1.01 Basis of preparation
The financial statements of the Company have been prepared and presented in accordance with Indian Generally Accepted Accounting Principles (Indian GAAP). The Company has prepared these financial statements to comply with all material respects with the accounting standards specified under section 133 of the Companies Act, 2013, read together with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). The financial statements have been prepared on an accrual basis and under the historical cost convention. The accounting policies adopted in the preparation of financial statements are consistent with those of previous year except for the change in accounting policy explained below.
All assets and liabilities have been classified as current or noncurrent as per the Company's normal operating cycle and other criteria set out in Schedule III of the Companies Act, 2013. Based on the nature of products and the time between acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current/non-current classification of assets and liabilities.
1.02 Change in Accounting Policies
The Company has changed its system of accounting in respect of amortization of dies and tools. As of 1st January, 2016, inventories of dies and tools have been capitalized under fixed assets and depreciated prospectively as per rate and method prescribed under Schedule II of the Companies Act, 2013. In the earlier years, the same were amortized on the basis of their effective residual life based on technical assessment. The Company has changed its policy due to better and more appropriate presentation in accounts. In earlier years, the Company was unable to obtain technical assessment in respect of consumption of dies and tools as per the accounting policy of the Company resulting in charge of consumption of dies and tools to Statement of Profit and Loss on a non scientific basis. The Company has therefore capitalized dies and tools and depreciated them on the basis of their useful life as per Schedule II of Companies Act, 2013.
1.03 Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in India requires the management to make judgments, estimates and assumptions that affect the reported amounts of Assets, Liabilities and the disclosure of Contingent Liabilities on the date of the Financial Statements and the reported amount of revenue and expenses during the reported period. Although these estimates are based on the management's best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. Changes in estimates are reflected in the financial statements in the period in which changes are made and if material, their effects are disclosed in notes to accounts.
1.04 Inventories
a) Inventories other than scrap materials are carried at lower of cost and net realizable value after providing cost of obsolescence, if any. Cost has been ascertained in case of semi-finished goods at 66% less on the price-list and finished goods have been valued at 57% less on the pricelist and special items have been valued at 31% less in case of semi-finished goods and 22% less in the case of finished goods of selling price, based on overall cost data and gross margins; since exact cost is not ascertainable. Excise duty payable on finished goods and scrap materials are shown separately as part of manufacturing cost and is included in the valuation of finished goods and scrap materials. Inventories are consumed on FIFO (First in First out) basis.
b) Scrap material has been valued at net realizable value.
c) Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
1.05 Tangible fixed assets
a) Tangible assets are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any.
The cost comprises purchase price, taxes, duties, freight and other incidental expenses directly attributable and related to acquisition and installation of the concerned assets and are further adjusted by the amount of CENVAT credit, VAT credit availed and subsidy directly attributable to the cost of fixed asset, wherever applicable. Interest and other borrowing costs during construction period to finance qualifying fixed assets is capitalized, if capitalization criteria are met.
b) The Company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset. Similarly, when significant parts of plant and equipment are required to be replaced at intervals or when a major inspection/ overhauling is required to be performed, such cost of replacement or inspection is capitalized (if the recognition criteria is satisfied) in the carrying amount of plant and equipment as a replacement cost or cost of major inspection/ overhauling, as the case may be and depreciated separately based on their specific useful life.
c) Subsequent expenditure related to fixed assets is capitalized only if such expenditure results in an increase in the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts are charged to the statement of profit and loss for the period during which such expenses are incurred.
d) Capital work-in- progress comprises cost of fixed assets that are not yet ready for their intended use at the balance sheet date and are carried at cost comprising direct cost, related incidental expenses, other directly attributable costs and borrowings costs.
e) Preoperative expenditure and trial run expenditure accumulated as capital work- in- progress is allocated on the basis of prime cost of fixed assets in the year of commencement of commercial production.
f) Gains or losses arising from disposal of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is disposed off.
1.06 Intangible assets
a) ACQUIRED INTANGIBLE ASSETS
Intangible assets including software licenses of enduring nature and contractual rights acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use.
b) RESEARCH AND DEVELOPMENT COST
Research costs are expensed as incurred. Development expenditure incurred on an individual project is recognized as an intangible asset when the Company can demonstrate all the following:
i) The technical feasibility of completing the intangible asset so that it will be available for use or sale;
ii) Its intention to complete the asset;
iii) Its ability to use or sale the asset;
iv) How the asset will generate future economic benefits;
v) The availability of adequate resources to complete the development and to use or sale the asset; and
vi) The ability to measure reliably the expenditure attributable to the intangible asset during development.
Following the initial recognition if the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete and the asset is available for use. It is amortized on straight line basis over the estimated useful life.
c) Gains or losses arising from disposal of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is disposed off.
