) Non-financial assets Intangible assets and property, plant and equipment
Intangible assets and property, plant and equipment are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the CGU to which the asset belongs.
If such assets are considered to be impaired, the impairment to be recognized in the statement of profit and loss is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversed in the statement of profit and loss if there has been a change in the estimates used to determine the recoverable amount.
The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.
d) Leases
Leases of property , plant and equipment that transfer to the company substantially all the risks and rewards of ownership are classified as finance leases. The leased assets are measured initially at an amount equal to lower of their fair value and the present value of the minimum lease payments. Subsequent to initial recognition the assets are accounted for in accordance with the accounting policy applicable to similar owned assets.
Leases in which a significant portion of risk and rewards of ownership are not transferred to the company as lessee are classified as operating lease. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight line over period of lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases.
e) Inventories
Inventories are valued at the lower of cost and net realisable value. Cost of inventories comprises purchase price, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In determining the cost, weighted average cost is used. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs to sell. The comparision of cost and net realizable value is made on an item-by-item basis. Inventories are stated net of write down or allowances on account of obsolescence, damage or slow moving items. The method of determination of cost is as follows:
- Raw materials and components- on a weighted average basis
- Stores and spares - on a weighted average basis
- Work-in-progress - includes costs of conversion
- Finished goods - includes costs of conversion
- Goods in transit - at purchase cost
The net realizable value of work-in-progress is determined with reference to the net realizable value of related finished goods. Raw materials and other supplies held for use in production of inventories are not written down below cost except in cases where material prices have declined, and it is estimated that the cost of the finished products will exceed their net realizable value. Fixed production overheads are allocated on the basis of normal capacity of production facilities. The provision for inventory obsolescence is assessed periodically and is provided as considered necessary.
f) Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits associated with the transaction will flow to the entity and revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and is inclusive of excise duty and net of taxes and duties collected on behalf of the government.
Revenue from the sale of goods and sale of scrap in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. This inter alia involves discounting of the consideration due to the present value if payment extends beyond normal credit terms. Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing effective control over, or managerial involvement with, the goods, and the amount of revenue can be measured reliably. The timing of transfers of risks and rewards varies depending on the individual terms of sale.
Export benefits are recognized in the statement of profit and loss account when the right to receive credit as per the terms of the entitlement is established in respect of exports made.
Service income including management fees is recognized when an unconditional right to receive such income is established and on the performance of services.
g) Other income
For all financial instruments measured at amortised cost, interest income is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset. Interest income is included in other income in the statement of profit and loss.
Dividend income is recognized in profit or loss when the right to receive payment is established, which is generally when the shareholders approves the dividend.
h) Investments in subsidiaries
The Company has chosen to avail the exemption provided by Ind AS 101 and value its investment in subsidiary at deemed cost. The deemed cost as defined in Ind AS 101 are as follows:
(i) fair value at the entityâs date of transition to Ind Ass in its separate financial statements; or
(ii) previous GAAP carrying amount at that date For the purpose of deemed cost, the Company has elected either (i) or (ii) mention above to measure its investment in each of its subsidiary (refer note 56).
i) Financial Instruments
A. Financial assets
i) Recognition and initial measurement
Trade receivables and debt securities are initially recognized when they are originated. All other financial assets and liabilities are initially recognized when the Company becomes a party to contractual provisions of the instrument.
A financial asset or liability is initially measured at fair value plus, for an item not at fair value through profit and loss (FVTPL), transaction cost that are directly attributable to its acquisition or issue.
ii) Classification and subsequent measurement Financial assets
On initial recognition, a financial instrument is classified and measured at
- Amortised cost
- Fair value through other comprehensive income (FVOCI) - debt instruments;
- Fair value through other comprehensive income (FVOCI) - equity investments; or
- Fair value through profit and loss (FVTPL).
Financial assets are not classified subsequent to their initial recognition, except if and in the period the Company changes its business model for managing financial assets.
A financial asset is measured at amortised cost if it meets both the following conditions and is not designated as at FVTPL:
- The asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
- The contractual terms of the financial assets give rise on a specified date to cash flows that are solely payments of principal and interest on the principal amounts outstanding.
A debt investment is measured at FVTOCI if it meets both of the following conditions and is not designated as at FVTPL:
- The asset is held within a business model whose objective is achieved by both collecting contractual cash flow and selling financial assets; and
- The contractual terms of the financial assets give rise on a specified date to cash flows that are solely payments of principal and interest on the principal amounts outstanding.
On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investmentâs fair value in OCI (designated as FVOCI- equity investment). This election is made on an investment-to-investment basis.
All financial assets not classified as amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL, if doing so eliminates or significantly reduces an accounting mistake that would otherwise arise.
Financial assets: Subsequent measurement and gains and losses
Financial assets, at FvtpL:
These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income are recognized in profit or loss.
Financial assets at amortised cost:
These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
Debt investments at FvTocI:
These assets are subsequently measured at fair value. Interest income under effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.
Equity investments at FvTocI:
These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in OCI and are not reclassified to profit or loss.
iii) Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and FVOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk. In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss. The Company follows âsimplified approachâ for recognition of impairment loss on trade receivables. The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from initial recognition. For recognition of impairment loss on financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If in subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognizing impairment loss allowance based on 12 month ECL.
iv) Derecognition of financial assets
A financial asset is derecognized only when:
- The Company has transferred the rights to receive cash flows from financial asset or
- Retains the contractual rights to receive the cash flows from financial asset but assumed a contractual obligation to pay the cash flows to one or more recipients.
Where the Company has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognized. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognized.
Where the Company has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognized if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognized to the extent of continuing involvement in the financial asset.
B. Financial liability
i) Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss or amortised cost.
All financial liabilities are recognized initially at fair value and, in case of loans and borrowings and payables, net of directly attributable transaction costs.
ii) Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109. Separate embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognized in the profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ losses are not subsequently transferred to statement of profit and loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognized in the statement of profit or loss. The Company has not designated any financial liability as at fair value through profit or loss .
Amortised cost
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the Effective Interest Rate (âEIRâ) method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of profit and loss.
Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified party fails to make a payment when due in accordance with the terms of a debt instrument.
Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognized less cumulative amortization.
Derecognition
A financial liability is derecognized 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 derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of profit or loss.
offsetting
Financial assets and financial liabilities are offset and the net amount reported in the balance sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
j) Employee benefits Defined benefit plans
The Companyâs gratuity plan is a defined benefit plan. The present value of gratuity obligation under such defined benefit plans is determined based on actuarial valuations carried out by an independent actuary using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measure each unit separately to build up the final obligation. The obligation is measured at the present value of estimated future cash flows. The discount rates used for determining the present value of obligation under defined benefit plans, is based on the market yields on Government securities as at the balance sheet date, having maturity periods approximating to the terms of related obligations.
Actuarial gains or losses are recognized in other comprehensive income. Further, the profit or loss does not include an expected return on plan assets. Instead net interest recognized in profit or loss is calculated by applying the discount rate used to measure the defined benefit obligation to the net defined benefit liability or asset. The actual return on plan assets above or below the discount rate is recognized as part of remeasurement of net defined liability or asset through other comprehensive income.
Remeasurements comprising actuarial gains or losses and return on plan assets (excluding amounts included in net interest on the net defined benefit liability) are not reclassified to profit or loss in subsequent periods.
The Companyâs gratuity scheme is administered through Life Insurance Corporation of India and the provision for the same is determined on the basis of actuarial valuation carried out by an independent actuary. Provision is made for the shortfall, if any, between the amounts required to be contributed to meet the accrued liability for gratuity as determined by actuarial valuation and the available corpus of the funds.
Short term employee benefits
All employee benefits falling due wholly within twelve months of rendering the services are classified as shortterm employee benefits, which include benefits like salaries, wages, short-term compensated absences and performance incentives and are recognised as expenses in the period in which the employee renders the related service.
Short term employee benefits are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid e.g. short term cash bonus, if the Company has a present legal or constructive obligation to pay this amount as a result of past services provided by the employee and the amount of obligation can be estimated reliably.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service (âpast service costâ or âpast service gainâ) or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.
Compensated absences
The employees of the Company are entitled to compensated absence. The employees can carry-forward a portion of the unutilized accumulating compensated absence and utilize it in future periods. The Company records an obligation for compensated absences in the period in which the employee renders the services that increases this entitlement. The obligation is measured on the basis of an independent actuarial valuation using the Projected Unit method as at the reporting date.
Defined contribution plan
A defined contribution plan is a post-employment benefit plan under which an entity pays specified contributions to a separate entity and has no obligation to pay any further amounts. The Company makes specified monthly contributions towards employee Provident Fund to Government administered Provident Fund Scheme which is a defined contribution plan. The Companyâs contribution is recognized as an expense in the statement of profit and loss during the period in which the employee renders the related service.
Termination benefits
Termination benefits are expensed at the earlier of when the Company can no longer withdraw the offer of those benefits and when the Company recognizes cost of restructuring. If the benefits are not expected to be settled wholly within 12 months of reporting date, then they are discounted.
k) Foreign currency transactions and balances
Foreign currency are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign currency denominated monetary assets and liabilities are translated into relevant functional currency at exchange rates in effect at the balance sheet date.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in statement of profit and loss.
Non-monetary assets and non-monetary liabilities denominated in foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was determined. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss and are generally recognized in statement of profit and loss,except exchange differences arising from the translation of the following items which are recognized in OCI:
- equity investments at fair value through OCI (FVOCI)
- a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; and
- qualifying cash flow hedges to the extent that the hedges are effective.
i) Taxes
Income tax expense comprises current and deferred income tax. Income tax expense is recognized in net profit in the statement of profit and loss except to the extent it relates to items recognized directly in equity, in which case it is recognized in other comprehensive income.
Current income tax for current and prior periods is recognized at the amount expected to be paid or or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred income tax assets and liabilities are recognized for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except for the cases mentioned below:
Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively by the balance sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as income or expense in the period that includes the enactment or substantive enactment date.
Deferred tax is not recognized for:
- Temporary differences arising on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits or loss at the time of the transaction;
- Temporary investments related to investment in subsidiaries, associates and joint arrangements to the extent that the Company is able to control the timing of reversal of the temporary differences and it is probable that they will not reverse in the forcible future; and
- Taxable temporary difference arising on the initial recognition of goodwill.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which they can be used. The existence of unused tax losses is strong evidence that future taxable profit may not be available. Therefore, in case of history of recent losses, the Company recognizes a deferred tax asset only to the extent that it has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profits will be available against which such deferred tax can be realized. Deferred tax assets, unrecognized or recognised, are reviewed at each reporting date and are recognised / reduced to the extent that it is probable / no longer probable respectively that the related tax benefit will be realized.
The Company offsets, the current tax assets and liabilities (on a year on year basis) and deferred tax assets and liabilities, where it has a legally enforceable right and where it intends to settle such assets and liabilities on a net basis.
m) provisions (other than employee benefits)
(i) General
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, the expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
(ii) onerous contract
Provision for onerous contracts. i.e. contracts where the expected unavoidable cost of meeting the obligations under the contract exceed the economic benefits expected to be received under it, are recognised when it is probable that an outflow of resources embodying economic benefits will be required to settle a present obligation as a result of an obligating event based on a reliable estimate of such obligation.
n) contingent Liability
A disclosure for contingent liabilities is made where there is a possible obligation or a present obligation that may probably not require an outflow of resources. When there is a possible or a present obligation where the likelihood of outflow of resources is remote, no provision or disclosure is made.
o) cash and cash equivalents
Cash and cash equivalent includes cash on hand, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.
p) Cash flow statement
Cash flows are reported using the indirect method, whereby net profit before taxes for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
q) Earnings per share
The basic earnings per share is computed by dividing the net profit attributable to the owners of the Company for the year by the weighted average number of equity shares outstanding during reporting period.
The number of shares used in computing diluted earnings per share comprises the weighted average shares considered for deriving basic earnings per share and also the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.
Dilutive potential equity shares are deemed converted as of the beginning of the reporting date, unless they have been issued at a later date. In computing diluted earnings per share, only potential equity shares that is dilutive and which either reduces earnings per share or increase loss per share are included.
r) Segment reporting
Based on the âmanagement approachâ as defined in Ind AS 108, Operating Segments, the Chief Operating Decision Maker evaluates the Companyâs performance and allocates resources based on an analysis of various performance indicators by business segments. Accordingly, information has been presented along these business segments viz. Hydraulics, Aerospace and defense, Automotive and aluminum castings and Others.
s) Warranties
Warranty costs are estimated by the Management on the basis of technical evaluation and past experience. Provision is made for estimated liability in respect of warranty costs in the period of sale of goods.
t) Government grants
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 relates to revenue, it is recognised in the statement of profit and loss on a systematic basis over the periods to which they relate. When the grant relates to an asset, it is treated as deferred income and recognised in the statement of profit and loss on a systematic basis over the useful life of the asset
u) Recent accounting pronouncements
Standards issued but not yet effective
On 28 March, 2018, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2018, notifying amendments to Ind AS 40, âInvestment Propertyâ, Ind AS 21, âThe Effects of Changes in Foreign Exchange Rates, Ind AS 12, âIncome Taxesâ, Ind AS 28, âInvestments in Associates and Joint Venturesâ, âInd AS 112, â Disclosure of Interests in Other Entitiesâ and Ind AS 115, âRevenue from contracts with customersâ.â These amendments maintain convergence with IFRS by incorporating amendments issued by the International Accounting Standards Board (IASB) into Ind AS. The amendments are applicable to the company from 1 April 2018.
Amendment to Ind AS 40, Investment Property
The amendment to Ind AS 40 lays down the principle regarding when a Company should transfer to, or from, investment property. Accordingly, a transfer is made only when:
i. There is an actual change of use i.e. an asset meets or ceases to meet the definition of investment property.
ii. There is evidence of the change in use.
The impact of the above stated amendment to the Company is Nil as the same is not applicable to the Company.
Amendment to Ind AS 21, The Effects of Changes in Foreign Exchange Rates
Appendix B to Ind AS 21, Foreign currency transactions and advance consideration clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency.
The Company is in process of evaluating the effect of this on the standalone financial statements and expects the impact to be not material.
Amendment to Ind AS 12, Income Taxes
The amendment to Ind AS 12 considers that:
i. Tax law determines which deductions are offset against taxable income in determining taxable income in determining taxable profits.
ii. No deferred tax asset is recognised if the reversal of the deductible temporary difference will not lead to tax deductions.
