Mar 31, 2023
1 CORPORATE INFORMATION,
SIGNIFICANT ACCOUNTING POLICIES AND SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
SRF Limited ("the Company") is a public limited company domiciled in India and incorporated under the provisions of the Companies Act, 1956. The Company''s equity shares are listed at the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The registered office of the Company is situated at The Galleria, DLF Mayur Vihar, Unit No. 236 and 237, Second Floor, Mayur Vihar Place, Noida Link Road, Mayur Vihar Phase I Extn, Delhi - 110091. The Company''s parent company is KAMA Holdings Limited.
The principal activities of the Company are manufacturing, purchase and sale of technical textiles, chemicals, packaging films and other polymers.
The standalone financial statements were authorised for issue in accordance with a resolution of the directors on May 9, 2023.
B SIGNIFICANT ACCOUNTING POLICIES1 Basis of Preparation
These standalone financial statements are prepared in accordance with Indian Accounting Standards (Ind AS), under the Companies (Indian Accounting Standards) Rules, 2015 notified under section 133 of the Companies Act 2013 (""the Act"") as amended thereafter and other relevant provisions of the Act.
The standalone financial statements have been prepared on an accrual basis and under the historical cost convention, except for the following assets and liabilities which have been measured at fair value:
- Derivative financial instruments
- Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments)
- Defined benefit plans - plan assets measured at fair value less present value of defined benefit obligation
- Share-based payments
The standalone financial statements are presented in Indian Rupees (INR) which is also the Company''s functional currency and all values are rounded to the nearest crores, except when otherwise indicated.
The principal accounting policies are set out below.
2 Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/non-current classification.
An asset is treated as current when it is:
- Expected to be realised or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realised within twelve months after the reporting period
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as noncurrent.
A liability is current when:
- It is expected to be settled in normal operating cycle
- It is held primarily for the purpose of trading
- It is due to be settled within twelve months after the reporting period
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Based on the nature of products and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has identified twelve months as its operating cycle for the purpose of current / non current classification of assets and liabilities.
3 Property, plant and equipment (PPE)
The cost of an item of property, plant and equipment shall be recognised as an asset if, and only if it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably.
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation and accumulated impairment losses, if any.
All items of property, plant and equipment have been measured at fair value at the date of transition to Ind AS. The Company have opted such fair valuation as deemed cost at the transition date i.e. April 1, 2015.
Cost of acquisition or construction is inclusive of freight, duties, non-recoverable taxes, incidental expenses and interest on borrowing attributable to the acquisition of qualifying assets, up to the date of commissioning of the assets.
Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for qualifying assets, upto the date of commissioning of the assets. Excess of net sale proceeds of items produced over the cost of testing, if any, are not recognised in the profit or loss but deducted from the directly attributable costs of property, plant, and equipment.
Likewise, when a major inspection for faults is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria is satisfied. All other repair and maintenance costs are recognised in the statement of profit and loss as incurred.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items of property, plant and equipment and depreciated accordingly.
Assets are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.
Capital Work in Progress: Project under which assets are not yet ready for their intended use are carried at cost comprising direct cost of labour and material, related incidental expenses and attributable interest.
Spare parts are capitalized when they meet the definition of PPE, i.e., when the Company intends to use these for a period of more than 12 months.
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value.
Depreciation has been provided on the cost of assets less their residual values on straight line method on the basis of estimated useful life of assets determined by the Company which are different from the useful life as prescribed in Schedule II of the 2013 Act. The estimated useful life of the assets have been assessed based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc. and are as under:
Management''s estimate of useful life
Roads |
40-50 years |
Buildings (including temporary structures) |
5-60 years |
Plant and equipment |
2-40 years |
Furniture and fixtures |
3-20 years |
Office equipment |
3-20 years |
Vehicles |
4-5 years |
Freehold land is not depreciated.
Depreciation is calculated on a pro rata basis except assets costing upto '' 5,000 each, which are fully depreciated in the year of purchase.
An item of property, plant and equipment or any significant part initially recognised of such item of property plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognised.
The estimated useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
Intangible assets acquired separately are measured on initial recognition at cost.
Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses, if any.
Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The useful lives considered are as follows:
Trademarks / Brand |
10-30 years |
Technical Knowhow |
30-40 years |
Software |
3-5 years |
Other intangibles |
2.5-8 years |
The Company has elected to continue with the carrying value of all of its intangibles assets recognised as on April 1, 2015 measured as per the previous GAAP and use that carrying value as its deemed cost as of transition date.
The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern
of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
An intangible asset is derecognised on disposal or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.
6 Research and development expenditure Expenditure on research and development of products is included under the natural heads of expenditure in the year in which it is incurred except which relate to development activities whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes.
Such development costs are capitalised if they can be reliably measured, the product or process is technically and commercially feasible and the Company has sufficient resources to complete the development and to use or sell the asset.
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses, if any. Amortisation of the asset begins when development is complete and the asset is available for use.
It is amortised over the period of expected future benefit. Amortisation expense is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset. During the period of development, the asset is tested for impairment annually.
7 Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Company''s cash-generating units that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cashgenerating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
8 Impairment of tangible and intangible assets other than goodwill
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication
exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) fair value less costs of disposal and its value in use.
Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.
Impairment loss is recognised when the carrying amount of an asset or CGU exceeds its recoverable amount. In such cases, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.
The Company bases its impairment calculation on detailed budgets and forecast, which are prepared separately for each of the Company''s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of 5 years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after 5th year. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Company estimates the asset''s or CGU''s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.
9 Leasing
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assess whether:
- the contract involves the use of an identified asset - this may be specified explicitly or implicitly and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;
- the Company has the right to obtain substantially all of the economic benefits from use of the asset through the period of use; and
- the Company has the right to direct the use of the asset. The Company has this right when it has the decisionmaking rights that are most relevant to changing how and for what purpose the asset is used. In rare cases, where the decision about how and for what purpose the asset is used is predetermined, the Company has the right to direct the use of the asset if either:
⢠the Company has the right to operate the asset; or
⢠the Company designed the asset in a way that predetermines how and for what purpose it will be used.
The Company reassesses whether a contract is, or contains, a lease only if the terms and conditions of the contract are changed.
At inception or on reassessment of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.
Company as lessee
The Company accounts for assets taken under lease arrangement in the following manner:
The Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right of use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments
made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentive received.
The right of use asset is subsequently depreciated using the straight line method from the commencement date to the end of the lease term. The estimated useful lives of right-of-use assets are determined on the basis of remaining lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company''s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate. The Company determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.
Lease payments included in the measurement of the lease liability comprise the fixed payments, including in-substance fixed payments and variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change
in Company''s estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
Short-term leases and leases of low-value assets
The Company has elected not to recognise right-of use assets and lease liabilities for short term leases that have a lease term of 12 months or less and leases of low value assets. The Company recognises the lease payments associated with these leases as an expense on a straight- line basis over the lease term.
10 Borrowing costs
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. Borrowing costs incurred for the period from commencement of activities relating to construction/development of the qualifying asset upto the date of capitalisation of such asset are added to the cost of the asset. All other borrowing costs are expensed in the period in which they occur. In case of a specific borrowing taken for
the purpose of acquisition, construction or production of a qualifying asset, the borrowing costs capitalised shall be the actual borrowing costs incurred during the period less any interest income earned on temporary investment of specific borrowing pending expenditure on qualifying asset.
In case funds are borrowed generally and such funds are used for the purpose of acquisition, construction or production of a qualifying asset, the borrowing costs capitalised are calculated by applying the weighted average capitalisation rate on general borrowings outstanding during the period, to the expenditures incurred on the qualifying asset.
If any specific borrowing remains outstanding after the related asset is ready for its intended use, that borrowing is considered part of the funds that are borrowed generally for calculating the capitalisation rate.
11 Foreign Currencies
Transactions in foreign currencies are recorded on initial recognition at the exchange rate prevailing on the date of the transaction.
(i) Monetary assets and liabilities denominated in foreign currency remaining unsettled at the end of the year, are translated at the closing rates prevailing on the Balance Sheet date. Non-monetary items which are carried in terms of historical cost denominated in foreign currency are reported using the exchange rate at the date of transaction. Any gains or losses arising due to differences in exchange rates at the time of translation or settlement are accounted for in the Statement of Profit and Loss either under the head foreign exchange fluctuation
or interest cost, as the case may be, except those relating to exchange differences arising from cash flow hedges to the extent that the hedges are effective and those covered below.
(ii) Exchange differences pertaining to long term foreign currency loans obtained or re-financed on or before March 31, 2016:
Exchange differences on long-term foreign currency monetary items relating to acquisition of depreciable assets are adjusted to the carrying cost of the assets and depreciated over the balance useful life of the assets.
(iii) Exchange differences pertaining to long term foreign currency loans obtained or re-financed on or after April 1, 2016:
The exchange differences pertaining to long term foreign currency loans obtained or re-financed on or after April 1, 2016 is treated in accordance with Ind AS 21/ Ind AS 109. Refer point (i) above.
2 Inventories
Inventories are valued at cost or net realisable value, whichever is lower. The basis of determining the cost for various categories of inventory are as follows:
(a) Raw materials, packing materials and stores and spares (including fuel) -Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis. The aforesaid items are valued at Net Realisable Value if the finished products in which they are to be incorporated are expected to be sold at a loss.
(b) Traded goods, Stock in progress and finished goods- Direct cost plus appropriate share of overheads based on normal operating capacity.
(c) By products - At estimated realisable value.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
The net realisable value of work-inprogress is determined with reference to the selling prices of related finished goods. Raw materials, components and other supplies held for use in the production of finished products are not written down below cost except in cases when a decline in the price of materials indicates that the cost of the finished products shall exceed the net realisable value.
The comparison of cost and net realisable value is made on an item-by-Item basis.
13 Provisions, contingent liabilities and contingent assets Provisions
The Company recognises a provision when there is a present obligation (legal or constructive) as a result of past events and it is more likely than not that an outflow of resources would be required to settle the obligation and a reliable estimate can be made.
When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain.
The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or nonoccurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent liabilities and commitments are reviewed by the management at each balance sheet date.
Contingent assets
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.
14 Revenue recognition
Sale of goods and services Revenue from sale of products is recognised upon transfer of control of products to customers at the time of shipment to or receipt of goods by the customers. Service
income is recognised over a period of time as and when the underlying services are performed.
Revenues towards satisfaction of a performance obligation are measured based on the transaction price (net of variable consideration), which is the consideration, net of tax collected from customers and remitted to government authorities such as goods and services tax and applicable discounts and allowances.
Any fees including upfront fees received in relation to contract manufacturing arrangements is recognised on straight line basis over the period over which the Company satisfies the underlying performance obligations. Contract assets are recognised when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled revenue (only act of invoicing is pending) when there is unconditional right to receive cash as per contractual terms. Advance from customers ("contract liability") is recognised when the Company has received consideration from the customer before it delivers the goods.
15 Taxation
Income tax expense represents the sum of current tax and deferred tax.
a) Current tax
Current income tax assets and liabilities are measured at the best estimate of amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss i.e. in other comprehensive income or in equity.
b) Deferred tax
Deferred tax is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts at the reporting date.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled.
Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss i.e. in other comprehensive income or in equity.
Deferred tax assets/liabilities are not recognised for below mentioned temporary differences:
(i) At the time of initial recognition of goodwill;
(ii) Initial recognition of assets or liabilities (other than in a business combination) at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT asset is recognised in the Balance Sheet when it is probable that future economic benefit associated with it will flow to the Company.
The Company considers whether it is probable that a taxation authority will accept an uncertain tax treatment. If the Company concludes that it is probable that the taxation authority will accept an uncertain tax treatment, the Company determines the taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatment used or planned to be used in its income tax filings. However, if the Company concludes that it is not probable that the taxation authority will accept an uncertain tax treatment, the Company reflects the effect of uncertainty in determining the related taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates.
16 Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with.
A government grant that becomes receivable as compensation for expenses or losses incurred is 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, unless the conditions for receiving the grant are met after the related expenses have been recognised. In this case, the grant is recognised when it becomes receivable.
Government grants related to assets are presented in the balance sheet at fair value as deferred income and is recognised in profit or loss on a systematic basis over the expected useful life of the related assets.
Revenue from export benefits arising from duty drawback scheme, remission of duties and taxes on exported product scheme are recognized on export of goods in accordance with their respective underlying scheme at fair value of consideration received or receivable. The benefit accrued under the above scheme is included under the head "Revenue from Operations" under ''Export and other incentives''
17 Employee benefits Short-term employee benefits
Wages and salaries including non monetary benefits that are expected to be settled within the operating cycle after the end of the period in which the related services are rendered, are measured at the undiscounted amount expected to be paid. A liability is recognised for the amount expected to be paid under short-term cash bonus, 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 obligation can be estimated reliably.
Defined contribution plans Provident fund administered through Regional Provident Fund Commissioner, Superannuation Fund and Employees'' State Insurance Corporation are defined contribution schemes. Contributions to such schemes are charged to the statement of profit and loss in the year when employees have rendered services entitling them to contributions. The Company has no obligation, other than the contribution payable to such schemes.
Defined benefit plans
The Company has defined benefit gratuity plan and provident fund for certain category of employees administered through a recognised provident fund trust. Provision for gratuity and provident fund for certain category of employees administered through a recognised provident fund trust are determined on an actuarial basis at the end of the year and charged to Statement of Profit and Loss, other than remeasurements. The cost of providing these benefits is determined using the projected unit credit method.
Remeasurements, comprising of actuarial gains and losses and the effect of the asset ceiling, (excluding amounts included in net interest on the net defined benefit liability and return on plan assets), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Remeasurements are not reclassified to statement of profit and loss in subsequent periods.
Other long-term employee benefits The Company also has other longterm employee benefits in the nature of compensated absences. Provision for compensated absences are determined on an actuarial basis at the end of the year and charged to Statement of Profit and Loss. The cost of providing these benefits is determined using the projected unit credit method.
Share based payments Equity settled share based payments to employees under SRF Long Term Share Based Incentive Plan (SRF LTIP) are measured at the fair value (which is the market price less exercise price) of the equity instruments on the grant date. This compensation expense is amortised over the remaining tenure over which the employees renders their service on a straight line basis.
18 Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
19 Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
20 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Initial Recognition and measurement Trade receivables and debt securities issued 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 (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus or minus, for an item not at FVTPL,transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.
A) Financial Assets
Classification and Subsequent measurement
For purposes of subsequent measurement, financial assets of the Company are classified in three categories:
a) At amortised cost
b) At fair value through profit and loss (FVTPL)
c) At fair value through other comprehensive income (FVTOCI)-debt instrument or equity instrument.
Financial asset is measured at amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in other income in the consolidated statement of profit and loss. The losses arising from impairment are recognised in the statement of profit and loss. This category generally applies to trade and other receivables.
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:
- it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
- its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets not classified as measured at amortised cost or FVOCI are measured at FVTPL. Financial assets included within the FVTPL category are measured at fair value with all changes recognised in the statement of profit and loss.
Equity Instruments
All equity instruments in the scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading are measured at fair value through profit and loss.
For all other equity instruments, the Company may make an irrevocable election to present subsequent changes in the fair value in other comprehensive income.
The Company makes such election on an instrument by instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognised in other comprehensive income. This cumulative gain or loss is not reclassified to statement of profit and loss on disposal of such instruments.
Investments in Subsidiaries are carried at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in subsidiaries, the difference between net disposal proceeds and the carrying amounts are recognized in the Standalone Statement of Profit and Loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset) is primarily derecognised (i.e. removed from the balance sheet) when:
a) The rights to receive cash flows from the asset have expired, or
b) The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (i) the Company has transferred substantially all the risks and rewards of the asset, or (ii) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a passthrough arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay. Any gain or loss on derecognition is recognised in profit or loss.
When the Company has retained substantially all the risks and rewards of ownership of the transferred asset,
the Company continues to recognise the transferred asset in its entirety and recognises a financial liability for the consideration received.
Impairment of financial assets The Company recognizes loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all financial assets with contractual cash flows other than trade receivable, ECLs are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of ECL (or reversal) that is required to adjust the loss allowance at the reporting date is recognised as an impairment gain or loss in the Statement of Profit and Loss.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, 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, that includes forwardlooking information. The Company considers a financial asset to be in default when the asset is unlikely to be realised in full.
Credit Impaired Financial Assets At each reporting date, the Company assesses whether financial assets carried at amortised cost and debt securities at FVOCI are credit-impaired. A financial asset is ''credit-impaired'' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable data:
⢠significant financial difficulty of the debtor;
⢠a breach of contract such as a default; or
⢠it is probable that the debtor will enter bankruptcy or other financial reorganisation
Presentation of allowance for ECL in the balance sheet
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.
Write Off
The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company''s procedures for recovery of amounts due.
B) Financial liabilities and Equity instruments Initial recognition and measurement All financial liabilities are recognised initially at fair value, net of directly attributable transaction costs, if any.
The Company''s financial liabilities includes borrowings, trade and other payables including financial guarantee contracts and derivative financial instruments.
Subsequent measurement Borrowings
Borrowings are subsequently measured at amortised cost. Any differences between the proceeds (net of transaction costs) and the redemption/repayment amount is recognised in profit and loss over the period of the borrowings using the effective interest rate method.
Trade and other payables Trade and other payables represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid.
Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Financial guarantee contracts Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified entity fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
Equity instrument
Equity instruments are any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Debt or equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
21 Derivative and non derivative financial instruments and hedge accounting Initial recognition and subsequent measurement
The Company uses derivative financial instruments (such as forward currency contracts, interest rate swaps and full currency swaps) or non derivative financial assets / liabilities to hedge its foreign currency risks and interest rate risks. The Company has opted for ""Hedge Accounting"" for all its derivative as well as non-derivative financial instrument used for hedging. Accordingly, at the inception of the hedge the Company formally designates a hedge relationship between the ''hedging instrument'' and ''hedged item'' which determine the initial recognition of the financial instrument as Fair Value Hedge or Cashflow hedge. The documentation includes the Company''s risk management objective and strategy for undertaking hedge, the hedging/ economic relationship, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of
changes in the hedging instrument''s fair value in offsetting the exposure to changes in the hedged item''s fair value or cash flows attributable to the hedged risk. The Company determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency/reference interest rates, contract amount and timing of their respective cash flows. The Company assesses whether the derivative designated in each hedging relationship is expected to be and has been effective in offsetting changes in cash flows of the hedged item using the hypothetical derivative method. In these hedge relationships, the main expected sources of ineffectiveness are:
⢠the effect of the counterparties'' and the Company''s own credit risk on the fair value of the forward foreign exchange contracts or swaps, which is not reflected in the change in the fair value of the hedged cash flows attributable to the change in exchange rates or interest rates and
⢠changes in the timing of the hedged transactions
Hedges entered into by the Company are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated. These financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognised in OCI and later reclassified to profit and loss when the hedge item affects profit or loss.
For the purpose of hedge accounting, hedges are classified as:
a) Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability.
b) Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment.
Hedges that meet the strict criteria for hedge accounting are accounted for, as described below:
Fair value hedges
The change in the fair value of a hedging instrument is recognised in the statement of profit and loss. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in the statement of profit and loss.
If the hedged item is derecognised, the unamortised fair value is recognised immediately in profit or loss. When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in statement of profit and loss.
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the statement of profit and loss.
The Company uses forward currency contracts as hedges of its exposure to foreign currency risk in forecast transactions and firm commitments. The ineffective portion relating to foreign currency contracts is recognised in the statement of profit and loss. In some cases, the Company separates the premium element and the spot element of a forward contract and designates only the change in fair value of the spot element of forward exchange contracts as the hedging instrument in cash flow hedging relationships. In such cases, the changes in the fair value of the premium element of the forward contract or the foreign currency basis spread of the financial instrument is accumulated in a separate component of equity as ''cost of hedging''. The changes in the fair value of such premium element or foreign currency basis spread are reclassified to profit or loss as a reclassification adjustment on a straight-line basis over the period of the forward contract or the financial instrument.
The Company also designates non derivative financial liabilities, such as foreign currency borrowings from banks, as hedging instruments for the hedge of foreign currency risk associated with highly probable forecasted transactions and, accordingly, applies cash flow hedge accounting for such relationships.
Amounts recognised as other comprehensive income are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast transaction occurs.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, the hedge accounting will be discontinued prospectively. Any cumulative gain or loss previously recognised in other comprehensive income remains separately in other equity if the forecast transaction or the foreign currency firm commitment is expected to occur else the amount shall be immediately reclassified from the cash flow hedge reserve to profit or loss as a reclassification adjustment.
22 Fair value measurement
The Company measures some of its financial instruments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
a) In the principal market for the asset or liability, or
b) In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
a) Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
b) Level 2 â 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).
c) Level 3 â Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Fo
Mar 31, 2022
1 Corporate Information, Significant Accounting Policies and Significant Accounting Judgements, Estimates and Assumptions
A CORPORATE INFORMATION
SRF Limited ("the Company") is a public limited company domiciled in India and incorporated under the provisions of the Companies Act, 1956. The Company''s equity shares are listed at the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The registered office of the Company is situated at The Galleria, DLF Mayur Vihar, Unit No. 236 and 237, Second Floor, Mayur Vihar Place, Noida Link Road, Mayur Vihar Phase I Extn, Delhi - 110091. The Company''s parent company is KAMA Holdings Limited.
The principal activities of the Company are manufacturing, purchase and sale of technical textiles, chemicals, packaging films and other polymers.
The standalone financial statements were authorised for issue in accordance with a resolution of the directors on May 9, 2022.
B SIGNIFICANT ACCOUNTING POLICIES
1 Basis of Preparation
These standalone financial statements are prepared in accordance with Indian Accounting Standards (Ind AS), under the Companies (Indian Accounting Standards) Rules, 2015 notified under section 133 of the Companies Act 2013 ("the Act") as amended thereafter and other relevant provisions of the Act.
The standalone financial statements have been prepared on an accrual basis and under the historical cost convention, except for the following assets and liabilities which have been measured at fair value:
- Derivative financial instruments
- Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments)
- Defined benefit plans - plan assets measured at fair value less present value of defined benefit obligation
- Share-based payments
The standalone financial statements are presented in Indian Rupees (INR) which is also the Company''s functional currency and all values are rounded to the nearest crores, except when otherwise indicated.
The principal accounting policies are set out below.
2 Current versus non-current classification The Company presents assets and liabilities in the balance sheet based on current/ non-current classification.
An asset is treated as current when it is:
- Expected to be realised or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle
- It is held primarily for the purpose of trading
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Based on the nature of products and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has identified twelve months as its operating cycle for the purpose of current / non current classification of assets and liabilities.
3 Property, plant and equipment (PPE)
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation and accumulated impairment losses, if any.
All items of property, plant and equipment have been measured at fair value at the date of transition to Ind AS. The Company have opted such fair valuation as deemed cost at the transition date i.e. April 1, 2015.
Cost of acquisition or construction is inclusive of freight, duties, non-recoverable taxes, incidental expenses and interest on loans attributable to the acquisition of qualifying assets, up to the date of commissioning of the assets.
Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for qualifying assets, upto the date of commissioning of the assets.
Likewise, when a major inspection for faults is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria is satisfied. All other repair and maintenance costs are recognised in the statement of profit and loss as incurred.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items of property, plant and equipment and depreciated accordingly.
