Click it and Unblock the Notifications
Accounting Policies of Hindustan Aeronautics Ltd. Company
Mar 31, 2025
CORPORATE INFORMATION:
Hindustan Aeronautics Limited (the Company) is a public company domiciled in India and is incorporated under the provisions of
the Companies Act applicable in India with its registered office located at Bengaluru, Karnataka, India. The Company''s shares are
listed on Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The Company is a public sector enterprise and is
under the administrative control of the Department of Defence Production, Ministry of Defence.
The Company is engaged in the design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of
products including, aircraft, helicopters, aero-engines, avionics, accessories and aerospace structures.
1. BASIS OF PREPERATION OF FINANCIAL STATEMENTS:
The Financial Statements are prepared to comply in all material aspects with Indian Accounting Standards (Ind AS) as
prescribed under Section 133 of Companies Act, 2013 read together with relevant rules of the Companies (Indian Accounting
Standards) Rules, 2015 (as amended). The Financial Statements have been prepared under the historical cost convention, on
the accrual basis of accounting except for certain financial instruments that are qualified to be measured at fair value.
The functional currency of the Company is Indian Rupee.
2. USES OF ESTIMATES:
a) Preparation of financial statements in conformity with the recognition and the measurement principle of Ind AS requires
the management of the Company to make estimates, judgments and assumptions that affects the reported balances
of Assets and Liabilities, disclosure relating to contingent liabilities as on the date of the Financial Statements and the
reported amount of revenues and expense for the reporting period.
b) Estimates and the underlying assumption are reviewed on an ongoing basis. The revision to the accounting estimates, if
material is recognized in the period in which the estimates are revised.
c) Estimates and judgments made in applying accounting policies that have significant effect on the amounts recognized
in the financial statements are as follows:
i. Employee Defined benefit plans
The liabilities and costs for defined benefit plans are determined using actuarial valuations. The actuarial valuation
involves making assumptions. These assumptions include salary escalation rate, discount rates, expected rate of
return on assets and mortality rates.
ii. Provisions and contingencies
Assessments undertaken in recognising provisions and contingencies have been made as per the best judgment of
the management based on the current available information.
iii. Income Taxes
The Company''s tax jurisdiction is India. Significant judgments are involved in estimating budgeted profits for the
purpose of paying advance tax, determining the provision for income taxes, including amount expected to be paid/
recovered for uncertain tax positions.
3. CURRENT/NON-CURRENT CLASSIFICATION:
An asset is classified as current if it satisfies any of the following conditions:
a) the asset is expected to be realized or intended to be sold or consumed in Company''s normal operating cycle;
b) the asset is held primarily for the purpose of trading;
c) the asset is expected to be realized within twelve months after the reporting period;
d) the asset is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least
twelve months after the reporting date;
All other assets are classified as non-current.
A liability is classified as current if it satisfies any of the following conditions:
a) the liability is expected to be settled in Company''s normal operating cycle;
b) the liability is held primarily for the purpose of trading;
c) the liability is due to be settled within 12 months after the reporting period;
d) the Company does not have an unconditional right to defer settlement of the liability for at least twelve months after
the reporting date;
All other liabilities are classified as non-current.
The Company is having multiple business activities. For the purpose of current/non-current classification of assets and
liabilities, the Company has ascertained its normal operating cycle, business activity wise as follows:
i. For major manufacturing projects, repair and overhaul activities, spares, normal operating cycle is considered as the time
period starting from the acquisition of assets for processing to their realization in cash or cash equivalents.
ii. In respect of Design and Development projects operating cycle is considered as the time period starting from the date of
implementation of the project till the date of initial operational clearance.
iii. In respect of those activities/projects for which operating cycle cannot be determined or identified the same is taken as
12 months.
4. PROPERTY, PLANT AND EQUIPMENT (PPE):
a) Items of Property, Plant and Equipment Property that qualifies for recognition as an asset is initially measured at its
cost. Following initial recognition, the items of Property, Plant and Equipment are carried at their cost less accumulated
depreciation and accumulated impairment losses if any.
b) The cost includes purchase price, import duties and non-refundable purchase taxes after deducting trade discounts
and rebates and any cost directly attributable including borrowing cost on qualifying assets to bringing the asset to the
location and condition necessary for it to be capable of operating in the manner intended by the management.
c) Subsequent expenditure relating to PPE including major inspection costs, spare parts, standby and servicing equipment
are capitalized only when it is probable that future economic benefits associated with these will flow to the Company
and the cost of the item can be measured reliably.
d) In accordance with Ind AS 101-First Time Adoption of Indian Accounting Standards, the Company had chosen to
consider the carrying value for all its PPE as their deemed cost at the Opening Balance Sheet as at April 01, 2015.
e) Depreciation is calculated on straight line basis over estimated useful life as prescribed in Schedule II of the Companies
Act, 2013. Where the useful life of the asset is not as per Schedule II of the Companies Act 2013, the same is disclosed
under Notes to Accounts.
f) PPE individually costing '' 50,000 and below are fully depreciated in the year of purchase.
g) Where part of an item of PPE with a cost significant in relation to the total cost of the item and have different useful lives,
they are treated as separate components and depreciated over their estimated useful life.
h) Certain items like Special Tools are amortized over the number of units of production expected to be obtained from the
asset based on technical assessment and management estimates depending on the nature and usage of the respective
assets.
i) CSR Assets are fully depreciated in the year of capitalization.
j) The cost and the related accumulated depreciation are eliminated from the Financial Statements upon sale or
de-recognition or retirement of the asset and the resultant gains or losses are recognized in the Statement of Profit and
Loss of the relevant period.
k) The estimated useful lives, residual values and depreciation / amortisation method are reviewed at the end of each
reporting period with the effect of changes in estimates accounted for on a prospective basis.
5 CAPITAL ADVANCES AND CAPITAL WORK IN PROGRESS (CWIP)
a) Advances given towards acquisition of PPE outstanding at each Balance sheet date are disclosed as other non-current
assets.
b) Cost of Assets not ready for its intended use as on the Balance sheet date is shown as CWIP. Such properties are classified
to the appropriate categories of PPE when completed and ready for its intended use.
c) Depreciation on such assets commence when the assets are ready for their intended use.
6. INVESTMENT PROPERTY
a) A property is considered as investment property only if the same is held for earning rentals and /or for capital appreciation
or both. Properties held by the Company (directly or indirectly) which are used in the production of supply of goods or
services for administrative purposes are not considered as Investment Property.
b) Investment Properties are measured initially at cost. Subsequent to initial recognition, investment properties are stated
at cost less accumulated depreciation and accumulated impairment loss, if any. In accordance with Ind AS 101, First
Time Adoption of Indian Accounting Standards, the Company has chosen to consider the carrying value for all its
Investment Property recognized in its Indian GAAP financial statement as their deemed cost as at the transition date viz,
April 01, 2015.
c) Depreciation is calculated on straight line basis over estimated useful life as prescribed in Schedule II of the Companies
Act, 2013. Where the useful life of the asset is not as per Schedule II of the Companies Act 2013, the same is disclosed
under Notes to Accounts.
7. INTANGIBLE ASSETS
a) Intangible Assets controlled and from which future economic benefits are expected to flow and having useful life are
initially measured at cost and subsequently at cost less accumulated amortization and cumulative impairment losses,
if any.
b) Development Costs having useful life and which will generate probable future economic benefits are recognized as an
intangible asset and amortised over production based on technical estimate and to the extent not amortized are carried
forward.
c) Expenditure on license fees, documentation charges etc, based on the definition criteria of intangible assets in terms of
reliability of measurement of cost and future economic benefits from the assets, are amortised over production based on
technical estimates, and to the extent not amortised, are carried forward.
d) The cost of software internally generated / acquired for internal use which is not an integral part of the related hardware,
is recognized as an intangible asset and is amortised over three years, on straight line method. Amortisation commences
when the asset is available for use.
e) Expenditure on Research is recognized as expenditure in the period in which it is incurred.
f) Wherever it is not possible to assess the useful life of an intangible asset (whether or not significant) the same is not
amortised. Impairment on such intangible assets are reviewed annually and when there is an indication of impairment,
the asset is impaired.
8. LEASE ACCOUNTING
The Company recognizes, at inception of a contract a lease if the contract conveys the right to control the use of an identified
asset for a period of time in exchange for consideration.
Company as a lessee
a) At the date of commencement of the lease, the Company recognizes a right-of-use ("ROU") asset representing its right
to use the underlying asset for the lease term and a lease liability for all lease arrangements in which it is a lessee except
for leases with a term of 12 months or less (short term leases) and leases for which the underlying assets is of low value.
For such short term and assets of low value leases, the Company recognizes the lease payment as an expense on a
straight-line basis over the term of the lease.
b) At commencement date the ROU asset is measured at cost. The cost of the ROU asset measured at inception shall
comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or
before the commencement date less any lease incentives received, plus any initial direct costs incurred. The ROU assets
are subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any.
c) The ROU assets are depreciated using the straight-line method from the commencement date over the shorter of lease
term or useful life of ROU asset. The estimated useful lives of ROU assets are determined on the same basis as those of
PPE. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not
be recoverable. Impairment loss, if any, is recognized in the statement of profit and loss.
d) At the commencement date, the Company measures the lease liability at the present value of the lease payments that
are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease or, if not readily
determinable, using the Company''s incremental borrowing rate.
e) Lease liability and ROU asset are separately presented in the Balance Sheet and lease payments are classified as financing
cash flows. Short term lease payments and payments for leases of low value assets are classified as operating cash flows.
Company as a lessor
At the inception of the lease the Company classifies each of its leases as either an operating lease or a finance lease.
I. Finance Lease:
a) A lease that transfers substantially all the risks and rewards incidental to ownership of an underlying asset to the
Lessee is classified as a finance lease. Title may or may not eventually be transferred.
b) At commencement date, an amount equal to the net investment in the lease is presented as receivable. The interest
rate implicit in the lease is used to measure the value of net investment in the lease.
c) The finance income is recognized over the lease term in the statement of profit and loss account so as to reflect a
constant periodic rate of return on the net investment in the lease.
d) The de-recognition and impairment requirement of the underlying asset is tested as per Ind AS 109- Financial
instruments.
e) Any modifications in the lease are accounted as a separate lease when the recognition criteria specified in paragraph
79 of the standard are met.
II. Operating Lease:
a) Lease other than finance leases are operating leases.
b) The lease payment from operating leases are recognized as income on either a straight-line basis or another
systematic basic, if required.
c) The expenses including depreciation cost associated with earning of the lease income is recognized as an expense.
d) Depreciation on underlying assets subject to operating leases are calculated on straight line basis over estimated
useful life as prescribed in Schedule II of the Companies Act, 2013.
e) Any modifications in the lease are accounted as a separate lease if the recognition criteria specified in the standard
is met.
Transition to Ind AS 116
a) Effective April 1, 2019, the Company has applied Ind AS 116 on Lease Accounting. Ind AS 116 replaces Ind AS
17. The Company has adopted Ind AS 116 using the cumulative effect method. The effect of initially applying
this standard is recognized at the date of initial application (i.e. April 1, 2019) and the comparative information
continues to be reported under Ind AS 17.
b) The Company has chosen the practical expedient provided by the standard to apply Ind AS 116 only to contracts
that were previously identified as leases under Ind AS 17 and therefore has not reassessed whether a contract is or
contains a lease at the date of initial application.
9. NON CURRENT INVESTMENTS
a) In accordance with Ind AS 101, First time adoption of Indian Accounting Standards, the Company has chosen to consider
the carrying amount of investment as their deemed cost as at the Opening Balance Sheet as at 01st April, 2015.
b) The Company has elected to recognize its investments in subsidiary and joint venture companies at cost in accordance
with the option available in Ind AS 27 ''Separate financial statements''.
c) Investments are carried individually at cost less accumulated impairment in the value of such Investments.
d) Cost of Investment includes acquisition charges such as brokerage, fees and duties.
e) The Company reviews the book value of the investment on a quarterly basis and provides for diminution in the value of
the investment based on the net worth of the investee company.
f) Impairment in the value of investment is made only if in the opinion of management when there is a permanent fall in
value of investment.
10. IMPAIRMENT OF NON-FINANCIAL ASSETS
As at each reporting date the Company assesses whether there is any indication that an asset may be impaired. If any
indication exists, the Company estimates the recoverable amount. If the estimated recoverable amount is found less than its
carrying amount, the impairment loss is recognised and assets are written down to their recoverable amount.
11. FINANCIAL INSTRUMENTS
A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument
of another entity. The Company recognizes a financial asset or a financial liability only when it becomes party to the contractual
provisions of the instrument.
I. Financial Assets
Initial recognition and Measurement
All financial assets are recognized at fair value on initial recognition except for trade receivables which are initially
measured at transaction price.
Transaction costs that are directly attributable to the acquisition or issue of the financial asset, which are not valued at
fair value through profit or loss (FVTPL), are added to the fair value on initial recognition.
Subsequent Measurement
For subsequent measurement, the Company classifies a financial asset in accordance with the below criteria:
i. The Company''s business model for managing the financial asset and
ii. The contractual cash flow characteristics of the financial asset
Based on the above criteria, for purpose of subsequent measurement, financial assets are classified in the following
categories:
a) Financial assets carried at amortised cost:
A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is
to hold the financial asset in order to collect contractual cash flows 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.
This category applies to cash and bank balances, trade receivables, loans and other financial assets of the Company.
b) Financial assets carried at fair value through other comprehensive income (FVOCI):
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a
business model whose objective is achieved by both collecting contractual cash flows and selling financial assets
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.
c) Financial assets carried at fair value through profit or loss (FVTPL):
A financial asset, which is not classified in any of the above categories are subsequently measured at fair value
through profit or loss.
Derecognition
The Company derecognizes (i.e removes from the Company''s balance sheet) a financial asset (or where applicable
a part of a financial asset) when the contractual rights to receive the cash flows from the financial asset expire or it
transfers the financial asset and the transfer qualifies for derecognition under Ind AS 109.
On derecognition of a financial asset, (except as mentioned in (b) above for financial assets measured at FVTOCI),
the difference between the asset''s carrying amount and the consideration received is recognized in the Statement
of Profit and Loss.
Impairment of Financial Assets
In accordance with Ind AS 109, the Company applies the expected credit loss (ECL) model for measurement and
recognition of impairment loss on financial assets with credit risk exposure.
a) Debts from the Government departments are generally treated as fully recoverable, based on past experience,
and hence in the opinion of Management there is no increase in the credit risk of such financial assets.
b) In respect of dues outstanding for a significant period of time, impairment on account of expected credit loss
is being assessed on a case-to-case basis.
c) Suitable provision is made for dues which are disputed.
d) ECL impairment loss allowance (or reversal) recognized during the period is recognized as expense/income in
the Statement of Profit and Loss.
II. Financial Liability
Initial recognition and Measurement
All financial liabilities are recognized at fair value on initial recognition and in the case of liabilities subsequently measured
at amortized cost, net of directly attributable transaction cost.
The Company''s Financial Liabilities include trade and other payables, loans and borrowings. For trade and other
payables liabilities are recognized for the amounts to be paid for the goods / services received whether billed by the
supplier or not.
Subsequent Measurement
All financial liabilities of the Company are subsequently measured at amortized cost.
Derecognition
A financial liability (or where applicable a part of the financial liability) is derecognized from the Company''s Balance Sheet
when the obligation specified in the contract is discharged or cancelled or expires.
The difference between the carrying amount of the financial liability derecognized and the consideration paid is
recognized in the Statement of Profit and Loss.
III. Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet wherever there is
a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis or
to realize the asset and settle the liability simultaneously.
