1. CORPORATE INFORMATION AND MATERIAL ACCOUNTING POLICIES
A. Corporate Information
AVRO INDIA LIMITED (the "Company") is a public limited company domiciled in India, incorporated under the provisions of the Companies Act and limited by shares (CIN: L25200UP1996PLC101013). The Company's shares are listed and actively traded on the National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange (BSE) Limited. The registered office of the Company is situated at A-7/36-39, South of G.T. Road Industrial rea Electrosteel Casting Compound Ghaziabad, Uttar Pradesh - 201009, India. The Company is primarily engaged in the manufacturing and selling of plastic moulded furniture and granules. It has established brand names including "AVON FURNITURE" and "AVRO FURNITURE" among others. The Company's products are distributed through both online and offline channels, with a network of retailers across India and major distributors concentrated in the state of Uttar Pradesh.
B. Basis of preparation of Financial Statements:
1. Statement of Compliance
The financial statements of the Company have been prepared on going concern basis following accrual system of accounting and in accordance with accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013 read together with Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) and presentation requirements of Division II of Schedule III to the Companies Act, 2013, (Ind AS compliant Schedule III), as applicable to the financial statements.
These financial statements were approved for issue by the Board of Directors in its meeting held on May 27, 2024.
2. Basis of measurement
The financial statements have been prepared under the historical cost convention except for the following assets and liabilities which have been measured at fair value:
• Certain financial assets and liabilities that are measured at fair value; and
• Plan assets in the case of employees defined benefit plans that are measured at fair value.
3. Functional and presentation currency:
These Financial Statements are presented in Indian Rupees (INR) which is the Company's functional currency. All amounts have been rounded to the nearest lakh upto two decimals except for per share data, unless otherwise stated.
C. Significant accounting estimates and judgments
The preparation of Financial Statements requires the management to make judgments, accounting estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures. 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.
This note provides an overview of the areas that involved a higher degree of judgment or omplexity, 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.
Significant areas of estimation and judgments as stated in the respective accounting policies t hat have the most significant effect on the financial statements are as follows:
i) Determination of the estimated useful lives of Property Plant and Equipment
The useful lives of dies and molds are determined by the technical expert, 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
ii) 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. Given the nature of business differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments that will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. The company establishes provisions, based on reasonable estimates.
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.
iii) Impairment of non-financial assets
The entity assesses at each reporting date whether there is an indication that an asset may be impaired. Determining the recoverable amount of the assets is judgmental and involves the use of significant estimates and assumptions. The estimates are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and do not reflect unanticipated events and circumstances that may occur.
iv) Impairment of financial assets
The impairment provision for financial assets is based on assumptions about risk of default and expected loss rates. The company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the company's past history, credit risk, and existing market conditions as well as forward looking estimates at the end of each reporting period.
D. New Standards, Interpretations and Amendments Adopted by the Company
Ministry of Corporate Affairs ('MCA') notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. For the year ended 31st March, 2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company.
E. Summary of Material Accounting Policies
A summary of the material accounting policies applied in the preparation of the financial statements are as given below. These accounting policies have been applied consistently to all periods presented in the financial statements.
1. Current and non-current classification
Based on the time involved between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has determined twelve months as its operating cycle for the purpose of classification of its assets and liabilities as current and non-current in the balance sheet.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
2. Property, plant and equipment
Property, plant and equipment are initially stated at cost. The cost of property, plant and equipment includes:
a. its purchase price, net of any trade discount and rebates including non-refundable purchase taxes and import duty;
b. any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
The borrowing costs that meet the criteria for capitalization as part of a qualifying asset, then these costs shall be included in the cost of property, plant, and equipment.
Property, plant and equipment are subsequently measured at cost net of accumulated depreciation and accumulated impairment losses, if any. Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when 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.
Depreciation on property, plant and equipment is provided on written down value method over the estimated useful lives of the assets as specified under part C of schedule II of the Companies Act, 2013 and disclosed in the notes to accounts. The residual values is not more than 5% of the original cost of assets.
Property, plant and equipment acquired during the period, individually costing up to Rs. 15000/- are fully depreciated.
Depreciation methods, useful lives and residual values are reviewed at each financial year end.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in statement of profit or loss within other gains/(losses).
The Cost of leasehold land is not amortised over the period of lease because it is perpetual in nature.