The Company is evaluating the effect of this on the standalone financial statements and expects the impact to be not material
Amendment to Ind AS 28, Investments in Associates and Joint Ventures
The amendment to Ind AS 28 clarifies that a venture capital organisation, or a mutual fund, unit trust and similar entities may elect, at initial recognition, to measure investments in an associate or joint venture at fair value through profit or loss separately for each associate or joint venture.
The impact of the above stated amendment to the Company is NIL as the same is not applicable to the Company.
Amendment to Ind AS 112, Disclosure of Interests in Other Entities
âThe amendment to Ind AS 112 provide that the disclosure requirements for interests in other entities also apply to interests that are classified (or included in a disposal group that is classified) as held for sale or as discontinued operations in accordance with Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations.
The impact of the above stated amendment to the Company is NIL as the same is not applicable to the Company.
Ind AS 115, Revenue from Contracts with Customers:
Ind AS 115, establishes a comprehensive framework for determining whether, how much and when revenue should be recognised. It replaces existing revenue recognition guidance, including Ind AS 18 Revenue, Ind AS 11 Construction Contracts and Guidance Note on Accounting for Real Estate Transactions. Ind AS 115 is effective for annual periods beginning on or after 1 April 2018 and will be applied accordingly.
The standard permits two possible methods of transition:
- Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors
- Retrospectively with cumulative effect of initially applying the standard recognised at the date of initial application (Cumulative catch - up approach)
The Company has completed an initial qualitative assessment of the potential impact of the adoption of Ind AS 115 on accounting policies followed in its standalone financial statements. The quantitative impact of adoption of Ind AS 115 on the standalone financial statements in the period of initial application is not expected to be material.
The Company will adopt the standard on 1 April, 2018 by using the cumulative catch-up transition method and accordingly comparatives for the year ending or ended 31 March, 2018 will not be retrospectively adjusted.
Mar 31, 2017
1 company Overview
Dynamatic Technologies Limited ("the Company") was incorporated in 1973 as Dynamatic Hydraulics Limited under provisions of the Companies Act, 1956. In 1992, the name of the Company was changed to Dynamatic Technologies Limited. The Company is in the business of manufacturing automotive components, hydraulics components, aerospace components and wind farm power generation. The Company is listed in India with National Stock Exchange and Bombay Stock Exchange.
2 Significant Accounting Policies
The accounting policies set out below have been applied consistently to the periods presented in these financial statements.
a) Basis of accounting and preparation of financial statements
The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting and comply with the accounting principles generally accepted in India ("GAAP"). GAAP comprises mandatory accounting standards specified under Section 133 of the Companies Act, 2013 ("Act") read with relevant rules there under, the provisions of the Act, other pronouncements of the Institute of Chartered Accountants of India (''ICAI''), and the guidelines issued by the Securities and Exchange Board of India (SEBI). The financial statements are prepared in Rupees in lacs unless otherwise stated.
b) Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles in India ("Indian GAAP") requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities as at the date of the financial statements. Actual results could differ from these estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.
c) Fixed assets and depreciation Tangible Fixed Assets
Tangible fixed assets are stated at the cost (or revalued amounts, as the case may be) of acquisition or construction, less accumulated depreciation. All costs incurred in bringing the assets to its working condition for intended use have been capitalized.
The cost of an item of tangible fixed asset comprises its purchase price, including import duties and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition for its intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
Leases under which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Such assets are capitalized at fair value of the asset or present value of the minimum lease payments at the inception of the lease, whichever is lower. Lease payments under operating leases are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term unless another systematic basis is more representative of the time pattern of the benefit.
Advances paid towards the acquisition of fixed assets, outstanding at each balance sheet date are shown under capital advances. The cost of the fixed asset not ready for its intended use on such date, is disclosed under capital work-in progress.
The Company had revalued certain land, building, plant and machineries and electrical installations based on valuations done by an external expert in the year 1991-92 and in 2010-11. An increase in net book value arising on revaluation of fixed assets is credited directly to Shareholders'' Fund under the heading of revaluation reserves and is regarded as not available for distribution. On disposal of a previously revalued item of fixed asset, the difference between net disposal proceeds and the net book value is charged or credited to statement of profit and loss except that, to the extent such a loss is related to an increase which was previously recorded as a credit to revaluation reserve and which has not been subsequently reversed or utilised, it is charged directly to that account. The amount standing in revaluation reserve following the retirement or disposal of an asset which relates to that asset is transferred to general reserve.
Borrowing costs directly attributable to the acquisition/ construction of the qualifying asset are capitalized as part of the cost of that asset. Other borrowing costs are recognized as an expense in the statement of profit and loss in the period in which they are incurred.
Spare parts that are held for use in the production or supply of goods or services and are expected to be used during more than a period of twelve months have been capitalized at their respective carrying amounts.
Depreciation on tangible assets is provided on the straight-line method over the useful lives of assets.
*Based on technical evaluation, the Management believes that the useful lives as given above best represent the period over which Management expects to use these assets. Hence, the useful lives for these assets is different from the useful lives as prescribed under Part C of Schedule II of the Companies Act 2013.
Freehold land is not depreciated.
d) Intangibles fixed assets
(i) Acquired intangible assets
Intangible assets that are acquired by the Company are measured initially at cost. After initial recognition, an intangible asset is carried at its cost less any accumulated amortization and any accumulated impairment loss.
Subsequent expenditure is capitalized only when it increases the future economic benefits from the specific asset to which it relates.
(ii) Internally generated intangible assets
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in statement of profit and loss as incurred.
Development activities involve a plan or design for the production of new or substantially improved products or processes. Development expenditure is capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use the asset. The expenditure capitalized includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and directly attributable borrowing costs (in the same manner as in the case of tangible fixed assets). Other development expenditure is recognized in the statement of profit and loss as incurred.
Intangible assets are amortized in the statement of profit and loss over their estimated useful lives, from the date that they are available for use based on the expected pattern of consumption of economic benefits of the asset. Accordingly, at present, these are being amortized on straight line basis. In accordance with the applicable Accounting Standard, the Company follows a rebuttable presumption that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use. However, if there is persuasive evidence that the useful life of an intangible asset is longer than ten years, it is amortized over the best estimate of its useful life. Such intangible assets that are not yet available for use are tested annually for impairment.
Amortization is provided on a pro-rata basis on straight-line method over the estimated useful lives of the assets, not exceeding ten years as detailed below:
Application software 4 years
Prototype development 10 years
e) Inventories
(i) Inventories are carried at the lower of cost and net realizable value.
(ii) Cost of inventories comprises purchase price and all incidental expenses incurred in bringing the inventory to its present location and condition. The method of determination of cost is as follows:
- Raw materials and components - on a weighted average basis
- Stores and spares - on a weighted average basis
- Work-in-progress - includes costs of conversion
- Finished goods - includes costs of conversion
- Goods in transit - at purchase cost
(iii) Fixed production overheads are allocated on the basis of normal capacity of production facilities.
(iv) The comparison of cost and net realizable value is made on an item-by-item basis.
(v) The net realizable value of work-in-progress is determined with reference to the net realizable value of related finished goods. Raw materials and other supplies held for use in production of inventories are not written down below cost except in cases where material prices have declined, and it is estimated that the cost of the finished products will exceed their net realizable value.
(vi) The provision for inventory obsolescence is assessed on a quarterly basis and is provided as considered necessary.
f) Employee benefits
Defined contribution plan
(i) Provident fund
A defined contribution plan is a post-employment benefit plan under which an entity makes specified monthly contribution towards Employee Provident Fund to Government administered Provident Fund Scheme which is a defined contribution plan. The Company''s contribution is recognized as an expense in the statement of profit and loss during the period in which the employee renders the related service.
Defined benefit plan
(ii) compensated absences
The employees of the Company are entitled to compensated absence. The employees can carry-forward a portion of the unutilized accumulating compensated absence and utilize it in future periods or receive cash compensation at retirement or termination of employment. The Company records an obligation for compensated absences in the period in which the employee renders the services that increases this entitlement. The Company measures the expected cost of compensated absence as the additional amount that the Company expects to pay as a result of the unused entitlement that has accumulated at the balance sheet date. The calculation of the Company''s obligation is performed annually by an independent actuary using the projected unit credit method as at the reporting date. Non-accumulating compensated absences are recognized in the period in which the absences occur. The Company recognizes actuarial gains and losses immediately in the statement of profit and loss.
(iii) Gratuity
The Company''s gratuity benefit scheme are defined benefit plans. The Company''s net obligation in respect of a defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognized past service costs and the fair value of any plan assets are deducted. The calculation of the Company''s obligation is performed annually by an independent actuary using the projected unit credit method as at the reporting date.
In accordance with the Payment of Gratuity Act, 1972, the Company provides for a lump sum payment to eligible employees, at retirement or termination of employment based on the last drawn salary and years of employment with the Company. The gratuity fund is managed by the Life Insurance Corporation of India (LIC).
The Company recognizes all actuarial gains and losses arising from defined benefit plans immediately in the statement of profit and loss account. All expenses related to defined benefit plans are recognized in employee benefits expense in the statement of profit and loss. The Company recognizes gains and losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs.
g) Revenue recognition
Revenue from sale of products (including sale of scrap and raw material) is recognized when the risks and rewards of ownership are transferred to customers. The amount recognized as sales is exclusive of excise duty, sales tax, trade and quantity discounts. Revenue from sale of products has been presented both gross and net of excise duty.
Service income including management fees is recognized when an unconditional right to receive such income is established.
Unbilled revenues included in other current assets represent cost and earnings in excess of billings as at the balance sheet date. Unearned revenues included in current liabilities represent billings in excess of earnings as at the balance sheet date.
Lease/sub-lease rental income is recognized when billable in accordance with the terms of the contract with the clients.
Export benefits are recognized in the statement of profit and loss account when the right to receive credit as per the terms of the entitlement is established in respect of exports made.
Interest on deployment of funds is recognized using the time proportion method, based on the underlying interest rates.
h) Foreign currency transactions and balances
The Company is exposed to currency fluctuations on foreign currency transactions. Transactions in foreign currency are recognized at the rate of exchange prevailing on the date of the transaction. Exchange difference arising on foreign exchange transactions settled during the year is recognized in the statement of profit and loss for the year.
All monetary assets and liabilities denominated in foreign currency are restated at the rates existing at the year end and the exchange gains / losses arising from the restatement is recognized in the statement of profit and loss, except exchange differences on long term foreign currency monetary items that are related to acquisition of depreciable assets are adjusted in the carrying amount of the related fixed assets and exchange differences arising on other long-term foreign currency monetary items are accumulated in ''Foreign Currency Monetary Item Translation Difference Account'' (FCMITDA), and are amortized over the balance period of the relevant foreign currency item.
i) Derivative instruments and Hedge accounting
The Company is exposed to foreign currency fluctuations on foreign currency assets, liabilities, firm commitments and highly probable forecasted transactions denominated in foreign currency. The Company limits the effects of foreign exchange rate fluctuations by following its risk management policies. In accordance with its risk management policies and procedures, the Company uses derivative instruments such as foreign currency forward contracts, options and currency swaps to hedge its risks associated with foreign currency fluctuations. The Company enters into derivative financial instruments, where the counterparty is a bank.
Premium or discount on foreign exchange forward contracts taken to hedge foreign currency risk of an existing asset / liability is recognized in the statement of profit and loss over the period of the contract. Exchange differences on such contracts are recognized in the statement of profit and loss of the reporting period in which the exchange rates change.
The Company has applied the principles of AS 30 '' Financial Instruments: Recognition and Measurement'', to the extent that the application of the principles does not conflict with existing accounting standards and other authoritative pronouncements of the Company Law Board and other regulatory requirements.
The derivatives that qualify for hedge accounting and designated as cash flow hedges are initially measured at fair value and are re-measured at a subsequent reporting date and the changes in the fair value of the derivatives i.e. gain or loss is recognized directly in shareholders'' funds under "hedge reserve" to the extent considered effective. Gain or loss upon fair value on derivative instruments that either do not qualify for hedge accounting or are not designated as cash flow hedges or designated as cash flow hedges to the extent considered ineffective, are recognized in the statement of profit and loss.
It is the policy of the Company to enter into derivative contracts to hedge interest rate risk related to loan liabilities. The derivative arrangements are coterminous with the loan agreement and it is the intention of the Company not to foreclose such arrangements during the tenure of the loan. Accordingly, the Company designates and applies cash flow hedge accounting on such types of arrangements.
Hedge accounting is discontinued when the hedging instrument expires, sold, terminated, or exercised, or no longer qualifies for hedge accounting. The cumulative gain or loss on the hedging instrument recognized in shareholder''s funds under "hedge reserve" is retained until the forecasted transaction occurs subsequent to which the same is adjusted against the related transaction in statement of profit and loss. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in shareholder''s fund is transferred to statement of profit and loss in the same period.
The fair value of derivative instruments is determined based on observable market inputs and estimates including currency spot and forward rates, yield curves and currency volatility.
j) Warranties
Warranty costs are estimated by the Management on the basis of technical evaluation and past experience. Provision is made for estimated liability in respect of warranty costs in the period of sale of goods.
k) Investments
Long-term investments are valued at cost less any other-than-temporary diminution in value, determined on the specific identification basis.
Investment are either classified as current or long-term based on Management''s intention at the time of purchase.
Investment that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments.
Current investments are carried at lower of cost and fair value determined on an individual investment basis.
l) Provisions and contingencies
The Company recognizes a provision when there is a present obligation as a result of past (or obligating) event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation that the likelihood of outflow of resources is remote, no provision or disclosure is made.
Provisions for onerous contracts, i.e. contracts where the expected unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it, are recognized when it is probable that an outflow of resources embodying economic benefits will be required to settle a present obligation as a result of an obligating event, based on a reliable estimate of such obligation.
m) Impairment of assets
The Company periodically assesses whether there is any indication that an asset or a group of assets comprising a cash generating unit may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. For an asset or group of assets that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. 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 if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost. An impairment loss is reversed only to the extent that the carrying amount of asset does not exceed the net book value that would have been determined; if no impairment loss had been recognized.
n) Income-tax
Income-tax expense comprises current tax (i.e. amount of tax for the year determined in accordance with the income-tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the year). The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax asset/ liability as at the balance sheet date resulting from timing differences between book profit and tax profit are not considered to the extent that such asset/ liability is expected to get reversed in the future years within the tax holiday period. Deferred tax assets are recognized only to the extent that there is reasonable certainty that the assets can be realized in future; however, where there is unabsorbed depreciation or carry forward of losses, deferred tax assets are recognized only if there is virtual certainty of realization of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably/ virtually certain (as the case may be) to be realized.
Minimum Alternate Tax (''MAT'') paid in accordance with the laws, which gives rise to future economic benefits in the form of tax credit against future income tax liability, is recognized as an asset in the balance sheet if there is convincing evidence that the Company will pay normal tax in the near future.
