Accounting Policies of Electrotherm (India) Ltd. Company
Mar 31, 2018
1.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A. CURRENT VERSUS NON-CURRENT CLASSIFICATION:
The Company presents assets and liabilities in the Balance Sheet based on current/non-current classification.
An asset is treated as current when it is:
- Expected to be realised or intended to be sold or consumed in the normal operating cycle;
- Held primarily for the purpose of trading;
- Expected to be realised within twelve months after the reporting period; or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in the normal operating cycle;
- It is held primarily for the purpose of trading;
- It is due to be settled within twelve months after the reporting period; or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
The operating cycle is the time between acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
B. FOREIGN CURRENCIES:
The Companyâs financial statements are presented in Rupees in Crore, which is also the companyâs functional currency. Transactions and balances
Transactions in foreign currencies are initially recorded in the Companyâs functional currency at the exchange rates prevailing on the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are restated in the functional currency at the exchange rates prevailing on the reporting date of financial statements.
Exchange differences arising on settlement of such transactions and on translation of monetary items are recognised in the Statement of Profit and Loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates on the dates of the initial transactions.
C. FAIR VALUE MEASUREMENT:
The Company measures financial instruments, such as, derivatives at fair value at each Balance Sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
- Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
- Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The Companyâs Management determines the policies and procedures for both recurring fair value measurement, such as unquoted financial assets measured at fair value, and for non-recurring fair value measurement.
External valuers are involved for valuation of significant assets, such as properties and unquoted financial assets, and significant liabilities, such as contingent consideration. Involvement of external valuers is decided upon annually by the Management after discussion with and approval by the Companyâs Audit Committee. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The Management decides, after discussions with the Companyâs external valuers, which valuation techniques and inputs to use for each case.
At each reporting date, the Management analyses the movements in the values of assets and liabilities which are required to be remeasured or re-assessed as per the Companyâs accounting policies. For this analysis, the Management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.
The Management, in conjunction with the Companyâs external valuers, also compares the change in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable.
For the purpose of fair value disclosures, the company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes. Disclosures for valuation methods, significant accounting judgements, estimates and assumptions, Quantitative disclosures of fair value measurement hierarchy and the Financial instruments (including those carried at amortised cost), are stated by way the note at the appropriate place of the accounts.
D. PROPERTY, PLANT AND EQUIPMENT (PPE):
On the date of transition the Company has elected to continue with the previous GAAPâs carrying amount as deemed cost to measure all the items of property, plant and equipment.
PPE and Capital work in progress are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price and borrowing costs if capitalization criteria are met, the cost of replacing part of the fixed assets and directly attributable cost of bringing the asset to its working condition for the intended use. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. This applies mainly to components for machinery. When significant parts of fixed assets are required to be replaced at intervals, the Company recognizes such parts as individual assets with specific useful lives and depreciates them accordingly. Likewise, when a major overhauling is performed, its cost is recognized in the carrying amount of the PPE as a replacement if the recognition criteria are satisfied. Any trade discounts and rebates are deducted in arriving at the purchase price.
Subsequent expenditure related to an item of PPE is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing PPE, including day-to-day repair and maintenance expenditure and cost of parts replaced, are charged to the Statement of Profit and Loss for the period during which such expenses are incurred.
CWIP comprises of cost of PPE that are yet not installed and not ready for their intended use at the Balance Sheet date.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if applicable.
The Company calculates depreciation on items of property, plant and equipment on a straight-line basis using the rates arrived at based on the useful lives defined under Schedule II of the Companies Act, 2013, except in respect of following fixed assets:
- Long Term Lease hold land is amortised over a period of 99 years, being the lease term.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the Statement of Profit and Loss when the asset is derecognised.
E. INTANGIBLE ASSETS:
Intangible Assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost, less any accumulated amortisation and accumulated impairment losses, if any.
Intangible assets in the form of software are amortised over a period of six years and trademarks over a period of five years as per their respective useful life based on a straight-line method. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the Statement of Profit and Loss.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of profit or loss when the asset is derecognised.
F. IMPAIRMENT OF NON-FINANCIAL ASSETS:
The Company assesses at each reporting date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset 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 reporting date there is an indication that 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 depreciated historical cost.
G. BORROWING COSTS:
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
H. LEASES:
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Company as a lessee:
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease. A leased asset is depreciated over the useful life of the asset.
Operating lease payments are recognised as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term.
I. FINANCIAL INSTRUMENTS:
A Financial instrument is any contract that gives rise to a financial asset of one entity and financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus in the case of financial assets not recorded at fair value through Statement of Profit and Loss, transaction costs that are attributable to the acquisition of the financial asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories:
- Debt instruments - measured at amortised cost
- Debt instruments, derivatives and equity instruments - measured at fair value through Profit or Loss (FVTPL)
- Equity instruments - measured at fair value through other comprehensive income (FVTOCI)
Debt instruments at amortised cost
A âdebt instrumentâ is measured at the amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
This category is the most relevant to the Company. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss. This category generally applies to trade, loans and other receivables.
Debt instrument at FVTPL
FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization at amortized cost or as FVTOCI, is classified as at FVTPL.
Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Equity investments
Investments in subsidiaries are measured at cost as per Ind AS 27 - Separate Financial Statements. All equity investments in scope of Ind AS 109 are measured at fair value. For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in the other comprehensive income (OCI). There is no recycling of the amounts from OCI to Statement of Profit and Loss, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Companyâs Balance Sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay. Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
a) Financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities, deposits, trade receivables and bank balance.
b) Financial guarantee contracts which are not measured at FVTPL.
The Company follows âsimplified approachâ for recognition of impairment loss allowance on Trade receivables. Under the simplified approach the Company does not track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines 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.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive, discounted at the original EIR. ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the Statement of Profit and Loss. This amount is reflected under the head âother expensesâ in the Statement of Profit and Loss.
