Mar 31, 2018
(a) Basis of preparation
(i) Statement of compliance
These Ind AS financial statements ("financial statements") have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 and the Companies (India Accounting Standards) Amendment Rules, 2016 notified under section 133 of Companies Act, 2013, (the ''Act'') and other relevant provisions of the Act.
The Company''s financial statements upto and for the year ended 31 March 2017 were prepared in accordance with the Companies (Accounting Standards) Rules, 2006, notified under section 133 of Companies Act, 2013, (the ''Act'') and other relevant provisions of the Act.
As these are the Company''s first financial statements prepared in accordance with Indian Accounting Standards (Ind AS), Ind AS 101, First time adoption of Indian Accounting Standards has been applied. The transition was carried out from Indian Accounting Principles generally accepted in India as prescribed under section 133 of the Act, read with rule 7 of the Companies (Accounts) Rules, 2014 (IGAAP), which was the previous GAAP. An explanation of how the transition to Ind AS has affected the previously reported financial position, financial performance and cash flow of the Company is provided in Note 31.
The financial statements were authorized for issue by the Company''s Board of Directors on 23 May 2018.
(ii) Functional and presentation currency
The functional currency of the Company is the Indian Rupee. These financial statements are presented in Indian Rupees. All amounts have been rounded-off to the nearest lakhs, up to two places of decimal, unless otherwise indicated.
(iv) Use of estimates and judgments
The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results could differ from those estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Any revisions to accounting estimates are recognized prospectively in current and future periods.
Judgments
Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements is included in the following notes:
- Note 3 and 2 (b) - Assessment of useful life and residual value of Property, plant and equipment
- Note 3 and 2 (c) - Assessment of useful life of Intangible assets
- Note 17 A, 17 B, 32 and 2 (f) (g) - Provisions and contingent liabilities
- Note 40 and 2 (L) - Income taxes
- Note 15 (A), 16 (B) and 2 (m) Lease classification including determining whether an arrangement contains a lease
- Note 8, 2 (d) - Inventory valuation Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant impact on the financial statements are as mentioned below:
Note 17 (A), 17(B) and 38 - measurement of defined benefit obligations: key actuarial assumptions
Note 17 (A), 17 (B) and 32 - recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources.
Note 2 (o) (ii) - Impairment test of non-financial assets: key assumptions underlying recoverable amounts Note 2 (o) (i)- Impairment of financial assets
Note 39 (B) and 2 (a) (v)- Fair value measurement of financial instruments
Note 18 and 2 (L) -Recognition of deferred tax assets: Availability of future taxable profits against which such deferred tax assets can be adjusted
(v) Measurement of fair values
A number of the Company''s accounting policies and disclosures require measurement of fair values, for both financial and non-financial assets and liabilities. The Company has an established control framework with respect to measurement of fair values.
Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.
- Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.
- Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
When measuring the fair value of an asset or liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the changes have occurred.
Further information about the assumptions made in measuring fair values is included in the following note: Note 39 (B) - financial instruments
(b) Property, plant and equipment (''PPE'')
(i) Recognition and measurement
Property, plant and equipment are measured at cost, which includes capitalised borrowing costs, less accumulated depreciation and/ or accumulated impairment losses, if any.
Cost of an item of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable costs of bringing the item to its working condition for its intended use and estimated costs of dismantling and removing the item and restoring the site on which it is located.
The cost of a self-constructed item of property, plant and equipment comprises the cost of materials and direct labor, any other costs directly attributable to bringing the item to working condition for its intended use, and estimated costs of dismantling and removing the item and restoring the site on which it is located.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.
Capital work-in-progress comprises the cost of PPE that are not ready for their intended use at the reporting date.
Advances paid towards acquisition of PPE outstanding at each Balance sheet date, are shown under other non-current assets.
(ii) Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment recognised as at 1 April 2016, measured as per the previous GAAP, and use that carrying value as the deemed cost of such property, plant and equipment (refer Note 31)
(iii) Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
(iv) Depreciation
Depreciation is calculated on cost of items of property, plant and equipment less their estimated residual values over their estimated useful lives using the straight-line method, and is recognised in the statement of profit and loss. Assets acquired under finance leases are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term. Freehold land is not depreciated.
Depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate. Based on technical evaluation and consequent advice, the management believes that its estimates of useful lives as given above best represent the period over which management expects to use these assets.
Depreciation on additions (disposals) is provided on a pro-rata basis i.e. from (upto) the date on which asset is ready for use (disposed of).
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
(c) Other intangible assets
(i) Intangible assets acquired separately:
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.
(ii) Internally generated: Research and development
Expenditure on research activities is recognised in profit or loss as incurred.
Development expenditure is capitalised as part of the cost of the resulting intangible asset only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. Otherwise, it is recognised in profit or loss as incurred. Subsequent to initial recognition, the asset is measured at cost less accumulated amortisation and/ or any accumulated impairment losses.
(iii) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in statement of profit or loss as incurred.
(iv) Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its intangible assets recognised as at 1 April 2016, measured as per the previous GAAP, and use that carrying value as the deemed cost of such intangible assets. (Refer note 31)
(v) Amortisation
Amortisation is calculated to write off the cost of intangible assets less their estimated residual values over their estimated useful lives using the straight-line method, and is included in depreciation and amortisation in Statement of Profit and Loss.
The estimated useful lives are as follows:
- Software 3-10 years
- Technical know-how 2.5-10 years
Amortisation method, useful lives and residual values are reviewed at the end of each financial year and adjusted if appropriate.
(vi) Derecognition
Intangible assets are derecognised on disposal or when no future economic benefits are expected from their use and disposal.
(d) Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the moving weighted average method, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their present location and condition. In the case of manufactured inventories and work-in-progress, cost includes an appropriate share of fixed production overheads based on normal operating capacity.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
The net realisable value of work-in-progress is determined with reference to the selling prices of related finished products.
Raw materials, components and other supplies held for use in the production of finished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realisable value. The comparison of cost and net realisable value is made on an item-by-item basis.
(e) Employee benefits
Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid e.g., salaries and wages, short term compensated absences and bonus etc., if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the amount of obligation can be estimated reliably.
Post-employment benefits Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions and will have no legal or constructive obligation to pay further amounts. The Company makes specified contributions towards these schemes such as Superannuation Fund, Provident Fund, Employee State Insurance and other funds as determined under relevant schemes and/ or statue. Obligations for contributions to defined contribution plans are recognised as an employee benefit expense in profit or loss in the periods during which the related services are rendered by employees.
Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. Gratuity is a defined benefit plan. The liability or asset recognised in the balance sheet in respect of gratuity plan is the present value of the defined benefits obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
Remeasurements of the net defined benefit liability i.e Gratuity, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised in other comprehensive income (''OCI''). The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefits that relates to past service (''past service cost'' or ''past service gain'') or the gain or loss on curtailment is recognised immediately in profit or loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
Other long term employee benefits
Compensated absences
The Company''s net obligations in respect of long-term employee benefits other than post-employment benefits is the amount of future benefits that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any related assets is deducted. Obligations such as those related to compensated absences are measured on the basis of an annual independent actuarial valuation using the projected unit cost credit method. Remeasurement gains or losses are recognised in profit or loss in the period in which they arise.
Termination benefits
Termination benefits are recognised as an expense when, as a result of past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
(f) Provisions (other than for employee benefits)
A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recognised at the best estimate of the expenditure required to settle the present obligation at the balance sheet date. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. Expected future operating losses are not provided for.
(i) Warranties
A provision for warranties is recognised when the underlying products or services are sold. The provision is based on technical evaluation, historical warranty data and a weighing of all possible outcomes by their associated probabilities. The timing of outflows will vary as and when warranty claim will arise.
(ii) Onerous contracts
A contract is considered to be onerous when the expected economic benefits to be derived by the Company from the contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision for an onerous contract is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract.
(g) Contingent liabilities
A contingent liability exists when there is a possible but not probable obligation, or a present obligation that may, but probably will not, require an outflow of resources, or a present obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resources is remote.
Contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits to the entity. Contingent assets are recognized when the realisation of income is virtually certain, then the related asset is not a contingent asset and its recognition is appropriate.
A contingent asset is disclosed where an inflow of economic benefits is probable.
(h) Commitments
Commitments include the amount of purchase order / contracts (net of advances) issued to parties for completion of assets. Provisions, contingent liabilities, contingent assets and commitments are reviewed at each reporting date.
(i) Revenue
Sale of products
Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing effective control over goods sold, or managerial involvement to the degree associated with ownership of goods, and the amount of revenue and its related cost can be measured reliably. Revenue from sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts, incentives and liquidated damages. This inter alia involves discounting of the consideration due to the present value if payment extends beyond normal credit terms. Revenues include excise duty till 30 June 2017 (goods and service tax (GST) applicable w.e.f. 1 July 2017) and are shown net of GST, sales tax, value added tax and applicable discounts and allowances, if any.
The timing of transfers of risks and rewards varies depending on the individual terms of sale as follows:
- For sales of vehicles to dealers, usually such transfer occurs when the vehicles are received by the dealer, however, for some international shipments transfer occurs from the date of bill of lading
- For government sales, transfer occurs when the confirmation for receipt of vehicles is given by customer
Rendering of services
Consideration received for services not yet rendered and for which Company has an obligation to perform is recognised as revenue received in advance and subsequently recognised as revenue in the statement of profit and loss over the period of the contract.
Other operating revenue
Export benefits are accounted for on accrual basis.
Revenue from royalty is recognized on accrual basis as per the terms of agreement entered into with the respective parties.
Revenue from dealer support services is recognized on accrual basis as per the terms of agreement entered into with the Dealers.
Other income
Government grants
Government grants are not recognised until there is reasonable assurance that the Company will comply with the conditions attached to them and that the grants will be received. Government grants are recognised in profit or loss on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the balance sheet and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.
(j) Recognition of interest income or expense
Interest income or expense is recognised using the effective interest method.
The ''effective interest rate'' is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument to:
- The gross carrying amount of the financial asset; or
- The amortised cost of the financial liability.
In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortised cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.
(k) Borrowing costs
Borrowing costs includes interest and other costs (including exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost) incurred in connection with the borrowing of funds. Borrowing costs directly attributable to acquisition or construction of an asset which necessarily take a substantial period of time to get ready for their intended use are capitalised as part of the cost of that asset. Other borrowing costs are recognised as an expense in the period in which they are incurred.
(l) Income-tax
Income tax comprises current and deferred tax. It is recognised in statement of profit or loss except to the extent that it relates to an item recognised directly in equity or in other comprehensive income.
Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. It is measured using tax rates (and tax laws) enacted or substantively enacted by the reporting date.
Current tax assets and current tax liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes. Deferred tax asset is recognised for the carry forward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised. Therefore, the Company recognises a deferred tax asset only to the extent that it has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which such deferred tax asset can be realized.
Deferred tax assets - unrecognised or recognised, are reviewed at each reporting date and are recognised / reduced to the extent that it is probable / no longer probable respectively that the related tax benefits will be realized.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and deferred tax liabilities are offset only if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authorities.
Minimum Alternative Tax (''MAT'') under the provisions of the Income-tax Act, 1961 is recognised as current tax in the Statement of Profit and Loss. The credit available under the Act in respect of MAT paid is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the period for which the MAT credit can be carried forward for set-off against the normal tax liability. MAT credit recognised as an asset is reviewed at each balance sheet date and written down to the extent the aforesaid convincing evidence no longer exists.
(m) Leases
(i) Determining whether arrangement contains a lease
At inception of an arrangement, it is determined whether the arrangement is or contains a lease.
At inception or on reassessment of the arrangement that contains a lease, the payments and other consideration required by such an arrangement are separated into those for the lease and those for other elements on the basis of their relative fair values. If it is concluded for a finance lease that it is impracticable to separate payments reliably, then an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. The liability is reduced as payments are made and an imputed finance cost on the liability is recognised using the incremental borrowing rate.
(ii) Assets held under lease
Leases of property, plant and equipment that transfer to the Company substantially all the risks and rewards of ownership are classified as finance leases. The leased assets are measured initially at an amount equal to the lower of their fair value and the present value of minimum lease payments. Subsequent to initial recognition, the assets are accounted for in accordance with the accounting policy applicable to similar owned assets.
Assets held under leases that do not transfer to the company substantially all the risk and rewards of ownership (i.e. operating leases) are not recognised in the Company''s balance sheet.
(iii) Lease Payments
Payments made under operating leases are recognised in profit or loss on a straight line basis over the term of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases.
Minimum lease payments made under finance leases are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
(n) Financial Instruments
(i) Recognition and initial measurement
Trade receivables are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Company becomes a party to the contractual provisions of the instrument.
