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Accounting Policies of Lumax Industries Ltd. Company
Mar 31, 2025
2. Material accounting policies
2.1 Basis of Preparation
The standalone financial statements of the Company have
been prepared in accordance with Indian Accounting
Standards (Ind AS) notified under the Companies (Indian
Accounting Standards) Rules, 2015 (as amended from
time to time) and presentation requirements of Division
II of Schedule III to the Companies Act, 2013, (Ind AS
compliant Schedule III), as applicable to the standalone
financial statement.
The standalone financial statements have been prepared
on a historical cost basis, except for the certain financial
assets and liabilities which have been measured at
fair value or revalued amount (refer accounting policy
regarding financial instruments).
⢠Certain financial assets and liabilities measured
at fair value (refer accounting policy regarding
financial instruments), and
⢠Defined benefit plans whereby the plan assets are
measured at fair value.
The Company has prepared the standalone financial
statements on the basis that it will continue to operate as
a going concern.
The Standalone Financial Statements are presented
in Indian Rupees (?) and all values are rounded to the
nearest lakhs ('' 00,000), except wherever otherwise
stated.
2.2 Summary of material accounting policies
A. Investment in subsidiary and associate
A subsidiary is an entity that is controlled by another
entity.
An associate is an entity over which the Company
has significant influence. Significant influence is the
power to participate in the financial and operating
policy decisions of the investee but is not control or
joint control over those policies.
Impairment of investments
The Company reviews its carrying value of
investments carried at cost annually, or more
frequently when there is indication for impairment.
If the recoverable amount is less than its carrying
amount, the impairment loss is recorded in the
Statement of Profit and Loss.
When an impairment loss subsequently reverses,
the carrying amount of the Investment is increased
to the revised estimate of its recoverable amount,
so that the increased carrying amount does not
exceed the cost of the Investment. A reversal of
an impairment loss is recognized immediately in
Statement of Profit or Loss
B. Current versus non-current classification
The Company segregates assets and liabilities into
current and non-current categories for presentation
in the balance sh eet after con siderin g its normal
operating cycle and other criteria set out in Ind AS
1, âPresentation of Financial Statementsâ. For this
purpose, current assets and liabilities include the
current portion of non-current assets and liabilities
respectively. Deferred tax assets and liabilities are
always classified as non-current.
The operating cycle is the time between the
acquisition of assets for processing and their
realization in cash and cash equivalents. The
Company has identified period up to twelve months
as its operating cycle.
C. Foreign currencies
Functional and presentational currency
The Companyâs standalone financial statements
are presented in Indian Rupees (?) which is also the
Companyâs functional currency. Functional currency
is the currency of the primary economic environment
in which a company operates and is normally the
currency in which the Company primarily generates
and expends cash.
Transactions and balances
Tran sactions in foreign currencies are initially
recorded by the Company at the functional currency
spot rates at the date the transaction first qualifies
for recognition. However, for practical reasons,
the Company uses average rate if the average
approximates the actual rate at the date of the
transaction.
Monetary assets and liabilities denominated in
foreign currencies are translated at the functional
currency spot rates of exchange at the reporting
date. Exchange differences arising on settlement
or translation of monetary items are recognized in
statement of profit and loss.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated
using the exchange rates at the dates of the initial
transactions. Non-monetary items measured at fair
value in a foreign currency are translated using the
exchange rates at the date when the fair value is
determined. The gain or loss arising on translation
of non-monetary items measured at fair value is
treated in line with the recognition of the gain or
loss on the change in fair value of the item (i.e.,
translation differences on items whose fair value
gain or loss is recognized in OCI or profit or loss are
also recognized in OCI or profit or loss, respectively).
I n determining the spot exchange rate to use on
initial recognition of the related asset, expense or
income (or part of it) on the derecognition of a non¬
monetary asset or non-monetary liability relating to
advance consideration, the date of the transaction is
the date on which the Company initially recognizes
the non-monetary asset or non-monetary liability
arising from the advance consideration. If there
are multiple payments or receipts in advance, the
Company determines the transaction date for each
payment or receipt of advance consideration.