The Balance Sheet presentation for various financial instruments is described below:
Financial assets measured at amortised cost:
ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the Balance Sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
For assessing increase in credit risk and impairment loss, the Company combines financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increases in credit risk to be identified on a timely basis.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through Statement of Profit and Loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including cash credit facilities from banks.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through Statement of Profit and Loss.
Financial liabilities at fair value through Profit or Loss include financial liabilities held for trading and financial liabilities designated upon initial recognition 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. Gains or losses on liabilities held for trading are recognised in the Statement of Profit and Loss.
Financial liabilities designated upon initial recognition at fair value through statement of Profit and 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/ loss are not subsequently transferred to P&L. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the Statement of Profit and Loss. The Company has not designated any financial liability at FVTPL.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in Statement of profit and loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the Statement of Profit and Loss.
This category generally applies to borrowings.
Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value through Statement of Profit and Loss (FVTPL), adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortisation.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Companyâs senior management determines change in the business model as a result of external or internal changes which are significant to the Companyâs operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
J. INVENTORIES:
Inventories are valued at the lower of cost and net realisable value after providing for obsolescence and other losses, wherever considered necessary. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Scrap is valued at net realisable value. Cost is determined on a Weighted Average method.
Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity, incurred in bringing them in their respective present location and condition.
Net realizable value is the estimated selling price in the ordinary course of business less estimated cost of completion and the estimated costs necessary to make the sale.
K. REVENUE:
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government. The Company has concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements as it has pricing latitude and is also exposed to inventory and credit risks.
Based on the Educational Material on Ind AS 18 issued by the ICAI, the Company has assumed that recovery of excise duty flows to the Company on its own account. This is for the reason that it is a liability of the manufacturer which forms part of the cost of production, irrespective of whether the goods are sold or not. Since the recovery of excise duty flows to the Company on its own account, revenue includes excise duty.
However, sales tax/ value added tax (VAT) and goods and service tax are not received by the Company on its own account. Rather, it is tax collected on value added to the commodity by the seller on behalf of the government. Accordingly, it is excluded from revenue.
The specific recognition criteria described below must also be met before revenue is recognised.
i) Sale of Goods
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of VAT/CST/GST, trade discounts & other taxes, adjustments for late delivery charges and material returned/rejected.
ii) The Company accounts for pro forma credits, refunds of duty of customs or excise, or refunds of sales tax in the year of admission of such claims by the concerned authorities. Benefits in respect of Export Licenses are recognised on application. Export benefits are accounted for as other operating income in the year of export based on eligibility and when there is no uncertainty on receiving the same.
iii) Dividend is recognised when the Companyâs right to receive the payment is established, which is generally when shareholders approve the dividend.
iv) Interest Income is recognized on time proportion basis taking into account the amounts outstanding and the rates applicable. Interest income is included under the head âother incomeâ in the Statement of Profit and Loss.
L. RETIREMENT AND OTHER EMPLOYEE BENEFITS:
Retirement benefits in the form of provident fund and superannuation fund are defined contribution plans. The Company has no obligation, other than the contributions payable to provident fund and superannuation fund. The Company recognises contribution payable to these funds as an expense, when an employee renders the related service.
In respect of gratuity liability, the Company operates defined benefit plan wherein contributions are made to a separately administered fund. The costs of providing benefits under this plan are determined on the basis of actuarial valuation at each reporting date being carried out using the projected unit credit method.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to Statement of profit and loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the Statement of Profit and Loss:
- Service costs comprising current service costs; and
- Net interest expense or income
The liability in respect of unused leave entitlement of the employees as at the reporting date is determined on the basis of an independent actuarial valuation carried out and the liability is recognized in the Statement of Profit and Loss. Actuarial gain and loss is recognise in full in the period in which they occur in the Statement of Profit and Loss.
M. TAXES:
Current income tax:
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognised outside the Statement of Profit and Loss is recognised outside the Statement of Profit and Loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred Tax:
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
- When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable Profit or Loss.
- In respect of taxable temporary differences associated with investments in subsidiaries, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, except:
- When the deferred tax asset arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
- In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside the Statement of Profit and Loss is recognised outside the Statement of Profit and Loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
N. PROVISIONS:
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 reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the Statement of Profit and Loss net of any reimbursement.
O. EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares, if any.
P. CASH AND CASH EQUIVALENT:
Cash and cash equivalents in the Balance Sheet comprise cash at banks and in hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of charges in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above.
Q. CASH DIVIDEND
The Company recognises a liability to make cash or non-cash distributions to equity holders of the Company when the distribution is authorised and the distribution is no longer at the discretion of the Company. As per the Companies Act, 2013, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.
Mar 31, 2016
1.00 SIGNIFICANT ACCOUNTING POLICIES
CORPORATE INFORMATION
Electrotherm (India) Limited (the Company) is a listed public company domiciled in India and incorporated under the provisions of the Companies Act, 1956.The Company is engaged in the Manufacturing of Electronic furnaces and other capital equipments, Sponge and PIG Iron, Ferrous and Non-ferrous Billets/Bars/Ingots, Duct Iron Pipes, Battery operated vehicles, Electric Power Generation and services relating to Electric furnaces, other capital equipments and battery operated vehicles.
(A) BASIS OF PREPARATION OF ACCOUNTS:
The Financial Statements are prepared to comply in all material respects with the Accounting Standards notified under the relevant provisions of Companies Act, 2013. The financial statements have been prepared under the historical cost convention (except for revalued assets which are stated at revalued amount) and on an accrual basis.
(B) USE OF ESTIMATES:
The preparation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting year. Differences between the actual results and estimates are recognized in the year in which the results are known /materialized.
