Accounting Policies of Indag Rubber Ltd. Company
Mar 31, 2019
1. Significant accounting policies
1.1 Statement of compliance and basis of preparation and presentation
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (âInd ASâ) notified under the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standard) (Amendment) Rules, 2016. The Company has prepared these financial statements to comply in all material respects with the Accounting Standards notified under Section 133 of the Companies Act, 2013 (âthe Actâ).
The financial statements have been prepared on historical cost basis except for certain financial instruments which are measured at fair value at the end of each reporting period as explained in the accounting policies below.
The financial statements of the Company are presented in Indian Rupee (Rs.) and all values are rounded to the nearest lakh, except when otherwise indicated.
1.2 Basis of classification of Current and Non-Current
All assets and liabilities have been classified as current or non-current as per the Companyâs normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current/non-current classification of assets and liabilities.
Deferred tax assets and liabilities are classified as non-current assets or liabilities.
1.3 Use of estimates
The preparation of these financial statements, in conformity with the recognition and measurement principles of Ind AS, requires the management of the Company to make judgments, estimates and assumptions that affect application of accounting policies and the reported amount of assets and liabilities, disclosures relating to contingent assets and liabilities as at the date of the financial statements and the reported amounts of income and expenses for the periods presented. Actual results may differ from these estimates. Accounting estimates could change from period to period.
Estimates and underlying assumptions are reviewed on ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods are affected. Changes in estimates are reflected in the financial statements in the period in which changes are made, if material, their effects are disclosed in the notes to the financial statements.
Key source of estimation of uncertainty at the date of the financial statements, which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, is in respect of valuation of deferred tax assets, property plant and equipments, impairement of investments, provisions and contingent liabilities.
1.4 Revenue Recognition
Revenue is recognised to the extent 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 received. 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 following specific criteria must also be met before revenue is recognised:
i) Sale of goods
Revenue from sale of goods is recognized when all the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods. Revenue is recognised when collectability of the resulting receivables is reasonably assured.
ii) Sale of services
Revenue from sale of services is recognised as and when the services are rendered and the stage of completion can be measured reliably.
iii) Dividend and interest income
Dividend income from investments is recognised when the right to receive dividend is established by the reporting date.
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time proportion basis, with reference to the principal outstanding and at the effective interest rate, which is the rate that exactly discounts estimated future cash receipts over the expected life of the financial asset to that assetâs net carrying amount on initial recognition.
iv) Export Benefits
Export entitlements in the form of Duty Drawback Scheme, Focus Product Scheme and Merchandise Export from India are recognized in the statement of profit and loss when the right to receive credit as per the terms of the scheme is established in respect of exports made and when there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
1.5 Operating leases
Operating leases comprises lease arrangements where the risks and rewards incidental to ownership of the leased asset substantially vest with the lessor. Operating Lease payments are recognized on a straight-line basis over the lease term in the statement of profit and loss unless the lease agreement explicitly states that increase is on account of inflation.
1.6 Foreign currency
These financial statements are presented in Indian rupees (Rs. / lakh), which is the Companyâs functional and presentation currency.
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Foreign currency denominated monetary assets and liabilities are re-measured into the functional currency at the exchange rate prevailing on the balance sheet date.
Exchange differences are recognized in the Statement of Profit and Loss.
1.7 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are recognized in the Statement of Profit and Loss in the period in which they are incurred.
Borrowing costs include interest and amortisation of ancillary costs incurred in connection with the arrangement of borrowings.
1.8 Employee benefits
(i) Retirement benefit in the form of provident fund (where contributed to the Regional PF Commissioner) is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognises contribution payable to the provident fund scheme as expenditure, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre payment will lead to, for example, a reduction in future payment or a cash refund.
Retirement benefits in the form of provident fund contributed to the Trust set up by the employer is a defined benefit scheme and is provided for on the basis of actuarial valuation of projected unit credit method made at the end of each financial year. The difference between the actuarial valuation of the provident fund of employees at the year end and the balance of own managed funds is provided for as liability in the books by the Company.
(ii) Gratuity liability under the Payment of Gratuity Act is a defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year. The gratuity plan has been funded by policy taken from Life Insurance Corporation of India. Actuarial gains and losses are recognised in full in the other comprehensive income for the period in which they occur. Past service cost both vested and unvested is recognised as an expense at the earlier of
(a) When the plan amendment or curtailment occurs; and
(b) When the entity recognises related restructuring costs or termination benefits.
(iii) Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.
(iv) The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred.
1.9 Income Taxes
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from âprofit before taxâ as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible.
The Companyâs current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.
1.10 Property, plant and equipment
Property, plant and equipment, capital work in progress are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciated them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in the statement of profit and loss as incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of respective asset if the recognition criteria for a provision are met.
An item of Property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the assets.
Gains or losses arising from disposal or retirement of property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
1.11 Depreciation on property, plant and equipment
Leasehold land is amortised on a straight line basis over the period of lease i.e., 95/99 years. Freehold land is not depreciated.
Furniture Fixture contains leasehold improvement which is amortized over the period of 10 years.
Depreciation on property, plant and equipment including stores and spares transferred from inventory is calculated on a straight-line basis using the rates arrived at, based on the useful lives estimated by the management, which are equal to the useful lives prescribed under Schedule II to the Companies Act, 2013.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at the end of each reporting period with the effect of any change in estimate accounted for on a prospective basis.
1.12 Intangible assets
Intangible assets purchased are measured at cost as of the date of acquisition less accumulated amortisation and accumulated impairment, if any.
Intangible assets consist of rights under licensing agreement and software licenses which are amortised over license period which equates the useful life ranging between 2-4 years on a straight-line basis or actual life of license whichever is earlier.
1.13 Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or cash-generating unitâs (CGU) net selling price and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.
The Company bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Companyâs cash-generating units to which the individual assets are allocated.
Impairment losses, including impairment on inventories, are recognized in the statement of profit and loss. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
1.14 Inventories
Inventories are valued as follows:
Raw materials, stores and spares and packing materials
Lower of cost and net realizable value. 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. Cost is determined on moving weighted average method.
Work in progress and finished goods (own manufactured)
Lower of cost and net realizable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost is determined on monthly moving weighted average basis.
Lower of cost and net realizable value. Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on moving weighted average basis.
Traded goods
Net realisable value is the estimated selling price in the ordinary course of business less estimated cost of completion and estimated costs necessary to make the sale.
1.15 Provisions
Provision is recognized when the Company has a present obligation (legal or constructive) as a result of past event and 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. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
1.16 Financial instruments
i. Classification, initial recognition and measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets other than equity instruments are classified into two categories: financial assets at fair value through profit or loss and at amortised cost. Financial assets that are equity instruments are classified at fair value through other comprehensive income. Financial liabilities are classified into financial liabilities at fair value through profit or loss.
Financial instruments are recognized on the balance sheet when the Company becomes a party to the contractual provisions of the instrument.
Initially, a financial instrument is recognized at its fair value. Transaction costs directly attributable to the acquisition or issue of financial instruments are recognized in determining the carrying amount, if it is not classified as at fair value through profit or loss. Subsequently, financial instruments are measured according to the category in which they are classified.
Financial assets at amortised cost: Financial assets having contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding and that are held within a business model whose objective is to hold such assets in order to collect such contractual cash flows are classified in this category. Subsequently, these are measured at amortized cost using the effective interest rate method less any impairment losses.
Equity investments at fair value through other comprehensive income: These include financial assets that are equity instruments and are irrevocably designated as such upon initial recognition. Subsequently, these are measured at fair value and changes therein are recognized directly in other comprehensive income, net of applicable income taxes.
Dividends from these equity investments are recognized in the Statement of Profit and Loss when the right to receive payment has been established. When the equity investment is derecognized, the cumulative gain or loss in equity is transferred to retained earnings.