D. Property, plant and equipment
I tems of property, plant and equipment are stated
at cost, net of accumulated depreciation and
accumulated impairment losses, if any. Such cost
includes the cost of replacing part of the plant
and equipment and borrowing costs for long-term
construction projects if the recognition criteria are
met. Likewise, when a major inspection is performed,
its cost is recognized in the carrying amount of
the plant and equipment as a replacement if the
recognition criteria are satisfied. All other repair
and maintenance costs are recognized in profit or
loss as incurred. When significant parts of plant and
equipment are required to be replaced at intervals,
the Company depreciates them separately based
on their specific useful lives.
Capital work in progress is stated at cost, net of
accumulated impairment loss, if any.
Items of stores and spares that meet the definition
of plant, property and equipment are capitalized
at cost and depreciated over their useful life.
Otherwise, such items are classified as inventories.
An item of property, plant and equipment and any
significant part initially recognized is derecognized
upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain
or loss arising on derecognition of the asset
(calculated as the difference between the net
disposal proceeds and the carrying amount of the
asset) is included in the statement of profit and loss
when the asset is derecognized.
Depreciation on property, plant and equipment
Depreciation is calculated on a straight-line basis
over the estimated useful lives as estimated by the
management which is in line with the Schedule II to
the Companies Act, 2013. The Company has used
the following useful lives to provide depreciation
on its property, plant and equipment which is in line
with schedule II:
The management has estimated, supported by
independent assessment by professionals, the
useful life of the following class of asset, which are
higher/different than that indicated in Schedule II.
The management believes that these estimated
useful lives are realistic and reflect fair approximation
of the period over which the assets are likely to be
used.
in the statement of profit and loss unless such
expenditure forms part of carrying value of another
assets, as follows:
The residual value of property, plant and equipment
is considered at 2%.
The residual values, useful lives and methods of
depreciation of property, plant and equipment are
reviewed at the end of each financial year and
adjusted prospectively, if appropriate. In particular,
the Company considers the impact of health, safety
and environment legislation in its assessment of
expected useful lives and estimated residual values.
Leasehold improvements are depreciated over the
lease term or useful life whichever is lower.
E. Intangible assets
Recognition and measurement
Intangible assets acquired separately are measured
on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost
less accumulated amortization and impairment
loss, if any. I ntern ally generated in tangible assets,
excluding capitalized development costs, are not
capitalized and expenditure is reflected in the
statement of profit and loss in the year in which the
expenditure is incurred.
The useful life of intangible assets are assessed as
finite.
Intangible assets with finite lives are amortized over
the useful economic life and assessed for impairment
whenever there is an indication that the intangible
assets may be impaired. The amortization period
and amortization method of the intangible asset with
a useful finite life are reviewed at least at the end
of each reporting period. Changes in the expected
useful life or the expected pattern of consumption
of future economic benefits embodied in the assets
are considered to modify the amortization period or
method, as appropriate, and are treated as changes
in accounting estimates. The amortization expense
on intangible assets with finite lives is recognized
An intangible asset is derecognized upon disposal
(i.e., at the date the recipient obtains control) or
when no future economic benefits are expected
from its use or disposal. Gain or loss arising from de¬
recognition of an intangible asset are measured as
the difference between the net disposal proceeds
and the carrying amount of the asset and are
recognized in the statement of profit and loss when
the asset is derecognized.
Research and development costs
Research costs are expensed as incurred.
Development expenditures on an individual project
are recognized as an intangible asset when the
Group can demonstrate:
⢠The technical feasibility of completing the
intangible asset so that the asset will be
available for use or sale
⢠I ts intention to complete and its ability and
intention to use or sell the asset
⢠How the asset will generate future economic
benefits
⢠The availability of resources to complete the
asset
⢠The ability to measure reliably the expenditure
during development
Following initial recognition of the development
expenditure as an asset, the asset is carried at cost
less any accumulated amortization and accumulated
impairment losses. Amortization of the asset begins
when development is complete, and the asset is
available for use. It is amortized over the period of
expected future benefit. Amortization expense is
recognized in the statement of profit and loss unless
such expenditure forms part of carrying value of
another asset. During the period of development, the
asset is tested for impairment annually.
F. Investment Properties
Property that is held for long term rental yields or
for capital appreciation or for both, and that is not
occupied by the Company, is classified as investment
property. Investment property is measured initially at
its cost, including related transaction cost and where
applicable borrowing costs. Subsequent to initial
recognition, investment property are stated at cost
less accumulated depreciation and accumulated
impairment loss, if any. Subsequent expenditure is
capitalized to assets carrying amount only when it is
probable that future economic benefits associated
with the expenditure will flow to the Company and
the cost of the item can be measured reliably.