The Company offsets, on a year on year basis, the current tax assets and liabilities where it has a legally enforceable right and where it intends to settle such assets and liabilities on a net basis.
o) Earnings per share
The basic earnings per share is computed by dividing the net profit attributable to equity shareholders for the year by the weighted average number of equity shares outstanding during the year. The Company did not have any potentially dilutive equity shares during the year.
p) cash flow statement
Cash flows are reported using indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated.
q) cash and cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash and balances with banks. The Company considers all short-term highly liquid investments with a remaining maturity at the date of purchase of 3 months or less and that is readily convertible to known amounts of cash or cash equivalents.
Mar 31, 2016
1 Company Overview
Dynamatic Technologies Limited ("the Company") was incorporated in 1973 as Dynamatic Hydraulics Limited under provisions of the
Companies Act, 1956 (''the Act''). In 1992, the name of the Company was changed to Dynamatic Technologies Limited. The Company is
in the business of manufacturing automotive components, hydraulics components, aerospace components and wind farm power
generation. The Company is listed in India with National Stock Exchange and Bombay Stock Exchange.
2 Significant Accounting Policies
The accounting policies set out below have been applied consistently to the periods presented in these financial statements.
a) Basis of accounting and preparation of financial statements
The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting
and comply with the accounting principles generally accepted in India. GAAP comprises mandatory accounting standards prescribed
under Section 133 of the Companies Act, 2013 ("Act") read with Rule 7 of the Companies (Accounts) Rules, 2014, the provision of
the Act (to the extent notified and applicable), other pronouncements of the Institute of Chartered Accountants of India
(''ICAI''), and the guidelines issued by the Securities and Exchange Board of India (SEBI). The financial statements are prepared
in Rupees in lacs unless otherwise stated.
b) Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles in India ("Indian GAAP")
requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of
contingent liabilities as at the date of the financial statements. Actual results could differ from these estimates. Any revision
to accounting estimates is recognised prospectively in current and future periods.
c) Fixed assets and depreciation
Tangible fixed assets are stated at the cost (or revalued amounts, as the case may be) of acquisition or construction, less
accumulated depreciation. All costs incurred in bringing the assets to its working condition for intended use have been
capitalised.
The cost of an item of tangible fixed asset comprises its purchase price, including import duties and other non-refundable taxes
or levies and any directly attributable cost of bringing the asset to its working condition for its intended use. Any trade
discounts and rebates are deducted in arriving at the purchase price.
Leases under which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases.
Such assets are capitalized at fair value of the asset or present value of the minimum lease payments at the inception of the
lease, whichever is lower. Lease payments under operating leases are recognized as an expense in the statement of profit and loss
on a straight-line basis over the lease term unless another systematic basis is more representative of the time pattern of the
benefit.
Advances paid towards the acquisition of fixed assets, outstanding at each balance sheet date are shown under capital advances.
The cost of the fixed asset not ready for its intended use on such date, is disclosed under capital work-in progress.
The Company had revalued certain land, building, plant and machineries and electrical installations based on valuations done by
an external expert in the year 1991-92 and in 2010-11. Other than land, additional depreciation due to revaluation is adjusted
out of revaluation reserve. An increase in net book value arising on revaluation of fixed assets is credited directly to
shareholders'' fund under the heading of revaluation reserves and is regarded as not available for distribution. On disposal of a
previously revalued item of fixed asset, the difference between net disposal proceeds and the net book value is charged or
credited to statement of profit and loss except that, to the extent such a loss is related to an increase which was previously
recorded as a credit to revaluation reserve and which has not been subsequently reversed or utilised, it is charged directly to
that account. The amount standing in revaluation reserve following the retirement or disposal of an asset which relates to that
asset is transferred to statement of profit and loss.
Borrowing costs directly attributable to the acquisition/ construction of the qualifying asset are capitalized as part of the
cost of that asset. Other borrowing costs are recognized as an expense in the statement of profit and loss in the period in which
they are incurred.
Depreciation on tangible assets is provided on the straight-line method over the useful lives of assets. Depreciation for assets
purchased/ sold during a period is proportionately charged. The Company estimates the useful life as determined as given below:
*Based on technical evaluation, the Management believes that the useful lives as given above best represent the period over which
Management expects to use these assets. Hence, the useful lives for these assets is different from the useful lives as prescribed
under Part C of Schedule II of the Companies Act 2013.
Freehold land is not depreciated. Assets individually costing Rs.5,000 or less are fully depreciated in the year of purchase.
d) Intangibles fixed assets
(i) Acquired intangible assets
Intangible assets that are acquired by the Company are measured initially at cost. After initial recognition, an intangible asset
is carried at its cost less any accumulated amortization and any accumulated impairment loss.
Subsequent expenditure is capitalized only when it increases the future economic benefits from the specific asset to which it
relates.
(ii) Internally generated intangible assets
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and
understanding, is recognized in statement of profit and loss as incurred.
Development activities involve a plan or design for the production of new or substantially improved products or processes.
Development expenditure is capitalized only if development costs can be measured reliably, the product or process is technically
and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to
complete development and to use the asset. The expenditure capitalized includes the cost of materials, direct labour, overhead
costs that are directly attributable to preparing the asset for its intended use, and directly attributable borrowing costs (in
the same manner as in the case of tangible fixed assets). Other development expenditure is recognized in the statement of profit
and loss as incurred.
Intangible assets are amortized in the statement of profit and loss over their estimated useful lives, from the date that they
are available for use based on the expected pattern of consumption of economic benefits of the asset. Accordingly, at present,
these are being amortized on straight line basis. In accordance with the applicable Accounting Standard, the Company follows a
rebuttable presumption that the useful life of an intangible asset will not exceed ten years from the date when the asset is
available for use. However, if there is persuasive evidence that the useful life of an intangible asset is longer than ten
years, it is amortized over the best estimate of its useful life. Such intangible assets that are not yet available for use are
tested annually for impairment.
Amortization is provided on a pro-rata basis on straight-line method over the estimated useful lives of the assets, not exceeding
ten years as detailed below:
Application software 4 years
Prototype development 10 years
e) Inventories
(i) Inventories are carried at the lower of cost and net realisable value.
(ii) Cost of inventories comprises purchase price and all incidental expenses incurred in bringing the inventory to its present
location and condition. The method of determination of cost is as follows:
- Raw materials and components - on a weighted average basis
- Stores and spares - on a weighted average basis
- Work-in-progress - includes costs of conversion
- Finished goods - includes costs of conversion
- Goods in transit - at purchase cost
(iii) Fixed production overheads are allocated on the basis of normal capacity of production facilities.
(iv) The comparison of cost and net realisable value is made on an item-by-item basis.
(v) The net realisable value of work-in-progress is determined with reference to the net realisable value of related finished
goods. Raw materials and other supplies held for use in production of inventories are not written down below cost except in cases
where material prices have declined, and it is estimated that the cost of the finished products will exceed their net realisable
value.
(vi) The provision for inventory obsolescence is assessed on a quarterly basis and is provided as considered necessary.
f) Employee benefits
(i) Provident fund
A defined contribution plan is a post-employment benefit plan under which an entity pays specified contributions to a separate
entity and has no obligation to pay any further amounts. The Company makes specified monthly contributions towards employee
provident fund to Government administered provident fund scheme which is a defined contribution plan. The Company''s contribution
is recognized as an expense in the Statement of Profit and Loss during the period in which the employee renders the related
service.
(ii) Compensated absences
The employees of the Company are entitled to compensated absence. The employees can carry-forward a portion of the unutilised
accumulating compensated absence and utilize it in future periods or receive cash compensation at retirement or termination of
employment. The Company records an obligation for compensated absences in the period in which the employee renders the services
that increases this entitlement. The Company measures the expected cost of compensated absence as the additional amount that the
Company expects to pay as a result of the used entitlement that has accumulated at the balance sheetdate. The Company recognizes
accumulated compensated absences based on actuarial valuation. Non- accumulating compensated absences are recognized in the
period in which the absences occur. The Company recognizes actuarial gains and losses immediately in the statement of profit and
loss.
(iii) Gratuity
In accordance with the Payment of Gratuity Act, 1972, the Company provides for a lump sum payment to eligible employees, at
retirement or termination of employment based on the last drawn salary and years of employment with the Company. The gratuity
fund is managed by the Life Insurance Corporation of India (LIC). The Company''s obligation in respect of the gratuity plan, which
is a defined benefit plan, is provided for based on actuarial valuation carried out by an independent actuary using the projected
unit credit method. The Company recognizes actuarial gains and losses immediately in the statement of profit and loss.
g) Revenue recognition
Revenue from sale of products(including sale of scrap and raw material) is recognized when the risks and rewards of ownership are
transferred to customers. The amount recognized as sales is exclusive of excise duty, sales tax, trade and quantity discounts.
Revenue from sale of products has been presented both gross and net of excise duty.
Service income including management fees is recognized when an unconditional right to receive such income is established.
Revenue from long-term contracts (contract revenue) is recognized on the percentage of completion method. Percentage of
completion method is applied by calculating the proportion that the actual costs bear to the estimated total costs of the
contract. The estimates of the contract revenue and costs are reviewed periodically by the Management and any effect of change
in estimate is recognized in the period such changes are determined. Liquidated damages/ penalties are provided for wherever
there is a delayed delivery attributable to the Company. Provision for foreseeable losses is made in the year in which such
losses are foreseen.
Unbilled revenues included in other current assets represent cost and earnings in excess of billings as at the balance sheet
date. Unearned revenues included in current liabilities represent billings in excess of earnings as at the balance sheet date.
Lease/sub-lease rental income is recognized when billable in accordance with the terms of the contract with the clients.
Export benefits are recognized in the statement of profit and loss account when the right to receive credit as per the terms of
the entitlement is established in respect of exports made.
Interest on deployment of funds is recognized using the time proportion method, based on the underlying interest rates.
h) Foreign currency transactions and balances
The Company is exposed to currency fluctuations on foreign currency transactions. Transactions in foreign currency are recognized
at the rate of exchange prevailing on the date of the transaction. Exchange difference arising on foreign exchange transactions
settled during the year is recognized in the statement of profit and loss for the year.
All monetary assets and liabilities denominated in foreign currency are restated at the rates existing at the year end and the
exchange gains / losses arising from the restatement is recognized in the statement of profit and loss, except exchange
differences on long term foreign currency monetary items that are related to acquisition of depreciable assets are adjusted in
the carrying amount of the related fixed assets and exchange differences arising on other long-term foreign currency monetary
items are accumulated in ''Foreign Currency Monetary Item Translation Difference Account'' (FCMITDA), and are amortized over the
balance period of the relevant foreign currency item.
i) Derivative instruments and Hedge accounting
The Company is exposed to foreign currency fluctuations on foreign currency assets, liabilities, firm commitments and highly
probable forecasted transactions denominated in foreign currency. The Company limits the effects of foreign exchange rate
fluctuations by following its risk management policies. In accordance with its risk management policies and procedures, the
Company uses derivative instruments such as foreign currency forward contracts, options and currency swaps to hedge its risks
associated with foreign currency fluctuations. The Company enters into derivative financial instruments, where the counter party
is a bank.
Premium or discount on foreign exchange forward contracts taken to hedge foreign currency risk of an existing asset / liability
is recognised in the statement of profit and loss over the period of the contract. Exchange differences on such contracts are
recognised in the statement of profit and loss of the reporting period in which the exchange rates change.
The Company has applied the principles of AS 30 ''Financial Instruments: Recognition and Measurement'', to the extent that the
application of the principles does not conflict with existing accounting standards and other authoritative pronouncements of the
Company Law Board and other regulatory requirements.
The derivatives that qualify for hedge accounting and designated as cash flow hedges are initially measured at fair value and are
re-measured at a subsequent reporting date and the changes in the fair value of the derivatives i.e. gain or loss is recognized
directly in shareholders'' funds under "hedge reserve" to the extent considered effective. Gain or loss upon fair value on
derivative instruments that either do not qualify for hedge accounting or are not designated as cash flow hedges or designated as
cash flow hedges to the extent considered ineffective, are recognized in the statement of profit and loss.
It is the policy of the Company to enter into derivative contracts to hedge interest rate risk related to loan liabilities. The
derivative arrangements are coterminous with the loan agreement and it is the intention of the Company not to foreclose such
arrangements during the tenure of the loan. Accordingly, the Company designates and applies cash flow hedge accounting on such
types of arrangements.
Hedge accounting is discontinued when the hedging instrument expires, sold, terminated, or exercised, or no longer qualifies for
hedge accounting. The cumulative gain or loss on the hedging instrument recognized in shareholder''s funds under "hedge reserve"
is retained until the forecasted transaction occurs subsequent to which the same is adjusted against the related transaction in
statement of profit and loss. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized
in shareholder''s fund is transferred to statement of profit and loss in the same period.
The fair value of derivative instruments is determined based on observable market inputs and estimates including currency spot
and forward rates, yield curves and currency volatility.
j) Warranties
Warranty costs are estimated by the Management on the basis of technical evaluation and past experience. Provision is made for
estimated liability in respect of warranty costs in the period of sale of goods.
k) Investments
Long-term investments are valued at cost less any other-than-temporary diminution in value, determined on the specific
identification basis.
l) Provisions and contingencies
The Company recognizes a provision when there is a present obligation as a result of past (or obligating) event that probably
requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a
contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require
an outflow of resources. When there is a possible obligation or a present obligation that the likelihood of outflow of resources
is remote, no provision or disclosure is made.
Provisions for onerous contracts, i.e. contracts where the expected unavoidable costs of meeting the obligations under the
contract exceed the economic benefits expected to be received under it, are recognized when it is probable that an outflow of
resources embodying economic benefits will be required to settle a present obligation as a result of an obligating event, based
on a reliable estimate of such obligation.
m) Impairment of assets
The Company periodically assesses whether there is any indication that an asset or a group of assets comprising a cash generating
unit may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. For an asset or
group of assets that does not generate largely independent cash inflows, the recoverable amount is determined for the
cash-generating unit to which the asset belongs. 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 if a previously assessed impairment loss no longer exists, the recoverable amount is
reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost. An
impairment loss is reversed only to the extent that the carrying amount of asset does not exceed the net book value that would
have been determined; if no impairment loss had been recognised.
n) Leases
Assets acquired under leases other than finance leases are classified as operating leases. The total lease rentals (including
scheduled rental increases) in respect of an asset taken on operating lease are charged to the statement of profit and loss on a
straight line basis over the lease term unless another systematic basis is more representative of the time pattern of the
benefit.
o) Income-tax
Income-tax expense comprises current tax (i.e. amount of tax for the year determined in accordance with the income-tax law) and
deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for
the year). The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the
tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax asset/ liability as at the
balance sheet date resulting from timing differences between book profit and tax profit are not considered to the extent that
such asset/liability is expected to get reversed in the future years within the tax holiday period. Deferred tax assets are
recognized only to the extent that there is reasonable certainty that the assets can be realized in future; however, where there
is unabsorbed depreciation or carry forward of losses, deferred tax assets are recognized only if there is virtual certainty of
realization of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to
reflect the amount that is reasonably/ virtually certain (as the case may be) to be realized.