Financial assets at fair value through profit or loss: Financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition. The transaction costs that are directly attributable to the acquisition of financial assets, which are measured at fair value through profit or loss, are immediately recognised in profit or loss.
Cash and cash equivalents: Cash and cash equivalents comprise cash at banks and on hand and shortterm deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
Equity instruments: An equity instrument is any contract that evidences residual interests in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Financial liabilities at fair value through profit or loss: Derivatives, including embedded derivatives separated from the host contract, unless they are designated as hedging instruments, for which hedge accounting is applied, are classified into this category. These are measured at fair value and changes in fair value are recognized in the Statement of Profit and Loss.
Financial guarantee contracts: These are initially measured at fair value and are subsequently measured at the higher of the amount of loss allowance determined or the amount initially recognized, less the cumulative amount of income recognized.
Other financial liabilities: These are measured at amortized cost using the effective interest rate method.
ii. Determination of fair value:
The fair value of a financial instrument on initial recognition is normally the transaction price (fair value of the consideration given or received). Subsequent to initial recognition, the Company determines the fair value of financial instruments, that are quoted in active markets, using the quoted bid prices (financial assets held) or quoted ask prices (financial liabilities held) and using valuation techniques for other instruments. Valuation techniques include discounted cash flow method and other valuation models.
iii. Derecognition of financial assets and financial liabilities:
The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expires or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.
Financial liabilities are derecognised when these are extingushed, which is when the obligation is discharged, cancelled or expired.
iv. Impairment of financial assets:
The Company recognizes a loss allowance for expected credit losses on a financial asset that is at amortized cost. Loss allowance in respect of financial assets is measured at an amount equal to life time expected credit losses and is calculated as the difference between their carrying amount and the present value of the expected future cash flows discounted at the original effective interest rate.
v. Derivative financial instruments
The Company does not hold any derivative and embedded derivative financial instruments.
1.17 Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability, if market participants would take those characteristics into account, when pricing the asset or liability at the measurement date.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
- Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
- Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
- Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
1.18 Segment reporting
The Operating Segment have been reported in a manner consistent with the internal reporting provided to the Chief Financial Officer and the Chief Executive Officer who are the Chief Operating Decision Maker (CODM).The Company is engaged in the manufacturing of the Precured Tread Rubber, Bonding Repair and Extrusion Gum and Rubber Cement, which are used for retreading of tyres and providing tyre retreading service. These products do not have any different risk and returns and thus the CODM performs review based on one operating segment.
The company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the company as a whole.
1.19 Investments in subsidiary & Joint Venture
Investments in subsidiary & Joint Venture are measured at cost as per Ind AS-27 - Separate financial statements.
1.20 Earnings per share
Basic earnings per share are computed by dividing profit/loss for the period by the weighted average number of shares outstanding during the year. Partly paid up shares are included as fully paid equivalents according to the fraction paid up. Diluted earnings per share are computed using the weighted average number of shares and dilutive potential shares, except where the result would be anti-dilutive.
1.21 Government grants and subsidies
Grants and subsidies from the government are recognized when there is reasonable assurance that (i) the Company will comply with the conditions attached to them, and (ii) the grant/ subsidy will be received.
Where the grant or subsidy relates to revenue, it is recognized as income on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs, which they are intended to compensate. Where the grant relates to an asset, it is recognized as deferred income and released to income in equal amounts over the expected useful life of the related asset.
1.22 Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
1.23 Recent accounting pronouncements
Ind AS 116, Leases: The Ministry of Corporate Affairs has notified the Ind AS 116, Leases which will be effective from April 1, 2019. Ind AS 116 would replace the existing leases standard Ind AS 17. The standard sets out the principles for the recognition, measurement, presentation and disclosures for both parties to a contract, i.e. the lessee and the lessor. Ind AS 116 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. Currently, operating lease expenses are charged to the statement of profit and loss. The Company is currently evaluating the requirements of Ind AS 116 on the financial statements.
Amendment to Ind AS 12, Income Taxes: On March 30, 2019, the Ministry of Corporate Affairs has notified limited amendments to Ind AS 12 âIncome Taxesâ. The amendments require an entity to recognise the income tax consequences of dividends as defined in Ind AS 109 when it recognises a liability to pay a dividend. The income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity shall recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events. The amendment will come into force for accounting periods beginning on or after April 1, 2019. The Company is evaluating the effect of the above in the financial statements.
Appendix C to Ind AS 12, Uncertainty over Income Tax Treatments: On March 30, 2019, Ministry of Corporate Affairs (âMCAâ) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2019 containing Appendix C to Ind AS 12, Uncertainty over Income Tax Treatments which clarifies the application and measurement requirements in Ind AS 12 when there is uncertainty over income tax treatments. The current and deferred tax asset or liability shall be recognized and measured by applying the requirements in Ind AS 12 based on the taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates determined by applying this appendix. The amendment is effective for annual periods beginning on or after April 1, 2019. The Company is evaluating the effect of the above in the financial statements.
Amendment to Ind AS 19, Employee Benefits: On March 30, 2019, the Ministry of Corporate Affairs has notified limited amendments to Ind AS 19 âEmployee Benefitsâ in connection with accounting for plan amendments, curtailments and settlements. The amendments require an entity to use updated assumptions to determine current service cost and net interest for the remainder of the period after a plan amendment, curtailment or settlement and to recognise in profit or loss as part of past service cost, or a gain or loss on settlement, any reduction in a surplus, even if that surplus was not previously recognised because of the impact of the asset ceiling. The amendment will come into force for accounting periods beginning on or after April 1, 2019. The Company is evaluating the effect of the above in the financial statements.
a. There are no customers who represent more than 5% of the total balance of trade receivables.
b. The credit period generally allowed on sales of goods and services varies from 21 to 60 days.
c. The provision for doubtful debts at the reporting period are analysed by the Company on case to case basis.
d. Movement in the credit loss allowances:
Cash credit from banks are secured by first pari passu charge on entire current assets including stocks lying at the Companyâs factory at Nalagarh and other stock points, on book debts and on entire fixed assets of the Company, present and future.
The Company has not utilised Cash Credit as on 31 March,2019 and 31 March,2018.
Mar 31, 2018
1. Significant accounting policies
1.1 Statement of compliance and basis of preparation and presentation
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (âInd ASâ) notified under the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standard) (Amendment) Rules, 2016. The Company has prepared these financial statements to comply in all material respects with the Accounting Standards notified under Section 133 of the Companies Act, 2013 (âthe Actâ).
The Company had prepared its financial statements in accordance with the requirements of previous GAAP up to the year ended 31 March, 2017, which includes Standards notified under the Companies (Accounting Standards) Rules, 2006. The date of transition to Ind AS is 1 April, 2016.
Previous periods financial statements have been restated to Ind AS. In accordance with Ind AS 101 First-time Adoption of Indian Accounting Standard, the Company has presented a reconciliation from the presentation of financial statements under Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 (âPrevious GAAPâ) to Ind AS of Shareholdersâ equity as at 31 March, 2017 and 1 April, 2016 and of the comprehensive net income for the year ended 31 March, 2017.
The financial statements have been prepared on historical cost basis except for certain financial instruments which are measured at fair value at the end of each reporting period as explained in the accounting policies below.
The financial statements of the Company are presented in Indian Rupee (Rs.) and all values are rounded to the nearest lakh, except when otherwise indicated.
1.2 Basis of classification of Current and Non-Current
All assets and liabilities have been classified as current or non-current as per the Companyâs normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current/non-current classification of assets and liabilities.
Deferred tax assets and liabilities are classified as non-current assets or liabilities.
1.3 Use of estimates
The preparation of these financial statements, in conformity with the recognition and measurement principles of Ind AS, requires the management of the Company to make judgments, estimates and assumptions that affect application of accounting policies and the reported amount of assets and liabilities, disclosures relating to contingent assets and liabilities as at the date of the financial statements and the reported amounts of income and expenses for the periods presented. Actual results may differ from these estimates. Accounting estimates could change from period to period.