Assets are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.
Capital Work in Progress: Project under which assets are not yet ready for their intended use are carried at cost comprising direct cost, related incidental expenses and attributable interest.
Spare parts are capitalized when they meet the definition of PPE, i.e., when the Company intends to use these for a period of more than 12 months.
4 Depreciation
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value.
Depreciation has been provided on the cost of assets less their residual values on straight line method on the basis of estimated useful life of assets determined by the Company which are different from the useful life as prescribed in Schedule II of the 2013 Act. The estimated useful life of the assets have been assessed based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc. and are as under:
Roads |
40-50 years |
Buildings (including temporary structures) |
5-60 years |
Plant and equipment |
2-40 years |
Furniture and fixtures |
3-20 years |
Office equipment |
3-20 years |
Vehicles |
4-5 years |
Freehold land is not depreciated.
Depreciation is calculated on a pro rata basis except assets costing upto '' 5,000 each, which are fully depreciated in the year of purchase.
An item of property, plant and equipment or any significant part initially recognised of such item of property plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognised.
The estimated useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost.
Following initial recognition, intangible
assets are carried at cost less any
accumulated amortisation and accumulated impairment losses, if any.
Internally generated intangibles, excluding capitalised development costs, are not
capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
Intangible assets with finite lives are
amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The useful lives considered are as follows:
Trademarks / Brand |
10-30 years |
Technical Knowhow |
30-40 years |
Software |
3-5 years |
Other intangibles |
2.5-8 years |
The Company has elected to continue with the carrying value of all of its intangibles assets recognised as on April 1, 2015 measured as per the previous GAAP and use that carrying value as its deemed cost as of transition date.
The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
An intangible asset is derecognised on disposal or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.
5 Research and development expenditure Expenditure on research and development of products is included under the natural heads of expenditure in the year in which it is incurred except which relate to development activities whereby research findings are applied to a plan or design
for the production of new or substantially improved products and processes.
Such development costs are capitalised if they can be reliably measured, the product or process is technically and commercially feasible and the Company has sufficient resources to complete the development and to use or sell the asset.
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses, if any. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation expense is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset. During the period of development, the asset is tested for impairment annually.
7 Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Company''s cash-generating units that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
8 Impairment of tangible and intangible assets other than goodwill The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) fair value less costs of disposal and its value in use.
Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.
Impairment loss is recognised when the carrying amount of an asset or CGU exceeds its recoverable amount. In such cases, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market
transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.
The Company bases its impairment calculation on detailed budgets and forecast, which are prepared separately for each of the Company''s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of 5 years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after 5th year. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Company estimates the asset''s or CGU''s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.
9 Leasing
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assess whether:
- the contract involves the use of an identified asset - this may be specified explicitly or implicitly and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;
- the Company has the right to obtain substantially all of the economic benefits from use of the asset through the period of use; and
- the Company has the right to direct the use of the asset. The Company has this right when it has the decisionmaking rights that are most relevant to changing how and for what purpose the asset is used. In rare cases, where the decision about how and for what purpose the asset is used is predetermined, the Company has the right to direct the use of the asset if either:
⢠the Company has the right to operate the asset; or
⢠the Company designed the asset in a way that predetermines how and for what purpose it will be used.
An entity shall reassess whether a contract is, or contains, a lease only if the terms and conditions of the contract are changed.
At inception or on reassessment of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.
Company as lessee
The Company accounts for assets taken under lease arrangement in the following manner:
The Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right of use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentive received.
The right of use asset is subsequently depreciated using the straight line method from the commencement date to the end of the lease term. The estimated useful lives of right-of-use assets are determined on the basis of remaining lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the Company''s incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise the fixed payments, including in-substance fixed payments.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in Company''s estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
Short-term leases and leases of low-value assets
The Company has elected not to recognise right-of use assets and lease liabilities for short term leases that have a lease term of 12 months or less and leases of low value assets. The Company recognises the lease payments associated with these leases as an expense on a straight- line basis over the lease term.
10 Borrowing costs
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
Borrowing costs directly attributable to the acquisition, construction or production of
an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. Borrowing costs incurred for the period from commencement of activities relating to construction/ development of the qualifying asset upto the date of capitalisation of such asset are added to the cost of the asset. All other borrowing costs are expensed in the period in which they occur.
In case of a specific borrowing taken for the purpose of acquisition, construction or production of a qualifying asset, the borrowing costs capitalised shall be the actual borrowing costs incurred during the period less any interest income earned on temporary investment of specific borrowing pending expenditure on qualifying asset.
In case funds are borrowed generally and such funds are used for the purpose of acquisition, construction or production of a qualifying asset, the borrowing costs capitalised are calculated by applying the weighted average capitalisation rate on general borrowings outstanding during the period, to the expenditures incurred on the qualifying asset.
If any specific borrowing remains outstanding after the related asset is ready for its intended use, that borrowing is considered part of the funds that are borrowed generally for calculating the capitalisation rate.
11 Foreign Currencies
Transactions in foreign currencies are recorded on initial recognition at the exchange rate prevailing on the date of the transaction.
(i) Monetary assets and liabilities denominated in foreign currency remaining unsettled at the end of the year, are translated at the closing rates prevailing on the Balance Sheet date. Non-monetary items which are carried in terms of historical cost denominated in foreign currency are reported using the exchange rate at the date of transaction. Any gains or losses arising due to differences in exchange rates at the time of translation or settlement are accounted for in the Statement of Profit and Loss either under the head foreign exchange fluctuation or interest cost, as the case may be, except those relating to exchange differences arising from cash flow hedges to the extent that the hedges are effective and those covered below.
(ii) Exchange differences pertaining to long term foreign currency loans obtained or re-financed on or before March 31, 2016:
Exchange differences on long-term foreign currency monetary items relating to acquisition of depreciable assets are adjusted to the carrying cost of the assets and depreciated over the balance useful life of the assets.
(iii) Exchange differences pertaining to long term foreign currency loans obtained or re-financed on or after April 1, 2016:
The exchange differences pertaining to long term foreign currency loans obtained or re-financed on or after April 1, 2016 is treated in accodance with Ind AS 21/ Ind AS 109. Refer point (i) above.
12 Inventories
Inventories are valued at cost or net realisable value, whichever is lower. The basis of determining the cost for various categories of inventory are as follows:
(a) Raw materials, packing materials and stores and spares (including fuel) -Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis. The aforesaid items are valued at Net Realisable Value if the finished products in which they are to be incorporated are expected to be sold at a loss.
(b) Traded goods, Stock in progress and finished goods- Direct cost plus appropriate share of overheads.
(c) By products - At estimated realisable value
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
13 Provisions, contingent liabilities and contingent assets
Provisions
The Company recognises a provision when there is a present obligation (legal or constructive) as a result of past events and it is more likely than not that an outflow of resources would be required to settle the obligation and a reliable estimate can be made.
When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate
asset, but only when the reimbursement is virtually certain.
The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent liabilities and commitments are reviewed by the management at each balance sheet date.
Contingent assets
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.
14 Revenue recognition
a) Sale of goods
Revenue from sale of products is recognised upon transfer of control of products to customers at the time of shipment to or receipt of goods by the customers. Service income is recognised as and when the underlying services are performed. The Company exercises judgement in determining whether the performance obligation is satisfied at a point in time or over a period of time.
Revenues are measured based on the transaction price, which is the consideration, net of tax collected from customers and remitted to government authorities such as goods and services tax and applicable discounts and allowances.
Any fees including upfront fees received in relation to contract manufacturing arrangements is recognised on straight line basis over the period over which the Company satisfies the underlying performance obligations. Contract assets are recognised when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled revenue (only act of invoicing is pending) when there is unconditional right to receive cash as per contractual terms. Advance from customers ("contract liability") is recognised when the Company has received consideration from the customer before it delivers the goods.
b) Interest and dividend income Interest income is recognised when it is probable that the economic benefits will flow to the Company using the effective interest rate and the amount of income can be measured
reliably. Interest income is accrued on a time basis, by reference to the principal outstanding.
Dividend income from investments is recognised when the shareholder''s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably).
c) Export Incentives
The benefit accrued under the Duty Drawback scheme and other schemes as per the Export and Import Policy in respect of exports made under the said Schemes is included under the head "Revenue from Operations" under ''Export and other Incentives'' Also refer policy on "government grants".
15 Taxation
Income tax expense represents the sum of
current tax and deferred tax.
a) Current tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss i.e. in other comprehensive income or in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
b) Deferred tax
Deferred tax is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts at the reporting date.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled.
Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss i.e. in other comprehensive income or in equity.
Deferred tax assets/liabilities are
not recognised for below mentioned
temporary differences:
(i) At the time of initial recognition of goodwill;
(ii) Initial recognition of assets or liabilities (other than in a business combination) at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT asset is recognised in the Balance Sheet when it is probable that future economic benefit associated with it will flow to the Company.
The Company considers whether it is probable that a taxation authority will accept an uncertain tax treatment. If the Company concludes that it is probable that the taxation authority will accept an uncertain tax treatment, the Company determines the taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatment used or planned to be used in its income tax filings. However, if the Company concludes that it is not probable that the taxation authority will accept an uncertain tax treatment, the Company reflects the effect of uncertainty in determining the related taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates.
16 Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with.
A government grant that becomes receivable as compensation for expenses or losses incurred in a previous period. Such a grant is recognised in profit or loss of the period in which it becomes receivable.
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.
Government grants related to assets are presented in the balance sheet as deferred income and is recognised in profit or loss on a systematic basis over the expected useful life of the related assets.
17 Employee benefits Short-term employee benefits
Wages and salaries including non monetary benefits that are expected to be settled within the operating cycle after the end of the period in which the related services are rendered, are measured at the undiscounted amount expected to be paid.
Defined contribution plans Provident fund administered through Regional Provident Fund Commissioner, Superannuation Fund and Employees'' State Insurance Corporation are defined contribution schemes. Contributions to such schemes are charged to the statement of profit and loss in the year when employees have rendered services entitling them to contributions. The Company has no obligation, other than the contribution payable to such schemes.
Defined benefit plans
The Company has defined benefit gratuity plan and provident fund for certain category of employees administered through a recognised provident fund trust. Provision for gratuity and provident fund for certain category of employees administered through a recognised provident fund trust are determined on an actuarial basis at the end of the year and charged to Statement of Profit and Loss, other than remeasurements. The cost of providing these benefits is determined using the projected unit credit method.
Remeasurements, comprising of actuarial gains and losses and the effect of the asset ceiling, (excluding amounts included in net interest on the net defined benefit liability and return on plan assets), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Remeasurements are not reclassified to statement of profit and loss in subsequent periods.
Other long-term employee benefits The Company also has other long-term employee benefits in the nature of compensated absences and long term retention pay. Provision for compensated absences and long term retention pay are determined on an actuarial basis at the end of the year and charged to Statement of Profit and Loss. The cost of providing these benefits is determined using the projected unit credit method.
Share based payments Equity settled share based payments to employees under SRF Long Term Share Based Incentive Plan (SRF LTIP) are measured at the fair value (which is the
market price less exercise price) of the equity instruments on the grant date. This compensation expense is amortised over the remaining tenure over which the employees renders their service on a straight line basis.
18 Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
19 Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
20 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
A) Financial assets
Initial recognition and measurement All financial assets are recognised initially at fair value plus transaction costs that are directly attributable to the acquisition of the financial asset.
Subsequent measurement For purposes of subsequent measurement, financial assets of the Company are classified in three categories:
a) At amortised cost
b) At fair value through profit
and loss (FVTPL)
c) At fair value through other
comprehensive income (FVTOCI
Financial Asset is measured at amortised
cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in other income in the statement of profit and loss. The losses arising from impairment are recognised in the statement of profit and loss. This category generally applies to trade and other receivables.
Financial assets not classified as measured at amortised cost or FVTOCI as are measured at FVTPL. Financial assets included within the FVTPL category are measured at fair value with all changes recognised in the statement of profit and loss.
Equity Investments
All equity investments in the scope of Ind
AS 109 are measured at fair value.
Equity instruments which are held for trading are measured at fair value through profit and loss.
For all other equity instruments, the Company may make an irrevocable election to present subsequent changes in the fair value in other comprehensive income. The Company makes such election on an instrument by instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognised in other comprehensive income. This cumulative gain or loss is not reclassified to statement of profit and loss on disposal of such instruments.
Investments representing equity interest in subsidiaries are carried at cost less any provision for impairment.
Derecognition
A financial asset (or, where applicable, a part of a financial asset) is primarily derecognised (i.e. removed from the balance sheet) when:
a) The rights to receive cash flows from the asset have expired, or
b) The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (i) the Company has transferred substantially all the risks and rewards of the asset, or (ii) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay. Any gain or loss on derecognition is recognised in profit or loss.
When the Company has retained substantially all the risks and rewards of ownership of the transferred asset, the Company continues to recognise the transferred asset in its entirety and recognises a financial liability for the consideration received.
Impairment of financial assets The Company recognizes loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all financial assets with contractual cash flows other than trade receivable, ECLs are measured at an amount equal to
the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of ECL (or reversal) that is required to adjust the loss allowance at the reporting date is recognised as an impairment gain or loss in the Statement of Profit and Loss.
B) Financial liabilities and Equity instruments Initial recognition and measurement All financial liabilities are recognised initially at fair value, net of directly attributable transaction costs, if any.
The Company''s financial liabilities includes borrowings, trade and other payables including financial guarantee contracts and derivative financial instruments.
Subsequent measurement Borrowings
Borrowings are subsequently measured at amortised cost. Any differences between the proceeds (net of transaction costs) and the redemption/repayment amount is recognised in profit and loss over the period of the borrowings using the effective interest rate method.
Trade and other payables Trade and other payables represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid.
Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Financial guarantee contracts Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified entity fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
Equity instrument
Equity instruments are any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Debt or equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
>1 Derivative and non derivative financial instruments and hedge accounting Initial recognition and subsequent
measurement
The Company uses derivative financial instruments (such as forward currency
contracts, interest rate swaps and full currency swaps) or non derivative financial assets / liabilities to hedge its foreign currency risks and interest rate risks. The Company has opted for "Hedge Accounting" for all its derivative as well as non-derivative financial instrument used for hedging. Accordingly, at the inception of the hedge the Company formally designates a hedge relationship between the ''hedging instrument'' and ''hedged item'' which determines the initial recognition of the financial intrument as Fair Value Hedge or Cashflow hedge. The documentation includes the Compnay''s risk management objective and strategy for undertaking hedge, the hedging/ economic relationship, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrument''s fair value in offsetting the exposure to changes in the hedged item''s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated. These financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognised in OCI and later reclassified to profit and loss when the hedge item affects profit or loss.
For the purpose of hedge accounting, hedges are classified as:
a) Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability.
b) Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment.
Hedges that meet the strict criteria for hedge accounting are accounted for, as described below:
Fair value hedges
The change in the fair value of a hedging instrument is recognised in the statement of profit and loss. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in the statement of profit and loss.
If the hedged item is derecognised, the unamortised fair value is recognised immediately in profit or loss. When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in statement of profit and loss.
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the statement of profit and loss.
The Company uses forward currency contracts as hedges of its exposure to foreign currency risk in forecast transactions and firm commitments. The ineffective portion relating to foreign currency contracts is recognised in the statement of profit and loss. In some cases, the Company separates the premium element and the spot element of a forward contract and designates only the change in fair value of the spot element of forward exchange contracts as the hedging instrument in cash flow hedging relationships. In such cases, the changes in the fair value of the premium element of the forward contract or the foreign currency basis spread of the financial instrument is accumulated in a separate component of equity as ''cost of hedging'' The changes in the fair value of such premium element or foreign currency basis spread are reclassified to profit or loss as a reclassification adjustment on a straight-line basis over the period of the forward contract or the financial instrument.
The Company also designates non derivative financial liabilities, such as foreign currency borrowings from banks, as hedging instruments for the hedge of foreign currency risk associated with highly probable forecasted transactions and, accordingly, applies cash flow hedge accounting for such relationships.
Amounts recognised as other comprehensive income are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast transaction occurs.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as
a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, the hedge accountig will be discontinued prospectively. Any cumulative gain or loss previously recognised in other comprehensive income remains separately in other equity if the forecast transaction or the foreign currency firm commitment is expected to occur else the amount shall be immediately reclassified from the cash flow hedge reserve to profit or loss as a reclassification adjustment.
22 Fair value measurement
The Company measures some of its financial instruments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
a) In the principal market for the asset or liability, or
b) In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in
its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
a) Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
b) Level 2 â 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).
c) Level 3âInputs for the asset or liability that are not based on observable market data (unobservable inputs).
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
23 Segment Reporting
Based on "Management Approach" as defined in Ind AS 108 -Operating Segments, the Chief Operating Decision Maker evaluates the Company''s performance and allocates the resources based on an analysis of various performance indicators by business segments. Inter segment sales and transfers are reflected at market prices.
Unallocable items includes general corporate income and expense items which are not allocated to any business segment.
Segment Policies:
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the standalone financial statements of the Company as a whole. Common allocable costs are allocated to each segment on an appropriate basis.
24 Dividend
The Company recognises a liability to make cash distributions to equity holders when the distribution is authorised and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.
25 Non-current assets held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. The appropriate level of management must be committed to a plan to sell, an active programme to locate a buyer and complete the plan has been initiated, the sale is considered highly
probable and is expected within one year from the date of classification.
Non-current assets (or disposal groups) held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Assets and liabilities classified as held for sale are presented separately from other assets and liabilities in the balance sheet. Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortised.
A discontinued operation is a component of the Company that either has been disposed of, or is classified as held for sale, and:
a) Represents a separate major line of business or geographical area of operations,
b) Is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations, or
c) Is a subsidiary acquired exclusively with a view to resale.
Discontinued operations are excluded from the results of continuing operations and are presented separately in the statement of profit and loss.
26 Recent pronouncements
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. On March 23, 2022, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2022, applicable from April 01, 2022, as below:
Ind AS 103 - Reference to Conceptual Framework
The amendments specifiy that to qualify for recognition as part of applying the acquisition method, the identifiable assets acquired and liabilities assumed must meet the definitions of assets and liabilities in the Conceptual Framework for Financial Reporting under Indian Accounting Standards (Conceptual Framework) issued by the Institute of Chartered Accountants of India at the acquisition date. These changes do not significantly change the requirements of Ind AS 103. The Company does not expect the amendment to have any significant impact in its financial statements.
Ind AS 16 - Proceeds before intended use The amendment clarifies that excess of net sale proceeds of items produced over the cost of testing, if any, shall not be recognised in the profit or loss but deducted from the directly attributable costs considered as part of cost of an item of property, plant, and equipment. The amendment is essentially a clarification and the Company does not expect the amendment to have any significant impact in its financial statements.
Ind AS 37 - Onerous Contracts - Costs of Fulfilling a Contract
The amendments specify that that the ''cost of fulfilling'' a contract comprises the ''costs that relate directly to the contract'' Costs that relate d
Mar 31, 2021
Significant accounting and assumptions
The preparation of financial statements requires management to make judgments,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Judgements, estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes.
⢠Classification and lease term determination of leasing arrangement - Note 1.B.9
⢠Derecognition of trade receivables and hedge effectiveness - Note 1.B.20
⢠Fair value measurement of derivative instruments - Note 1.B.22
⢠Assessment of useful life of property, plant and equipment and intangible asset - Note 1.B.4
⢠Recognition and estimation of tax expense including determination of applicable tax rate for measuring deferred tax balances - Note 1.B.15
⢠Estimation of assets and obligations relating to employee benefits (including actuarial assumptions) - Note 1.B.17
⢠Assessment of impairment of financial assets and non-financial assets - Note 1.B.20 and Note 1.B.8
⢠Recognition and measurement of contingencies: key assumptions about the likelihood and magnitude of an outflow of resources - Note 1.B.13
Mar 31, 2019
1 Corporate Information, Significant Accounting Policies and Significant Accounting Judgements, Estimates and Assumptions A Corporate Information
SRF Limited ("the Company") is a public limited company domiciled in India and incorporated under the provisions of the Companies Act, 1956. The Company''s equity shares are listed at the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The registered office of the Company is situated at The Galleria, DLF Mayur Vihar, Unit No. 236 and 237, Second Floor, Mayur Vihar Place, Noida Link Road, Mayur Vihar Phase I Extn, Delhi - 110091. The Company''s parent and ultimate holding company is KAMA Holdings Limited.
The principal activities of the Company are manufacturing, purchase and sale of technical textiles, chemicals, packaging films and other polymers.
The standalone financial statements were authorised for issue in accordance with a resolution of the directors on May 13, 2019.
B Significant Accounting Policies
1 Basis of Preparation
These standalone financial statements are prepared in accordance with Indian Accounting Standard (Ind AS), under the Companies (Indian Accounting Standards) Rules, 2015 notified under section 133 of the Companies Act 2013 ("the Act") as amended thereafter and other relevant provisions of the Act.
The standalone financial statements have been prepared on an accrual basis and under the historical cost convention, except for the following assets and liabilities which have been measured at fair value:
- Derivative financial instruments
- Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments),
- Defined benefit plans - plan assets measured at fair value less present value of defined benefit obligation
- Share-based payments
The standalone financial statements are presented in Indian Rupees (INR) which is also the Company''s functional currency and all values are rounded to the nearest Crores, except when otherwise indicated.
The principal accounting policies are set out below.
2 Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/non-current classification.
An asset is treated as current when it is:
- Expected to be realised or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle
- It is held primarily for the purpose of trading
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Based on the nature of products and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has identified twelve months as its operating cycle for the purpose of current / non current classification of assets and liabilities.
3 Property, plant and equipment (PPE)
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation and accumulated impairment losses, if any.
All items of property, plant and equipment have been measured at fair value at the date of transition to Ind AS. The Company have opted such fair valuation as deemed cost at the transition date i.e. April 1, 2015.
Cost of acquisition or construction is inclusive of freight, duties, non-recoverable taxes, incidental expenses and interest on loans attributable to the acquisition of qualifying assets, up to the date of commissioning of the assets.
Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for qualifying assets, up to the date of commissioning of the assets.
Likewise, when a major inspection for faults is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria is satisfied. All other repair and maintenance costs are recognised in the statement of profit and loss as incurred.
Assets are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.
Capital Work in Progress: Project under which assets are not yet ready for their intended use are carried at cost comprising direct cost, related incidental expenses and attributable interest.
Spare parts are capitalized when they meet the definition of PPE, i.e., when the Company intends to use these for a period of more than
12 months.
4 Depreciation
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value.
Freehold land is not depreciated
Depreciation is calculated on a pro rata basis except assets costing up to '' 5,000 each, which are fully depreciated in the year of purchase.
An item of property, plant and equipment or any significant part initially recognised of such item of property plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.
The estimated useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
5 Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost.
Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses, if any.
Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The useful lives considered are as follows:
Trademarks / Brand 10-30 years
Technical Knowhow 10-30 years
Software 3 years
Other intangibles 2.5-10 years
The Company has elected to continue with the carrying value of all of its intangibles assets recognised as on April 1, 2015 measured as per the previous GAAP and use that carrying value as its deemed cost as of transition date.
The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
An intangible asset is derecognised on disposal or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.
6 Research and development expenditure
Expenditure on research and development of products is included under the natural heads of expenditure in the year in which it is incurred except which relate to development activities whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes.