(C) REVENUE RECOGNITION:
Sales are recognized when goods are billed and are accounted net of trade discounts, rebates, VAT & excise duty (except where Exemption is availed) but includes, export incentives. Income on services rendered is accounted for as and when the services are rendered as per the terms.
(D) TANGIBLE ASSETS:
Tangible Assets are stated at cost net of recoverable taxes and includes amounts added on revaluation, less accumulated depreciation and impairment loss, if any. It also includes assets acquired from other division of the Company less depreciation thereon. All costs, including financing costs till commencement of commercial production, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the fixed assets are capitalized.
(E) INTANGIBLE ASSETS:
An intangible asset is recognized, only where it is probable that future economic benefits attributable to the asset will accrue to the enterprise and the cost can be measured reliably.
(F) DEPRECIATION:
Tangible Assets
(a) The Company has provided depreciation on tangible assets on Straight-line method (SLM) except the assets at Chattral unit over the useful life of the assets as defined in Schedule II of the Companies Act, 2013. The life has been decided by the management considering the type and nature of the assets as defined in Schedule II of the Companies Act, 2013.
(b) The assets at Chattral unit are depreciated to the extent of depreciable amount on the Written Down Value (WDV) Method. Depreciation is calculated based on useful life of the asset as defined in Schedule II of the Companies Act, 2013.
(c) The amount of Long Term lease hold land is amortized by equal installments during the last fifteen years of the residual lease period.
(d) Depreciation for Power Plant at Kutch is provided at the rates applicable for continuous process plant.
Intangible Assets
The intangible assets consist of Computer Software and the same is amortized over a period of 6 years.
(G) INVESTMENTS:
Long term investments including investment in subsidiary companies are stated at cost. Diminution in value, if any, which is of a temporary nature, is not provided.
(H) INVENTORIES:
Finished goods are valued at cost or estimated net realizable value whichever is lower. Raw-material and stores are valued at cost. Work-in-progress value includes raw-material, labour and appropriate overheads. The Cost is worked out on weighted average basis.
(I) RESEARCH AND DEVELOPMENT:
Revenue expenditure on research and development is charged against the profit of the year in which it is incurred, except in case of new projects, where it is accounted for as deferred revenue expenditure and charged to Statement of Profit & Loss from the commencement of the project in five years. Capital expenditure on research and development is shown as an addition to fixed assets.
(J) FOREIGN EXCHANGE TRANSACTIONS:
The transactions in Foreign Exchange are accounted at the exchange rate prevailing on the date of transaction. Foreign Currency monetary assets and liabilities at the date of balance sheet are translated at the rate of exchange prevailing on that date.
Gains/losses arising out of fluctuations in the exchange rates are recognized in the Statement of Profit and Loss in the period in which they arise except in respect of imported Fixed Assets where exchange variance is adjusted in the carrying amount of respective Fixed Assets.
Differences between the forward exchange rates and the exchange rates at the date of transactions are recognized as income or expense over the life of the contracts, except in respect of liabilities incurred for acquiring imported Fixed Assets, in which case such differences are adjusted in the carrying amount of the respective Fixed Assets.
Profit/loss arising on cancellation or renewal of forward exchange contracts are accounted for as income/expense for the period, except in case of forward exchange contracts relating to liabilities incurred for acquiring imported Fixed Assets, in which case such profit/loss are adjusted in the carrying amount of the respective Fixed Asset.
(K) TAXES ON INCOME:
Current tax is determined as the amount of tax payable in respect of taxable income for the period and the credits computed in accordance with the provisions of the Income Tax Act, 1961, and based on the expected outcome of the assessment/appeals.
MAT credit is recognized as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the specified period.
Deferred Tax is recognized, subject to the consideration of prudence, on timing differences, being the difference between taxable incomes and accounting income that originate in one year and are capable of reversal in one or more subsequent years. Deferred Tax asset/liability is calculated on the basis of the rate of Income Tax (excluding other levies) applicable for the current year.
Deferred tax assets are recognized and carried forward to the extent that there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.
(L) LEASES:
Lease payments for assets taken on operating lease are recognized as an expense in the statement of profit and loss over the lease term.
(M) BORROWING COSTS:
Borrowing costs are recognized as expenses in the period in which they are incurred, except to the extent where borrowing costs that are directly attributable to the acquisition, construction, or production of an asset till put for its intended use is capitalized as part of the cost of that asset. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing cost (except as stated in notes) is charged to revenue.
(N) IMPAIRMENT OF ASSETS:
The company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the company estimates the recoverable amount of the assets. If such recoverable amount of the assets 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 depreciated historical cost.
(O) DEFERRED REVENUE EXPENDITURE:
Expenditure relating to Preliminary Expenses, Capital issues and Deferred Revenue Expenses is amortized on straight line basis over a period of five years.
(P) RETIREMENT / POST RETIREMENT BENEFITS:
Contributions to defined contribution schemes such as Employees Provident fund and Family pension fund are charged to the Statement of Profit & Loss as and when incurred.
The company contributes to Group Gratuity policy with SBI Life Insurance Company Limited and Life Insurance Company Limited, for the Future Gratuity payment of the employees of the Engineering and EV Division on actuarial valuation method, whereas in case of Steel Division liability is provided on the basis of actuarial valuation.
Leave Encashment liability of the company is provided on the basis of actuarial valuation.
(Q) PROVISIONS AND CONTINGENT LIABILITIES:
(i) Provisions are recognized when the present obligation of a past event gives rise to a probable outflow, embodying economic benefits on settlement and the amount of obligation can be reliably estimated. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
(ii) Contingent Liabilities are disclosed after a careful evaluation of facts and legal aspects of the matter involved.
(iii) Provisions and Contingent Liabilities are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.