Estimates and underlying assumptions are reviewed on ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods are affected. Changes in estimates are reflected in the financial statements in the period in which changes are made, if material, their effects are disclosed in the notes to the financial statements.
Key source of estimation of uncertainty at the date of the financial statements, which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, is in respect of valuation of deferred tax assets, Property plant and equipments, impairement of investments, provisions and contingent liabilities.
1.4 Revenue Recognition
Revenue is recognised to the extent 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 received. 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 following specific criteria must also be met before revenue is recognised:
i) Sale of goods
Revenue from sale of goods is recognized when all the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods. Revenue is recognised when collectability of the resulting receivables is reasonably assured.
ii) Sale of services
Revenue from sale of services is recognised as and when the services are rendered and the stage of completion can be measured reliably.
iii) Dividend and interest income
Dividend income from investments is recognised when the right to receive dividend is established by the reporting date.
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time proportion basis, with reference to the principal outstanding and at the effective interest rate, which is the rate that exactly discounts estimated future cash receipts over the expected life of the financial asset to that assetâs net carrying amount on initial recognition.
1.5 Operating leases
Operating leases comprises lease arrangements where the risks and rewards incidental to ownership of the leased asset substantially vest with the lessor. Operating Lease payments are recognized on a straight-line basis over the lease term in the statement of profit and loss unless the lease agreement explicitly states that increase is on account of inflation.
1.6 Foreign currency
These financial statements are presented in Indian rupees (Rs. / lakh), which is the Companyâs functional and presentation currency.
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Foreign currency denominated monetary assets and liabilities are re-measured into the functional currency at the exchange rate prevailing on the balance sheet date.
Exchange differences are recognized in the Statement of Profit and Loss.
1.7 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are recognized in the Statement of Profit and Loss in the period in which they are incurred.
Borrowing costs include interest and amortisation of ancillary costs incurred in connection with the arrangement of borrowings.
1.8 Employee benefits
(i) Retirement benefit in the form of provident fund (where contributed to the Regional PF Commissioner) is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognises contribution payable to the provident fund scheme as expenditure, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre payment will lead to, for example, a reduction in future payment or a cash refund.
Retirement benefits in the form of provident fund contributed to the Trust set up by the employer is a defined benefit scheme and is provided for on the basis of actuarial valuation of projected unit credit method made at the end of each financial year. The difference between the actuarial valuation of the provident fund of employees at the year end and the balance of own managed funds is provided for as liability in the books by the Company.
(ii) Gratuity liability under the Payment of Gratuity Act is a defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year. The gratuity plan has been funded by policy taken from Life Insurance Corporation of India. Actuarial gains and losses are recognised in full in the other comprehensive income for the period in which they occur. Past service cost both vested and unvested is recognised as an expense at the earlier of
(a) When the plan amendment or curtailment occurs; and
(b) When the entity recognises related restructuring costs or termination benefits.
(iii) Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.
(iv) The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. The Company presents the entire leave as a current liability in the balance sheet, since it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
1.9 Income Taxes
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from âprofit before taxâ as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible.
The Companyâs current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.
1.10 Property, plant and equipment
For transition to Ind AS the Company has elected to continue with the carrying value of all of its plant and equipment (including freehold land) as at the transition date i.e. April 01, 2016 measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
Property, plant and equipment, capital work in progress are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciated them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in the statement of profit and loss as incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of respective asset if the recognition criteria for a provision are met.
An item of Property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the assets.
Gains or losses arising from disposal or retirement of property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
1.11 Depreciation on property, plant and equipment
Leasehold land is amortised on a straight line basis over the period of lease i.e., 95/99 years. Freehold land is not depreciated.
Depreciation on property, plant and equipment including stores and spares transferred from inventory is calculated on a straight-line basis using the rates arrived at, based on the useful lives estimated by the management, which are equal to the useful lives prescribed under Schedule II to the Companies Act, 2013.
Estimated useful lives of the assets are as follows:
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at the end of each reporting period with the effect of any change in estimate accounted for on a prospective basis.
1.12 Intangible assets
The Company has elected to continue with the carrying value of all of its intangible assets as at the transition date i.e. April 01, 2016 measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
Intangible assets purchased are measured at cost as of the date of acquisition less accumulated amortisation and accumulated impairment, if any.
Intangible assets consist of rights under licensing agreement and software licenses which are amortised over license period which equates the useful life ranging between 2-4 years on a straight-line basis or actual life of license whichever is earlier.
1.13 Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or cash-generating unitâs (CGU) net selling price and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.
The Company bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Companyâs cash-generating units to which the individual assets are allocated. Impairment losses, including impairment on inventories, are recognized in the statement of profit and loss. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
1.14 Inventories
Inventories are valued as follows:
Raw materials, stores and spares and packing Lower of cost and net realizable value. However, materials and materials 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. Cost is determined on moving weighted average method.
Work in progress and finished goods Lower of cost and net realizable value. Cost includes direct (own manufactured) materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost is determined on monthly moving weighted average basis.
Traded goods Lower of cost and net realizable value. Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on moving weighted average basis.
Net realisable value is the estimated selling price in the ordinary course of business less estimated cost of completion and estimated costs necessary to make the sale.
1.15 Provisions
Provision is recognized when the Company has a present obligation (legal or constructive) as a result of past event and 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. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
1.16 Financial instruments
i. Classification, initial recognition and measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets other than equity instruments are classified into two categories: financial assets at fair value through profit or loss and at amortised cost. Financial assets that are equity instruments are classified at fair value through other comprehensive income. Financial liabilities are classified into financial liabilities at fair value through profit or loss.
Financial instruments are recognized on the balance sheet when the Company becomes a party to the contractual provisions of the instrument.
Initially, a financial instrument is recognized at its fair value. Transaction costs directly attributable to the acquisition or issue of financial instruments are recognized in determining the carrying amount, if it is not classified as at fair value through profit or loss. Subsequently, financial instruments are measured according to the category in which they are classified.
Financial assets at amortised cost: Financial assets having contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding and that are held within a business model whose objective is to hold such assets in order to collect such contractual cash flows are classified in this category. Subsequently, these are measured at amortized cost using the effective interest rate method less any impairment losses.
Equity investments at fair value through other comprehensive income: These include financial assets that are equity instruments and are irrevocably designated as such upon initial recognition. Subsequently, these are measured at fair value and changes therein are recognized directly in other comprehensive income, net of applicable income taxes.
Dividends from these equity investments are recognized in the Statement of Profit and Loss when the right to receive payment has been established. When the equity investment is derecognized, the cumulative gain or loss in equity is transferred to retained earnings.
Financial assets at fair value through profit or loss: Financial assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through other comprehensive income on initial recognition. The transaction costs that are directly attributable to the acquisition of financial assets, which are measured at fair value through profit or loss, are immediately recognised in profit or loss.
Cash and cash equivalents: Cash and cash equivalents comprise cash at banks and on hand and shortterm deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
Equity instruments: An equity instrument is any contract that evidences residual interests in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Financial liabilities at fair value through profit or loss: Derivatives, including embedded derivatives separated from the host contract, unless they are designated as hedging instruments, for which hedge accounting is applied, are classified into this category. These are measured at fair value and changes in fair value are recognized in the Statement of Profit and Loss.
Financial guarantee contracts: These are initially measured at fair value and are subsequently measured at the higher of the amount of loss allowance determined or the amount initially recognized, less the cumulative amount of income recognized.
Other financial liabilities: These are measured at amortized cost using the effective interest rate method.
ii. Determination of fair value:
The fair value of a financial instrument on initial recognition is normally the transaction price (fair value of the consideration given or received). Subsequent to initial recognition, the Company determines the fair value of financial instruments, that are quoted in active markets, using the quoted bid prices (financial assets held) or quoted ask prices (financial liabilities held) and using valuation techniques for other instruments. Valuation techniques include discounted cash flow method and other valuation models.
iii. Derecognition of financial assets and financial liabilities:
The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expires or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.