A financial asset or financial liability is initially measured at fair value plus, for an item not at fair value through profit and loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue.
(ii) Classification and subsequent measurement Financial assets
On initial recognition, a financial asset is classified as measured at:
a. Amortised cost;
b. Fair value through other comprehensive income (''FVOCI'') - debt investment;
c. Fair value through other comprehensive income (''FVOCI'') - equity investment; or
d. Fair value through profit and loss (''FVTPL'')
Financial assets are not reclassified subsequent to their initial recognition, except if and in the period the Company changes its business model for managing financial assets.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:
- the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:
- the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
On the initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment''s fair value in OCI (designated as FVOCI - equity investment). This election is made on an investment-by- investment basis.
All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Financial liabilities: Classification, subsequent measurement and gains and losses
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL, if it is classified as held for trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on de-recognition is also recognised in profit or loss.
(iii) De-recognition Financial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset.
If the Company enters into transactions whereby it transfers assets recognised on its balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets, the transferred assets are not derecognised.
Financial liabilities
The Company derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
The Company also derecognises a financial liability when its terms are modified and the cash flows under the modified terms are substantially different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognised in profit or loss.
(iv) Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.
(v) Derivative financial instruments
The Company holds derivative financial instruments to hedge its exposure to interest rate and foreign exchange rate risks by entering into cross currency interest rate swaps. Embedded derivatives are separated from the host contract and accounted for separately if the host contract is not a financial asset and certain criteria are met.
Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value and changes therein are generally recognised in profit or loss.
(vi) Hedge accounting:
The Company designates certain derivatives as hedging instruments to hedge the variability in cash flows associated with highly probable forecast transactions arising from changes in foreign exchange rates and interest rates.
At inception of designated hedging relationships, the Company documents the risk management objective and strategy for undertaking the hedge. The Company also documents the economic relationship between the hedged item and the hedging instrument, including whether the changes in cash flows of the hedged item and hedging instrument are expected to offset each other.
Cash flow hedges:
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in OCI and accumulated in the other equity under ''effective portion of cash flow hedges''. The effective portion of changes in the fair value of the derivative that is recognised in OCI is limited to the cumulative change in fair value of the hedged item, determined on a present value basis, from inception of the hedge. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss.
Amounts previously recognised in other comprehensive income and accumulated in equity relating to (effective portion as described above) are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting.
(o) Impairment
(i) Impairment of financial assets
The Company recognises loss allowances for expected credit loss on financial assets measured at amortised cost. At each reporting date, the Company assesses whether financial assets carried at amortised cost is credit-impaired. A financial asset is ''credit-impaired'' when one or more events that have detrimental impact on the estimated future cash flows of the financial assets have occurred.
The Company measures loss allowances at an amount equal to lifetime expected credit losses, except for the following, which are measured as 12 month expected credit losses:
- Bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.
Loss allowances for trade receivables are always measured at an amount equal to lifetime expected credit losses. Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument. The Company follows ''simplified approach'' for recognition of impairment loss allowance for trade receivables. The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime expected credit loss at each reporting date, right from its initial recognition.
12-month expected credit losses are the portion of expected credit losses that result from default events that are possible within 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).
In all cases, the maximum period considered when estimating expected credit losses is the maximum contractual period over which the Company is exposed to credit risk.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company''s historical experience and informed credit assessment and including forward looking information.
Measurement of expected credit losses
Expected credit losses are a probability- weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. difference between the cash flow due to the Company in accordance with the contract and the cash flow that the Company expects to receive).
Presentation of allowance for expected credit losses in the balance sheet
Loss allowance for financial assets measured at amortised cost is deducted from the gross carrying amount of the assets.
Write-off
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtors do not have assets or sources of income that could generate sufficient cash flows to repay the amount subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company''s procedure for recovery of amounts due.
(ii) Impairment of non-financial assets
The Company''s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset''s recoverable amount is estimated.
For impairment testing, assets that do not generate independent cash inflows are grouped together into cash-generating units (CGUs). Each CGU represents the smallest group of assets that generates cash inflows that are largely independent of the cash inflows of other assets or CGUs.
The recoverable amount of a CGU (or an individual asset) is the higher of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, 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 CGU (or the asset).
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its estimated recoverable amount. Impairment losses are recognised in the statement of profit and loss. Impairment loss recognised in respect of a CGU is allocated to reduce the carrying amounts of the assets of the CGU (or group of CGUs) on a pro rata basis.
An impairment loss in respect of assets for which impairment loss has been recognised in prior periods, the Company reviews at each reporting date whether there is any indication that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. Such a reversal is made only to the extent that the asset''s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(p) Foreign currency transactions
Initial recognition
Transactions in foreign currencies are translated into the functional currency of the Company at the exchange rates at the dates of the transactions or an average rate if the average rate approximates the actual rate at the date of the transaction.
Measurement at the reporting date
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Nonmonetary assets and liabilities that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Exchange differences on restatement/settlement of all monetary items are recognised in profit or loss. Exchange differences related to qualifying cash flow hedges are recognised in other comprehensive income to the extent that hedges are effective.
(q) Operating segments
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company''s other components, and for which discrete financial information is available. All operating segments'' operating results are reviewed regularly by the Company''s Chief Operating Decision Maker (CODM) to make decisions about resources to be allocated to the segments and assess their performance.
(r) Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents include cash in hand, demand deposits held with banks, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
(s) Cash flow statement
Cash flows are reported using the indirect method, whereby profit / (loss) for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
(t) Earnings per share
Basic earnings per share are calculated by dividing the net profit/ (loss) for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed using the weighted average number of equity and dilutive equity equivalent shares outstanding during the year end, except where the results would be anti-dilutive.
(u) Research and development
Expenditure on research is expensed off under the respective heads of account in the period in which it is incurred.
Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised, if the cost can be reliably measured, the product or process is technically and commercially feasible and the Company has sufficient resources to complete the development and right to use the asset. The expenditure capitalised includes the cost of materials, direct labor and an appropriate proportion of overheads that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in the Statement of Profit and Loss as an expense as incurred.
Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Property, plant and equipment used for research and development are depreciated in accordance with the Company''s policy as stated above.
Materials identified for use in research and development process are carried as inventories and charged to the Statement of Profit and Loss on consumption of such materials for research and development activities.
(v) Recent accounting pronouncement
Ind AS 115, Revenue from contracts with customers
Ind AS 115 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Ind AS 115 will supersede the current revenue recognition standard Ind AS 18 Revenue, Ind AS 11 Construction Contracts when it becomes effective.
The core principle of Ind AS 115 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the standard introduces a 5-step approach to revenue recognition:
- Step 1: Identify the contract(s) with a customer
- Step 2: Identify the performance obligation in contract
- Step 3: Determine the transaction price
- Step 4: Allocate the transaction price to the performance obligations in the contract
- Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
Under Ind AS 115, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when ''control'' of the goods or services underlying the particular performance obligation is transferred to the customer.
The Company has completed its evaluation of the possible impact of Ind AS 115 and does not expect the impact of the adoption of the new standard to be material.
Appendix B, Ind AS 21 - The effect of changes in Foreign Exchange rates
The amendment clarifies on the accounting of transactions that include the receipt or payment of advance consideration in a foreign currency. The appendix explains that the date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt. The impact of the same is not expected to be material on the Company''s financial statements.
Mar 31, 2017
i) Basis of preparation of financial statements
The financial statements are prepared under the historical cost convention on the accrual basis of accounting, in accordance with the Indian Generally Accepted Accounting Principles (GAAP) and comply with the accounting standards, as prescribed by Section 133 of the Companies Act, 2013 (âActâ) read with Rule 7 of the Companies (Accounts) Rules, 2014, to the extent applicable, as adopted consistently by the Company. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. The financial statements have been prepared in Indian rupees rounded off to the nearest lakhs.
ii) Use of estimates
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses and the disclosure of contingent liabilities on the date of the financial statements. Examples of such estimates include provision for warranty, provision for service charges, provision for future obligations under employee benefits plan and useful life of fixed assets. Actual results could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Any revision to accounting estimates is recognised prospectively in current and future periods.
iii) Current -non-current classification
All assets and liabilities are classified into current and non-current as per the Companyâs normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013.
Assets
An asset is classified as current when it satisfies any of the following criteria:
a. it is expected to be realised in, or is intended for sale or consumption in, the companyâs normal operating cycle;
b. it is held primarily for the purpose of being traded;
c. it is expected to be realised within 12 months after the reporting date; or
d. it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.
Current assets include the current portion of non-current financial assets.
All other assets are classified as non-current.
Liabilities
A liability is classified as current when it satisfies any of the following criteria:
a. it is expected to be settled in the companyâs normal operating cycle;
b. it is held primarily for the purpose of being traded;
c. it is due to be settled within 12 months after the reporting date; or
d. the Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
Current liabilities include current portion of non-current financial liabilities.
All other liabilities are classified as non-current.
Operating cycle
Operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents.
iv) Revenue recognition
Revenue from sale of goods in the course of ordinary activities is recognised when property in the goods or all significant risks and rewards of their ownership are transferred to the customer and no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of the goods and regarding its collection. The amount recognised as revenue is exclusive of sales tax/value added taxes (VAT), and is net of returns, trade discounts and quantity discounts.
Export benefits are accounted for on accrual basis.
Revenue from royalty is recognized on accrual basis as per the terms of agreement entered into with the respective parties.
Revenue from dealer support services is recognized on accrual basis as per the terms of agreement entered into with the Dealers.
Interest income is recognised on a time proportion basis taking into account the amount outstanding and the interest rate applicable.
v) Tangible and intangible fixed assets
Tangible fixed assets are carried at cost of acquisition or construction less accumulated depreciation and/or accumulated impairment loss, if any. The cost of an item of tangible fixed asset comprises its purchase price, including import duties and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition for its intended use. Subsequent expenditure is capitalised only when it increases the future economic benefits from the specific asset to which it relates. Advance paid towards acquisition of tangible fixed assets outstanding at each Balance Sheet date, are shown under long-term loans and advances and cost of assets not ready for intended use before the year end, are shown as capital work in progress.
If significant component of an item of tangible fixed assets have different useful lives, then they are accounted for as a specific items of tangible fixed assets.
The useful lives are reviewed by the management at each financial year-end and revised, if appropriate. In case of a revision, the unamortised depreciable amount is charged over the revised remaining useful life. A fixed asset is eliminated from the financial statements on disposal or when no further benefit is expected from its use and disposal. Losses arising from retirement or gains or losses arising from disposal of fixed assets which are carried at cost are recognised in the Statement of Profit and Loss.
Intangible assets are amortised in the Statement of Profit &Loss over their estimated useful lives, from the date that they are available for use based on the expected pattern of consumption of economic benefits of the asset. Accordingly, at present, these are being amortised on straight line basis. In accordance with the applicable Accounting Standard, the Company follows a rebuttable presumption that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use. However, if there is persuasive evidence that the useful life of an intangible asset is longer than ten years, it is amortised over the best estimate of its useful life. Such intangible assets and intangible assets that are not yet available for use are tested annually for impairment.
Amortisation method and useful lives of intangible assets are reviewed at each reporting date. If the useful life of an asset is estimated to be significantly different from previous estimates, the amortisation period is changed accordingly. If there has been a significant change in the expected pattern of economic benefits from the asset, the amortisation method is changed to reflect the changed pattern. An intangible asset is derecognized on disposal or when no future economic benefits, are expected from its use. Losses arising from retirement and gains or losses arising from disposal of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss.
vi) Depreciation/ Amortisation
Depreciation on tangible fixed assets is provided on the straight-line method based on the estimated useful life of each asset as determined by the management. Depreciation for assets purchased / sold during the period is proportionately charged.
Depreciation rates are based on the useful lives as specified in Part âCâ of Schedule II to the Act, except for the following assets, which are being depreciated based on the managements estimate of the useful life of tangible fixed assets. Such useful lives are lower than the lives arrived at on the basis of Schedule II of the Act:
# For the above mentioned class of assets, based on internal technical evaluation, the management believes that the useful lives as given above best represent the period over which management expects to use these assets.
Capital spares are amortized in a systematic manner over a period not exceeding the useful life of the asset to which they relate.
Intangible assets are amortised on a straight-line method on a monthly pro-rata basis over a period of three to ten years based on the estimated useful life of the assets.
vii) Borrowing costs
Borrowing costs are interest and other costs (including exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs) incurred by the Company in connection with the borrowings of funds. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of those assets which take necessarily a substantial period of time to get ready for their intended use. Other borrowing costs are recognized as an expense in the period in which they are incurred.
viii) Impairment of assets
The carrying amounts of assets are reviewed at each balance sheet date in accordance with Accounting Standard - 28 on âImpairment of Assetsâ to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is estimated and impairment loss is recognised wherever the carrying amount of an asset or cash generating unit exceeds its recoverable amount. For the purpose of impairment testing, assets are grouped together into smallest group of assets (Cash Generating Unit or CGU) that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUâs. The recoverable amount of an asset or CGU is the greater of its value in use and its net selling price. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflect current market assessments of the time value of money and the risks specific to the CGU.