Though the Company measures investment
property using cost based measurement, the
fair value of investment property is disclosed in
the notes. Fair values are determined based on
an annual evaluation performed by an external
independent valuer applying a valuation model as
per Ind AS 113 âFair value measurementâ.
Investment property are derecognized either
when they have been disposed of or when they
are permanently withdrawn from use and no future
economic benefit is expected from their disposal.
The difference between the net disposal proceeds
and the carrying amount of the asset is recognized
in profit or loss in the period of recognition.
Transfer of property from investment property to
the property, plant and equipment is made when
the property is no longer held for long term rental
yields or for capital appreciation or both at carrying
amount of the property transferred.
G. Borrowing costs
Borrowing costs directly attributable to the
acquisition, construction or production of an asset
that necessarily takes a substantial period of time to
get ready for its intended use or sale are capitalized
as part of the cost of the asset. All other borrowing
costs are expensed in the period in which they
occur. Borrowing costs consist of interest and other
costs that an entity incurs in connection with the
borrowing of funds. Borrowing cost also includes
exchange differences to the extent regarded as an
adjustment to the borrowing costs.
H. Leases
The Company assesses at contract inception
whether a contract is, or contains, a lease. That is, 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
The Company applies a single recognition and
measurement approach for all leases, except
for short-term leases and leases of low-value
assets. The Company recognizes lease liabilities
to make lease payments and right-to-use assets
representing the right to use the underlying assets.
i. Right-to-use assets
The Company recognizes right-to-use assets
at the commencement date of the lease (i.e.,
the date the underlying asset is available
for use). Right-to-use assets are measured
at cost, less any accumulated depreciation
and impairment losses, and adjusted for any
remeasurement of lease liabilities. The cost
of right-to-use assets includes the amount
of lease liabilities recognized, initial direct
costs incurred, and lease payments made at
or before the commencement date less any
lease incentives received. Right-to-use assets
are depreciated on a straight-line basis over
the lease term.
Leasehold Land-99 years
Solar Panel-15 years
Vehicle-5 years
Building-10-15 years
I f ownership of the leased asset transfers to
the Company at the end of the lease term or
the cost reflects the exercise of a purchase
option, depreciation is calculated using the
estimated useful life of the asset.
The right-to-use assets are also subject to
impairment. Refer to the accounting policies
section Impairment of non-financial assets.
ii. Lease Liabilities
At the commencement date of the lease,
the Company recognizes lease liabilities
measured at the present value of lease
payments to be made over the lease term.
The lease payments include fixed payments
(including in substance fixed payments) less
any lease incentives receivable, variable
lease payments that depend on an index
or a rate, and amounts expected to be paid
under residual value guarantees. The lease
payments also include the exercise price of
a purchase option reasonably certain to be
exercised by the Company and payments of
penalties for terminating the lease, if the lease
term reflects the Company exercising the
option to terminate. Variable lease payments
that do not depend on an index or a rate are
recognized as expenses (unless they are
incurred to produce inventories) in the period
in which the event or condition that triggers
the payment occurs.
In calculating the present value of lease
payments, the Company uses its incremental
borrowing rate at the lease commencement
date because the interest rate implicit in the
lease is not readily determinable. After the
commencement date, the amount of lease
liabilities is increased to reflect the accretion
of interest and reduced for the lease payments
made. In addition, the carrying amount of
lease liabilities is remeasured if there is a
modification, a change in the lease term, a
change in the lease payments (e.g., changes
to future payments resulting from a change in
an index or rate used to determine such lease
payments) or a change in the assessment of
an option to purchase the underlying asset.
iii. Short-term leases and leases of low-value
assets
The Company applies the short-term lease
recognition exemption to its short-term leases
(i.e., those leases that have a lease term of
12 months or less from the commencement
date and do not contain a purchase option).
It also applies the lease of low-value assets
recognition exemption to leases that are
considered to be low value. Lease payments
on short-term leases and leases of low-value
assets are recognized as expense on a
straight-line basis over the lease term.