Such development costs are capitalised if they can be reliably measured, the product or process is technically and commercially feasible and the Company has sufficient resources to complete the development and to use or sell the asset.
Following initial recognition of the development expenditure as an asset, the asset is carried at cost ess any accumulated amortisation and accumulated impairment losses, if any. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation expense is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset. During the period of development, the asset is tested for impairment annually.
7 Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Company''s cash-generating units (or Company''s of cash-generating units) that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
8 Impairment of tangible and intangible assets other than goodwill
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) fair value less costs of disposal and its value in use.
Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.
Impairment loss is recognised when the carrying amount of an asset or CGU exceeds its recoverable amount. In such cases, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Company''s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of 5 years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after 5th year. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Company estimates the asset''s or CGU''s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.
9 Leasing
Company as lessee:
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease.
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Operating Leases as lessee:
Lease rental expenses from operating leases is generally recognised on a straight line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases, such increases are recognised in the year in which such benefits accrue. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
Finance leases as lessee:
Assets held under finance lease are initially recognised as assets at the fair value at the inception of lease or at the present value of the minimum lease payments, whichever is lower. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the statement of profit and loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Company''s general policy on the borrowing cost.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
10 Borrowing costs
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset.
Borrowing costs for the period from commencement of activities relating to construction/development of the qualifying asset up to the date of capitalisation of such asset is added to the cost of the assets.
Interest income earned on temporary investment of specific borrowing pending expenditure on qualifying asset is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are expensed in the period in which they occur.
11 Foreign Currencies
Transactions in foreign currencies are recorded on initial recognition at the exchange rate prevailing on the date of the transaction.
(i) Monetary assets and liabilities denominated in foreign currency remaining unsettled at the end of the year, are translated at the closing rates prevailing on the Balance Sheet date. Non-monetary items which are carried in terms of historical cost denominated in foreign currency are reported using the exchange rate at the date of transaction. Any gains or losses arising due to differences in exchange rates at the time of translation or settlement are accounted for in the Statement of Profit and Loss either under the head foreign exchange fluctuation or interest cost, as the case may be, except those relating to exchange differences arising from cash flow hedges to the extent that the hedges are effective.
(ii) Exchange differences pertaining to long term foreign currency loans obtained or refinanced on or before March 31, 2016:
Exchange differences on long-term foreign currency monetary items relating to acquisition of depreciable assets are adjusted to the carrying cost of the assets and depreciated over the balance useful life of the assets.
(iii) Exchange differences pertaining to long term foreign currency loans obtained or refinanced on or after April 1, 2016:
The exchange differences pertaining to long term foreign currency loans obtained or refinanced on or after April 1, 2016 is treated in accordance with Ind AS 21 / Ind AS 109.
12 Inventories
Inventories are valued at cost or net realisable value, whichever is lower. The basis of determining the cost for various categories of inventory are as follows:
(a) Raw materials, packing materials and stores and spares (including fuel) - Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis. The aforesaid items are valued at Net Realisable Value if the finished products in which they are to be incorporated are expected to be sold at a loss.
(b) Traded goods, Stock in progress and finished goods- Direct cost plus appropriate share of overheads and excise duty, wherever applicable.
(c) By products - At estimated realisable value
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
13 Provisions and Contingent Liabilities Provisions
The Company recognises a provision when there is a present obligation (legal or constructive) as a result of past events and it is more likely than not that an outflow of resources would be required to settle the obligation and a reliable estimate can be made.
When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain.
The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liability
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent liabilities and commitments are reviewed by the management at each balance sheet date.
14 Revenue recognition
Effective April 1, 2018, the Company adopted IND AS 115 "Revenue from Contracts with Customers" using the cumulative catch-up transition method, applied to contracts that were not completed as at April 1, 2018. In accordance with the cumulative catch-up transition method, the comparatives have not been retrospectively adjusted. There is no material effect on adoption of Ind AS 115 on the financial statements.
a) Sale of goods
Revenue from sale of products is recognised upon transfer of control of products to customers at the time of shipment to or receipt of goods by the customers. Service income is recognised as and when the underlying services are performed. The Company exercises judgement in determining whether the performance obligation is satisfied at a point in time or over a period of time.
Revenues are measured based on the transaction price, which is the consideration, net of tax collected from customers and remitted to government authorities such as sales tax, excise duty, value added tax,
r
goods and services tax and applicable < discounts and allowances.
r
Any fees including upfront fees received j in relation to contract manufacturing arrangements is recognised on straight line basis over the period over which the Company satisfies the underlying performance obligations. Contract assets are recognised when there is excess of revenue earned over billings on contracts. j Contract assets are classified as unbilled ; revenue (only act of invoicing is pending) j when there is unconditional right to receive < cash as per contractual terms. Advance ¦ from customers ("contract liability") is recognised when the Company has received consideration from the customer before it delivers the goods.
b) Interest and dividend income
Interest income is recognised when it is probable that the economic benefits will flow to the Company using the effective interest rate and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding.
Dividend income from investments is recognised when the shareholder''s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably).
c) Export Incentives
The benefit accrued under the Duty Drawback scheme and other schemes as per the Export and Import Policy in respect of exports made under the said Schemes is included under the head "Revenue from Operations" under ''Export and other Incentives''.
15 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
a) Current tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss i.e. in other comprehensive income or in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
b) Deferred tax
Deferred tax is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts at the reporting date.
Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date.
Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss i.e. in other comprehensive income or in equity.
Deferred tax assets/liabilities are not recognised for below mentioned temporary differences:
(i) At the time of initial recognition of goodwill;
(ii) Initial recognition of assets or liabilities (other than in a business combination) at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT asset is recognised in the Balance Sheet when it is probable that future economic benefit associated with it will flow to the Company.
16 Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with.
A government grant that becomes receivable as compensation for expenses or losses incurred in a previous period. Such a grant is recognised in profit or loss of the period in which it becomes receivable.
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.
Government grants related to assets are presented in the balance sheet as deferred income and is recognised in profit or loss on a systematic basis over the expected useful life of the related assets.
17 Employee benefits
Short-term employee benefits
Wages and salaries including non monetary benefits that are expected to be settled within the operating cycle after the end of the period in which the related services are rendered and are measured at the undiscounted amount expected to be paid.
Defined contribution plans
Provident fund administered through Regional Provident Fund Commissioner, Superannuation Fund and Employees'' State Insurance Corporation are defined contribution schemes. Contributions to such schemes are charged to the statement of profit and loss in the year when employees have rendered services entitling them to contributions. The Company has no obligation, other than the contribution payable to such schemes.
Defined benefit plans
The Company has defined benefit gratuity plan and provident fund for certain category of employees administered through a recognised provident fund trust. Provision for gratuity and provident fund for certain category of employees administered through a recognised provident fund trust are determined on an actuarial basis at the end of the year and charged to Statement of Profit and Loss, other than remeasurements. The cost of providing these benefits is determined using the projected unit credit method.
Remeasurements, comprising of actuarial gains and losses and the effect of the asset ceiling, (excluding amounts included in net interest on the net defined benefit liability and return on plan assets), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Remeasurements are not reclassified to statement of profit and loss in subsequent periods.
Other long-term employee benefits
The Company also has other long-term employee benefits in the nature of compensated absences and long term retention pay. Provision for compensated absences and long term retention pay are determined on an actuarial basis at the end of the year and charged to Statement of Profit and Loss. The cost of providing these benefits is determined using the projected unit credit method.
Share based payments
Equity settled share based payments to employees under SRF Long Term Share Based Incentive Plan (SRF LTIP) are measured at the fair value (which is the market price less exercise price) of the equity instruments on the grant date. This compensation expense is amortised over the remaining tenure over which the employees renders their service on a straight line basis.
18 Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
19 Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and shortterm deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
20 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
A) Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus transaction costs that are directly attributable to the acquisition of the financial asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets of the Company are classified in three categories:
a) At amortised cost
b) At fair value through profit and loss (FVTPL)
c) At fair value through other comprehensive income (FVTOCI)
Financial Asset is measured at amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal
and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in other income in the statement of profit and loss. The losses arising from impairment are recognised in the statement of profit and loss. This category generally applies to trade and other receivables.
Financial assets not classified as measured at amortised cost or FVTOCI as are measured at FVTPL. Financial assets included within the FVTPL category are measured at fair value with all changes recognised in the statement of profit and loss.
Equity Investments
All equity investments in the scope of Ind AS 109 are measured at fair value.
Equity instruments which are held for trading are measured at fair value through profit and loss.
For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument by instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognised in other comprehensive income. This cumulative gain or loss is not reclassified to statement of profit and loss on disposal of such instruments.
Investments representing equity interest in subsidiaries are carried at cost less any provision for impairment.
Derecognition
A financial asset (or, where applicable, a part of a financial asset) is primarily derecognised (i.e. removed from the balance sheet) when:
a) The rights to receive cash flows from the asset have expired, or
b) The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (i) the Company has transferred substantially all the risks and rewards of the asset, or (ii) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In
that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
The Company recognizes loss allowance using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all financial assets with contractual cash flows other than trade receivable, ECLs are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of ECL (or reversal) that is required to adjust the loss allowance at the reporting date is recognised as an impairment gain or loss in the Statement of Profit and Loss.
B) Financial liabilities and Equity instruments
Initial recognition and measurement
All financial liabilities are recognised initially at fair value, net of directly attributable transaction costs, if any.
The Company''s financial liabilities includes borrowings, trade and other payables including financial guarantee contracts and derivative financial instruments.
Subsequent measurement Borrowings
Borrowings are subsequently measured at amortised cost. Any differences between the proceeds (net of transaction costs) and the redemption/repayment amount is recognised in profit and loss over the period of the borrowings using the effective interest rate method.
Trade and other payables
Trade and other payables represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified entity fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
Equity instrument
Equity instruments are any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Debt or equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
21 Derivative financial instruments and hedge accounting Initial recognition and subsequent measurement
The Company uses derivative financial instruments (such as forward currency contracts, interest rate swaps) or non-derivative financial assets / liabilities to hedge its foreign currency risks and interest rate risks respectively. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognised in OCI and later reclassified to profit and loss when the hedge item affects profit or loss.
For the purpose of hedge accounting, hedges are classified as:
a) Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability.
b) Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Company''s risk management objective and strategy for undertaking hedge, the hedging/ economic relationship, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrument''s fair value in offsetting the exposure to changes in the hedged item''s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
Hedges that meet the strict criteria for hedge accounting are accounted for, as described below:
Fair value hedges
The change in the fair value of a hedging instrument is recognised in the statement of profit and loss. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in the statement of profit and loss .
If the hedged item is derecognised, the unamortised fair value is recognised immediately in profit or loss. When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in statement of profit and loss.
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the statement of profit and loss.
The Company uses forward currency contracts as hedges of its exposure to foreign currency risk in forecast transactions and firm commitments. The ineffective portion relating to foreign currency contracts is recognised in the statement of profit or loss.
The company also designates non derivative financial liabilities, such as foreign currency borrowings from banks, as hedging instruments for the hedge of foreign currency risk associated with highly probable forecasted transactions and, accordingly, applies cash flow hedge accounting for such relationships.
Amounts recognised as other comprehensive income are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast transaction occurs.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss
previously recognised in other comprehensive income remains separately in other equity until the forecast transaction occurs or the foreign currency firm commitment is met.
22 Fair value measurement
The Company measures some of its financial instruments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
a) In the principal market for the asset or liability, or
b) In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
a) Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
b) 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).
c) Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
23 Segment Reporting
Based on "Management Approach" as defined in Ind AS 108 -Operating Segments, the Chief Operating Decision Maker evaluates the Company''s performance and allocates the resources based on an analysis of various performance indicators by business segments. Inter segment sales and transfers are reflected at market prices.
Unallocable items includes general corporate income and expense items which are not allocated to any business segment.
Segment Policies:
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the standalone financial statements of the Company as a whole.
Common allocable costs are allocated to each segment on an appropriate basis.
24 Dividend
The Company recognises a liability to make cash distributions to equity holders when the distribution is authorised and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.
25 Applicability of New and Revised Ind AS
Ministry of Corporate Affairs ("MCA") through Companies (Indian Accounting Standards) Amendment Rules, 2019 and Companies (Indian Accounting Standards) Second Amendment Rules, 2019 has notified the following new and amendments to Ind AS which the Company has not applied as they are effective from April 1, 2019:
Ind AS 116 - Leases
Ind AS 116 will replace the existing leases standard, Ind AS 17 Leases and sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. It introduces a single, on-balance sheet lessee accounting model for lessees. A lessee recognises present value of the lease payment (discounted using incremental borrowing rate) as right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments and lease rent expense will be replaced with the amortization of right-of-use asset and interest accrued on lease liability. The standard also contains enhanced disclosure requirements for lessees and will have consequential impact on cash flows categories as well.
The Company will adopt Ind AS 116 effective annual reporting period beginning April 1, 2019 using the modified retrospective approach and elected to measure the right-of -use assets at an amount equal to the lease liability as at the date of initial application.
The Company has completed an initial assessment of the potential impact on its standalone financial statements but has not yet completed its detailed assessment. The quantitative impact of adoption of Ind AS 116 on the standalone financial statements in the period of initial application is not reasonably estimable as at present.
Ind AS 12 - Income taxes
(amendments relating to income tax consequences of dividend and uncertainty over income tax treatments)
The amendment relating to income tax consequences of dividend clarify that an entity shall recognise the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events. The Company does not expect any impact from this pronouncement.
Appendix C of Ind AS 12 specifies that the amendment is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under relevant tax laws. It outlines the following: (1) the entity has to use judgement, to determine whether each tax treatment should be considered separately or whether some can be considered together. The decision should be based on the approach which provides better predictions of the resolution of the uncertainty (2) the entity is to assume that the taxation authority will have full knowledge of all relevant information while examining any amount (3) entity has to consider the probability of the relevant taxation authority accepting the tax treatment and the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates would depend upon the probability. The Company is in the process of evaluating the impact on its financial statements.
Ind AS 109 - Financial Instruments
(Prepayment Features with Negative Compensation)
The amendments relate to the existing requirements in Ind AS 109 regarding termination rights in order to allow measurement at amortised cost (or, depending on the business model, at fair value through other comprehensive income) even in the case of negative compensation payments. The Company does not expect this amendment to have any impact on its financial statements.
Ind AS 19 - Employee Benefits
(Plan Amendment, Curtailment or Settlement)
The amendments clarify that if a plan amendment, curtailment or settlement occurs, it is mandatory that the current service cost and the net interest for the period after the re-measurement are determined using the assumptions used for the remeasurement. In addition, amendments have been included to clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling. The Company does not expect this amendment to have any significant impact on its financial statements.
Ind AS 23 - Borrowing Costs
The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings. The Company has completed an initial assessment of the potential impact on its standalone financial statements but has not yet completed its detailed assessment. The quantitative impact of this amendment on the standalone financial statements in the period of initial application is not reasonably estimable as at present.
C Significant accounting judgements, estimates and assumptions
The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Judgments, estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes.
- Leasing arrangement (classification and accounting) - Note 1.B.9
- Financial instruments - Note 1.B.20
- Fair value measurement - Note 1.B.22
- Assessment of useful life of property, plant and equipment and intangible asset - Note 1.B.4
- Recognition and estimation of tax expense including deferred tax- Note 1.B.15
- Estimation of assets and obligations relating to employee benefits (including actuarial assumptions) - Note 1.B.17
- Estimated impairment of financial assets and non-financial assets - Note 1.B.8
- Recognition and measurement of contingency: Key assumption about the likelihood and magnitude of an outflow of resources - Note 1.B.13
Mar 31, 2018
SIGNIFICANT ACCOUNTING POLICIES AND OTHER EXPLANATORY INFORMATION TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018
1 Company information
SNL Bearings Limited (''the Company'') established in 1983, is engaged in the manufacture and marketing of antifriction bearing products. The holding Company NRB Bearings Limited acquired the Company on 1st June, 2000.
The registered and corporate office of the company is situated at Dhannur, 15, Sir P. M. Road, Fort, Mumbai 400 001, Maharashtra.
The separate financial statements were authorised for issue in accordance with the resolution of the directors on 17 May 2018.
Basis of Preparation
The Company has prepared its financial statements to comply in all material respects with the provisions of the Companies Act, 2013 (the Act) and rules framed thereunder and the guidelines issued by Securities and Exchange Board of India. In accordance with the notification issued by the Ministry of Corporate Affairs, the Company has adopted Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 under Section 133 of the Act, with effect from 1 April 2017. Till 31 March 2017, the Company used to prepare its financial statements as per Companies (Accounting Standards) Rules, 2014 (Previous GAAP) read with rule 7 and other relevant provisions of the Act. These are the first Ind AS Financial Statements of the Company. The transition from Previous GAAP to Ind AS has been accounted for in accordance with Ind AS 101 "First Time Adoption of Indian Accounting Standards", with 1 April 2016 being the transition date. The balance and transactions for the comparative period have been restated accordingly. As per Ind AS 101, the Company has presented a reconciliation of its transition from Previous GAAP to Ind AS of its total equity as at 1 April 2016 and 31 March 2017 and reconciliation of total comprehensive income and cash flow for the year ended 31 March 2017. Please refer note 42 for detailed information on the transition.
The financial statements have been prepared on a historical cost convention and accrual basis, except for the following assets and liabilities:
i) Certain financial assets and liabilities that are measured at fair value ii) Defined benefit plans-plan assets measured at fair value. 1A Significant accounting policies a. Foreign currency transactions
The functional currency of the Company is Indian national rupee (INR) which is also the presentation currency. All other currencies are accounted for as foreign currency.
Transactions denominated in foreign currencies are initially recorded at the exchange rate prevailing at the date of transaction.
Foreign currency monetary items are reported using the closing exchange rates. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Exchange differences on monetary items are recognised in Statement of Profit and Loss in the period in which they arise.
b. Revenue recognition
Revenue is measured at the fair value of consideration received or receivable. Revenue is recognised only when it can be reliably measured and it is probable that future economic benefits will flow to the company.
Revenue from operations includes sales of goods. Revenue from sale of goods is recognised when significant risk and rewards of ownership of the goods have been passed on to the customer. Amounts disclosed as revenue are inclusive of excise duty and net of returns, goods and service tax, value added taxes and amounts collected on behalf of third parties.
c. Other income
Interest income for all debt instruments is recognised using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.
Dividend are recognised in profit or loss only when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the company, and the amount of the dividend can be measured reliably. Interest income is recognised using effective interest method.
d. Income tax
The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period.
Deferred income tax is provided in full, using the balance sheet approach, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss). Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the company has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
e. Leases
As a lessee
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the company as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period 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.
f. Impairment of non-financial assets
The carrying amount of the non-financial assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal /external factors. An impairment loss is recognised whenever the carrying amount of an asset or a cash generating unit exceeds its recoverable amount. The recoverable amount of the assets (or where applicable, that of the cash generating unit to which the asset belongs) is estimated as the higher of its net selling price and its value in use. Impairment loss is recognised in the statement of profit and loss.
After impairment, depreciation / amortisation is provided on the revised carrying amount of the asset over its remaining useful life.
A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation / amortisation if there were no impairment.
g. Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
h. Trade receivable
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
i. Inventories
Raw Material and components, work in progress, finished goods and traded goods are stated at "cost or net realisable value whichever is lower". Good in transit are stated at cost. Cost formulae used is weighted average cost. Due allowance is estimated and made for defective
and obsolete items, wherever necessary, based on the past experience of the company. Cost comprises of all cost of purchase, cost of conversion and other cost incurred in bringing the inventories to their present location and condition.
Costs of conversion and other costs are determined on the basis of standard cost method adjusted for variances between standard costs and actual costs, unless such costs are specifically identifiable, in which case they are included in the valuation at actuals.
j. Investments and financial assets Classification
The Company classifies its financial assets in the following measurement categories:
⢠those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
⢠those measured at amortised cost.
The classification depends on the company''s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.
The Company reclassifies debt investments when and only when its business model for managing those assets changes.
Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Measurement of debt instruments
Subsequent measurement of debt instruments depends on the company''s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the company classifies its debt instruments:
⢠Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in profit or loss when the asset is derecognised or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
⢠Fair value through other comprehensive income (FVOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets'' cash flows represent
solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit and loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/ (losses). Interest income from these financial assets is included in other income using the effective interest rate method.
⢠Fair value through profit or loss (FVTPL): Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented net in the statement of profit and loss within other gains/(losses) in the period in which it arises. Interest income from these financial assets is included in other income.
Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and FVOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables only, the company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
De-recognition of financial assets
A financial asset is derecognised only when
⢠The Company has transferred the rights to receive cash flows from the financial asset or
⢠retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the company has transferred an asset, the company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the company has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised if the company has not retained control of the financial asset. Where the company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
k. Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty.
I. Property plant and equipment (including Capital Work-in-Progress)
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation. Historical cost are stated at cost of acquisition inclusive of all attributable cost of bringing the assets to their working condition, less accumulated depreciation and accumulated impairment losses, if any.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is possible that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Schedule II to the Companies Act, 2013 prescribes useful lives for property, plant and equipments and allows Companies to use higher/lower useful lives and residual values if such useful lives and residual values can be technically supported and justification for difference is disclosed in the financial statements. The management believes that the depreciation rates currently used fairly reflect its estimate of the useful lives and residual values of property, plant and equipment.
Depreciation/ amortisation on fixed assets has been provided on the straight-line method as per the useful life assessed based on technical advice, taking into account the nature of the asset, the estimated use of the asset on the basis of management''s best estimation of getting economic benefits from those class of assets.
The Company uses its external technical expertise along with historical and industry trends for arriving at the economic life of an asset.
Class of asset |
Revised useful life based on SLM (Range) |
Building on Leasehold land |
15 - 50 years |
Plant and equipment |
4 - 30 years |
Furniture and fixtures |
6 years |
Vehicles |
6 - 8 years |
Office equipment |
3 - 10 years |
Electrical installations |
15 years |
Computer software |
3 years |
Assets not yet ready for use are recognised as capital work in progress.
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 the property, plant and equipment.
m. Intangible assets
Intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Cost includes expenditure that is directly attributable to the acquisition of the intangible assets.
Identifiable intangible assets are recognised when it is probable that future economic benefits attributed to the asset will flow to the Company and the cost (including accumulated depreciation / amortisation) of the asset can be reliably measured.
Computer softwares are capitalised at the amounts paid to acquire the respective license for use and are amortised over the period of useful lives or period of three years, whichever is less. The assets'' useful lives are reviewed at each financial year end.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the asset is derecognised.
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its intangible assets as at 1 April 2016 measured as per the previous GAAP and use that carrying value as the deemed cost (including accumulated amortisation) of intangible assets.
n. Borrowings and other financial liabilities
Borrowings and other financial liabilities are initially recognised at fair value (net of transaction costs incurred). Difference between the fair value and the transaction proceeds on initial recognition is recognised as an asset / liability based on the underlying reason for the difference.
Subsequently all financial liabilities are measured at amortised cost using the effective interest rate method.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. The gain / loss is recognised in other equity in case of transaction with shareholders.