Impairment losses are recognised in the Statement of Profit and Loss. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assetâs carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortisation, if no impairment loss had been recognised.
ix) Inventories
Inventories which comprise raw materials, work-in-progress, finished goods, stock-in-trade, stores and spares, and loose tools are carried at the lower of cost and net realisable value. Cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In determining the cost, quarterly weighted average cost method is used. In the case of manufactured inventories, fixed production overheads are allocated on the basis of normal capacity of production facilities. Excise duty liability is included in the valuation of closing inventory of finished goods.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary to make the sale. The net realisable value of work-in-progress is determined with reference to the selling prices of related finished products. Raw materials and other supplies held for use in the production of finished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realisable value.
x) Employee benefits
Short term employee benefits:
All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and bonus, etc, are recognised in the Statement of Profit and Loss in the period in which the employee renders the related service.
Defined contribution plans:
Contribution to Employee Provident fund and Employeesâ State Insurance Fund
A defined contribution plan is a post-employment benefit plan under which an entity pays specified contributions to a separate entity and has no obligation to pay any further amounts. The Company makes specified monthly contributions towards employee provident fund to Government administered provident fund scheme which is a defined contribution plan. The Companyâs contribution is recognised as an expense in the Statement of Profit and Loss during the period in which the employee renders the related service.
Superannuation Scheme:
Certain employees are also participants in the superannuation plan (âthe Planâ) which is a defined contribution plan. The Company has no obligations to the Plan beyond its monthly contributions, which are periodically contributed to the superannuation scheme, the administration of which is entrusted with Life Insurance Corporation of India (âLICâ).
Defined benefit plans:
Gratuity is a defined benefit plan. The administration of the gratuity scheme has been entrusted to the LIC. Contributions are made by the Company to the LIC based on actuarial valuation of obligation as at 31 March every year conducted by the LIC. Such contributions paid during the year have been charged to the Statement of Profit and Loss on accrual basis. The Company also carries out an actuarial valuation conducted by an independent actuary as at 31 March every year for company as a whole. Any incremental value of obligation, as compared with the obligation determined by the LIC is charged to the Statement of Profit and Loss.
The present value of obligations under such defined benefit plan is determined based on actuarial valuation carried out by an independent actuary using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measure each unit separately to build up the final obligation.
The obligation is measured at the present value of estimated future cash flows. The discount rates used for determining the present value of obligation under defined benefit plans, is based on the market yields on Government securities as at the Balance Sheet date, having maturity periods approximating the terms of related obligations.
Other long term benefits:
The employees can carry-forward a portion of the unutilised accrued compensated absences and utilise it in future service periods or receive cash compensation on termination of employment. Since the compensated absences do not fall due wholly within twelve months after the end of the period in which the employees render the related service and are also not expected to be utilized wholly within twelve months after the end of such period, the benefit is classified as a long-term employee benefit. The Company records an obligation for such compensated absences in the period in which the employee renders the services that increase this entitlement. The obligation is measured on the basis of independent actuarial valuation using the projected unit credit method.
Actuarial gains /losses:
The Company recognises all actuarial gains and losses arising from defined benefit plans immediately in the Statement of Profit and Loss.
xi) Research and development
Expenditure on research is expensed off under the respective heads of account in the period in which it is incurred.
Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised, if the cost can be reliably measured, the product or process is technically and commercially feasible and the Company has sufficient resources to complete the development and right to use the asset. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in the Statement of Profit and Loss as an expense as incurred.
Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Fixed assets used for research and development are depreciated in accordance with the Companyâs policy as stated above.
Materials identified for use in research and development process are carried as inventories and charged to the Statement of Profit and Loss on consumption of such materials for research and development activities.
xii) Warranty and service expenses
A provision is estimated for expected warranty and free service coupon cost in respect of products sold during the year on the basis of past experience regarding failure trends of products and costs of rectification or replacement.
xiii) Foreign currency transactions
Transactions in foreign currency are recorded at the exchange rate prevailing at the date of the transaction. Exchange differences arising on foreign currency transactions settled during the year are recognised in the statement of Profit and Loss for the year.
Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the closing exchange rates on that date; the resultant exchange differences are recognised in the Statement of Profit and Loss. Non- monetary assets are recorded at the rates prevailing on the date of the transaction.
The Company recognises all derivative contracts (other than those designated as hedges) at fair value, on the date on which the derivative contracts are entered into and are re-measured at fair value as at the Balance Sheet or reporting dates. Derivatives are classified as assets when the fair value is positive (positive marked to market value) or as liabilities when the fair value is negative (negative marked to market value). Changes in the fair value of derivatives other than those designated as hedges are recognised in the Statement of Profit and Loss.
The changes in fair value of derivatives, designated as hedges, are recognised directly in Cash Flow Hedge Reserve under Reserves and Surplus. Amount accumulated in Cash Flow Hedge Reserve are reclassified to the Statement of Profit and Loss in the same periods during which the exchange fluctuation (gain)/loss on underlying transaction affects the Profit and Loss. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Cumulative gain or loss on the hedging instrument recognised in Reserves and Surplus is retained there and is transferred to statement of profit and loss when the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in Reserves and Surplus is transferred to the statement of profit and loss.
xiv) Taxation
Income-tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the Income-tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period). Income-tax expense is recognised in profit or loss except that tax expense related to items recognised directly in reserves is also recognised in those reserves.
Current tax is measured at the amount expected to be paid to (recovered from) the taxation authorities, using the applicable tax rates and tax laws. Deferred tax is recognised in respect of timing differences between taxable income and accounting income i.e. differences that originate in one period and are capable of reversal in one or more subsequent periods. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realised. Deferred tax assets are reviewed as at each balance sheet date and written down or written-up to reflect the amount that is reasonably/virtually certain (as the case maybe) to be realised.
Minimum Alternative Tax (âMATâ) under the provisions of the Income-tax Act, 1961 is recognised as current tax in the Statement of Profit and Loss. The credit available under the Act in respect of MAT paid is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the period for which the MAT credit can be carried forward for set-off against the normal tax liability. MAT credit recognised as an asset is reviewed at each balance sheet date and written down to the extent the aforesaid convincing evidence no longer exists.
xv) Government grant
Grants in the form of Capital/Investment subsidy are treated as Capital Reserve.
xvi) Operating lease (as lessee)
Assets acquired under leases other than finance leases are classified as operating leases. The total lease rentals (including scheduled rental increases) in respect of an asset taken on operating lease are charged to the Statement of Profit and Loss on a straight line basis over the lease term unless another systematic basis is more representative of the time pattern of the benefit.
xvii) Earnings per share
Basic earnings per share are calculated by dividing the net profit/ (loss) for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed using the weighted average number of equity and dilutive equity equivalent shares outstanding during the year end, except where the results would be anti-dilutive.
xviii) Provisions, contingent liabilities and contingent assets
A provision is recognized if, as a result of a past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recognized at the best estimate of the expenditure required to settle the present obligation at the balance sheet date. The provisions are measured on an undiscounted basis. Provision in respect of loss contingencies relating to claims, litigation, assessment, fines, penalties, etc. are recognised when it is probable that a liability has been incurred and the amount can be estimated reliably.
A contingent liability exists when there is a possible but not probable obligation, or a present obligation that may, but probably will not, require an outflow of resources, or a present obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resources is remote. Contingent assets are neither recognised nor disclosed in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.
xix) Cash and cash equivalents
Cash and cash equivalents include cash in hand, demand deposits with banks, other short term highly liquid investments with original maturities of three months or less.
Mar 31, 2016
1. Company overview
SML Isuzu Limited (Formerly Swaraj Mazda Limited) is a public company, incorporated under the Companies Act, 1956 and its shares are listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) in India. The Company is primarily engaged in the business of manufacture and sale of Commercial Vehicles and its parts. The Company has its operations primarily in India.
2. The financial statements for the year ended 31 March 2016 have been prepared as per the requirements of Schedule III of the Companies Act, 2013.
3. Significant Accounting Policies
i) Basis of preparation of financial statements
The financial statements are prepared under the historical cost convention on the accrual basis of accounting, in accordance with the Indian Generally Accepted Accounting Principles (GAAP) and comply with the accounting standards, as prescribed by Section133 of the Companies Act, 2013 (''Act'') read with Rule 7 of the Companies (Accounts) Rules, 2014, to the extent applicable, as adopted consistently by the Company. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. The financial statements have been prepared in Indian rupees rounded off to the nearest lakhs.
ii) Use of estimates
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses and the disclosure of contingent liabilities on the date of the financial statements. Actual results could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Any revision to accounting estimates is recognized prospectively in current and future periods.
iii) Current -non-current classification
All assets and liabilities are classified into current and non-current.
Assets
An asset is classified as current when it satisfies any of the following criteria:
a. it is expected to be realized in, or is intended for sale or consumption in, the company''s normal operating cycle;
b. it is held primarily for the purpose of being traded;
c. it is expected to be realized within 12 months after the reporting date; or
d. it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.
Current assets include the current portion of non-current financial assets.
All other assets are classified as non-current.
Liabilities
A liability is classified as current when it satisfies any of the following criteria:
a. it is expected to be settled in the company''s normal operating cycle;
b. it is held primarily for the purpose of being traded;
c. it is due to be settled within 12 months after the reporting date; or
d. the Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
Current liabilities include current portion of non-current financial liabilities.
All other liabilities are classified as non-current.
Operating cycle
Operating cycle is the time between the acquisition of assets for processing and their realization in cash or cash equivalents.
iv) Revenue recognition
Revenue from sale of goods in the course of ordinary activities is recognized when property in the goods or all significant risks and rewards of their ownership are transferred to the customer and no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of the goods and regarding its collection. The amount recognized as revenue is exclusive of sales tax/value added taxes (VAT), and is net of returns, trade discounts and quantity discounts.
Export benefits are accounted for on accrual basis.
Revenue from royalty is recognized on accrual basis as per the terms of agreement entered into with the customers.
Revenue from dealer support services is recognized on accrual basis as per the terms of agreement entered into with the Dealers.
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the interest rate applicable.
v) Tangible and intangible fixed assets
Tangible fixed assets are carried at cost of acquisition or construction less accumulated depreciation and /or accumulated impairment loss, if any. The cost of an item of tangible fixed asset comprises its purchase price, including import duties and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition for its intended use. Subsequent expenditure is capitalized only when it increases the future economic benefits from the specific asset to which it relates.
The useful lives are reviewed by the management at each financial year-end and revised, if appropriate. In case of a revision, the unamortized depreciable amount is charged over the revised remaining useful life. A fixed asset is eliminated from the financial statements on disposal or when no further benefit is expected from its use and disposal. Losses arising from retirement or gains or losses arising from disposal of fixed assets which are carried at cost are recognized in the Statement of Profit and Loss.
Intangible assets are amortized in the Statement of Profit & Loss over their estimated useful lives, from the date that they are available for use based on the expected pattern of consumption of economic benefits of the asset. Accordingly, at present, these are being amortized on straight line basis. In accordance with the applicable Accounting Standard, the Company follows a rebuttable presumption that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use. However, if there is persuasive evidence that the useful life of an intangible asset is longer than ten years, it is amortized over the best estimate of its useful life. Such intangible assets and intangible assets that are not yet available for use are tested annually for impairment.
Amortization method and useful lives are reviewed at each reporting date. If the useful life of an asset is estimated to be significantly different from previous estimates, the amortization period is changed accordingly. If there has been a significant change in the expected pattern of economic benefits from the asset, the amortization method is changed to reflect the changed pattern. An intangible asset is derecognized on disposal or when no future economic benefits are expected from its use. Losses arising from retirement and gains or losses arising from disposal of an intangible asset 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.
vi) Depreciation/ Amortization
Depreciation on tangible fixed assets is provided on the straight-line method based on the estimated useful life of each asset as determined by the management. Depreciation for assets purchased/sold during the period is proportionately charged.
Pursuant to Companies Act, 2013 (''the Act'') being effective from 1 April 2014, the Company has aligned the depreciation rates based on the useful lives as specified in Part ''C'' of Schedule II to the Act, except for the following assets, which are being depreciated based on the managementâs estimate of the useful life of tangible fixed assets. Such useful lives are lower than the lives arrived at on the basis of Schedule II of the Act:
# For the above mentioned class of assets, based on internal technical evaluation, the management believes that the useful lives as given above best represent the period over which management expects to use these assets.