(R) SEGMENT REPORTING:
The accounting policies adopted for segment reporting are in line with the accounting policies of the company with the following additional policies for the segment reporting:
Inter segment revenue have been accounted for, based on the transaction price agreed to, between segments which is primarily market led.
Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the enterprise as a whole are not allocable to segment on a reasonable basis and have been included under "unallocated corporate expenses".
(S) FINANCE COST:
Finance Costs includes interest, bank charges, amortization of ancillary costs incurred in connection with the arrangement of borrowing and applicable gain/loss on foreign currency transactions and translation arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Finance Costs that are directly attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to statement of profit and loss.
(T) GENERAL:
Accounting policies not specifically referred to are consistent with generally accepted accounting policies.
Mar 31, 2014
(A) BASIS OF PREPARATION OF ACCOUNTS:
The Financial Statements are prepared to comply in all material
respects with the Accounting Standards notified by the Companies
(Accounting Standards) Rules, 2006 and the relevant provisions of the
Companies Act, 1956. The financial statements have been prepared under
the historical cost convention (except for revalued assets which are
stated at revalued amount) on an accrual basis.
(B) USE OF ESTIMATES:
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period.
Differences between the actual results and estimates are recognized in
the period in which the results are known /materialized.
(C) REVENUE RECOGNITION:
Sales are recognized when goods are billed and are accounted net of
trade discounts, rebates, VAT & excise duty (except where Exemption is
availed) but includes, export incentives. Income on services rendered
is accounted for as and when the services are rendered as per the
terms.
(D) TANGIBLE ASSETS:
Tangible Assets are stated at cost net of recoverable taxes and
includes amounts added on revaluation, less accumulated depreciation
and impairment loss, if any. It also includes assets acquired from
other division of the Company less depreciation thereon. All costs,
including financing costs till commencement of commercial production,
net charges on foreign exchange contracts and adjustments arising from
exchange rate variations attributable to the fixed assets are
capitalized.
(E) INTANGIBLE ASSETS:
An intangible asset is recognized, only where it is probable that
future economic benefits attributable to the asset will accrue to the
enterprise and the cost can be measured reliably.
(F) DEPRECIATION:
Depreciation on all assets has been provided on Straight Line Method
(S.L.M) except assets at Chattral Unit on which depreciation has been
provided on Written down Value Method (W.D.V.) as per the rates
prescribed in Schedule XIV of the Companies Act. 1956.
Depreciation for Power Plant at Kutch is provided at the rates
applicable for continuous process plant.
The amount of Long Term lease hold land is amortized by equal
installments during the last fifteen years of the residual lease
period.
(G) INVESTMENTS:
Long term investments including investment in subsidiary companies are
stated at cost. Diminution in value, if any, which is of a temporary
nature, is not provided.
(H) INVENTORIES:
Finished goods are valued at cost or estimated net realizable value
whichever is lower. Raw-material and stores are valued at cost.
Work-in-progress value includes raw-material, labour and appropriate
overheads. The Cost is worked out on weighted average basis.
(I) RESEARCH AND DEVELOPMENT:
Revenue expenditure on research and development is charged against the
profit of the year in which it is incurred, except in case of new
projects, where it is accounted for as deferred revenue expenditure and
charged to Statement of Profit & Loss from the commencement of the
project in five years. Capital expenditure on research and development
is shown as an addition to fixed assets.
(J) FOREIGN EXCHANGE TRANSACTIONS:
The transactions in Foreign Exchange are accounted at the exchange rate
prevailing on the date of transaction. Foreign Currency monetary assets
and liabilities at the date of balance sheet are translated at the rate
of exchange prevailing on that date.
Gains/losses arising out of fluctuations in the exchange rates are
recognized in the Statement of Profit and Loss in the period in which
they arise except in respect of imported Fixed Assets where exchange
variance is adjusted in the carrying amount of respective Fixed Assets.
Differences between the forward exchange rates and the exchange rates
at the date of transactions are recognized as income or expense over
the life of the contracts, except in respect of liabilities incurred
for acquiring imported Fixed Assets, in which case such differences are
adjusted in the carrying amount of the respective Fixed Assets.
Profit/loss arising on cancellation or renewal of forward exchange
contracts are accounted for as income/expense for the period, except in
case of forward exchange contracts relating to liabilities incurred for
acquiring imported Fixed Assets, in which case such profit/loss are
adjusted in the carrying amount of the respective Fixed Asset.
(K) TAXES ON INCOME:
Current tax is determined as the amount of tax payable in respect of
taxable income for the period and the credits computed in accordance
with the provisions of the Income Tax Act, 1961, and based on the
expected outcome of the assessment/appeals.
MAT credit is recognized as an asset only when and to the extent there
is convincing evidence that the company will pay normal income tax
during the specified period.
Deferred Tax is recognized, subject to the consideration of prudence,
on timing differences, being the difference between taxable income and
accounting income that originate in one year and are capable of
reversal in one or more subsequent years. Deferred Tax asset/liability
is calculated on the basis of the rate of Income Tax (excluding other
levies) applicable for the current year.
Deferred tax assets are recognized and carried forward to the extent
that there is virtual certainty that sufficient future taxable income
will be available against which such deferred tax assets can be
realized.
(L) LEASES:
Lease payments for assets taken on operating lease are recognized as an
expense in the revenue/statement of profit and loss over the lease
term.
(M) BORROWING COSTS:
Borrowing costs are recognized as expenses in the period in which they
are incurred, except to the extent where borrowing costs that are
directly attributable to the acquisition, construction, or production
of an asset till put for its intended use is capitalized as part of the
cost of that asset. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing cost (except as stated in notes) is charged to revenue.
(N) IMPAIRMENT OF ASSETS:
The company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the company estimates the recoverable amount of the assets. If
such recoverable amount of the assets 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 depreciated historical cost.
