1. Statement on Significant Accounting Policies
1.1 Basis of Preparation of Financial Statements:
As per notification issued by the Ministry of Corporate Affairs, the financial statements have been prepared in accordance with Indian Accounting standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015. For all periods up to and including the year ended March 31, 2017, the company prepared its financial statements in accordance with accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP). In accordance with Ind AS 101 First-time adoption of Indian Accounting Standards, the Company has presented a reconciliation from the presentation of financial statements under Accounting standards notified under the Companies (Accounting standards) Rules, 2006 (“Previous GAAP”) to Ind AS. All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle, and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as up to twelve months for the purpose of current/non-current classification of assets and liabilities.
1.2 Use of Estimates
The preparation of financial statements in conformity with the recognition and measurement principles of Ind AS requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying financial statements are based upon management’s evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying financial statements. Any revisions to accounting estimates are recognized prospectively in future periods. Key sources of estimation of uncertainty at the date of the financial statements which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, is in respect of useful lives of property, plant and equipment, provisions and contingent liabilities.
1.3 Property, plant and equipment and depreciation:
A) Since there is no change in the functional currency, the company has elected to continue with the carrying value for all of its property, plant and equipment as recognized in its Indian GAAP financial statements as deemed cost at the transition date viz. April 1, 2016. Property, plant and equipment are stated at their cost of acquisitions including incidental expenses related to acquisition and installation of the concerned assets (including cost of specific borrowings). The Property, plant and equipment manufactured internally by the Company are stated at manufacturing cost. Property, plant and equipment are shown net of accumulated depreciation and impairment losses; except for free hold land, which is at cost.
B) Expenditure on New Projects and Expenditure during the construction:-
In case of new projects and in case of substantial modernization or expansion at the existing units of the company, expenditure incurred including interest on borrowings and financing cost of specific loan, prior to the commencement of commercial production is being capitalized to the cost of asset. Trial run expenditure is also capitalized.
C) Intangible assets are measured on initial recognition at cost. Expenditure incurred in development phase, where it is reasonably certain that outcome of development will be commercially exploited to yield future economic benefit to the company is considered as an intangible asset. Such developmental expenditure is capitalized at cost including share of allocable expenses.
D) Depreciation / Amortization on Assets (other than Freehold Land) :
Pursuant to enactment of the Companies Act 2013 (the ‘Act’), the company has revised useful life of its Property, plant and equipment as per provision of schedule II of the said Act. Accordingly the company provides depreciation on all its assets on the “Straight Line Method” in accordance with the said Act.
Intangible assets are amortized over their respective individual estimated useful lives on a straight line basis, commencing from the date the asset is available to the Company for its intended use.
1.4 Inventories:
Stores and spares, raw materials and components are valued at cost or net realizable value whichever is lower, Cost of Inventories has been computed to include all cost of purchases, cost of conversion and other costs incurred in bringing the inventories to their present location and condition.
Cost of Raw materials is ascertained on weighted moving average basis.
Work-in-process, Dies under fabrication and Finished Goods are valued at the lower of cost or net realizable value.
Scrap and Non-moving semi-finished goods, slow-moving and obsolete items, are valued at the lower of cost or net realizable value.
Stock of Trial Product is valued at cost.
Dies are valued at cost.
Die Block and Die Steel are valued at material cost.
Goods in transit are stated at actual cost up to the date of Balance Sheet.
Shares, Units of Mutual Funds shown as stock in trade are valued at cost or market value whichever is lower.
Management reviews the inventory age listing on a periodic basis. The purpose is to ascertain whether an allowance is required to be made in the financial statements for any obsolete and slow-moving items. Management is satisfied that adequate allowance for obsolete and slow-moving inventories has been made in the financial statements.
1.5 Research & Development costs:
Research and Development expenditure is charged to Profit & Loss Account under the respective heads of account in the year in which it is incurred. However expenditure incurred during development phase, where it is reasonably certain that the outcome of research will be commercially exploited to yield economic benefit to the Company, is considered as an intangible asset. Assets purchased for Research and Development are treated in the same way as any other asset.
1.6 Post employment and other employee benefits:
Short terms employee benefits - All employee benefits payable within 12 months of rendering the service are classified as short term benefits. Such benefits include salary, wages, bonus, short term compensated absences, awards, ex-gratia, performance pay and the same are recognized in the period in which the employee renders the related service. The liabilities are presented under current provisions in the Balance sheet.
Provident Fund -
Benefits in the form of Provident Fund and Pension Scheme whether in pursuance of law or otherwise which are defined contributions is accounted on accrual basis and charged to statement of profit and loss of the year.