Capital spares are amortized in a systematic manner over a period not exceeding the useful life of the asset to which they relate.
Intangible assets are amortized on a straight-line method on a monthly pro-rata basis over a period of three to ten years based on the estimated useful life of the assets.
vii) Inventories
Inventories which comprise raw materials, work-in-progress, finished goods, stock-in-trade, stores and spares, and loose tools are carried at the lower of cost and net realizable value. Cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In determining the cost, quarterly weighted average cost method is used. In the case of manufactured inventories, fixed production overheads are allocated on the basis of normal capacity of production facilities.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary to make the sale. The net realizable value of work-in-progress is determined with reference to the selling prices of related finished products. Raw materials and other supplies held for use in the production of finished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realizable value.
viii) Employee benefits Short-term employee benefits:
All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages and bonus, etc, are recognized in the Statement of Profit and Loss in the period in which the employee renders the related service.
Defined contribution plans:
Contribution to Employeesâ Provident Fund and Employees'' State Insurance Fund
A defined contribution plan is a post-employment benefit plan under which an entity pays specified contributions to a separate entity and has no obligation to pay any further amounts. The Company makes specified monthly contributions towards employee provident fund to Government administered provident fund scheme which is a defined contribution plan. The Company''s contribution is recognized as an expense in the Statement of Profit and Loss during the period in which the employee renders the related service.
Superannuation Scheme:
Certain employees are also participants in the superannuation plan (''the Plan'') which is a defined contribution plan. The Company has no obligations to the Plan beyond its monthly contributions, which are periodically contributed to the superannuation scheme, the administration of which is entrusted with Life Insurance Corporation of India (''LIC'').
Defined benefit plans:
Gratuity is a defined benefit plan. The administration of the gratuity scheme has been entrusted to the LIC. Contributions are made by the Company to the LIC based on actuarial valuation of obligation as at 31 March every year conducted by the LIC. Such contributions paid during the year have been charged to the Statement of Profit and Loss on accrual basis. The Company also carries out an actuarial valuation conducted by an independent actuary as at 31 March every year for company as a whole. Any incremental value of obligation, as compared with the obligation determined by the LIC is charged to the Statement of Profit and Loss.
The present value of obligations under such defined benefit plan is determined based on actuarial valuation carried out by an independent actuary using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measure each unit separately to build up the final obligation.
The obligation is measured at the present value of estimated future cash flows. The discount rates used for determining the present value of obligation under defined benefit plans, is based on the market yields on Government securities as at the Balance Sheet date, having maturity periods approximating the terms of related obligations.
Other long-term benefits:
The employees can carry forward a portion of the unutilized accrued compensated absences and utilize it in future service periods or receive cash compensation on termination of employment. Since the compensated absences do not fall due wholly within twelve months after the end of the period in which the employees render the related service and are also not expected to be utilized wholly within twelve months after the end of such period, the benefit is classified as a long-term employee benefit. The Company records an obligation for such compensated absences in the period in which the employee renders the services that increase this entitlement. The obligation is measured on the basis of independent actuarial valuation using the projected unit credit method.
Actuarial gains /losses:
The Company recognizes all actuarial gains and losses arising from defined benefit plans immediately in the Statement of Profit and Loss.
ix) Research and development
Expenditure on research is expensed off under the respective heads of account in the period in which it is incurred.
Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalized, if the cost can be reliably measured, the product or process is technically and commercially feasible and the Company has sufficient resources to complete the development and right to use the asset. The expenditure capitalized includes the cost of materials, direct labour and an appropriate proportion of overheads that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognized in the Statement of Profit and Loss as an expense as incurred.
Capitalized development expenditure is stated at cost less accumulated amortization and impairment losses. Fixed assets used for research and development are depreciated in accordance with the Company''s policy as stated above.
Materials identified for use in research and development process are carried as inventories and charged to the Statement of Profit and Loss on consumption of such materials for research and development activities.
x) Warranty and service expenses
A provision is estimated for expected warranty and free service coupon cost in respect of products sold during the year on the basis of past experience regarding failure trends of products and costs of rectification or replacement.
xi) Foreign currency transactions
Transactions in foreign currency are recorded at the exchange rate prevailing at the date of the transaction. Exchange differences arising on foreign currency transactions settled during the year are recognized in the statement of Profit and Loss for the year.
Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the closing exchange rates on that date; the resultant exchange differences are recognized in the Statement of Profit and Loss.
xii) Taxation
Income-tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income-tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period). Income-tax expense is recognized in profit or loss except that tax expense related to items recognized directly in reserves is also recognized in those reserves.
Current tax is measured at the amount expected to be paid to (recovered from) the taxation authorities, using the applicable tax rates and tax laws. Deferred tax is recognized in respect of timing differences between taxable income and accounting income i.e. differences that originate in one period and are capable of reversal in one or more subsequent periods. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognized only if there is a virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realized. Deferred tax assets are reviewed as at each balance sheet date and written down or written up to reflect the amount that is reasonably/virtually certain (as the case may be) to be realized.
Minimum Alternative Tax (''MAT'') under the provisions of the Income-tax Act, 1961 is recognized as current tax in the Statement of Profit and Loss. The credit available under the Act in respect of MAT paid 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 period for which the MAT credit can be carried forward for set-off against the normal tax liability. MAT credit recognized as an asset is reviewed at each balance sheet date and written down to the extent the aforesaid convincing evidence no longer exists.
xiii) Government grant
Grants in the form of Capital /Investment subsidy are treated as Capital Reserve.
xiv) Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. Other borrowing costs are recognized as an expense in the period in which they are incurred.
xv) Impairment of assets
The carrying amounts of assets are reviewed at each balance sheet date in accordance with Accounting Standard -28 on ''Impairment of Assets'' to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is estimated and impairment loss is recognized wherever the carrying amount of an asset or cash generating unit exceeds its recoverable amount. Impairment losses are recognized in the Statement of Profit and Loss. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset''s carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortization, if no impairment loss had been recognized.
xvi) Operating lease (As lessee)
Assets acquired under leases other than finance leases are classified as operating leases. The total lease rentals (including scheduled rental increases) in respect of an asset taken on operating lease are charged to the Statement of Profit and Loss on a straight line basis over the lease term unless another systematic basis is more representative of the time pattern of the benefit.
xvii) Earnings per share
Basic earnings per share are calculated by dividing the net profit / (loss) for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed using the weighted average number of equity and dilutive equity equivalent shares outstanding during the year end, except where the results would be anti-dilutive.
xviii) Provisions, contingent liabilities and contingent assets
A provision is recognized if, as a result of a past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recognized at the best estimate of the expenditure required to settle the present obligation at the balance sheet date. The provisions are measured on an undiscounted basis. Provision in respect of loss contingencies relating to claims, litigation, assessment, fines, penalties, etc. are recognized when it is probable that a liability has been incurred and the amount can be estimated reliably.
A contingent liability exists when there is a possible but not probable obligation, or a present obligation that may, but probably will not, require an outflow of resources, or a present obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resources is remote. Contingent assets are neither recognized nor disclosed in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognized in the period in which the change occurs.
xix) Cash and cash equivalents:
Cash and cash equivalents include cash in hand, demand deposits with banks, other short-term highly liquid investments with original maturities of three months or less.
c. Rights, preferences and restrictions attached to the equity shares
The Company has a single class of equity shares. Accordingly, all equity shares rank equally with regard to dividends and share in the Companyâs residual assets. The equity shares are entitled to receive dividend as declared from time to time. The voting rights of an equity shareholder on a poll (not on show of hands) are in proportion to its share of the paid-up equity capital of the Company. Voting rights cannot be exercised in respect of shares on which any call or other sums presently payable have not been paid.
Failure to pay any amount called up on shares may lead to forfeiture of the shares.
On winding up of the Company, the holders of equity shares will be entitled to receive the residual assets of the Company, remaining after distribution of all preferential amounts in proportion to the number of equity shares held.
b) In addition, the Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Company''s management does not reasonably expect that these legal actions, when ultimately concluded and determined, will have a material and adverse effect on the Company''s results of operations or financial condition.
Mar 31, 2015
I) Basis of preparation of financial statements
The financial statements are prepared under the historical cost
convention on the accrual basis of accounting, in accordance with the
Indian Generally Accepted Accounting Principles (GAAP) and comply with
the accounting standards, as prescribed by the Section133 of the
Companies Act, 2013 ('Act') read with Rule 7 of the Companies
(Accounts) Rules, 2014, to the extent applicable, as adopted
consistently by the Company. Accounting policies have been consistently
applied except where a newly issued accounting standard is initially
adopted or a revision to an existing accounting standard requires a
change in the accounting policy hitherto in use. The financial
statements have been prepared in Indian rupees rounded off to the
nearest lakhs.
ii) Use of estimates
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles (GAAP) requires management to make
judgments, estimates and assumptions that affect the application of
accounting policies and reported amounts of assets, liabilities, income
and expenses and the disclosure of contingent liabilities on the date
of the financial statements. Actual results could differ from those
estimates. Estimates and underlying assumptions are reviewed on an
ongoing basis. Any revision to accounting estimates is recognised
prospectively in current and future periods.
iii) Current -non-current classification
All assets and liabilities are classified into current and non-current.
Assets
An asset is classified as current when it satisfies any of the
following criteria:
a. it is expected to be realised in, or is intended for sale or
consumption in, the company's normal operating cycle;
b. it is held primarily for the purpose of being traded;
c. it is expected to be realised within 12 months after the reporting
date; or
d. it is cash or cash equivalent unless it is restricted from being
exchanged or used to settle a liability for at least 12 months after
the reporting date.
Current assets include the current portion of non-current financial
assets.
All other assets are classified as non-current.
Liabilities
A liability is classified as current when it satisfies any of the
following criteria:
a. it is expected to be settled in the company's normal operating
cycle;
b. it is held primarily for the purpose of being traded;
c. it is due to be settled within 12 months after the reporting date;
or
d. the Company does not have an unconditional right to defer
settlement of the liability for at least 12 months after the reporting
date. Terms of a liability that could, at the option of the
counterparty, result in its settlement by the issue of equity
instruments do not affect its classification.
Current liabilities include current portion of non-current financial
liabilities.
All other liabilities are classified as non-current.
Operating cycle
Operating cycle is the time between the acquisition of assets for
processing and their realisation in cash or cash equivalents.
iv) Revenue recognition
Revenue from sale of goods in the course of ordinary activities is
recognised when property in the goods or all significant risks and
rewards of their ownership are transferred to the customer and no
significant uncertainty exists regarding the amount of the
consideration that will be derived from the sale of the goods and
regarding its collection. The amount recognised as revenue is exclusive
of sales tax/value added taxes (VAT), and is net of returns, trade
discounts and quantity discounts.
Export benefits are accounted for on accrual basis.
Revenue from royalty is recognized on accrual basis as per the terms of
agreement entered into with the customers.
Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the interest rate applicable.
v) Tangible and intangible fixed assets
Tangible assets are recorded at cost. Cost includes freight, duties,
taxes and expenses incidental to acquisition and installation of fixed
assets. In case of self-constructed fixed assets, appropriate overheads
including salaries and wages are allocated to the cost of the asset.
The cost of capital spares is capitalized along with the cost of the
related asset.
Intangible assets comprising technical know how, product designs,
prototypes etc. either acquired or internally developed are stated at
cost. In case of internally generated intangible assets, appropriate
overheads including salaries and wages are allocated to the cost of the
asset.
Capital work in progress includes cost of assets at site, direct and
indirect expenditure incidental to construction and interest on the
funds deployed for construction.
vi) Depreciation/ Amortisation
Depreciation on tangible fixed assets is provided on the straight-line
method based on the estimated useful life of each asset as determined
by the management. Depreciation for assets purchased / sold during the
period is proportionately charged.
Pursuant to Companies Act, 2013 ('the Act') being effective from 1
April 2014, the Company has aligned the depreciation rates based on the
useful lives as specified in Part 'C' of Schedule II to the Act, except
for the following assets, which are being depreciated based on the
managements estimate of the useful life of tangible fixed assets such
useful lives are lower than the lives arrived at on the basis of
Schedule II of the Act:
Estimated life (Years) #
Plant and equipments 2-12
Office equipment (Air Conditioners) 4
Vehicles (Motor cars) 4
Buildings - Air Ventilators 10
* For the above mentioned class of assets, based on internal technical
evaluation, the management believes that the useful lives as given
above best represent the period over which management expects to use
these assets. Also, refer to note 45 of the financial statements.
Capital spares are amortized in a systematic manner over a period not
exceeding the useful life of the asset to which they relate.
