2.16. Accounting of provisions, contingent liabilities and contingent assets
Provisions are recognized, when there is a present legal or constructive obligation as a result of past events, where it is probable that there will be outflow of resources to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. Where the effect is material the provision is discounted to net present value using an appropriate current market-based pre-tax discount rate and the unwinding of the discount is included in finance costs.
Contingent liabilities are recognized only when there is a possible obligation arising from past events, due to occurrence or non-occurrence of one or more uncertain future events, not wholly within the control of the Company, or where any present obligation cannot be measured in terms of future outflow of resources, or where a reliable estimate of the obligation cannot be made. The company does not recognize a contingent liability but disclose its existence in financial statements.
Contingent assets are not disclosed in the financial statements unless an inflow of economic benefits is highly probable.
3.1. Dividend to equity shareholders
Dividend to equity shareholders is recognized as a liability and deducted from shareholders equity, in the period in which the dividends are approved by the equity shareholders in the general meeting.
3.2. Earnings per share (EPS)
Basic EPS is computed by dividing the profit or loss attributable to the equity shareholders of the Company by the weighted average number of Ordinary shared outstanding during the year. Diluted EPS is computed by adjusting the profit or loss attributable to the ordinary equity shareholders and the weighted average number of ordinary equity shares, for the effects of all dilutive potential Ordinary shares.
3.3. Exceptional Items
Exceptional items are transactions which due to their size or incidence are separately disclosed to enable a full understanding of company financial performance.
3.4. Current and 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, or
• Cash or cash equivalents 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,
• It is due to be settled within twelve months after the reporting period, or
• 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 and advance against current tax are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
3.5. Cash flow statement
Cash flow are reported using indirect method, where by profit before tax is adjusted for the effects transaction of non-cash nature and any deferrals or accruals of past or future cash receipt or payments.
4. Critical accounting judgments and key sources of estimation uncertainty
The preparation of the financial statements in conformity with the Ind AS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilitiesand disclosures as at date of the financial statements and the reported amounts of the revenues and expenses for the years presented. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimated under different assumptions and conditions.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods
Critical Judgments
In the process of applying the Company's accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognized in the financial statements:
Discount rate used to determine the carrying amount of the Company's defined benefit obligation
In determining the appropriate discount rate for plans operated in India, the management considers the interest rate of government bonds in currencies consistent with the currencies of the post-employment benefit obligation.
Contingences and commitments
In the normal course of business, contingent liabilities may arise from litigations and other claims against the company. Where the potential liabilities have a low probability of crystallizing or are very difficult to quantify reliable, we treat them as contingent liabilities. Such liabilities are disclosed in the notes but are not provided for in the financial statements. Although there can be no assurance regarding the final outcome of the legal proceedings, we do not expect them to have a materially adverse impact on our financial position or profitability.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
Useful lives of property, plant and equipment
As described in Note 2, the company reviews the estimated useful lives and residual values of property, plant and equipment at the end of each reporting period. During the current financial year, the management determined that there were no changes to the useful lives and residual values of the property, plant and equipment.
Allowances for doubtful debts
The company makes allowances for doubtful debts based on an assessment of the recoverability of trade and other receivables. The identification of doubtful debts requires use of judgment and estimates. Where the expectation is different from the original estimate, such difference will impact the carrying value of the trade and other receivables and doubtful debts expenses in the period in which such estimate has been changed.
Allowances for inventories
Management reviews the inventory age listing on a periodic basis. This review involves comparison of the carrying value of the aged inventory items with the respective net realizable value. 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.
Liability for sales return
In making judgment for liability for sales return, the management considered the detailed criteria for the recognition of revenue from the sale of goods set out in Ind AS 18 and in particular, whether the company has transferred to the buyer the significant risk and rewards of ownership of the goods. Following the detailed quantification of the Company's liability towards sales return, the management is satisfied that significant risk and rewards have been transferred and that recognition of the revenue in the current year is appropriate, in conjunction with the recognition of an appropriate liability for sales return. Accruals for estimated product returns, which are based on historical experience of actual sales returns and adjustment on account of current market scenario is considered by Company to be reliable estimate of future sales returns.
Footnote:
Based on the information available with the Company, details of dues outstanding in respect of Micro, Small and Medium Enterprises at the balance sheet date which were outstanding for more than 45 days are given above Further, no interest during the year has been paid or payable in respect thereof.
The above disclosure has been determined to the extent such parties have been identified on the basis of information available with the company. This has been relied upon by the Auditor.
33. RELATED PARTY DISCLOSURE
Information given in accordance with the requirements of Accounting Standard 18 - Related Party disclosures notified by Ministry of Corporate Affairs Under Section 188 of the Companies Act 2013 and Regulation 23 of SEBI (Listing Obligation and Disclosure Requirement Regulation, 2015).
34. SEGMENT REPORTING
The Company is engaged in the business of "Automotive Components" and therefore, has only one reportable segment in accordance with IND AS 108 "Operating Segments".