Financial liabilities are derecognised when these are extingushed, which is when the obligation is discharged, cancelled or expired.
iv. Impairment of financial assets:
The Company recognizes a loss allowance for expected credit losses on a financial asset that is at amortized cost. Loss allowance in respect of financial assets is measured at an amount equal to life time expected credit losses and is calculated as the difference between their carrying amount and the present value of the expected future cash flows discounted at the original effective interest rate.
v. Derivative financial instruments
The Company does not hold any derivative and embedded derivative financial instruments.
1.17 Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability, if market participants would take those characteristics into account, when pricing the asset or liability at the measurement date.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
- Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
- Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
- Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
1.18 Segment reporting
The Operating Segment have been reported in a manner consistent with the internal reporting provided to the Chief Financial Officer and the Chief Executive Officer who are the Chief Operating Decision Maker (CODM).The Company is engaged in the manufacturing of the Precured Tread Rubber, Bonding Repair and Extrusion Gum and Rubber Cement, which are used for retreading of tyres and providing tyre retreading service. These products do not have any different risk and returns and thus the CODM performs review based on one operating segment.
The company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the company as a whole.
1.19 Investments in subsidiary
Investments in subsidiary are measured at cost as per Ind AS-27 - Separate financial statements.
1.20 Earnings per share
Basic earnings per share are computed by dividing profit/loss for the period by the weighted average number of shares outstanding during the year. Partly paid up shares are included as fully paid equivalents according to the fraction paid up. Diluted earnings per share are computed using the weighted average number of shares and dilutive potential shares, except where the result would be anti-dilutive.
1.21 Government grants and subsidies
Grants and subsidies from the government are recognized when there is reasonable assurance that (i) the Company will comply with the conditions attached to them, and (ii) the grant/ subsidy will be received.
Where the grant or subsidy relates to revenue, it is recognized as income on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs, which they are intended to compensate. Where the grant relates to an asset, it is recognized as deferred income and released to income in equal amounts over the expected useful life of the related asset.
1.22 Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
1.23 Recent accounting pronouncements
i) IND AS 115- Revenue from contract with customers: On March 28, 2018, Ministry of Corporate Affairs (âMCAâ) has notified the Ind AS 115, Revenue from Contract with Customers.
ii) Appendix B to Ind AS 21, foreign currency transactions and advance consideration: On March 28, 2018, Ministry of Corporate Affairs (âMCAâ) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21.
The Company has not considered above pronouncements in these financial statements as the same will come into force from April 1, 2018.
Mar 31, 2017
1. Basis of preparation
These abridged financial statements have been prepared in accordance with the requirements of Rule 10 of the Companies (Accounts) Rules, 2014. These abridged financial statements have been prepared on the basis of the complete set of financial statements for the year ended March 31, 2017.
2.[2.1] Change in Accounting Policy
Pre-revised AS 10 required that stand-by and servicing equipment should normally be capitalized as plant, property and equipment. It required that machinery spares are usually treated as inventory and charged to profit or loss on consumption. However, spares parts that can be only used in connection with a particular item of plant, property and equipment, and whose use is expected to be irregular, are capitalized. Such spare parts are depreciated over a period, not exceeding the remaining useful life of the principal asset.
According to AS 10 (R), all spare parts, stand-by and servicing equipment qualify as plant, property and equipment (PPE) if they meet the definition of PPE i.e. if the Company intends to use these during more than a period of 12 months. The spare parts capitalized in this manner are depreciated as per AS 10 (R)
The Company has changed its accounting policy of plant, property and equipment to comply with AS 10 (R). The Company has applied transitional provisions, which requires previously recognized stores and spares as inventory should be capitalized as a PPE at its carrying amount and depreciated prospectively over its remaining useful life. However, this change has no material impact on the profit for the year.
3.[26] Segment Information
The Company is engaged in the manufacturing of the Procured Tread Rubber, Bonding Repair and Extrusion Gum and Rubber Cement, which are used for retreading of tyres. These products do not have any different risk and returns and thus the Company has only one business segment.
Segment Information
Geographical Segments
The Company has organized its manufacturing operations into two major geographical segments : Domestic (in India) and Overseas (Outside India).
The analysis of geographical segments is based on the geographical location of the customers.
The geographical segments considered for disclosure are as follows:
- Sales within India include sales to customers located within India.
- Sales outside India include sales to customers located outside India.
The following table shows the distribution of the Company''s consolidated revenue and trade receivables by geographical market, regardless of where the goods were produced:
The Company has common fixed assets in India for producing goods/providing services to domestic as well as overseas market. Hence, separate figures for fixed assets/ addition to fixed assets have not been furnished.
4. [27] Related party disclosures
The Company has the following related parties in accordance with Accounting Standard- 18 âRelated Party Disclosuresâ notified under Section 133 of the Companies Act, 2013.
Mar 31, 2015
(The note numbers appearing in the brackets "[ ]" are as they
appear in the Complete Set of Financial Statements)
1. Basis of preparation
These abridged financial statements have been prepared in accordance
with the requirements of Rule 7A of the Companies (Central
Government's) General Rules and Forms, 1956 and clause 32 of the
Listing Agreement. These abridged financial statements have been
prepared on the basis of the complete set of financial statements for
the year ended March 31,2015.
Mar 31, 2013
A) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgements, estimates and assumptions
that affect the reported amount of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting year. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amount of assets or
liabilities in future years.
b) Tangible fixed assets
Fixed assets are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any. The cost comprises purchase
price, borrowing costs if capitalisation criteria are met and directly
attributable cost of bringing the asset to its working condition for
the intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price.
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 year 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.
c) Depreciation on tangible fixed assets
Depreciation on fixed assets is provided using straight line method and
written down value method at the rates based on the estimated useful
life of the asset, which is in accordance with the rates specified
in Schedule XIV of the Companies Act, 1956.
i) Cost of leasehold land is being amortised over the lease period of
95/99 years.
ii) Assets costing less than or equal to Rs. 5,000 are depreciated
fully in the year of purchase.
iii) Depreciation on Buildings and Plant & Machinery has been provided
on SLM at the rates prescribed in Schedule XIV to the Companies Act,
1956.
iv) Depreciation on all other fixed assets has been provided on WDV at
the rates prescribed in Schedule XIV to the Companies Act, 1956.
v) Depreciation on the amount of adjustment to fixed assets on account
of capitalisation of insurance spares is provided over the remaining
useful life of related assets.
d) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortisation and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalised development costs, are not capitalised and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
Costs relating to software, software licenses and website development,
which are acquired, are capitalised and amortised on a straight-line
basis over their four year useful lives or actual period of license,
whichever is lower.
e) Leases
Where the Company is lessee
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognised as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
f) Borrowing costs
Borrowing cost includes interest and amortisation of ancillary costs
incurred in connection with the arrangement of borrowings.
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 respective asset. All other borrowing costs are
expensed in the period they occur.
g) Impairment of tangible and intangible assets
The Company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists or
when annual impairment testing for an asset is required, the Company
estimates the asset''s recoverable amount. An asset''s recoverable amount
is the higher of an asset''s or cash-generating unit''s (CGU) net selling
price and its value in use. The recoverable amount is determined for an
individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. In determining net
selling price, recent market transactions are taken into account, if
available. If no such transactions can be identified, an appropriate
valuation model is used.
The Company bases its impairment calculation on detailed budgets and
forecast calculations which are prepared separately for each of the
Company''s cash-generating units to which the individual assets are
allocated. These budgets and forecast calculations are generally
covering a period of five years. For longer periods, a long term growth
rate is calculated and applied to project future cash flows after the
fifth year.