Borrowings are classified as current liabilities unless the company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
o. Borrowing Costs
General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use, are added to the cost of those assets, until such time the assets are substantially ready for their intended use. All other borrowing costs are recognised as an expense in Profit or Loss in the period in which they are incurred.
p. Provisions, Contingent Liabilities and contingent assets
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are discounted using equivalent period government securities interest rate. Unwinding of the discount is recognised in the statement of profit and loss as a finance cost. Provisions are reviewed at each balance sheet date and are adjusted to reflect the current best estimate.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made. Information on contingent liability is disclosed in the Notes to the Financial Statements. Contingent assets are not recognised, but disclosed in the financial statements. However, when the realisation of income is virtually certain, then the related asset is no longer a contingent asset, but it is recognised as an asset.
q. Employee Benefits
Short term obligations: Short term employee benefits are recognised as an expense at the undiscounted amount in the statement of profit and loss of the year in which the related service is rendered.
Other long term employee benefit obligations:
Compensated absences: The Company provides for the encashment of leave or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment/availment. The Company makes provision for compensated absences based on an actuarial valuation by actuary. Actuarial gains and losses arising on the measurement of defined benefit obligation is charged/ credited to Profit and loss account.
Post employment obligations:
The Company operates the following post employment schemes: Defined benefit plans:
i) Gratuity: The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service. Vesting occurs upon completion of five years of service. The Company has obtained insurance policies with the Life Insurance Corporation of India (LIC) and makes an annual contribution to LIC. The Company makes provision for gratuity based on an actuarial valuation done as per projected unit credit method by an actuary. Actuarial gains and losses arising on the remeasurement of defined benefit obligation is charged/ credited to other comprehensive income.
ii) Provident fund: For certain employees, the monthly contribution for Provident Fund is made to a Trust administered by the Company. Both the eligible employees and the Company make monthly contributions to the provident fund equal to a specified percentage of the covered employee''s salary. The Company contributes a portion to the Employees'' Provident Fund Trust (The PF trust). The PF trust invests in specific designated instruments as permitted by Indian Law. The rate at which the annual interest is payable to the beneficiaries by the PF trust is being administrated by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the PF trust and the notified interest rate. The Company makes provision for Provident fund based on an actuarial valuation done as per projected unit credit method by an actuary. Actuarial gains and losses on shortfall, if any, arising on the remeasurement of defined benefit obligation is charged/ credited to other comprehensive income.
Defined contribution plans:
i) Provident fund and family pension fund: Defined contribution plans such as Provident Fund and family pension fund are charged to the Statement of Profit and Loss as incurred. The Company''s contribution to Provident Fund and family pension fund is determined based on a fixed percentage of the eligible employees'' salary and charged to the Statement of Profit and Loss on accrual basis. The Company''s contributions to Defined Contribution Plan are charged to the statement of profit and loss as incurred. The Company does not have any obligation other than the contribution made to the fund administered by the government.
r. Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss (excluding other comprehensive income) for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events such as bonus issue, bonus element in a right issue, shares split and reserve share splits (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss (excluding other comprehensive income) for the year attributable to equity share holders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
s. Operating Cycle
Based on the nature of products /activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.
t. Critical estimates and Judgements
The preparation of Financial Statements in conformity with Ind AS which requires management to make estimates, assumptions and exercise judgement in applying the accounting policies that affect the reported amount of assets, liabilities and disclosure of contingent liabilities at the date of financial statements and the reported amounts of income and expenses during the year.
The Management believes that these estimates are prudent and reasonable and are based upon the Management''s best knowledge of current events and actions. Actual results could differ from these estimates and differences between actual results and estimates are recognised in the periods in which the results are known or materialised.
This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed.
i) Property, plant and equipment, Investment Properties and Intangible Assets:
Management reviews the estimated useful lives and residual values of the assets annually in order to determine the amount of depreciation to be recorded during any reporting period. The useful lives and residual values as per schedule II to the Companies Act, 2013 or are based on the Company''s historical experience with similar assets and taking into account anticipated technological changes, whichever is more appropriate, based on technical evaluation.
ii) Income Tax:
The Company reviews at each balance sheet date the carrying amount of deferred tax assets. The factors used in estimates may differ from actual outcome which could lead to an adjustment to the amounts reported in the financial statements.
iii) Contingencies:
Management has estimated the possible outflow of resources at the end of each annual reporting financial year, if any, in respect of contingencies/claim/litigations against the Company as it is not possible to predict the outcome of pending matters with accuracy.
iv; impairment or Financial assets:
The impairment provisions for financial assets are based on assumptions about risk of default and expected cash loss. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Company''s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
v) Impairment of non-financial assets:
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or Cash Generating Units (CGU) fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent to those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less cost of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.
vi) Defined benefit obligation
The cost of post-employment benefits is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rate of return on assets, future salary increases and mortality rates. Due to the long term nature of these plans such estimates are subject to significant uncertainty. The assumptions used are disclosed in Note 38.
u. Standard issued but not yet effective Ind AS 115
On 28 March 2018, the Ministry of Corporate Affairs (MCA), in consultation with the National Advisory Committee on Accounting Standards, has issued Companies (Indian Accounting Standards) Amendment Rules, 2018 to amend the Companies (Indian Accounting Standards) Rules, 2015. This results in introduction of Ind AS 115, Revenue from Contracts with customers, that comprehensively revamps the revenue recognition guidance. Consequently, Ind AS 18 and Ind AS 11 have been withdrawn, and other standards are suitably modified. The amendment is applicable to the Company from 01 April 2018. The Company is currently assessing the potential impact of this amendment.
Appendix B of Ind AS 21
This appendix is for determining the date of transaction where the entity has received / paid any foreign currency advances. This appendix states that the date of transaction shall be the date on which such advance is received or paid. Therefore these non-monetary advances will not be restated at the time of their adjustment against the particular transaction. The Company is currently assessing the potential impact of this amendment.
2 Property, plant and equipment
(Rs. in lakhs)
Buildings on Leasehold land** |
Plant and equipment |
Furniture and fixtures |
Vehicles |
Office equipment |
Computers |
Electrical Installation |
Total |
|
Gross carrying value |
||||||||
As at 01 April 2016 |
181.61 |
1,828.82 |
4.81 |
7.73 |
8.14 |
23.89 |
72.51 |
2,127.51 |
Additions |
_ |
94.07 |
_ |
_ |
_ |
26.91 |
_ |
120.98 |
Disposals |
8.55 |
146.62 |
- |
- |
2.10 |
9.68 |
72.51 |
239.46 |
As at 31 March 2017 |
173.06 |
1,776.27 |
4.81 |
7.73 |
6.04 |
41.12 |
- |
2,009.03 |
Additions |
7.36 |
25.03 |
- |
- |
- |
- |
- |
32.39 |
Disposals |
- |
- |
- |
- |
- |
- |
- |
- |
As at 31 March 2018 |
180.42 |
1,801.30 |
4.81 |
7.73 |
6.04 |
41.12 |
- |
2,041.42 |
Accumulated depreciation |
||||||||
As at 01 April 2016 |
93.36 |
1,050.84 |
4.34 |
3.96 |
2.54 |
22.67 |
68.89 |
1,246.60 |
Charge for the year |
2.59 |
57.12 |
0.32 |
0.87 |
2.04 |
5.23 |
- |
68.17 |
Disposals |
7.03 |
139.37 |
- |
- |
- |
11.78 |
68.89 |
227.07 |
As at 31 March 2017 |
88.92 |
968.59 |
4.66 |
4.83 |
4.58 |
16.12 |
- |
1,087.70 |
Charge for the year |
2.76 |
60.14 |
0.14 |
0.66 |
1.04 |
8.28 |
- |
73.02 |
Disposals |
- |
- |
- |
- |
- |
- |
- |
|
As at 31 March 2018 |
91.68 |
1,028.73 |
4.80 |
5.49 |
5.62 |
24.40 |
- |
1,160.72 |
Net Carrying value |
||||||||
As at 01 April 2016 |
88.25 |
777.98 |
0.47 |
3.77 |
5.60 |
1.22 |
3.62 |
880.91 |
As at 31 March 2017 |
84.14 |
807.68 |
0.15 |
2.90 |
1.46 |
25.00 |
- |
921.33 |
As at 31 March 2018 |
88.74 |
772.57 |
0.01 |
2.24 |
0.42 |
16.72 |
- |
880.70 |
**The Company''s building is constructed on leasehold land, lessor being SBL Industries Limited, which is under liquidation with its assets under control of the Official Liquidator. The details of the lease period expired/ expiring are as follows:
Out of the leasehold land of 1.46 acres plus 139,481 sq. ft., in respect of 1.46 acres and 88,320 sq. ft. lease period is valid till 29 August 2081 and in respect of 39,225 sq. ft. lease has expired on 30 September 2017. In respect of 11,936 sq. ft. the lease had expired on 29 August 2012 and the Company continues to retain possession as monthly lessee and has been regularly depositing the monthly lease rents.
Mar 31, 2018
SIGNIFICANT ACCOUNTING POLICIES AND OTHER EXPLANATORY INFORMATION TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2018
1 Company information
SNL Bearings Limited (''the Company'') established in 1983, is engaged in the manufacture and marketing of antifriction bearing products. The holding Company NRB Bearings Limited acquired the Company on 1st June, 2000.
The registered and corporate office of the company is situated at Dhannur, 15, Sir P. M. Road, Fort, Mumbai 400 001, Maharashtra.
The separate financial statements were authorised for issue in accordance with the resolution of the directors on 17 May 2018.
Basis of Preparation
The Company has prepared its financial statements to comply in all material respects with the provisions of the Companies Act, 2013 (the Act) and rules framed thereunder and the guidelines issued by Securities and Exchange Board of India. In accordance with the notification issued by the Ministry of Corporate Affairs, the Company has adopted Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 under Section 133 of the Act, with effect from 1 April 2017. Till 31 March 2017, the Company used to prepare its financial statements as per Companies (Accounting Standards) Rules, 2014 (Previous GAAP) read with rule 7 and other relevant provisions of the Act. These are the first Ind AS Financial Statements of the Company. The transition from Previous GAAP to Ind AS has been accounted for in accordance with Ind AS 101 "First Time Adoption of Indian Accounting Standards", with 1 April 2016 being the transition date. The balance and transactions for the comparative period have been restated accordingly. As per Ind AS 101, the Company has presented a reconciliation of its transition from Previous GAAP to Ind AS of its total equity as at 1 April 2016 and 31 March 2017 and reconciliation of total comprehensive income and cash flow for the year ended 31 March 2017. Please refer note 42 for detailed information on the transition.
The financial statements have been prepared on a historical cost convention and accrual basis, except for the following assets and liabilities:
i) Certain financial assets and liabilities that are measured at fair value ii) Defined benefit plans-plan assets measured at fair value. 1A Significant accounting policies a. Foreign currency transactions
The functional currency of the Company is Indian national rupee (INR) which is also the presentation currency. All other currencies are accounted for as foreign currency.
Transactions denominated in foreign currencies are initially recorded at the exchange rate prevailing at the date of transaction.
Foreign currency monetary items are reported using the closing exchange rates. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Exchange differences on monetary items are recognised in Statement of Profit and Loss in the period in which they arise.
b. Revenue recognition
Revenue is measured at the fair value of consideration received or receivable. Revenue is recognised only when it can be reliably measured and it is probable that future economic benefits will flow to the company.
Revenue from operations includes sales of goods. Revenue from sale of goods is recognised when significant risk and rewards of ownership of the goods have been passed on to the customer. Amounts disclosed as revenue are inclusive of excise duty and net of returns, goods and service tax, value added taxes and amounts collected on behalf of third parties.
c. Other income
Interest income for all debt instruments is recognised using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.
Dividend are recognised in profit or loss only when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the company, and the amount of the dividend can be measured reliably. Interest income is recognised using effective interest method.
d. Income tax
The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period.
Deferred income tax is provided in full, using the balance sheet approach, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss). Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the company has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
e. Leases
As a lessee
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the company as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period 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.
f. Impairment of non-financial assets
The carrying amount of the non-financial assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal /external factors. An impairment loss is recognised whenever the carrying amount of an asset or a cash generating unit exceeds its recoverable amount. The recoverable amount of the assets (or where applicable, that of the cash generating unit to which the asset belongs) is estimated as the higher of its net selling price and its value in use. Impairment loss is recognised in the statement of profit and loss.
After impairment, depreciation / amortisation is provided on the revised carrying amount of the asset over its remaining useful life.
A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation / amortisation if there were no impairment.
g. Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
h. Trade receivable
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
i. Inventories
Raw Material and components, work in progress, finished goods and traded goods are stated at "cost or net realisable value whichever is lower". Good in transit are stated at cost. Cost formulae used is weighted average cost. Due allowance is estimated and made for defective
and obsolete items, wherever necessary, based on the past experience of the company. Cost comprises of all cost of purchase, cost of conversion and other cost incurred in bringing the inventories to their present location and condition.
Costs of conversion and other costs are determined on the basis of standard cost method adjusted for variances between standard costs and actual costs, unless such costs are specifically identifiable, in which case they are included in the valuation at actuals.
j. Investments and financial assets Classification
The Company classifies its financial assets in the following measurement categories:
⢠those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
⢠those measured at amortised cost.
The classification depends on the company''s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.
The Company reclassifies debt investments when and only when its business model for managing those assets changes.
Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Measurement of debt instruments
Subsequent measurement of debt instruments depends on the company''s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the company classifies its debt instruments:
⢠Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in profit or loss when the asset is derecognised or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
⢠Fair value through other comprehensive income (FVOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets'' cash flows represent
solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit and loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/ (losses). Interest income from these financial assets is included in other income using the effective interest rate method.
⢠Fair value through profit or loss (FVTPL): Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented net in the statement of profit and loss within other gains/(losses) in the period in which it arises. Interest income from these financial assets is included in other income.
Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and FVOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables only, the company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
De-recognition of financial assets
A financial asset is derecognised only when
⢠The Company has transferred the rights to receive cash flows from the financial asset or
⢠retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the company has transferred an asset, the company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the company has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised if the company has not retained control of the financial asset. Where the company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
k. Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty.
I. Property plant and equipment (including Capital Work-in-Progress)
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation. Historical cost are stated at cost of acquisition inclusive of all attributable cost of bringing the assets to their working condition, less accumulated depreciation and accumulated impairment losses, if any.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is possible that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Schedule II to the Companies Act, 2013 prescribes useful lives for property, plant and equipments and allows Companies to use higher/lower useful lives and residual values if such useful lives and residual values can be technically supported and justification for difference is disclosed in the financial statements. The management believes that the depreciation rates currently used fairly reflect its estimate of the useful lives and residual values of property, plant and equipment.
Depreciation/ amortisation on fixed assets has been provided on the straight-line method as per the useful life assessed based on technical advice, taking into account the nature of the asset, the estimated use of the asset on the basis of management''s best estimation of getting economic benefits from those class of assets.
The Company uses its external technical expertise along with historical and industry trends for arriving at the economic life of an asset.
Class of asset |
Revised useful life based on SLM (Range) |
Building on Leasehold land |
15 - 50 years |
Plant and equipment |
4 - 30 years |
Furniture and fixtures |
6 years |
Vehicles |
6 - 8 years |
Office equipment |
3 - 10 years |
Electrical installations |
15 years |
Computer software |
3 years |
Assets not yet ready for use are recognised as capital work in progress.
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 the property, plant and equipment.
m. Intangible assets
Intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Cost includes expenditure that is directly attributable to the acquisition of the intangible assets.
Identifiable intangible assets are recognised when it is probable that future economic benefits attributed to the asset will flow to the Company and the cost (including accumulated depreciation / amortisation) of the asset can be reliably measured.
Computer softwares are capitalised at the amounts paid to acquire the respective license for use and are amortised over the period of useful lives or period of three years, whichever is less. The assets'' useful lives are reviewed at each financial year end.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the asset is derecognised.
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its intangible assets as at 1 April 2016 measured as per the previous GAAP and use that carrying value as the deemed cost (including accumulated amortisation) of intangible assets.
n. Borrowings and other financial liabilities
Borrowings and other financial liabilities are initially recognised at fair value (net of transaction costs incurred). Difference between the fair value and the transaction proceeds on initial recognition is recognised as an asset / liability based on the underlying reason for the difference.
Subsequently all financial liabilities are measured at amortised cost using the effective interest rate method.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. The gain / loss is recognised in other equity in case of transaction with shareholders.
Borrowings are classified as current liabilities unless the company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
o. Borrowing Costs
General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use, are added to the cost of those assets, until such time the assets are substantially ready for their intended use. All other borrowing costs are recognised as an expense in Profit or Loss in the period in which they are incurred.
p. Provisions, Contingent Liabilities and contingent assets
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are discounted using equivalent period government securities interest rate. Unwinding of the discount is recognised in the statement of profit and loss as a finance cost. Provisions are reviewed at each balance sheet date and are adjusted to reflect the current best estimate.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made. Information on contingent liability is disclosed in the Notes to the Financial Statements. Contingent assets are not recognised, but disclosed in the financial statements. However, when the realisation of income is virtually certain, then the related asset is no longer a contingent asset, but it is recognised as an asset.
q. Employee Benefits
Short term obligations: Short term employee benefits are recognised as an expense at the undiscounted amount in the statement of profit and loss of the year in which the related service is rendered.
Other long term employee benefit obligations:
Compensated absences: The Company provides for the encashment of leave or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment/availment. The Company makes provision for compensated absences based on an actuarial valuation by actuary. Actuarial gains and losses arising on the measurement of defined benefit obligation is charged/ credited to Profit and loss account.
Post employment obligations:
The Company operates the following post employment schemes: Defined benefit plans:
i) Gratuity: The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service. Vesting occurs upon completion of five years of service. The Company has obtained insurance policies with the Life Insurance Corporation of India (LIC) and makes an annual contribution to LIC. The Company makes provision for gratuity based on an actuarial valuation done as per projected unit credit method by an actuary. Actuarial gains and losses arising on the remeasurement of defined benefit obligation is charged/ credited to other comprehensive income.
ii) Provident fund: For certain employees, the monthly contribution for Provident Fund is made to a Trust administered by the Company. Both the eligible employees and the Company make monthly contributions to the provident fund equal to a specified percentage of the covered employee''s salary. The Company contributes a portion to the Employees'' Provident Fund Trust (The PF trust). The PF trust invests in specific designated instruments as permitted by Indian Law. The rate at which the annual interest is payable to the beneficiaries by the PF trust is being administrated by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the PF trust and the notified interest rate. The Company makes provision for Provident fund based on an actuarial valuation done as per projected unit credit method by an actuary. Actuarial gains and losses on shortfall, if any, arising on the remeasurement of defined benefit obligation is charged/ credited to other comprehensive income.
Defined contribution plans:
i) Provident fund and family pension fund: Defined contribution plans such as Provident Fund and family pension fund are charged to the Statement of Profit and Loss as incurred. The Company''s contribution to Provident Fund and family pension fund is determined based on a fixed percentage of the eligible employees'' salary and charged to the Statement of Profit and Loss on accrual basis. The Company''s contributions to Defined Contribution Plan are charged to the statement of profit and loss as incurred. The Company does not have any obligation other than the contribution made to the fund administered by the government.
r. Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss (excluding other comprehensive income) for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events such as bonus issue, bonus element in a right issue, shares split and reserve share splits (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss (excluding other comprehensive income) for the year attributable to equity share holders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
s. Operating Cycle
Based on the nature of products /activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.
t. Critical estimates and Judgements
The preparation of Financial Statements in conformity with Ind AS which requires management to make estimates, assumptions and exercise judgement in applying the accounting policies that affect the reported amount of assets, liabilities and disclosure of contingent liabilities at the date of financial statements and the reported amounts of income and expenses during the year.
The Management believes that these estimates are prudent and reasonable and are based upon the Management''s best knowledge of current events and actions. Actual results could differ from these estimates and differences between actual results and estimates are recognised in the periods in which the results are known or materialised.
This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed.
i) Property, plant and equipment, Investment Properties and Intangible Assets:
Management reviews the estimated useful lives and residual values of the assets annually in order to determine the amount of depreciation to be recorded during any reporting period. The useful lives and residual values as per schedule II to the Companies Act, 2013 or are based on the Company''s historical experience with similar assets and taking into account anticipated technological changes, whichever is more appropriate, based on technical evaluation.
ii) Income Tax:
The Company reviews at each balance sheet date the carrying amount of deferred tax assets. The factors used in estimates may differ from actual outcome which could lead to an adjustment to the amounts reported in the financial statements.
iii) Contingencies:
Management has estimated the possible outflow of resources at the end of each annual reporting financial year, if any, in respect of contingencies/claim/litigations against the Company as it is not possible to predict the outcome of pending matters with accuracy.
iv; impairment or Financial assets:
The impairment provisions for financial assets are based on assumptions about risk of default and expected cash loss. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Company''s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
v) Impairment of non-financial assets:
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or Cash Generating Units (CGU) fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent to those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less cost of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.
vi) Defined benefit obligation
The cost of post-employment benefits is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rate of return on assets, future salary increases and mortality rates. Due to the long term nature of these plans such estimates are subject to significant uncertainty. The assumptions used are disclosed in Note 38.
u. Standard issued but not yet effective Ind AS 115
On 28 March 2018, the Ministry of Corporate Affairs (MCA), in consultation with the National Advisory Committee on Accounting Standards, has issued Companies (Indian Accounting Standards) Amendment Rules, 2018 to amend the Companies (Indian Accounting Standards) Rules, 2015. This results in introduction of Ind AS 115, Revenue from Contracts with customers, that comprehensively revamps the revenue recognition guidance. Consequently, Ind AS 18 and Ind AS 11 have been withdrawn, and other standards are suitably modified. The amendment is applicable to the Company from 01 April 2018. The Company is currently assessing the potential impact of this amendment.
Appendix B of Ind AS 21
This appendix is for determining the date of transaction where the entity has received / paid any foreign currency advances. This appendix states that the date of transaction shall be the date on which such advance is received or paid. Therefore these non-monetary advances will not be restated at the time of their adjustment against the particular transaction. The Company is currently assessing the potential impact of this amendment.