Company as a lessor
Leases in which the Company does not
transfer substantially all the risks and rewards
incidental to ownership of an asset are
classified as operating leases. Rental income
arising is accounted for on a straight-line
basis over the lease terms. Initial direct costs
incurred in negotiating and arranging an
operating lease are added to the carrying
amount of the leased asset, i.e., asset given on
lease, and recognized over the lease term on
the same basis as rental income. Contingent
rents are recognized as revenue in the period
in which they are earned.
Leases are classified as finance leases when
substantially all of the risks and rewards of
ownership transfer from the Company to the
lessee. Amounts due from lessees under
finance leases are recorded as receivables
at the Companyâs net investment in the
leases. Finance lease income is allocated to
accounting periods so as to reflect a constant
period ic rate of return on the net investment
outstanding in respect of the lease.
I. Inventories
Inventories which comprise raw materials,
components, work in progress, finished goods,
traded goods, moulds and stores and spares are
valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present
location and condition are accounted as follows:
⢠Raw materials, components, stores and
spares: Cost includes cost of purchase and
other costs incurred in bringing the inventories
to their present location and condition. Cost is
determined on moving weighted average basis.
⢠Work-in-progress and finished goods: Cost
includes cost of direct materials and labour
and a proportion of manufacturing overheads
based on the normal operating capacity but
excluding borrowing costs. Cost is determined
on weighted moving weighted average basis.
⢠Traded goods: Cost includes cost of purchase
and other costs incurred in bringing the
inventories to their present location and
condition. Cost is determined on moving
weighted average basis.
⢠Moulds: Cost includes cost of purchase and
other costs incurred in bringing the inventories
to their present location and condition.
⢠Stores and spares: Stores and spares which
do not meet the definition of Property, plant
and equipment are accounted as inventories.
Net realisable value is the estimated selling price in
the ordinary course of business, less the estimated
costs of completion and the estimated costs
necessary to make the sale.
Scraps are valued at net realisable value.
J. Impairment of non-financial assets
The Company assesses at each reporting date
whether there is an indication that an asset may
be impaired. If any indication exists, or when
annual impairment testing for an asset is required,
the Company estimates the assetâs recoverable
amount. An assetâs recoverable amount is the
higher of an assetâs or cash-generating unitsâ (CGU)
fair value less costs of disposal and its value in
use. The recoverable amount is determined for an
individual asset, unless the asset does not generate
cash inflows that are largely independent of those
from other assets or groups of assets. Where
the carrying amount of an asset or CGU exceeds
its recoverable amount, the asset is considered
impaired and is written down to its recoverable
amount.
In assessing value in use, the estimated future
cash flows are discounted to their present value
using a pre-tax discount rate that reflects current
market assessments of the time value of money
and the risks specific to the asset. In determining
fair value less costs of disposal, recent market
transactions are taken into account, if available. If no
such transactions can be identified, an appropriate
valuation model is used. These calculations are
corroborated by valuation multiples, quoted share
prices for publicly traded companies or other
available fair value indicators.
The Company bases its impairment calculation on
detailed budgets and forecast calculations, which
are prepared separately for each of the Company
CGUs to which the individual assets are allocated.
These budgets and forecast calculations generally
cover a period of five years. For longer periods,
a long-term growth rate is calculated and applied
to project future cash flows after the fifth year. To
estimate cash flow projections beyond periods
covered by the most recent budgets/forecasts,
the Company extrapolates cash flow projections
in the budget using a steady or declining growth
rate for subsequent years, unless an increasing rate
can be justified. In any case, this growth rate does
not exceed the long-term average growth rate for
the products, industries, or country or countries in
which the Company operates, or for the market in
which the asset is used.
Impairment losses of non-financial assets, including
impairment on inventories, are recognized in the
statement of profit and loss, except for properties
previously revalued with the revaluation surplus
taken to OCI. For such properties, the impairment is
recognized in OCI up to the amount of any previous
revaluation surplus.
For assets excluding goodwill, an assessment is
made at each reporting date to determine whether
there is an indication that previously recognized
impairment losses no longer exist or have
decreased. If such indication exists, the Company
estimates the assetâs or CGUâs recoverable amount.
A previously recognized impairment loss is reversed
only if there has been a change in the assumptions
used to determine the assetâs recoverable amount
since the last impairment loss was recognized. The
reversal is limited so that the carrying amount of the
asset does not exceed its recoverable amount, nor
exceed the carrying amount that would have been
determined, net of depreciation, had no impairment
loss been recognized for the asset in prior years.