12. FAIR VALUE MEASUREMENT
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair
value hierarchy that categorizes into three levels, described as follows, the inputs to valuation techniques used to measure
value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities
(Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs):
Level 1 - quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 - inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The Company measures financial instruments, in its financial statements at fair value at each reporting date.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy.
13. DEFERRED DEBTS
Unpaid installment payments under deferred payment terms for the cost of imported materials and tooling content of
the equipment / products sold are accounted as deferred debts from the customer and are recovered as and when the
installments are paid.
14. INVENTORIES
a) Inventories other than Saleable / Disposable scrap are valued at lower of Cost and Net Realisable Value. Saleable /
Disposable scrap is valued at net realisable value.
b) The cost of raw material excluding Goods-in-Transit, components and stores are assigned by using the weighted average
cost formula. Goods-in-Transit are valued at cost-to-date. In the case of Finished Goods, Stock-in-Trade and Work-In¬
Progress, cost includes costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their
present location and condition. Cost includes Taxes and duties (other than Taxes and duties for which input credit is
available).
c) Provision for redundancy is assessed on ageing at a suitable percentage / level of the value of closing inventory of raw
material and components, stores and spare parts and construction material. Besides, wherever necessary, adequate
provision is made for the redundancy of such materials in respect of completed / specific projects and other surplus /
redundant material pending transfer to salvage stores.
d) Stores declared surplus / unserviceable / redundant are charged to revenue in the year of such identification.
e) Consumables issued from stores and lying unused at the end of the year are not reckoned as inventory.
15. REVENUE RECOGNITION
I. Manufacturing of Aircraft/ Helicopter/Spares/Repair Contracts
a) Revenue on Sale of Goods and Services is recognized at a point in time when the Company satisfies the performance
obligation on transfer of control of the products to the Customer in an amount that reflects the consideration the
Company expects to receive in exchange for those products pursuant to the Contract with customer. It is measured
at transaction price. Revenue from service Warranty is recognized on straight line basis over the period of Warranty.
Transfer of Control happens on:
i. Acceptance by the buyer''s Inspector, by way of Signaling Out Certificate (SOC)
or
Acceptance by the buyer''s pilot, by way of Certificate of Conformity (COC), wherever, specifically required in
the contract, in the case of Aircrafts/Helicopters,
ii. Acceptance by the Buyer''s inspection agency/SOC or as agreed to by the Buyer, in the case of Repair & Overhaul
of Aircraft/Helicopter/Engine, Rotables, Site repairs, Cat ''B'' repair servicing etc.,
iii. For other deliverables like Spares, Revenue is recognized based on the Acceptance by the buyer''s inspection
agency or as agreed to by the buyer.
b) In case of Performance Based Logistic Contracts, Revenue is recognized over a period of time, based on Helicopter
Availability Certificate, jointly signed by Seller and Buyer.
c) Revenue is recognized based on the prices agreed with Customers. Where the prices are yet to be agreed/
determined, the revenue is recognised at the most likely amount based on past experience. Differential revenue, if
any, is recognised on receipt of approval / sanction.
II. Development Contracts
a) Revenue is recognized over a period of time on incurrence of expenditure identifiable to work orders:
i. where milestones have been defined, on achievement of milestone under the output method.
ii. where milestones have not been defined, on incurrence of expenditure under the input method.
b) Where the customer''s sanction for revision is pending, the expenditure incurred is retained in work-in-progress/
intangible asset. Subsequent revenue is recognized on receipt of revised financial sanction from the customer.
III. Significant Financing Component
a) For the majority of the contracts, advance payments are received, prior to commencement of work and milestone
payments are paid in accordance with the terms of the contract.
b) Payments received from customers in advance are not considered to be a significant financing component as they
are given with the objective to protect the interest of the contracting parties.
IV. Contract Modification
A contract modification exists when the change in scope is agreed but the corresponding change in price is not
determined. In such circumstances, revenue is recognized, based on the Company''s assessment of the estimated change
in the transaction price arising from the modification.
V. Other Income
Interest Income is accrued on a time proportion basis, by reference to the principal outstanding and at the effective
interest rate applicable.
Dividend income from investments is recognised when the right to receive payment has been established.
VI. Receivables
Receivables represent the Company''s unconditional right to consideration under the contract. The right to consideration
is considered unconditional, if only passage of time is required before payment of that consideration is due.
VII. Contract Assets
Contract Assets represents the Company''s right to receive the consideration in exchange for the Goods or Services that
the Company has transferred to the Customer, when that right is conditioned on something other than passage of time.
16. EMPLOYEE BENEFITS
I. Short Term Employee Benefits:
All employee benefits payable wholly within twelve months of rendering the related service are classified as short-term
employee benefits and they mainly include wages & salaries, incentives, performance related pay, non-monetary benefits
such as medical care, etc. They are valued on undiscounted basis and recognized as an expense in the statement of profit
and loss of the period in which the employee renders the related service.
II. Post-Employment Benefits:
a) The Company operates Defined Contribution Pension Scheme and Post Superannuation Group Health Insurance
Scheme for employees which are considered as defined contribution plans. The schemes are managed by duly
constituted trusts. The Company periodically contributes to the trust fund. The Company recognizes contribution
payable to a defined contribution plan as an expense in the statement of profit and loss account. The Company''s
liability is limited to the extent of contribution made to these trusts.
b) Provident Fund Scheme
Eligible employees of the Company receive benefits from a provident fund, which is a defined benefit plan. The
Company makes specified monthly contributions towards Employee Provident Fund scheme to separate trusts
established for the purpose based on a fixed percentage of the eligible employee''s salary and the same is charged
to the Statement of Profit and Loss.
The minimum rate at which annual interest is payable by the trust to the beneficiaries is being notified by the
Government. The Company has an obligation to make good the shortfall, if any, between the return on investments
of the trust and the notified interest rate. Such shortfall is determined at each Balance Sheet date based on actuarial
valuation and charged to the Statement of Profit and Loss.
c) Gratuity Scheme
The Company provides for gratuity covering eligible employees. The same is considered as a defined benefit
retirement plan. The Company contributes Gratuity liabilities to the Gratuity Trust.
Recognition and measurement of defined benefit plans:
The cost of providing defined benefits is determined on the basis of actuarial valuation using the Projected Unit
Credit method with valuation being carried out at each Balance Sheet date.
The Company recognises the net obligation of a defined benefit plan in its Balance Sheet as an asset or liability. The
net defined benefit obligations recognised in the Balance Sheet represent the present value of the defined benefit
obligations as reduced by the fair value of plan assets.
The Company recognises the following changes in the net defined benefit obligation as an expense in the statement
of profit and loss.
i. Service cost comprising current service costs, past service costs.
ii. Net interest on the defined benefit liability (asset). Net interest cost is calculated by applying the discount rate
to the net balance of the defined benefit obligation and the fair value of plan assets.
Gains and losses through re-measurements of the net defined benefit liability/(asset) comprising actuarial gains
and losses and the return on the plan assets (excluding amounts included in net interest on the net defined benefit
liability/asset), are recognized in the balance sheet with a corresponding debit or credit to retained earnings through
other comprehensive income in the period in which they occur. Re-measurements are not classified to the statement
of profit and loss in the subsequent period. The effect of any plan amendments is recognized in net profit in the
Statement of Profit and Loss.
III. Compensated Absences:
The Company has a policy on compensated absences like Vacation leave which are accumulating in nature. Vacation
leave can either be availed or encashed subject to restrictions on the maximum number of accumulations of leave.
The Company determines the liability for such accumulated leaves using the Project Unit Credit method with actuarial
valuations being carried out at each Balance Sheet date. The obligation is funded through qualifying insurance policies
made with insurance companies.
17. FOREIGN CURRENCY TRANSACTION/TRANSLATION
Initial Recognition:
On initial recognition, transaction in foreign currencies, entered into by the Company, are recorded in the functional currency
by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency
at the date of the transaction.
Measurement of Foreign currency items at reporting date:
Foreign currency monetary items are translated at closing exchange rates. Non- monetary items that are measured in terms
of historical cost in a foreign currency are translated using the exchange rate at the date of transaction. Non-monetary items
that are measured at fair value in a foreign currency are translated using the exchange rate at the date when the fair value is
measured.
Recognition of Exchange Difference:
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from
those at which they are translated on initial recognition during the period or in previous financial statement is recognized in
statement of profit and loss in the period in which they arise.
18. INCOME TAXES
a) Current Tax is the amount of tax payable on the taxable income for the year as determined in accordance with the
provisions of Income Tax Act,1961(the "Act").
b) Deferred Tax is recognized using the Balance Sheet method, providing for temporary differences between the carrying
amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred
Tax Assets in excess of Deferred Tax Liability are recognized to the extent that it is probable that future taxable profits will
be available against which the temporary difference can be utilized. Deferred Tax Assets are reviewed at each reporting
date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
19. CLAIMS BY THE COMPANY
Claims on suppliers / underwriters / carriers towards loss / damages, claims for export subsidy, duty drawbacks, and claims on
Customs department for refunds are accounted when claims are preferred.
Mar 31, 2024
CORPORATE INFORMATION:
Hindustan Aeronautics Limited (the Company) is a public company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India with its registered office located at Bengaluru, Karnataka, India. The Company''s shares are listed on Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).The Company is a public sector enterprise and is under the administrative control of the Department of Defence Production, Ministry of Defence.
The Company is engaged in the design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products including, aircraft, helicopters, aero-engines, avionics, accessories and aerospace structures.
1. BASIS OF ACCOUNTING:
The Financial Statements are prepared to comply in all material aspects with Indian Accounting Standards (Ind AS) as prescribed under Section 133 of Companies Act, 2013 read with relevant rules of the Companies (Indian Accounting Standards) Rules.
2. USES OF ESTIMATES:
a) Preparation of financial statements in conformity with the recognition and the measurement principle of Ind AS requires the management of the Company to make estimates, judgments and assumptions that affects the reported balances of Assets and Liabilities, disclosure relating to contingent liabilities as on the date of the Financial Statements and the reported amount of revenues and expense for the reporting period.
b) Estimates and the underlying assumption are reviewed on an ongoing basis. The revision to the accounting estimates, if material is recognized in the period in which the estimates are revised.
c) Estimates and judgments made in applying accounting policies that have significant effect on the amounts recognized in the financial statements are as follows:
i. Employee Defined benefit plans
The liabilities and costs for defined benefit plans are determined using actuarial valuations. The actuarial valuation involves making assumptions. These assumptions include salary escalation rate, discount rates, expected rate of return on assets and mortality rates.
ii. Provisions and contingencies
Assessments undertaken in recognising provisions and contingencies have been made as per the best judgment of the management based on the current available information.
iii. Income Taxes
The Company''s tax jurisdiction is India. Significant judgments are involved in estimating budgeted profits for the purpose of paying advance tax, determining the provision for income taxes, including amount expected to be paid/ recovered for uncertain tax positions.
3. PROPERTY, PLANT AND EQUIPMENT(PPE):
a) Property, Plant and Equipment are stated at cost net of accumulated depreciation and accumulated impairment losses, if any.
b) The cost includes purchase price, import duties and non-refundable purchase taxes after deducting trade discounts and rebates and any cost directly attributable including borrowing cost on qualifying assets to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by the management.
c) Subsequent expenditure relating to PPE including major inspection costs, spare parts, standby and servicing equipment are capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably.
d) In accordance with Ind AS 101-First Time Adoption of Indian Accounting Standards, the Company had chosen to consider the carrying value for all its PPE as their deemed cost at the Opening Balance Sheet as at April 01, 2015.
e) Depreciation is calculated on straight line basis over estimated useful life as prescribed in Schedule II of the Companies Act 2013. Where the useful life of the asset is not as per Schedule II of the Companies Act 2013, the same is disclosed under Notes to Accounts.
f) PPE individually costing ''50,000 and below are fully depreciated in the year of purchase.
g) Where part of an item of PPE with a cost significant in relation to the total cost of the item and have different useful lives, they are treated as separate components and depreciated over their estimated useful life.
h) Certain items like Special Tools are amortized over the number of units of production expected to be obtained from the asset based on technical assessment and management estimates depending on the nature and usage of the respective assets.
i) CSR Assets are fully depreciated in the year of capitalization.
j) The cost and the related accumulated depreciation are eliminated from the Financial Statements upon sale or derecognition or retirement of the asset and the resultant gains or losses are recognized in the Statement of Profit and Loss of the relevant period.
k) The estimated useful lives, residual values and depreciation / amortisation method are reviewed at the end of each reporting period with the effect of changes in estimates accounted for on a prospective basis.
3.1: CAPITAL ADVANCES AND CAPITAL WORK IN PROGRESS (CWIP)
a) Advances given towards acquisition of PPE outstanding at each Balance Sheet date are disclosed as other Noncurrent assets.
b) Cost of Assets not ready for its intended use as on the Balance Sheet date is shown as CWIP. Such properties are classified to the appropriate categories of PPE when completed and ready for its intended use.
c) Depreciation on such assets commence when the assets are ready for their intended use.
4. investment property
a) A property is considered as investment property only if the same is held for earning rentals and /or for capital appreciation or both. Properties held by the Company (directly or indirectly) which are used in the production of supply of goods or services for administrative purposes are not considered as Investment Property.
b) Investment Properties are stated at cost net of accumulated depreciation and accumulated impairment losses, if any. In accordance with Ind AS 101, First Time Adoption of Indian Accounting Standards, the Company has chosen to consider the carrying value for all its Investment Property recognized in its Indian GAAP financial statement as their deemed cost as at the transition date viz, April 01, 2015.
c) Depreciation is calculated on straight line basis over estimated useful life as prescribed in Schedule II of the Companies Act 2013. Where the useful life of the asset is not as per Schedule II of the Companies Act 2013, the same is disclosed under Notes to Accounts.
5. INTANGIBLE ASSETS
a) Intangible Assets controlled and from which future economic benefits are expected to flow and having useful life are recognized at cost less any accumulated amortization and accumulated impairment losses, if any.
b) Development Costs having useful life and which will generate probable future economic benefits are recognized as an intangible asset and amortised over production based on technical estimate and to the extent not amortized are carried forward.
c) Expenditure on license fees, documentation charges etc, based on the definition criteria of intangible assets in terms of reliability of measurement of cost and future economic benefits from the assets, are amortised over production based on technical estimates, and to the extent not amortised, are carried forward.
d) The cost of software internally generated / acquired for internal use which is not an integral part of the related hardware, is recognized as an intangible asset and is amortised over three years, on straight line method. Amortisation commences when the asset is available for use.
e) Expenditure on Research is recognized as expenditure in the period in which it is incurred.
f) Wherever it is not possible to assess the useful life of an intangible asset (whether or not significant) the same is not amortised. Impairment on such intangible assets are reviewed annually and when there is an indication of impairment, the asset is impaired.
6. LEASE ACCOUNTING
6.1. The Company recognizes, at inception of a contract a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
6.2. The Company as a lessee
a) At the date of commencement of the lease, the Company recognizes a right-of-use ("ROU") asset representing its right to use the underlying asset for the lease term and a lease liability for all lease arrangements in which it is a lessee except for leases with a term of 12 months or less (short term leases) and leases for which the underlying assets is of low value. For such short term and assets of low value leases, the Company recognizes the lease payment as an expense on a straight line basis over the term of the lease.
b) At commencement date the ROU asset is measured at cost. The cost of the ROU asset measured at inception shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date less any lease incentives received, plus any initial direct costs incurred. The ROU assets are subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any.
c) The ROU assets are depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of ROU asset. The estimated useful lives of ROU assets are determined on the same basis as those of PPE. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss, if any, is recognized in the statement of profit and loss.
d) At the commencement date, the Company measures the lease liability at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the Company''s incremental borrowing rate.
e) Lease liability and ROU asset are separately presented in the Balance Sheet and lease payments are classified as financing cash flows. Short term lease payments and payments for leases of low value assets are classified as operating cash flows.