2 Property, plant and equipment
(Rs. in lakhs)
Buildings on Leasehold land** |
Plant and equipment |
Furniture and fixtures |
Vehicles |
Office equipment |
Computers |
Electrical Installation |
Total |
|
Gross carrying value |
||||||||
As at 01 April 2016 |
181.61 |
1,828.82 |
4.81 |
7.73 |
8.14 |
23.89 |
72.51 |
2,127.51 |
Additions |
_ |
94.07 |
_ |
_ |
_ |
26.91 |
_ |
120.98 |
Disposals |
8.55 |
146.62 |
- |
- |
2.10 |
9.68 |
72.51 |
239.46 |
As at 31 March 2017 |
173.06 |
1,776.27 |
4.81 |
7.73 |
6.04 |
41.12 |
- |
2,009.03 |
Additions |
7.36 |
25.03 |
- |
- |
- |
- |
- |
32.39 |
Disposals |
- |
- |
- |
- |
- |
- |
- |
- |
As at 31 March 2018 |
180.42 |
1,801.30 |
4.81 |
7.73 |
6.04 |
41.12 |
- |
2,041.42 |
Accumulated depreciation |
||||||||
As at 01 April 2016 |
93.36 |
1,050.84 |
4.34 |
3.96 |
2.54 |
22.67 |
68.89 |
1,246.60 |
Charge for the year |
2.59 |
57.12 |
0.32 |
0.87 |
2.04 |
5.23 |
- |
68.17 |
Disposals |
7.03 |
139.37 |
- |
- |
- |
11.78 |
68.89 |
227.07 |
As at 31 March 2017 |
88.92 |
968.59 |
4.66 |
4.83 |
4.58 |
16.12 |
- |
1,087.70 |
Charge for the year |
2.76 |
60.14 |
0.14 |
0.66 |
1.04 |
8.28 |
- |
73.02 |
Disposals |
- |
- |
- |
- |
- |
- |
- |
|
As at 31 March 2018 |
91.68 |
1,028.73 |
4.80 |
5.49 |
5.62 |
24.40 |
- |
1,160.72 |
Net Carrying value |
||||||||
As at 01 April 2016 |
88.25 |
777.98 |
0.47 |
3.77 |
5.60 |
1.22 |
3.62 |
880.91 |
As at 31 March 2017 |
84.14 |
807.68 |
0.15 |
2.90 |
1.46 |
25.00 |
- |
921.33 |
As at 31 March 2018 |
88.74 |
772.57 |
0.01 |
2.24 |
0.42 |
16.72 |
- |
880.70 |
**The Company''s building is constructed on leasehold land, lessor being SBL Industries Limited, which is under liquidation with its assets under control of the Official Liquidator. The details of the lease period expired/ expiring are as follows:
Out of the leasehold land of 1.46 acres plus 139,481 sq. ft., in respect of 1.46 acres and 88,320 sq. ft. lease period is valid till 29 August 2081 and in respect of 39,225 sq. ft. lease has expired on 30 September 2017. In respect of 11,936 sq. ft. the lease had expired on 29 August 2012 and the Company continues to retain possession as monthly lessee and has been regularly depositing the monthly lease rents.
Mar 31, 2018
1 Statement of compliance
These financial statements are prepared in accordance with Indian Accounting Standard (Ind AS), under the historical cost convention on the accrual basis except for certain financial instruments that are measured at fair values, the provisions of the Companies Act, 2013 Cthe Actâ) (to the extent notified). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules issued thereafter.
Effective April 1, 2016, the Company has adopted all the Ind AS standards and the adoption was carried out in accordance with Ind AS 101 First time adoption of Indian Accounting Standards, with April 1, 2015 as the transition date. 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.
2 Basis of preparation
The financial statements have been prepared on the historical cost convention on accrual basis except for certain financial instruments which are measured at fair value at the end of each reporting period, as explained in the accounting policies mentioned below.
Historical cost is generally based on the fair value of the consideration given in exchange of goods or services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique.
The principal accounting policies are set out below.
All assets and liabilities have been classified as current or non-current according to the Companyâs operating cycle and other criteria set out in the Act. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months.
3 Property, plant and equipment (PPE)
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation and accumulated impairment losses, if any.
All items of property, plant and equipment have been measured at fair value at the date of transition to Ind AS. The Company have opted such fair valuation as deemed cost at the transition date i.e. April 1, 2015.
Cost of acquisition or construction is inclusive of freight, duties, relevant taxes, incidental expenses and interest on loans attributable to the acquisition of qualifying assets, up to the date of commissioning of the assets.
Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for qualifying assets, upto the date of commissioning of the assets.
Likewise, when a major inspection for faults is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria is satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.
Assets are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.
Capital Work in Progress: Project under which assets are not yet ready for their intended use are carried at cost comprising direct cost, related incidental expenses and attributable interest.
Spare parts are capitalized when they meet the definition of PPE, i.e., when the Company intends to use these during more than a period of 12 months.
4 Depreciation
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value.
Depreciation has been provided on the cost of assets less their residual values on straight line method on the basis of estimated useful life of assets determined by the Company which are different from the useful life as prescribed in Schedule II of the 2013 Act. The estimated useful life of the assets have been assessed based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc. and are as under:
Freehold land is not depreciated
Depreciation is calculated on a pro rata basis except that, assets costing upto Rs.5,000 each are fully depreciated in the year of purchase.
An item of property, plant and equipment or any significant part initially recognised of such item of property plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.
The estimated useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
5 Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost.
Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses, if any.
Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The useful lives considering the terms of the business purchase agreements are as follows:
The Company has elected to continue with the carrying value of all of its intangibles assets recognised as on April 1, 2015 measured as per the previous GAAP and use that carrying value as its deemed cost as of transition date.
The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
An intangible asset is derecognised on disposal or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.
6 research and development expenditure
Expenditure on research and development of products is included under the natural heads of expenditure in the year in which it is incurred except which relate to development activities whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes.
Such costs are capitalised if they can be reliably measured, the product or process is technically and commercially feasible and the Company has sufficient resources to complete the development and to use or sell the asset.
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses, if any. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation expense is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset. During the period of development, the asset is tested for impairment annually.
7 Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Companyâs cash-generating units (or Companyâs of cash-generating units) that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
8 Impairment of tangible and intangible assets other than goodwill
As at each balance sheet date, the carrying amount of cash generating units / assets is tested for impairment so as to determine:
(a) the provision for impairment loss, if any, required;
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or cash-generating unitâs (CGU) fair value less costs of disposal and its value in use.
Impairment loss is recognized when the carrying amount of an asset exceeds recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Companyâs CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of 5 years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after 5th year. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified.
(b) the reversal, if any, required of impairment loss recognized in previous periods.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognized impairment losses no longer exist or have decreased. If such indication exists, the Company estimates the assetâs or CGUâs recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the assetâs recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.
9 Leasing
Company as lessee:
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease.
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Operating Leases as lessee:
Lease rental expenses from operating leases is generally recognised on a straight line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases, such increases are recognised in the year in which such benefits accrue. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
Finance leases as lessee:
Assets held under finance lease are initially recognised as assets at the fair value at the inception of lease or at the present value of the minimum lease payments, whichever is lower. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the statement of profit and loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Companyâs general policy on the borrowing cost.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
10 Borrowing costs
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
Borrowing costs, allocated to and utilised for qualifying assets, pertaining to the period from commencement of activities relating to construction/ development of the qualifying asset upto the date of capitalisation of such asset is added to the cost of the assets.
Interest income earned on temporary investment of specific borrowing pending expenditure on qualifying asset is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are expensed in the period in which they occur.
11 foreign Currencies
a) functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates Cthe functional currencyâ). The financial statements are presented in Indian Rupee (INR/ Rs.), which is the Companyâs functional and presentation currency.
b) Transaction and balances
Transactions in foreign currencies are recorded on initial recognition at the exchange rate prevailing on the date of the transaction.
(i) Any gains or losses arising due to differences in exchange rates at the time of translation or settlement are accounted for in the Statement of Profit & Loss either under the head foreign exchange fluctuation or interest cost, as the case may be, except those relating to longterm foreign currency monetary items.
(ii) Exchange differences pertaining to long term foreign currency loans obtained or re-financed on or before March 31, 2016:
Exchange differences on long-term foreign currency monetary items relating to acquisition of depreciable assets are adjusted to the carrying cost of the assets and depreciated over the balance useful life of the assets.
(iii) Exchange differences pertaining to long term foreign currency loans obtained or re-financed on or after April 1, 2016 The exchange differences pertaining to long term foreign currency loans obtained or re-financed on or after April 1, 2016 is charged off or credited to profit & loss account.
12 Inventories
Inventories are valued at cost or net realisable value, whichever is lower. The basis of determining the cost for various categories of inventory are as follows:
(a) Raw materials and stores & spares - Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
(b) Stock in trade, Stock in process and finished goods- Direct cost plus appropriate share of overheads and excise duty, wherever applicable
(c) By products - At estimated realisable value Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
13 Provisions and Contingent Liabilities
Provisions
The Company recognised a provision when there is a present obligation (legal or constructive) as a result of past events and it is more likely than not that an outflow of resources would be required to settle the obligation and a reliable estimate can be made.
When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain.
The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liability
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. Where there is a possible obligation or a present obligation that the likelihood of outflow of resources is remote, no provision or disclosure is made.
14 Revenue recognition
a) Sale of goods
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government.
Sales of products is inclusive of excise duty and net of value added tax / sales tax / goods and service tax.
Revenue is recognised when the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs can be estimated reliably, there is no continuing management involvement with the goods nor it exercises effective control over the goods and the amount of revenue can be measured reliably. Revenue is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates and cash discount. The timing of the transfer of risks and rewards varies depending on the individual terms of the sales arrangements.
b) Interest and dividend income
Interest income is recognised when it is probable that the economic benefits will flow to the Company using the effective interest rate and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding.
Dividend income from investments is recognised when the shareholderâs right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably).
15 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
a) Current tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss i.e. in other comprehensive income. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
b) Deferred tax
Deferred tax is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts at the reporting date.
Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss i.e. in other comprehensive income.
Deferred tax assets/liabilities are recognised for all taxable temporary differences, except:
(i) At the time of initial recognition of goodwill;
(ii) Initial recognition of assets or liabilities (other than in a business combination) at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
Deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
c) Minimum Alternate tax (Mat)
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT asset is recognised in the Balance Sheet when it is probable that future economic benefit associated with it will flow to the Company.
16 Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with.
A government grant that becomes receivable as compensation for expenses or losses incurred in a previous period. Such a grant is recognised in profit or loss of the period in which it becomes receivable.
Government grants shall be 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.
Government grants related to assets are presented in the balance sheet as deferred income and is recognised in profit or loss on a systematic basis over the expected useful life of the related assets.
17 Employee benefits
Wages and salaries including non monetary benefits that are expected to be settled within the operating cycle after the end of the period in which the related services are rendered and are measured at the undiscounted amount expected to be paid.
In case of provident fund administered through Regional Provident Fund Commissioner, the Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service. The Companyâs contributions paid / payable during the year to provident fund administered through Regional Provident Fund Commissioner, Superannuation Fund and Employeesâ State Insurance Corporation are recognised in the Statement of Profit and Loss as an expense when employees have rendered services entitling them to contributions.
Provision for gratuity, compensated absences, provident fund for certain category of employees administered through a recognised provident fund trust and long term retention pay are determined on an actuarial basis at the end of the year and charged to Statement of Profit and Loss. The cost of providing these benefits is determined using the projected unit credit method.
Remeasurements, comprising of actuarial gains and losses and the effect of the asset ceiling, (excluding amounts included in net interest on the net defined benefit liability and return on plan assets), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. It is included in retained earnings in the statement of changes in equity and in the balance sheet.
18 Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
19 Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and shortterm deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
20 financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
A) financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus transaction costs that are directly attributable to the acquisition of the financial asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets of the Company are classified in three categories:
a) At amortised cost
b) At fair value through profit and loss (FVTPL)
c) At fair value through other comprehensive income (FVTOCI)
Financial Asset is measured at amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss. This category generally applies to trade and other receivables.
Equity instruments which are held for trading are measured at fair value through profit or loss.
For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value.
The Company makes such election on an instrument by instrument basis. The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in other comprehensive income. This cumulative gain or loss is not reclassified to profit or loss on disposal of such instruments.
Financial assets included within the FVTPL category are measured at fair value with all changes recognized in the P&L.
Investments representing equity interest in subsidiaries are carried at cost less any provision for impairment.
Investment in mutual funds are measured at fair value through profit or loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset) is primarily derecognised (i.e. removed from the balance sheet) when:
a) The rights to receive cash flows from the asset have expired, or
b) The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement; and either (i) the Company has transferred substantially all the risks and rewards of the asset, or (ii) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
a) Financial assets that are debt instruments, and are measured at amortised cost e.g., loans, security deposits, trade receivables and bank balance.
The Company follows âsimplified approachâ for recognition of impairment loss allowance on financial assets that do not contain a significant financing component.
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 ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognising impairment loss allowance based on 12-month ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR. When estimating the cash flows, an entity is required to consider:
a) All contractual terms of the financial instrument (including prepayment, extension, call and similar options) over the expected life of the financial instrument. However, in rare cases when the expected life of the financial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the financial instrument
b) Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms
At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed. On that basis, the Company estimates the following provision matrix at the reporting date:
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the statement of profit and loss (P&L). This amount is reflected under the head âother expensesâ in the P&L. The balance sheet presentation for various financial instruments is described below:
a) Financial assets measured as at amortised cost, contractual revenue receivables and lease receivables: ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount until the asset meets write-off criteria.
B) Financial liabilities and Equity instruments Initial recognition and measurement
All financial liabilities are recognised initially at fair value, net of directly attributable transaction costs, if any.
The Companyâs financial liabilities includes borrowings, trade and other payables including financial guarantee contracts and derivative financial instruments.
Subsequent measurement Borrowings
Borrowings are subsequently measured at amortised cost. Any differences between the proceeds (net of transaction costs) and the redemption/repayment amount is recognised in profit and loss over the period of the borrowings using the effective interest rate method.
Trade and other payables
Trade and other payables represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified entity fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortisation.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
Equity instrument
Equity instruments are any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Debt or equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
21 Derivative financial instruments and hedge accounting
Initial recognition and subsequent measurement
The Company uses derivative financial instruments, (such as forward currency contracts, interest rate swaps) or non-derivative financial assets / liabilities to hedge its foreign currency risks and interest rate risks respectively. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognised in OCI and later reclassified to profit or loss when the hedge item affects profit or loss.
For the purpose of hedge accounting, hedges are classified as:
a) Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability.
b) Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Companyâs risk management objective and strategy for undertaking hedge, the hedging/ economic relationship, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrumentâs fair value in offsetting the exposure to changes in the hedged itemâs fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
Hedges that meet the strict criteria for hedge accounting are accounted for, as described below:
Fair value hedges
The change in the fair value of a hedging instrument is recognised in the statement of profit and loss. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in the statement of profit and loss.
If the hedged item is derecognised, the unamortised fair value is recognised immediately in profit or loss. When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in profit and loss.
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the statement of profit and loss.
The Company uses forward currency contracts as hedges of its exposure to foreign currency risk in forecast transactions and firm commitments. The ineffective portion relating to foreign currency contracts is recognised in the statement of profit or loss.
The company also designates non derivative financial liabilities, such as foreign currency borrowings from banks, as hedging instruments for the hedge of foreign currency risk associated with highly probable forecasted transactions and, accordingly, applies cash flow hedge accounting for such relationships.
Amounts recognised as other comprehensive income are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast transaction occurs.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognised in other comprehensive income remains separately in other equity until the forecast transaction occurs or the foreign currency firm commitment is met.
22 fair value measurement
The Company measures financial instruments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
a) In the principal market for the asset or liability, or
b) In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
a) Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
b) Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
c) Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
23 Applicability of new and revised Ind AS
Ministry of Corporate affairs has notified Ind AS 115 âRevenue from Contracts with customersâ, which is effective from April 1, 2018. The new standard outlines a single comprehensive control-based model for revenue recognition and supersedes current revenue recognition guidance based on risks or rewards. The Company is evaluating the requirements of Ind AS 115 and its effect of the financial statements.
Appendix B to Ind AS 21, Foreign currency transactions and advance consideration: On March 28, 2018, Ministry of Corporate Affairs (âMCAâ) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The amendment will come into force from April 1, 2018. The Company is evaluating the requirements of appendix B to Ind AS 21 and its effect of the financial statements.
Amendment to Ind AS 7: Effective April 1, 2017, the Company adopted the amendment to Ind AS 7, which require the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting of a reconciliation between the opening and closing balances in Balance sheet for liabilities arising from financing activities, to meet the disclosure requirement. The adoption of amendment did not have any material impact on the financial statements, refer Cash Flow Statement.
Mar 31, 2017
1 CORPORATE INFORMATION, SIGNIFICANT ACCOUNTING POLICIES AND SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
A CORPORATE INFORMATION
âSRF Limited (âthe Companyâ) is a public limited company domiciled in India and incorporated under the provisions of companies Act, 2013 (âthe 2013 Actâ). The Companyâs equity shares are listed at the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The registered office of the Company is situated at C-8, Commercial Complex, Safdarjung Development Area, New Delhi - 110 016. The Companyâs parent and ultimate holding company is KAMA Holdings Limited.
The principal activities of the Company are manufacturing, purchase and sale of technical textiles, chemicals & polymers and packaging films.
The financial statements were approved for issue in accordance with a resolution of the directors on May 22, 2017.â
B SIGNIFICANT ACCOUNTING POLICIES
1 Statement of compliance
The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Section 133 of the 2013 Act read with the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the 2013 Act.
Up to the year ended March 31, 2016, the Company prepared the financial statements in accordance with the requirements of previous GAAP, which includes standards notified under the Companies (Accounting Standards) Rules, 2006 and other relevant provisions of the 2013 Act.
These are the Companyâs first Ind AS financial statements. The date of transition to the Ind AS is April 1, 2015. Refer Note 39 for details of first-time adoption exceptions and exemptions availed by the Company.
2 Basis of preparation
The financial statements have been prepared on the historical cost convention on accrual basis except for certain financial instruments which are measured at fair value at the end of each reporting period, as explained in the accounting policies mentioned below.
Historical cost is generally based on the fair value of the consideration given in exchange of goods or services.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique.
The principal accounting policies are set out below.
All assets and liabilities have been classified as current or non-current according to the Companyâs operating cycle and other criteria set out in the Act. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as twelve months.
3 Property, plant and equipment (PPE)
âProperty, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation and accumulated impairment losses, if any.
All Items of Property plant and equipment have been measured at fair value at the date of transition to Ind AS. The Company have opted such fair valuation as deemed cost at the transition date i.e. April 1, 2015.
Cost of acquisition or construction is inclusive of freight, duties, relevant taxes, incidental expenses and interest on loans attributable to the acquisition of qualifying assets, up to the date of commissioning of the assets.
Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for qualifying assets, up to the date of commissioning of the assets.
Likewise, when a major inspection for faults is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria is satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred.
Assets are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.
Capital Work in Progress: Project under which assets are not yet ready for their intended use are carried at cost comprising direct cost, related incidental expenses and attributable interest. Spare parts are capitalized when they meet the definition of PPE, i.e., when the Company intends to use these during more than a period of 12 months. of property plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognized.
The estimated useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
5 Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost.
Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any. Internally generated intangibles, excluding capitalized development costs, are not capitalized and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
Freehold land is not depreciated Depreciation is calculated on a pro rata basis except that, assets costing up to Rs, 5,000 each are fully depreciated in the year of purchase
An item of property, plant and equipment or any significant part initially recognized of such item
The Company has elected to continue with the carrying value of all of its intangibles assets recognized as on April 1, 2015 measured as per the previous GAAP and use that carrying value as its deemed cost as of transition date.
The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
An intangible asset is derecognized on disposal or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit or loss when the asset is derecognized.
6 Research and development expenditure
Expenditure on research and development of products is included under the natural heads of expenditure in the year in which it is incurred except which relate to development activities whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes.
Such costs are capitalized if they can be reliably measured, the product or process is technically and commercially feasible and the Company has sufficient resources to complete the development and to use or sell the asset.
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization and accumulated impairment losses, if any. Amortization of the asset begins when development is complete and the asset is available for use. It is amortized over the period of expected future benefit. Amortization expense is recognized in the statement of profit and loss unless such expenditure forms part of carrying value of another asset. During the period of development, the asset is tested for impairment annually.
7 Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Companyâs cash-generating units (or Companyâs of cash-generating units) that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
8 Impairment of tangible and intangible assets other than goodwill
As at each balance sheet date, the carrying amount of cash generating units / assets is tested for impairment so as to determine:
(a) the provision for impairment loss, if any, required;
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or cash-generating unitâs (CGU) fair value less costs of disposal and its value in use.
Impairment loss is recognized when the carrying amount of an asset exceeds recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Companyâs CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of 5 years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after 5th year. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified.
(b) the reversal, if any, required of impairment loss recognized in previous periods.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognized impairment losses no longer exist or have decreased.
If such indication exists, the Company estimates the assetâs or CGU''s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the assetâs recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years.
9 Leasing
Company as a lessee
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the
Company is classified as a finance lease. The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Operating Leases as lessee:
Lease rental expenses from operating leases is generally recognized on a straight line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the less orâs expected inflationary cost increases, such increases are recognized in the year in which such benefits accrue. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.
Finance leases as lessee:
Assets held under finance lease are initially recognized as assets at the fair value at the inception of lease or at the present value of the minimum lease payments, whichever is lower. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in finance costs in the statement of profit and loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Companyâs general policy on the borrowing cost.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
10. Borrowing costs
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
Borrowing costs, allocated to and utilized for qualifying assets, pertaining to the period from commencement of activities relating to construction/development of the qualifying asset up to the date of capitalization of such asset is added to the cost of the assets.
Interest income earned on temporary investment of specific borrowing pending expenditure on qualifying asset is deducted from the borrowing costs eligible for capitalization. All other borrowing costs are expensed in the period in which they occur.
11 Foreign Currencies
a) Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (âthe functional currencyâ). The financial statements are presented in Indian Rupee (INR/ ''), which is the Companyâs functional and presentation currency.
b) Transaction and balances
Transactions in foreign currencies are recorded on initial recognition at the exchange rate prevailing on the date of the transaction.
(i) Any gains or losses arising due to differences in exchange rates at the time of translation or settlement are accounted for in the Statement of Profit & Loss either under the head foreign exchange fluctuation or interest cost, as the case may be, except those relating to long-term foreign currency monetary items.
(ii) Exchange differences pertaining to long term foreign currency loans obtained or re-financed on or before March 31, 2016: Exchange differences on long-term foreign currency monetary items relating to acquisition of depreciable assets are adjusted to the carrying cost of the assets and depreciated over the balance useful life of the assets.
(iii) Exchange differences pertaining to long term foreign currency loans obtained or re-financed on or after April 1 , 201 6 The exchange differences pertaining to long term foreign currency loans obtained or refinanced on or after April 1, 2016 is charged off or credited to profit & loss account.
12 Inventories
âInventories are valued at cost or net realizable value, whichever is lower. The basis of determining the cost for various categories of inventory are as follows:
(a) Raw materials and stores & spares - Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
(b) Stock in trade, Stock in process and finished goods- Direct cost plus appropriate share of overheads and excise duty, wherever applicable
(c) By products - At estimated realizable value Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
13 Provisions and Contingent Liabilities Provisions
The Company recognized a provision when there is a present obligation (legal or constructive) as a result of past events and it is more likely than not that an outflow of resources would be required to settle the obligation and a reliable estimate can be made.
When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain.
The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
Contingent liability
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. Where there is a possible obligation or a present obligation that the likelihood of outflow of resources is remote, no provision or disclosure is made.
14 Revenue recognition
a) Sale of goods
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government.
Sales of products is inclusive of excise duty and net of value added tax / sales tax. Revenue is recognized when the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs can be estimated reliably, there is no continuing management involvement with the goods nor it exercises effective control over the goods and the amount of revenue can be measured reliably. Revenue is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates and cash discount. The timing of the transfer of risks and rewards varies depending on the individual terms of the sales arrangements.
b) Interest and dividend income
Interest income is recognized when it is probable that the economic benefits will flow to the Company using the effective interest rate and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding.
Dividend income from investments is recognized when the shareholderâs right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably).
15 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
a) Current tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current income tax relating to items recognized outside profit or loss is recognized outside profit or loss i.e. in other comprehensive income. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
b) Deferred tax
Deferred tax is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts at the reporting date. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized.
Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss i.e. in other comprehensive income.