Gratuity -
The employees’ gratuity fund scheme is Company’s defined benefit plan. Payment for present liability of future payment of gratuity is being made to the approved gratuity funds under cash accumulation policy of the Life Insurance Corporation of India. The Employees’ gratuity, a defined benefit plan, is determined based on the actuarial valuation using the Projected Unit Credit Method as at the date of the Balance Sheet and shortfall in the fair value of the Planned Asset is recognized as obligation. Now as per Ind AS 19, all Actuarial (gains)/losses will be termed as remeasurements and will be immediately recognized in Other Comprehensive Income on the face of Statement of Profit & Loss.
Privilege Leave Benefits -
Privilege leave benefits or compensated absences are considered as long term unfunded benefit and is recognized on the basis of an actuarial valuation using the Projected Unit Credit Method determined by an appointed Actuary.
Termination Benefits -
Termination benefits such as compensation under voluntary retirement scheme are recognized as liability in the year of termination.
1.8 Foreign Currency Transactions
Initial recognition -
The company’s financial statements are presented in INR, which is also its functional currency. Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount, the exchange rate between the reporting currency and the foreign currency at the date of transaction.
Conversion -
Monetary Assets and Liabilities, designated in foreign currencies are revalorized at the rate prevailing on the date of Balance Sheet. Non-monetary assets and liabilities that are measured in terms of historical cost in foreign currencies are not retranslated. Exchange difference arising on the settlement and conversion on foreign currency transactions are recognized as income or as expenses in the year in which they arise.
1.9 Investments:
Investments which are readily realizable and are intended to be held for not more than one year from the date on which investments are made are classified as current investments.
1.10 Revenue Recognition:
A) Revenue from the domestic sales is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer.
B) Revenue from export sales are recognized when all the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on the basis of dates of bill of lading/other delivering documents as per the terms of the contract.
C) Export incentives:
Export incentives are accounted for on export of goods if the entitlement can be estimated with reasonable accuracy and conditions precedent to claim are fulfilled.
D) Revenue from the sale of goods is measured at the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.
E) Dividend is accrued in the year in which it is declared, whereby right to receive is established.
F) Interest income is recognized using the effective interest method.
1.11 Cash Flow Statement:
Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non cash nature and any deferral or accruals of past or future cash receipts or payments. The cash flows from regular operating, investing and financing activities of the Company are segregated.
1.12 Cash and cash equivalents:
Cash comprises cash on hand and demand deposits with bank. Cash equivalents are short term, highly liquid investments that are readily convertible into known amounts of cash which are subject to an insignificant risk of changes in value.
1.13 Borrowing Costs:
Borrowing Costs directly attributable to the acquisition, construction or production of qualifying assets are capitalized till the month in which the asset is ready to use, as part of the cost of that asset. Other borrowing costs are recognized as expenses in the period in which these are incurred.
1.14 Taxation:
Current Income Tax:
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 rates adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
Deferred Tax:
Deferred income taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date.
Deferred Tax liabilities are recognised for all timing differences. Deferred tax assets are recognised for timing differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.
1.15 Earnings per share:-
The basic & diluted earning per share is computed by dividing the net profit or loss attributable to equity shareholder for the period by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earning per share, the net profit or loss for the period attributable to equity shareholders & the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
1.16 Impairment of Assets:
Impairment of financial assets
The Company measures the expected credit loss associated with its assets based on historical trend, industry practices and the business environment in which the entity operates or any other appropriate basis. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
Impairment of non-financial assets
Non Financial Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash-generating units). Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
1.17 Provisions and contingent liabilities
Provisions are recognized when the company has a present legal or constructive obligation as a result of past event, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Provisions are determined based on the best estimate required to settle the obligation at the balance sheet date. Provisions are reviewed at each balance sheet date and adjusted to reflect current best estimates. The Company does not recognize a contingent liability but discloses its existence in the financial statements. A disclosure of contingent liability is made where there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources.
1.18 Government grants
Grants from the Government are recoganised at the fair value where there is reasonable assurance that the grant will be received and the Company will comply with all the attached conditions.
When loans or similar assistance are provided by governments or related institutions, with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as a government grant. The loan or assistance is initially recognised and measured at fair value and the government grant is measured as the difference between the fair value and initial carrying value of the loan. The loan is subsequently measured as per the accounting policy applicable to financial liabilities.
1.21 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. All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Equity Investments
All equity investments in scope of Ind AS 109 are measured at amortised cost. For all equity instruments not held for trading, 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-in-strument basis.
The classification is made on initial recognition and is irrevocable.
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