Intangible assets are amortised on a straight-line method on a monthly
pro-rata basis over a period of three to ten years based on the
estimated useful life of the assets.
vii) Inventories
Inventories are valued at lower of cost or net realizable value. Cost
for the purpose of valuation is calculated on a quarterly weighted
average method. In respect of finished goods and work-in-progress,
applicable manufacturing overheads and other costs incurred in bringing
the items of inventory to their present location and condition are also
included. Excise duty is included in finished goods and stock-in-trade
valuation.
viii) Employee benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short-term employee benefits. Benefits
such as salaries, wages and bonus, etc, are recognised in the Statement
of Profit and Loss in the period in which the employee renders the
related service.
Defined contribution plans:
Contribution to Employee Provident fund and Employees' State Insurance
Fund Contribution to employee's provident fund scheme and employees'
state insurance fund are defined contribution plans. The Company's
contribution paid / payable under these schemes is recognised as an
expense in the Statement of Profit and Loss during the period in which
the employee renders the related service.
Superannuation Scheme:
Certain employees are also participants in the superannuation plan
('the Plan') which is a defined contribution plan. The Company has no
obligations to the Plan beyond its monthly contributions, which are
periodically contributed to the superannuation scheme, the
administration of which is entrusted with Life Insurance Corporation of
India ('LIC').
Defined benefit plans:
Gratuity is a defined benefit plan. The administration of the gratuity
scheme has been entrusted to the LIC. Contributions are made by the
Company to the LIC based on actuarial valuation of obligation as at 31
March every year conducted by the LIC. Such contributions paid during
the year have been charged to the Statement of Profit and Loss on
accrual basis. The Company also carries out an actuarial valuation
conducted by an independent actuary as at 31 March every year for
company as a whole. Any incremental value of obligation, as compared
with the obligation determined by the LIC is charged to the Statement
of Profit and Loss.
The present value of obligations under such defined benefit plan is
determined based on actuarial valuation carried out by an independent
actuary using the Projected Unit Credit Method, which recognises each
period of service as giving rise to additional unit of employee benefit
entitlement and measure each unit separately to build up the final
obligation.
The obligation is measured at the present value of estimated future
cash flows. The discount rates used for determining the present value
of obligation under defined benefit plans, is based on the market
yields on Government securities as at the Balance Sheet date, having
maturity periods approximating the terms of related obligations.
Other long term benefits:
The employees can carry-forward a portion of the unutilised accrued
compensated absences and utilise it in future service periods or receive
cash compensation on termination of employment. Since the compensated
absences do not fall due wholly within twelve months after the end of
the period in which the employees render the related service and are
also not expected to be utilized wholly within twelve months after the
end of such period, the benefit is classified as a long-term employee
benefit. The Company records an obligation for such compensated absences
in the period in which the employee renders the services that increase
this entitlement. The obligation is measured on the basis of independent
actuarial valuation using the projected unit credit method.
Actuarial gains /losses:
The Company recognises all actuarial gains and losses arising from
defined benefit plans immediately in the Statement of Profit and Loss.
ix) Research and development
Expenditure on research is expensed off under the respective heads of
account in the period in which it is incurred.
Expenditure on development activities, whereby research findings are
applied to a plan or design for the production of new or substantially
improved products and processes, is capitalised, if the cost can be
reliably measured, the product or process is technically and
commercially feasible and the Company has sufficient resources to
complete the development and right to use the asset. The expenditure
capitalised includes the cost of materials, direct labour and an
appropriate proportion of overheads that are directly attributable to
preparing the asset for its intended use. Other development expenditure
is recognised in the Statement of Profit and Loss as an expense as
incurred.
Capitalised development expenditure is stated at cost less accumulated
amortisation and impairment losses. Fixed assets used for research and
development are depreciated in accordance with the Company's policy as
stated above.
Materials identified for use in research and development process are
carried as inventories and charged to the Statement of Profit and Loss
on consumption of such materials for research and development
activities.
x) Warranty and service expenses
A provision is estimated for expected warranty and free service coupon
cost in respect of products sold during the year on the basis of past
experience regarding failure trends of products and costs of
rectification or replacement.
xi) Foreign currency transactions
Transactions in foreign currency are recorded at the exchange rate
prevailing at the date of the transaction. Exchange differences
arising on foreign currency transactions settled during the year are
recognised in the statement of Profit and Loss for the year.
Monetary assets and liabilities denominated in foreign currencies as at
the balance sheet date are translated at the closing exchange rates on
that date; the resultant exchange differences are recognised in the
Statement of Profit and Loss.
xii) Taxation
Income-tax expense comprises current tax (i.e. the amount of tax for
the year determined in accordance with the Income-tax Act, 1961) and
deferred tax charge or credit (reflecting the tax effects of the timing
differences between the accounting income and taxable income for the
year).
Minimum Alternate Tax (MAT) paid in excess of normal income tax is
recognised as asset (MAT Credit entitlement) only to the extent, there
is reasonable certainty that company shall be liable to pay tax as per
the normal provisions of the Income Tax Act,1961 in future.
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantially enacted by the Balance Sheet date. Deferred tax
assets are recognised only to the extent there is reasonable certainty
that the assets can be realised in the future. However, where there is
unabsorbed depreciation or carry forward loss under taxation laws,
deferred tax assets are recognised only if there is virtual certainty of
realisation of such assets. Deferred tax assets are reviewed at each
Balance Sheet date and written down or written up to reflect the amount
that is reasonably/ virtually certain (as the case may be) to be
realised.
xiii) Government grant
Grants in the form of Capital/Investment subsidy are treated as Capital
Reserve.
xiv) Borrowing costs
Borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset are capitalized as
part of the cost of that asset. Other borrowing costs are recognized as
an expense in the period in which they are incurred.
xv) Impairment of assets
The carrying amounts of assets are reviewed at each balance sheet date
in accordance with Accounting Standard - 28 on 'Impairment of Assets'
to determine whether there is any indication of impairment. If any such
indication exists, the recoverable amount of the asset is estimated. An
impairment loss is recognised whenever the carrying amount of an asset
or cash generating unit exceeds its recoverable amount. Impairment
losses are recognised in the Statement of Profit and Loss. An
impairment loss is reversed if there has been a change in the estimates
used to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset's carrying amount does not
exceed the carrying amount that would have been determined net of
depreciation or amortisation, if no impairment loss had been
recognised.
xvi) Operating lease (As lessee)
Lease arrangements, where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor, are recognised as
operating lease.
Lease payments under operating lease are recognised as an expense in
the Statement of Profit and Loss on a straight line basis over the
lease period.
xvii) Earnings per share
Basic earnings per share are calculated by dividing the net profit /
(loss) for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year. Diluted
earnings per share is computed using the weighted average number of
equity and dilutive equity equivalent shares outstanding during the
year end, except where the results would be anti-dilutive.
xviii) Provisions, contingent liabilities and contingent assets
A provision is created when there is a present obligation as a result
of a past event that probably requires an outflow of resources and a
reliable estimate can be made of the amount of the obligation. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. When there is a possible obligation or
a present obligation in respect of which the likelihood of outflow of
resources is remote, no provision or disclosure is made. The Company
does not recognise assets which are of contingent nature until there is
virtual certainty of realisability of such assets. However, if it has
become virtually certain that an inflow of economic benefits will
arise, asset and related income is recognised in the financial
statements of the period in which the change occurs.
xix) Cash and cash equivalents:
Cash and cash equivalents include cash in hand, demand deposits with
banks, other short term highly liquid investments with original
maturities of three months or less.
Mar 31, 2014
I) Basis of preparation of financial statements
The financial statements are prepared under the historical cost
convention on the accrual basis of accounting, in accordance with the
Indian Generally Accepted Accounting Principles (GAAP) and comply with
the accounting standards, as prescribed by the Companies (Accounting
Standards) Rules, 2006, and the provisions of the Companies Act, 1956,
to the extent applicable, as adopted consistently by the Company. The
financial statements have been prepared in Indian rupees rounded off to
the nearest lakhs.
ii) Use of estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent
liabilities on the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Examples
of such estimates include estimated provision for doubtful debts,
future obligations under employee retirement benefit plans and
estimated useful life of fixed assets. Differences between actual
results and estimates are recognised in the year in which the actual
results are known or materialised. Any revision to accounting estimates
is recognised in accordance with the requirements of the respective
accounting standard.
iii) Current -non-current classification
All assets and liabilities are classified into current and non-current.
Assets
An asset is classified as current when it satisfies any of the
following criteria:
a. it is expected to be realised in, or is intended for sale or
consumption in, the company''s normal operating cycle;
b. it is held primarily for the purpose of being traded;
c. it is expected to be realised within 12 months after the reporting
date; or
d. it is cash or cash equivalent unless it is restricted from being
exchanged or used to settle a liability for at least 12 months after
the reporting date.
Current assets include the current portion of non-current financial
assets.
All other assets are classified as non-current.
Liabilities
A liability is classified as current when it satisfies any of the
following criteria:
a. it is expected to be settled in the company''s normal operating
cycle;
b. it is held primarily for the purpose of being traded;
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2014
c. it is due to be settled within 12 months after the reporting date;
or
d. the Company does not have an unconditional right to defer
settlement of the liability for at least 12 months after the reporting
date. Terms of a liability that could, at the option of the
counterparty, result in its settlement by the issue of equity
instruments do not affect its classification.
Current liabilities include current portion of non-current financial
liabilities.
All other liabilities are classified as non-current.
Operating cycle
Operating cycle is the time between the acquisition of assets for
processing and their realisation in cash or cash equivalents.
iv) Revenue recognition
Sales are recognized on transfer of significant risks and rewards of
ownership to the customer that usually takes place on dispatch of goods
to the customer from the factory/ stockyard/ storage area. In case of
export sales, revenue is recognized as on the date of bill of lading,
being the effective date of transfer of significant risks and rewards
of ownership to the customer. Export benefits are accounted for on
accrual basis.
Interest income is recognised using the time proportion method, based
on underlying interest rates.
Revenue from royalty is recognized on accrual basis as per the terms of
agreement entered into with the customers.
v) Tangible and intangible fixed assets
Tangible assets are recorded at cost. Cost includes freight, duties,
taxes and expenses incidental to acquisition and installation of fixed
assets. In case of self-constructed fixed assets, appropriate overheads
including salaries & wages are allocated to the cost of the asset. The
cost of capital spares is capitalized along with the cost of the
related asset.
Intangible assets comprising technical know how, product designs,
prototypes etc. either acquired or internally developed are stated at
cost. In case of internally generated intangible assets, appropriate
overheads including salaries and wages are allocated to the cost of the
asset.
Capital work in progress includes cost of assets at site, direct and
indirect expenditure incidental to construction and interest on the
funds deployed for construction.
vi) Depreciation/ Amortisation
Depreciation on tangible fixed assets is provided on a Straight-line
method on a monthly pro-rata basis at the rates and in the manner
prescribed in Schedule XIV to the Companies Act, 1956, except on
following assets which are being depreciated at the rates mentioned
below which are equivalent to the management estimate of the useful
economic life of the assets:
All assets costing up to Rs. 5,000/- are being fully depreciated in the
year of purchase. Capital spares are amortized in a systematic manner
over a period not exceeding the useful life of the asset to which they
relate.
Intangible assets are amortised on a straight-line method on a monthly
pro-rata basis over a period of three to ten years based on the
estimated useful life of the assets.
vii) Inventories
Inventories are valued at lower of cost or net realizable value. Cost
for the purpose of valuation is calculated on a quarterly weighted
average method. In respect of finished goods & work-in-progress,
applicable manufacturing overheads and other costs incurred in bringing
the items of inventory to their present location and condition are also
included. Excise duty is included in finished goods and stock-in-trade
valuation.
viii) Employee benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short-term employee benefits. Benefits
such as salaries, wages and bonus, etc, are recognised in the Statement
of Profit and Loss in the period in which the employee renders the
related service.
Defined contribution plans: The employee''s provident fund scheme,
employees'' state insurance fund and contribution to superannuation fund
are defined contribution plans. The Company''s contribution paid /
payable under these schemes is recognised as an expense in the
Statement of Profit and Loss during the period in which the employee
renders the related service.
The Company has created a trust which has taken master policy with the
Life Insurance Corporation of India to cover its liability towards
employees'' Superannuation.
Defined benefit plans: The Company''s gratuity plan is a defined benefit
plan. The present value of gratuity obligation under such defined
benefit plan is determined based on an actuarial valuation carried out
by an independent actuary using the Projected Unit Credit Method, which
recognises each period of current and past service as giving rise to
additional unit of employee benefit entitlement and measures each unit
separately to build up the final obligation. The obligation is measured
at the present value of the estimated future cash flows. The discount
rate used for determining the present value of the obligation under
defined benefit plans, is based on the market yields on Government
securities as at the valuation date having maturity periods
approximating to the terms of related obligations. Actuarial gains and
losses are recognised immediately in the Statement of Profit and Loss.