Deferred tax assets/liabilities are recognized for all taxable temporary differences, except:
(i) At the time of initial recognition of goodwill;
(ii) Initial recognition of assets or liabilities (other than in a business combination) at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; Deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.
c) Minimum Alternate Tax (MAT)
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT asset is recognized in the Balance Sheet when it is probable that future economic benefit associated with it will flow to the Company.
16 Government grants
Government grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with.
A government grant that becomes receivable as compensation for expenses or losses incurred in a previous period. Such a grant is recognized in profit or loss of the period in which it becomes receivable.
Government grants shall be recognized in profit or loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grants are intended to compensate.
Government grants related to assets are presented in the balance sheet as deferred income and is recognized in profit or loss on a systematic basis over the expected useful life of the related assets.
17 Employee benefits
Wages and salaries including non monetary benefits that are expected to be settled within the operating cycle after the end of the period in which the related services are rendered and are measured at the undiscounted amount expected to be paid.
In case of provident fund administered through Regional Provident Fund Commissioner, the Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service. The Companyâs contributions paid / payable during the year to provident fund administered through Regional Provident Fund Commissioner, Superannuation Fund and Employeesâ State Insurance Corporation are recognized in the Statement of Profit and Loss as an expense when employees have rendered services entitling them to contributions. Provision for gratuity, compensated absences, provident fund for certain category of employees administered through a recognized provident fund trust and long term retention pay are determined on an actuarial basis at the end of the year and charged to Statement of Profit and Loss. The cost of providing these benefits is determined using the projected unit credit method.
Remeasurements, comprising of actuarial gains and losses and the effect of the asset ceiling, (excluding amounts included in net interest on the net defined benefit liability and return on plan assets), are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. It is included in retained earnings in the statement of changes in equity and in the balance sheet.
18 Earning Per Share
Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year is adjusted for the effects of all dilutive potential equity shares.
19 Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
20 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
A) Financial assets
Initial recognition and measurement All financial assets are recognized initially at fair value plus transaction costs that are directly attributable to the acquisition of the financial asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets of the Company are classified in three categories:
a) At amortized cost
b) At fair value through profit and loss (FVTPL)
c) At fair value through other comprehensive income (FVTOCI)
Financial Asset is measured at amortized cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate (EIR) method. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the profit or loss. The losses arising from impairment are recognized in the profit or loss. This category generally applies to trade and other receivables.
Equity instruments which are held for trading are measured at fair value through profit or loss.
For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value.
The Company makes such election on an instrument by instrument basis. The classification is made on initial recognition and is irrevocable. If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognized in other comprehensive income. This cumulative gain or loss is not reclassified to profit or loss on disposal of such instruments. Financial assets included within the FVTPL category are measured at fair value with all changes recognized in the P&L.
Investments representing equity interest in subsidiaries are carried at cost less any provision for impairment.
Investment in mutual funds are measured at fair value through profit or loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset) is primarily derecognized (i.e. removed from the balance sheet) when:
a) The rights to receive cash flows from the asset have expired, or
b) The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement; and either (i) the Company has transferred substantially all the risks and rewards of the asset, or (ii) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognize the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay. Impairment of financial assets In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
a) Financial assets that are debt instruments, and are measured at amortized cost e.g., loans, security deposits, trade receivables and bank balance.
The Company follows âsimplified approachâ for recognition of impairment loss allowance on financial assets that do not contain a significant financing component.
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 ECLs at each reporting date, right from its initial recognition. For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognizing impairment loss allowance based on 12-month ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR. When estimating the cash flows, an entity is required to consider:
a) All contractual terms of the financial instrument (including prepayment, extension, call and similar options) over the expected life of the financial instrument. However, in rare cases when the expected life of the financial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the financial instrument
b) Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms
At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analyzed. On that basis, the Company estimates the following provision matrix at the reporting date: ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the statement of profit and loss (P&L). This amount is reflected under the head âother expensesâ in the P&L. The balance sheet presentation for various financial instruments is described below:
a) Financial assets measured as at amortized cost, contractual revenue receivables and lease receivables: ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount until the asset meets write-off criteria.
B) Financial liabilities and Equity instruments Initial recognition and measurement All financial liabilities are recognized initially at fair value, net of directly attributable transaction costs, if any.
The Companyâs financial liabilities includes borrowings, trade and other payables including financial guarantee contracts and derivative financial instruments.
Subsequent measurement Borrowings
Borrowings are subsequently measured at amortized cost. Any differences between the proceeds (net of transaction costs) and the redemption/repayment amount is recognized in profit and loss over the period of the borrowings using the effective interest rate method.
Trade and other payables
Trade and other payables represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified entity fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognized less cumulative amortization .
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of profit or loss.
Equity instrument
Equity instruments are any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Debt or equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
21 Derivative financial instruments and hedge accounting
Initial recognition and subsequent measurement
The Company uses derivative financial instruments, such as forward currency contracts, interest rate swaps to hedge its foreign currency risks and interest rate risks respectively. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit
or loss, except for the effective portion of cash flow hedges, which is recognized in OCI and later reclassified to profit or loss when the hedge item affects profit or loss.
For the purpose of hedge accounting, hedges are classified as:
a) Fair value hedges when hedging the exposure to changes in the fair value of a recognized asset or liability.
b) Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognized firm commitment.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Companyâs risk management objective and strategy for undertaking hedge, the hedging/ economic relationship, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrumentâs fair value in offsetting the exposure to changes in the hedged itemâs fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
Hedges that meet the strict criteria for hedge accounting are accounted for, as described below:
Fair value hedges
The change in the fair value of a hedging instrument is recognized in the statement of profit and loss.
The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognized in the statement of profit and loss .
If the hedged item is derecognized, the unamortized fair value is recognized immediately in profit or loss. When an unrecognized firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in profit and loss.
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognized in other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognized immediately in the statement of profit and loss.
The Company uses forward currency contracts as hedges of its exposure to foreign currency risk in forecast transactions and firm commitments. The ineffective portion relating to foreign currency contracts is recognized in the statement of profit or loss. Amounts recognized as other comprehensive income are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognized or when a forecast sale occurs.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognized in other comprehensive income remains separately in other equity until the forecast transaction occurs or the foreign currency firm commitment is met.
22 Fair value measurement
The Company measures financial instruments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
a) In the principal market for the asset or liability, or
b) In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
a) Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
b) Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
c) Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
23 Applicability of New and Revised Ind AS
Ind AS 7 has been amended in March 2017 to require an entity to enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. The Company is evaluating the requirements of the amendment and its effect on the financial statements. Further, the amendment to Ind AS 102 provides guidance to measurement of cash settled, modification of cash settled awards and awards that include a net settlement feature in respect of withholding taxes. This amendment is not applicable to the Company.
C. Significant accounting judgments, estimates and assumptions
The preparation of the Companyâs financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures. Actual results may differ from the estimates. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. The Company continually evaluates these estimates and assumptions based on the most recently available information. Revisions to accounting estimates are recognized prospectively in the Statement of Profit and Loss in the period in which the estimates are revised and in any future periods affected.
(i) Significant accounting judgments
In the process of applying the Company''s accounting policies, management has made the following judgments, which have the significant effect on the amounts recognized in the financial statements:
(a) Contingent Liabilities
In ordinary course of business, the Company faces claims by various parties. The Company assesses such claims and monitors the legal environment on an ongoing basis, with the assistance of external legal counsel, wherever necessary. The Company records a liability for any claims where a potential loss probable and capable of being estimated and discloses such matters in its financial statements, if material. For potential losses that are considered possible, but not probable, the Company provides disclosures in the financial statements but does not record a liability in its financial statements unless the loss becomes probable.
(ii) Significant estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
(a) Defined benefit plans/ Other Long term employee benefits
The cost of the defined benefit plans and other long term employee benefit plans are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. The management considers the interest rates of government securities based on expected settlement period of various plans. Further details about various employee benefit obligations are given in Note 34.
(b) Fair value measurement
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow (DCF) model based on level-2 and level-3 inputs. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as price estimates, volume estimates, rate estimates etc. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Also refer note 38 for further disclosures of estimates and assumptions on fair valuation.
(c) Taxes
Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws and the amount and timing of future taxable income. The Company establishes provision, based on reasonable estimates. The amount of such provisions is based on various factors such as experience of previous tax audits and differing interpretations of tax regulation by the taxable entity and the responsible tax authority. Such differences in interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective domicile of the companies.
(d) Useful lives of Property, plant and equipment and Intangible assets
The Company reviews the estimated useful lives at the end of each reporting period limited under a land delivery receipt. During the previous year the Company has sold 1.03 acres of land. Thus, the Company is in possession of 135.46 acres of industrial land at Manali, Chennai.
(iii) Convincing of buildings and other superstructures located at Companyâs plant at Malanpur in the state of Madhya Pradesh including immovable machinery is linked to the Stamp duty matter (Refer to note 31).
(iv) Out of the Industrial Free hold land measuring 32.41 acres at the Companyâs plant in Gummidipoondi, the Company does not have clear title to 2.43 acres.
(v) Capital expenditure incurred during the year includes '' 65.27 Crores (2016 - Rs, 22.30 crores) on account of research and development. Depreciation for the year includes depreciation on assets deployed in research and development as per note 40 (a) below.
(vi) Capital work in progress includes pre-operative expenses of Rs, 6.35 crores (2016: 4.21 crores, 2015: 2.15 crores)
(vii) Refer to note 15.1 for information on PPE pledged as security by the Company.
(viii) Refer to note 40 (c)
(ix) Refer to note 31 (e) for information on PPE charged as security by the Company
(x) The Company has opted to use fair value as deemed cost for its PPE for which the fair value of such PPE as on April 1, 2015 is Rs, 2985.78 crores. The carrying amount of such assets as on April 1, 2015 reported under previous GAAP was Rs, 2,936.29 crores
Engineering plastics units
The recoverable amount of this CGU is determined based on a value in use calculation which use cash flow projections based on financial budget approved by the directors of the Company covering a five year period and a discount rate of 10% per annum (2016: 10%, 2015: 10%). Cash flow projections during the budget period are based on the same expected gross margins and raw materials price inflation throughout the budget period. The cash flow beyond the five year period have been extrapolated using Nil (2016: Nil, 2015: Nil) growth rate.
Based on the above impairment testing no impairment losses have been recognized
Industrial yarn unit
The recoverable amount of this CGU is determined based on a value in use calculation which use cash flow projections based on financial budget approved by the directors of the Company covering a five year period and a discount rate of 10% per annum (2016: 10%, 2015: 10%). Cash flow projections during the budget period are based on the same expected gross margins and raw materials price inflation throughout the budget period. The cash flow beyond the five year period have been extrapolated using Nil (2016: Nil, 2015: Nil) growth rate. Based on the above impairment testing no impairment losses have been recognized
proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. The Board may from time to time pay to the members such interim dividends as appear to it to be justified by the profits of the Company.
During the year ended March 31, 2017, the amount of interim dividend recognized as distributions to equity shareholders was Rs, 12 per share (2016 : Rs, 10 per share, 2015: Rs, 10 per share).
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
The general reserve is created from time to time on transfer of profits from retained earnings. General reserve is created by transfer from one component of equity to another and is not an item of other comprehensive income, items included in general reserve will not be reclassified subsequently to profit and loss.
The amount that can be distributed as dividend by the Company to its equity shareholders is determined based on the financial statements of the Company and also considering the requirements of the Companies Act, 2013. The amounts reported above are not distributable in entirety.
* net of income tax of Rs, 0.13 crore (2016: Rs, 1.09 crores)
The Cash flow hedge reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges. The cumulative gain or loss arising on changes in the fair value of the designated portion of the hedging instruments that are recognized and accumulated under the heading of cash flow hedging reserve will be reclassified to profit or loss only when the hedged transaction affects the profit or loss, or included as a basis adjustment to the non-financial hedged item.
Capital Redemption Reserve is a statutory, non-distributable reserve into which amounts are transferred following the redemption or purchase of a companyâs own shares.
The Company has issued non-convertible debentures in FY 2014-15 and as per the provisions of the 2013 Act, it is required to create debenture redemption reserve out of the profits of the Company available for payment of dividend.
This reserves represents the cumulative gains and losses arising on the revaluation of equity instruments measured at fair value through other comprehensive income, net of amount reclassified to retained earnings when those assets have been disposed of.
Includes Nil (As on March 31, 2016 - Nil and As on April 1, 2015 Rs, 50.00 Crores) for Commercial Paper issued by the Company. The maximum amount due during the year is Rs, 125.00 Crores (2015-16 - Rs, 150.00 Crores and 2014-15 Rs, 125.00 Crores)
Mar 31, 2016
1 Corporate information
SNL Bearings Limited, established in 1983, is engaged in the manufacture and marketing of antifriction bearing products. The holding Company NRB Bearings Limited acquired the Company on 1st June, 2000.
2 Significant accounting policies :
2.1 Basis of accounting and preparation of financial statements :
The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013 and the relevant provisions of the Companies Act, 2013 ("the 2013 Act") as applicable. The financial statements have been prepared on accrual basis under the historical cost convention.
2.2 Use of Estimates :
The preparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognized in the periods in which the results are known / materialize.
2.3 Fixed assets, depreciation and amortization :
(a) Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value.
Depreciation on tangible fixed assets has been provided on the straight-line method as per the useful life assessed based on technical advice, taking into account the nature of the asset, the estimated use of the asset on the basis of management''s best estimation of getting economic benefits from those class of assets. The Company uses its technical expertise along with historical and industry trends for arriving the economic life on an asset.
(b) Fixed assets are stated at their original cost including incidental expenses related to acquisition and installation, less accumulated depreciation and impairment loss, if any. Cost comprises of the purchase price and any other attributable cost of bringing the assets to its working condition for its intended use.
2.4 Foreign currency transactions and translations :
Transactions in foreign currency are recorded at the original rates of exchange in force at the time the transactions are affected. At the year end, monetary items denominated in foreign currency are reported using the closing rate of exchange. Exchange differences arising thereon and on realization/payment of foreign exchange are accounted for in the relevant year as income or expense in the statement of Profit and loss account.
2.5 Inventories :
Inventories comprising of raw materials, stores and spare parts, tools, bought out components & packing materials, manufactured components, work-in-progress and finished goods are valued at the lower of cost and net realizable value. Material costs included in the valuation of inventories are determined on the basis of weighted average method. Costs of conversion and other costs are determined on the basis of standard cost method adjusted for variances between standard costs and actual costs, unless such costs are specifically identifiable, in which case they are included in the valuation at actual.
2.6 Employee benefits :
(a) Short term employee benefits are recognized as an expense at the undiscounted amount in the statement of profit and loss of the year in which the related service is rendered.
(b) Long term benefits:
(i) Defined Contribution Plan :
Provident and Family Pension Fund
The eligible employees of the Company are entitled to receive post employment benefits in respect of provident and family pension fund, in which both employees and the Company make monthly contributions at a specified percentage of the employees'' eligible salary (currently 12% of employees'' eligible salary). The contributions are made to Regional Provident Fund Commissioner or Provident Fund Trust and the Central Provident Fund under the State Pension Scheme. Provident Fund and Family Pension Fund are classified as Defined Contribution Plans as the Company has no further obligations beyond making the contribution. The Company''s contributions to Defined Contribution Plan are charged to the statement of profit and loss as incurred.
(ii) Defined Benefit Plan :
1 Gratuity :
The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service. Vesting occurs upon completion of five years of service. The Company has obtained insurance policies with the Life Insurance Corporation of India (LIC) and makes an annual contribution to LIC. The Company makes provision for gratuity based on an actuarial valuation by actuary.
2 Compensated absences :
The Company provides for the encashment of leave or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment/availment. The Company makes provision for compensated absences based on an actuarial valuation by actuary.
3 Actuarial gains and losses are recognized in the statement of profit and loss.
2.7 Impairment of assets :
An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. Recoverable amount is the higher of an asset''s net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Net selling price is the amount obtainable from sale of the asset in an arm''s length transaction between knowledgeable, willing parties, less the costs of disposal. An impairment loss is charged to the statement of Profit and Loss in the year in which as asset is identified as impaired. The impaired loss recognized in prior accounting periods is reversed if there has been a change in the estimate of the recoverable value.
2.8 Revenue :
Revenue is recognized to the extent that it is probable that the economic benefits will low to the company. Revenue is recognized only when no significant uncertainties exist regarding the amount of consideration and it is reasonably certain that ultimate collection will be made.
"Net Sales" excludes amounts recovered towards excise duty, sales tax, octroi and freight and are net of sales returns.
2.9 Taxation :
(a) Income taxes are accounted for in accordance with Accounting Standard (AS)-22 "Accounting for taxes on income". Income tax comprises both current and deferred tax.
(b) Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961 and other applicable tax laws.
(c) The tax effect of the timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. They are measured using substantially enacted tax rates and tax regulations as at the Balance Sheet date.
(d) Deferred tax assets are recognized only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realized.
2.10 Lease :
Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognized as operating leases. Lease rentals under operating leases are recognized in the Statement of Profit and Loss on a straight-line basis.
2.11 Provisions and contingencies :
(a) A provision is recognized when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.
(b) Contingent liabilities are disclosed as notes when the Company has a possible of present obligation where it is not probable that an outflow of resources will be required to settle it. Contingent assets are neither recognized nor disclosed.
2.12 Segment Reporting :
In accordance with Accounting Standard 17 on Segment reporting, the Company has manufacturing of bearings and special purpose machines as the reportable business Segments and is geographically located primarily in India.
2.13 Cash and Cash equivalents (for purpose of cash flow statement)
The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash that are subject to an insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be cash equivalents.
2.14 Cash flow statement
Cash lows are reported using the indirect method, whereby profit before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
2.15 Borrowing costs
Borrowing costs that are attributable in the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are recognized as an expense in the period in which they are incurred.
2.16 Earnings per Share
Basic earnings per share is computed by dividing the Profit after tax attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.
Diluted earnings per share is computed by dividing the Profit after tax attributable to equity shareholders as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.
2.17 Other income
Interest income is accounted on accrual basis.
2.18 Operating Cycle
Based on the nature of products / activities of the Company and the normal time between acquisition of assets and their realization in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.
Mar 31, 2016
1 Corporate information
SNL Bearings Limited, established in 1983, is engaged in the manufacture and marketing of antifriction bearing products. The holding Company NRB Bearings Limited acquired the Company on 1st June, 2000.
2 Significant accounting policies :
2.1 Basis of accounting and preparation of financial statements :
The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013 and the relevant provisions of the Companies Act, 2013 ("the 2013 Act") as applicable. The financial statements have been prepared on accrual basis under the historical cost convention.
2.2 Use of Estimates :
The preparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognized in the periods in which the results are known / materialize.
2.3 Fixed assets, depreciation and amortization :
(a) Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value.
Depreciation on tangible fixed assets has been provided on the straight-line method as per the useful life assessed based on technical advice, taking into account the nature of the asset, the estimated use of the asset on the basis of management''s best estimation of getting economic benefits from those class of assets. The Company uses its technical expertise along with historical and industry trends for arriving the economic life on an asset.
(b) Fixed assets are stated at their original cost including incidental expenses related to acquisition and installation, less accumulated depreciation and impairment loss, if any. Cost comprises of the purchase price and any other attributable cost of bringing the assets to its working condition for its intended use.
2.4 Foreign currency transactions and translations :
Transactions in foreign currency are recorded at the original rates of exchange in force at the time the transactions are affected. At the year end, monetary items denominated in foreign currency are reported using the closing rate of exchange. Exchange differences arising thereon and on realization/payment of foreign exchange are accounted for in the relevant year as income or expense in the statement of Profit and loss account.
2.5 Inventories :
Inventories comprising of raw materials, stores and spare parts, tools, bought out components & packing materials, manufactured components, work-in-progress and finished goods are valued at the lower of cost and net realizable value. Material costs included in the valuation of inventories are determined on the basis of weighted average method. Costs of conversion and other costs are determined on the basis of standard cost method adjusted for variances between standard costs and actual costs, unless such costs are specifically identifiable, in which case they are included in the valuation at actual.
2.6 Employee benefits :
(a) Short term employee benefits are recognized as an expense at the undiscounted amount in the statement of profit and loss of the year in which the related service is rendered.
(b) Long term benefits:
(i) Defined Contribution Plan :
Provident and Family Pension Fund
The eligible employees of the Company are entitled to receive post employment benefits in respect of provident and family pension fund, in which both employees and the Company make monthly contributions at a specified percentage of the employees'' eligible salary (currently 12% of employees'' eligible salary). The contributions are made to Regional Provident Fund Commissioner or Provident Fund Trust and the Central Provident Fund under the State Pension Scheme. Provident Fund and Family Pension Fund are classified as Defined Contribution Plans as the Company has no further obligations beyond making the contribution. The Company''s contributions to Defined Contribution Plan are charged to the statement of profit and loss as incurred.
(ii) Defined Benefit Plan :
1 Gratuity :
The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service. Vesting occurs upon completion of five years of service. The Company has obtained insurance policies with the Life Insurance Corporation of India (LIC) and makes an annual contribution to LIC. The Company makes provision for gratuity based on an actuarial valuation by actuary.
2 Compensated absences :
The Company provides for the encashment of leave or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment/availment. The Company makes provision for compensated absences based on an actuarial valuation by actuary.
3 Actuarial gains and losses are recognized in the statement of profit and loss.
2.7 Impairment of assets :
An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. Recoverable amount is the higher of an asset''s net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Net selling price is the amount obtainable from sale of the asset in an arm''s length transaction between knowledgeable, willing parties, less the costs of disposal. An impairment loss is charged to the statement of Profit and Loss in the year in which as asset is identified as impaired. The impaired loss recognized in prior accounting periods is reversed if there has been a change in the estimate of the recoverable value.
2.8 Revenue :
Revenue is recognized to the extent that it is probable that the economic benefits will low to the company. Revenue is recognized only when no significant uncertainties exist regarding the amount of consideration and it is reasonably certain that ultimate collection will be made.
"Net Sales" excludes amounts recovered towards excise duty, sales tax, octroi and freight and are net of sales returns.
2.9 Taxation :
(a) Income taxes are accounted for in accordance with Accounting Standard (AS)-22 "Accounting for taxes on income". Income tax comprises both current and deferred tax.
(b) Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961 and other applicable tax laws.
(c) The tax effect of the timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. They are measured using substantially enacted tax rates and tax regulations as at the Balance Sheet date.
(d) Deferred tax assets are recognized only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realized.
2.10 Lease :
Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognized as operating leases. Lease rentals under operating leases are recognized in the Statement of Profit and Loss on a straight-line basis.
2.11 Provisions and contingencies :
(a) A provision is recognized when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.
(b) Contingent liabilities are disclosed as notes when the Company has a possible of present obligation where it is not probable that an outflow of resources will be required to settle it. Contingent assets are neither recognized nor disclosed.
2.12 Segment Reporting :
In accordance with Accounting Standard 17 on Segment reporting, the Company has manufacturing of bearings and special purpose machines as the reportable business Segments and is geographically located primarily in India.
2.13 Cash and Cash equivalents (for purpose of cash flow statement)
The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash that are subject to an insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be cash equivalents.
2.14 Cash flow statement
Cash lows are reported using the indirect method, whereby profit before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
2.15 Borrowing costs
Borrowing costs that are attributable in the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are recognized as an expense in the period in which they are incurred.
2.16 Earnings per Share
Basic earnings per share is computed by dividing the Profit after tax attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.
