NOTE NO. 1
CORPORATE INFORMATION:
Veljan Denison Limited (the “Company”) is a Public Limited Company incorporated on 19th December, 1973 with its Registered Office at Plot No 44, 4th floor, HCL Towers, Chikoti Gardens, Begumpet, Hyderabad 500 016 Telangana State. The Company is engaged in the business of Manufacturing of Hydraulic Pumps, Motors, Valves and Custom Built Power Packs. The Company is listed on Bombay Stock Exchange Limited, Mumbai.
The financial statements of the company for the year ended March 31st, 2024 are approved for issue by the Company’s Board of Directors on 23rd May, 2024.
MATERIAL ACCOUNTING POLICIESAND KEYACCOUNTING ESTIMATESAND JUDGEMENTS:
1. Material Accounting Policies:
1.1. Statement of Compliance:
These financial statements have been prepared in accordance with the Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standard) Rules, 2015 notified under section 133 of the Companies Act 2013, amendments there to and other relevant provisions of the Act.
1.2. Basis of Preparation of Financial Statements.
These financial statements have been prepared in accordance with the Indian Accounting Standards (Ind AS) as specified under section 133 ofthe CompaniesAct2013 and other relevant provisions oftheAct.
These Ind AS Financial statements have been prepared on a going concern basis using historical cost convention and on an accrual method of accounting except for certain financial assets and liabilities that are measured at fair values at the end of each reporting period, as stated in the accounting policies set out below. The accounting policies have been consistently except where a newly issued accounting standard is initially adopted or a revision to an existing standard requires a change in the accounting policy hither to in use.
The financial statements are presented in INR which is also the Company functional currency and all values are in Rupees except when otherwise indicated.
1.3. Classification ofAssets and Liabilities as Current and Non Current:
The Company has determined its operating cycle as 12 months for the purpose of classification of current and noncurrent assets and liabilities. This is based on the nature of product and the time between the acquisition of inventories for processing and their realization in cash and cash equivalents.
Deferred tax assets and deferred tax liabilities are classified as non -current assets and liabilities.
1.4. Use of Estimates & Judgments:
The estimates and Judgments used in the preparation of the financial statements are continuously evaluated by the Company and are based on historical experience and various other assumptions and factors (including expectations of future events) that the Company believes to be reasonable under the existing circumstances.
1.5. Property, Plant and Equipment-TangibleAssets:
i. Property, Plant and Equipment other than land are stated at cost less accumulated depreciation and impairment losses if any. Cost comprises of purchase price and any attributable cost of bringing the assets to its working condition for its intended use.
ii. Capital Work In Progress in respect of assets which are not ready for their intended use are carried at cost, comprising of direct costs, related incidental expenses and attributable interest.
iii. Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
iv. Depreciation on Fixed Assets is provided on ascertained useful life of assets under Straight Line Method (SLM) prescribed in Schedule II of the Companies Act, 2013 except assets costing Rs. 5,000 or less on which depreciation is charged @100% in the year of acquisition.
v. The Company follows the policy of charging depreciation on pro-rata basis on the assets acquired or disposed off during year.
1.6. IntangibleAssets:
Intangible assets are stated at cost less accumulated amortization. Cost includes any expenditure directly attributable on making the asset ready for its intended use.
Intangible assets are amortized over their useful life.
1.7. Impairment ofAssets
The carrying values of assets/cash generating units at each balance sheet date are reviewed for Impairment if any indication of impairment exists. An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value.
Recoverable value: Recoverable value being higher of value in use and fair value less cost of disposal. Value in use is computed at net present value of cash flow expected over the balance useful life of the assets. An impairment loss is recognized as an expense in the Statement of profit and loss in the year in which an asset identified as impaired.
Cash & Cash Equivalents:
For the purpose of presentation in the statement of cashflows, cash and cash equivalents includes cash on hand, deposits held at call with principal 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.
Trade Receivable:
Trade Receivables are recognised initially at fair value and subsequently measured at amortised cost using effective interest method, less provision for impairment.