Minimum Alternate Tax (''MAT'') paid in accordance with the laws, which gives rise to future economic benefits in the form of tax
credit against future income tax liability, is recognized as an asset in the balance sheet if there is convincing evidence that
the Company will pay normal tax in the near future.
The Company offsets, on a year on year basis, the current tax assets and liabilities where it has a legally enforceable right and
where it intends to settle such assets and liabilities on a net basis.
p) Earnings per share
The basic earnings per share is computed by dividing the net profit attributable to equity shareholders for the year by the
weighted average number of equity shares outstanding during the year. The Company did not have any potentially dilutive equity
shares during the year.
q) Cash flow statement
Cash flows are reported using indirect method, whereby net profit before tax is adjusted for the effects of transactions of a
non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating,
investing and financing activities of the Company are segregated.
r) Cash and cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash and balances with banks. The Company considers all highly
liquid investments with a remaining maturity at the date of purchase of 3 months or less and that is readily convertible to known
amounts of cash or cash equivalents.
Mar 31, 2015
The accounting policies set out below have been applied consistently to
the periods presented in these financial statements.
a) Basis of accounting and preparation of financial statements
The financial statements have been prepared and presented under the
historical cost convention on the accrual basis of accounting and
comply with the accounting principles generally accepted in India.
GAAP comprises mandatory accounting standards prescribed under Section
133 of the Companies Act, 2013 ("Act") read with Rule 7 of the
Companies (Accounts) Rules, 2014, the provision of the Act (to the
extent notified and applicable), other pronouncements of the Institute
of Chartered Accountants of India ('ICAI'), and the guidelines issued
by the Securities and Exchange Board of India (SEBI). The financial
statements are prepared in Rupees in lacs unless otherwise stated.
b) use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles in India (Indian GAAP) requires
Management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent liabilities
as at the date of the financial statements. Actual results could differ
from these estimates. Any revision to accounting estimates is
recognised prospectively in current and future periods.
c) Fixed assets and depreciation
Tangible fixed assets are stated at the cost (or revalued amounts, as
the case may be) of acquisition or construction, less accumulated
depreciation. All costs incurred in bringing the assets to its working
condition for intended use have been capitalised.
The cost of an item of tangible fixed asset comprises its purchase
price, including import duties and other non-refundable taxes or levies
and any directly attributable cost of bringing the asset to its working
condition for its intended use. Any trade discounts and rebates are
deducted in arriving at the purchase price.
Leases under which the Company assumes substantially all the risks and
rewards of ownership are classified as finance leases. Such assets are
capitalised at fair value of the asset or present value of the minimum
lease payments at the inception of the lease, whichever is lower. Lease
payments under operating leases are recognised as an expense in the
statement of profit and loss on a straight-line basis over the lease
term.
Advances paid towards the acquisition of fixed assets, outstanding at
each balance sheet date are shown under capital advances. The cost of
the fixed asset not ready for its intended use on such date, is
disclosed under capital work-in progress.
The Company had revalued certain land, building, plant and machineries
and electrical installations based on valuations done by an external
expert in the year 1991-92 and in 2010-11. Other than land, additional
depreciation due to revaluation is adjusted out of revaluation reserve.
An increase in net book value arising on revaluation of fixed assets is
credited directly to owner's interests under the heading of revaluation
reserves and is regarded as not available for distribution. On disposal
of a previously revalued item of fixed asset, the difference between
net disposal proceeds and the net book value is charged or credited to
statement of profit and loss except that, to the extent such a loss is
related to an increase which was previously recorded as a credit to
revaluation reserve and which has not been subsequently reversed or
utilised, it is charged directly to that account. The amount standing
in revaluation reserve following the retirement or disposal of an asset
which relates to that asset is transferred to statement of profit and
loss.
Borrowing costs directly attributable to the acquisition/ construction
of the qualifying asset are capitalised as part of the cost of that
asset. Other borrowing costs are recognised as an expense in the
statement of profit and loss in the period in which they are incurred.
Depreciation on tangible assets is provided on the straight-line method
over the useful lives of assets estimated by the Company supported.
Depreciation for assets purchased/ sold during a period is
proportionately charged. The Company estimates the useful life as
determined as given below:
Freehold land is not depreciated. Assets individually costing Rs.5,000 or
less are fully depreciated in the year of purchase.
d) Intangibles fixed assets
(i) Acquired intangible assets
Intangible assets that are acquired by the Company are measured
initially at cost. After initial recognition, an intangible asset is
carried at its cost less any accumulated amortisation and any
accumulated impairment loss.
Subsequent expenditure is capitalised only when it increases the future
economic benefits from the specific asset to which it relates.
(ii) Internally generated intangible assets
Expenditure on research activities, undertaken with the prospect of
gaining new scientific or technical knowledge and understanding, is
recognised in statement of profit and loss as incurred.
Development activities involve a plan or design for the production of
new or substantially improved products or processes. Development
expenditure is capitalised only if development costs can be measured
reliably, the product or process is technically and commercially
feasible, future economic benefits are probable, and the Company
intends to and has sufficient resources to complete development and to
use the asset.
The expenditure capitalised includes the cost of materials, direct
labour, overhead costs that are directly attributable to preparing the
asset for its intended use, and directly attributable borrowing costs
(in the same manner as in the case of tangible fixed assets). Other
development expenditure is recognised in the statement of profit and
loss as incurred.
Intangible assets are amortised in the statement of profit and loss
over their estimated useful lives, from the date that they are
available for use based on the expected pattern of consumption of
economic benefits of the asset. Accordingly, at present, these are
being amortised on straight line basis. In accordance with the
applicable Accounting Standard, the Company follows a rebuttable
presumption that the useful life of an intangible asset will not exceed
ten years from the date when the asset is available for use. However,
if there is persuasive evidence that the useful life of an intangible
asset is longer than ten years, it is amortised over the best estimate
of its useful life. Such intangible assets that are not yet available
for use are tested annually for impairment.
Amortisation is provided on a pro-rata basis on straight-line method
over the estimated useful lives of the assets, not exceeding ten years
as detailed below:
Application software 4 years
Prototype/ Product development 9 to 10 years
e) Inventories
(i) Inventories are carried at the lower of cost and net realisable
value.
(ii) Cost of inventories comprises purchase price and all incidental
expenses incurred in bringing the inventory to its present location and
condition. The method of determination of cost is as follows:
- Raw materials and components - on a weighted average basis
- Stores and spares - on a weighted average basis
- Work-in-progress - includes costs of conversion
- Finished goods - includes costs of conversion
- Goods in transit - at purchase cost
The Company in the current year has revised its method of valuation of
inventories to weighted average as compared to first in first out
(FIFO) in the previous year. In the view of the Management, the revised
policy would result in a more appropriate presentation of its financial
statements. Had the Company followed FIFO method for valuation of
inventories, the value of inventories as at 31 March 2015 would have
increased from Rs.8,256 lacs to Rs.8,315 lacs and resultant increase in
profit before tax from Rs.2,978 lacs to Rs.3,037 lacs.
(iii) Fixed production overheads are allocated on the basis of normal
capacity of production facilities.
(iv) The comparison of cost and net realisable value is made on an
item-by-item basis.
(v) The net realisable value of work-in-progress is determined with
reference to the net realisable value of related finished goods. Raw
materials and other supplies held for use in production of inventories
are not written down below cost except in cases where material prices
have declined, and it is estimated that the cost of the finished
products will exceed their net realisable value.
(vi) The provision for inventory obsolescence is assessed on a
quarterly basis and is provided as considered necessary.
f) Employee benefits
(i) Provident fund
Employees receive benefits from a provident fund. The employee and
employer each make monthly contributions towards employee provident
fund to Government administered provident fund scheme which is a
defined contribution plan.
(ii) Compensated absences
The employees of the Company are entitled to compensated absence. The
employees can carry-forward a portion of the unutilised accumulating
compensated absence and utilise it in future periods or receive cash
compensation at retirement or termination of employment. The Company
records an obligation for compensated absences in the period in which
the employee renders the services that increases this entitlement. The
Company measures the expected cost of compensated absence as the
additional amount that the Company expects to pay as a result of the
unused entitlement that has accumulated at the balance sheet date. The
Company recognises accumulated compensated absences based on actuarial
valuation. Non- accumulating compensated absences are recognised in the
period in which the absences occur. The Company recognises actuarial
gains and losses immediately in the statement of profit and loss.
(iii) Gratuity
In accordance with the Payment of Gratuity Act, 1972, the Company
provides for a lump sum payment to eligible employees, at retirement or
termination of employment based on the last drawn salary and years of
employment with the Company. The gratuity fund is managed by the Life
Insurance Corporation of India (LIC). The Company's obligation in
respect of the gratuity plan, which is a defined benefit plan, is
provided for based on actuarial valuation carried out by an independent
actuary using the projected unit credit method. The Company recognises
actuarial gains and losses immediately in the statement of profit and
loss.
g) Revenue recognition
Revenue from sale of products (including sale of scrap and raw
material) is recognised when the risks and rewards of ownership are
transferred to customers. The amount recognised as sales is exclusive
of excise duty, sales tax, trade and quantity discounts. Revenue from
sale of products has been presented both gross and net of excise duty.
Service income including management fees is recognised when an
unconditional right to receive such income is established.
Revenue from long-term contracts (contract revenue) is recognised on
the percentage of completion method. Percentage of completion method is
applied by calculating the proportion that the actual costs bear to the
estimated total costs of the contract. The estimates of the contract
revenue and costs are reviewed periodically by the Management and any
effect of change in estimate is recognised in the period such changes
are determined. Liquidated damages/ penalties are provided for wherever
there is a delayed delivery attributable to the Company. Provision for
foreseeable losses is made in the year in which such losses are
foreseen.
Unbilled revenues included in other current assets represent cost and
earnings in excess of billings as at the balance sheet date. Unearned
revenues included in current liabilities represent billings in excess
of earnings as at the balance sheet date.
Lease/sub-lease rental income is recognised when billable in accordance
with the terms of the contract with the clients.
Export benefits are recognised in the statement of profit and loss
account when the right to receive credit as per the terms of the
entitlement is established in respect of exports made.
Interest on deployment of funds is recognised using the time proportion
method, based on the underlying interest rates.
h) Foreign currency transactions and balances
The Company is exposed to currency fluctuations on foreign currency
transactions. Transactions in foreign currency are recognised at the
rate of exchange prevailing on the date of the transaction. Exchange
difference arising on foreign exchange transactions settled during the
year is recognised in the statement of profit and loss for the year.
All monetary assets and liabilities denominated in foreign currency are
restated at the rates existing at the year end and the exchange gains/
losses arising from the restatement is recognised in the statement of
profit and loss.
i) Derivative instruments and Hedge accounting
The Company is exposed to foreign currency fluctuations on foreign
currency assets, liabilities, firm commitments and highly probable
forecasted transactions denominated in foreign currency. The Company
limits the effects of foreign exchange rate fluctuations by following
its risk management policies. In accordance with its risk management
policies and procedures, the Company uses derivative instruments such
as foreign currency forward contracts, options and currency swaps to
hedge its risks associated with foreign currency fluctuations. The
Company enters into derivative financial instruments, where the
counterparty is a bank.
Premium or discount on foreign exchange forward contracts taken to
hedge foreign currency risk of an existing asset / liability is
recognised in the statement of profit and loss over the period of the
contract. Exchange differences on such contracts are recognised in the
statement of profit and loss of the reporting period in which the
exchange rates change.
The Company has applied the principles of AS 30 'Financial Instruments:
Recognition and
Measurement', to the extent that the application of the principles does
not conflict with existing accounting standards and other authoritative
pronouncements of the Company Law Board and other regulatory
requirements.
The derivatives that qualify for hedge accounting and designated as
cash flow hedges are initially measured at fair value and are
re-measured at a subsequent reporting date and the changes in the fair
value of the derivatives i.e. gain or loss is recognised directly in
shareholders' funds under "hedge reserve" to the extent considered
effective. Gain or loss upon fair value on derivative instruments that
either do not qualify for hedge accounting or are not designated as
cash flow hedges or designated as cash flow hedges to the extent
considered ineffective, are recognised in the statement of profit and
loss.
It is the policy of the Company to enter into derivative contracts to
hedge interest rate risk related to loan liabilities. The derivative
arrangements are coterminous with the loan agreement and it is the
intention of the Company not to foreclose such arrangements during the
tenure of the loan. Accordingly, the Company designates and applies
cash flow hedge accounting on such types of arrangements.
Hedge accounting is discontinued when the hedging instrument expires,
sold, terminated, or exercised, or no longer qualifies for hedge
accounting. The cumulative gain or loss on the hedging instrument
recognised in shareholder's funds under "hedge reserve" is retained
until the forecasted transaction occurs subsequent to which the same is
adjusted against the related transaction in statement of profit and
loss. If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognised in shareholder's fund is transferred
to statement of profit and loss in the same period.
The fair value of derivative instruments is determined based on
observable market inputs and estimates including currency spot and
forward rates, yield curves and currency volatility.
j) Warranties
Warranty costs are estimated by the Management on the basis of
technical evaluation and past experience. The Company accrues the
estimated cost of warranties at the time when the revenue is
recognised.
k) Investments
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. However, that part
of long term investments which is expected to be realised within 12
months after the reporting date is also presented under 'current
assets' as "current portion of long term investments" in consonance
with the current-non-current classification scheme of Schedule III to
the Companies Act, 2013.
Current investments are carried at lower of cost and fair value
determined on an individual investment basis. Long-term investments are
carried at cost. However, provision for diminution in value, if any,
is made to recognise a decline other than temporary in the value of the
investments.
l) provisions and contingencies
The Company recognises a provision when there is a present obligation
as a result of past (or obligating) event that probably requires an
outflow of resources and a reliable estimate can be made of the amount
of the obligation. A disclosure for a contingent liability is made when
there is a possible obligation or a present obligation that may, but
probably will not, require an outflow of resources. When there is a
possible obligation or a present obligation that the likelihood of
outflow of resources is remote, no provision or disclosure is made.