Diluted earnings per share is computed by dividing the Profit after tax attributable to equity shareholders as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.
2.17 Other income
Interest income is accounted on accrual basis.
2.18 Operating Cycle
Based on the nature of products / activities of the Company and the normal time between acquisition of assets and their realization in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.
Mar 31, 2015
2.1 Basis of accounting and preparation of financial statements:
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards specified under
Section 133 of the Companies Act, 2013, read with Rule 7 of the
Companies (Accounts) Rules, 2014 and the relevant provisions of the
Companies Act, 2013 ("the 2013 Act") as applicable. The financial
statements have been prepared on accrual basis under the historical
cost convention.
2.2 Use of Estimates :
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialise.
2.3 Fixed assets, depreciation and amortization :
(a) Depreciable amount for assets is the cost of an asset, or other
amount substituted for cost, less its estimated residual value.
Depreciation on tangible fixed assets has been provided on the
straight-line method as per the useful life assessed based on technical
advice, taking into account the nature of the asset, the estimated use
of the asset on the basis of management''s best estimation of getting
economic benefits from those class of assets. The Company uses its
technical expertise along with historical and industry trends for
arriving the economic life on an asset.
Asset Revised useful life based on SLM (Range)
Buildings on leasehold land 15 - 50 Years
Plant and equipment 4 - 40 Years
Furniture and fixtures 6 Years
Vehicles 6 - 8 Years
Office Equipments 3 -10 Years
Electrical Installations 15 Years
Computer software 3 Years
(b) Tangible assets are stated at their original cost including
incidental expenses related to acquisition and installation, less
accumulated depreciation and impairment loss, if any. Cost comprises of
the purchase price and any other attributable cost of bringing the
assets to its working condition for its intended use.
(c) Intangible assets - Computer software acquired is amortised over a
period of three years on a straight line basis.
2.4 Foreign currency transactions and translations :
Transactions in foreign currency are recorded at the original rates of
exchange in force at the time the transactions are effected. At the
year end, monetary items denominated in foreign currency are reported
using the closing rate of exchange. Exchange differences arising
thereon and on realization/payment of foreign exchange are accounted
for in the relevant year as income or expense in the statement of
Profit and loss account.
2.5 Inventories :
Inventories comprising of raw materials, stores and spare parts, tools,
bought out components & packing materials, manufactured components,
work-in-progress and finished goods are valued at the lower of cost and
net realisable value. Material costs included in the valuation of
inventories are determined on the basis of weighted average method.
Costs of conversion and other costs are determined on the basis of
standard cost method adjusted for variances between standard costs and
actual costs, unless such costs are specifically identifiable, in which
case they are included in the valuation at actuals.
2.6 Employee benefits :
(a) Short term employee benefits are recognised as an expense at the
undiscounted amount in the statement of profit and loss of the year in
which the related service is rendered.
(b) Long term benefits:
(i) Defined Contribution Plan :
Provident and Family Pension Fund
The eligible employees of the Company are entitled to receive post
employment benefits in respect of provident and family pension fund, in
which both employees and the Company make monthly contributions at a
specified percentage of the employees'' eligible salary (currently 12%
of employees'' eligible salary). The contributions are made to Regional
Provident Fund Commissioner or Provident Fund Trust and the Central
Provident Fund under the State Pension Scheme. Provident Fund and
Family Pension Fund are classified as Defined Contribution Plans as the
Company has no further obligations beyond making the contribution. The
Company''s contributions to Defined Contribution Plan are charged to the
statement of profit and loss as incurred.
(ii) Defined Benefit Plan :
1 Gratuity :
The Company has an obligation towards gratuity, a defined benefit
retirement plan covering eligible employees. The plan provides a lump
sum payment to vested employees at retirement, death while in
employment or on termination of employment of an amount equivalent to
15 days salary payable for each completed year of service. Vesting
occurs upon completion of five years of service. The Company has
obtained insurance policies with the Life Insurance Corporation of
India (LIC) and makes an annual contribution to LIC. The Company makes
provision for gratuity based on an actuarial valuation by actuary.
2 Compensated absences :
The Company provides for the encashment of leave or leave with pay
subject to certain rules. The employees are entitled to accumulate
leave subject to certain limits for future encashment/availment. The
Company makes provision for compensated absences based on an actuarial
valuation by actuary.
3 Actuarial gains and losses are recognised in the statement of profit
and loss.
2.7 Impairment of assets :
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. Recoverable amount is the higher of an asset''s
net selling price and its value in use. Value in use is the present
value of estimated future cash flows expected to arise from the
continuing use of the asset and from its disposal at the end of its
useful life. Net selling price is the amount obtainable from sale of
the asset in an arm''s length transaction between knowledgeable, willing
parties, less the costs of disposal. An impairment loss is charged to
the statement of Profit and Loss in the year in which as asset is
identified as impaired. The impaired loss recognized in prior
accounting periods is reversed if there has been a change in the
estimate of the recoverable value.
2.8 Revenue :
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the company. Revenue is recognized only
when no significant uncertainties exist regarding the amount of
consideration and it is reasonably certain that ultimate collection
will be made.
"Net Sales" excludes amounts recovered towards excise duty, sales tax,
octroi and freight and are net of sales returns.
2.9 Taxation :
(a) Income taxes are accounted for in accordance with Accounting
Standard (AS)-22 "Accounting for taxes on income". Income tax comprises
both current and deferred tax.
(b) Current tax is the amount of tax payable on the taxable income for
the year as determined in accordance with the applicable tax rates and
the provisions of the Income Tax Act, 1961 and other applicable tax
laws.
(c) The tax effect of the timing differences that result between
taxable income and accounting income and are capable of reversal in one
or more subsequent periods are recorded as a deferred tax asset or
deferred tax liability. They are measured using substantially enacted
tax rates and tax regulations as at the Balance Sheet date.
(d) Deferred tax assets are recognised only if there is virtual
certainty supported by convincing evidence that there will be
sufficient future taxable income available to realise the assets.
2.10 Lease :
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognised as
operating leases. Lease rentals under operating leases are recognised
in the Statement of Profit and Loss on a straight-line basis.
2.11 Provisions and contingencies :
(a) A provision is recognised when the Company has a present obligation
as a result of past events and it is probable that an outflow of
resources will be required to settle the obligation in respect of which
a reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
Balance Sheet date. These are reviewed at each Balance Sheet date and
adjusted to reflect the current best estimates.
(b) Contingent liabilities are disclosed as notes when the Company has
a possible of present obligation where it is not probable that an
outflow of resources will be required to settle it. Contingent assets
are neither recognized nor disclosed.
2.12 Segment Reporting :
In accordance with Accounting Standard 17 on Segment reporting, the
Company has manufacturing of bearings and special purpose machines as
the reportable business Segments and is geographically located
primarily in India.
2.13 Cash and Cash equivalents (for purpose of cash flow statement)
The Company considers all highly liquid financial instruments, which
are readily convertible into known amounts of cash that are subject to
an insignificant risk of change in value and having original maturities
of three months or less from the date of purchase, to be cash
equivalents.
2.14 Cash flow statement
Cash flows are reported using the indirect method, whereby profit
before extraordinary items and tax is adjusted for the effects of
transactions of non-cash nature and any deferrals or accruals of past
or future cash receipts or payments. The cash flows from operating,
investing and financing activities of the Company are segregated based
on the available information.
2.15 Borrowing costs
Borrowing costs that are attributable in the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are recognised as an expense in the period in which
they are incurred.
2.16 Earnings per Share
"Basic earnings per share is computed by dividing the Profit after tax
attributable to equity shareholders by the weighted average number of
equity shares outstanding during the year. Diluted earnings per share
is computed by dividing the Profit after tax attributable to equity
shareholders as adjusted for dividend, interest and other charges to
expense or income (net of any attributable taxes) relating to the
dilutive potential equity shares, by the weighted average number of
equity shares considered for deriving basic earnings per share and the
weighted average number of equity shares which could have been issued
on the conversion of all dilutive potential equity shares."
2.17 Other income
Interest income is accounted on accrual basis.
2.18 Operating Cycle
Based on the nature of products / activities of the Company and the
normal time between acquisition of assets and their realisation in cash
or cash equivalents, the Company has determined its operating cycle as
12 months for the purpose of classification of its assets and
liabilities as current and non-current.
Mar 31, 2014
(i) BASIS OF ACCOUNTING AND PREPARATION OF FINANCIAL STATMENTS The
financial statements of the Company have been prepared in accordance
with the Generally Accepted Accounting Principles in India (Indian
GAAP) to comply with the Accounting Standards notifed under Section
211(3C) of the Companies Act, 1956 ("the 1956 Act") (which continues to
be applicable in respect of Section 133 of the Companies Act, 2013
("the 2013 Act") in terms of General circular 15/2013 dated 13
September 2013 of the Ministry of Corporate Affairs) and the relevant
provisions of the 1956 Act/2013 Act, as applicable. The financial
statements have been prepared on accrual basis under the historical
cost convention, as modifed to include the revaluation of certain fixed
assets, and have been prepared in accordance with the applicable
Accounting Standards and relevant presentational requirements of the
1956 Act. The accounting policies adopted in the preparation of the
financial statements are consistent with those followed in the previous
year except, for change in the accounting policy for fixed assets and
foreign currency translation as more fully described in note 47.
(ii) USE OF ESTIMATES
The preparation of financial statements in conformity with the Indian
GAAP requires the management of the Company to make estimates and
assumptions that affect the reported balance of assets and liabilities,
revenues and expenses and disclosures relating to contingent
liabilities. The management believes that the estimates used in
preparation of the financial statements are prudent and reasonable.
Future results could differ from these estimates. Any revision to
accounting estimates is recognised prospectively in the current and
future periods.
(iii) FIXED ASSETS
Fixed assets are stated at cost of acquisition or construction less
accumulated depreciation except for certain fixed assets which are
revalued and are therefore, stated at their revalued book values. Cost
of acquisition or construction is inclusive of freight, duties, taxes,
incidental expenses and interest on loans attributable to the
acquisition of qualifying assets, up to the date of commissioning of
the assets. The Company has adopted the provisions of para 46A of AS
11 "The Effect of Changes in Foreign Exchange Rates", accordingly
exchange differences arising on restatement/settlement of long term
foreign currency borrowings related to acquisition of depreciable fixed
assets are adjusted to the cost of the respective assets and
depreciated over the remaining useful life of such assets.
The basis for revaluation is current cost of depreciated assets at the
time of revaluation. If the revaluation shows an increase in the value
of a category of assets, the same is added to the historical value net
of any decline in value of any asset of that category; any such
decrease is expensed. The decline in value of any individual asset in a
category is charged to revenue over the remaining useful life of that
asset and corresponding adjustment made on the amount withdrawn from
the revaluation reserve. Consideration is given at each balance sheet
date to determine whether there is any indication of impairment of the
carrying amount of the Company''s fixed assets. If any indication exists,
an asset''s recoverable amount is estimated. An impairment loss is
recognised whenever the carrying amount of an asset exceeds its
recoverable amount. The recoverable amount is the greater of net
selling price and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value based
on an appropriate discount factor. Fixed assets retired from active
use and held for sale are stated at the lower of their net book value
and net realisable value and are disclosed separately. Capital Work in
Progress: Project under which tangible fixed assets are not yet ready
for their intended use are carried at cost comprising direct cost,
related incidental expenses and attributable interest.
(iv) DEPRECIATION AND AMORTISATION
a. Depreciation on fixed assets is provided on straight line method at
the rates specified in Schedule XIV of the Companies Act, 1956 or at
rates arrived at on the basis of the balance useful lives of the assets
based on technical evaluation/revaluation of the related assets,
whichever is higher, except in case of the following assets where
depreciation is provided at the rates indicated against each assets: -
Vehicles - 21%
Data Processing Equipments - 31.67%
Mobile Phones - 95%
b. Depreciation is calculated on a pro rata basis except that, assets
costing upto Rs. 5,000 each are fully depreciated in the year of
purchase.
c. On assets sold, discarded, etc. during the year, depreciation is
provided upto the date of sale/ discard.
d. In respect of revalued assets, a transfer is made from the
revaluation reserve to the statement of Profit and loss for the sum of
the differences as below: -
- the difference between the amounts of depreciation on revalued value
at rates based on useful life prescribed by valuers and on the
historical cost at rates prescribed in Schedule XIV, if the former is
higher.
- where assets are discarded/disposed off, the difference between the
written down value as per the revalued value and historical cost.
e. No write-off is made in respect of leasehold land as the lease is a
perpetual lease.
f. Depreciation (amortisation) on intangibles is provided on straight
line method as follows:
- Trademark and technical knowhow over a period of ten years
- Software over a period of three years
- Goodwill over a period of ten years
(v) FOREIGN CURRENCY TRANSACTIONS AND TRANSLATIONS
Transactions in foreign currencies are recorded on initial recognition
at the exchange rate prevailing on the date of the transaction.
Exchange differences arising on settlement/ restatement of shortÂterm
foreign currency monetary assets and liabilities of the Company are
recognised as income or expense in the Statement of Profit and Loss.
The exchange differences arising on settlement/ restatement of long
term foreign currency monetary items are capitalised as part of the
depreciable fixed assets to which the monetary item relates and
depreciated over the remaining useful life of such assets. If such
monetary items do not relate to acquisition of depreciable fixed assets,
the exchange difference is amortised over the maturity period/ upto the
date of settlement of such monetary items, whichever is earlier, and
charged to the Statement of Profit and Loss. The unamortised exchange
difference is carried in the Balance Sheet as "Foreign currency
monetary item translation difference account" net of the tax effect
thereon, where applicable. The Company uses foreign exchange forward
and option contracts to hedge its exposure to movements in foreign
exchange rates relating to certain firm commitments and highly probable
forecast transactions. Effective 1 April 2007, the Company designates
such contracts in a cash fow hedge relationship by applying the
principles set out in Accounting Standard (AS) Â 30 - "Financial
Instruments: Recognition and Measurement". Forward and option
contracts are fair valued at each reporting date. The resultant gain or
loss from these contracts that are designated and effective as hedges
of future cash flows are recognised directly in Cash Flow Hedge Reserve
under Reserves and Surplus, net of applicable deferred income taxes and
the ineffective portion is recognised immediately in statement of Profit
and loss.
Amount accumulated in Cash Flow Hedge Reserve are reclassified to the
statement of Profit and loss in the same periods during which the
forecasted transaction affects the Profit and loss. Hedge Accounting is
discontinued when the hedging instrument expires, or is sold or
terminated or exercised or no longer qualifes for hedge accounting.
Any cumulative gain or loss on the hedging instrument recognised in
Cash Flow Hedge Reserve is retained there until the forecasted
transaction occurs. If the forecasted transaction is no longer
expected to occur, the net cumulative gain or loss is immediately
transferred from the Cash Flow Hedge Reserve to the statement of Profit
and loss.
Contracts that are not designated as hedges of future cash flows are
fair valued at each reporting date and the resultant gain or loss is
recognised in the statement of Profit and loss.
(vi) RESEARCH & DEVELOPMENT
Expenditure on research & development of products is included under the
natural heads of expenditure in the year in which it is incurred except
which relate to development activities whereby research fndings are
applied to a plan or design for the production of new or substantially
improved products and processes. Such costs are capitalised if they can
be reliably measured, the product or process is technically and
commercially feasible and the Company has suffcient resources to
complete the development and to use or sell the asset. Capital
expenditure on research & development 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 and
is treated in the same manner as expenditure on other fixed assets and
depreciated as per Company policy.
(vii) INVENTORIES
Stores and spares are valued at cost or under. Stock in trade is valued
at cost or net realisable value, whichever is lower. The basis of
determining the cost for various categories of inventory are as
follows: Stores, spares and raw - Weighted average rate materials Stock
in trade
Stock in process and - Direct cost plus fnished goods appropriate share
of overheads and excise duty, wherever applicable By products - At
estimated realisable value
(viii) INVESTMENTS
Long term investments are valued at cost unless there is a decline in
value other than temporary. Current investments are stated at lower of
cost or fair value.
(ix) EMPLOYEE BENEFITS
Company''s contributions paid/payable during the year to provident fund
administered through Regional Provident Fund Commissioner,
Superannuation Fund and Employees'' State Insurance Corporation are
recognised in the statement of Profit and loss.
Provision for gratuity, compensated absences, provident fund for
certain category of employees administered through a recognised
provident fund trust and long term retention pay are determined on an
actuarial basis at the end of the year and charged to revenue each
year.
(x) BORROWING COSTS
Borrowing costs include interest, amortisation of ancillary costs
incurred and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment to the
interest cost. Costs in connection with the borrowing of funds to the
extent not directly related to the acquisition of qualifying assets are
charged to the Statement of Profit and Loss over the tenure of the loan.
Borrowing costs, allocated to and utilised for qualifying assets,
pertaining to the period from commencement of activities relating to
construction/development of the qualifying asset upto the date of
capitalisation of such asset is added to the cost of the assets.
(xi) PROVISIONS AND CONTINGENT LIABILITIES The Company recognises a
provision when there is a present obligation as a result of past events
and it is more likely than not that an outfow of resources would be
required to settle the obligation and a reliable estimate can be made.
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 outfow of resources. Where there is a possible
obligation or a present obligation that the likelihood of outfow of
resources is remote, no provision or disclosure is made.
(xii) REVENUE RECOGNITION
Sale of goods is recognised, net of returns and trade discounts on the
transfer of significant risks and rewards of ownership to the buyer
which generally coincides with the dispatch of goods to customers.
Gross sales are inclusive of excise duty and net of value added
tax/sales tax. Sale of certified Emission Reductions (CER''s) is
recognised as income on the delivery of the CER''s to the customer''s
account as evidenced by the receipt of confirmation of execution of
delivery instructions. Other income includes interest income which is
accounted on accrual basis, dividend income is accounted for when the
right to receive is established.
(xiii) RESERVES
a. Revaluation reserve represents the difference between the revalued
amount of the assets and the written down value of the assets on the
date of revaluation net of withdrawals therefrom.
b. Capital receipts are credited to capital reserve.
c. Cash fow hedge reserve represents the gain or loss arising out of
adjusting the hedging instruments to mark to market net of applicable
deferred income taxes.
(xiv) TAXATION
a. The income tax liability is provided in accordance with the
provisions of the Income tax Act, 1961.
b. Minimum Alternate Tax (MAT) paid in accordance with the tax laws,
which gives future economic benefits in the form of adjustment to future
income tax liability, is considered as an asset if there is convincing
evidence that the Company will pay normal income tax. Accordingly, MAT
is recognised as an asset in the Balance Sheet when it is probable that
future economic benefit associated with it will fow to the Company.
c. Deferred tax is recognised, subject to the consideration of
prudence, on timing differences, being the difference between taxable
income and accounting income that originate in one period and are
capable of reversal in one or more subsequent periods. Deferred tax is
measured using the tax rates and the tax laws enacted or substantively
enacted as at the reporting date. Deferred tax assets and liabilities
are offset if such items relate to taxes on income levied by the same
governing tax laws and the Company has a legally enforceable right for
such set off. Deferred tax assets are reviewed at each balance sheet
date for their realisability.
Mar 31, 2013
1.1 Basis of accounting and preparation of fnancial statements:
The fnancial statements are prepared under historical cost convention
on an accrual basis and are in accordance with the requirements of the
Companies Act, 1956, and comply with the Accounting Standards referred
to in sub-section (3C) of section 211 of the said Act.
1.2 Use of Estimates:
The preparation of fnancial statements in conformity with the generally
accepted accounting principles requires estimates and assumptions to be
made that affect the reported amounts of assets and liabilities on the
date of the fnancial statements and the reported amounts of revenues
and expenses during the reported period. The estimates and assumptions
used in the accompanying fnancial statements are based upon
Management''s evaluation of the relevant facts and circumstances as on
the date of fnancial statements. Actual results may differ from the
estimates used in preparing the accompanying fnancial statements.
Differences between the actual results and estimates are recognized in
the period in which the results are known/ materialize.
1.3 Fixed assets, depreciation and amortization:
(a) Tangible assets are stated at their original cost including
incidental expenses related to acquisition and installation, less
accumulated depreciation and impairment loss, if any. Cost comprises
of the purchase price and any other attributable cost of bringing the
assets to its working condition for its intended use.
(b) Intangible assets - Computer software acquired is amortised over a
period of three years on a straight line basis.
(c) Depreciation is provided on the straight line method at the rates
prescribed in Schedule XIV to the Companies Act, 1956.
1.4 Foreign currency transactions and translations:
Transactions in foreign currency are recorded at the original rates of
exchange in force at the time the transactions are effected. At the
year end, monetary items denominated in foreign currency are reported
using the closing rate of exchange. Exchange differences arising
thereon and on realization/payment of foreign exchange are accounted
for in the relevant year as income or expense in the statement of Proft
and loss account.
1.5 Inventories:
Inventories comprising of raw materials, stores and spare parts, tools,
bought out components & packing materials, manufactured components,
work-in-progress and fnished goods are valued at the lower of cost and
net realisable value. Material costs included in the valuation of
inventories are determined on the basis of weighted average method.
Costs of conversion and other costs are determined on the basis of
standard cost method adjusted for variances between standard costs and
actual costs, unless such costs are specifcally identifable, in which
case they are included in the valuation at actuals.
1.6 Employee benefts:
(a) Short term employee benefts are recognised as an expense at the
undiscounted amount in the proft and loss account of the year in which
the related service is rendered.
(b) Long term benefts:
(i) Defned Contribution Plan :
Provident and Family Pension Fund
The eligible employees of the Company are entitled to receive post
employment benefts in respect of provident and family pension fund, in
which both employees and the Company make monthly contributions at a
specifed percentage of the employees'' eligible salary (currently 12% of
employees'' eligible salary). The contributions are made to Regional
Provident Fund Commissioner or provident fund trust and the Central
Provident Fund under the State Pension Scheme. Provident Fund and
Family Pension Fund are classifed as Defned Contribution Plans as the
Company has no further obligations beyond making the contribution. The
Company''s contributions to Defned Contribution Plan are charged to
proft and loss account as incurred.
(ii) Defned Beneft Plan :
1 Gratuity
The Company has an obligation towards gratuity, a defned beneft
retirement plan covering eligible employees. The plan provides a lump
sum payment to vested employees at retirement, death while in
employment or on termination of employment of an amount equivalent to
15 days salary payable for each completed year of service. Vesting
occurs upon completion of fve years of service. The Company has
obtained insurance policies with the Life Insurance Corporation of
India (LIC) and makes an annual contribution to LIC. The Company makes
provision for gratuity based on an actuarial valuation by actuary.
2 Compensated absences
The Company provides for the encashment of leave or leave with pay
subject to certain rules. The employees are entitled to accumulate
leave subject to certain limits for future encashment/availment. The
Company makes provision for compensated absences based on an actuarial
valuation by actuary.
3. Actuarial gains and losses are recognised in the statement of proft
and loss.
1.7 Impairment of assets:
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. Recoverable amount is the higher of an asset''s
net selling price and its value in use. Value in use is the present
value of estimated future cash fows expected to arise from the
continuing use of the asset and from its disposal at the end of its
useful life. Net selling price is the amount obtainable from sale of
the asset in an arm''s length transaction between knowledgeable, willing
parties, less the costs of disposal. An impairment loss is charged to
the statement of Proft and Loss in the year in which as asset is
identifed as impaired. The impaired loss recognized in prior accounting
periods is reversed if there has been a change in the estimate of the
recoverable value.