1.8. Inventory:
Inventories of raw materials, consumable stores and packing materials are valued at cost on weighted average method, finished goods and work in process are valued at cost on weighted average method or realisable value whichever less. Jigs & Fixtures and patterns are valued after providing for amortisation at 20% and 10% respectively under written down value method. Initial tools were capitalised and amortised at 10% on written down value and further issue of tools are charged to revenue as and when issued.
1.9. Financial Instrument:
A Financial instrument is any contract that gives rise to a financial asset of one entity and financial liability or equity instrument of another entity.
a. FinancialAsset:
Initial recognition and measurement:
All financial instruments are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through statement of profit and loss transaction costs that are attributable to the acquisition of the financial asset, purchase or sales of financial assets that require delivery of assets within a time frame established by regulation
or convention in the market place are recognized on the trade date i.e. the date that company commits to purchase or sell the asset.
Subsequent Measurement:
For the purpose of subsequent measurement financial assets are classified as measured at:
1) Amortised cost
2) Fair value through profit and loss (FVTPL)
3) Fair value through Other Comprehensive Income (FVTOCI)
FinancialAsset measured at amortized cost:
Financial Assets held within a business model whose objective is to hold financial assets in order to collect contractual cash flow and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding are measured at amortized cost using effective interest rate (EIR) method. The EIR amortization is recognized as finance income in the statement of Profit &Loss.
The company while applying above criteria has classified all the financial assets (except investments in equity share) at amortized cost
FinancialAssets Measured at fairvalue through other comprehensive Income:
Financial assets that are held within a business model whose objective is achieved by both, selling financial assets collecting contractual cash flow that are solely payment of principal and interest, are subsequently measured at fair value through other comprehensive income. Fair value movements are recognized in the other comprehensive income (OCI) interest income measured using the EIR method and impairment losses, if any are recognized in the statement of Profit and loss. On derecognition, cumulative gain or loss previously recognised in OCI is reclassified from the equityto ‘other income’in the statement ofprofit and loss.
FinancialAssets at fairvalue through profit or loss (FVTPL):
Financial Asset are measured at fair value through profit & loss if it does not meet the criteria for classification as measured at amortized cost or at FVTOCI. All fair value changes are recognized in the statement of profit and loss.
De-recognition of FinancialAssets:
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the contractual rights to receive the cash flows from the asset.
Impairment of FinancialAssets:
In accordance with Ind AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss on the debt instruments, that are measured at amortized cost e.g., loans, debt securities, deposits, trade receivables and bank balance.
Expected credit loss 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.
The management uses a provision matrix to determine the impairment loss on the portfolio of trade and other receivable. Provision matrix is based on its historically observed expected credit loss rates over the expected life of the trade receivables and is adjusted for forward looking estimates.
Expected credit loss allowance or reversal recognized during the period is recognized as income or expense, as the case may be, in the statement of profit and loss. In case of balance sheet, it is shown as reduction from the specific financial asset.
b. Financial Liabilities
Initial recognition and measurement:
Financial liabilities are recognized initially at fair value plus any transaction cost that are attributable to the acquisition ofthe financial liability except financial liabilities at FVTPLthat are measured at fair value
Subsequent Measurement:
Financial liabilities are subsequently measured at amortised cost using the EIR method. Financial Liabilities carried at fair value through profit or loss are measured at fair value with all changes in fair value recognised in the statement ofprofit and loss.
Financial Liabilities at amortized cost:
Amortized cost for financial liabilities represents amount at which financial liability is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between the initial amount and the maturity amount.
All the financial liabilities of the company are subsequently measured at amortised cost using effective interest method.
De recognition of Financial Liabilities
A financial liability shall be de recognized when, and only when, it is extinguished i.e. when the obligation specified in the contract is discharged or cancelled or expires.
1.10. Foreign Currency Transactions:
The functional and presentation currency of the Company is Indian Rupee. Transactions in foreign currency are accounted for at the exchange rate prevailing on the transaction date. Gains/losses arising on settlement as also on translation of monetary items are recognised in the Statement of Profit and Loss.