6.3. Company as a lessor
At the inception of the lease the Company classifies each of its leases as either an operating lease or a finance lease.
6.3.1 Finance Lease:
a) A lease that transfers substantially all the risks and rewards incidental to ownership of an underlying asset to the Lessee is classified as a finance lease. Title may or may not eventually be transferred.
b) At commencement date, an amount equal to the net investment in the lease is presented as receivable. The interest rate implicit in the lease is used to measure the value of net investment in the lease.
c) The finance income is recognized over the lease term in the statement of profit and loss account so as to reflect a constant periodic rate of return on the net investment in the lease.
d) The de-recognition and impairment requirement of the underlying asset is tested as per Ind AS 109- Financial instruments.
e) Any modifications in the lease are accounted as a separate lease when the recognition criteria specified in paragraph 79 of the standard are met.
6.3.2 Operating Lease:
a) Lease other than finance leases are operating leases.
b) The lease payment from operating leases are recognized as income on either a straight-line basis or another systematic basic, if required.
c) The expenses including depreciation cost associated with earning of the lease income is recognized as an expense.
d) Depreciation on underlying assets subject to operating leases are calculated on straight line basis over estimated useful life as prescribed in Schedule II of the Companies Act, 2013.
e) Any modifications in the lease are accounted as a separate lease if the recognition criteria specified in the standard is met.
6.4. Transition to Ind AS 116
a) Effective April 1, 2019, the Company has applied Ind AS 116 on Lease Accounting. Ind AS 116 replaces Ind AS 17. The Company has adopted Ind AS 116 using the cumulative effect method. The effect of initially applying this standard is recognized at the date of initial application (i.e. April 1, 2019) and the comparative information continues to be reported under Ind AS 17.
b) The Company has chosen the practical expedient provided by the standard to apply Ind AS 116 only to contracts that were previously identified as leases under Ind AS 17 and therefore has not reassessed whether a contract is or contains a lease at the date of initial application.
7. NON CURRENT INvESTMENTS
a) In accordance with Ind AS 101, First time adoption of Indian Accounting Standards, the Company has chosen to consider the carrying amount of investment as their deemed cost as at the Opening Balance Sheet as at 01st April, 2015.
b) Investments are carried individually at cost less accumulated impairment in the value of such Investments.
c) Cost of Investment includes acquisition charges such as brokerage, fees and duties.
d) The Company reviews the book value of the investment on a quarterly basis and provides for diminution in the value of the investment based on the net worth of the investee company.
e) Impairment in the value of investment is made only if in the opinion of management when there is a permanent fall in value of investment.
8. IMPAIRMENT OF ASSETS
As at each Balance Sheet date, the carrying amount of assets is assessed as to whether there is any indication of impairment. If the estimated recoverable amount is found less than its carrying amount, the impairment loss is recognised and assets are written down to their recoverable amount.
9. FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The Company recognizes all Financial Assets other than non-current investments and Financial Liabilities at Fair Value on inception and subsequent measurements are done at amortised cost.
10. DEFERRED DEBTS
Unpaid installment payments under deferred payment terms for the cost of imported materials and tooling content of the equipment / products sold are accounted as deferred debts from the customer and are recovered as and when the installments are paid.
11. TRADE AND OTHER PAYABLES
Liabilities are recognized for the amounts to be paid for the goods / services received whether billed by the supplier or not.
12. INVENTORIES
a) Inventories are valued at lower of Cost and Net Realisable Value.
b) The cost of raw material excluding Goods-in-Transit, components and stores are assigned by using the weighted average cost formula. Goods-in-Transit are valued at cost-to-date. In the case of Finished Goods, Stock-in-Trade and Work-InProgress, cost includes costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost includes Taxes and duties (other than Taxes and duties for which input credit is available).
c) Provision for redundancy is assessed on ageing at a suitable percentage / level of the value of closing inventory of raw material and components, stores and spare parts and construction material. Besides, wherever necessary, adequate provision is made for the redundancy of such materials in respect of completed / specific projects and other surplus / redundant material pending transfer to salvage stores.
d) Saleable / Disposable scrap is valued at Net Realisable Value.
e) Stores declared surplus / unserviceable / redundant are charged to revenue in the year of such identification.
f) Consumables issued from stores and lying unused at the end of the year are not reckoned as inventory.
13. REVENUE RECOGNITION
13.1. Manufacturing of Aircraft/ Helicopter/Spares/Repair Contracts
a) Revenue on Sale of Goods and Services is recognized at a point in time when the Company satisfies the performance obligation on transfer of control of the products to the Customer in an amount that reflects the consideration the Company expects to receive in exchange for those products pursuant to the Contract with customer. Revenue from service Warranty is recognized on straight line basis over the period of Warranty.
Transfer of Control happens on:
i. Acceptance by the buyer''s Inspector, by way of Signaling Out Certificate (SOC)
or
Acceptance by the buyer''s pilot, by way of Certificate of Conformity (COC), wherever, specifically required in the contract, in the case of Aircrafts/Helicopters,
ii. Acceptance by the Buyer''s inspection agency/SOC or as agreed to by the Buyer, in the case of Repair& Overhaul of Aircraft/Helicopter/Engine, Rotables, Site repairs, Cat ''B'' repair servicing etc.,
iii. For other deliverables like Spares, Revenue is recognized based on the Acceptance by the buyer''s inspection agency or as agreed to by the buyer.
b) In case of Performance Based Logistic Contracts, Revenue is recognized over a period of time, based on Helicopter Availability Certificate, Jointly signed by Seller and Buyer.
c) Revenue is recognized based on the prices agreed with Customers. Where the prices are yet to be agreed/ determined, the revenue is recognised at the most likely amount based on past experience. Differential revenue, if any, is recognised on receipt of approval / sanction.
13.2. Development Contracts
a) Revenue is recognized over a period of time on incurrence of expenditure identifiable to work orders: i. where milestones have been defined, on achievement of milestone under the output method.
ii. where milestones have not been defined, on incurrence of expenditure under the input method.
b) Where the customer''s sanction for revision is pending, the expenditure incurred is retained in work-in-progress/ intangible asset. Subsequent revenue is recognized on receipt of revised financial sanction from the customer.
13.3. Significant Financing Component
a) For the majority of the contracts, advance payments are received, prior to commencement of work and milestone payments are paid in accordance with the terms of the contract.
b) Payments received from customers in advance are not considered to be a significant financing component as they are given with the objective to protect the interest of the contracting parties.
13.4. Contract Modification
A contract modification exists when the change in scope is agreed but the corresponding change in price is not determined. In such circumstances, revenue is recognized, based on the Company''s assessment of the estimated change in the transaction price arising from the modification.
13.5. Other Income
Interest Income is accrued on a time proportion basis, by reference to the principal outstanding and at the effective interest rate applicable.
Dividend income from investments is recognised when the right to receive payment has been established.
14. Receivables
a) Receivables represent the Company''s unconditional right to consideration under the contract. The right to consideration is considered unconditional, if only passage of time is required before payment of that consideration is due.
b) Debts from the Government departments are generally treated as fully recoverable, based on past experience, and hence in the opinion of Management there is no increase in credit risk of such financial assets.
c) Impairment on account of expected credit loss is being assessed on a case to case basis in respect of dues outstanding for a significant period of time.
14.1. Contract Assets
Contract Assets represents the Company''s right to receive the consideration in exchange for the Goods or Services that the Company has transferred to the Customer, when that right is conditioned on something other than passage of time.
15. EMPLOYEE BENEFITS
a) Gratuity and Provident Fund are Defined Benefit Plans and the liability is provided on the basis of actuarial valuation in respect of eligible employees and is remitted to the trust progressively.
b) Provision for Earned leave is a Defined Benefit Plan and the liability is provided on the basis of actuarial valuation.
c) Pension Scheme and Post Superannuation Group Health Insurance Scheme for employees are Defined Contribution Plans and the contribution to the corpus of the same is made by the Company to the respective trust. The Company''s liability is limited to the extent of contribution made to these trusts.
16. FOREIGN CURRENCY TRANSACTION/TRANSLATION a) Initial Recognition:
On initial recognition, transaction in foreign currencies, entered into by the Company, are recorded in the functional currency by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.
b) Measurement of Foreign currency items at reporting date:
Foreign currency monetary items are translated at closing exchange rates. Non- monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of transaction. Nonmonetary items that are measured at fair value in a foreign currency are translated using the exchange rate at the date when the fair value is measured.
c) Recognition of Exchange Difference:
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they are translated on initial recognition during the period or in previous financial statement is recognized in statement of profit and loss in the period in which they arise.
17. INCOME TAXES
a) Current Tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of Income Tax Act,1961(the "Act").
b) Deferred Tax is recognized using the Balance Sheet method, providing for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred Tax Assets in excess of Deferred Tax Liability are recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred Tax Assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
18. CLAIMS BY THE COMPANY
Claims on suppliers / underwriters / carriers towards loss / damages, claims for export subsidy, duty drawbacks, and claims on Customs department for refunds are accounted when claims are preferred.
19. provision and contingent liabilities
a) A provision is recognised, when the Company has the present obligation as result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which reliable estimate can be made.
b) Where no reliable estimate can be made or when there is a possible obligation or present obligations that may, but probably will not, require an outflow of resources, disclosure is made as Contingent Liability. Expected reimbursement, if any, is disclosed under Notes to Accounts.
c) When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
19.1 provision for warranty
Provision for warranty is recognized on actuarial valuation for Manufacturing and Repair and Overhaul of Aircraft/ Helicopter/Engine/Rotables and Spares and development activities etc.
19.2 PROviSION FOR LIQUIDATED DAMAGES
Provision for Liquidated Damages is recognized when the expected date of delivery of Goods / rendering of Service in respect of Manufacturing and Repair and Overhaul of Aircraft/Helicopter/Engine/Rotables, Spares and Development activities etc is beyond the due date as per delivery schedule and at the rates specified in the Contract with the Customer.
19.3 PROviSION FOR ONEROUS CONTRACTS
A provision for onerous contract is recognized when the expected benefits to be derived by the Company from the contract are lower than the unavoidable cost of meeting its obligations under the contract. Before a provision is established, the Company recognizes any impairment loss on the assets associated with that contract.
20. ESTIMATES AND ERRORS
The Company revises its accounting policies if the change is required due to a change in Ind AS or if the change will provide more relevant and reliable information to the users of the financial statements. Changes in accounting policies are applied retrospectively unless it is impracticable to apply.
A change in an accounting estimate that results in changes in the carrying amounts of recognised assets or liabilities or to statement of profit and loss is applied prospectively in the period(s) of change.
When it is difficult to distinguish a change in an accounting policy from a change in an accounting estimate, the change is treated as a change in an accounting estimate.
Discovery of material errors results in revisions retrospectively by restating the comparative amounts of assets, liabilities, and equity of the earliest prior period in which the error is discovered. The opening balances of the earliest period presented are also restated.
21. EVENTS AFTER THE REPORTING PERIOD
Adjusting events are events that provide further evidence of conditions that existed at the end of the reporting period. The financial statements are adjusted for such events before authorisation for issue.
Non-adjusting events are events that are indicative of conditions that arose after the end of the reporting period. Nonadjusting events after the reporting date are not accounted.
22. The functional currency of the Company is Indian Rupee.
Mar 31, 2023
CORPORATE INFORMATION:
Hindustan Aeronautics Limited (the Company) is a public company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India with its registered office located at Bengaluru, Karnataka, India. The Company''s shares are listed on Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).The Company is a public sector enterprise and is under the administrative control of the Department of Defence Production, Ministry of Defence.
The Company is engaged in the design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products including, aircraft, helicopters, aero-engines, avionics, accessories and aerospace structures.
The Financial Statements are prepared to comply in all material aspects with Indian Accounting Standards (Ind AS) as prescribed under Section 133 of Companies Act, 2013 read with relevant rules of the Companies (Indian Accounting Standards)Rules.
a) Preparation of financial statements in conformity with the recognition and the measurement principle of Ind AS requires the management of the Company to make estimates, judgments and assumptions that affects the reported balances of Assets and Liabilities, disclosure relating to contingent liabilities as on the date of the Financial Statements and the reported amount of revenues and expense for the reporting period.
b) Estimates and the underlying assumption are reviewed on an ongoing basis. The revision to the accounting estimates, if material is recognized in the period in which the estimates are revised.
c) Estimates and judgments made in applying accounting policies that have significant effect on the amounts recognized in the financial statements are as follows:
i. Employee Defined benefit plans
The liabilities and costs for defined benefit plans are determined using actuarial valuations. The actuarial valuation involves making assumptions. These assumptions include salary escalation rate, discount rates, expected rate of return on assets and mortality rates.
ii. Provisions and contingencies
Assessments undertaken in recognising provisions and contingencies have been made as per the best judgment of the management based on the current available information.
The Company''s tax jurisdiction is India. Significant judgments are involved in estimating budgeted profits for the purpose of paying advance tax, determining the provision for income taxes, including amount expected to be paid/ recovered for uncertain tax positions.
3. PROPERTY, PLANT AND EQUIPMENT(PPE):
a) Property, Plant and Equipment are stated at cost net of accumulated depreciation and accumulated impairment losses, if any.
b) The cost includes purchase price, import duties and non-refundable purchase taxes after deducting trade discounts and rebates and any cost directly attributable including borrowing cost on qualifying assets to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by the management.
c) Subsequent expenditure relating to PPE including major inspection costs, spare parts, standby and servicing equipment are capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably.
d) In accordance with Ind AS 101-First Time Adoption of Indian Accounting Standards, the Company had chosen to consider the carrying value for all its PPE as their deemed cost at the Opening Balance Sheet as at April 01, 2015.
e) Depreciation is calculated on straight line basis over estimated useful life as prescribed in Schedule II of the Companies Act 2013. Where the useful life of the asset is not as per Schedule II of the Companies Act 2013, the same is disclosed under Notes to Accounts.
f) PPE individually costing '' 50,000 and below are fully depreciated in the year of purchase.
g) Where part of an item of PPE with a cost significant in relation to the total cost of the item and have different useful lives, they are treated as separate components and depreciated over their estimated useful life.
h) Certain items like Special Tools are amortized over the number of units of production expected to be obtained from the asset based on technical assessment and management estimates depending on the nature and usage of the respective assets.
i) CSR Assets are fully depreciated in the year of capitalization.
j) The cost and the related accumulated depreciation are eliminated from the Financial Statements upon sale or derecognition or retirement of the asset and the resultant gains or losses are recognized in the Statement of Profit and Loss of the relevant period.
k) The estimated useful lives, residual values and depreciation / amortisation method are reviewed at the end of each reporting period with the effect of changes in estimates accounted for on a prospective basis.