(O) DEFERRED REVENUE EXPENDITURE:
Expenditure relating to Preliminary Expenses, Capital issues and
Deferred Revenue Expenses is amortized on straight line basis over a
period of five years.
(P) RETIREMENT / POST RETIREMENT BENEFITS:
Contributions to defined contribution schemes such as Employees
Provident fund and Family pension fund are charged to the Statement of
Profit & Loss as and when incurred.
The company contributes to Group Gratuity policy with SBI Life
Insurance Company Limited and Life Insurance Company Limited, for the
Future Gratuity payment of the employees of the Engineering and EV
Division on actuarial valuation method, whereas in case of Steel
Division liability is provided on the basis of actuarial valuation.
Leave Encashment liability of the company is provided on the basis of
actuarial valuation.
(Q) PROVISIONS AND CONTINGENT LIABILITIES:
(i) Provisions are recognized when the present obligation of a past
event gives rise to a probable outflow, embodying economic benefits on
settlement and the amount of obligation can be reliably
estimated.Provisions are not discounted to its present value and are
determined based on best estimate required to settle the obligation at
the balance sheet date. These are reviewed at each balance sheet date
and adjusted to reflect the current best estimates.
(ii) Contingent Liabilities are disclosed after a careful evaluation of
facts and legal aspects of the matter involved.
(iii) Provisions and Contingent Liabilities are reviewed at each
Balance Sheet date and adjusted to reflect the current best estimates.
(R) SEGMENT REPORTING:
The accounting policies adopted for segment reporting are in line with
the accounting policies of the company with the following additional
policies for the segment reporting:
Inter segment revenue have been accounted for, based on the transaction
price agreed to, between segments which is primarily market led.
Revenue and expenses have been identified to segments on the basis of
their relationship to the operating activities of the segment. Revenue
and expenses, which relate to the enterprise as a whole and are not
allocable to segment on a reasonable basis and have been included under
"unallocated corporate expenses".
(S) FINANCE COST:
Finance Costs includes interest, bank charges, amortization of
ancillary costs incurred in connection with the arrangement of
borrowing and applicable gain/loss on foreign currency transactions and
translation arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Finance Costs that are directly attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are charged to statement of profit and loss.
(T) GENERAL:
Accounting policies not specifically referred to are consistent with
generally accepted accounting policies.
Sep 30, 2013
(A) BASIS OF PREPARATION OF ACCOUNTS:
The Financial Statements are prepared to comply in all material
respects with the Accounting Standards notified by the Companies
(Accounting Standards) Rules, 2006 and the relevant provisions of the
Companies Act, 1956. The financial statements have been prepared under
the historical cost convention (except for revalued assets which are
stated at revalued amount) on an accrual basis.
(B) USE OF ESTIMATES:
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period.
Differences between the actual results and estimates are recognized in
the period in which the results are known /materialized.
(C) REVENUE RECOGNITION:
Sales are recognized when goods are billed and are accounted net of
trade discounts, rebates, VAT & excise duty (except where Exemption is
availed) but includes, export incentives. Income on services rendered
is accounted for as and when the services are rendered as per the
terms.
(D) TANGIBLE ASSETS:
Tangible Assets are stated at cost net of recoverable taxes and
includes amounts added on revaluation, less accumulated depreciation
and impairment loss, if any. It also includes assets acquired from
other division of the Company less depreciation thereon. All costs,
including financing costs till commencement of commercial production,
net charges on foreign exchange contracts and adjustments arising from
exchange rate variations attributable to the fixed assets are
capitalized.
(E) INTANGIBLE ASSETS:
An intangible asset is recognized, only where it is probable that
future economic benefits attributable to the asset will accrue to the
enterprise and the cost can be measured reliably.
(F) DEPRECIATION:
Depreciation on all assets has been provided on Straight Line Method
(S.L.M) except assets at Chattral Unit on which depreciation has been
provided on Written down Value Method (W.D.V.) as per the rates
prescribed in Schedule XIV of the Companies Act. 1956.
Depreciation for Power Plant at Kutch is provided at the rates
applicable for continuous process plant.
The amount of Long Term lease hold land is amortized by equal
installments during the last fifteen years of the residual lease
period.
(G) INVESTMENTS:
Long term investments including investment in subsidiary companies are
stated at cost. Diminution in value, if any, which is of a temporary
nature, is not provided.
(H) INVENTORIES:
Finished goods are valued at cost or estimated net realizable value
whichever is lower. Raw material and stores are valued at cost. Work in
progress value includes raw material, labour and appropriate overheads.
The Cost is worked out on weighted average basis.
(I) RESEARCH AND DEVELOPMENT:
Revenue expenditure on research and development is charged against the
profit of the year in which it is incurred, except in case of new
projects, where it is accounted for as deferred revenue expenditure and
charged to Statement of Profit & Loss from the commencement of the
project in five years. Capital expenditure on research and development
is shown as an addition to fixed assets.
(J) FOREIGN EXCHANGE TRANSACTIONS:
The transactions in Foreign Exchange are accounted at the exchange rate
prevailing on the date of transaction. Foreign Currency monetary assets
and liabilities at the date of balance sheet are translated at the rate
of exchange prevailing on that date.
Gains/losses arising out of fluctuations in the exchange rates are
recognized in the Statement of Profit and Loss in the period in which
they arise except in respect of imported Fixed Assets where exchange
variance is adjusted in the carrying amount of respective Fixed Assets.
Differences between the forward exchange rates and the exchange rates
at the date of transactions are recognized as income or expense over
the life of the contracts, except in respect of liabilities incurred
for acquiring imported Fixed Assets, in which case such differences are
adjusted in the carrying amount of the respective Fixed Assets.
Profit/loss arising on cancellation or renewal of forward exchange
contracts are accounted for as income/expense for the period, except in
case of forward exchange contracts relating to liabilities incurred for
acquiring imported Fixed Assets, in which case such profit/loss are
adjusted in the carrying amount of the respective Fixed Asset.