1.11. Borrowing Costs:
Borrowing costs that are attributable to 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 its intended use. All other borrowing costs are recognized as an expense in the period in which they are incurred.
1.12. Revenue Recognition:
Revenue is recognized when the significant risks and rewards of universal ship are transferred to buyer. Revenue can be reliably measured and it is probable that future Economic benefits will flow to the Company.
a. Sale ofProducts:
Revenue from the sale of goods measured fair value of consideration received or receivable net of returns, trade discounts and allowances, and excluding taxes collected on behalf of Government.
b. Interest Income:
Interest on deposits with Government departments and financial Institutions are recognized in statement ofprofit and loss when the right to receive/receivable during the period.
1.13 Employee Benefits:
Short-term employee benefits are expensed as the related service is provided. A Liability is recognised for the amount expected to be paid 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.
a. Defined Contribution Plans:
Contribution towards provident fund for employees is made to the regulatory authorities, where the company has no further obligations. Such benefits are classified as defined Contribution schemes as the company does not carry any further obligations, apart from the Contributions made on a monthly basis.
b. Defined benefit plans:
Gratuity liability is defined benefit obligation and is provided on the basis of an actuarial valuation on projected unit credit method made at the end of each year. The Company funds the benefit through contribution to LIC.
Remeasurement of the net defined benefit liability, which comprise actuarial gains and losses and the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income (OCI) net interest expense (income) on the net defined liability (assets) is computed by applying the discount rate, used to measure the net defined liability (asset). Net interest expense and other expenses related to defined benefit plans are recognized in Statement of profit and loss.
1.14. Taxes on Income:
Tax expense comprises of current and deferred tax:
a. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian TaxAct.
b. Deferred tax is recognized in respect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes. Deferred tax is measuredbased on thetax rates and thetax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.
1.15. Provisions:
Provisions are recognized when, as a result of past event, the Company has a legal or constructive obligation; it is probable that an outflow of resources will be required to in respect of which a reliable estimate can be made. Provisions are not discounted to their present value and are determined based on 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.
1.16. Contingent Liabilities:
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 beyond the control of the company or a present obligation that arises from past events where 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.
1.17. Claims:
Claims against the Company not acknowledged as debts are disclosed after a careful evaluation of the facts and legal aspects ofthe matter involved.
1.18. Offsetting:
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
1.19. Earnings per share:
The Company presents basic and diluted earnings per share (‘EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
1.20. Cash flow statement:
Cash flows are reported using the Indirect method. Whereby profit for the period is adjusted for effects of transactions of a non-cash nature. Any deferrals are accruals of past or future operating cash receipts or payments and item of Income or expenses associated with investing or financing cash flows. The cash flows from operating investing and financing activities ofthe company are segregated.
1.21. Segment Reporting:
The operations ofthe company are related to one segmenti.e Hydraulic equipment.
1.22. Events after Reporting date:
Where events occurring after the Balance Sheet date provide evidence of conditions that existed at the end of the reporting period., the impact of such events is adjusted within the financial statements. Otherwise, events after the Balance Sheet date of material size or nature are only disclosed.
1.23. RecentAccounting Pronouncements:
The Company applied for the first time these amendments of Ind AS 8 , Ind AS 1 and Ind AS 12 and there is no material impact on financials.
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 March 31,2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company
1.24. CriticalAccounting Estimates and Judgments:
The preparation of financial statements is in conformity with generally accepted accounting principles which require management to make estimates and assumption that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the result of operations during the reporting period. Although these estimates are based upon management’s best knowledge of current events and actions, actual results could differ from these estimates. Revisions in accounting estimates are recognized prospectively.
The areas involving critical estimates or judgments are:
Estimates of useful life of property, plant and equipment and intangibles
Measurement of defined benefit obligation
Recognition of deferred taxes
Estimation of impairment
Estimation ofprovision and contingent liabilities
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