1.07 Depreciation and amortization
a) DEPRECIATION OF TANGIBLE ASSETS:
Depreciation on fixed assets is provided on prorate basis on written down value method except in case of Plant II, Manesar and Recoil Division where depreciation has been provided on straight line method using the useful lives of assets and in the manner prescribed in Schedule II of The Companies Act, 2013.
b) AMORTISATION OF INTANGIBLE ASSETS: Intangible assets are amortized on a straight line basis over their estimated useful life of six years.
1.08 Prior Period Items / Extraordinary Items
Prior Period expenses/incomes, are shown as prior period items in the statement of profit and loss account as per the provision of Accounting Standard-5 "Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies" notified under Section 133 of the Companies Act, 2013, read together with Rule 7 of the Companies (Accounts) Rules, 2014. Items of income or expenses that arise from events or transactions that are distinct from ordinary activities of the enterprise and are not expected to recur frequently or regularly are treated as extraordinary items.
1.09 Exceptional Items
Exceptional items are transactions which due to their size or incidence are separately disclosed to enable a full understanding of the Group's financial performance. Items which may be considered exceptional are significant gains or losses on disposal of investments of joint venture, write down of inventories and loss due to strike.
1.10 Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized:
a) SALE OF GOODS:
Revenue from sale of Goods is recognized when all the significant risks and rewards of ownership of the goods have been passed to the buyer and no significant uncertainty exists regarding the amount of consideration that will be derived from the sale of goods. Sales are recorded net of returns and trade discount. The Group collects sales taxes and value added taxes (VAT) on behalf of the Government and, therefore, these are not economics benefits flowing to the Company and therefore are excluded from revenue. Excise Duty is deducted from revenue (gross) to arrive at revenue from operations (net). Sales do not include inter-divisional transfers. Export sales are recognized at the time of clearance of goods and approval from Excise Authorities.
b) SERVICES:
Revenue from service related activities is recognized using the proportionate completion method.
c) EXPORT INCENTIVES:
Export incentives under various schemes notified by the Government have been recognized on the basis of their entitlement rates in accordance with the Foreign Trade Policy 2015-20 (FTP 2015-20). Benefits in respect of advance licenses are recognized when there is reasonable assurance that the Company will comply with the conditions attached to them and incentive will be received.
d) RENTAL INCOME:
Rental income is recognized on a time proportionate basis.
e) INTEREST INCOME:
Interest income is recognized on time proportionate basis taking into account the amount outstanding and the applicable rate of interest.
f) DIVIDEND INCOME:
Dividend income is accounted for when the right to receive the payment is established.
g) CLAIMS:
Claims are recognized when there exists reasonable certainty with regard to the amounts to be realized and the ultimate collection thereof.
h) PROFIT ON SALE OF INVESTMENTS:
Profit on sale of investments is recorded on transfer of title from the Group and is determined as the difference between the sale price and carrying value of the investment.
1.11 Foreign Currency Transactions
a) INITIAL RECOGNITION:
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
b) MEASUREMENT OF FOREIGN CURRENCY ITEMS AT THE BALANCE SHEET DATE:
Foreign currency monetary items are retranslated using the exchange rate prevailing at the reporting date. Non-monetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction.
c) EXCHANGE DIFFERENCES:
Exchange differences arising on conversion / settlement of foreign currency monetary items and on foreign currency liabilities relating to fixed assets acquisition are recognized as income or expense in the year in which they arise. In case of exchange variation arising on reporting of long term foreign currency monetary item at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, in so far as they relate to the acquisition of a depreciable capital assets, are added to or deducted from the cost of assets and are depreciated over the balance life of the asset, and in other cases accumulated in a foreign Currency Monetary Item Translation Difference Account; and amortized over the balance period of such long term asset/liability by recognition as income or expense in each of such period.
d) BANK GUARANTEE AND LETTER OF CREDIT:
Bank Guarantee and Letter of Credits are recognized at the point of negotiation with Banks and converted at the rates prevailing on the date of Negotiation, However, Outstanding at the period end are recognized at the rate prevailing as on that date and total sum is considered as contingent liability.
1.12 Government Grants and Subsidies
Grants and Subsidies from the Government are recognized when there is reasonable assurance that
i) The Company will comply with the conditions attached to them; and ii) the grant/subsidy will be received.
Grants related to revenue are deducted in reporting the related expense.
1.13 Investments
Investments are classified into current and long-term investments. Investments that are readily realizable and intended to be held for not more than one year from the date of acquisition are classified as current investments. All other investments are long-term investments and classified as Non Current Investments.
On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties.
Current investments are stated in the financial statements at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. A provision for diminution in the value of long-term investments is made only if such a decline is other than temporary in the opinion of the management. Reversal of such provision for diminution is made when there is a rise in the value of long term investments, or if the reasons for the decline no longer exist.