(K) TAXES ON INCOME:
Current tax is determined as the amount of tax payable in respect of
taxable income for the period and the credits computed in accordance
with the provisions of the Income Tax Act, 1961, and based on the
expected outcome of the assessment/appeals.
MAT credit is recognized as an asset only when and to the extent there
is convincing evidence that the company will pay normal income tax
during the specified period.
Deferred Tax is recognized, subject to the consideration of prudence,
on timing differences, being the difference between taxable income and
accounting income that originate in one year and are capable of
reversal in one or more subsequent years. Deferred Tax asset/liability
is calculated on the basis of the rate of Income Tax (excluding other
levies) applicable for the current year.
Deferred tax assets are recognized and carried forward to the extent
that there is virtual certainty that sufficient future taxable income
will be available against which such deferred tax assets can be
realized.
(L) LEASES:
Lease payments for assets taken on operating lease are recognized as an
expense in the revenue/statement of profit and loss over the lease
term.
(M) BORROWING COSTS:
Borrowing costs are recognized as expenses in the period in which they
are incurred, except to the extent where borrowing costs that are
directly attributable to the acquisition, construction, or production
of an asset till put for its intended use is capitalized as part of the
cost of that asset. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing cost (except as stated in notes) is charged to revenue.
(N) IMPAIRMENT OF ASSETS:
The company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the company estimates the recoverable amount of the assets. If
such recoverable amount of the assets 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 depreciated historical cost.
(O) DEFERRED REVENUE EXPENDITURE:
Expenditure relating to Preliminary Expenses, Capital issues and
Deferred Revenue Expenses is amortized on straight line basis over a
period of five years.
(P) RETIREMENT / POST RETIREMENT BENEFITS:
Contributions to defined contribution schemes such as Employees
Provident fund and Family pension fund are charged to the Statement of
Profit & Loss as and when incurred.
The company contributes to Group Gratuity policy with SBI Life
Insurance Company Limited and Life Insurance Company Limited, for the
Future Gratuity payment of the employees of the Engineering and EV
Division on actuarial valuation method, whereas in case of Steel
Division liability is provided on the basis of actuarial valuation.
Leave Encashment liability of the company is provided on the basis of
actuarial valuation.
(Q) PROVISIONS AND CONTINGENT LIABILITIES:
(i) Provisions are recognized when the present obligation of a past
event gives rise to a probable outflow, embodying economic benefits on
settlement and the amount of obligation can be reliably
estimated.Provisions are not discounted to its present value and are
determined based on best estimate required to settle the obligation at
the balance sheet date. These are reviewed at each balance sheet date
and adjusted to reflect the current best estimates.
(ii) Contingent Liabilities are disclosed after a careful evaluation of
facts and legal aspects of the matter involved.
(iii) Provisions and Contingent Liabilities are reviewed at each
Balance Sheet date and adjusted to reflect the current best estimates.
(R) SEGMENT REPORTING:
The accounting policies adopted for segment reporting are in line with
the accounting policies of the company with the following additional
policies for the segment reporting:
Inter segment revenue have been accounted for, based on the transaction
price agreed to, between segments which is primarily market led.
Revenue and expenses have been identified to segments on the basis of
their relationship to the operating activities of the segment. Revenue
and expenses, which relate to the enterprise as a whole and are not
allocable to segment on a reasonable basis and have been included under
"unallocated corporate expenses".
(S) FINANCE COST:
Finance Costs includes interest, bank charges, amortization of
ancillary costs incurred in connection with the arrangement of
borrowing and applicable gain/loss on foreign currency transactions and
translation arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Finance Costs that are directly attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are charged to statement of profit and loss.
(T) GENERAL:
Accounting policies not specifically referred to are consistent with
generally accepted accounting policies.
Mar 31, 2011
(A) BASIS OF PREPARATION OF ACCOUNTS:
The financial statements are prepared under the historical cost
convention, (except for revalued assets which are stated at revalued
amount) and in accordance with the generally accepted accounting
principles in India and the provisions of the Companies Act, 1956.
(B) USE OF ESTIMATES:
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period.
Differences between the actual results and estimates are recognized in
the period in which the results are known/materialized.
(C) REVENUE RECOGNITION:
Sales are recognized when goods are billed and are accounted net of
trade discounts, rebates, VAT & excise duty (except where Exemption is
availed) but includes, export incentives. Income on services rendered
is accounted for as and when the services are rendered as per the
terms.
(D) FIXED ASSETS:
Fixed Assets are stated at cost (net of availed CENVAT and Taxes),
except revalued assets which are stated at revalued amount and include
assets acquired from other Division of the Company less
depreciation. The costs of fixed assets include expenses incurred during
pre-commercial production/construction period.
(E) DEPRECIATION:
Depreciation on all the assets has been provided as per the rates
prescribed in Schedule XIV of the Companies Act. 1956.
Depreciation on all assets has been provided on Straight Line Method
(S.L.M) except assets at Chattral Unit on which depreciation has been
provided on Written down Value Method (W.D.V.).
Depreciation for Power Plant at Kutch is provided at the rates
applicable for continuous process plant.
The amount of Long Term lease hold land is amortized by equal
installments during the last fifteen years of the residual lease
period.
(F) INVESTMENTS:
Long term investments including investment in subsidiary company are
stated at cost. Diminution in value, if any, which is of a temporary
nature, is not provided.
(G) INVENTORIES:
Finished goods are valued at cost or estimated net realizable value
whichever is lower. Raw-material and stores are valued at cost.
Work-in-progress value includes raw-material, labour and appropriate
overheads. The Cost is worked out on weighted average basis.