Provisions for onerous contracts, i.e. contracts where the expected
unavoidable costs of meeting the obligations under the contract exceed
the economic benefits expected to be received under it, are recognised
when it is probable that an outflow of resources embodying economic
benefits will be required to settle a present obligation as a result of
an obligating event, based on a reliable estimate of such obligation.
m) Impairment of assets
The Company periodically assesses whether there is any indication that
an asset or a group of assets comprising a cash generating unit may be
impaired. If any such indication exists, the Company estimates the
recoverable amount of the asset. For an asset or group of assets that
does not generate largely independent cash inflows, the recoverable
amount is determined for the cash-generating unit to which the asset
belongs. 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 if a previously assessed
impairment loss no longer exists, the recoverable amount is reassessed
and the asset is reflected at the recoverable amount subject to a
maximum of depreciable historical cost. An impairment loss is reversed
only to the extent that the carrying amount of asset does not exceed
the net book value that would have been determined; if no impairment
loss had been recognised.
n) Leases
Assets acquired under leases other than finance leases are classified
as operating leases. The total lease rentals (including scheduled
rental increases) in respect of an asset taken on operating lease are
charged to the statement of profit and loss on a straight line basis
over the lease term unless another systematic basis is more
representative of the time pattern of the benefit.
o) Income-tax
Income-tax expense comprises current tax (i.e. amount of tax for the
year determined in accordance with the income-tax law) and deferred tax
charge or credit (reflecting the tax effects of timing differences
between accounting income and taxable income for the period). The
deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantively enacted by the balance sheet date. Deferred
tax asset/ liability as at the balance sheet date resulting from timing
differences between book profit and tax profit are not considered to
the extent that such asset/ liability is expected to get reversed in
the future years within the tax holiday period. Deferred tax assets are
recognised only to the extent that there is reasonable certainty that
the assets can be realised in future; however, where there is
unabsorbed depreciation or carry forward of losses, deferred tax assets
are recognised only if there is virtual certainty of realisation of
such assets. Deferred tax assets are reviewed as at each balance sheet
date and written down or written up to reflect the amount that is
reasonably/ virtually certain (as the case may be) to be realised.
Minimum Alternate Tax ('MAT') paid in accordance with the laws, which
gives rise to future economic benefits in the form of tax credit
against future income tax liability, is recognised as an asset in the
balance sheet if there is convincing evidence that the Company will pay
normal tax in the near future.
The Company offsets, on a year on year basis, the current tax assets
and liabilities where it has a legally enforceable right and where it
intends to settle such assets and liabilities on a net basis.
p) Earnings per share
The basic earnings per share is computed by dividing the net profit
attributable to equity shareholders for the year by the weighted
average number of equity shares outstanding during the year. The
Company did not have any potentially dilutive equity shares during the
year.
q) Cash flow statement
Cash flows are reported using indirect method, whereby net profit
before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from operating, investing and financing
activities of the Company are segregated.
Rights, preferences and restrictions attached to equity shares:
The Company has a single class of equity shares. Accordingly, all
equity shares rank equally with regard to dividends and share in the
Company's residual assets. The equity shares are entitled to receive
dividend as declared from time to time. The voting rights of an equity
shareholder on a poll (not on show of hands) are in proportion to its
share of the paid-up equity capital of the Company.
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive any of the remaining asset of the
Company after distribution of all preferential amounts, if any. The
distribution will be in proportion to the number of equity shares held
by the shareholders.
2. Other Commitment
JKM Erla Automotive Limited (JEAL), a subsidiary of the Company, had
issued 2,636,000 0.01% redeemable, non- cumulative redeemable
preference shares [NCRPS] of Rs.10 each, with SHL Trading Limited
("Subscriber") on 8 June 2011 at a premium of Rs. 115 per share
aggregating Rs.3,300 lacs. These shares were redeemable, in whole or in
part after 18 months by subscriber, after giving a notice in writing to
JEAL, at a price that ensures to the subscriber an internal rate of
return of 18% per annum. Till 31 March 2015, the Company has redeemed
2,278,306 shares and balance 357,694 shares is redeemable as at 31
March 2015. The Company undertakes the liability in case JEAL is unable
to redeem the NCRPS or does not pay the Redemption Value when due and
payable. There are no other material commitments.
Mar 31, 2013
The accounting policies set out below have been applied consistently to
the periods presented in these financial statements.
a) Basis of accounting and preparation of financial statements
The financial statements are prepared and presented in accordance with
the Indian Generally Accepted Accounting Principles (''GAAP'') under the
historical cost convention on accrual basis other than the assets
revalued. GAAP comprises mandatory accounting standards as specified in
the Companies (Accounting Standards) Rules, 2006, (''the Rules'') and the
relevant provisions of the Act to the extent applicable. The accounting
policies have been consistently applied by the Company. The financial
statements are presented in Indian rupees rounded off to the nearest
lacs.
b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles in India (Indian GAAP) requires
Management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent liabilities
at the date of the financial statements. Actual results could differ
from these estimates. Any revision to accounting estimates is
recognised prospectively in current and future periods.
c) Fixed assets and depreciation
Tangible fixed assets are stated at the cost of acquisition or
construction, less accumulated depreciation. All costs incurred in
bringing the assets to its working condition for intended use have been
capitalised.
The cost of an item of tangible fixed asset comprises its purchase
price, including import duties and other non-refundable taxes or levies
and any directly attributable cost of bringing the asset to its working
condition for its intended use. Any trade discounts and rebates are
deducted in arriving at the purchase price.
The Company had revalued certain land, building, plant and machineries
and electrical installations based on valuations done by an external
expert in the year 1991-92 and in 2010-11. Other than land, additional
depreciation due to revaluation is adjusted out of revaluation reserve.
Borrowing costs directly attributable to the acquisition/ construction
of the qualifying asset are capitalized as part of the cost of that
asset. Other borrowing costs are recognized as an expense in the
statement of profit and loss in the period in which they are incurred.
Exchange differences arising in respect of translation/ settlement of
long term foreign currency borrowings attributable to the acquisition
of a depreciable asset are also included in the cost of the asset.
Tangible fixed assets under construction are disclosed as capital
work-in-progress.
Depreciation on fixed assets is provided using the straight-line
method. The rates of depreciation prescribed in Schedule XIV to the Act
are considered as minimum rates. If the Management''s estimate of the
useful life of a fixed asset at the time of the acquisition of the
asset or of the remaining useful life on a subsequent review is shorter
than envisaged in the aforesaid schedule, depreciation is provided at a
higher rate based on the Management''s estimate of the useful life/
remaining useful life. Pursuant to this policy, depreciation on the
following fixed assets has been provided at the following rates
(straight line method), which are higher than the corresponding rates
prescribed in Schedule XIV:
Freehold land is not depreciated. Assets individually costing Rs.5,000 or
less are fully depreciated in the year of purchase.
Depreciation is provided on a pro-rata basis i.e. from the date on
which asset is ready for use.
d) Intangibles fixed assets
(i) Acquired intangible assets
Intangible assets that are acquired by the Company are measured
initially at cost. After initial recognition, an intangible asset is
carried at its cost less any accumulated amortization and any
accumulated impairment loss.
Subsequent expenditure is capitalized only when it increases the future
economic benefits from the specific asset to which it relates.
(ii) Internally generated intangible assets
Expenditure on research activities, undertaken with the prospect of
gaining new scientific or technical knowledge and understanding, is
recognized in statement of profit or loss as incurred.
Development activities involve a plan or design for the production of
new or substantially improved products or processes. Development
expenditure is capitalized only if development costs can be measured
reliably, the product or process is technically and commercially
feasible, future economic benefits are probable, and the Company
intends to and has sufficient resources to complete development and to
use the asset. The expenditure capitalized includes the cost of
materials, direct labour, overhead costs that are directly attributable
to preparing the asset for its intended use, and directly attributable
borrowing costs (in the same manner as in the case of tangible fixed
assets). Other development expenditure is recognized in the statement
of profit or loss as incurred.
Intangible assets are amortized in the statement of profit or loss over
their estimated useful lives, from the date that they are available for
use based on the expected pattern of consumption of economic benefits
of the asset. Accordingly, at present, these are being amortized on
straight line basis. In accordance with the applicable Accounting
Standard, the Company follows a rebuttable presumption that the useful
life of an intangible asset will not exceed ten years from the date
when the asset is available for use. However, if there is persuasive
evidence that the useful life of an intangible asset is longer than ten
years, it is amortized over the best estimate of its useful life. Such
intangible assets and intangible assets that are not yet available for
use are tested annually for impairment.
Amortization is provided on a pro-rata basis on straight-line method
over the estimated useful lives of the assets, not exceeding ten years
as detailed below:
Application software 4 years
Prototype/ Product development 8-10 years
e) Inventories
(i) Inventories are carried at the lower of cost and net realisable
value.
(ii) Cost of inventories comprises purchase price and all incidental
expenses incurred in bringing the inventory to its present location and
condition. The method of determination of cost is as follows:
- Raw materials and components  on a first in first out method
- Work-in-progress  includes costs of conversion
- Finished goods  includes costs of conversion
- Goods in transit  at purchase cost
(iii) Fixed production overheads are allocated on the basis of normal
capacity of production facilities.
(iv) Inventories are valued at lower of cost or net realizable value.
The comparison of cost and net realisable value is made on an
item-by-item basis.
(v) The net realisable value of work-in-progress is determined with
reference to the net realisable value of related finished goods. Raw
materials and other supplies held for use in production of inventories
are not written down below cost except in cases where material prices
have declined, and it is estimated that the cost of the finished
products will exceed their net realisable value.
(vi) The provision for inventory obsolescence is assessed on a
quarterly basis and is provided as considered necessary.
f) Employee benefits
Short-term employee benefits
Employee benefits payable wholly within twelve months of receiving
employee services are classified as short-term employee benefits. These
benefits include salaries and wages, bonus and ex-gratia.
The undiscounted amount of short-term employee benefits to be paid in
exchange for employee services is recognized as an expense as the
related service is rendered by employees.
Post employment benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under
which an entity pays specified contributions to a separate entity and
has no obligation to pay any further amounts. The Company makes
specified monthly contributions towards employee provident fund to
Government administered provident fund scheme which is a defined
contribution plan. The Company''s contribution is recognized as an
expense in the statement of profit and loss during the period in which
the employee renders the related service.
Defined benefit scheme
Gratuity and compensated absences liability is a defined benefit scheme
and is accrued based on an actuarial valuation at the balance sheet
date, carried out by an independent actuary. The Company''s gratuity
scheme is administered by Life Insurance Corporation of India.
Actuarial gain/(losses) are charged to the statement of profit and
loss.
g) Revenue recognition
Revenue from sale of products is recognized when the risks and rewards
of ownership are transferred to customers, which generally coincides
with delivery to the customers. The amount recognized as sales is
exclusive of excise duty, sales tax, trade and quantity discounts.
Revenue from sale of products has been presented both gross and net of
excise duty.
Service income is recognized when an unconditional right to receive
such income is established.
Revenue from long-term contracts (contract revenue) is recognized on
the percentage of completion method. Percentage of completion method is
applied by calculating the proportion that the actual costs bear to the
estimated total costs of the contract. The estimates of the contract
revenue and costs are reviewed periodically by the Management and any
effect of change in estimate is recognized in the period such changes
are determined. Liquidated damages/ penalties are provided for wherever
there is a delayed delivery attributable to the Company. Provision for
foreseeable losses is made in the year in which such losses are
foreseen.
Unbilled revenues included in other current assets represent cost and
earnings in excess of billings as at the balance sheet date. Unearned
revenues included in current liabilities represent billings in excess
of earnings as at the balance sheet date.
Interest on deployment of funds is recognized using the time proportion
method, based on the underlying interest rates.
h) Foreign currency transactions and balances
The Company is exposed to currency fluctuations on foreign currency
transactions. Transactions in foreign currency are recognized at the
rate of exchange prevailing on the date of the transaction. Exchange
difference arising on foreign exchange transactions settled during the
year is recognized in the statement of profit and loss for the year.
All monetary assets and liabilities denominated in foreign currency are
restated at the rates existing at the year end and the exchange gains/
losses arising from the restatement is recognized in the statement of
profit and loss.
i) Derivative instruments and Hedge accounting
The Company is exposed to foreign currency fluctuations on foreign
currency assets, liabilities, firm commitments and highly probable
forecasted transactions denominated in foreign currency. The Company
limits the effects of foreign exchange rate fluctuations by following
its risk management policies. In accordance with its risk management
policies and procedures, the Company uses derivative instruments such
as foreign currency forward contracts, options and currency swaps to
hedge its risks associated with foreign currency fluctuations. The
Company enters into derivative financial instruments, where the
counterparty is a bank.
Premium or discount on foreign exchange forward contracts taken to
hedge foreign currency risk of an existing asset / liability is
recognised in the statement of profit and loss over the period of the
contract. Exchange differences on such contracts are recognised in the
statement of profit and loss of the reporting period in which the
exchange rates change.
The Company has applied the principles of AS 30 '' Financial
Instruments: Recognition and Measurement'', to the extent that the
application of the principles does not conflict with existing
accounting standards and other authoritative pronouncements of the
Company Law Board and other regulatory requirements.
The derivatives that qualify for hedge accounting and designated as
cash flow hedges are initially measured at fair value and are
re-measured at a subsequent reporting date and the changes in the fair
value of the derivatives i.e. gain or loss is recognized directly in
shareholders'' funds under "hedge reserve" to the extent considered
effective. Gain or loss upon fair value on derivative instruments that
either do not qualify for hedge accounting or are not designated as
cash flow hedges or designated as cash flow hedges to the extent
considered ineffective, are recognized in the statement of profit and
loss.
It is the policy of the Company to enter into derivative contracts to
hedge the risk of foreign exchange rate fluctuation and interest rate
risk related to loan liabilities. The derivative arrangements are
coterminous with the loan agreement and it is the intention of the
Company not to foreclose such arrangements during the tenure of the
loan. Accordingly, the Company designates and applies cash flow hedge
accounting on such types of arrangements.
Hedge accounting is discontinued when the hedging instrument expires,
sold, terminated, or exercised, or no longer qualifies for hedge
accounting. The cumulative gain or loss on the hedging instrument
recognized in shareholder''s funds under "hedge reserve" is retained
until the forecasted transaction occurs subsequent to which the same is
adjusted against the related transaction in statement of profit and
loss. If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognized in shareholder''s fund is transferred
to statement of profit and loss in the same period.