Impairment losses, including impairment on inventories, are recognised
in the statement of profit and loss.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer
exist or may have decreased. If such indication exists, the Company
estimates the asset''s or cash-generating unit''s recoverable amount. A
previously recognised impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset''s
recoverable amount since the last impairment loss was recognised. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss
been recognised for the asset in prior years. Such reversal is
recognised in the statement of profit and loss unless the asset is
carried at a revalued amount, in which case the reversal is treated as
a revaluation increase.
h) Investments
Investments, which are readily realisable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long - term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties. If an investment is acquired, or
partly acquired, by the issue of share or other securities, the
acquisition cost is the fair value of the securities issued, if an
investment is acquired in exchange for another asset, the acquisition
is determined by reference to the fair value of the asset given up or
by reference to the fair value of the investment acquired, which is
more clearly evident.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis. Long
- term investments are carried at cost. However, provision for
diminution in value is made to recognise a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between is carrying amount
and net disposal proceeds is charged or credited to the statement of
profit and loss.
i) Inventories
Inventories are valued as follows:
Raw materials, stores and spares and packing materials
Lower of cost and net realisable value. 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. Cost is
determined on moving weighted average method.
Work in progress and finished goods (own manufactured)
Lower of cost and net realisable value. Cost includes direct materials
and labour and a proportion of manufacturing overheads based on normal
operating capacity. Cost is determined on monthly moving weighted
average basis.
Lower of cost and net realisable value. Cost includes cost of purchase
and other costs incurred in bringing the Traded goods inventories to
their present location and condition. Cost is determined on moving
weighted average basis.
Net realisable value is the estimated selling price in the ordinary
course of business less estimated cost of completion and estimated
costs necessary to make the sale.
j) Revenue Recognition
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. The following specific recognition criteria must
also be met before revenue is recognised:
Sale of goods
Revenue from sale of goods is recognised when all the significant risks
and rewards of ownership of the goods have been passed to the buyer,
usually on delivery of the goods. The Company collects sales taxes and
value added taxes (VAT) on behalf of the government and, therefore,
these are not economic benefits flowing to the Company. Hence, they are
excluded from revenue.
Sale of services (Income from services)
Revenue from sale of services is recognised as and when the services
are rendered.
Interest
Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
Export Benefits
Export entitlements in the form of Duty Drawback Scheme and Duty
Entitlement Passbook Scheme are recognised in the statement of profit
and loss when the right to receive credit as per the terms of the
scheme is established in respect of exports made and when there is no
significant uncertainty regarding the ultimate collection of the
relevant export proceeds.
Dividends
Dividend income is recognised when the Company''s right to receive
dividend is established at the reporting date.
k) Foreign currency translation
Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Non-monetary items, which are measured at fair value or other similar
valuation denominated in a foreign currency, are translated using the
exchange rate at the date when such value was determined.
Exchange differences
Exchange differences arising on the settlement of monetary items, or on
reporting such monetary items at rates different from those at which
they were initially recorded during the year, or reported in previous
financial statements, are recognised as income or as expenses in the
year in which they arise.
l) Retirement and other benefits
(i) Retirement benefits in the form of provident fund (where
contributed to the Regional PF Commissioner) is a defined contribution
scheme.The Company has no obligation, other than the contribution
payable to the provident fund. The Company recognises contribution
payable to the provident fund scheme as an expenditure, when an
employee renders the related service. If the contribution payable to
the scheme for service received before the balance sheet date exceeds
the contribution already paid, the deficit payable to the scheme is
recognised as a liability after deducting the contribution already
paid. If the contribution already paid exceeds the contribution due for
services received before the balance sheet date, then excess is
recognised as an asset to the extent that the pre payment will lead to,
for example, a reduction in future payment or a cash refund.
Retirement benefits in the form of provident fund contributed to the
Trust set up by the employer is a defined benefit scheme and the
payments are charged to the statement of profit and loss of the year
when the payments to the Trust are due. Shortfall in the funds, if any,
is adequately provided for by the Company.
(ii) Gratuity liability under the Payment of Gratuity Act is a defined
benefit obligation and is provided for on the basis of an actuarial
valuation on projected unit credit method made at the end of each
financial year. The gratuity plan has been funded by policy taken from
Life Insurance Corporation of India. Actuarial gains and losses for
defined benefit plan are recognised in full in the year in which they
occur in the statement of profit and loss.
(iii) Accumulated leave, which is expected to be utilized within the
next 12 months, is treated as short- term employee benefit. The Company
measures the expected cost of such absences as the additional amount
that it expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
(iv) The Company treats accumulated leave expected to be carried
forward beyond twelve months, as long-term employee benefit for
measurement purposes. Such long-term compensated absences are provided,
based on the actuarial valuation using the projected unit credit method
at the year-end. Actuarial gains / losses are immediately taken to the
statement of profit and loss and are not deferred.
m) Income taxes
Tax expense comprises of current tax and deferred tax. Current income
tax is measured at the amount expected to be paid to the income tax
authorities in accordance with the Income-tax Act,1961 enacted in India
and tax laws prevailing in the respective tax jurisdictions where the
Company operates. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted, at the reporting
date.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date.
Deferred tax liabilities are recognised for all taxable timing
differences. Deferred tax assets are recognised for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realised. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognised only if there is virtual certainty supported
by convincing evidence that such deferred tax assets can be realised
against future taxable profits.
In the situation where the Company is entitled to a tax holiday under
the Income Tax Act,1961 enacted in India or tax laws prevailing in the
respective tax jurisdictions where it operates, no deferred tax (asset
or liability) is recognised in respect of timing differences which
reverse during the tax holiday period, to the extent the company''s
gross total income is subject to the deduction during the tax holiday
period. Deferred tax in respect of timing differences which reverse
after the tax holiday period is recognised in the year in which the
timing differences originate. However, the Company restricts
recognition of deferred tax assets to the extent that it has become
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available against which such
deferred tax assets can be realised. For recognition of deferred
taxes, the timing differences which originate first are considered to
reverse first.
At each reporting date, the Company re-assesses unrecognised deferred
tax assets. It recognises unrecognised deferred tax assets to the
extent that it has become reasonably certain or virtually certain, as
the case may be, that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company write- down the carrying amount of a
deferred tax asset to the extent that it is no longer reasonably
certain or virtually certain, as the case may be, that sufficient
future taxable income will be available against which deferred tax
asset can be realised. Any such write-down is reversed to the extent
that it becomes reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set off current tax assets against
current tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the same taxable entity and the same taxation
authority.
Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The Company recognises MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period, i.e. the period for which MAT credit is allowed to be
carried forward. In the year in which the Company recognises MAT credit
as an asset in accordance with the Guidance Note on Accounting for
Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as "MAT Credit Entitlement." The
Company reviews the "MAT credit entitlement" asset at each reporting
date and write down the asset to the extent the Company does not have
convincing evidence that it will pay normal tax during the specified
period.
n) Segment reporting
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole.
o) Earnings per share
Basic earning per share is calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
p) Provisions
A provision is recognised when the Company has a present obligation as
a result of 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.
Provisions are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
reporting date. These estimates are reviewed at each reporting date and
adjusted to reflect the current best estimates.
q) Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
r) Government grants and subsidies
Grants and subsidies from the government are recognised when there is
reasonable assurance that (i) the Company will comply with the
conditions attached to them and (ii) the grant/subsidy will be
received.
When the grant or subsidy relates to revenue, it is recognised as
income on a systematic basis in the statement of profit and loss over
the periods necessary to match them with the related costs, which they
are intended to compensate. Where the grant or subsidy relates to an
asset, its value is deducted in arriving at the carrying amount of the
related asset.
Government grants of the nature of promoter''s contribution are credited
to capital reserve and treated as a part of the shareholder''s funds.