(H) RESEARCH AND DEVELOPMENT:
Revenue expenditure on research and development is charged against the
profit of the year in which it is incurred, except in case of new
projects, where it is accounted for as deferred revenue expenditure and
charged to Profit & Loss account from the commencement of the project
in five years. Capital expenditure on research and development is shown
as an addition to fixed assets.
(I) FOREIGN EXCHANGE TRANSACTIONS:
The transactions in foreign Exchange are accounted at the exchange rate
prevailing on the date of transaction. Foreign Currency monetary assets
and liabilities at the date of balance sheet are translated at the rate
of exchange prevailing on that date.
Gains/losses arising out of fluctuations in the exchange rates are
recognized in Profit and Loss in the period in which they arise except
in respect of imported Fixed Assets where exchange variance is adjusted
in the carrying amount of respective Fixed Assets.
To account for differences between the forward exchange rates and the
exchange rates at the date of transactions, as income or expense over
the life of the contracts, except in respect of liabilities incurred
for acquiring imported Fixed Assets, in which case such differences are
adjusted in the carrying amount of the respective Fixed Assets.
To account for profit/loss arising on cancellation or renewal of
forward exchange contracts as income/expense for the period, except in
case of forward exchange contracts relating to liabilities incurred for
acquiring imported Fixed Assets, in which case such profit/loss are
adjusted in the carrying amount of the respective Fixed Asset.
(J) TAXES ON INCOME :
Current tax is determined as the amount of tax payable in respect of
taxable income for the period and the credits computed in accordance
with the provisions of the Income Tax Act, 1961, and based on the
expected outcome of the assessment/appeals.
MAT credit is recognized as an asset only when and to the extent there
is convincing evidence that the company will pay normal income tax
during the specified period.
Deferred Tax is recognized, subject to the consideration of prudence,
on timing differences, being the difference between taxable income and
accounting income that originate in one year and are capable of
reversal in one or more subsequent years. Deferred Tax asset/liability
is calculated on the basis of the rate of Income Tax (excluding other
levies) applicable for the current year.
Deferred tax assets are recognized and carried forward to the extent
that there is virtual certainty that sufficient future taxable income
will be available against which such deferred tax assets can be
realized
(K) LEASES:
Lease payments for assets taken on operating lease are recognized as an
expense in the revenue / profit and loss account over the lease term.
(L) BORROWING COSTS:
Borrowing costs are recognized as expenses in the period in which they
are incurred, except to the extent where borrowing costs that are
directly attributable to the acquisition, construction, or production
of an asset till put for its intended use is capitalized as part of the
cost of that asset. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing cost(except as stated in note no 7) is charged to revenue.
(M) IMPAIRMENT OF ASSETS:
The company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the company estimates the recoverable amount of the assets. If
such recoverable amount of the assets is less than its carrying amount,
the carrying amount is reduced to its recoverable amount. The reduction
is treated as an impairment loss and is recognized in the profit and
loss account. If at the balance sheet date there is an indication that
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 depreciated historical cost.
(N) DEFERRED REVENUE EXPENDITURE :
Expenditure relating to Preliminary Expenses, Capital issues and
Deferred Revenue Expenses is amortized on straight line basis over a
period of five years.
(O) RETIREMENT / POST RETIREMENT BENEFITS:
Contributions to defined contribution schemes such as Employees
Provident fund and Family pension fund are charged to the profit & loss
account as and when incurred.
The company contributes to Group Gratuity policy with SBI Life
Insurance Company Limited and Life Insurance Company Limited, for the
Future Gratuity payment of the employees of the Engineering and EV
Division on actuarial valuation method, whereas in case of Steel
Division liability is provided on the basis of actuarial valuation.
Leave Encashment liability of the company is provided on the basis of
actuarial valuation.
(P) PROVISIONS AND CONTINGENT LIABILITIES:
i. Provisions are recognized when the present obligation of a past
event gives rise to a probable outflow, embodying economic benefits on
settlement and the amount of obligation can be reliably estimated.
ii. Contingent Liabilities are disclosed after a careful evaluation of
facts and legal aspects of the matter involved.
iii. Provisions and Contingent Liabilities are reviewed at each Balance
Sheet date and adjusted to reflect the current best estimates.
(Q) SEGMENT REPORTING
The accounting policies adopted for segment reporting are in line with
the accounting policies of the company with the following additional
policies for the segment reporting:
a) Inter segment revenue have been accounted for, based on the
transaction price agreed to, between segments which is primarily market
led.
b) Revenue and expenses have been identified to segments on the basis
of their relationship to the operating activities of the segment.
Revenue and expenses, which relate to the enterprise as a whole and are
not allocable to segment on a reasonable basis, have been included
under "unallocated corporate expenses".
I. TOTAL FOREIGN EXCHANGE EARNING & OUTGO:
(a) Earning in Foreign Exchange for Export of Goods & Services Rs.
797.53 Millions (Rs. 534.53 Millions in Previous Year)
(b) Expenditures in Foreign Currency for Import of Materials, Traveling
& Others Rs. 3163.67 Millions (Rs. 3204.65 Millions in Previous Year).
Mar 31, 2010
(A) Basis of Preparation of Accounts
The financial statements are prepared under the historical cost
convention (except for revalued assets which are stated at revalued
amount) and in accordance with the generally accepted accounting
principles in India and the provisions of the Companies Act, 1956.
(B) Use of Estimates
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period.
Differences between the actual results and estimates are recognized in
the period in which the results are known/materialized.
(C) Revenue Recognition
Sales are recognized when goods are billed and are accounted net of
trade discounts, rebates, VAT & excise duty (except where Exemption is
availed) but includes, export incentives. Income on services rendered
is accounted for as and when the services are rendered as per the
terms.
(D) Fixed Assets
Fixed Assets are stated at cost (net of availed CENVAT and Taxes),
except revalued assets which are stated at revalued amount and include
assets acquired from other Division of the Company less depreciation.