3.1: CAPITAL ADVANCES AND CAPITAL WORK IN PROGRESS (CWIP)
a) Advances given towards acquisition of PPE outstanding at each Balance Sheet date are disclosed as other Noncurrent assets.
b) Cost of Assets not ready for its intended use as on the Balance Sheet date is shown as CWIP Such properties are classified to the appropriate categories of PPE when completed and ready for its intended use.
c) Depreciation on such assets commence when the assets are ready for their intended use.
a) A property is considered as investment property only if the same is held for earning rentals and /or for capital appreciation or both. Properties held by the Company (directly or indirectly) which are used in the production of supply of goods or services for administrative purposes are not considered as Investment Property.
b) Investment Properties are stated at cost net of accumulated depreciation and accumulated impairment losses, if any. In accordance with Ind AS 101, First Time Adoption of Indian Accounting Standards, the Company has chosen to consider the carrying value for all its Investment Property recognized in its Indian GAAP financial statement as their deemed cost as at the transition date viz, April 01, 2015.
c) Depreciation is calculated on straight line basis over estimated useful life as prescribed in Schedule II of the Companies Act 2013. Where the useful life of the asset is not as per Schedule II of the Companies Act 2013, the same is disclosed under Notes to Accounts.
a) Intangible Assets controlled and from which future economic benefits are expected to flow and having useful life are recognized at cost less any accumulated amortization and accumulated impairment losses, if any.
b) Development Costs having useful life and which will generate probable future economic benefits are recognized as an intangible asset and amortised over production based on technical estimate and to the extent not amortized are carried forward.
c) Expenditure on license fees, documentation charges etc, based on the definition criteria of intangible assets in terms of
reliability of measurement of cost and future economic benefits from the assets, are amortised over production based on
technical estimates, and to the extent not amortised, are carried forward.
d) The cost of software internally generated / acquired for internal use which is not an integral part of the related hardware, is recognized as an intangible asset and is amortised over three years, on straight line method. Amortisation commences when the asset is available for use.
e) Expenditure on Research is recognized as expenditure in the period in which it is incurred.
f) Wherever it is not possible to assess the useful life of an intangible asset (whether or not significant) the same is not
amortised. Impairment on such intangible assets are reviewed annually and when there is an indication of impairment, the asset is impaired.
6.1. The Company recognizes, at inception of a contract a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
a) At the date of commencement of the lease, the Company recognizes a right-of-use ("ROU") asset representing its right to use the underlying asset for the lease term and a lease liability for all lease arrangements in which it is a lessee except for leases with a term of 12 months or less (short term leases) and leases for which the underlying assets is of low value. For such short term and assets of low value leases, the Company recognizes the lease payment as an expense on a straight line basis over the term of the lease.
b) At commencement date the ROU asset is measured at cost. The cost of the ROU asset measured at inception shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date less any lease incentives received, plus any initial direct costs incurred. The ROU assets are subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any.
c) The ROU assets are depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of ROU asset. The estimated useful lives of ROU assets are determined on the same basis as those of PPE. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss, if any, is recognized in the statement of profit and loss.
d) At the commencement date, the Company measures the lease liability at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the Company''s incremental borrowing rate.
e) Lease liability and ROU asset are separately presented in the Balance Sheet and lease payments are classified as financing cash flows. Short term lease payments and payments for leases of low value assets are classified as operating cash flows.
At the inception of the lease the Company classifies each of its leases as either an operating lease or a finance lease.
a) A lease that transfers substantially all the risks and rewards incidental to ownership of an underlying asset to the Lessee is classified as a finance lease. Title may or may not eventually be transferred.
b) At commencement date, an amount equal to the net investment in the lease is presented as receivable. The interest rate implicit in the lease is used to measure the value of net investment in the lease.
c) The finance income is recognized over the lease term in the statement of profit and loss account so as to reflect a constant periodic rate of return on the net investment in the lease.
d) The de-recognition and impairment requirement of the underlying asset is tested as per Ind AS 109-Financial instruments.
e) Any modifications in the lease are accounted as a separate lease when the recognition criteria specified in paragraph 79 of the standard are met.
a) Lease other than finance leases are operating leases.
b) The lease payment from operating leases are recognized as income on either a straight-line basis or another systematic basis, if required.
c) The expenses including depreciation cost associated with earning of the lease income is recognized as an expense.
d) Depreciation on underlying assets subject to operating leases are calculated on straight line basis over estimated useful life as prescribed in Schedule II of the Companies Act, 2013.
e) Any modifications in the lease are accounted as a separate lease if the recognition criteria specified in the standard is met.
a) Effective April 1, 2019, the Company has applied Ind AS 116 on Lease Accounting. Ind AS 116 replaces Ind AS 17. The Company has adopted Ind AS 116 using the cumulative effect method. The effect of initially applying this standard is recognized at the date of initial application (i.e. April 1, 2019) and the comparative information continues to be reported under Ind AS 17.
b) The Company has chosen the practical expedient provided by the standard to apply Ind AS 116 only to contracts that were previously identified as leases under Ind AS 17 and therefore has not reassessed whether a contract is or contains a lease at the date of initial application.
a) In accordance with Ind AS 101, First time adoption of Indian Accounting Standards, the Company has chosen to consider
the carrying amount of investment as their deemed cost as at the Opening Balance Sheet as at 01st April, 2015.
b) Investments are carried individually at cost less accumulated impairment in the value of such Investments.
c) Cost of Investment includes acquisition charges such as brokerage, fees and duties.
d) The Company reviews the book value of the investment on a quarterly basis and provides for diminution in the value of the investment based on the net worth of the investee company.
e) Impairment in the value of investment is made only if in the opinion of management when there is a permanent fall in value of investment.
As at each Balance Sheet date, the carrying amount of assets is assessed as to whether there is any indication of impairment. If the estimated recoverable amount is found less than its carrying amount, the impairment loss is recognised and assets are written down to their recoverable amount.
9. FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The Company recognizes all Financial Assets other than non-current investments and Financial Liabilities at Fair Value on inception and subsequent measurements are done at amortised cost.
Unpaid installment payments under deferred payment terms for the cost of imported materials and tooling content of the equipment / products sold are accounted as deferred debts from the customer and are recovered as and when the installments are paid.
Liabilities are recognized for the amounts to be paid for the goods / services received whether billed by the supplier or not.
a) Inventories are valued at lower of Cost and Net Realisable Value.
b) The cost of raw material excluding Goods-in-Transit, components and stores are assigned by using the weighted average cost formula. Goods-in-Transit are valued at cost-to-date. In the case of Finished Goods, Stock-in-Trade and Work-InProgress, cost includes costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost includes Taxes and duties (other than Taxes and duties for which input credit is available).
c) Provision for redundancy is assessed on ageing at a suitable percentage / level of the value of closing inventory of raw material and components, stores and spare parts and construction material. Besides, wherever necessary, adequate provision is made for the redundancy of such materials in respect of completed / specific projects and other surplus / redundant material pending transfer to salvage stores.
d) Saleable / Disposable scrap is valued at Net Realisable Value.
e) Stores declared surplus / unserviceable / redundant are charged to revenue in the year of such identification.
f) Consumables issued from stores and lying unused at the end of the year are not reckoned as inventory.
13. REVENUE RECOGNITION13.1. Manufacturing of Aircraft/ Helicopter/Spares/Repair Contracts
a) Revenue on Sale of Goods and Services is recognized at a point in time when the Company satisfies the performance obligation on transfer of control of the products to the Customer in an amount that reflects the consideration the Company expects to receive in exchange for those products pursuant to the Contract with customer. Revenue from service Warranty is recognized on straight line basis over the period of Warranty.
Transfer of Control happens on:
i. Acceptance by the buyer''s Inspector, by way of Signaling Out Certificate (SOC)
op
Acceptance by the buyer''s pilot, by way of Certificate of Conformity (COC), wherever, specifically required in the contract,
in the case of Aircrafts/Helicopters,
ii. Acceptance by the Buyer''s inspection agency/SOC or as agreed to by the Buyer, in the case of Repair & Overhaul of Aircraft/Helicopter/Engine, Rotables, Site repairs, Cat ''B'' repair servicing etc.,
iii. For other deliverables like Spares, Revenue is recognized based on the Acceptance by the buyer''s inspection agency or as agreed to by the buyer.
b) I n case of Performance Based Logistic Contracts, Revenue is recognized over a period of time, based on Helicopter Availability Certificate, Jointly signed by Seller and Buyer.
c) Revenue is recognized based on the prices agreed with Customers. Where the prices are yet to be agreed/ determined, the revenue is recognised at the most likely amount based on past experience. Differential revenue, if any, is recognised on receipt of approval / sanction.
a) Revenue is recognized over a period of time on incurrence of expenditure identifiable to work orders:
i. where milestones have been defined, on achievement of milestone under the output method.
ii. where milestones have not been defined, on incurrence of expenditure under the input method.
b) Where the customer''s sanction for revision is pending, the expenditure incurred is retained in work-in-progress/ intangible asset. Subsequent revenue is recognized on receipt of revised financial sanction from the customer.
13.3. Significant Financing Component
a) For the majority of the contracts, advance payments are received, prior to commencement of work and milestone payments are paid in accordance with the terms of the contract.
b) Payments received from customers in advance are not considered to be a significant financing component as they are given with the objective to protect the interest of the contracting parties.
A contract modification exists when the change in scope is agreed but the corresponding change in price is not determined. In such circumstances, revenue is recognized, based on the Company''s assessment of the estimated change in the transaction price arising from the modification.
Interest Income is accrued on a time proportion basis, by reference to the principal outstanding and at the effective interest rate applicable.
Dividend income from investments is recognised when the right to receive payment has been established.
a) Receivables represent the Company''s unconditional right to consideration under the contract. The right to consideration is considered unconditional, if only passage of time is required before payment of that consideration is due.
b) Debts from the Government departments are generally treated as fully recoverable, based on past experience, and hence in the opinion of Management there is no increase in credit risk of such financial assets.
c) I mpairment on account of expected credit loss is being assessed on a case to case basis in respect of dues outstanding for a significant period of time.
Contract Assets represents the Company''s right to receive the consideration in exchange for the Goods or Services that the Company has transferred to the Customer, when that right is conditioned on something other than passage of time.
a) Gratuity and Provident Fund are Defined Benefit Plans and the liability is provided on the basis of actuarial valuation in respect of eligible employees and is remitted to the trust progressively.
b) Provision for Earned leave is a Defined Benefit Plan and the liability is provided on the basis of actuarial valuation.
c) Pension Scheme and Post Superannuation Group Health Insurance Scheme for employees are Defined Contribution Plans and the contribution to the corpus of the same is made by the Company to the respective trust. The Company''s liability is limited to the extent of contribution made to these trusts.
16. FOREIGN CURRENCY TRANSACTION/TRANSLATION
a) Initial Recognition:
On initial recognition, transaction in foreign currencies, entered into by the Company, are recorded in the functional currency by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.
b) Measurement of Foreign currency items at reporting date:
Foreign currency monetary items are translated at closing exchange rates. Non- monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of transaction. Nonmonetary items that are measured at fair value in a foreign currency are translated using the exchange rate at the date when the fair value is measured.
c) Recognition of Exchange Difference:
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they are translated on initial recognition during the period or in previous financial statement is recognized in statement of profit and loss in the period in which they arise.
a) Current Tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of Income Tax Act,1961(the "Act").
b) Deferred Tax is recognized using the Balance Sheet method, providing for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred Tax Assets in excess of Deferred Tax Liability are recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred Tax Assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Claims on suppliers / underwriters / carriers towards loss / damages, claims for export subsidy, duty drawbacks, and claims on Customs department for refunds are accounted when claims are preferred.
19. PROVISION AND CONTINGENT LIABILITIES
a) A provision is recognised, when the Company has the present obligation as result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which reliable estimate can be made.
b) Where no reliable estimate can be made or when there is a possible obligation or present obligations that may, but probably will not, require an outflow of resources, disclosure is made as Contingent Liability. Expected reimbursement, if any, is disclosed under Notes to Accounts.
c) When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Provision for warranty is recognized on actuarial valuation for Manufacturing and Repair and Overhaul of Aircraft/ Helicopter/Engine/Rotables and Spares and development activities etc.
19.2 PROVISION FOR LIQUIDATED DAMAGES
Provision for Liquidated Damages is recognized when the expected date of delivery of Goods / rendering of Service in respect of Manufacturing and Repair and Overhaul of Aircraft/Helicopter/Engine/Rotables, Spares and Development activities etc is beyond the due date as per delivery schedule and at the rates specified in the Contract with the Customer.
19.3 PROVISION FOR ONEROUS CONTRACTS
A provision for onerous contract is recognized when the expected benefits to be derived by the Company from the contract are lower than the unavoidable cost of meeting its obligations under the contract. Before a provision is established, the Company recognizes any impairment loss on the assets associated with that contract.
The Company revises its accounting policies if the change is required due to a change in Ind AS or if the change will provide more relevant and reliable information to the users of the financial statements. Changes in accounting policies are applied retrospectively unless it is impracticable to apply.
A change in an accounting estimate that results in changes in the carrying amounts of recognised assets or liabilities or to statement of profit and loss is applied prospectively in the period(s) of change.
When it is difficult to distinguish a change in an accounting policy from a change in an accounting estimate, the change is treated as a change in an accounting estimate.
Discovery of material errors results in revisions retrospectively by restating the comparative amounts of assets, liabilities, and equity of the earliest prior period in which the error is discovered. The opening balances of the earliest period presented are also restated.
21. EVENTS AFTER THE REPORTING PERIOD
Adjusting events are events that provide further evidence of conditions that existed at the end of the reporting period. The financial statements are adjusted for such events before authorisation for issue.
Non-adjusting events are events that are indicative of conditions that arose after the end of the reporting period. Nonadjusting events after the reporting date are not accounted.
22. The functional currency of the Company is Indian Rupee.
Mar 31, 2022
1. BASIS OF ACCOUNTING:
The Financial Statements are prepared to comply in all material aspects with Indian Accounting Standards (Ind AS) as prescribed under Section 133 of Companies Act, 2013 read with relevant rules of the Companies (Indian Accounting Standards)Rules.
a) Preparation of financial statements in conformity with the recognition and the measurement principle of Ind AS requires the management of the Company to make estimates, judgments and assumptions that affects the reported balances of Assets and Liabilities, disclosure relating to contingent liabilities as on the date of the Financial Statements and the reported amount of revenues and expense for the reporting period.
b) Estimates and the underlying assumption are reviewed on an ongoing basis. The revision to the accounting estimates, if material is recognized in the period in which the estimates are revised.
c) Estimates and judgments made in applying accounting policies that have significant effect on the amounts recognized in the financial statements are as follows:
i. Employee Defined benefit plans
The liabilities and costs for defined benefit plans are determined using actuarial valuations. The actuarial valuation involves making assumptions. These assumptions include salary escalation rate, discount rates, expected rate of return on assets and mortality rates.
ii. Provisions and contingencies
Assessments undertaken in recognising provisions and contingencies have been made as per the best judgment of the management based on the current available information.
The Company''s tax jurisdiction is India. Significant judgments are involved in estimating budgeted profits for the purpose of paying advance tax, determining the provision for income taxes, including amount expected to be paid/ recovered for uncertain tax positions.
3. PROPERTY, PLANT AND EQUIPMENT(PPE):
a) Property, Plant and Equipment are stated at cost net of accumulated depreciation and accumulated impairment losses, if any.
b) The cost includes purchase price, import duties and non-refundable purchase taxes after deducting trade discounts and rebates and any cost directly attributable including borrowing cost on qualifying assets to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by the management.
c) Subsequent expenditure relating to PPE including major inspection costs, spare parts, standby and servicing equipment are capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably.
d) In accordance with Ind AS 101-First Time Adoption of Indian Accounting Standards, the Company had chosen to consider the carrying value for all its PPE as their deemed cost at the Opening Balance Sheet as at April 01, 2015.
e) Depreciation is calculated on straight line basis over estimated useful life as prescribed in Schedule II of the Companies Act 2013. Where the useful life of the asset is not as per Schedule II of the Companies Act 2013, the same is disclosed under Notes to Accounts.
f) PPE individually costing '' 50,000 and below are fully depreciated in the year of purchase.
g) Where part of an item of PPE with a cost significant in relation to the total cost of the item and have different useful lives, they are treated as separate components and depreciated over their estimated useful life.
h) Certain items like Special Tools are amortized over the number of units of production expected to be obtained from the asset based on technical assessment and management estimates depending on the nature and usage of the respective assets.
i) CSR Assets are fully depreciated in the year of capitalization.
j) The cost and the related accumulated depreciation are eliminated from the Financial Statements upon sale or derecognition or retirement of the asset and the resultant gains or losses are recognized in the Statement of Profit and Loss of the relevant period.
k) The estimated useful lives, residual values and depreciation / amortisation method are reviewed at the end of each reporting period with the effect of changes in estimates accounted for on a prospective basis.