The fair value of derivative instruments is determined based on
observable market inputs and estimates including currency spot and
forward rates, yield curves and currency volatility.
j) Warranties
Warranty costs are estimated by the Management on the basis of
technical evaluation and past experience. The Company accrues the
estimated cost of warranties at the time when the revenue is
recognised.
k) Investments
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. However, that part
of long term investments which is expected to be realized within 12
months after the reporting date is also presented under ''current
assets'' as "current portion of long term investments" in consonance
with the currentÂnon-current classification scheme of revised Schedule
VI.
Current investments (including current portion thereof) are carried at
lower of cost and fair value determined on an individual investment
basis. Long- term investments are carried at cost. However, provision
for diminution in value, if any, is made to recognize a decline other
than temporary in the value of the investments.
l) Provisions and contingencies
The Company recognizes a provision when there is a present obligation
as a result of past (or obligating) event that probably requires an
outflow of resources and a reliable estimate can be made of the amount
of the obligation. A disclosure for a contingent liability is made when
there is a possible obligation or a present obligation that may, but
probably will not, require an outflow of resources. When there is a
possible obligation or a present obligation that the likelihood of
outflow of resources is remote, no provision or disclosure is made.
Provisions for onerous contracts, i.e. contracts where the expected
unavoidable costs of meeting the obligations under the contract exceed
the economic benefits expected to be received under it, are recognized
when it is probable that an outflow of resources embodying economic
benefits will be required to settle a present obligation as a result of
an obligating event, based on a reliable estimate of such obligation.
m) Impairment of assets
The Company periodically assesses whether there is any indication that
an asset or a group of assets comprising a cash generating unit may be
impaired. If any such indication exists, the Company estimates the
recoverable amount of the asset. For an asset or group of assets that
does not generate largely independent cash inflows, the recoverable
amount is determined for the cash-generating unit to which the asset
belongs. 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 if a previously assessed
impairment loss no longer exists, the recoverable amount is reassessed
and the asset is reflected at the recoverable amount subject to a
maximum of depreciable historical cost. An impairment loss is reversed
only to the extent that the carrying amount of asset does not exceed
the net book value that would have been determined; if no impairment
loss had been recognised.
n) Leases
Leases under which the Company assumes substantially all the risks and
rewards of ownership are classified as finance leases. Such assets
acquired on or after 1 April 2001 are capitalised at fair value of the
asset or present value of the minimum lease payments at the inception
of the lease, whichever is lower.
For operating leases, lease payments (excluding cost for services, such
as maintenance) are recognised as an expense in the statement of profit
and loss on a straight line basis over the lease term. The lease term
is the non- cancellable period for which the lessee has agreed to take
on lease the asset together with any further periods for which the
lessee has the option to continue the lease of the asset, with or
without further payment, which option at the inception of the lease it
is reasonably certain that the lessee will exercise.
o) Income-tax
Income-tax expense comprises current tax (i.e. amount of tax for the
year determined in accordance with the income-tax law) and deferred tax
charge or credit (reflecting the tax effects of timing differences
between accounting income and taxable income for the period). The
deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognized using the tax rates that have been
enacted or substantively enacted by the balance sheet date. Deferred
tax asset/ liability as at the balance sheet date resulting from timing
differences between book profit and tax profit are not considered to
the extent that such asset/ liability is expected to get reversed in
the future years within the tax holiday period. Deferred tax assets are
recognized only to the extent that there is reasonable certainty that
the assets can be realized in future; however, where there is
unabsorbed depreciation or carry forward of losses, deferred tax assets
are recognized only if there is virtual certainty of realization of
such assets. Deferred tax assets are reviewed as at each balance sheet
date and written down or written up to reflect the amount that is
reasonably/ virtually certain (as the case may be) to be realized.
Minimum Alternate Tax (''MAT'') paid in accordance with the laws, which
gives rise to future economic benefits in the form of tax credit
against future income tax liability, is recognized as an asset in the
balance sheet if there is convincing evidence that the Company will pay
normal tax in the near future.
The Company offsets, on a year on year basis, the current tax assets
and liabilities where it has a legally enforceable right and where it
intends to settle such assets and liabilities on a net basis.
p) Earnings per share
The basic earnings per share is computed by dividing the net profit
attributable to equity shareholders for the year by the weighted
average number of equity shares outstanding during the year. The
Company did not have any potentially dilutive equity shares during the
year.
q) Cash flow statement
Cash flows are reported using indirect method, whereby net profit
before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from operating, investing and financing
activities of the Company are segregated.
Mar 31, 2012
The accounting policies set out below have been applied consistently to
the periods presented in these financial statements.
a) Basis of accounting and preparation of financial statements
The financial statements are prepared and presented in accordance with
the Indian Generally Accepted Accounting Principles ('GAAP') under the
historical cost convention on accrual basis other than the assets
revalued. GAAP comprises mandatory accounting standards as specified in
the Companies (Accounting Standards) Rules, 2006, ('the Rules') and the
relevant provisions of the Act to the extent applicable. The accounting
policies have been consistently applied by the Company. The financial
statements are presented in Indian rupees rounded off to the nearest
lacs.
This is the first year of application of the revised Schedule VI to the
Companies Act, 1956 for the preparation of the financial statements of
the company. The revised Schedule VI introduces some significant
conceptual changes as well as new disclosures. These include
classification of all assets and liabilities into current and
non-current. The previous year figures have also undergone a major
reclassification to comply with the requirements of the revised
Schedule VI.
b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles in India (Indian GAAP) requires
Management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent liabilities
at the date of the financial statements. Actual results could differ
from these estimates. Any revision to accounting estimates is
recognised prospectively in current and future periods.
c) Fixed assets and depreciation
Tangible fixed assets are stated at the cost of acquisition or
construction, less accumulated depreciation. All costs incurred in
bringing the assets to its working condition for intended use have been
capitalised.
The cost of an item of tangible fixed asset comprises
its purchase price, including import duties and other non-refundable
taxes or levies and any directly attributable cost of bringing the
asset to its working condition for its intended use; any trade
discounts and rebates are deducted in arriving at the purchase price.
The Company had revalued certain land, building, plant and machineries
and electrical installations based on valuations done by an external
expert in the year 1991-92 and in 2010-11. Other than land, additional
depreciation due to revaluation is adjusted out of revaluation reserve.
Borrowing costs directly attributable to the acquisition/ construction
of the 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.
Exchange differences arising in respect of translation/ settlement of
long term foreign currency borrowings attributable to the acquisition
of a depreciable asset are also included in the cost of the asset.
Tangible fixed assets under construction are disclosed as capital
work-in-progress
Leases under which the Company assumes substantially all the risks and
rewards of ownership are classified as finance leases. Assets taken on
finance lease are initially capitalized at fair value of the asset or
present value of the minimum lease payments at the inception of the
lease, whichever is lower. Lease payments are apportioned between the
finance charge and the reduction of the outstanding liability. The
finance charge is allocated to periods during the lease term so as to
produce a constant periodic rate of interest on the remaining balance
of the liability for each period.
Depreciation on fixed assets is provided using the straight-line
method. The rates of depreciation prescribed in Schedule XIV to the Act
are considered as minimum rates. If the Management's estimate of the
useful life of a fixed asset at the time of the acquisition of the
asset or of the remaining useful life on a subsequent review is shorter
than envisaged in the aforesaid schedule, depreciation is provided at a
higher rate based on the Management's estimate of the useful
life/remaining useful life. Pursuant to this policy, depreciation on
the following fixed assets has been provided at the following rates
(straight line method), which are higher than the corresponding rates
prescribed in Schedule XIV:
Freehold land is not depreciated. Assets individually costing Rs.5,000 or
less are fully depreciated in the year of purchase. Depreciation is
provided on a pro-rata basis i.e. from the date on which asset is ready
for use.
d) Intangibles fixed assets
(i) Acquired intangible assets
Intangible assets that are acquired by the Company are measured
initially at cost. After initial recognition, an intangible asset is
carried at its cost less any accumulated amortization and any
accumulated impairment loss.
Subsequent expenditure is capitalized only when it increases the future
economic benefits from the specific asset to which it relates.
(ii) Internally generated intangible assets
Expenditure on research activities, undertaken with the prospect of
gaining new scientific or technical knowledge and understanding, is
recognized in profit or loss as incurred.
Development activities involve a plan or design for the production of
new or substantially improved products or processes. Development
expenditure is capitalized only if development costs can be measured
reliably, the product or process is technically and commercially
feasible, future economic benefits are probable, and the Company
intends to and has sufficient resources to complete development and to
use the asset. The expenditure capitalized includes the cost of
materials, direct labour, overhead costs that are directly attributable
to preparing the asset for its intended use, and directly attributable
borrowing costs (in the same manner as in the case of tangible fixed
assets). Other development expenditure is recognized in profit or loss
as incurred.
Intangible assets are amortized in profit or loss over their estimated
useful lives, from the date that they are available for use based on
the expected pattern of consumption of economic benefits of the asset.
Accordingly, at present, these are being amortized on straight line
basis. In accordance with the applicable Accounting Standard, the
Company follows a rebuttable presumption that the useful life of an
intangible asset will not exceed ten years from the date when the asset
is available for use. However, if there is persuasive evidence that the
useful life of an intangible asset is longer than ten years, it is
amortized over the best estimate of its useful life. Such intangible
assets and intangible assets that are not yet available for use are
tested annually for impairment.
Amortization is provided on a pro-rata basis on straight-line method
over the estimated useful lives of the assets, not exceeding ten years
as detailed below:
Application software 4 years
Prototype/ Product development 8-10 years
e) Inventories
Inventories are valued at lower of cost or net realizable value.
Consumable stores and spares used for maintenance are debited to the
statement of profit and loss upon issuance.
The cost determined on first-in-first-out (FIFO) basis, comprises costs
of purchase, costs of conversion and other costs incurred in bringing
the inventories to their present location and condition.
The comparison of cost and net realisable value is made on an
item-by-item basis.
Raw materials and other supplies held for use in production of
inventories are not written down below cost except where material
prices have declined and it is estimated that the cost of finished
products will exceed their net realisable value.
Provision for inventory obsolescence is provided as considered
necessary.
f) Employee benefits
Short-term employee benefits
Employee benefits payable wholly within twelve months of receiving
employee services are classified as short-term employee benefits. These
benefits include salaries and wages, bonus and ex-gratia. The
undiscounted amount of short-term employee benefits to be paid in
exchange for employee services is recognized as an expense as the
related service is rendered by employees.
Post employment benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under
which an entity pays specified contributions to a separate entity and
has no obligation to pay any further amounts. The Company makes
specified monthly contributions towards employee provident fund to
Government administered provident fund scheme which is a defined
contribution plan. The Company's contribution is recognized as an
expense in the statement of profit and loss during the period in which
the employee renders the related service.
Defined benefit scheme
Gratuity and compensated absences liability is a defined benefit scheme
and is accrued based on an actuarial valuation at the balance sheet
date, carried out by an independent actuary. The Company's gratuity
scheme is administered by Life Insurance Corporation of India.
Actuarial gain/(losses) are charged to the statement of profit and
loss.
g) Revenue recognition
Revenue from sale of products is recognized when the risks and rewards
of ownership are transferred to customers, which generally coincides
with delivery to the customers. The amount recognized as sales is
exclusive of excise duty, sales tax, trade and quantity discounts.
Revenue from sale of products has been presented both gross and net of
excise duty.
Service income is recognized when an unconditional right to receive
such income is established.
Revenue from project execution services is recognized on rendering of
services in accordance with the terms of the arrangement with customers
using proportionate completion method (cost to cost method).
Unbilled revenues included in other current assets represent cost and
earnings in excess of billings as at the balance sheet date. Unearned
revenues included in current liabilities represent billings in excess
of earnings as at the balance sheet date.
Interest on deployment of funds is recognized using the time proportion
method, based on the underlying interest rates.
h) Foreign currency transactions and balances
The Company is exposed to currency fluctuations on foreign currency
transactions. Transactions in foreign currency are recognized at the
rate of exchange prevailing on the date of the transaction. Exchange
difference arising on foreign exchange transactions settled during the
year is recognized in the statement of profit and loss for the year.
All monetary assets and liabilities denominated in foreign currency are
restated at the rates existing at the year end and the exchange
gains/losses arising from the restatement is recognized in the
statement of profit and loss.
i) Derivative instruments and Hedge accounting
The Company is exposed to foreign currency fluctuations on foreign
currency assets, liabilities, firm commitments and highly probable
forecasted transactions denominated in foreign currency. The Company
limits the effects of foreign exchange rate fluctuations by following
its risk management policies. In accordance with its risk management
policies and procedures, the Company uses derivative instruments such
as foreign currency forward contracts, options and currency swaps to
hedge its risks associated with foreign currency fluctuations. The
Company enters into derivative financial instruments, where the
counterparty is a bank.
The Company has applied the principles of AS 30 'Financial Instruments:
Recognition and Measurement', to the extent that the application of the
principles does not conflict with existing accounting standards and
other authoritative pronouncements of the Company Law Board and other
regulatory requirements.
The derivatives that qualify for hedge accounting and designated as
cash flow hedges are initially measured at fair value and are
re-measured at a subsequent reporting date and the changes in the fair
value of the derivatives i.e. gain or loss is recognized directly in
shareholders' funds under "hedge reserve" to the extent considered
effective. Gain or loss upon fair value on derivative instruments that
either do not qualify for hedge accounting or are not designated as
cash flow hedges or designated as cash flow hedges to the extent
considered ineffective, are recognized in the statement of profit and
loss.
It is the policy of the Company to enter into derivative contracts to
hedge the risk of foreign exchange rate fluctuation and interest rate
risks related to the loan liabilities. The derivative arrangements are
co-terminus with the loan agreement and it is the intention of the
Company not to foreclose such arrangements during the tenure of the
loan. Accordingly the Company designates and applies cash flow hedge
accounting on such types of arrangements.
Hedge accounting is discontinued when the hedging instrument expires,
sold, terminated, or exercised, or no longer qualifies for hedge
accounting. The cumulative gain or loss on the hedging instrument
recognized in shareholder's funds under "hedge reserve" is retained
until the forecasted transaction occurs subsequent to which the same is
adjusted against the related transaction in statement of profit and
loss. If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognized in shareholder's fund is transferred
to statement of profit and loss in the same period.
The fair value of derivative instruments is determined based on
observable market inputs and estimates including currency spot and
forward rates, yield curves and currency volatility.
j) Warranties
Warranty costs are estimated by the Management on the basis of
technical evaluation and past experience. The Company accrues the
estimated cost of warranties at the time when the revenue is
recognised.
k) Investments
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. However, that part
of long term investments which is expected to be realized within 12
months after the reporting date is also presented under 'current
assets' as "current portion of long term investments" in consonance
with the current-non-current classification scheme of revised Schedule
VI.