3. Capital work-in-progress
Capital work-in-progress comprises of property, plant and equipment that are not ready for their intended use at the end of reporting period and are carried at cost comprising direct costs, related incidental expenses, other directly attributable costs and borrowing costs.
4. Intangible Assets
Intangible asset comprising of computer software (Payroll Software) are stated at cost of acquisition less accumulated amortisation and any accumulated impairment losses, if any.
The intangible asset are amortised over a period of 60 months, on a straight-line basis, as per management estimate of its useful life, over which economic benefits are expected to be realized.
5. Financial Instruments
The Company recognises financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument.
i) Financial asset
a) Initial measurement
All financial assets (excluding trade receivables which is measured at transaction price) are recognised initially at fair value plus transaction costs that are directly attributable to the acquisition of financial asset. Transaction costs directly attributable to the acquisition of financial assets carried at fair value through profit or loss are expensed in statement of profit and loss.
b) Subsequent measurement
Subsequent measurement of financial asset depends on the Company business model for managing the asset and the cash flow characteristics of the asset. The Company classifies its financial asset as:
Financial Assets at amortised cost
After initial measurement, the financial assets that are held for collection of contractual cash flows where those cash flow represent solely payments of principal and interest (SPPI) on the principal amount outstanding are measured at amortised cost using the effective interest rate (EIR) method. Interest income from these financial assets is included in other income.
Financial Assets at fair value through other comprehensive income
Financial instruments included within FVTOCI category are measured initially as well as at each reporting period at fair value plus transaction costs. Fair value movements are recognised in other comprehensive income (OCI). However, the Company recognises interest income, impairment losses & reversals and foreign exchange gain loss in statement of profit and loss. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from equity to profit and loss.
Financial Assets at fair value through profit and loss
Fair value through profit and loss is the residual category. Any financial instrument which does not meet the criteria for categorization as at amortized cost or fair value through other comprehensive income is classified at FVTPL.
Financial instruments included within FVTPL category are measured initially as well as at each reporting period at fair value plus transaction costs. Fair value movements are recorded in statement of profit and loss.
Impairment of financial assets
The Company applies the expected credit loss (ECL) model for recognising impairment loss on financial assets measured at amortised cost, trade receivables, and other contractual rights to receive cash or other financial asset.
For trade receivables and contract assets, the Company follows 'simplified approach' and measures the loss allowance at an amount equal to lifetime expected credit losses.
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.
ECL impairment loss allowance (or reversal) recognised during the period is recognised as expense/ income in the statement of profit and loss
ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the company does not reduce impairment allowance from the gross carrying amount.
ii) Financial liability
a)Initial measurement
All financial liabilities are recognised initially at fair value net of directly attributable transaction costs. The Company's financial liabilities include loans and borrowings, trade and other payables and other financial liabilities etc.
b)Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at amortised cost
After initial recognition, trade payables are measured at transaction price whereas the borrowings and other financial liabilities are subsequently measured at amortised cost using the EIR (Effective Interest Rate) method. Amortised cost is calculated by taking nto account any discount or premium on acquisition and fees or costs that are an
ntegral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
6. Fair value measurement of financial instruments
The company measures financial instruments at fair value at each reporting period.
All assets and liabilities for which fair value is measured, are disclosed in the financial statements are categorised within the level 1 (quoted price unadjusted in active market), level 2 (Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable) and level 3 (Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable) of fair value hierarchy.
The fair value of an asset or a liability is measured using the assumptions that marke participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
7. Inventories
Inventories are valued at lower of cost and net realizable value.
Inventories includes raw material, work-in-progress, finished goods, store & spare, packing material. Raw material and components: cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined using first in first out (FIFO) basis. Finished goods and work in progress: cost includes cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity but excluding borrowing costs. Cost is determined on weighted average basis.
Store, spare parts, packing material etc.: Cost is determined on FIFO basis.
Inter branch transfers are valued at works/factory costs of the transferor unit/ branch.
8. Employee Benefits
a. Short term employee benefits: Employee benefits such as salaries falling due wholly within twelve months of rendering the service are classified as short-term employee benefits and undiscounted amount of such benefits are expensed in the statement of profit and loss in the period in which the employee renders the related services.
b. Post-employment benefits:
Defined contribution plan: A defined contribution plan is a plan under which the Company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognized as an employee benefits expense in the statement of profit and loss during the period in which the employee renders the related services.
Contribution to Defined Contribution Plans such as Provident Fund and Employees' State Insurance Corporation are charged to the Statement of Profit and Loss as incurred.