3.1: Capital Advances And Capital Work In Progress (CWIP)
a) Advances given towards acquisition of PPE outstanding at each Balance sheet date are disclosed as other Noncurrent assets.
b) Cost of Assets not ready for its intended use as on the Balance sheet date is shown as CWIP Such properties are classified to the appropriate categories of PPE when completed and ready for its intended use.
c) Depreciation on such assets commence when the assets are ready for their intended use.
a) A property is considered as investment property only if the same is held for earning rentals and /or for capital appreciation or both. Properties held by the Company (directly or indirectly) which are used in the production of supply of goods or services for administrative purposes are not considered as Investment Property.
b) Investment Properties are stated at cost net of accumulated depreciation and accumulated impairment losses, if any. In accordance with Ind AS 101, First Time Adoption of Indian Accounting Standards, the Company has chosen to consider the carrying value for all its Investment Property recognized in its Indian GAAP financial statement as their deemed cost as at the transition date viz, April 01, 2015.
c) Depreciation is calculated on straight line basis over estimated useful life as prescribed in Schedule II of the Companies Act 2013. Where the useful life of the asset is not as per Schedule II of the Companies Act 2013, the same is disclosed under Notes to Accounts.
a) Intangible Assets controlled and from which future economic benefits are expected to flow and having useful life are recognized at cost less any accumulated amortization and accumulated impairment losses, if any.
b) Development Costs having useful life and which will generate probable future economic benefits are recognized as an intangible asset and amortised over production based on technical estimate and to the extent not amortized are carried forward.
c) Expenditure on license fees, documentation charges etc, based on the definition criteria of intangible assets in terms of reliability of measurement of cost and future economic benefits from the assets, are amortised over production based on technical estimates, and to the extent not amortised, are carried forward.
d) The cost of software internally generated / acquired for internal use which is not an integral part of the related hardware, is recognized as an intangible asset and is amortised over three years, on straight line method. Amortisation commences when the asset is available for use.
e) Expenditure on Research is recognized as expenditure in the period in which it is incurred.
f) Wherever it is not possible to assess the useful life of an intangible asset (whether or not significant) the same is not amortised. Impairment on such intangible assets are reviewed annually and when there is an indication of impairment, the asset is impaired.
6.1. The Company recognizes, at inception of a contract a lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for consideration.
a) At the date of commencement of the lease, the Company recognizes a right-of-use ("ROU") asset representing its right to use the underlying asset for the lease term and a lease liability for all lease arrangements in which it is a lessee except for leases with a term of 12 months or less (short term leases) and leases for which the underlying assets is of low value. For such short term and assets of low value leases, the Company recognizes the lease payment as an expense on a straight line basis over the term of the lease.
b) At commencement date the ROU asset is measured at cost. The cost of the ROU asset measured at inception shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date less any lease incentives received, plus any initial direct costs incurred. The ROU assets are subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any.
c) The ROU assets are depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of ROU asset. The estimated useful lives of ROU assets are determined on the same basis as those of PPE. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss, if any, is recognized in the statement of profit and loss.
d) At the commencement date, the Company measures the lease liability at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the Company''s incremental borrowing rate.
e) Lease liability and ROU asset are separately presented in the Balance Sheet and lease payments are classified as financing cash flows. Short term lease payments and payments for leases of low value assets are classified as operating cash flows.
At the inception of the lease the Company classifies each of its leases as either an operating lease or a finance lease.
a) A lease that transfers substantially all the risks and rewards incidental to ownership of an underlying asset to the Lessee is classified as a finance lease. Title may or may not eventually be transferred.
b) At commencement date, an amount equal to the net investment in the lease is presented as receivable. The interest rate implicit in the lease is used to measure the value of net investment in the lease.
c) The finance income is recognized over the lease term in the statement of profit and loss account so as to reflect a constant periodic rate of return on the net investment in the lease.
d) The de-recognition and impairment requirement of the underlying asset is tested as per Ind AS 109- Financial instruments.
e) Any modifications in the lease are accounted as a separate lease when the recognition criteria specified in paragraph 79 of the standard are met.
a) Lease other than finance leases are operating leases.
b) The lease payment from operating leases are recognized as income on either a straight-line basis or another systematic basic, if required.
c) The expenses including depreciation cost associated with earning of the lease income is recognized as an expense.
d) Depreciation on underlying assets subject to operating leases are calculated on straight line basis over estimated useful life as prescribed in Schedule II of the Companies Act, 2013.
e) Any modifications in the lease are accounted as a separate lease if the recognition criteria specified in the standard is met.
a) Effective April 1, 2019, the Company has applied Ind AS 116 on Lease Accounting. Ind AS 116 replaces Ind AS 17. The Company has adopted Ind AS 116 using the cumulative effect method. The effect of initially applying this standard is recognized at the date of initial application (i.e. April 1, 2019) and the comparative information continues to be reported under Ind AS 17.
b) The Company has chosen the practical expedient provided by the standard to apply Ind AS 116 only to contracts that were previously identified as leases under Ind AS 17 and therefore has not reassessed whether a contract is or contains a lease at the date of initial application.
a) In accordance with Ind AS 101, First time adoption of Indian Accounting Standards, the Company has chosen to consider the carrying amount of investment as their deemed cost as at the Opening Balance Sheet as at 01st April, 2015.
b) Investments are carried individually at cost less accumulated impairment in the value of such Investments.
c) Cost of Investment includes acquisition charges such as brokerage, fees and duties.
d) The Company reviews the book value of the investment on a quarterly basis and provides for diminution in the value of the investment based on the net worth of the investee company.
e) Impairment in the value of investment is made only if in the opinion of management when there is a permanent fall in value of investment.
As at each Balance Sheet date, the carrying amount of assets is assessed as to whether there is any indication of impairment. If the estimated recoverable amount is found less than its carrying amount, the impairment loss is recognised and assets are written down to their recoverable amount.
9. FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The Company recognizes all Financial Assets other than non-current investments and Financial Liabilities at Fair Value on inception and subsequent measurements are done at amortised cost.
Unpaid installment payments under deferred payment terms for the cost of imported materials and tooling content of the equipment / products sold are accounted as deferred debts from the customer and are recovered as and when the installments are paid.
Liabilities are recognized for the amounts to be paid for the goods / services received whether billed by the supplier or not.
a) Inventories are valued at lower of Cost and Net Realisable Value.
b) The cost of raw material excluding Goods-in-Transit, components and stores are assigned by using the weighted average cost formula. Goods-in-Transit are valued at cost-to-date. In the case of Finished Goods, Stock-in-Trade and Work-In-
Progress, cost includes costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost includes Taxes and duties (other than Taxes and duties for which input credit is available).
c) Provision for redundancy is assessed on ageing at a suitable percentage / level of the value of closing inventory of raw material and components, stores and spare parts and construction material. Besides, wherever necessary, adequate provision is made for the redundancy of such materials in respect of completed / specific projects and other surplus / redundant material pending transfer to salvage stores.
d) Saleable / Disposable scrap is valued at Net Realisable Value.
e) Stores declared surplus / unserviceable / redundant are charged to revenue in the year of such identification.
f) Consumables issued from stores and lying unused at the end of the year are not reckoned as inventory.
13. REVENUE RECOGNITION13.1. Manufacturing of Aircraft/Helicopter/Spares/Repair Contracts
a) Revenue on Sale of Goods and Services is recognized at a point in time when the Company satisfies the performance obligation on transfer of control of the products to the Customer in an amount that reflects the consideration the Company expects to receive in exchange for those products pursuant to the Contract with customer. Revenue from service Warranty is recognized on straight line basis over the period of Warranty.
Transfer of Control happens on:
i. Acceptance by the buyer''s Inspector, by way of Signaling Out Certificate (SOC)
or
Acceptance by the buyer''s pilot, by way of Certificate of Conformity (COC), wherever, specifically required in the contract,
in the case of Aircrafts/Helicopters,
ii. Acceptance by the Buyer''s inspection agency/SOC or as agreed to by the Buyer, in the case of Repair& Overhaul of Aircraft/Helicopter/Engine, Rotables, Site repairs, Cat ''B'' repair servicing etc.,
iii. For other deliverables like Spares, Revenue is recognized based on the Acceptance by the buyer''s inspection agency or as agreed to by the buyer.
b) In case of Performance Based Logistic Contracts, Revenue is recognized over a period of time, based on Helicopter Availability Certificate, Jointly signed by Seller and Buyer.
c) Revenue is recognized based on the prices agreed with Customers. Where the prices are yet to be agreed/ determined, the revenue is recognised at the most likely amount based on past experience. Differential revenue, if any, is recognised on receipt of approval / sanction.
a) Revenue is recognized over a period of time on incurrence of expenditure identifiable to work orders:
i. where milestones have been defined, on achievement of milestone under the output method.
ii. where milestones have not been defined, on incurrence of expenditure under the input method.
b) Where the customer''s sanction for revision is pending, the expenditure incurred is retained in work-in-progress/ intangible asset. Subsequent revenue is recognized on receipt of revised financial sanction from the customer.
13.3. Significant Financing Component
a) For the majority of the contracts, advance payments are received, prior to commencement of work and milestone payments are paid in accordance with the terms of the contract.
b) Payments received from customers in advance are not considered to be a significant financing component as they are given with the objective to protect the interest of the contracting parties.
A contract modification exists when the change in scope is agreed but the corresponding change in price is not determined. In such circumstances, revenue is recognized, based on the Company''s assessment of the estimated change in the transaction price arising from the modification.
I nterest Income is accrued on a time proportion basis, by reference to the principal outstanding and at the effective interest rate applicable.
Dividend income from investments is recognised when the right to receive payment has been established.
a) Receivables represent the Company''s unconditional right to consideration under the contract. The right to consideration is considered unconditional, if only passage of time is required before payment of that consideration is due.
b) Debts from the Government departments are generally treated as fully recoverable, based on past experience, and hence in the opinion of Management there is no increase in credit risk of such financial assets.
c) Impairment on account of expected credit loss is being assessed on a case to case basis in respect of dues outstanding for a significant period of time.
Contract Assets represents the Company''s right to receive the consideration in exchange for the Goods or Services that the Company has transferred to the Customer, when that right is conditioned on something other than passage of time.
a) Gratuity and Provident Fund are Defined Benefit Plans and the liability is provided on the basis of actuarial valuation in respect of eligible employees and is remitted to the trust progressively.
b) Provision for Earned leave is a Defined Benefit Plan and the liability is provided on the basis of actuarial valuation.
c) Pension Scheme and Post Superannuation Group Health Insurance Scheme for employees are Defined Contribution Plans and the contribution to the corpus of the same is made by the Company to the respective trust. The Company''s liability is limited to the extent of contribution made to these trusts.
16. FOREIGN CURRENCY TRANSACTION/TRANSLATION
a) Initial Recognition:
On initial recognition, transaction in foreign currencies, entered into by the Company, are recorded in the functional currency by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.
b) Measurement of Foreign currency items at reporting date:
Foreign currency monetary items are translated at closing exchange rates. Non- monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of transaction. Nonmonetary items that are measured at fair value in a foreign currency are translated using the exchange rate at the date when the fair value is measured.
c) Recognition of Exchange Difference:
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they are translated on initial recognition during the period or in previous financial statement is recognized in statement of profit and loss in the period in which they arise.
a) Current Tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of Income Tax Act,1961(the "Act").
b) Deferred Tax is recognized using the Balance Sheet method, providing for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred Tax Assets in excess of Deferred Tax Liability are recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred Tax Assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Claims on suppliers / underwriters / carriers towards loss / damages, claims for export subsidy, duty drawbacks, and claims on Customs department for refunds are accounted when claims are preferred.
19. PROVISION AND CONTINGENT LIABILITIES
a) A provision is recognised, when the Company has the present obligation as result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which reliable estimate can be made.
b) Where no reliable estimate can be made or when there is a possible obligation or present obligations that may, but probably will not, require an outflow of resources, disclosure is made as Contingent Liability. Expected reimbursement, if any, is disclosed under Notes to Accounts.
c) When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Provision for warranty is recognized on actuarial valuation for Manufacturing and Repair and Overhaul of Aircraft/ Helicopter/Engine/Rotables and Spares and development activities etc.
19.2 PROVISION FOR LIQUIDATED DAMAGES
Provision for Liquidated Damages is recognized when the expected date of delivery of Goods / rendering of Service in respect of Manufacturing and Repair and Overhaul of Aircraft/Helicopter/Engine/Rotables, Spares and Development activities etc is beyond the due date as per delivery schedule and at the rates specified in the Contract with the Customer.
19.3 PROVISION FOR ONEROUS CONTRACTS
A provision for onerous contract is recognized when the expected benefits to be derived by the Company from the contract are lower than the unavoidable cost of meeting its obligations under the contract. Before a provision is established, the Company recognizes any impairment loss on the assets associated with that contract.
The Company revises its accounting policies if the change is required due to a change in Ind AS or if the change will provide more relevant and reliable information to the users of the financial statements. Changes in accounting policies are applied retrospectively unless it is impracticable to apply.
A change in an accounting estimate that results in changes in the carrying amounts of recognised assets or liabilities or to statement of profit and loss is applied prospectively in the period(s) of change.
When it is difficult to distinguish a change in an accounting policy from a change in an accounting estimate, the change is treated as a change in an accounting estimate.
Discovery of material errors results in revisions retrospectively by restating the comparative amounts of assets, liabilities, and equity of the earliest prior period in which the error is discovered. The opening balances of the earliest period presented are also restated.
21. EVENTS AFTER THE REPORTING PERIOD
Adjusting events are events that provide further evidence of conditions that existed at the end of the reporting period. The financial statements are adjusted for such events before authorisation for issue.
Non-adjusting events are events that are indicative of conditions that arose after the end of the reporting period. Nonadjusting eventsafter the reporting date are not accounted.
22. The functional currency of the Company is Indian Rupee.
Mar 31, 2019
Significant Accounting Policies
1. BASIS OF ACCOUNTING
The Financial Statements are prepared to comply in all material aspects with Indian Accounting Standards (Ind AS) as prescribed under Section 133 of Companies Act, 2013 read with relevant rules of the Companies (Indian Accounting Standards) Rules with effect from 1st April 2016.
2. USES OF ESTIMATES
Preparation of financial statements in conformity with the recognition and the measurement principle of Ind AS requires the management of the Company to make estimates, judgments and assumptions that affects the reported balances of Assets and Liabilities, disclosure relating to contingent liabilities as on the date of the Financial Statements and the reported amount of revenues and expense for the reporting period.
Estimates and the underline assumption are reviewed on ongoing basis. The revision to the accounting estimates if material is recognized in the period in which the estimates are revised.