The costs of fixed assets include expenses incurred during
pre-commercial production/construction period.
(E) Depreciation
Depreciation on all the assets has been provided as per the rates
prescribed in Schedule XIV of the Companies Act,
1956.
Depreciation on all assets has been provided on Straight Line Method
(S.L.M) except assets at Chattral Unit on which
depreciation has been provided on Written Down Value Method (W.D.V.).
Depreciation for Power Plant at Kutch is provided at the rates
applicable for continuous process plant.
The amount of Long Term lease hold land is amortized by equal
installments during the last fifteen years of the
residual lease period.
(F) Investments
Long term investments including investment in subsidiary company are
stated at cost. Diminution in value, if any, which is of a temporary
nature, is not provided.
(G) Inventories
Finished goods are valued at cost or estimated net realizable value
whichever is lower. Raw-material and stores are valued at cost.
Work-in-progress value includes raw-material, labour and appropriate
overheads. The Cost is worked out on weighted average basis.
(H) Research and Development
Revenue expenditure on research and development is charged against the
profit of the year in which it is incurred, except in case of new
projects, where it is accounted for as deferred revenue expenditure and
charged to Profit & Loss account from the commencement of the project
in five years. Capital expenditure on research and development is shown
as an addition to fixed assets.
(I) Foreign Exchange Transactions
The transactions in foreign exchange are accounted at the exchange rate
prevailing on the date of transaction. Foreign Currency monetary
assets and liabilities at the date of balance sheet are translated at
the rate of exchange prevailing on that date.
Gains/losses arising out of fluctuations in the exchange rates are
recognized in Profit and Loss in the period in which they arise except
in respect of imported Fixed Assets where exchange variance is adjusted
in the carrying amount of respective Fixed Assets.
To account for differences between the forward exchange rates and the
exchange rates at the date of transactions, as income or expense over
the life of the contracts, except in respect of liabilities incurred
for acquiring imported Fixed Assets, in which case such differences are
adjusted in the carrying amount of the respective Fixed Assets. To
account for profit/loss arising on cancellation or renewal of forward
exchange contracts as income/expense for the period, except in case of
forward exchange contracts relating to liabilities incurred for
acquiring imported Fixed Assets, in which case such profit/loss are
adjusted in the carrying amount of the respective Fixed Asset.
(J) Taxes on Income
Current tax is determined as the amount of tax payable in respect of
taxable income for the period and the credits computed in accordance
with the provisions of the Income Tax, 1961, and based on the expected
outcome of the assessment/appeals.
MAT credit is recognized as an asset only when and to the extent there
is convincing evidence that the Company will pay normal income tax
during the specified period.
Deferred Tax is recognized, subject to the consideration of prudence,
on timing differences, being the difference between taxable income and
accounting income that originate in one year and are capable of
reversal in one or more subsequent years.
Deferred tax assets are recognized and carried forward to the extent
that there is virtual certainty that sufficient future taxable income
will be available against which such deferred tax assets can be
realized.
(K) Leases
Lease payments for assets taken on operating lease are recognized as an
expense in the revenue / profit and loss account over the lease term.
(L) Borrowing Costs
Borrowing costs are recognized as expenses in the period in which they
are incurred, except to the extent where borrowing costs that are
directly attributable to the acquisition, construction, or production
of an asset till put for its intended use is capitalized as part of the
cost of that asset. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing cost (except as stated in note no 8) is charged to revenue.
(M) Impairment of Assets
The company assesses at each balance sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the company estimates the recoverable amount of the assets. If
such recoverable amount of the assets is less than its carrying amount,
the carrying amount is reduced to its recoverable amount. The reduction
is treated as an impairment loss and is recognized in the profit and
loss account. If at the balance sheet date there is an indication that
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 depreciated historical cost.
(N) Deferred Revenue Expenditure
Expenditure relating to Preliminary Expenses, Capital Issues and
Deferred Revenue Expenses is amortized on straight line basis over a
period of five years.
(O) Retirement / Post Retirement Benefits
Contributions to defined contribution schemes such as Employees
Provident Fund and Family Pension Fund are charged to the profit & loss
account as and when incurred.
The company contributes to Group Gratuity policy with SBI Life
Insurance Company Limited, for the Future Gratuity payment for the
employees of the Engineering and EV Division on actuarial valuation
method, whereas in case of Steel Division liability is provided on the
basis of actuarial valuation.
Leave Encashment liability of the company is provided on the basis of
actuarial valuation.
(P) Provisions and Contingent Liabilities
i. Provisions are recognized when the present obligation of a past
event gives rise to a probable outflow, embodying economic benefits on
settlement and the amount of obligation can be reliably estimated.
ii. Contingent Liabilities are disclosed after a careful evaluation of
facts and legal aspects of the matter involved.
iii. Provisions and Contingent Liabilities are reviewed at each Balance
Sheet date and adjusted to reflect the current best estimates.
(Q) Segment Reporting
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company with the following additional
policies for the segment reporting:
a) Inter segment revenue have been accounted for, based on the
transaction price agreed to, between segments which is primarily market
led.
b) Revenue and expenses have been identified to segments on the basis
of their relationship to the operating activities of the segment.
Revenue and expenses, which relate to the enterprise as a whole and are
not allocable to segment on a reasonable basis, have been included
under "unallocated corporate expenses".
l. Total Foreign Exchange Earning & Outgo
(a) Earning in Foreign Exchange for Export of Goods & Services
Rs. 534.53 Millions (Rs. 2337.02 Millions in Previous Year)
(b) Expenditures in Foreign Currency for Import of Materials,
Traveling & Others Rs. 3204.65 Millions (Rs. 2656.20
Millions in Previous Year).
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Electrotherm (India) Ltd. Corporate Announcements
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