1.8 Revenue / Sales:
Revenue is recognized to the extent that it is probable that the
economic benefts will fow to the company. Revenue is recognized only
when no signifcant uncertainties exist regarding the amount of
consideration and it is reasonably certain that ultimate collection
will be made.
"Net Sales excludes amounts recovered towards excise duty, sales tax,
octroi and freight and are net of sales returns.
1.9 Taxation:
(a) Income taxes are accounted for in accordance with Accounting
Standard (AS)-22 "Accounting for taxes on incomeÂ. Income tax comprises
both current and deferred tax.
(b) Current tax is measured on the basis of estimated taxable income
and tax credits computed in accordance with the provisions of the
Income Tax Act, 1961.
c) The tax effect of the timing differences that result between taxable
income and accounting income and are capable of reversal in one or more
subsequent periods are recorded as a deferred tax asset or deferred tax
liability. They are measured using substantially enacted tax rates and
tax regulations as at the Balance Sheet date.
(d) Deferred tax assets on account of other timing differences are
recognized only to the extent there is a reasonable certainty of its
realization.
1.10 Lease:
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognised as
operating leases. Lease rentals under operating leases are recognised
in the Statement of Proft and Loss on a straight-line basis.
1.11 Provisions and contingencies:
(a) A provision is recognised when the Company has a present obligation
as a result of past events and it is probable that an outfow of
resources will be required to settle the obligation in respect of which
a reliable estimate can be made. Provisions (excluding retirement
benefts) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
Balance Sheet date. These are reviewed at each Balance Sheet date and
adjusted to refect the current best estimates.
(b) Contingent liabilities are disclosed as notes when the Company has
a possible of present obligation where it is not probable that an
outfow of resources will be required to settle it. Contingent assets
are neither recognized nor disclosed.
1.12 Segment Reporting:
In accordance with Accounting Standard 17 on Segment reporting, the
company has manufacturing of bearings and special purpose machines as
the reportable business Segments and is geographically located
primarily in India.
Mar 31, 2012
(i) Accounting Convention
The financial statements are prepared under the historical cost
convention, as modified to include the revaluation of certain fixed
assets, and have been prepared in accordance with the applicable
Accounting Standards and relevant presentational requirements of the
Companies Act, 1956.
(ii) Use of Estimates
The preparation of financial statements requires the management of the
Company to make estimates and assumptions that affect the reported
balance of assets and liabilities, revenues and expenses and
disclosures relating to contingent liabilities. The management
believes that the estimates used in preparation of the financial
statements are prudent and reasonable. Future results could differ
from these estimates. Any revision to accounting estimates is
recognised prospectively in the current and future periods.
(iii) Fixed Assets
Fixed assets are stated at cost of acquisition or construction less
accumulated depreciation except for certain fixed assets which are
revalued and are therefore, stated at their revalued book values. Cost
of acquisition or construction is inclusive of freight, duties, taxes,
incidental expenses and interest on loans attributable to the
acquisition of qualifying assets, up to the date of commissioning of
the assets.
The basis for revaluation is current cost of depreciated assets at the
time of revaluation. If the revaluation shows an increase in the value
of a category of assets, the same is added to the historical value net
of any decline in value of any asset of that category; any such
decrease is expensed. The decline in value of any individual asset in a
category is charged to revenue over the remaining useful life of that
asset and corresponding adjustment made on the amount withdrawn from
the revaluation reserve.
Consideration is given at each balance sheet date to determine whether
there is any indication of impairment of the carrying amount of the
Company's fixed assets. If any indication exists, an asset's
recoverable amount is estimated. An impairment loss is recognized
whenever the carrying amount of an asset exceeds its recoverable
amount. The recoverable amount is the greater of net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value based on an appropriate
discount factor.
(iv) Depreciation
(a) Depreciation on fixed assets is provided on straight line method at
the rates specified in Schedule XIV of the Companies Act, 1956 or at
rates arrived at on the basis of the balance useful lives of the assets
based on technical evaluation / revaluation of the related assets,
whichever is higher, except in case of the following assets where
depreciation is provided at the rates indicated against each assets: -
Vehicles - 21%
Data Processing Equipment - 31.67%
Mobile Phones - 95%
(b) Depreciation is calculated on a pro rata basis except that, assets
costing upto Rs 5,000 each are fully depreciated in the year of
purchase.
(c) On assets sold, discarded, etc. during the year, depreciation is
provided upto the date of sale / discard.
(d) In respect of revalued assets, a transfer is made from the
revaluation reserve to the statement of profit and loss for the sum of
the differences as below: -
- the difference between the amounts of depreciation on revalued value
at rates based on useful life prescribed by valuers and on the
historical cost at rates prescribed in Schedule XIV, if the former is
higher.
- where assets are discarded / disposed off, the difference between the
written down value as per the revalued value and historical cost.
(e) No write-off is made in respect of leasehold land as the lease is a
perpetual lease.
(f) Depreciation (amortization) on intangibles is provided on straight
line method as follows:
- Trademark and technical knowhow over a period of ten years
- Software over a period of three years
- Goodwill over a period of ten years
(v) Foreign Currency Transactions
Transactions in foreign currencies are recorded on initial recognition
at the exchange rate prevailing on the date of the transaction.
All monetary items are re-stated at the exchange rate prevailing as at
the date of the balance sheet and the loss or gain is taken to the
statement of profit and loss as exchange fluctuation.
The Company uses foreign exchange forward and option contracts to hedge
its exposure to movements in foreign exchange rates relating to certain
firm commitments and highly probable forecast transactions. Effective
April 1, 2007, the Company designates such contracts in a cash flow
hedge relationship by applying the principles set out in Accounting
Standard (AS) Ã 30 - "Financial Instruments: Recognition and
Measurement".
Forward and option contracts are fair valued at each reporting date.
The resultant gain or loss from these contracts that are designated and
effective as hedges of future cash flows are recognised directly in
Cash Flow Hedge Reserve under Reserves and Surplus, net of applicable
deferred income taxes and the ineffective portion is recognised
immediately in statement of profit and loss.
Amount accumulated in Cash Flow Hedge Reserve are reclassified to the
statement of profit and loss in the same periods during which the
forecasted transaction affects the profit and loss.
Hedge Accounting is discontinued when the hedging instrument expires,
or is sold or terminated or exercised or no longer qualifies for hedge
accounting. Any cumulative gain or loss on the hedging instrument
recognised in Cash Flow Hedge Reserve is retained there until the
forecasted transaction occurs.
If the forecasted transaction is no longer expected to occur, the net
cumulative gain or loss is immediately transferred from the Cash Flow
Hedge Reserve to the statement of profit and loss.
Contracts that are not designated as hedges of future cash flows are
fair valued at each reporting date and the resultant gain or loss is
recognised in the statement of profit and loss.
(vi) Research & Development
Expenditure on research and development of products is included under
the natural heads of expenditure in the year in which it is incurred
except which relate to development activities whereby research findings
are applied to a plan or design for the production of new or
substantially improved products and processes. Such costs are
capitalized if they can be reliably measured, the product or process is
technically and commercially feasible and the Company has sufficient
resources to complete the development and to use or sell the asset.
Capital expenditure on research and development 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 and is treated in the same manner as expenditure on other fixed
assets and depreciated as per Company policy.
(vii) Inventories
Stores and spares are valued at cost or under. Stock in trade is valued
at cost or net realizable value, whichever is lower. The bases of
determining the cost for various categories of inventory are as
follows:
Stores, spares and raw materials - Weighted average rate
Stock in trade
Process stocks and finished goods - Direct cost plus appropriate share
of overheads and excise duty,
wherever applicable
By products - At estimated realizable value
(viii) Investments
Long term investments are valued at cost unless there is a decline in
value other than temporary. Current investments are stated at lower of
cost or fair value.
(ix) Employee Benefits
Company's contributions paid / payable during the year to provident
fund administered through Regional Provident Fund Commissioner,
Superannuation Fund and Employees' State Insurance Corporation are
recognized in the statement of profit and loss.
Provision for gratuity, compensated absences, provident fund for
certain category of employees administered through a recognized
provident fund trust and long term retention pay are determined on an
actuarial basis at the end of the year and charged to revenue each
year.
(x) Provisions and Contingent Liabilities
The Company recognises a provision when there is a present obligation
as a result of past events and it is more likely than not that an
outflow of resources would be required to settle the obligation and a
reliable estimate can be made. 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. Where
there is a possible obligation or a present obligation that the
likelihood of outflow of resources is remote, no provision or
disclosure is made.
(xi) Revenue Recognition
Sale of goods is recognised at the point of dispatch of goods to
customers. Gross sales are inclusive of excise duty and net of value
added tax / sales tax.
Sale of Certified Emission Reductions (CER's) is recognised as income
on the delivery of the CER's to the customer's account as evidenced by
the receipt of confirmation of execution of delivery instructions.
(xii) Reserves
a. Revaluation reserve represents the difference between the revalued
amount of the assets and the written down value of the assets on the
date of revaluation net of withdrawals therefrom.
b. Capital receipts are credited to capital reserve.
c. Cash flow hedge reserve represents the gain or loss arising out of
adjusting the hedging instruments to mark to market net of applicable
deferred income taxes.
(xiii) Taxation
a. The income tax liability is provided in accordance with the
provisions of the Income tax Act, 1961.
b. Deferred tax is recognised, subject to the consideration of
prudence, on timing differences, being the difference between taxable
income and accounting income that originate in one period and are
capable of reversal in one or more subsequent periods.
d) The Company has bought back 1,04,64,505 equity shares (Previous Year
à 73,97,509 equity shares) in aggregate in the last five financial
years.
e) Terms/ rights attached to equity shares
The Company has only one class of equity shares having a par value of
Rs 10 per share. Each holder of equity shares is entitled to one vote
per share. The Company declares and pays dividends in Indian rupees.
The final dividend proposed by the Board of Directors is subject to the
approval of the shareholders in the ensuing Annual General Meeting. The
Board may from time to time pay to the members such interim dividends
as appear to it to be justified by the profits of the Company.
During the year ended March 31, 2012, the amount of interim dividend
recognized as distributions to equity shareholders was Rs 14 per share
(Previous Year - Rs 14 per share).
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive remaining assets of the Company,
after distribution of all preferential amounts. The distribution will
be in proportion to the number of equity shares held by the
shareholders.
Mar 31, 2011
1. Basis of accounting
The financial statements are prepared under historical cost convention
on an accrual basis and are in accordance with the requirements of the
Companies Act, 1956, and comply with the Accounting Standards referred
to in sub-section (3C) of section 211 of the said Act.
2. Use of Estimates
The preparation of financial statements in conformity with the
generally accepted accounting principles requires estimates and
assumptions to be made that affect the reported amounts of assets and
liabilities on the date of the financial statements and the reported
amounts of revenues and expenses during the reported period. The
estimates and assumptions used in the accompanying financial statements
are based upon Managements evaluation of the relevant facts and
circumstances as on the date of financial statements. Actual results
may differ from the estimates used in preparing the accompanying
financial statements. Differences between the actual results and
estimates are recognized in the period in which the results are
known/materialize
3. Fixed assets and depreciation
(a) Tangible fixed assets are stated at their original cost including
incidental expenses related to acquisition and installation, less
accumulated depreciation. Cost comprises of the purchase price and any
other attributable cost of bringing the assets to its working condition
for its intended use.
(b) Computer software is amortised over a period of three years on a
straight line basis.
(c) Depreciation is provided on the straight line method at the rates
prescribed in Schedule XIV to the Companies Act, 1956.
4. Foreign currency transactions Transactions in foreign currency are
recorded at the original rates of exchange in force at the time the
transactions are effected.
At the year end, monetary items denominated in foreign currency are
reported using the closing rate of exchange.
Exchange differences arising thereon and on realization/payment of
foreign exchange are accounted for in the relevant year as income or
expense.
5. Inventories
Stock-in-trade comprising of raw materials, stores and spare parts,
bought out components & packing materials, manufactured components,
work-in-progress and finished goods are valued at the lower of cost and
net realisable value. Material costs included in the valuation of
stock-in-trade are determined on the basis of weighted average method.
Costs of conversion and other costs are determined on the basis of
standard cost method adjusted for variances between standard costs and
actual costs, unless such costs are specifically identifiable, in which
case they are included in the valuation at actuals.
6. Employee benefits
(a) Short term employee benefits are recognised as an expense at the
undiscounted amount in the profit and loss account of the year in which
the related service is rendered.
(b) Long term benefits:
(i) Defined Contribution Plan :
Provident and Family Pension Fund
The eligible employees of the Company are entitled to receive post
employment benefits in respect of provident and family pension fund, in
which both employees and the Company make monthly contributions at a
specified percentage of the employees eligible salary (currently 12%
of employees eligible salary). The contributions are made to Regional
Provident Fund Commissioner or provident fund trust and the Central
Provident Fund under the State Pension Scheme. Provident Fund and
Family Pension Fund are classified as Defined Contribution Plans as the
Company has no further obligations beyond making the contribution. The
Companys contributions to Defined Contribution Plan are charged to
profit and loss account as incurred.
(ii) Defined Benefit Plan :
1. Gratuity
The Company has an obligation towards gratuity, a defined benefit
retirement plan covering eligible employees. The plan provides a lump
sum payment to vested employees at retirement, death while in
employment or on termination of employment of an amount equivalent to
15 days salary payable for each completed year of service. Vesting
occurs upon completion of five years of service. The Company has
obtained insurance policies with the Life Insurance Corporation of
India (LIC) and makes an annual contribution to LIC. The Company makes
provision for gratuity based on an actuarial valuation by actuary.
2. Compensated absences
The Company provides for the encashment of leave or leave with pay
subject to certain rules. The employees are entitled to accumulate
leave subject to certain limits for future encashment/availment. The
Company makes provision for compensated absences based on an actuarial
valuation by actuary.
3. Actuarial gains and losses are recognised in the profit and loss
account.
7. Borrowing costs
Borrowing costs that are directly attributable to the acquisition of
qualifying assets are capitalised for the period until the asset is
ready for its intended use. A qualifying asset is an asset that
necessarily takes substantial period of time to get ready for its
intended use. Other borrowing costs are recognised as an expense in the
period in which they are incurred. No borrowing costs were eligible for
capitalisation during the year.
8. Impairment of assets
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. Recoverable amount is the higher of an assets
net selling price and its value in use. Value in use is the present
value of estimated future cash flows expected to arise from the
continuing use of the asset and from its disposal at the end of its
useful life. Net selling price is the amount obtainable from sale of
the asset in an arms length transaction between knowledgeable, willing
parties, less the costs of disposal. An impairment loss is charged to
the Profit & Loss in the year in which an asset is identified as
impaired. The impaired loss recognized in prior accounting periods is
reversed if there has been a change in the estimate of the recoverable
value.
9. Revenue/Sales
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the company. Revenue is recognized only
when no significant uncertainties exist regarding the amount of
consideration and it is reasonably certain that ultimate collection
will be made.
Sale of goods/machines is recognized on dispatch to customers. "Net
Sales" excludes amounts recovered towards excise duty, sales tax,
octroi and freight and net of sales returns.
10. Taxation
a. Income taxes are accounted for in accordance with Accounting
Standard (AS)-22 "Accounting for taxes on income". Income tax comprises
both current and deferred tax.
b. Current tax is measured on the basis of estimated taxable income
and tax credits computed in accordance with the provisions of the
Income Tax Act, 1961.
c. The tax effect of the timing differences that result between
taxable income and accounting income and are capable of reversal in one
or more subsequent periods are recorded as a deferred tax asset or
deferred tax liability. They are measured using substantially enacted
tax rates and tax regulations as at the Balance Sheet date.
d. Deferred tax assets on account of other timing differences are
recognized only to the extent there is a reasonable certainty of its
realization.
11. Leases
a. Finance Lease
Assets acquired under lease where the company has substantially all the
risks and rewards of ownership are classified as Finance Lease. Such
assets are capitalized at the inception of the lease at the lower of
the fair value or the present value of minimum lease payments and a
liability is created for an equivalent amount. Each lease rental is
allocated between the liability and the interest cost, so as to obtain
a constant periodic rate of interest on the outstanding liability for
each period.
b. Operating Lease
Assets acquired on lease where significant portions of the risks and
rewards incidental to ownership are retained by the lessors are
classified as operating leases. Such lease rentals are charged to
Profit & Loss Account on straight line basis.
12. Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognized when the company has a legal and constructive
obligation as a result of a past event, for which it is probable that
cash outflow will be required and a reliable estimate can be made of
the amount of the obligation.
Contingent liabilities are disclosed when the Company has a possible of
present obligation where it is not probable that an outflow of
resources will be required to settle it. Contingent assets are neither
recognized nor disclosed.
13. Segment Reporting
In accordance with Accounting Standard 17 on Segment reporting, the
company has manufacturing of bearings and special purpose machines as
the reportable business Segments and is geographically located
primarily in India.
Mar 31, 2010
1. Basis of accounting
The financial statements are prepared under historical cost convention
on an accrual basis and are in accordance with the requirements of the
Companies Act, 1956, and comply with the Accounting Standards referred
to in sub-section (3C) of section 211 of the said Act.
2. Use of Estimates
The preparation of financial statements in conformity with the
generally accepted accounting principles requires estimates and
assumptions to be made that affect the reported amounts of assets and
liabilities on the date of the financial statements and the reported
amounts of revenues and expenses during the reported period. The
estimates and assumptions used in the accompanying financial statements
are based upon Managements evaluation of the relevant facts and
circumstances as on the date of financial statements. Actual results
may differ from the estimates used in preparing the accompanying
financial statements. Differences between the actual results and
estimates are recognized in the period in which the results are known/
materialize.
3. Fixed assets and depreciation
(a) Tangible fixed assets are stated at their original cost including
incidentaLexpenses related to acquisition and installation, less
accumulated depreciation. Cost comprises of the purchase price and any
other attributable cost of bringing the assets to its working condition
for its intended use.
(b) Computer software is amortised over a period of three years on a
straight line basis.
(c) Depreciation is provided on the straight line method at the rates
prescribed in Schedule XIV to the Companies Act, 1956.
4. Foreign currency transactions
Transactions in foreign currency are recorded at the original rates of
exchange in force at the time the transactions are effected.
At the year end, monetary items denominated in foreign currency are
reported using the closing rate of exchange.
Exchange differences arising thereon and on realization/payment of
foreign exchange are accounted for in the relevant year as income or
expense.
5. Inventories
Stock-in-trade comprising of raw materials, stores and spare parts,
bought out components & packing materials, manufactured components,
work-in-progress and finished goods are valued at the lower of cost and
net realisable value. Material costs included in the valuation of
stock-in-trade are determined on the basis of weighted average method.
Costs of conversion and other costs are determined on the basis of
standard cost method adjusted for variances between standard costs and
actual costs, unless such costs are specifically identifiable, in which
case they are included in the valuation at actuals.
6. Employee benefits
(a) Short term employee benefits are recognised as an expense at the
undiscounted amount in the profit and loss account of the year in which
the related service is rendered.
(b) Long term benefits:
(i) Defined Contribution Plan :
Provident and Family Pension Fund
The eligible employees of the Company are entitled to receive post
employment benefits in respect of provident and family pension fund, in
which both employees and the Company make monthly contributions at a
specified percentage of the employees eligible salary (currently 12%
of employees eligible salary). The contributions are made to Regional
Provident Fund Commissioner or Provident Fund Trust and the Central
Provident Fund under the State Pension Scheme. Provident Fund and
Family Pension Fund are classified as Defined Contribution Plans as the
Company has no further obligations beyond making the contribution. The
Companys contributions to Defined Contribution Plan are charged to
profit and loss account as incurred.
(ii) Defined Benefit Plan :
1. Gratuity
The Company has an obligation towards gratuity, a defined benefit
retirement plan covering eligible employees. The plan provides a lump
sum payment to vested employees at retirement, death while in
employment or on termination of employment of an amount equivalent to
15 days salary payable for each completed year of service. Vesting
occurs upon completion of five years of service. The Company has
obtained insurance policies with the Life Insurance Corporation of
India (LIC) and make an annual contribution to LIC. The Company makes
provision for gratuity based on an actuarial valuation by actuary.
2. Compensated absences
The Company provides for the encashment of leave or leave with pay
subject to certain rules. The employees are entitled to accumulate
leave subject to certain limits for future encashment/availment. The
Company makes provision for compensated absences based on an actuarial
valuation by actuary.
3. Actuarial gains and losses are recognised in the profit and loss
account.
7. Borrowing costs
Borrowing costs that are directly attributable to the acquisition of
qualifying assets are capitalised for the period until the asset is
ready for its intended use. A qualifying asset is an asset that
necessarily takes substantial period of time to get ready for its
intended use. Other borrowing costs are recognised as an expense in the
period in which they are incurred. No borrowing costs were eligible for
capitalisation during the year.
8. Impairment of assets
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. Recoverable amount is the higher of an assets
net selling price and its value in use. Value in use is the present
value of estimated future cash flows expected to arise from the
continuing use of the asset and from its disposal at the end of its
useful life. Net selling price is the amount obtainable from sale of
the asset in an arms length transaction between knowledgeable, willing
parties, less the costs of disposal. An impairment loss is charged to
the Profit & Loss in the year in which as asset is identified as
impaired. The impaired loss recognized in prior accounting periods is
reversed if there has been a change in the estimate of the recoverable
value.
9. Revenue/Sales
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the company. Revenue is recognized only
when no significant uncertainties exist regarding the amount of
consideration and it is reasonably certain that ultimate collection
will be made.
Sale of goods/machines is recognized on dispatch to customers. "Net
Sales" excludes amounts recovered towards excise duty, sales tax,
octroi and freight and net of sales returns.
10. Taxation
a. Income taxes are accounted for in accordance with Accounting
Standard (AS)-22 "Accounting for taxes on income". Income tax comprises
both current and deferred tax.
b. Current tax is measured on the basis of estimated taxable income
and tax credits computed in accordance with the provisions of the
Income Tax Act, 1961.
c. The tax effect of the timing differences that result between
taxable income and accounting income and are capable of reversal in one
or more subsequent periods are recorded as a deferred tax asset or
deferred tax liability. They are measured using substantially enacted
tax rates and tax regulations as at the Balance Sheet date.
d. Deferred tax assets on account of other timing differences are
recognized only to the extent there is a reasonable certainty of its
realization.
e. Provision for Fringe Benefits Tax (FBT) is made in accordance with
Chapter XIIH of the Income Tax Act, 1961.
11. Leases
a. Finance Lease
Assets acquired under lease where the company has substantially all the
risks and rewards of ownership are classified as Finance Lease. Such
assets are capitalized at the inception of the lease at the lower of
the fair value or the present value of minimum lease payments and a
liability is created for an equivalent amount. Each lease rental is
allocated between the liability and the interest cost, so as to obtain
a constant periodic rate of interest on the outstanding liability for
each period.
b. Operating Lease
Assets acquired on lease where significant portions of the risks and
rewards incidental to ownership are retained by the lessors are
classified as operating leases. Such lease rentals are charged to
Profit & Loss Account on straight line basis.
12. Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
13. Segment Reporting
In accordance with Accounting Standard 17 on Segment reporting, the
company has manufacturing of bearings and special purpose machines as
the reportable business Segments and is geographically located
primarily in India.
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