Mar 31, 2012
A) Change in presentation and disclosure of financial statements
During the year ended 31 March 2012, the revised Schedule VI notified
under the Companies Act 1956, has become applicable to the Company, for
preparation and presentation of its financial statements. The adoption
of revised Schedule VI does not impact recognition and measurement
principles followed for preparation of financial statements. However,
it has significant impact on presentation and disclosures made in the
financial statements. The Company has also reclassified the previous
year figures in accordance with the requirements applicable in the
current year.
b) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management's best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
c) Tangible fixed assets
Fixed assets are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any. The cost comprises purchase
price, borrowing costs if capitalization criteria are met and directly
attributable cost of bringing the asset to its working condition for
the intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price.
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 recognized in the statement of profit and
loss when the asset is derecognized.
d) Depreciation on tangible fixed assets
Depreciation on fixed assets is provided using straight line method and
written down value method at the rates based on the estimated useful
life of the asset, which is in accordance with the rates specified in
Schedule XIV of the Companies Act, 1956.
i) Cost of leasehold land is being amortised over the lease period of
95/99 years.
ii) Assets costing less than or equal to Rs. 5,000 are depreciated
fully in the year of purchase.
iii) Depreciation on Buildings and Plant & Machinery has been provided
on SLM at the rates prescribed in Schedule XIV to the Companies Act,
1956.
iv) Depreciation on all other fixed assets has been provided on WDV at
the rates prescribed in Schedule XIV to the Companies Act, 1956.
v) Depreciation on the amount of adjustment to fixed assets on account
of capitalisation of insurance spares is provided over the remaining
useful life of related assets.
e) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
Costs relating to software, software licenses and website development,
which are acquired, are capitalized and amortized on a straight-line
basis over their four year useful lives or actual period of license,
whichever is lower.
f) Leases
Where the Company is lessee
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
g) Borrowing costs
Borrowing cost includes interest and amortization of ancillary costs
incurred in connection with the arrangement of borrowings.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
h) Impairment of tangible and intangible assets
The Company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the Company
estimates the asset's recoverable amount. An asset's recoverable amount
is the higher of an asset's or cash-generating unit's (CGU) net selling
price and its value in use. The recoverable amount is determined for an
individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre- tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. In determining net
selling price, recent market transactions are taken into account, if
available. If no such transactions can be identified, an appropriate
valuation model is used.
The Company bases its impairment calculation on detailed budgets and
forecast calculations which are prepared separately for each of the
company's cash-generating units to which the individual assets are
allocated. These budgets and forecast calculations are generally
covering a period of five years. For longer periods, a long term growth
rate is calculated and applied to project future cash flows after the
fifth year.
Impairment losses of continuing operations, including impairment on
inventories, are recognized in the statement of profit and loss.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer
exist or may have decreased. If such indication exists, the Company
estimates the asset's or cash-generating unit's recoverable amount. A
previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset's
recoverable amount since the last impairment loss was recognized. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss
been recognized for the asset in prior years. Such reversal is
recognized in the statement of profit and loss unless the asset is
carried at a revalued amount, in which case the reversal is treated as
a revaluation increase.
i) Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long - term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties. If an investment is acquired, or
partly acquired, by the issue of share or other securities, the
acquisition cost is the fair value of the securities issued, if an
investment is acquired in exchange for another asset, the acquisition
is determined by reference to the fair value of the asset given up or
by reference to the fair value of the investment acquired, which is
more clearly evident.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis. Long
- term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between is carrying amount
and net disposal proceeds is charged or credited to the statement of
profit and loss.
j) Inventories
Inventories are valued as follows:
Raw materials, stores and spares, packing materials and traded goods
Lower of cost and net realizable value. 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. Cost is
determined on moving weighted average method.
Work in progress and finished goods (own manufactured)
Lower of cost and net realizable value. Cost includes direct materials
and labour and a proportion of manufacturing overheads based on normal
operating capacity. Cost is determined on monthly moving weighted
average basis.
Net realisable value is the estimated selling price in the ordinary
course of business less estimated cost of completion and estimated
costs necessary to make the sale.
k) Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognized:
Sale of goods
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership of the goods have been passed to the buyer,
usually on delivery of the goods. The Company collects sales taxes and
value added taxes (VAT) on behalf of the government and, therefore,
these are not economic benefits flowing to the Company. Hence, they are
excluded from revenue.
Sale of services (Income from services)
Revenue from sale of services is recognized as and when the services
are rendered.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
Export Benefits
Export entitlements in the form of Duty Drawback Scheme and Duty
Entitlement Passbook Scheme are recognized in the statement of profit
and loss when the right to receive credit as per the terms of the
scheme is established in respect of exports made and when there is no
significant uncertainty regarding the ultimate collection of the
relevant export proceeds.
Dividends
Dividend income is recognized when the Company's right to receive
dividend is established by the reporting date.
l) Foreign currency translation Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Non-monetary items, which are measured at fair value or other similar
valuation denominated in a foreign currency, are translated using the
exchange rate at the date when such value was determined.
Exchange differences
Exchange differences arising on the settlement of monetary items, or on
reporting such monetary items at rates different from those at which
they were initially recorded during the year, or reported in previous
financial statements, are recognized as income or as expenses in the
year in which they arise.
m) Retirement and other benefits
(i) Retirement benefits in the form of provident fund (where
contributed to the Regional PF Commissioner) is a defined contribution
scheme. The contributions to the provident fund are charged to the
statement of profit and loss for the year when the contributions to the
fund are due. The Company has no obligation, other than the
contribution payable to the provident fund.
Retirement benefits in the form of provident fund contributed to the
Trust set up by the employer is a defined benefit scheme and the
payments are charged to the statement of profit and loss of the year
when the payments to the Trust are due. Shortfall in the funds, if any,
is adequately provided for by the Company.
(ii) Gratuity liability under the Payment of Gratuity Act is a defined
benefit obligation and is provided for on the basis of an actuarial
valuation on projected unit credit method made at the end of each
financial year. The gratuity plan has been funded by policy taken from
Life Insurance Corporation of India. Actuarial gains and losses for
defined benefit plan are recognized in full in the period in which they
occur in the statement of profit and loss.
(iii) Accumulated leave, which is expected to be utilized within the
next 12 months, is treated as short-term employee benefit. The Company
measures the expected cost of such absences as the additional amount
that it expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
(iv) The Company treats accumulated leave expected to be carried
forward beyond twelve months, as long-term employee benefit for
measurement purposes. Such long-term compensated absences are provided
for based on the actuarial valuation using the projected unit credit
method at the year-end. Actuarial gains/losses are immediately taken
to the statement of profit and loss and are not deferred.
n) Income taxes
Tax expense comprises of current tax and deferred tax. Current income
tax is measured at the amount expected to be paid to the income tax
authorities in accordance with the Income-tax Act, 1961 enacted in
India and tax laws prevailing in the respective tax jurisdictions where
the Company operates. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted, at the
reporting date.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that such deferred tax assets can be realized
against future taxable profits.
In the situation where the Company is entitled to a tax holiday under
the Income Tax Act, 1961 enacted in India or tax laws prevailing in the
respective tax jurisdictions where it operates, no deferred tax (asset
or liability) is recognized in respect of timing differences which
reverse during the tax holiday period, to the extent the company's
gross total income is subject to the deduction during the tax holiday
period. Deferred tax in respect of timing differences which reverse
after the tax holiday period is recognized in the year in which the
timing differences originate. However, the Company restricts
recognition of deferred tax assets to the extent that it has become
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. For recognition of deferred taxes,
the timing differences which originate first are considered to reverse
first.
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax assets to the
extent that it has become reasonably certain or virtually certain, as
the case may be, that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes- down the carrying amount of a
deferred tax asset to the extent that it is no longer reasonably
certain or virtually certain, as the case may be, that sufficient
future taxable income will be available against which deferred tax
asset can be realized. Any such write-down is reversed to the extent
that it becomes reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set off current tax assets against
current tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the same taxable entity and the same taxation
authority.
Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The Company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to
be carried forward. In the year in which the Company recognizes MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as "MAT Credit Entitlement." The
Company reviews the "MAT credit entitlement" asset at each reporting
date and writes down the asset to the extent the Company does not have
convincing evidence that it will pay normal tax during the specified
period.
o) Segment reporting
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole.
p) Earnings per share
Basic earning per share is calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
q) Provisions
A provision is recognized when the Company has a present obligation as
a result of 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.
Provisions are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
reporting date. These estimates are reviewed at each reporting date and
adjusted to reflect the current best estimates.
r) Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank and in hand and short-term investments with an
original maturity of three months or less.
s) Government grants and subsidies
Grants and subsidies from the government are recognized when there is
reasonable assurance that (i) the Company will comply with the
conditions attached to them, and (ii) the grant/subsidy will be
received.
When the grant or subsidy relates to revenue, it is recognized as
income on a systematic basis in the statement of profit and loss over
the periods necessary to match them with the related costs, which they
are intended to compensate. Where the grant or subsidy relates to an
asset, its value is deducted in arriving at the carrying amount of the
related asset.
Government grants of the nature of promoters' contribution are credited
to capital reserve and treated as a part of the shareholders' funds.
Mar 31, 2011
(a) Basis of preparation
The financial statements have been prepared to comply in all material
respects with the accounting standards notified by the Companies
Accounting Standards Rules. 2006 (as amended) and the relevant
provisions of the Companies Act, 1956. The financial statements have
been prepared under the historical cost convention on an accrual basis.
The accounting policies have been consistently applied by the Company
and are consistent with those used in the previous year.
(b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to maKe estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
year. Although these estimates are based upon management's best
knowledge of current events and actions, actual results could differ
from these estimates.
(c) Fixed Assets
Fixed assets are stated at cost less accumulated depreciation and
impairment losses, if any. Cost comprises the purchase price and any
directly attributable cost of bringing the asset to its working
condition for its intended use. Borrowing costs relating to acquisition
of fixed assets which takes substantial period of time to get ready for
its Intended use are also included to the extent they relate to the
period till such assets are ready to be put to use.
(d) Depreciation/Amortisation
Depreciation on Fixed Assets is provided using Straight Line Method and
Written Down Value Method at the rates based on the estimated useful
life of the asset, which is in accordance with the rates specified in
Schedule XIV of the Companies Act. 1956.
i) Cost of leasehold land is being amortised over the lease period of
95/99 years.
ii) Assets costing less than or equal to Rs. 5,000 are depreciated
fully in the year of purchase.
iii) Costs relating to software, software licenses and website
development, which are acquired, are capitalized and amortized on a
straight-line basis over their four year useful lives or actual period
of license whichever is lower.
iv) Depreciation on Buildings and Plant & Machinery has been provided
on SLM at the rates prescribed in Schedule XIV to the Companies Act,
1956.
v) Depreciation on all other fixed assets has been provided on WDV at
the rates prescribed in Schedule XIV to the Companies Act, 1956,
(e) Impairment
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use,the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and risks
specific to the asset.
(f) Leases
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the profit and toss account on a straight-line basis over the lease
term.
(g) Inventories
Inventories are valued as follows:
Raw materials, stores and spares, Lower of cost and net realizable
packing materials and traded value.However and other item
goods held for use in the production
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. Cost is
determined on moving weighted
average method.
Work in progress and finished Lower of cost and net realizable
goods (own manufactured) value. Cost include direct
materials and labour and a
proportion manufacturing
overheads based on normal
operation capacity. Cost is
determined on monthly moving
weighted average basis.
Net realisable value is the estimated selling price in the ordinary
course of business less estimated cost of completion and estimated
costs necessary to make the sate.
(h) Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured
Sale of Goods
Revenue is recognised when the significant risks and rewards of
ownership of the goods have passed to the buyer
Sale of Services(income from services)
Revenue from sale of services is recognized as and when the services
are rendered.
Interest
Revenue is recognized on a time proportion basis taking into account
the amount outstanding and the rate applicable.
Export Benefits
Export Entitlements in the form of Duty Drawback Scheme and Duty
Entitlement Passbook Scheme are recognized in the Profit and Loss
Account when the right to receive credit as per the terms of the scheme
is established in respect of exports made and when there is no
significant uncertainty regarding the ultimate collection of the
relevant export proceeds.
Dividends
Revenue is recognized when the right to receive payment is established
by the balance sheet date.
(i) Foreign currency translation
(i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(iii) Exchange Differences
Exchange differences arising on the settlement of monetary items, or on
reporting such Monetary items at rates different from those at which
they were initially recorded during the year, or reported in previous
financial statements, are recognized as Income or a expenses in the
year in which they arise.
(j) Retirement and other benefits
i.Retirement benefits in the form of Provident Fund (where contributed
to the Regional PF Commissioner)is a defined contribution scheme and
the contributions are charged to the profit and loss account of the
year when the contributions to the fund are due. There are no other
obligations other than the contribution payable to the respective
authorities.
Retirement benefits in the form of Provident Fund contributed to the
Trust set up by the employer is a defined benefits scheme and the
payments are charged to the Profit and Loss Account of the year when
the payments to the Trust are due. Shortfall in the funds, if any, Is
adequately provided for by the Company. . .
ii.Gratuity liability is a defined benefit obligation and is provided
for on the basis of an ctuarial valuation on projected unit credit
method carried by an independent actuary made at the end of each
financial year.
iii.Short term compensated absences are provided for based on
estimates. Long term Compensated absences are provided for based on
actuarial valuation on projected unit credit method earned by an
independent actuary as at the end of each year.
iv. Actuarial gains/losses are immediately taken to profit and loss
account and are not deferred.
(K) Income taxes
Tax expense comprises of current and deferred tax. Current income tax
is measured at the amount expected to be paid to the income tax
authorities in accordance with the Income-tax Act, 1961 enacted in
India. Deferred income tax reflects the impact of current year liming
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets and deferred tax liabilities are offset, if a legally
enforceable right exists to set off current tax assets against current
lax liabilities and the deferred tax assets and deferred tax
Liabilities relate to the taxes on income Leived by same governing
taxation laws. Deferred tax assets are recognized only to the extent
that there is reasonable certainty that,sufficient future taxable
income will be available against such deferred tax assets are
recognized only if there is virtual certainty supported by convincing
evidence that such deferred tax assets can be realized against future
taxable profits.
At each balance sheet date, the Company re-assesses unrecognized
defferred tax assets. It recognizes unrecognized deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be that Sufficient future taxable income will be
available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be,that sufficient future taxable
income will be available against which deferred tax asset can be
realized.Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
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 to
during the specified period. In the year in which the Minimum
Alternative to (MAT) credit becomes eligible to be recognized as an
asset in accordance with the recommendations contained in guidance note
issued by the institute of Chartered Accountants of India,the said
asset is created by way of a credit to the profit and loss account and
shown as MAT Credit Entitlement. The Company reviews the same at each
balance sheet date and writes down the carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the
effect that Company will pay normal income to during the specified
period.
(l) Borrowing Cost
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of he respective asset. All other borrowing costs are
expensed in Ihe period they occur. Borrowing costs consist of interest
and other costs that an entity incurs in connection with the borrowing
of funds.
(m) Segment Reporting Policies
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole.
(n) Earnings Per Share
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year The
weiqhted average number of equity shares outstanding during the year
are adjusted for events of bonus issue: bonus element ina rights issue
to existing shareholders;share split;and reverse share split
(consolidation of shares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
(o) Provisions
A provision is recognized when an enterprise has a present obligation
as a result of past event,it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and are adjusted to reflect the current best
estimates.
(p) Cash and cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash at
bank and in hand, cheques in hand and short term investments with an
original maturity of three months or less.
(q) Government grants and subsidies
Grants and subsidies from the government are recognized when there is
reasonable assurance that the grant/subsidy will be received and all
attaching conditions will be complied with.