35. Employee benefit plan
a. Defined contribution plan
The company makes provident fund contribution to defined contribution retirement benefit plan for eligible employees. Under the scheme, the company is required to contribute a specific percentage of pay roll costs to fund the benefits. The contribution as specified under the law are paid to government authorities ( PF commissioner) and such contribution is recognised as expense in year it is determined.
b. Defined benefit plan
The company offer it employees defined benefit plan in form of gratuity scheme.( a lump sum amount). The gratuity scheme covers all regular employees. In case of gratuity scheme company contributes funds to gratuity trust which is irrevocable, and if company did not make contribution in trust then such unpaid contribution is shown under provision in financial statement. Commitments are actuarially determined at year end. The actuarial valuation is done based on " Projected Unit Credit " method. These plan typically expose the company to actuarial risk such as ; investment risk, interest rate risk, longevity risk and salary risk.
c. Investment risk:
The present value of defined benefit liability is calculated using discount rate which is determined by using reference to market yields at the end of reporting period on government bonds. If return on planned assets is below this rate it will create plan deficit.
d. Interest risk:
A decrease in bond interest rate will increase the plan liability; however this will partially offset by an increase in plan assets.
e. Longevity risk:
The present value of defined benefit plan is calculated by reference to the best estimate of the mortality of plan participants. An increase in life expectancy of plan participants will increase the plan's liability.
f. Salary risk:
The present value of defined benefit plan is calculated by reference to the future salary of plan participants. As such an increase in the salary of plan participants will increase the plan's liability.
38. Financial risk management objective & policies
The company's principal financial liabilities , other then derivatives , comprise borrowings, trade payable , other payable, security deposits, unpaid dividend. The company's principal financial assets includes investments, trade and other receivables, cash & cash equivalents that derived directly from its operation. The company's financial risk management is an integral part of how to plan and execute its business strategies.
The company is exposed to various business risk such as market risk, credit risk, and liquidity risk.
The company's senior management overseas the management of these risk. The company has system based approach to risk management, established policies and procedures, and internal financial controls with object to ensure early identification , evaluation and management of key financial risk.
Accordingly the company's risk management frame work has objective of ensuring that such risk are managed with acceptable & approved parameters in disciplined and consistent manner and in compliance with applicable regulation. The board of directors reviews policies for managing each of these risk which are summarised below.
Market risk- Market risk is risk that the fair value of future cash flows of financial instrument will fluctuate because of changes in market prices.
The company's activities expose it primarily to the financial risk of changes in foreign currency exchange rates. The company enter into derivative financial instruments to manage its exposure to foreign currency risk including forward foreign exchange contracts to hedge the exchange rate risk arising on import and exports.
Foreign Currency Risk
The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise.
Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts.
Equity risk
There is no material equity risk relating to the company's equity investments which are detailed in note 6 "Investments".
Interest risk
There is no material interest risk relating to the company's financial liabilities which are detailed in note 17, 18 and 19.
Credit risk management
Credit risk refers to the risk that a counter party will default on its contractual obligation resulting in financial loss to the company. The company uses its own trading records to evaluate the credit worthiness of its customers. The Company's exposure are continuously monitored and the aggregate value of transactions concluded, are spread amongst approved counter parties (refer note 9 - Trade receivable).
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk management framework for the management of the Company's short-term, medium-term and long-term funding and liquidity management requirements.
The Company manages liquidity risk by maintaining adequate reserves, bank facilities and reserves borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.
Liquidity risk table
The following table detail the Company's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods.
The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the company can be required to pay.
39. Capital Management
For purpose of company capital management, capital includes equity attributable to equity holders of the company and all other equity reserves. the primarily objective of the company capital management is to ensure that it maintains an efficient capital structure and maximise shareholder value. Company declare dividends or adjust dividend payments after considering required capital structure
40. Investors' Protection Fund : A sum of Rs. 0.97 Lakhs relating to Financial Year 2015-16 is transferred to the credit of Investors' Protection Fund and there is no due and outstanding for transfer to the credit of the Investors' Protection Fund as on 31.03.2024 (Previous Year Rs. 0.55 Lakhs).
41. The company has decided to apply for compounding under section 441 of the Companies Act, 2013 of matter arose out of the inspection by MCA. Since the matter is not finalized by the Competent Authority, its impact on the account could not be ascertained. Once the same is decided by the competent authority, the same shall be accounted for in the year in which it is determined.
42. Previous year's figures have been regrouped and / or reclassified wherever necessary to conform to this year's classification.
As per our report of even date
For M/s GSA & Associates LLP For and on behalf of the board of directors of Akar Auto Industries Limited
Chartered Accountants
(FRN 000257N) N. K. Gupta Sunil Todi
Chairman Managing Director
DIN:00062268 DIN:00061952
Deepa Jain
Partner Pawan Kumar Gupta Radhyeshyam Rathi
Membership No. 119681 Chief Finance Officer Company Secretary
Place: Chh. Sambhaji Nagar, (Aurangabad) Place: Chh. Sambhaji Nagar, (Aurangabad)
Date: 30th May 2024 Date: 30th May 2024
UDIN No.: 24119681BKBHKP7784
|