Gains or losses on the curtailment or settlement of any defined benefit
plan are recognised when the curtailment or settlement occurs.
Other long term employee benefits: Benefits under the Company''s
compensated absences policy constitute the other long term employee
benefits. The liability in respect of compensated absences is provided
on the basis of an actuarial valuation done by an independent actuary
at the year end. Actuarial gains and losses are recognised immediately
in the Statement of Profit and Loss.
ix) Research and development
Revenue expenditure on research is charged to the Statement of Profit
and Loss in the year in which it is incurred. Capital expenditure on
development is shown as an addition to fixed assets and depreciated at
the rate as applicable to respective assets.
x) Warranty and service expenses
A provision is estimated for expected warranty and free service coupon
cost in respect of products sold during the year on the basis of past
experience regarding failure trends of products and costs of
rectification or replacement.
xi) Foreign currency transactions
Transactions in foreign currency are recorded at the exchange rate
prevailing at the date of the transaction. Exchange differences arising
on foreign currency transactions settled during the year are recognised
in the statement of Profit and Loss for the year.
Monetary assets and liabilities denominated in foreign currencies as at
the balance sheet date are translated at the closing exchange rates on
that date; the resultant exchange differences are recognised in the
statement of Profit and Loss.
xii) Taxation
Income-tax expense comprises current tax (i.e. the amount of tax for
the year determined in accordance with the Income-tax Act, 1961) and
deferred tax charge or credit (reflecting the tax effects of the timing
differences between the accounting income and taxable income for the
year).
Minimum Alternate Tax (MAT) paid in excess of normal income tax is
recognised as asset (MAT Credit entitlement) only to the extent, there
is reasonable certainty that company shall be liable to pay tax as per
the normal provisions of the Income Tax Act,1961 in future.
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantially enacted by the Balance Sheet date. Deferred
tax assets are recognised only to the extent there is reasonable
certainty that the assets can be realised in the future. However, where
there is unabsorbed depreciation or carry forward loss under taxation
laws, deferred tax assets are recognised only if there is virtual
certainty of realisation of such assets. Deferred tax assets are
reviewed at each Balance Sheet date and written down or written up to
reflect the amount that is reasonably/ virtually certain (as the case
may be) to be realised.
xiii) Government grant
Grants in the form of Capital/Investment subsidy are treated as Capital
Reserve.
xiv) Borrowing costs
Borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset are capitalized as
part of the cost of that asset. Other borrowing costs are recognized as
an expense in the period in which they are incurred.
xv) Impairment of assets
The carrying amounts of assets are reviewed at each balance sheet date
in accordance with Accounting Standard - 28 on ''Impairment of Assets''
to determine whether there is any indication of impairment. If any such
indication exists, the recoverable amount of the asset is estimated. An
impairment loss is recognised whenever the carrying amount of an asset
or cash generating unit exceeds its recoverable amount. Impairment
losses are recognised in the statement of profit and loss. An
impairment loss is reversed if there has been a change in the estimates
used to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset''s carrying amount does not
exceed the carrying amount that would have been determined net of
depreciation or amortisation, if no impairment loss had been
recognised.
xvi) Operating lease (As lessee)
Lease arrangements, where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor, are recognised as
operating lease.
Lease payments under operating lease are recognised as an expense in
the Statement of Profit and Loss on a straight line basis over the
lease period.
xvii) Earnings per share
Basic earnings per share are calculated by dividing the net profit /
(loss) for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year. Diluted
earnings per share is computed using the weighted average number of
equity and dilutive equity equivalent shares outstanding during the
year end, except where the results would be anti-dilutive.
xviii)Provisions, contingent liabilities and contingent assets
A provision is created when there is a present obligation as a result
of a past event that probably requires an outflow of resources and a
reliable estimate can be made of the amount of the obligation. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. When there is a possible obligation or
a present obligation in respect of which the likelihood of outflow of
resources is remote, no provision or disclosure is made. The Company
does not recognise assets which are of contingent nature until there is
virtual certainty of realisability of such assets. However, if it has
become virtually certain that an inflow of economic benefits will
arise, asset and related income is recognised in the financial
statements of the period in which the change occurs.
xix) Cash and cash equivalents:
Cash and cash equivalents include cash in hand, demand deposits with
banks, other short term highly liquid investments with original
maturities of three months or less.
c. Rights, Preferences and restrictions attached to the equity shares
:Â
The Company has a single class of equity shares. Accordingly, all
equity shares rank equally with regard to dividends and share in the
Company''s residual assets. The equity shares are entitled to receive
dividend as declared from time to time. The voting rights of an equity
shareholder on a poll (not on show of hands) are in proportion to its
share of the paid-up equity capital of the Company. Voting rights
cannot be exercised in respect of shares on which any call or other
sums presently payable have not been paid.
Failure to pay any amount called up on shares may lead to forfeiture of
the shares.
On winding up of the Company, the holders of equity shares will be
entitled to receive the residual assets of the Company, remaining after
distribution of all preferential amounts in proportion to the number of
equity shares held.
* The Board of Directors have recommended a dividend of Rs. 3.0 per
share (previous year Rs. 8.0 per share) subject to the approval of the
Shareholders at the Annual General Meeting.
Mar 31, 2013
I) Basis of preparation of financial statements
The financial statements are prepared under the historical cost
convention on the accrual basis of accounting, in accordance with the
Indian Generally Accepted Accounting Principles (GAAP) and comply with
the accounting standards, as prescribed by the Companies (Accounting
Standards) Rules, 2006, and the provisions of the Companies Act, 1956,
to the extent applicable, as adopted consistently by the Company. The
financial statements have been prepared in Indian rupees rounded off to
the nearest lakhs.
ii) Use of estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent
liabilities on the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Examples
of such estimates include estimated provision for doubtful debts,
future obligations under employee retirement benefit plans and
estimated useful life of fixed assets. Differences between actual
results and estimates are recognised in the year in which the actual
results are known or materialised. Any revision to accounting estimates
is recognised in accordance with the requirements of the respective
accounting standard.
iii) Current -non-current classification
All assets and liabilities are classified into current and non-current.
Assets
An asset is classified as current when it satisfies any of the
following criteria:
a. it is expected to be realised in, or is intended for sale or
consumption in, the company''s normal operating cycle;
b. it is held primarily for the purpose of being traded;
c. it is expected to be realised within 12 months after the reporting
date; or
d. it is cash or cash equivalent unless it is restricted from being
exchanged or used to settle a liability for at least 12 months after
the reporting date.
Current assets include the current portion of non-current financial
assets.
All other assets are classified as non-current.
Liabilities
A liability is classified as current when it satisfies any of the
following criteria:
a. it is expected to be settled in the company''s normal operating
cycle;
b. it is held primarily for the purpose of being traded;
c. it is due to be settled within 12 months after the reporting date;
or
d. the company does not have an unconditional right to defer
settlement of the liability for at least 12 months after the reporting
date. Terms of a liability that could, at the option of the
counterparty, result in its settlement by the issue of equity
instruments do not affect its classification.
Current liabilities include current portion of non-current financial
liabilities. All other liabilities are classified as non-current.
Operating cycle
Operating cycle is the time between the acquisition of assets for
processing and their realisation in cash or cash equivalents.
iv) Revenue recognition
Sales are recognized on transfer of significant risks and rewards of
ownership to the customer that usually takes place on dispatch of goods
to the customer from the factory/ stockyard/ storage area. In case of
export sales, revenue is recognized as on the date of bill of lading,
being the effective date of transfer of significant risks and rewards
of ownership to the customer. Export benefits are accounted for on
accrual basis.
Interest income is recognised using the time proportion method, based
on underlying interest rates.
Revenue from royalty is recognized on accrual basis as per the terms of
agreement entered into with the customers.
v) Tangible and intangible fixed assets
Tangible assets are recorded at cost. Cost includes freight, duties,
taxes and expenses incidental to acquisition and installation of fixed
assets. In case of self-constructed fixed assets, appropriate overheads
including salaries & wages are allocated to the cost of the asset. The
cost of capital spares is capitalized along with the cost of the
related asset.
Intangible assets comprising technical know how, product designs,
prototypes etc. either acquired or internally developed are stated at
cost. In case of internally generated intangible assets, appropriate
overheads including salaries and wages are allocated to the cost of the
asset.
Capital work in progress includes cost of assets at site, direct and
indirect expenditure incidental to construction and interest on the
funds deployed for construction.
vi) Depreciation/ Amortisation
Depreciation on tangible fixed assets is provided on a Straight-line
method on a monthly pro-rata basis at the rates and in the manner
prescribed in Schedule XIV to the Companies Act, 1956, except on
following assets which are being depreciated at the rates mentioned
below which are equivalent to the management estimate of the useful
economic life of the assets:
All assets costing up to Rs. 5,000/- are being fully depreciated in the
year of purchase. Capital spares are amortized in a systematic manner
over a period not exceeding the useful life of the asset to which they
relate.
Intangible assets are amortised on a straight-line method on a monthly
pro-rata basis over a period of three to ten years based on the
estimated useful life of the assets.
vii) Inventories
Inventories are valued at lower of cost or net realizable value. Cost
for the purpose of valuation is calculated on a quarterly weighted
average method. In respect of finished goods & work-in-progress,
applicable manufacturing overheads and other costs incurred in bringing
the items of inventory to their present location and condition are also
included. Excise duty is included in finished goods and stock-in-trade
valuation.
viii) Employee benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short-term employee benefits. Benefits
such as salaries, wages and bonus etc, are recognised in the Statement
of Profit and Loss in the period in which the employee renders the
related service.
Defined contribution plans: The employees'' provident fund scheme,
employees'' state insurance fund and contribution to superannuation fund
are defined contribution plans. The Company''s contribution paid /
payable under these schemes is recognised as an expense in the
Statement of Profit and Loss during the period in which the employee
renders the related service.
The Company has created a trust which has taken master policy with the
Life Insurance Corporation of India to cover its liability towards
employees'' Superannuation.
Defined benefit plans: The Company''s gratuity plan is a defined benefit
plan. The present value of gratuity obligation under such defined
benefit plan is determined based on an actuarial valuation carried out
by an independent actuary using the Projected Unit Credit Method, which
recognises each period of current and past service as giving rise to
additional unit of employee benefit entitlement and measures each unit
separately to build up the final obligation. The obligation is measured
at the present value of the estimated future cash flows. The discount
rate used for determining the present value of the obligation under
defined benefit plans, is based on the market yields on Government
securities as at the valuation date having maturity periods
approximating to the terms of related obligations. Actuarial gains and
losses are recognised immediately in the Statement of Profit and Loss.
Gains or losses on the curtailment or settlement of any defined benefit
plan are recognised when the curtailment or settlement occurs.
Other long term employee benefits: Benefits under the Company''s
compensated absences policy constitute the other long term employee
benefits. The liability in respect of compensated absences is provided
on the basis of an actuarial valuation done by an independent actuary
at the year end. Actuarial gains and losses are recognised immediately
in the Statement of Profit and Loss.
ix) Research and development
Revenue expenditure on research is charged to the Statement of Profit
and Loss in the year in which it is incurred. Capital expenditure on
development is shown as an addition to fixed assets and depreciated at
the rate as applicable to respective assets.
x) Warranty expenses
Provision for warranty is estimated by the management on the basis of a
technical evaluation and past experience.
xi) Foreign currency transactions
Transactions in foreign currency are recorded at the exchange rate
prevailing at the date of the transaction. Exchange differences
arising on foreign currency transactions settled during the year are
recognised in the statement of Profit and Loss for the year.
Monetary assets and liabilities denominated in foreign currencies as at
the balance sheet date are translated at the closing exchange rates on
that date; the resultant exchange differences are recognised in the
statement of Profit and Loss.
xii) Taxation
Income-tax expense comprises current tax (i.e. the amount of tax for
the year determined in accordance with the Income-tax Act, 1961) and
deferred tax charge or credit (reflecting the tax effects of the timing
differences between the accounting income and taxable income for the
year).
Minimum Alternate Tax (MAT) paid in excess of normal income tax is
recognised as asset (MAT Credit entitlement) only to the extent, there
is reasonable certainty that company shall be liable to pay tax as per
the normal provisions of the Income Tax Act,1961 in future.