When the grant or subsidy relates to an expense item, it is recognized
as income over the periods necessary to match them on a systematic
basis to the costs, which it is intended to compensate. Where the grant
or subsidy relates to an asset, its value Is deducted in arriving at
the carrying amount of the related asset.Government grants of the
nature of promoters' contribution are credited to capital reserve and
treated as a part of shareholders' funds
Mar 31, 2010
(a) Basis of preparation
The financial statements have been prepared to comply in all material
respects with the notified accounting standards by Companies Accounting
Standards Rules, 2006 (as amended) and the relevant provisions of the
Companies Act, 1956. The financial statements have been prepared under
the historical cost convention on an accrual basis. The accounting
policies have been consistently applied by the Company and except for
the change in accounting policy discussed more fully below, are
consistent with those used in the previous year.
(b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
year. Although these estimates are based upon managements best
knowledge of current events and actions, actual results could differ
from these estimates.
(c) Change in Accounting Policy
For reflection of better position of stocks in the financial statements
and to follow uniform basis of valuation of all kinds of stocks at the
year end, the Company has changed its method of ascertaining the cost
of materials and overheads for the purpose of valuation of inventory of
work in progress and finished goods from annual weighted average method
to monthly moving weighted average method.
Had the Company continued to use the earlier basis of accounting, cost
of materials and overheads for aforesaid inventory, the profit after
tax would have been lower by Rs. 19,402 and value of inventory of work
in progress and finished goods would have been lower by Rs. 2,782 and
Rs. 16,620 respectively, consequently surplus of profit and loss
account would have been lower by Rs. 19,402.
(d) Fixed Assets
Fixed assets are stated at cost less accumulated depreciation and
impairment losses, if any. Cost comprises the purchase price and any
directly attributable cost of bringing the asset to its working
condition for its intended use. Borrowing costs relating to acquisition
of fixed asset which takes substantial period of time to get ready for
its intended use are also included to the extent they relate to the
period till such assets are ready to be put to use.
(e) Depreciation /Amortisation
Depreciation on Fixed Assets is provided using Straight Line Method and
Written Down Value Method at the rates based on the estimated useful
life of the asset, which is in accordance with the rates specified in
Schedule XIV of the Companies Act, 1956.
i) Cost of leasehold land is being amortised over the lease period.
ii) Assets costing less than or equal to Rs. 5,000 are depreciated
fully in the year of purchase.
iii) Costs relating to software, software licenses and website
development, which are acquired, are capitalized and amortized on a
straight-line basis over their four year useful lives or actual period
of license whichever is lower. iv) Depreciation on Buildings and Plant
& Machinery has been provided on SLM at the rates prescribed in
Schedule XIV to the Companies Act, 1956.
v) Depreciation on all other fixed assets has been provided on WDV at
the rates prescribed in Schedule XIV to the Companies Act, 1956.
(f) Impairment
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital.
(g) Leases
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalized at the lower of the fair value and present value of the
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are charged directly against income. Lease
management fees, legal charges and other initial direct costs are
capitalized.
If there is no reasonable certainty that the Company will obtain the
ownership by the end of the lease item, capitalized leased assets are
depreciated over the shorter of the estimated useful life of the asset
or the lease term.
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased term, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss account on a straight-line basis over the lease
term.
(h) Inventories
Inventories are valued as follows:
Raw materials, components, stores and spares, packing materials and
traded goods
Lower of cost and net realizable value. 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. Cost is
determined on moving weighted average method.
Work in progress and finished goods (own manufactured)
Lower of cost and net realizable value. Cost includes direct materials
and labour and a proportion of manufacturing overheads based on normal
operating capacity. Cost is determined on monthly moving weighted
average basis.
Net realisable value is the estimated selling price in the ordinary
course of business less estimated cost of completion and estimated
costs necessary to make the sale.
(i) Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Sale of Goods
Revenue is recognised when the significant risks and rewards of
ownership of the goods have passed to the buyer. Sales Tax and VAT
deducted from turnover (gross) are the amount that is included in the
amount of turnover (gross) and not the entire amount of liability
arises during the year.
Sale of Services (Income from services)
Revenue from sale of services is recognized as and when the services
are rendered.
Interest
Revenue is recognized on a time proportion basis taking into account
the amount outstanding and the rate applicable except interest on
delayed payments from customers which is accounted on acceptance basis
on account of uncertainties involved.
Export Benefits
Export Entitlements in the form of Duty Drawback Scheme and Duty
Entitlement Passbook Scheme are recognized in the Profit and Loss
Account when the right to receive credit as per the terms of the scheme
is established in respect of exports made and when there is no
significant uncertainty regarding the ultimate collection of the
relevant export proceeds.
Dividends *
Revenue is recognised when the right to receive payment is established
by the balance sheet date.
(j) Foreign currency translation
(i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined. (iii) Exchange Differences
Exchange differences arising on the settlement of monetary items, or on
reporting such monetary items of Company at rates different from those
at which they were initially recorded during the year, or reported in
previous financial statements, are recognized as income or as expenses
in the year in which they arise. (k) Retirement and other benefits
i. Retirement benefits in the form of Provident Fund (where contributed
to the Regional PF Commissioner) is a defined contribution scheme and
the contributions are charged to the Profit and Loss Account of the
year when the contributions to the fund are due. There are no other
obligations other than the contribution payable to the respective
authorities.
Retirement benefits in the form of Provident Fund contributed to Trust
set up by the employer is a defined benefit scheme and the payments are
charged to the Profit and Loss Account of the year when the payments to
the Trust are due. Shortfall in the funds, if any, is adequately
provided for by the Company.
ii. Gratuity liability is a defined benefit obligation and is provided
for on the basis of an actuarial valuation on projected unit credit
method carried by an independent actuary made at the end of each
financial year.
iii. Short term compensated absences are provided for on based on
estimates. Long term compensated absences are provided for based on
actuarial valuation on projected unit credit method carried by an
independent actuary as at the end of each financial year.
iv. Actuarial gains/losses are immediately taken to profit and loss
account and are not deferred.
(l) Income taxes
Tax expense comprises of current and deferred tax. Current income tax
is measured at the amount expected to be paid to the income tax
authorities in accordance with the Income-tax Act, 1961 enacted in
India. Deferred income tax reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. In situations
where the Company has unabsorbed depreciation or carry forward tax
losses, all deferred tax assets are recognized only if there is virtual
certainty supported by convincing evidence that such deferred tax
assets can be realized against future taxable profits.
At each balance sheet date the Company re-assesses unrecognized
deferred tax assets. It recognizes unrecognized deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be that sufficient future taxable income will be
available against which suqh deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
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. In the year in which the Minimum
Alternative tax (MAT) credit becomes eligible to be recognized as an
asset in accordance with the recommendations contained in guidance note
issued by the Institute of Chartered Accountants of India, the said
asset is created by way of a credit to the profit and loss account and
shown as MAT Credit Entitlement. The Company reviews the same at each
balance sheet date and writes down the carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the
effect that Company will pay normal Income Tax during the specified
period.
(m) Earnings Per Share
Basic earnings per share are calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year. The
weighted average numbers of equity shares outstanding during the year
are adjusted for events of bonus issue; bonus element in a rights issue
to existing shareholders; share split; and reverse share split
(consolidation of shares).
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
(n) Provisions
A provision is recognized when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and are adjusted to reflect the current best
estimates.
(o) Cash and cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash at
bank and in hand, cheques in hand and short term investments with an
original maturity of three months or less.
(p) Government grants and subsidies
Grants and subsidies from the government are recognized when there is
reasonable assurance that the grant/subsidy will be received and all
attaching conditions will be complied with.
When the grant or subsidy relates to an expense item, it is recognized
as income over the periods necessary to match them on a systematic
basis to the costs, which it is intended to compensate. Where the grant
or subsidy relates to an asset, its value is deducted in arriving at
the carrying amount of the related asset. Government grants of the
nature of promoters contribution are credited to capital reserve and
treated as a part of shareholders funds.
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