Current investments (including current portion thereof) are carried at
lower of cost and fair value determined on an individual investment
basis. Long- term investments are carried at cost. However, provision
for diminution in value, if any, is made to recognize a decline other
than temporary in the value of the investments.
l) Provisions and contingencies
The Company recognizes a provision when there is a present obligation
as a result of past (or obligating) event that probably requires an
outflow of resources and a reliable estimate can be made of the amount
of the obligation. A disclosure for a contingent liability is made when
there is a possible obligation or a present obligation that may, but
probably will not, require an outflow of resources. When there is a
possible obligation or a present obligation that the likelihood of
outflow of resources is remote, no provision or disclosure is made.
Provisions for onerous contracts, i.e. contracts where the expected
unavoidable costs of meeting the obligations under the contract exceed
the economic benefits expected to be received under it, are recognized
when it is probable that an outflow of resources embodying economic
benefits will be required to settle a present obligation as a result of
an obligating event, based on a reliable estimate of such obligation.
m) Impairment of assets
The Company periodically assesses whether there is any indication that
an asset or a group of assets comprising a cash generating unit may be
impaired. If any such indication exists, the Company estimates the
recoverable amount of the asset. For an asset or group of assets that
does not generate largely independent cash inflows, the recoverable
amount is determined for the cash-generating unit to which the asset
belongs. 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 if a previously assessed
impairment loss no longer exists, the recoverable amount is reassessed
and the asset is reflected at the recoverable amount subject to a
maximum of depreciable historical cost. An impairment loss is reversed
only to the extent that the carrying amount of asset does not exceed
the net book value that would have been determined; if no impairment
loss had been recognised.
n) Leases
Leases under which the Company assumes substantially all the risks and
rewards of ownership are classified as finance leases. Such assets
acquired on or after 1 April 2001 are capitalised at fair value of the
asset or present value of the minimum lease payments at the inception
of the lease, whichever is lower.
For operating leases, lease payments (excluding cost for services, such
as maintenance) are recognised as an expense in the statement of profit
and loss on a straight line basis over the lease term. The lease term
is the non- cancellable period for which the lessee has agreed to take
on lease the asset together with any further periods for which the
lessee has the option to continue the lease of the asset, with or
without further payment, which option at the inception of the lease it
is reasonably certain that the lessee will exercise.
o) Income-tax
Income-tax expense comprises current tax (i.e. amount of tax for the
year determined in accordance with the income-tax law) and deferred tax
charge or credit (reflecting the tax effects of timing differences
between accounting income and taxable income for the period). The
deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognized using the tax rates that have been
enacted or substantively enacted by the balance sheet date. Deferred
tax asset/liability as at the balance sheet date resulting from timing
differences between book profit and tax profit are not considered to
the extent that such asset/liability is expected to get reversed in the
future years within the tax holiday period. Deferred tax assets are
recognized only to the extent that there is reasonable certainty that
the assets can be realized in future; however, where there is
unabsorbed depreciation or carry forward of losses, deferred tax assets
are recognized only if there is virtual certainty of realization of
such assets. Deferred tax assets are reviewed as at each balance sheet
date and written down or written up to reflect the amount that is
reasonably/ virtually certain (as the case may be) to be realized.
Minimum Alternate Tax ('MAT') paid in accordance with the laws, which
gives rise to future economic benefits in the form of tax credit
against future income tax liability, is recognized as an asset in the
balance sheet if there is convincing evidence that the Company will pay
normal tax in the near future.
The Company offsets, on a year on year basis, the current tax assets
and liabilities where it has a legally enforceable right and where it
intends to settle such assets and liabilities on a net basis.
p) Earnings per share
The basic earnings/ (loss) per share is computed by dividing the net
profit/ (loss) attributable to equity shareholders for the year by the
weighted average number of equity shares outstanding during the year.
The Company did not have any potentially dilutive equity shares during
the year.
q) Cash flow statement
Cash flows are reported using indirect method, whereby net profit
before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from regular revenue generating, investing and
financing activities of the Company are segregated.
Mar 31, 2011
The consolidated financial statements have been prepared and presented
in accordance with the Indian Generally Accepted Accounting Principles
(ÃGAAPÃ) under the historical cost convention on the accrual basis,
other than assets revalued. GAAP comprises of accounting standards
notified by the Central Government of India under Section 211 (3C) of
the Companies Act, 1956, other pronouncements of the Institute of
Chartered Accountants of India, the provisions of the Companies Act,
1956 (Ãthe ActÃ) and guidelines issued by Securities and Exchange Board
of India to the extent applicable. The Consolidated Financial
Statements have been prepared in Indian Rupee thousands.
b. Principles of consolidation
The Consolidated Financial Statements include the financial statements
of Dynamatic Technologies Limited (ÃParent CompanyÃ) and its
subsidiaries (collectively referred to as 'the Dynamatic Group').
Consolidated Financial Statements have been prepared on the following
basis:
The financial statements have been combined on a line-by-line basis by
adding together the book values of like items of assets, liabilities,
income and expenses after eliminating intra-group balances /
transactions and resulting unrealized profits in full. The amounts
shown in respect of reserves comprise the amount of the relevant
reserves as per the balance sheet of the Parent Company and its share
in the post-acquisition increase/decrease in the reserves of the
consolidated entities.
The excess/deficit of cost to the Parent Company of its investment over
its portion of net worth in the consolidated entities at the respective
dates on which investment in such entities was made is recognized in
the consolidated financial statements as goodwill/capital reserve.
The Consolidated Financial Statements are presented, to the extent
possible, in the same format as that adopted by the Parent Company for
its separate financial statements.
The Consolidated Financial Statements are prepared using uniform
accounting policies for like transactions and other events in similar
circumstances.
c. Use of estimates
The preparation of Consolidated Financial Statements in conformity with
Generally Accepted Accounting Principles (GAAP) requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses, during the reporting year. Examples of such estimates
include estimates of provision for warranty, provision for doubtful
debts and the useful life of fixed assets. Actual results could differ
from these estimates. Any revision to accounting estimates is
recognised prospectively in current and future periods.
d. Fixed assets and depreciation
Fixed assets are stated at the cost of acquisition or construction,
less accumulated depreciation. All costs incurred in bringing the
assets to its working condition for intended use have been capitalised.
Advances paid towards the acquisition of fixed assets and the cost of
assets not put to use as at the balance sheet date are disclosed under
capital work-in-progress.
Depreciation on fixed assets is provided using the straight-line
method. The rates of depreciation prescribed in Schedule XIV to the Act
are considered as minimum rates. If the management's estimate of the
useful life of a fixed asset at the time of the acquisition of the
asset or of the remaining useful life on a subsequent review is shorter
than envisaged in the aforesaid schedule, depreciation is provided at a
higher rate based on the management's estimate of the useful
life/remaining useful life. Pursuant to this policy, depreciation on
the following fixed assets has been provided at the following rates
(straight line method), which are higher than the corresponding rates
prescribed in Schedule XIV:
Pro-rata depreciation is provided from the date of purchase/ disposal
on assets purchased or sold during the year. Assets individually
costing Rs.5,000 or less are fully depreciated in the year of purchase.
Certain Land, Building, Plant and Machineries and Electrical
Installations are stated at revalued amount based on valuations done by
an external expert in the year 1991- 92 and 2010-11. Other than land,
additional depreciation due to revaluation is adjusted out of
revaluation reserve.
e. Intangibles and amortization
Research costs are expensed as incurred. Development expenditure
incurred on an individual project is carried forward when its future
recoverability can reasonably be regarded as assured.
Subsequent expenditure incurred on a recognized intangible asset is
added to the cost of intangible asset when it is probable that the
expenditure will enable the asset to generate future economic benefits
in excess of its originally assessed standard of performance; and the
expenditure can be measured and attributed to the asset reliably.
Amortization is provided on a pro-rata basis on straight- line method
over the estimated useful lives of the assets, not exceeding ten years
as detailed below:
Application software 4 years
Prototype/ Product development 8-10 years
The carrying value of development costs is reviewed for impairment
annually when the asset is not in use or otherwise when events or
changes in circumstances indicate that the carrying value may not be
recoverable.
Goodwill arising on consolidation is not amortized. It is tested for
impairment at each balance sheet date.
f. Inventories
Inventories are valued at lower of cost or net realizable value.
Consumable stores and spares used for maintenance are debited to the
profit and loss account upon issuance.
The cost determined on First-In-First-Out (FIFO) basis, comprises costs
of purchase, costs of conversion and other costs incurred in bringing
the inventories to their present location and condition.
The comparison of cost and net realizable value is made on an
item-by-item basis.
Raw materials and other supplies held for use in production of
inventories are not written down below cost except where material
prices have declined, and it is estimated that the cost of finished
products will exceed their net realizable value.
Provision for inventory obsolescence is provided as considered
necessary.
g. Employee benefits
Gratuity liability is a defined benefit scheme and is accrued based on
an actuarial valuation at the balance sheet date, carried out by an
independent actuary. The Parent Company's gratuity scheme for Indian
entities is administered by Life Insurance Corporation of India.
Actuarial gain/losses are charged to the Profit and Loss account.
Compensated absence is a long term employee benefit and is accrued
based on an actuarial valuation at the balance sheet date, carried out
by an independent actuary.
Contributions to Provident Fund/Scottish equitable and standard life,
which are defined contribution schemes are provided at pre-determined
rates to the appropriate authorities.
h. Revenue recognition
Revenue from sale of products is recognized when the risks and rewards
of ownership are transferred to customers, which generally coincides
with delivery to the customers. The amount recognized as sales is
exclusive of excise duty, sales tax, trade and quantity discounts.
Revenue from sale of products has been presented both gross and net of
excise duty.
Service income is recognized when an unconditional right to receive
such income is established.
Revenue from project execution services are recognized on rendering of
services in accordance with the terms of the arrangement with customers
using proportionate completion method.
Unbilled revenues included in other current assets represent cost and
earnings in excess of billings as at the balance sheet date. Unearned
revenues included in current liabilities represent billings in excess
of earnings as at the balance sheet date.
Interest on deployment of funds is recognized using the time proportion
method, based on the underlying interest rates.
i. Foreign currency transactions and balances
The reporting currency of the Parent Company is Indian Rupee. However,
the local currencies of the non-integral subsidiaries are different
from the reporting currency of the Parent Company.
Transactions in foreign currency are recognized at the rate of exchange
prevailing on the date of the transaction.
All monetary assets and liabilities denominated in foreign currency are
restated at the rates ruling at the year end and the exchange
gains/losses arising there from are adjusted to the consolidated profit
and loss account, except in case of exchange differences relating to
long- term monetary items which are dealt with in the following manner:
In so far as they relate to the acquisition of a depreciable capital
asset are added to/deducted from the cost of the asset and depreciated
over the balance life of the asset.
Integral and non-integral operations
The financial statements of the foreign non-integral subsidiaries are
translated into Indian Rupees as follows:- - All assets and
liabilities, both monetary and non- monetary (excluding share capital,
opening reserves and surplus) are translated using the year-end rates.
- Share capital and opening reserves and surplus are carried at
historical cost.
- Profit and Loss items are translated at the respective monthly
average rates.
- The resulting net exchange difference is credited or debited to the
foreign currency translation reserve.
- Contingent liabilities are translated at the closing rate.
Exchange differences which have been deferred in foreign currency
translation reserve are not recognised as income or expenses until the
disposal of that entity.
j. Derivatives
In accordance with its risk management policies and procedures, the
Parent Company uses derivative instruments such as foreign currency
forward contracts and currency options to hedge its risks associated
with foreign currency fluctuations relating to certain firm commitments
and highly probable forecasted transactions.
Effective 1st April 2008, the Parent Company has applied the principles
of AS 30 'Financial Instruments: Recognition and Measurement', to the
extent that the application of the principles did not conflict with
existing accounting standards and other authoritative pronouncements of
the Company Law Board and other regulatory requirements. The
derivatives that qualify for hedge accounting and designated as cash
flow hedges are initially measured at fair value and are re-measured at
a subsequent reporting date and the changes in the fair value of the
derivatives i.e. gain or loss is recognized directly in shareholders'
funds under hedging reserve to the extent considered highly effective.
Gain or loss upon fair value on derivative instruments that either do
not qualify for hedge accounting or are not designated as cash flow
hedges or designated as cash flow hedges to the extent considered
ineffective, are recognized in the Profit and Loss Account.
To designate a forward or option contract as an effective hedge, the
management objectively evaluates and evidences with appropriate
supporting documents at the inception of each contract whether the
contract is effective in achieving offsetting cash flows attributable
to the hedged risk.
Hedge accounting is discontinued when the hedging instrument expires,
sold, terminated, or exercised, or no longer qualifies for hedge
accounting. The cumulative gain or loss on the hedging instrument
recognized in shareholder's funds under hedging reserve is retained
there until the forecasted transaction occurs subsequent to which the
same is adjusted against the related transaction in profit and loss
account. If a hedged transaction is no longer expected to occur, the
net cumulative gain or loss recognized in shareholder's fund is
transferred to Profit and Loss Account in the same period.
k. Warranty
Warranty costs are estimated by the management on the basis of
technical evaluation and past experience. The Parent Company accrues
the estimated cost of warranties at the time when the revenue is
recognised.
l. Borrowing costs
Borrowing costs directly attributable to acquisition or construction of
those fixed assets, which necessarily take a substantial period of time
to get ready for their intended use, are capitalized. Other borrowing
costs are accounted as an expense.
m. Investments
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long- term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value, if any, is made to
recognize a decline other than temporary in the value of the
investments.
n. Provisions and contingencies
The Parent Company recognizes a provision when there is a present
obligation as a result of past (or obligating) event that probably
requires an outflow of resources and a reliable estimate can be made of
the amount of the obligation. A disclosure for a contingent liability
is made when there is a possible obligation or a present obligation
that may, but probably will not, require an outflow of resources. When
there is a possible obligation or a present obligation that the
likelihood of outflow of resources is remote, no provision or
disclosure is made.