Defined Benefit Plan: A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. Under such plans, the obligation for any benefits remains with the Company. The company's liability towards gratuity is in the nature of defined benefit plans. Remeasurement of net defined benefit liability, which comprises actuarial gains and losses and the return on plan assets (excluding interest) and the effect of the asset ceiling (if any excluding interest), are recognized immediately in other comprehensive income.
9. Foreign Exchange Transactions
Foreign currency transactions are recorded at exchange rates prevailing on the date of the transaction. Foreign currency monetary items are retranslated at the each reporting date. The exchange gains and losses arising on settlement and restatement are recognised in the statement of profit and loss. Nonmonetary items which are measured in terms of historical cost denominated in foreign currencies are translated using the exchange rates at the dates of the initial transactions.
10. Borrowing Costs
Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds and are charged to the statement of profit and loss in the period in which they are incurred except when it meets the criteria for capitalization as part of qualifying assets.
11. Impairment of non-financial assets
At each reporting date, the Company reviews the carrying amounts of its non-financial assets to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
If such assets are considered to be impaired, the impairment to be recognised in the Statement of Profit and Loss is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset.
12. Revenue Recognition Sale of products
Revenue from sale of goods is recognised when control of the products being sold is transferred to the customer and when there are no longer any unfulfilled obligations. The Performance Obligations in our contracts are fulfilled at the time of dispatch, delivery or upon formal customer acceptance depending on terms with customers. Revenue is measured on the basis of transaction price, which is the consideration, adjusted for volume discounts, rebates, schemes allowances, price concessions, incentives and returns, if any, as specified in the contracts with the customers. Accumulated experience is used to estimate the provision for such discounts and rebates. Revenue is only recognised to the extent that it is highly probable a significant reversal will not occur.
Sales return - Our customers have the contractual right to return goods only when authorised by the Company. An estimate is made of goods that will be returned and a liability is recognised for this amount using a best estimate based on accumulated experience. The Company deals in various products and operates in various distribution channels. Accordingly, the estimate of sales returns is determined primarily by the Company's historical experience in the markets in which the Company operates by considering actual sales returns, estimated shelf life and other factors.
13. Other Income
Income from services rendered including commission income
- I ncome from services rendered including the commission income is recognised based on agreements/arrangements as the service is performed and there are no unfulfilled obligations.
- Interest income is recognised using Effective Interest rate method.
- Dividend income on investments is recognised when the right to receive dividend is established
- All other income is accounted on accrual basis when no significant uncertainty exists regarding the amount that will be received.
14. Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes unrestricted cash and short-term deposits with original maturities of three months and less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.
15. Taxes
Tax expense comprises current tax and deferred income tax. Current and deferred tax are recognised in the statement of profit & loss except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively.
Current income Tax
Current tax is determined as the tax payable in respect of taxable income for the period and is computed in accordance with relevant tax regulations.
Current income tax is recognised in statement of profit and loss. 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.
Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Deferred Tax
Deferred tax is provided for temporary taxable/deductible difference arising on the difference of tax base and accounting base of assets/liabilities using the liability method and are measured at the enacted tax rates or substantively enacted tax rates at reporting date.
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. Any such reduction shall be reversed to the extent that it becomes probable that sufficient taxable profit will be available. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit 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.
16. Earnings per share
In determining basic earnings per share, the company considers the net profit attributable to equity shareholders. The number of shares used in computing basic earnings per share is the weighted average number of shares outstanding during the period.
In determining diluted earnings per share, the net profit attributable to equity shareholders and weighted average number of shares outstanding during the period are adjusted for the effect of all dilutive potential equity shares.
17. Provisions, Contingent Assets and Contingent Liabilities a) Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. This provision are reviewed at each reporting date and adjusted to reflect the current best estimates.
b) Contingent liabilities
Contingent liabilities are disclosed when there is a possible obligation or present obligations that may but probably will not, require an outflow of resources embodying economic benefits or the amount of such obligation cannot be measured reliably. When there is possible obligation or a present obligation in respect of which likelihood of outflow of resources embodying economic benefits is remote, no provision or disclosure is made. Contingent liabilities has been disclosed as a part of notes to account. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
17) Material prior period errors
Errors/omissions discovered in the current year relating to prior periods are treated as immaterial and adjusted during the current year, if all such errors and omissions in aggregate does not exceed 0.50% of total operating revenue as per last audited financial statement of the Company.
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