3. PROPERTY PLANT & EQUIPMENT (PPE)
a) Property, Plant and Equipment are stated at cost net of accumulated depreciation and accumulated impairment losses, if any.
b) The costs directly attributable including borrowing cost on qualifying asset are capitalized when the Property, Plant and Equipment are ready for the intended use by management.
c) Subsequent expenditure relating to Property, Plant and Equipment including major inspection costs, spare parts, standby and servicing equipment are capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably.
d) In accordance with Ind AS 101 provisions relating to first time adoption, the Company has chosen to consider the carrying value for all its Property, Plant and Equipment as their deemed cost as at the Opening Balance Sheet as at April 01, 2015.
e) Lease hold land is capitalized and depreciated over the period of lease.
f) The assets created after 01.04.2016 has been capitalized in respect of Customer Funded Asset.
g) Goods and Service tax (GST) charged by vendors on Property plant and Equipment (PPE) other than civil works are not capitalized, but considered for Input GST credit.
h) Depreciation is calculated on straight line basis over estimated useful life as prescribed in Schedule II of the Companies Act, 2013.
i) Plant and Equipment individually costing Rs. 50,000 and below are fully depreciated in the year of purchase.
j) Where part of an item of Property, Plant and Equipment with a cost significant in relation to the cost and have different useful lives, they are treated as separate components and depreciated over their estimated useful lives.
k) Certain items like Special Tools are amortized over the number of units of production expected to be obtained from the asset based on technical assessment and management estimates depending on the nature and usage of the respective assets.
I) CSR Assets are fully depreciated in the year of capitalization.
m) The cost and the related accumulated depreciation are eliminated from the Financial Statement upon sale or de-recognition or retirement of the asset and the resultant gain or losses are recognized in the Statement of Profit and Loss of the relevant period.
n) The estimated useful lives, residual values and depreciation /amortisation method are reviewed at the end of each reporting period with the effect of changes in estimates accounted for on a prospective basis.
4. INVESTMENT PROPERTY
a) A property is considered as investment property only if the same is held for capital appreciation and /or earning rentals. Properties held by the Company (directly or indirectly) which are used in the production of supply of goods or services for administrative purposes are not considered as Investment Property.
b) Investment Properties are stated at cost net of accumulated depreciation and accumulated impairment losses, if any. In accordance with Ind AS 101 provisions relating to first time adoption, the Company has chosen to consider the carrying value for all its Investment Property recognized in its Indian GAAP financial statement as their deemed cost as at the transition date viz, April 01, 2015.
5. INTANGIBLE ASSETS
a) Intangible Assets controlled and from which future economic benefits are expected to flow and having an useful life are recognized at cost less any accumulated amortization and accumulated impairment losses if any.
b) Expenditure on Research and Development is charged off as an expenditure in the year in which it is incurred.
c) Development Costs having an useful life are recognized as an intangible asset and amortised over production on technical estimate and to the extent not amortized are carried forward.
d) Expenditure on licence fees, documentation charges etc, based on the definition criteria of intangible assets in terms of reliability of measurement of cost and future economic benefits from the assets, are amortised over production on technical estimates, and to the extent not amortised, are carried forward.
e) The cost of software internally generated/acquired for internal use which is not an integral part of the related hardware, is recognized as an intangible asset and is amortised over three years, on straight line method. Amortisation commences when the asset is available for use.
f) Wherever it is not possible to assess the useful life of an intangible assets (whether or not significant) the same has not been amortised. Impairment on the intangible assets are reviewed annually and when there is an indication of impairment.the asset is impaired.
6. LEASE ACCOUNTING
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease. Title may or may not eventually be transferred.
Finance Lease:
a) At commencement, assets and liabilities in the balance sheet are recognized at lower of fair value and the present value of the minimum lease payments, each determined at inception of lease.
b) Minimum lease payments shall be apportioned between finance charge and the outstanding liability.
c) Leased assets are depreciated over the useful life of the leased assets.
d) Contingent rentals are recognized as expenses in the period in which they are incurred.
e) Impairment on the leased assets are reviewed annually and when there is an indication of impairment, the asset is impaired. Operating Lease:
a) Lease other than finance leases are operating leases.
b) Upfront lease payments, if any, made under operating leases are recognized in the statement of profit and loss over the terms of the lease.
c) Rent and maintenance charges paid for assets/liabilities taken on operating leases are charged to revenue in the period in which they arise.
7. NON CURRENT INVESTMENTS
a) In accordance with Ind AS 101, provision relating to first time adoption, the Company has chosen to consider the carrying amount of investment as their deemed cost as at the Opening Balance Sheet as at 01st April, 2015.
b) Investments are carried individually at cost less accumulated impairment in the value of such Investments.
c) Cost of Investment includes acquisition charges such as brokerage, fees and duties.
d) The Company reviews the book value of the investment on a yearly basis and provides for diminution in the value of the investment based on the net worth of the investee company.
e) Impairment in the value of investment is made only if in the opinion of management when there is a permanent fall in value of investment.
8. IMPAIRMENT OF ASSETS
As at each Balance Sheet date, the carrying amount of assets is assessed as to whether there is any indication of impairment. If the estimated recoverable amount is found less than its carrying amount, the impairment loss is recognised and assets are written down to their recoverable amount.
9. FINANCIAL ASSETS AND LIABILITIES
The Company recognizes all Financial Assets and Liabilities at Fair Value on inception and subsequent measurements are done at amortised cost.
10. DEFERRED DEBTS
Unpaid installment payments under deferred payment terms for the cost of imported materials and tooling content of the equipment/products sold are accounted as deferred debts from the customer and are recovered as and when the installments are paid.
11. TRADE AND OTHER PAYABLES
Liabilities are recognized for the amounts to be paid in future for the goods/services received whether billed by the supplier or not.
12. INVENTORIES
a) Inventories are valued at lower of Cost and Net Realisable Value.
b) The cost of raw material excluding Goods-in-Transit, components and stores are assigned by using the weighted average cost formula. Goods-in-Transit are valued at cost-to-date. In the case of Finished Goods, Stock-in-Trade and Work-in-Progress, cost includes costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
c) Provision for redundancy is assessed on ageing at a suitable percentage / level of the value of closing inventory of raw material and components, stores and spare parts and construction material. Besides, wherever necessary, adequate provision is made for the redundancy of such materials in respect of completed / specific projects and other surplus / redundant material pending transfer to salvage stores.
d) Saleable/Disposable scrap is valued at Net Realisable Value.
e) Stores declared surplus / unserviceable / redundant are charged to revenue in the year of such identification.
f) Consumables issued from stores and lying unused at the end of the year are not reckoned as inventory.
13. REVENUE RECOGNITION
13.1. Manufacturing of Aircraft/Helicopter/Spares/Repair Contracts
a) Revenue is recognized at a point in time when there is a transfer of significant risks and rewards of ownership and on satisfaction of performance obligation on the basis of:
i. Acceptance by the buyer''s Inspector, by way of Signaling Out Certificate (SOC), in the case of Aircrafts/ Helicopters,
ii. Acceptance by the Buyer''s inspection agency/SOC or as agreed to by the Buyer, in the case of Repair & Overhaul of Aircraft/Helicopter/Engine, Rotables, Site repairs. Cat ''B'' repair servicing etc.,
iii. For other deliverables likes Spares, Revenue is recognized based on the Acceptance by the buyer''s inspection agency or as agreed to by the buyer.
b) Revenue on Warranty is being recognized proportionately to the extent of warranty falling within the reporting period.
c) Revenue is recognized based on the prices agreed with Customers. Where the prices are yet to be agreed/ determined, the revenue is recognised at the most likely amount based on past experience. Differential revenue, if any, is recognised on receipt of Government sanction.
13.2. Development Contracts
a) Revenue is recognized over a period of time on incurrence of expenditure identifiable to work orders: i. where milestones have been defined, on achievement of milestone under the output method.
ii. where milestones have not been defined, on incurrence of expenditure under the input method
b) Where the customer''s sanction for revision is pending, the expenditure incurred is retained in work-in-progress/ intangible asset. Subsequent revenue is recognized on receipt of revised financial sanction from the customer.
13.3. Significant Financing Component
a) For the majority of the contracts, advance payments are received, prior to commencement of work and milestone payments are paid in accordance with the terms of the contract.
b) Payments received from customers in advance are not considered to be a significant financing component because they are used to meet working capital demands that can be higher in the early stages of the contract.
13.4. Contract Modification
A contract modification exists when the change in scope is agreed but the corresponding change in price is not determined. In such circumstances, revenue is recognized, based on the Company''s assessment of the estimated change in the transaction price arising from the modification.
13.5. Receivables
a) Receivables represent the Company''s unconditional right to consideration under the contract. The right to consideration is considered unconditional, if only passage of time is required before payment of that consideration is due.
b) Debts from the Government departments are generally treated as fully recoverable, based on past experience, and hence the Company does not recognize credit risk of such financial assets. Impairment on account of expected credit loss is being assessed on a case to case basis in respect of dues outstanding fora significant period of time.
13.6. Contract Assets
Contract Assets represents the Company''s right to receive the consideration in exchange for the Goods or Services that the Company has transferred to the Customer, when that right is conditioned on something other than passage of time.
14. Transition to Ind AS 115
Effective April 1, 2018, the Company has applied Ind AS 115 on Revenue recognition. Ind AS 115 replaces Ind AS 18 Revenue and Ind AS 11 Construction Contracts. The Company has adopted Ind AS 115 using the cumulative effect method. The effect of initially applying this standard is recognized at the date of initial application (i.e. April 1, 2018). The standard is applied retrospectively only to contracts that are not completed as at the date of initial application and the comparative information continues to be reported under Ind AS 18 and Ind AS 11.
15. EMPLOYEE BENEFITS
a) Gratuity and Provident Fund are Defined Benefit Plans and the liability is provided on the basis of actuarial valuation in respect of eligible employees and is remitted to the trust progressively.
b) Provision for Earned leave is a Defined Benefit Plan and the liability is provided on the basis of actuarial valuation.
c) Pension Scheme and Post Superannuation Group Health Insurance Scheme for employees are Defined Contribution Plans and the contribution to the corpus of the same is made by the Company to the respective trust. The Company''s liability is limited to the extent of contribution made to these trust.
16. FOREIGN CURRENCY TRANSACTION
Assets and Liabilities in foreign currency are re-instated at the rate prevalent at the Balance Sheet date. The Income/Expenditure on account of such transaction is charged to Statement of the Profit & Loss.
17. INCOME TAXES
a) Current Tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of Income Tax Act,1961 (the "Act"). Current Tax includes tax liability computed as per the normal provisions of the Act and/ or under Section IISJBof the Act.
b) Deferred Tax is recognized using the Balance Sheet method, providing for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred Tax Assets in excess of Deferred Tax Liability are recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred Tax Assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
18. CLAIMS BY THE COMPANY
Claims on suppliers / underwriters / carriers towards loss / damages, claims for export subsidy, duty drawbacks, and claims on Customs department for refunds are accounted when claims are preferred and are carried forward till such time the Company has a legal right to recover such amounts.
19. PROVISION AND CONTINGENT LIABILITIES
a) A provision is recognised, when the Company has the present obligation as result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which reliable estimate can be made.
b) Where no reliable estimate can be made or when there is a possible obligation or present obligations that may, but probably will not, require an outflow of resources, disclosure is made as Contingent Liability.
c) When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
19.1 PROVISION FOR WARRANTY
Provision for warranty is recognized on actuarial valuation for Manufacturing and Repair and Overhaul of Aircraft/ Helicopter/Engine/Rotablesand Spares and development activities etc.
19.2 PROVISION FOR LIQUIDATED DAMAGES
Provision for Liquidated Damages is recognized when there is a delay between the due date of supply of the Goods/ rendering of Service as per delivery schedule and the expected date of delivery of said Goods / rendering of Service in respect of Manufacturing and Repair and Overhaul of Aircraft/Helicopter/Engine/ Rotables, Spares and Development activities etc.
19.3 PROVISION FOR ONEROUS CONTRACTS
A provision for onerous contract is recognized when the expected benefits to be derived by the Company from the contract are lower than the unavoidable cost of meeting its obligations under the contract. Before a provision is established, the Company recognizes any impairment loss on the assets associated with that contract.
20. The functional currency of the Company is Indian Rupee.
|
(C. B. Ananthakrishnan) |
(R. Madhavan) |
|
Director (Finance) & CFO |
Chairman & Managing Director |
|
DIN: 06761339 |
DIN: 08209860 |
|
(G.V. Sesha Reddy) |
|
|
Company Secretary |
|
|
Place: Bengaluru |
|
|
Date: 27.05.2019 |
125
Mar 31, 2018
Significant Accounting Policies
1. BASIS OF ACCOUNTING:
The Consolidated Financial Statements are prepared to comply in all material aspects with Indian Accounting Standards (Ind AS) as prescribed under Section 133 of Companies Act 2013 read with relevant rules of the Companies (Indian Accounting Standards)Rules with effect from 1st April 2016.
2. USES OF ESTIMATES:
Preparation of financial statements in conformity with the recognition and the measurement principle of Ind AS requires the management of the Company to make estimates, judgments and assumptions that affects the reported balances of Assets and Liabilities, disclosure relating to contingent liabilities as on the date of the Financial Statements and the reported amount of revenues and expense for the reporting period.
Estimates and the underline assumption are reviewed on ongoing basis. The revision to the accounting estimates if material are recognized in the period in which the estimates are revised.
3. BASIS OF CONSOLIDATION:
The interest in Joint Venture Companies has been accounted by using the Equity method of accounting to the extent of investment made. The financial statement of the subsidiary Company are consolidated on line by line basis.
4. PROPERTY PLANT & EQUIPMENT(PPE):
a) Property, Plant and Equipment are stated at cost net of accumulated depreciation and accumulated impairment losses, if any.
b) The costs directly attributable including borrowing cost on qualifying asset are capitalized when the Property, Plant and Equipment are ready for use, as intended by the management.
c) Subsequent expenditure relating to Property, Plant and Equipment including major inspection costs, spare parts, standby and servicing equipment are capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably.
d) In accordance with Ind AS 101 provisions relating to first time adoption, the Company has chosen to consider the carrying value for all its Property, Plant and Equipment as their deemed cost as at the Opening Balance Sheet as at April 01, 2015.
e) Lease hold land is capitalized and depreciated over the period of lease.
f) As per para D36 of Ind AS 101, in respect of Assets funded by Customer the Company has adopted and applied Appendix C of Ind AS 18 wherein the assets created after 01.04.2016 has been capitalized.
g) Goods and Service tax (GST) charged by vendors on Property plant and Equipment (PPE) other than civil works are not capitalized, but considered for Input tax credit.
i) Plant and Equipment individually costing H50,000 and below are fully depreciated in the year of purchase.
j) Where cost of an item of Property, Plant and Equipment are significant and have different useful lives, they are treated as separate components and depreciated over their estimated useful lives.
k) Certain items like Special Tools are amortized over the number of units of production expected to be obtained from the asset based on technical assessment and management estimates depending on the nature and usage of the respective assets.
l) CSR Assets are fully depreciated in the year of capitalization.
m) The cost and the related accumulated depreciation is eliminated from the Financial Statement upon sale or derecognition or retirement of the asset and the resultant gain or losses are recognized in the Statement of Profit and Loss of the relevant period.
n) The estimated useful lives, residual values and depreciation / amortization method are reviewed at the end of each reporting period with the effect of changes in estimates accounted for on a prospective basis.
5. INVESTMENT PROPERTY
(a) A property is considered as investment property only if the same is held for capital appreciation and /or earning rentals. Properties held by the company (directly or indirectly) which are used in the production of supply of goods or services for administrative purposes are not considered as Investment Property.