Provisions for onerous contracts, i.e. contracts where the expected
unavoidable costs of meeting the obligations under the contract exceed
the economic benefits expected to be received under it, are recognized
when it is probable that an outflow of resources embodying economic
benefits will be required to settle a present obligation as a result of
an obligating event, based on a reliable estimate of such obligation.
o. Impairment of assets
The Parent Company periodically assesses whether there is any
indication that an asset or a group of assets comprising a cash
generating unit may be impaired. If any such indication exists, the
Parent Company estimates the recoverable amount of the asset. For an
asset or group of assets that does not generate largely independent
cash inflows, the recoverable amount is determined for the
cash-generating unit to which the asset belongs. 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 Consolidated
Profit and Loss Account. If at the Consolidated Balance Sheet date,
there is an indication that if a previously assessed impairment loss
no longer exists, the recoverable amount is reassessed and the asset
is reflected at the recoverable amount subject to a maximum of
depreciable historical cost. An impairment loss is reversed only to
the extent that the carrying amount of asset does not exceed the net
book value that would have been determined; if no impairment loss had
been recognised.
p. Leases
Leases under which the Parent Company assumes substantially all the
risks and rewards of ownership are classified as finance leases. Such
assets acquired on or after 1st April 2001 are capitalised at fair
value of the asset or present value of the minimum lease payments at
the inception of the lease, whichever is lower.
For operating leases, lease payments (excluding cost for services, such
as maintenance) are recognised as an expense in the statement of profit
and loss on a straight line basis over the lease term. The lease term
is the non- cancellable period for which the lessee has agreed to take
on lease the asset together with any further periods for which the
lessee has the option to continue the lease of the asset, with or
without further payment, which option at the inception of the lease it
is reasonably certain that the lessee will exercise.
q. Income-tax
Income-tax expense comprises current tax (i.e. amount of tax for the
year determined in accordance with the income-tax law) and deferred tax
charge or credit (reflecting the tax effects of timing differences
between accounting income and taxable income for the period). The
deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognized using the tax rates that have been
enacted or substantively enacted by the balance sheet date. Deferred
tax asset/liability as at the balance sheet date resulting from timing
differences between book profit and tax profit are not considered to
the extent that such asset/liability is expected to get reversed in the
future years within the tax holiday period. Deferred tax assets are
recognized only to the extent
that there is reasonable certainty that the assets can be realized in
future; however, where there is unabsorbed depreciation or carry
forward of losses, deferred tax assets are recognized only if there is
virtual certainty of realization of such assets. Deferred tax assets
are reviewed as at each balance sheet date and written down or written
up to reflect the amount that is reasonably/ virtually certain (as the
case may be) to be realized.
The Parent Company offsets, on a year on year basis, the current tax
assets and liabilities where it has a legally enforceable right and
where it intends to settle such assets and liabilities on a net basis.
r. Earnings Per Share
The basic Earnings/ (loss) Per Share is computed by dividing the net
profit/ (loss) attributable to equity shareholders for the year by the
weighted average number of equity shares outstanding during the year.
The Parent Company did not have any potentially dilutive equity shares
during the year.
s. Government grants and subsidies
Grants and subsidies from the Government are recognized when there is
reasonable assurance that the grant/subsidy will be received and all
attaching conditions will be complied with.
The grant or subsidy relating to an asset is reduced from the cost of
the asset. The grant or subsidy not specifically attached to a specific
fixed asset is credited to Capital Reserve and is retained till the
attached conditions are fulfilled.
t. Cash flow statement
Cash flows are reported using indirect method, whereby net profits
before tax is adjusted for the effects of transactions of a non-cash
nature and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from regular revenue generating, investing and
financing activities of the Parent Company are segregated.
u. Cash and cash equivalent
Cash and cash equivalents comprise cash balances on hand and cash
balance and deposits with banks.
Mar 31, 2010
A. Background
Dynamatic technologies limiteD ("the company") was incorporated in 1973
as Dynamatic hydraulics limited under provisions of the companies act,
1956 (the act). in 1992 the name of the company was changed to
Dynamatic technologies limited. the company is in the business of
manufacturing automotive components, hydraulics gear pumps, aerospace
components and wind farm power generation. the company is listed in
india with national stock exchange and Bombay stock exchange.
b. Basis of accounting and preparation of financial statements
The financial statements are prepared in accordance with the indian
generally accepted accounting principles (ÃgaapÃ) under the historical
cost convention on the accrual basis. gaap comprises mandatory
accounting standards as specified in the companies (accounting
standards) Rules, 2006, (Ãthe RulesÃ) and the relevant provisions of
the act to the extent applicable. the accounting policies have been
consistently applied by the company. the financial statements are
presented in indian rupees thousands.
c. Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles in india (indian gaap) requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses, during the reporting year. examples of such
estimates include estimates of provision for warranty, provision for
doubtful debts and the useful life of fixed assets. actual results
could differ from these estimates. any revision to accounting estimates
is recognised prospectively in current and future periods.
d. Fixed assets and depreciation
Fixed assets are stated at the cost of acquisition or construction,
less accumulated depreciation. all costs incurred in bringing the
assets to its working condition for intended use have been capitalised.
advances paid towards the acquisition of fixed assets and the cost of
assets not put to use as at the balance sheet date are disclosed under
capital work-in- progress.
Depreciation on fixed assets is provided using the straight-line
method. the rates of depreciation Prescribed in schedule XiV to the
act are considered as minimum rates. if the managementÃs estimate of
the useful life of a fixed asset at the time of the acquisition of
the asset or of the remaining useful life on a subsequent review
is shorter than envisaged in the aforesaid schedule, depreciation
is provided at a higher rate based on the managementÃs estimate of
the useful life/remaining useful life. pursuant to this policy,
depreciation on the following fixed assets has been provided at
the following rates (straight line method), which are higher
than the corresponding rates prescribed in schedule XiV:
Rate per annum
Data processing equipment 25%
Furniture and fixtures 10% office equipment
- mobile phones 50%
- others 20% plant and machinery (wind farm) 10.34%
Pro-rata depreciation is provided from the date of purchase / disposal
on assets purchased or sold during the year. assets individually
costing Rs. 5,000 or less are fully depreciated in the year of
purchase.
Certain land, building, plant and machineries, and electrical
installations are stated at revalued amount based on valuations done by
an external expert in the year 1991-92. additional depreciation due to
revaluation is adjusted out of revaluation reserve
Intangibles and amortization
Research costs are expensed as incurred. Development expenditure
incurred on an individual project is carried forward when its future
recoverability can reasonably be regarded as assured.
Subsequent expenditure incurred on a recognized intangible asset is
added to the cost of intangible asset when it is probable that the
expenditure will enable the asset to generate future economic benefits
in excess of its originally assessed standard of performance and the
expenditure can be measured and attributed to the asset reliably.
amortization is provided on a pro-rata basis on straight- line method
over the estimated useful lives of the assets, not exceeding ten years
as detailed below:
Application software 4 years
Prototype / product development 8-10 years
The carrying value of development costs is reviewed for impairment
annually when the asset is not in use and otherwise when events or
changes in circumstances indicate that the carrying value may not be
recoverable
f. Inventories
Inventories are valued at lower of cost or net realizable value.
consumable stores and spares used for maintenance are debited to the
profit and loss account upon issuance.
The cost determined on first-in-first-out (FiFo) basis, comprises costs
of purchase, costs of conversion and other costs incurred in bringing
the inventories to their present location and condition.
The comparison of cost and net realisable value is made on an
item-by-item basis.
Raw materials and other supplies held for use in production of
inventories are not written down below cost except where material
prices have declined, and it is estimated that the cost of finished
products will exceed their net realisable value.
Provision for inventory obsolescence is provided as considered
necessary.
g. Employee benefits
Gratuity liability is a defined benefit scheme and is accrued based on
an actuarial valuation at the balance sheet date, carried out by an
independent actuary. the companyÃs gratuity scheme is administered by
life insurance corporation of india. actuarial gains/losses are charged
to the profit and loss account.
Compensated absence is a long term employee benefit and is accrued
based on an actuarial valuation at the balance sheet date, carried out
by an independent actuary.
Contributions to provident fund, which is a defined contribution
scheme, are provided at pre-determined rates to the appropriate
authorities.
h. Revenue recognition
Revenue from sale of products is recognized when the risks and rewards
of ownership are transferred to customers, which generally coincides
with delivery to the customers. the amount recognized as sales is
exclusive of excise duty, sales tax, trade and quantity discounts.
Revenue from sale of products has been presented both gross and net of
excise duty.
Service income is recognized when an unconditional right to receive
such income is established.
Revenue from project execution services are recognized on rendering of
services in accordance with the terms of the arrangement with customers
using proportionate completion method.
Unbilled revenues included in other current assets represent cost and
earnings in excess of billings as at the balance sheet date. unearned
revenues included in current liabilities represent billings in excess
of earnings as at the balance sheet date.
Interest on deployment of funds is recognized using the time proportion
method, based on the underlying interest rates.
I Foreign currency transactions and balances
Transactions in foreign currency are recognized at the rate of exchange
prevailing on the date of the transaction.
All monetary assets and liabilities denominated in foreign currency are
restated at the rates ruling at the year end and the exchange
gains/losses arising there from are adjusted to the profit and loss
account, except in case of exchange differences relating to long-term
monetary items which are dealt with in the following manner:
(i) In so far as they relate to the acquisition of a depreciable
capital asset are added to / deducted from the cost of the asset and
depreciated over the balance life of the asset
(ii) In other cases, such exchange differences are accumulated in a
"Foreign currency monetary item translation Difference account" and
amortized over the balance term of the long-term monetary items but not
beyond 31 march 2011.
j Derivatives
In accordance with its Risk management policies and procedures, the
company uses derivative instruments such as foreign currency forward
contracts and currency options to hedge its risks associated with
foreign currency fluctuations relating to certain firm commitments and
highly probable forecasted transactions.
Effective 1 april 2008, the company has applied the principles of as 30
à Financial instruments: Recognition and measurementÃ, to the extent
that the application of the principles did not conflict with existing
accounting standards and other authoritative pronouncements of the
company law Board and other regulatory requirements. the derivatives
that qualify for hedge accounting and designated as cash flow hedges
are initially measured at fair value and are re-measured at a
subsequent reporting date and the changes in the fair value of the
derivatives i.e. gain or loss is recognized directly in shareholdersÃ
funds under hedging reserve to the extent considered highly effective.
gain or loss upon fair value on derivative instruments that either do
not qualify for hedge accounting or are not designated as cash flow
hedges or designated as cash flow hedges to the extent considered
ineffective, are recognized in the profit and loss account.
To designate a forward or option contracts as an effective hedge, the
management objectively evaluates and evidences with appropriate
supporting documents at the inception of each contract whether the
contract is effective in achieving offsetting cash flows attributable
to the hedged risk.
Hedge accounting is discontinued when the hedging instrument expires,
sold, terminated, or exercised, or no longer qualifies for hedge
accounting. the cumulative gain or loss on the hedging instrument
recognized in shareholderÃs funds under hedging reserve is retained
there until the forecasted transaction occurs subsequent to which the
same is adjusted against the related transaction in profit and loss
account. if a hedged transaction is no longer expected to occur, the
net cumulative gain or loss recognized in shareholderÃs fund is
transferred to profit and loss account in the same period.
k. Warranty
Warranty costs are estimated by the management on the basis of
technical evaluation and past experience. the company accrues the
estimated cost of warranty at the time when the revenue is recognised.
l. Borrowing costs
Borrowing costs directly attributable to acquisition or construction of
those fixed assets, which necessarily take a substantial period of time
to get ready for their intended use, are capitalized. other borrowing
costs are accounted as an expense.
m. Investments
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. all other
investments are classified as long-term investments. current
investments are carried at lower of cost and fair value determined on
an individual investment basis. long-term investments are carried at
cost. however, provision for diminution in value, if any, is made to
recognize a decline other than temporary in the value of the
investments.
n. Provisions and contingencies
The company recognizes a provision when there is a present obligation
as a result of past (or obligating) event that probably requires an
outflow of resources and a reliable estimate can be made of the amount
of the obligation. a disclosure for a contingent liability is made when
there is a possible obligation or a present obligation that may, but
probably will not, require an outflow of resources. When there is a
possible obligation or a present obligation that the likelihood of
outflow of resources is remote, no provision or disclosure is made.
Provisions for onerous contracts, i.e. contracts where the expected
unavoidable costs of meeting the obligations
under the contract exceed the economic benefits expected to be received
under it, are recognized when it is probable that an outflow of
resources embodying economic benefits will be required to settle a
present obligation as a result of an obligating event, based on a
reliable estimate of such obligation.
o. Impairment of assets
The company periodically assesses whether there is any indication that
an asset or a group of assets comprising a cash generating unit may be
impaired. if any such indication exists, the company estimates the
recoverable amount of the asset. For an asset or group of assets that
does not generate largely independent cash inflows, the recoverable
amount is determined for the cash-generating unit to which the asset
belongs. 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 profit and loss account. if at the balance sheet
date, there is an indication that if a previously assessed impairment
loss no longer exists, the recoverable amount is reassessed and the
asset is reflected at the recoverable amount subject to a maximum of
depreciable historical cost. an impairment loss is reversed only to
the extent that the carrying amount of asset does not exceed the net
book value that would have been determined; if no impairment loss had
been recognised.
p. Leases
Leases under which the company assumes substantially all the risks and
rewards of ownership are classified as finance leases. such assets
acquired on or after 1st april, 2001 are capitalised at fair value of
the asset or present value of the minimum lease payments at the
inception of the lease, whichever is lower.
For operating leases, lease payments (excluding cost for services, such
as maintenance) are recognised as an expense in the statement of profit
and loss on a straight line basis over the lease term. the lease term
is the non- cancellable period for which the lessee has agreed to take
on lease the asset together with any further periods for which the
lessee has the option to continue the lease of the asset, with or
without further payment, which option at the inception of the lease it
is reasonably certain that the lessee will exercise.
q. Income tax
Income tax expense comprises current tax (i.e. amount of tax for the
year determined in accordance with the income tax law) and deferred tax
charge or credit (reflecting the tax effects of timing differences
between accounting income and taxable income for the period). the
deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognized using the tax rates that have
been enacted or substantively enacted by the balance sheet date.
Deferred tax asset / liability as at the balance sheet date resulting
from timing differences between book profit and tax profit are not
considered to the extent that such asset / liability is expected to
get reversed in the future years within the tax holiday period.
Deferred tax assets are recognized only to the
extent that there is reasonable certainty that the assets can be
realized in future; however, where there is unabsorbed depreciation or
carry forward of losses, deferred tax assets are recognized only if
there is virtual certainty of realization of such assets. Deferred tax
assets are reviewed as at each balance sheet date and written down or
written up to reflect the amount that is reasonably / virtually certain
(as the case may be) to be realized.
The company offsets, on a year on year basis, the current tax assets
and liabilities where it has a legally enforceable right and where it
intends to settle such assets and liabilities on a net basis.
r. Fringe benefit tax
Fringe benefit tax is determined at current applicable rates on
expenses falling within the ambit of ÃFringe Benefità as defined under
the income tax act, 1961. the same has been abolished with effect
from april 1, 2009.
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