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantially enacted by the Balance Sheet date. Deferred
tax assets are recognised only to the extent there is reasonable
certainty that the assets can be realised in the future. However, where
there is an unabsorbed depreciation or carry forward loss under
taxation laws, deferred tax assets are recognised only if there is
virtual certainty of realisation of such assets. Deferred tax assets
are reviewed at each Balance Sheet date and written down or written up
to reflect the amount that is reasonably/ virtually certain (as the
case may be) to be realised.
xiii) Government grant
Grants in the form of Capital/Investment subsidy are treated as Capital
Reserve.
xiv) Borrowing costs
Borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset are capitalized as
part of the cost of that asset. Other borrowing costs are recognized as
an expense in the period in which they are incurred.
xv) Impairment of assets
The carrying amounts of assets are reviewed at each balance sheet date
in accordance with Accounting Standard - 28 on ''Impairment of Assets''
to determine whether there is any indication of impairment. If any such
indication exists, the recoverable amount of the asset is estimated. An
impairment loss is recognised whenever the carrying amount of an asset
or cash generating unit exceeds its recoverable amount. Impairment
losses are recognised in the statement of profit and loss. An
impairment loss is reversed if there has been a change in the estimates
used to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset''s carrying amount does not
exceed the carrying amount that would have been determined net of
depreciation or amortisation, if no impairment loss had been
recognised.
xvi) Operating lease (As lessee)
Lease arrangements, where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor, are recognised as
operating lease.
Lease payments under operating lease are recognised as an expense in
the statement of profit and loss on a straight line basis over the
lease period.
xvii) Earnings per share
Basic earnings per share are calculated by dividing the net profit /
(loss) for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year. Diluted
earnings per share is computed using the weighted average number of
equity and dilutive equity equivalent shares outstanding during the
year end, except where the results would be anti-dilutive.
xviii)Provisions, contingent liabilities and contingent assets
A provision is created when there is a present obligation as a result
of a past event that probably requires an outflow of resources and a
reliable estimate can be made of the amount of the obligation. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. When there is a possible obligation or
a present obligation in respect of which the likelihood of outflow of
resources is remote, no provision or disclosure is made. The Company
does not recognise assets which are of contingent nature until there is
virtual certainty of realisability of such assets. However, if it has
become virtually certain that an inflow of economic benefits will
arise, asset and related income is recognised in the financial
statements of the period in which the change occurs.
xix) Cash and cash equivalents:
Cash and cash equivalents include cash in hand, demand deposits with
banks, other short term highly liquid investments with original
maturities of three months or less.
Mar 31, 2012
I) Use of estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent
liabilities on the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Examples
of such estimates include estimated provision for doubtful debts,
future obligations under employee retirement benefit plans and
estimated useful life of fixed assets. Differences between actual
results and estimates are recognised in the year in which the actual
results are known or materialised. Any revision to accounting estimates
is recognised in accordance with the requirements of the respective
accounting standard.
ii) Revenue recognition
Sales are recognized on transfer of significant risks and rewards to
the customer that usually takes place on dispatch of goods to the
customer from the factory/ stockyard/ storage area. In case of export
sales, revenue is recognized as on the date of bill of lading, being
the effective date of transfer of significant risks and rewards to the
customer. Export benefits are accounted for on accrual basis.
Interest income is recognised using the time proportion method, based
on underlying interest rates.
Revenue from royalty is recognized on accrual basis as per the terms of
agreement entered into with the customers.
iii) Fixed assets
Tangible assets are recorded at cost. Cost includes freight, duties,
taxes and expenses incidental to acquisition and installation of fixed
assets. In case of self-constructed fixed assets, appropriate overheads
including salaries & wages are allocated to the cost of the asset. The
cost of capital spares is capitalized along with the cost of the
related asset.
Intangible assets comprising of technical know how, product designs,
prototypes etc. either acquired or internally developed are stated at
cost. In case of internally generated intangible assets, appropriate
overheads including salaries and wages are allocated to the cost of the
asset.
Capital work in progress includes cost of assets at site, direct and
indirect expenditure incidental to construction and interest on the
funds deployed for construction.
iv) Depreciation/ Amortisation
Depreciation on tangible fixed assets is provided on a Straight-line
method on a monthly pro-rata basis at the rates and in the manner
prescribed in Schedule XIV to the Companies Act, 1956, except on
following assets which are being depreciated at the rates mentioned
below which are equivalent to the management estimate of the useful
economic life of the assets:
All assets costing up to Rs. 5,000/- are being fully depreciated in the
year of purchase. Capital spares are amortized in a systematic manner
over a period not exceeding the useful life of the asset to which they
relate.
Intangible assets are amortised on a straight-line method on a monthly
pro-rata basis over a period of three to ten years based on the
estimated useful life of the assets.
v) Inventories
Inventories are valued at lower of cost or net realizable value. Cost
for the purpose of valuation is calculated on a quarterly weighted
average method. In respect of finished goods & work-in-progress,
applicable manufacturing overheads and other costs incurred in bringing
the items of inventory to their present location and condition are also
included. Excise duty is included in finished goods and stock-in-trade
valuation.
vi) Employee benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short-term employee benefits. Benefits
such as salaries, wages and bonus, etc, are recognised in the statement
of profit and loss in the period in which the employee renders the
related service.
Defined contribution plans: The employee's provident fund scheme,
employees' state insurance fund and contribution to superannuation
fund are defined contribution plans. The Company's contribution paid
/ payable under these schemes is recognised as an expense in the
statement of profit and loss during the period in which the employee
renders the related service.
The Company has created a trust which has taken master policy with the
Life Insurance Corporation of India to cover its liability towards
employees' Superannuation.
Defined benefit plans: The Company's gratuity plan is a defined
benefit plan. The present value of gratuity obligation under such
defined benefit plan is determined based on an actuarial valuation
carried out by an independent actuary using the Projected Unit Credit
Method, which recognises each period of current and past service as
giving rise to additional unit of employee benefit entitlement and
measures each unit separately to build up the final obligation. The
obligation is measured at the present value of the estimated future
cash flows. The discount rate used for determining the present value of
the obligation under defined benefit plans, is based on the market
yields on Government securities as at the valuation date having
maturity periods approximating to the terms of related obligations.
Actuarial gains and losses are recognised immediately in the Statement
of profit and loss.
Gains or losses on the curtailment or settlement of any defined benefit
plan are recognised when the curtailment or settlement occurs.
Other long term employee benefits: Benefits under the Company's leave
encashment policy constitute the other long term employee benefits. The
liability in respect of leave encashment is provided on the basis of an
actuarial valuation done by an independent actuary at the year end.
Actuarial gains and losses are recognised immediately in the Statement
of profit and loss.
vii) Research and development
Revenue expenditure on research is charged to the Statement of profit
and loss in the year in which it is incurred. Capital expenditure on
development is shown as an addition to fixed assets and depreciated at
the rate as applicable to respective assets.
viii) Warranty expenses
Provision for warranty is estimated by the management on the basis of a
technical evaluation and past experience.
ix) Foreign currency transactions
Transactions in foreign currency are recorded at the exchange rate
prevailing at the date of the transaction. Exchange differences
arising on foreign currency transactions settled during the year are
recognised in the statement of profit and loss for the year.
Monetary assets and liabilities denominated in foreign currencies as at
the balance sheet date are translated at the closing exchange rates on
that date; the resultant exchange differences are recognised in the
statement of profit and loss.
x) Taxation
Income-tax expense comprises current tax (i.e. the amount of tax for
the year determined in accordance with the Income-tax Act, 1961) and
deferred tax charge or credit (reflecting the tax effects of the timing
differences between the accounting income and taxable income for the
year).
Minimum Alternate Tax (MAT) paid in excess of normal income tax is
recognised as asset (MAT Credit entitlement) only to the extent, there
is reasonable certainty that company shall be liable to pay tax as per
the normal provisions of the Income Tax Act,1961 in future.
The deferred tax charge or credit and the corresponding deferred tax
liabilities or assets are recognised using the tax rates that have been
enacted or substantially enacted by the Balance Sheet date. Deferred
tax assets are recognised only to the extent there is reasonable
certainty that the assets can be realised in the future. However, where
there is unabsorbed depreciation or carry forward loss under taxation
laws, deferred tax assets are recognised only if there is virtual
certainty of realisation of such assets. Deferred tax assets are
reviewed at each Balance Sheet date and written down or written up to
reflect the amount that is reasonably/ virtually certain (as the case
may be) to be realised.
xi) Government grant
Grants in the form of Capital/Investment subsidy are treated as Capital
Reserve.
xii) Borrowing costs
Borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset are capitalized as
part of the cost of that asset. Other borrowing costs are recognized as
an expense in the period in which they are incurred.
xiii) Impairment of assets
The carrying amounts of assets are reviewed at each balance sheet date
in accordance with Accounting Standard - 28 on ÃImpairment of
Assets' to determine whether there is any indication of impairment.
If any such indication exists, the recoverable amount of the asset is
estimated. An impairment loss is recognised whenever the carrying
amount of an asset or cash generating unit exceeds its recoverable
amount. Impairment losses are recognised in the statement of profit and
loss. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss
is reversed only to the extent that the asset's carrying amount does
not exceed the carrying amount that would have been determined net of
depreciation or amortisation, if no impairment loss had been
recognised.
xiv) Operating lease (As lessee)
Lease arrangements, where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor, are recognised as
operating lease.
Lease payments under operating lease are recognised as an expense in
the statement of profit and loss on a straight line basis over the
lease period.
xv) Earnings per share
Basic earnings per share are calculated by dividing the net profit /
(loss) for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year. Diluted
earnings per share is computed using the weighted average number of
equity and dilutive equity equivalent shares outstanding during the
year end, except where the results would be anti-dilutive.
xvi) Provisions, contingent liabilities and contingent assets
A provision is created when there is a present obligation as a result
of a past event that probably requires an outflow of resources and a
reliable estimate can be made of the amount of the obligation. A
disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not,
require an outflow of resources. When there is a possible obligation or
a present obligation in respect of which the likelihood of outflow of
resources is remote, no provision or disclosure is made. The Company
does not recognise assets which are of contingent nature until there is
virtual certainty of realisability of such assets. However, if it has
become virtually certain that an inflow of economic benefits will
arise, asset and related income is recognised in the financial
statements of the period in which the change occurs.
xvii) Cash and cash equivalents
Cash and cash equivalents include cash in hand, demand deposits with
banks, other short term highly liquid investments with original
maturities of three months or less.
a.Subsequent to the year end, Sumitomo Corporation, Japan has sold
1,591,881 equity shares of Rs 10 each representing 11.00% of the
paid-up equity share capital in the company on 13 April 2012 to an
existing shareholder, Isuzu Motors Limited, Japan thereby increasing
the shareholding of Isuzu Motors Limited in the company to 15%.
Consequently, shareholding of Sumitomo Corporation, Japan in the
Company has been reduced to 43.96 % and it has ceased to be the holding
and ultimate holding company of the company since the date of such
transfer.
b. The company has only one class of equity shares having par value of
Rs. 10 per share. Each shareholder is entitled to one vote per share
with a right to receive per share dividend declared by the company. In
the event of liquidation, the equity shareholders are entitled to
receive remaining assets of the company (after distribution of all
preferential amounts, if any) in the proportion of equity shares held
by the shareholders.
Mar 31, 2011
1) ACCOUNTING CONVENTION
The Financial Statements are prepared to comply in all material aspects
with the applicable accounting principles in India, the applicable
Accounting Standards notified under Section 211 (3C) of the Companies
Act, 1956 and the relevant provisions of the Companies Act, 1956.
2) REVENUE RECOGNITION
Sales are recognized on transfer of significant risks and rewards to
the customer that usually takes place on dispatch of goods to the
customer from the factory/ stockyard/ storage area. In case of export
sales, revenue is recognized as on the date of bill of lading, being
the effective date of transfer of significant risks and rewards to the
customer. Export benefits are accounted for on accrual basis.
3) FIXED ASSETS/INTANGIBLE ASSETS
Fixed assets are recorded at cost of acquisition. Cost includes
freight, duties, taxes and expenses incidental to acquisition and
installation of fixed assets. In case of self-constructed fixed assets,
appropriate overheads including salaries & wages are allocated to the
cost of the asset. The Cost of Capital Spares is capitalized along with
the cost of the related Asset.
Intangible assets comprising of Technical know how, product designs,
prototypes etc. either acquired or internally developed are stated at
cost. In case of internally generated intangible assets, appropriate
overheads including salary and wages are allocated to the cost of the
asset.
Capital work in Progress includes cost of assets at site, direct and
indirect expenditure incidental to construction, advances made for
acquisition of capital assets and interest on the funds deployed for
construction.