On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss.
1.14 Retirement Benefits
a) GRATUITY
The Employee's Gratuity Fund Scheme, which is defined benefit plan, is managed by trust maintained with Life Insurance Corporation of India (LIC). The liabilities with respect to Gratuity Plan are determined by actuarial valuation on projected unit credit method on the balance sheet date, based upon which the Company contributes to the Group Gratuity Scheme. The difference, if any, between the actuarial valuation of the gratuity of employees at the year end and the balance of funds with Life Insurance Corporation of India is provided for as assets/(liability) in the books. Actuarial gains/(losses) for defined plans are recognized in full and are immediately taken to the statement of profit and loss and are not deferred.
b) PROVIDENT FUND
Retirement benefit in the form of provident fund is a defined contribution scheme. The contribution to provident fund is made in accordance with the relevant scheme and are charged to the statement of profit and loss for the year when contribution are due. 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 expenditure, when an employee renders the related services.
c) COMPENSATED ABSENCES
Accrual for leave encashment benefit is based on actuarial valuation as on the balance sheet date in pursuance of the company's leave rules.
1.15 Borrowing Costs
Borrowing cost includes interest and amortization of ancillary costs incurred in connection with the arrangement of borrowings and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period in which they occur.
1.16 Leases
OPERATING LEASES
Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term.
FINANCE LEASES
Lease under which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Such assets acquired are capitalized at fair value of the asset or present value of the minimum lease payments at the inception of the lease, whichever is lower.
1.17 Segment Reporting
BUSINESS SEGMENTS
Based on similarity of activities, risks and reward structure, organization structure and internal reporting systems, the Company has structured its operation into manufacturing and trading of "Fasteners".
SECONDARY SEGMENT: GEOGRAPHICAL SEGMENT
Secondary segmental reporting is performed on the geographical locations of customers i.e. within India and Overseas.
1.18 Earning per share
Basic earnings per share is computed by dividing the profit/ (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earning per share is computed by dividing the profit/(loss) after tax (including the post tax effect of extraordinary items, if any) 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 earning per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period presented.
1.19 Taxes on Income
Tax expense for the year comprises of direct taxes.
DIRECT TAXES
a) Current income-tax is measured at the amount expected to be paid to taxation authorities in accordance with the Income-tax Act, 1961 enacted in India by using the tax rates and tax laws that are enacted at the reporting date. Current income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.
b) Deferred income tax reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date.
Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized and carried forward only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations, where the Company has unabsorbed depreciation or carry forward tax losses under tax laws, all deferred tax assets are recognized only to the extent that there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
Deferred tax assets and deferred tax liabilities are off-set, if a legally enforceable right exists to set-off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to taxes on income levied by the same governing taxation laws.
The carrying amount of deferred tax assets are reviewed at each reporting date. The Company writes-down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.
c) Minimum Alternate Tax (MAT) paid in a year is charged to the Statement of Profit and Loss as Current Tax. The Company recognizes MAT Credit available as an asset only to the extent there is convincing evidence that the Company will pay normal income tax during specified period i.e. the period for which MAT credit is allowed to be carried forward. In the year in which the Company recognizes MAT credit as an asset in accordance with the 'Guidance Note on Accounting for Credit Available in respect of Minimum Alternate Tax under the Income -Tax Act, 1961', the said asset is created by way of credit to the statement of profit and loss and shown as "MAT Credit Entitlement" under loans and advances. The Company reviews the "MAT Credit Entitlement" asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will pay normal tax during the specified period.
INDIRECT TAXES
a) Excise duty (including education cess) has been accounted for in respect of the goods cleared. The company is providing excise duty liability in respect of finished products.
b) Service tax has been accounted for in respect of service rendered.
c) Final sale tax/ Value added tax liability is ascertained on the finalization of assessments in accordance to provisions of sale tax/ value added laws of respective states where the company is having offices/works.
1.20 Miscellaneous Expenditure
Technical know-how is amortized on a systematic basis on straight line method over its useful life based upon the respective technical know-how agreements.
1.21 Impairment of Assets
At the end of each year, the Company determines whether a provision should be made for impairment loss on fixed assets by considering the indications that an impairment loss may have occurred and where the recoverable amount of any fixed asset is lower than its carrying amount, a provision for impairment loss on fixed assets is made for the difference. Recoverable amount is generally measured using discounted estimated cash flows. Post impairment, depreciation is provided on the revised carrying value of the asset over its remaining useful life.
1.22 Provisions and Contingent Liabilities
PROVISIONS
A provision is recognized when the Company has a present obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of obligation. Provisions are not discounted to their present value and are determined based on the best estimates required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.
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 recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases, where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
1.23 Cash and Cash Equivalents
Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.
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