Accounting Policies of Five Core Electronics Ltd. Company

Mar 31, 2018

1 Significant accounting policies

1.01 Basis of accounting and preparation of financial statements

These financial statements have been prepared in accordance with the Generally Accepted Accounting Principle (GAAP) in India under the historical cost convention on the accrual basis of accounting. Pursuant to section 133 of the Companies Act, 2013 read under Rule 7 of the companies (Accounts) Rules, 2014, till the standards of accounting or any addendum thereto are prescribed by central government in consultation and recommendation of the National Financial Regulatory Authority, the existing Accounting Standards notified under the Companies Act,1956 shall continue to apply. Consequently, These financial statements have been prepared to comply in all material, aspects with the accounting standards notified under section 211(3C) [ Companies (Accounting Standards ) rules, 2006,as amended ] and other relevant provisions of the companies Act, 2013.The accounting policies adopted in the preparation of financial statements are consistent with those of previous year.

2.02 Use of estimates

The preparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialise.

2.03 Inventories

i. Inventories are valued on first -in-first out basis as under

a. Raw Material At cost or net realizable value, whichever is less

b. Work in progress At cost

c. Stores & Spares At cost

d. Finished Goods At cost or net realizable value whichever is lower

ii. Appropriate share of overheads are allocated over the work in progress, manufactured/ Processed finished goods.

iii. Appropriate provisions are made for slow and non moving inventories to write down the carrying value.

2.04 Cash and cash equivalents (for purposes of Cash Flow Statement)

Cash comprises cash on hand, Cheques in hand and fixed deposits with banks. Cash equivalents are short-term balances, highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

2.05 Cash flow statement

Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.

2.06 Fixed Assets

Assets are capitalised at cost, net of accumulated depreciation and accumulated impairment losses, if any and inclusive of all costs incurred to bring the assets to their location and working condition upto the date the assets are put to use.

Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.

Gains or losses arising from derecognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the asset is derecognised.

2.07 Depreciation and amortisation

Depreciation on fixed assets other than Land is provided on the written down value of fixed assets at the rates calculated in accordance with the lifes prescribed by the Schedule II to the Companies Act, 2013 Depreciation on the acquisition/purchase of assets during the year has been provided on pro-rata basis according to the period each asset was put to use during the year.

2.08 Revenue recognition

a. Revenue in respect of Sale of Products is recognized on dispatch of goods to the Customers, which coincides with the transfer of Property to the buyer.

b. Service Income is recognized as and when the services are performed in accordance with the terms of the Contract.

c. Insurance claims are recognized for on their acceptance & receipts.

d. Duty Draw back are accounted on accrual basis. Difference if any at the time duty drawback is cleared by the Government authorities is duly accounted on actual basis.

e. DEPB / Focus are accounted for as Income at the time of export on accrual basis.

2.09 Foreign currency transactions and translations

Initial recognition

Transactions in foreign currencies entered into by the Company are accounted at the exchange rates prevailing on the date of the transaction or at rates that are closely approximate the rate at the date of the transaction.

Measurement of foreign currency monetary items at the Balance Sheet date

Foreign currency monetary items of the Company outstanding at the Balance Sheet date are restated at the year-end rates.

Treatment of exchange differences

Exchange differences arising on settlement / restatement of foreign currency monetary assets and liabilities of the Company are recognised as income or expense in the Statement of Profit and Loss.

2.10 Investments

Long-term investments (excluding investment properties), are carried individually at cost less provision for diminution, other than temporary, in the value of such investments. Current investments are carried individually, at the lower of cost and fair value. Costs of investments include acquisition charges such as brokerage, fees and duties.

2.11 Employee benefits

Retirement benefit in the form of provident fund & other funds is a defined contribution scheme. The company has no obligation, other than the contribution payable to the respective fund. The company recognizes contribution payable to the gratuity & other funds as an expenditure, when an employee renders the related service and is charged to statement of profit and loss.

The company operates defined benefit plans for its employees, viz., gratuity. The costs of providing benefits under the gratuity plan are determined on the basis of actuarial valuation at each year-end. Actuarial gains and losses are recognised in full in the period in which they occur in the statement of profit and loss.

2.12 Segment reporting

The Company identifies primary segments based on the dominant source, nature of risks and returns and the internal organisation and management structure. The operating segments are the segments for which separate financial information is available and for which operating profit/loss amounts are evaluated regularly by the executive Management in deciding how to allocate resources and in assessing performance.

The Company has only one business, disclosure of segment-wise information is not applicable under accounting Standard 17 - ''Segmental Information'' (AS-17) notified by the Companies (Accounting Standards) Rules, 2006. There is no geographical segment to be reported since all the operations are undertaken in India.

2.13 Leases

Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating leases. Lease rentals under operating leases are recognised in the Statement of Profit and Loss on a straight-line basis.

2.14 Earnings per share

Basic earnings per share is computed by dividing the profit / (loss) after tax by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit / (loss) after tax as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. Dilutive potential equity shares are determined independently for each period presented.

2.15 Taxes on income

Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of the Income Tax Act, 1961.

Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognised as an asset in the Balance Sheet when it is probable that future economic benefit associated with it will flow to the Company.

Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantially enacted as at the reporting date. Deferred tax liabilities are recognised for all timing differences. Deferred tax assets in respect of unabsorbed depreciation and carry forward of losses are recognised only if there is virtual certainty that there will be sufficient future taxable income available to realize such assets. Deferred tax assets are recognised for timing differences of other items only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realized. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each Balance Sheet date for their reliability.

2.16 Provisions and contingencies

A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed in the Notes.

2.17 Miscellaneous Expenditure

Preliminary expenses included under the above heads is being amortized over the period of 5 years i.e. 1/5th expenses is charged every year to the Profit & Loss A/c.

2.18 Impairment of assets

The carrying values of assets / cash generating units at each Balance Sheet date are reviewed for impairment. If any indication of impairment exists, the recoverable amount of such assets is estimated and impairment is recognised, if the carrying amount of these assets exceeds their recoverable amount. The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor. When there is indication that an impairment loss recognised for an asset in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of Profit and Loss.

2.19 Borrowing Costs

Borrowing costs that are 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 its intended use. Other borrowing costs are recognized as expenses in the period in which they are incurred.