4) DEPRECIATION/AMORTISATION
Depreciation on tangible fixed assets is provided on a Straight-Line
Method on a monthly pro-rata basis at the rates and in the manner
prescribed in Schedule XIV to the Companies Act, 1956, except on
following assets which are being depreciated at the rates mentioned
below:
Motor cars and air conditioners - 25.00%
Computers - 33.33%
All assets costing up to Rs. 5,000/- are being fully depreciated in the
year of purchase.
Capital spares are amortized in a systematic manner over a period not
exceeding the useful life of the asset to which they relate.
Intangible assets are amortised on a Straight-Line Method on a monthly
pro-rata basis over a period of three to ten years based on the
estimated useful life of the assets.
5) INVENTORIES
Inventories are valued at lower of cost or net realizable value. Cost
for the purpose of valuation is calculated on a quarterly weighted
average method. In respect of Finished Goods & Work-in-Progress,
applicable manufacturing overheads and other costs incurred in bringing
the items of inventory to their present location and condition are also
included. Excise duty is included in finished goods valuation.
6) EMPLOYEE BENEFITS
(a) Post-employment benefit plans
i. Defined Contribution Plans - The Company contributes to the
appropriate authorities its share of the Employees' Provident & Pension
Fund and Employee State Insurance, which is charged to Profit and Loss
Account every year. The Company has created trust which has taken
Master policy with the Life Insurance Corporation of India to cover its
liability towards employees' Superannuation. Annual contribution of
Superannuation is charged to Profit and Loss Account every year
ii. Defined Benefit Plans - The estimated liability towards Gratuity
and Leave Encashment is being provided for based on the actuarial
valuation carried out at the year-end using Projected Unit Credit
Method. Actuarial gains and losses are recognized in full in the Profit
and Loss Account for the period in which they occur.
The Company has created trust which has taken Master policy with the
Life Insurance Corporation of India to cover its liability towards
employees' Gratuity. The Gratuity obligation recognized in the Balance
Sheet represents the present value of the defined benefit obligation as
adjusted for unrecognized past service cost and as reduced by the fair
value of Gratuity Fund.
(b) Short term employment benefits
The undiscounted amount of short term employee benefits expected to be
paid in exchange for services rendered by employees is recognized
during the period when the employee renders the services. These
benefits include compensated absences and performance incentives.
7) RESEARCH & DEVELOPMENT
Revenue expenditure on Research and Development is charged to the
Profit and Loss Account in the year in which it is incurred. Capital
expenditure on Research and Development is shown as an addition to
fixed assets and depreciated at the rate as applicable to respective
assets.
8) WARRANTY EXPENSES
Provision for warranty is made in the accounts on the basis of past
experience and technical evaluation in respect of vehicles sold.
9) FOREIGN CURRENCY TRANSACTIONS
Foreign currency transactions are recorded at exchange rates prevailing
at the date of transaction. Exchange differences, if any, arising on
settlement of transactions are recognized as income or expense in the
year in which they arise.
At the Balance Sheet date all monetary assets and monetary liabilities
denominated in foreign currency are reported at the exchange rates
prevailing at the Balance Sheet date and the resultant exchange
difference, if any, is recognized in the Profit & Loss Account.
10) TAXATION
Tax Expense, comprising current tax & deferred tax is included in
determining the net profit for the year. The current tax has been
computed in accordance with relevant tax rates and tax laws. Minimum
Alternate Tax (MAT) paid in excess of normal income tax is recognised
as asset (MAT Credit entitlement) only to the extent, there is
reasonable certainty that company shall be liable to pay tax as per the
normal provisions of the Income Tax Act, 1961 in future.
In accordance with Accounting Standard - 22 'Accounting for Taxes on
Income', notified under Section 211 (3C) of the Companies Act, 1956,
the deferred tax for timing differences between the book and the tax
profits for the year is accounted for using the tax rates and laws
that have been enacted or substantially enacted as on the Balance
Sheet date. However, in the year of transition, the accumulated
deferred tax (liabilities) / assets at the beginning of the year
has been recognized with a corresponding charge to the General
Reserve.
Deferred tax assets arising from temporary timing differences are
recognized to the extent there is a reasonable / virtual certainty that
the assets can be realised in the future and are reviewed for the
appropriateness of their respective carrying values at each Balance
Sheet date.
11) GOVERNMENT GRANTS
Grants in the form of Capital/Investment subsidy are treated as Capital
Reserve.
12) BORROWING COSTS
Borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset are capitalized as
part of the cost of that asset. Other borrowing costs are recognized as
an expense in the period in which they are incurred.
13) LEASES
As lessee:
Lease rental in respect of assets taken on "Operating Lease" are
charged to Profit & Loss account on straight-line basis over the lease
term.
14) IMPAIRMENT OF ASSETS
In accordance with Accounting Standard - 28 on 'Impairment of Assets',
notified under Section 211 (3C) of the Companies Act, 1956, recoverable
amount of relevant assets is computed and compared with the carrying
amount for determining impairment loss, if any at the Balance Sheet
date in case there is an indication that any asset may be impaired. If
the carrying amount of the asset exceeds its recoverable amount, an
impairment loss is recognised in the Profit and Loss Account to the
extent the carrying amount exceeds recoverable amount.
15) PROVISIONS AND CONTINGENCIES
Provisions are recognized when the Company has a present obligation as
a result of past events, for which it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation, and a reliable estimate of the amount can be made.
Provisions required to settle are reviewed regularly and are adjusted
where necessary to reflect the current best estimates of the
obligation. Where the Company expects a provision to be reimbursed, the
reimbursement is recognized as a separate asset, only when such
reimbursement is virtually certain. Contingent liabilities are
disclosed after an evaluation of the facts and legal aspects of the
matters involved.
Mar 31, 2010
1) ACCOUNTING CONVENTION
The Financial Statements are prepared to comply in all material aspects
with the applicable accounting principles in India, the applicable
Accounting Standards notified under Section 211(3C) of the Companies
Act, 1956 and the relevant provisions of the Companies Act, 1956.
2) REVENUE RECOGNITION
Sales are recognized on transfer of significant risks and rewards to
the customer that usually takes place on dispatch of goods to the
customer from the factory/ stockyard/ storage area. In case of export
sales, revenue is recognized as on the date of bill of lading, being
the effective date of transfer of significant risks and rewards to the
customer. Export benefits are accounted for on accrual basis.
3) FIXED ASSETS / INTANGIBLE ASSETS
Fixed assets are recorded at cost of acquisition. Cost includes
freight, duties, taxes and expenses incidental to acquisition and
installation of fixed assets. In case of self-constructed fixed assets,
appropriate overheads including salaries & wages are allocated to the
cost of the asset. The Cost of Capital Spares is capitalized along with
the cost of the related Asset.
Intangible assets comprising of Technical know how, product designs,
prototypes etc. either acquired or internally developed are stated at
cost. In case of internally generated intangible assets, appropriate
overheads including salary and wages are allocated to the cost of the
asset.
Capital Work-in-Progress includes cost of assets at site, direct and
indirect expenditure incidental to construction, advances made for
acquisition of capital assets and interest on the funds deployed for
construction.
4) DEPRECIATION / AMORTISATION
Depreciation on tangible fixed assets is provided on a Straight-Line
Method on a monthly pro-rata basis at the rates and in the manner
prescribed in Schedule XIV to the Companies Act, 1956, except on
following assets which are being depreciated at the rates mentioned
below:
Motor cars and air conditioners - 25.00%
Computers - 33.33%
All assets costing up to Rs. 5,000/- are being fully depreciated in the
year of purchase.
Capital spares are amortized in a systematic manner over a period not
exceeding the useful life of the asset to which they relate.
Intangible assets are amortised on a Straight-Line Method on a monthly
pro-rata basis over a period of three to ten years based on the
estimated useful life of the assets.
5) INVENTORIES
Inventories are valued at lower of cost or net realizable value. Cost
for the purpose of valuation is calculated on a quarterly weighted
average method. In respect of Finished Goods & Work-in-Progress,
applicable manufacturing overheads and other costs incurred in bringing
the items of inventory to their present location and condition are also
included. Excise duty is included in finished goods valuation.
6) EMPLOYEE BENEFITS
(a) Post-employment benefit plans
i. Defined Contribution Plans - The Company contributes to the
appropriate authorities its share of the Employees Provident & Pension
Fund and Employee State Insurance, which is charged to Profit and Loss
Account every year. The Company has created trust which has taken
Master policy with the Life Insurance Corporation of India to cover its
liability towards employees Superannuation. Annual contribution of
Superannuation is charged to Profit and Loss Account every year
ii. Defined Benefit Plans - The estimated liability towards Gratuity
and Leave Encashment is being provided for based on the actuarial
valuation carried out at the year-end using Projected Unit Credit
Method. Actuarial gains and losses are recognized in full in the Profit
and Loss Account for the period in which they occur.
The Company has created trust which has taken Master policy with the
Life Insurance Corporation of India to cover its liability towards
employees Gratuity. The Gratuity obligation recognized in the Balance
Sheet represents the present value of the defined benefit obligation as
adjusted for unrecognized past service cost and as reduced by the fair
value of Gratuity Fund.
(b) Short term employment benefits
The undiscounted amount of short term employee benefits expected to be
paid in exchange for services rendered by employees is recognized
during the period when the employee renders the services. These
benefits include compensated absences and performance incentives.
7) RESEARCH & DEVELOPMENT
Revenue expenditure on Research and Development is charged to the
Profit and Loss Account in the year in which it is incurred. Capital
expenditure on Research and Development is shown as an addition to
fixed assets and depreciated at the rate as applicable to respective
assets.
8) WARRANTY EXPENSES
Provision for warranty is made in the accounts on the basis of past
experience and technical evaluation in respect of vehicles sold.
9) FOREIGN CURRENCY TRANSACTIONS
Foreign currency transactions are recorded at exchange rates prevailing
at the date of transaction. Exchange differences, if any, arising on
settlement of transactions are recognized as income or expense in the
year in which they arise.
At the Balance Sheet date all monetary assets and monetary liabilities
denominated in foreign currency are reported at the exchange rates
prevailing at the Balance Sheet date and the resultant exchange
difference, if any, is recognized in the Profit & Loss Account.
10) TAXATION
Tax Expense, comprising current tax, deferred tax & fringe benefit tax
is included in determining the net profit for the year. The current
tax & fringe benefit tax has been computed in accordance with relevant
tax rates and tax laws. Minimum Alternate Tax (MAT) paid in excess of
normal income tax is recognised as asset (MAT Credit entitlement) only
to the extent, there is reasonable certainty that company shall be
liable to pay tax as per the normal provisions of the Income Tax
Act,1961 in future.
In accordance with Accounting Standard à 22 ÃAccounting for Taxes on
Income, notified under Section 211(3C) of the Companies Act, 1956, the
deferred tax for timing differences between the book and the tax
profits for the year is accounted for using the tax rates and laws that
have been enacted or substantially enacted as on the Balance Sheet
date. However, in the year of transition, the accumulated deferred tax
(liabilities) / assets at the beginning of the year has been recognized
with a corresponding charge to the General Reserve.
Deferred tax assets arising from temporary timing differences are
recognized to the extent there is a reasonable / virtual certainty that
the assets can be realised in the future and are reviewed for the
appropriateness of their respective carrying values at each Balance
Sheet date.
11) GOVERNMENT GRANTS
Grants in the form of Capital/Investment subsidy are treated as Capital
Reserve.
12) BORROWING COSTS
Borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset are capitalized as
part of the cost of that asset. Other borrowing costs are recognized as
an expense in the period in which they are incurred.
13) LEASES
As lessee:
Lease rental in respect of assets taken on ÃOperating Leaseà are
charged to Profit & Loss account on straight-line basis over the lease
term.
14) IMPAIRMENT OF ASSETS
In accordance with Accounting Standard à 28 on ÃImpairment of Assets,
notified under Section 211(3C) of the Companies Act, 1956, recoverable
amount of relevant assets is computed and compared with the carrying
amount for determining impairment loss, if any at the Balance Sheet
date in case there is an indication that any asset may be impaired. If
the carrying amount of the asset exceeds its recoverable amount, an
impairment loss is recognised in the Profit and Loss Account to the
extent the carrying amount exceeds recoverable amount.
15) PROVISIONS AND CONTINGENCIES
Provisions are recognized when the Company has a present obligation as
a result of past events, for which it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation, and a reliable estimate of the amount can be made.
Provisions required to settle are reviewed regularly and are adjusted
where necessary to reflect the current best estimates of the
obligation. Where the Company expects a provision to be reimbursed, the
reimbursement is recognized as a separate asset, only when such
reimbursement is virtually certain. Contingent liabilities are
disclosed after an evaluation of the facts and legal aspects of the
matters involved.
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