(b) Investment Properties are stated at cost net of accumulated depreciation and accumulated impairment losses, if any. In accordance with Ind AS 101 provisions relating to first time adoption, the Company has chosen to consider the carrying value for all its Investment Property recognized in its Indian GAAP financial statement as their deemed cost as at the transition date viz. April 01, 2015.
6. INTANGIBLE ASSETS
a) Intangible Assets are recognized at cost less any accumulated amortization and accumulated impairment losses if any.
b) Expenditure on Research and Development is charged off as an expenditure in the year in which it is incurred.
c) Development Costs having an useful life are recognized as an intangible asset and amortized over its useful life.
d) Expenditure on licence fees, documentation charges etc, based on the definition criteria of intangible assets in terms of reliability of measurement of cost and future economic benefits from the assets, are amortized over production on technical estimates, and to the extent not amortized, are carried forward.
e) The cost of software internally generated / acquired for internal use which is not an integral part of the related hardware, is recognized as an intangible asset and is amortized over its useful life, on straight line method. Amortization commences when the asset is available for use.
f) Wherever it is not possible to assess the useful life of an intangible assets (whether or not significant) the same has not been amortized. Impairment on the intangible assets are reviewed annually and when there is an indication of impairment, the asset is impaired.
7. LEASE ACCOUNTING
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease. Title may or may not eventually be transferred.
Finance Lease:
a) At commencement, assets and liabilities in the balance sheet are recognized at lower of fair value and the present value of the minimum lease payments, each determined at inception of lease.
b) Minimum lease payments shall be apportioned between finance charge and the outstanding liability.
c) Leased assets are depreciated over the useful life of the leased assets.
d) Contingent rentals are recognized as expenses in the period in which they are incurred.
e) Impairment on the leased assets are reviewed annually and when there is an indication of impairment, the asset is impaired.
Operating Lease
a) Lease other than finance leases are operating leases.
b) Upfront lease payments, if any, made under operating leases are recognized in the statement of profit and loss over the terms of the lease.
c) Rent and maintenance charges paid for assets/ liabilities taken on operating leases are charged to revenue in the period in which they arise.
8. LONG TERM INVESTMENT
a) In accordance with Ind AS 101, provision relating to first time adoption, the Company has chosen to consider the carrying amount of investment as their deemed cost as at the Opening Balance sheet as at 01st April, 2015.
b) Investments are carried individually at cost less accumulated impairment in the value of such Investment.
c) Cost of Investment includes acquisition charges such as brokerage, fees and duties.
d) The company reviews the book value of the investment on a yearly basis and provides for diminution in the value of the investment based on the net worth of the investee company
e) Impairment in value of investment is made only if in the opinion of management when there is a permanent fall in value of investment.
9. IMPAIRMENT OF ASSETS
As at the end of each Balance Sheet date, the carrying amount of assets is assessed as to whether there is any indication of impairment. If the estimated recoverable amount is found less than its carrying amount, the impairment loss is recognized and assets are written down to their recoverable amount.
10. FINANCIAL ASSETS AND LIABILITIES
The Company recognizes all Financial Assets and Liabilities at Fair Value on inception and subsequent measurements are done at amortized cost.
11. DEFERRED DEBTS
Unpaid installment payments under deferred payment terms for the cost of imported materials and tooling content of the equipment / products sold are accounted as deferred debts from the customer and are recovered as and when the installments are paid.
12. TRADE RECEIVABLES
Debts from the Government departments are generally treated as fully recoverable and hence the Company does not recognize credit risk of such financial assets. Impairment on account of expected credit loss is being assessed on a case to case basis in respect of dues outstanding for a significant period of time.
13. TRADE AND OTHER PAYABLES
Liabilities are recognized for the amounts to be paid in future for goods / services received whether billed by the supplier or not.
14. INVENTORIES
a) Inventories are valued at lower of cost and Net Realizable Value.
b) The cost of raw material excluding Goods-in-Transit, components and stores are assigned by using the weighted average cost formula. Goods-in-Transit are valued at cost to date. In the case of Finished Goods, Stock-in-Trade and Work-In-Progress, cost includes costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
c) Provision for redundancy is assessed on ageing at a suitable percentage / level of the value of closing inventory of raw material and components, stores and spare parts and construction material. Besides, wherever necessary, adequate provision is made for the redundancy of such materials in respect of completed / specific projects and other surplus / redundant material pending transfer to salvage stores.
d) Saleable / Disposable scrap is valued at Net Realizable Value.
e) Stores declared surplus / unserviceable / redundant are charged to revenue in the year of such identification.
f) Consumables issued from stores and lying unused at the end of the year are not reckoned as inventory.
15. REVENUE RECOGNITION
Revenue is recognized when it is probable that the economic benefit associated with the transaction will flow directly to the entity and the amount of revenue can be measured reliably.
15.1. Manufacturing, Repair and Overhaul / Spares Sale
a) Sales are set up on the basis of
i. Acceptance by the buyer''s Inspector, by way of signaling out certificate, in the case of the manufacture of aircraft/helicopters
ii. For other deliverables like spares, sales are set up based on acceptance by the buyer''s inspection agency or as agreed to by the buyer.
iii. For Repair of Aircraft/Helicopter/Engine & Repair/Overhaul of Rotables, Site repairs, Cat ''B'' repair servicing etc., sales are recognized on acceptance by the Buyer''s inspection agency or as agreed to by the Buyer.
iv. For Overhaul of Aircraft/Helicopter/Engine, sales are set up on Percentage Completion of Service (POC) method.
b) Sales are set up based on prices agreed with the customers. Where the prices are yet to be agreed with the customer, sales are set up on provisional basis.
c) Revenue on Warranty is being recognized proportionately to the extent of warranty falling within the reporting period.
15.2. Development Sales
Development Sales are recognized on incurrence of expenditure identifiable to work orders and milestones achieved as per contract. Where milestones have not been defined in terms of their respective contract, sales are recognized based on the actual incurrence of expenditure. Where the Customer''s sanction for revision (time and cost) is pending, the expenditure incurred is retained in WIP/intangible asset .Subsequent sale is recognized on receipt of revised financial sanction from the Customer.
16. EMPLOYEE BENEFITS
a) Gratuity and Provident Fund are Defined Benefit Plans and liability is provided on the basis of actuarial valuation in respect of eligible employees and is remitted to the trust progressively.
b) Provision for Earned leave is a Defined Benefit Plan and the liability is provided on the basis of actuarial valuation.
c) Pension Scheme and Post Superannuation Group Health Insurance Scheme for employees are Defined Contribution Plans and the contribution to the corpus of the same is made by the Company to the trust. The Company''s liability is limited to the extent of contribution made to these funds.
17. FOREIGN CURRENCY TRANSACTION
Assets and Liabilities in foreign currency are re-instated at the rate prevalent on each Balance Sheet date. The Income /
Expenditure on account of such transaction is charged to Statement of the Profit & Loss.
18. INCOME TAXES
a) Current Tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of Income Tax Act,1961(the âActâ). Current Tax includes tax liability computed as per the normal provisions of the Act and /or under Section 115JB of the Act.
b) Deferred Tax is recognized using the Balance Sheet method, providing for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred Tax Assets in excess of Deferred Tax Liability are recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred Tax Assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
19. CLAIMS BY THE COMPANY
Claims on suppliers / underwriters / carriers towards loss / damages, claims for export subsidy, duty drawbacks, and claims
on Customs department for refunds are accounted when claims are preferred and are carried forward till such time the
Company has a legal right to recover such amounts.
20. PROVISION AND CONTINGENT LIABILITIES
a) A provision is recognized, when the Company has the present obligation as result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which reliable estimate can be made.
b) Where no reliable estimate can be made or when there is a possible obligation or present obligations that may, but probably will not, require an outflow of resources, disclosure is made as Contingent Liability.
c) When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
20.1 PROVISION FOR WARRANTY
Provision for warranty is recognized on actuarial valuation for Manufacturing and Repair and Overhaul of Aircraft/ Helicopter/Engine/Rotables and Spares and development activities etc.
20.2 PROVISION FOR LIQUIDATED DAMAGES
Provision for Liquidated Damages is recognized when there is a delay between the due date of supply of the Goods/ rendering of Service as per delivery schedule and the expected date of delivery of said Goods / rendering of Service in respect of Manufacturing and Repair and Overhaul of Aircraft/Helicopter/Engine/ Rotables, Spares and development activities etc.
20.3 PROVISION FOR ONEROUS CONTRACTS
A provision for onerous contract is recognized when the expected benefits to be derived by the Company from the contract are lower than the unavoidable cost of meeting its obligations under the contract. Before a provision is established, the Company recognizes any impairment loss on the assets associated with that contract.
21. The functional currency of the Company is Indian Rupee.
As per para D7AA of Ind AS 101 dealing with transitional provisions, Property, Plant and Equipment (PPE) and Intangible assets, the Company has considered the carrying values as at the date of transition as the âDeemed Costâ and necessary modifications in the disclosures have been made in the financial statements of the current year. In view of the above, in line with the requirements of Ind AS 1 and Schedule III of the Companies Act, 2013, the figures of the preceding period i.e. as at 1st April 2016 have also been disclosed in the financial statements of the current year. However, there is no change in the Written Down Value of the Fixed Assets in the Financial Statements on account of the above modification in Disclosure.
As per para D7AA of Ind AS 101 dealing with transitional provisions, Property, Plant and Equipment (PPE) and Intangible assets, the Company has considered the carrying values as at the date of transition as the âDeemed Costâ and necessary modifications in the disclosures have been made in the financial statements of the current year. In view of the above, in line with the requirements of Ind AS 1 and Schedule III of the Companies Act, 2013, the figures of the preceding period i.e. as at 1st April 2016 have also been disclosed in the financial statements of the current year. However, there is no change in the Written Down Value of the Fixed Assets in the Financial Statements on account of the above modification in Disclosure.
As per para D7AA of Ind AS 101 dealing with transitional provisions, Property, Plant and Equipment (PPE) and Intangible assets, the Company has considered the carrying values as at the date of transition as the âDeemed Costâ and necessary modifications in the disclosures have been made in the financial statements of the current year. In view of the above, in line with the requirements of Ind AS 1 and Schedule III of the Companies Act, 2013, the figures of the preceding period i.e. as at 1st April 2016 have also been disclosed in the financial statements of the current year. However, there is no change in the Written Down Value of the Fixed Assets in the Financial Statements on account of the above modification in Disclosure.
The Company''s Barrack pore Unit is in possession of 22.51 acres (22.51 acres) of land on which the Division has its Buildings, Hangar, Plant and Machinery etc. The instruments of transfer in favour of Division / Company either by way of lease or transfer in respect of this land is pending execution. Provision for lease rental amounting to H33 Lakhs (Previous year H32.00 Lakhs) has been made. The transfer of the land is being pursued with Defence Estate Officer, Kolkata.
The above does not include 7.115 acres of land received from the Army in exchange of 5 acres of land at Bangalore which was received free of cost from the State Government before 31st March 1969. Since the value of 5 acres land was NIL, the
14.4 value of 7.115 acres land received in exchange of 5 acres land is also taken as NIL.
Land under Property Plant and Equipment includes land taken on lease for establishing a unit at Kasargod at a cost of RS,708 lakhs (200acres). This cost is amortized over the lease period of 90 years. The Lease charges for the year amounting to RS,8.00 Lakhs has been considered under depreciation for the year.
Land under Property Plant land Equipment includes land (0.27 acres) taken on lease for Liason Office Mumbai at a cost of RS,3 lakhs (including development cost). This cost is amortized over the lease period of 30 years . The amount of amortization has been considered under depreciation for the year.
Facilities Management Division (FMD) is holding 2105.831 acres (2105.831 acres) land of which 13.637 acres (11.959 acres) is under litigation / encroachment by third parties and 10.152 Acres(10.152 Acres) is under dispute with BEM Limited.
b) Titles to land are not in the name of the Company in respect of 39 survey numbers at FMD Division, However, Records of Tenancy Certificate is available.
c) An amount of RS,2314 Lakhs (PY RS,2179 Lakhs) towards Lease cum Rental charges with various parties has not been considered in the books of accounts of FMD, pending dispute settlement.
d) Land at Nasik Division includes 1.339 acres of land encroached by 7 persons.
e) Further, about 50.21 acres of the land belonging to the Company''s Koraput Division is encroached upon by the
14.5 nearby villagers for cultivation.
f) Land at Corporate office includes 711.22 sq.mt of land has been acquired for the Metro Rail Project by M/s. Bangalore Metro Rail Corporation Limited (BMRCL). The compensation awarded of RS,549 Lakhs by M/s. Karnataka Industrial Area Development Board (KIADB) is contested by Company in the City Civil Court at Bangalore. Meanwhile, a Joint Committee comprising the Company & BMRCL Officials was formed to arrive at an out of court settlement. The Joint Committee has finalized the recommendations for out of court settlement and the same has been accepted by the Company. However, on completion of the Metro project, the land utilized is restricted to 272.94 sq.mt. Accordingly, further necessary actions are being taken by the BMRCL/ KIADB in the matter. As the matter is subjudice, no adjustment has been made in the Books.
DIVIDEND POLICY:
As per extant memorandum F.No. PP/14(0005)/2016 dated June 20, 2016, of the Department of Public Enterprises, Ministry of Heavy Industries & Public Enterprises, Government of India (GOI) (âDoEâ) read with the memorandum F.No. 5/2/2016-Policy dated 27th May, 2016 of the Department of Investment & Public Asset Management, Ministry of Finance, Gol, all central public sector enterprises are required to pay a minimum annual dividend of 30% of Profit After Tax (PAT) or 5% of the net-worth, whichever is higher, subject to the maximum dividend permitted under the extant 18A legal provisions and the conditions mentioned in the aforesaid memorandum.
However, the declaration and payment of dividends on our Equity Shares will be recommended by our Board and approved by our shareholders, at their discretion, subject to the provisions of the Articles, the Companies Act, 2013. Further, the dividends, if any, will depend on a number of factors, including but not limited to our earnings, guidelines issued by the DoE, capital requirements and overall financial position of our Company. In addition, our ability to pay dividends may be impacted by a number of factors, including the results of operations, financial condition, contractual restrictions, restrictive covenants under the loan or financing arrangements the Company may enter into.
In terms of Pricing Policy agreed with Indian Air Force and Indian Army, prices approved are exclusive of taxes and 19(a) duties i.e. Sales Tax, Service Tax, GST, Customs Duty etc. In case, the above customer does not submit an exemption certificate, taxes would be levied and the same would be re-imbursed by the customer.
1.) The Sales Tax /VAT/Entry Tax disputes on sales to the Indian Armed Forces in the State of Karnataka and Odisha have been resolved between officials of Department of Defence Production(DDP), Ministry of Defence (MoD), the Company and representatives of Indian Air Force (IAF) and Indian Army with Commercial Tax Department and Finance Department of Government of Karnataka and Odisha
The Company in Financial Year 2011-12 and 2012-13 has initiated criminal and civil proceedings for recovery of fradulently drawn amounts by certain contract employee and his accomplices and institutions namely , the State Bank of India (SBI) for RS,289 Lakhs and Shri Krishna Souharda Credit Co-operative Limited for RS,102.07 Lakhs. Both the civil 21 cases and criminal case are under progress in the court. Properties of the accused amounting to H138.30 Lakhs have also been attached by court. During the court proceedings SBI sought an adjournment stating that bank is willing to settle its liability through negotiation with the Company as out of court settlement. Negotiation with SBI is in the advance stage of finalization for recovery of substantial amount. Further the Company is hopeful of getting the amount recovered from the accused through the court as the property of the accused has been attached.
Claims Receivable includes RS,42399 lakhs being a claim made by the Company in terms of Contract for supply of 20 LCA (IOC) (vide No AIR/HQ/S96056/6/4/ASR dated. 31st March, 2006) with IAF (customer) for revision in the 24A Contract Price as per article 3.5 of the said contract.
Pursuant to the provisions in the contract, Change Order 3 to the contract was submitted to the customer on 10th April 2018 for a value of RS,536217 lakhs which is under consideration.
The Company''s IJT Division is primarily engaged in the production of Intermediate Jet Trainers (IJT) Aircraft. The supply contract with IAF is under execution. In view of the fact that concurrent production is happening along with 24B improvement in the Design & Development to meet the customers requirement, resulted in non-absorption of fixed overheads. This in turn has resulted in losses for the division. However, considering the value of advancement / progress made in the products under development, the division will be a cash generating unit once the supply of produced Aircrafts commences.
The Company experience cyclicality in respect of recognition of revenue from operations, which is attributable to the delivery of a majority of our products in the second half of the year. The Company recognize sales upon acceptance 25B of the product by customers and issuance of a signalling out certificate by them. The sales are dependent on the certification process which needs to be completed before the customers can take deliveries. The certification process typically takes place in the third and fourth quarter due to favorable weather conditions for flight tests during this period. This leads to bunching up of sales during the third and fourth quarter of each financial year and consequently, the revenue varies significantly between the first and second half of the year.
Aircraft have been accepted and signaled out by customers'' inspector with fitment of Cat-B items taken on Loan, in cases of non availability of Cat-A item. As the aircraft is flight worthy and the customers have accepted the same,
26 the sales are accounted, consistently, on the basis of Signal Out Certificate (SOC). As a principle, Cat-B / Loan items fitted on the aircraft are excluded in value for recognising Sales. Sales in respect of such Cat-A items are recognized on supply of Cat-A items, within the contract period.
Pending finalization of contract for delivery of 1 ALH to Nepal as directed by Government of India, sales was initially recognized at RS,8210 lakhs (at the rate it was originally sold to Indian Army). Based on the replacement cost, an
27 invoice for RS,12473 lakhs was subsequently raised on Ministry of External Affairs (MEA), Government of India (GOI). Pending confirmation of payment of the balance amount of RS,4989 lakhs (being 40% of the revised invoice), provision has been created. Against the invoice amount, an amount of RS,3150 lakhs has been received in the month November 2017 from the Ministry of External Affairs.
Balance shown under Trade Receivables, Trade Payable, Claims Receivable, Advance against Goods and Services, Capital Advances, deposits and stock / materials lying with sub-contractors / fabricators are subject to confirmation, reconciliation & consequential adjustments, if any. Since the Company is a Government entity under the control of Ministry of Defence (MoD), around 98 % of the Company''s turnover, around 99 % of Trade receivables, around 97% of
28
Claims receivables and around 99% of the Customer''s Advance is with respect to Government and Government related entities. The bills are raised on the customers by the divisions located at various places and reconciliation is carried out on an ongoing basis and provisions made, wherever considered necessary. However, management does not expect to have any material financial impact of such pending confirmation / reconciliation.
29 In the opinion of the Board, the Company do not have any assets other than fixed assets and Non-current investments having a value on realization in the ordinary course of business less than the amount stated.
The expenditure involved in the work carried out post SOC date is absorbed against the provision for future charges.
The Company has taken up with Ministry of Defence (MoD) for amendment of ALH contract in respect of both Indian Air Force and Indian Army to bring them in line with the accounting policy of the Company. In respect of Indian Air Force, MoD have concurred âin principleâ to above, with the stipulation that the contract amendment can be made only after similar contract amendment in respect of Indian Army contract with the Company is finalized. In respect of Indian Army contracts, the matter is under discussion.
30b RS,47258 lakhs under Miscellaneous sales represent Gratuity claims due to increase in Gratuity limit from RS,10 lakhs to RS,20 lakhs.
HTFE 25 Project: The Company has taken up the design and development of Hindustan Turbo Fan Engine (HTFE-25) in 2013-14 with a time frame of 6 years for completion. The project has been initiated based on the technical feasibility and the market potential of 200-250 units.
31A The expenditure of RS,9373 lakhs (PY RS,6513 lakhs) has been accounted under Intangible Assets under Development and would be amortized over production units.
Preliminary Design Review (PDR) of the engine has been completed during 2014-15. The Idle run of core engine achieved during March 2015. Further tests, under progress for full Revolution per minute (Rpm). The second core engine parts are under manufacturing.
HTT 40 Project: The Company has undertaken the design and development of Hindustan Turbo Prop Trainer Aircraft ( HTT- 40). Taking into the capability of the proposed Turbo Prop Aircraft , market studies, upgrade functionality etc. requirement of 326 Aircraft (106 Aircraft for IAF and 220 Aircraft for other customers) has been projected by the Company.
31B
The Company continues to fund the HTT Design and Development program.
Hence the expenditure of RS,11104 lakhs (PY 12236 lakhs) has been treated as Development Expenditure and accounted under Intangible Assets under Development.
Special Tools includes RS,1715 Lakhs (Previous Year ; RS,2187 lakhs) towards COMPASS Project at Bharat Electronics 31C Limited (BEL), on behalf of MRO Division against which Company derives future economic benefits for repair of electro optical pods.
Financial Risk Management
The Company is exposed to market risk, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company based on its business operation evaluated the following risks:
a) Foreign currency risk:
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in exchange rates. The Company''s exposure to the risk of changes in exchange rates relates primarily to the Company''s imports for which the payment has to be done in currencies other than the functional currency of the Company. The fluctuation in exchange rates in respect to the Indian rupee may have very restricted impact on company as any fluctuations in foreign exchange are in general reimbursed by the customers of the Company in terms of the contractual obligations which the Company has with its customers.
b) Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counter party to a financial instrument fails to meet its contractual obligations resulting in a financial loss to the Company. Credit risk arises principally from trade receivables, loans & advances, advances given to suppliers (for procurement of goods, services and capital goods, cash & cash equivalents and deposits with banks and financial institutions). The Company for the Financial Year (FY) derived 97.97 % (Previous Year (PY) 96.90% of its total sales from sales to the Indian Defense Services. The Company expects to continue to derive most of its sales from the Indian Defense Services under the contracts of the Ministry of Defense (MoD), Government of India (GoI) -the Company''s principal shareholder and administrative ministry.
c) Provision for expected credit losses:
As the Company''s debtors are predominantly the Government of India (Indian Defense Services, Ministry of External Affairs), Central Public Sector Undertakings where the counter-parties have sufficient capacity to meet the obligations and where the risk of default is NIL/negligible. Accordingly, no loss allowance for impairment has been
33 recognized. Further, management believes that the unimpaired amounts that are due collectible in full, based on historical payment behavior and extensive analysis of customer credit risk. Hence, no impairment loss has been recognized during the reporting periods in respect of trade receivables.
d) Liquidity risk:
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Typically, the Company ensures that it has sufficient cash on demand to meet expected operational expenses including the servicing of financial obligations. The Company''s standard contract terms provide that, the Company receives advance payments from customers pursuant to the applicable contracts, including the GoI and the Indian Defense Services at the time of signing of any contract and milestone payments on achievement of physical milestones. These payments are utilized to meet the Company''s working capital needs (for the Company required to maintain a high level of working capital because the Company''s activities are characterized by long product development periods and production cycles). A majority of the Company''s research, design and development costs are funded by the Indian Defense services. Services and supply of spares are governed by the Fixed Price Quotation (FPQ) policy for fixation of the prices wherein the prices are fixed for the base year with escalation parameters for a pricing period of 5-7 years. The process of fixation of prices and approvals takes a minimum period of two years after the expiry of previous pricing period. In the interim, the approved prices of the previous pricing period are continued and payments are accordingly realized and on finalization of the revised prices, the differential prices are paid to the Company. Further, certain costs not forming part of selling price are reimbursed by customer on incurrence of expenditure. The reimbursement is based on verification and issuance of audit certificate by the payees. There are delays in the above process due to unanticipated variations/adjustments in the scope and schedule of the Company''s obligations due to subsequent modifications by the customers and delays in receipt of approvals from the customer. Further, payments to the Company by the Indian Defense Services are reliant on the continuing availability of budgetary appropriations by Government of India and any disruptions to the availability of such appropriations could adversely affect the Company''s cash flows.
Financial Risk Management
e) Market risk:
The Ministry of Defense (MoD) and the Government of India (GoI) have continued efforts to reform defense related policies such as the Defense Procurement Procedure 2016 (âDPP 2016â) to promote private participation, a level playing field and the domestic defense manufacturing Industry and eco-system. While the MoD has given the highest priority to Indigenously Designed, Developed and Manufactured (âIDDMâ) products for capital procurement, the Company faces completion to be selected as the Indian production agency for such contracts. These policies have raised the level of market competition in the areas in which the Company operates.
f) Risk Mitigation Process:
As a step of institutionalizing the risk management in the Company, an elaborate framework has been developed and the Company''s top management has overall responsibility for the establishment and oversight of the Company''s risk management framework. An important purpose of the framework is to have a structured and comprehensive risk management system across the company which ensures that the risks are being properly identified and effectively managed. The Company has a risk management policy to manage & mitigate these risks. The risk management process includes risk identification, risk assessment, risk evaluation, risk mitigation and regular review and monitoring of risks. The Companyâs risk management policy aims to reduce volatility in financial statements while maintaining balance between providing predictability in the Company''s business plan along with reasonable participation in market movement. Capital Management:
For the purpose of the Company''s capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Company''s capital management is to maximize the shareholder value.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and requirements. To maintain or adjust the capital structure, the Company may adjust the dividend payment to
34 shareholders, return capital to shareholders or issue new shares.
The Company monitors capital by using debt equity ratio, which is borrowings divided by Equity.
Borrowing Term for Loan (Note - 24)
Name of the State Bank of India lender
Facilities Term loan of H100000 lakhs may be availed as Rupee facility or capex LC subject to maximum of RS,40000 lakhs
Purpose The proceeds of the Term Loan will be utilized specifically for building capacity for executing order of 162
LCH. The expenses will include, Civil works, Plant and Machinery and Deferred Revenue Expenditure. Security Primary: First charge on the Project assets present and future excluding Civil works and intangible.
Collateral: Second charge on the Current Assets (stock and receivables)
Interest Rate Interest at the rate of 0.10% above 1 year MCLR which is presently 7.95% p.a. calculated on daily products 35A at monthly rests. The Bank shall at any time and from time to time be entitled to vary the margin based on the Credit Risk Assessment of the borrower at its discretion and MCLR will be reset on an annual basis on the anniversary of reset. The interest will be serviced by the Company during the moratorium.
Security The security has to be perfected within 6 months from the date of first disbursement. In the event
Perfection the Company does not perfect the security within the stipulated period, a penal interest of 0.25% p.a. will be charged for the delayed period Disbursement The term loan of RS,100000 lakhs will be disbursed in tranches beginning from the fourth quarter of Financial Year 2017-18 to first quarter of Financial Year 2024-25 Repayment The repayment will be made as quarterly payments amounting to RS,6250 lakhs after a moratorium of 4 years i.e. Repayment will be from fourth Quarter of Financial Year 2021-22 to third quarter of Financial Year 2025-26.
Borrowing Cash Credit (Note 30)
Details of lender A Consortium of 7 banks Limit RS,250000 lakhs as Cash Credit
35B(i) Purpose Working Capital Requirements
Security Paripassu first charge on stocks and receivables of the Company with other consortium banks
Interest Rate Interest at the rate of 0.25% over MCLR which is presently 8% p.a, present effective rate being 8.25% p.a at monthly rests .
Borrowing - Working Capital Loan against Fixed Deposits Details of lender Bank of India and Bank of Baroda Limit against Fixed Deposit of RS,67000 lakhs
35B(ii) Purpose Working Capital Requirements
Security Fixed Deposit of RS,67000 lakhs
Interest Rate Bank of India - 5.5% p.a. ; Bank of Baroda - 5.60% p.a.
Repayment On demand
Disclaimer: This is 3rd Party content/feed, viewers are requested to use their discretion and conduct proper diligence before investing, GoodReturns does not take any liability on the genuineness and correctness of the information in this article
More Information on Hindustan Aeronautics Ltd.
-
Hindustan Aeronautics Ltd. Tools
- Block Deals
-
Hindustan Aeronautics Ltd. Company Details
- Company Profile
- Company History
- Management Team
- Capital Structure
- Product Mix
- Banker/Auditor/Registrar
-
Company History
- BSE Price History
- NSE Price History
-
Hindustan Aeronautics Ltd. Key Financial Ratios
- Ratios
-
Hindustan Aeronautics Ltd. Results
- Quarterly Results
- Half Yearly Results
- Nine Months Results
- Annual Results
-
Hindustan Aeronautics Ltd. Financial Data
- Audited Results
- Cash Flow
- Balance Sheet
-
Hindustan Aeronautics Ltd. Reports
- Accounting Policies
- Auditors Report
- Directors Report
- Notes To Account
-
Hindustan Aeronautics Ltd. Corporate Announcements
- Book Closure
- Dividend
- Board Meetings
-
Rs 9.6 Lakh Crore Wiped Out In Intense Stock Market Rout; Sensex Nosedives 1,546 Pts, Nifty Sinks 495 Pts; Why -
Stock Market Crashed On February 1: Sensex Down 2,371 Pts, Nifty Fell 749 Pts; Why Rs 7 Lakh Cr Wealth Eroded? -
BSE, NSE Trading After Union Budget 2026 Announcement; Know Rules To Buy, Sell Stocks on 1st February, Sunday -
Budget Jitters Hit Dalal Street: Sensex Falls Over 600 Points, Nifty Slips Sharply: Why Stock Market Is Down? -
Stock Market Outlook 29 Jan: Sensex, Nifty Today Likely To Trade Firm Amid Domestic Cues & Fed Policy Decision -
Stock Market Outlook 28 Jan 2026: Nifty, Sensex Likely to Trade Higher Post India-EU Deal; Oil Stocks in Focus -
Stock Market Outlook Today, 27 January 2026: Sensex, Nifty Likely To Remain Weak as Fed Decision Weighs -
India VIX Today Jumps Over 12% to Seven-Month High as Nifty Slips Below 25,200, Sensex Declines -
Indian Stock Market Crash: Sensex Falls 5,035 Pts, Nifty Drops 1,453 Pts From Peak; Can Budget Revive Bulls? -
Dalal Street Bloodbath to Bounce: Nifty, Sensex Recover After Rs 11.45 Lakh Crore MCap Erased in 48 Hrs -
Natural Gas Price Rallies 12% As Arctic Cold Fuels Demand | All You Need To Know -
Nifty and Bank Nifty Outlook: Range-Bound Trading Dominates as Key Levels Define the Path -
Stocks To Buy Today, Jan 16: Top 2 Picks By Riyank Arora of Mehta Equities For Profitable Trading On Friday
-
Stock Market Outlook January 16, 2026; Sensex, Nifty Today Expected To Trade Range-Bound After Holiday -
Global Markets Send Mixed Signals Ahead of Trading Day -
Stocks To Buy Today, Jan 14: Top 2 Picks By Riyank Arora of Mehta Equities For Profitable Trading On Wednesday
-
Block for 8 hours
-
Block for 12 hours
-
Block for 24 hours
-
Don't block
Sign in with Google- Male
- Female
- Others
- Under 18
- 18 to 25
- 26 to 35
- 36 to 45
- 45 to 55
- 55+