Such reversal is recognized in the statement of profit
and loss unless the asset is carried at a revalued
amount, in which case, the reversal is treated as a
revaluation increase.
Goodwill is tested for impairment annually at each
year end and when circumstances indicate that
the carrying value may be impaired. Impairment
is determined for goodwill by assessing the
recoverable amount of each CGU (or group of
CGUs) to which the goodwill relates. When the
recoverable amount of the CGU is less than itâs
carrying amount, an impairment loss is recognized.
Impairment losses relating to goodwill cannot be
reversed in future periods. Intangible assets with
indefinite useful lives are tested for impairment
annually at the CGU level, as appropriate, and when
circumstances indicate that the carrying value may
be impaired.
K. Revenue from contracts with customers
Revenue from contracts with customers is
recognized when control of the goods or services
are transferred to the customer at an amount that
reflects the consideration to which the Company
expects to be entitled in exchange for those goods
or services. The Company has generally concluded
that it is the principal in its revenue arrangements,
because it typically controls the goods before
transferring them to the customer.
However, Goods and services tax (GST), is not
received by the Company on its own account.
Rather, it is tax collected on value added to the
commodity by the seller on behalf of the government.
Accordingly, it is excluded from revenue.
a) Sale of products including moulds
Revenue from sale of products is recognized
at the point in time when control of the goods
is transferred to the customer, generally
on delivery of the goods and there are no
unfulfilled obligations.
The Company considers, whether there are
other promises in the contract in which their are
separate performance obligations, to which a
portion of the transaction price needs to be
allocated. In determining the transaction price
for the sale of product, the Company considers
the effects of variable consideration, the
existence of significant financing components,
noncash consideration, and consideration
payable to the customer, if any.
Revenue arising from the sale of goods
(including moulds) is recognized when the
customer obtains control of the promised
asset, i.e. either at the delivery or dispatch of
goods (based on the agreed terms of sale with
the respective customers), which is the point in
time when the customer has the ability to direct
the use of the goods and obtain substantially
all of the remaining benefits of the goods.
Warranty obligation
The Company generally provides for warranties
for general repair of defects that existed at the
time of sale. These warranties are assurance-
type warranties under Ind AS 115, which are
accounted for under Ind AS 37 (Provisions,
Contingent Liabilities and Contingent Assets).
b) Sale of services
Revenue from sale of services is recognized
in accordance with the terms of contract when
the services are rendered and the related
costs are incurred.
c) Contract balances
i) Contract assets
Contract assets is right to consideration
in exchange for goods or services
transferred to the customer and
performance obligation satisfied. If the
Company performs by transferring goods
or services to a customer before the
customer pays consideration or before
payment is due, a contract asset is
recognized for the earned consideration
that is conditional. Upon completion of
the attached condition and acceptance
by the customer, the amounts recognized
as contract assets is reclassified to
trade receivables upon invoicing. A
receivables represents the Companyâs
right to an amount of consideration that
is unconditional. Contract assets are
subject to impairment assessment. Refer
to accounting policies on impairment
of financial assets in section (Financial
instruments - initial recognition and
subsequent measurement)
ii) Trade receivables
A receivable is recognized if an amount
of consideration that is unconditional
(i.e., only the passage of time is required
before payment of the consideration
is due). Refer to accounting policies
of financial assets in section âfinancial
instruments - initial recognition and
subsequent measurementâ.
iii) Contract liabilities
A contract liability is the obligation
to transfer goods or services to a
customer for which the Company has
received consideration (or an amount of
consideration is due) from the customer
or has raised the invoice in advance. If a
customer pays consideration before the
Company transfers goods or services
to the customer, a contract liability is
recognized when the payment is made or
the payment is due (whichever is earlier).
Contract liabilities are recognized as
revenue when the Company performs
under the contract (i.e., transfers control
of the related goods or services to the
customer).
d) Interest Income
I nterest income is accrued on a time basis,
by reference to the principal outstanding and
recorded using the Effective Interest Rate
(EIR). EIR is the rate that exactly discounts
the estimated future cash receipts over the
expected life of the financial instrument or a
shorter period, where appropriate, to the gross
carrying amount of the financial asset. When
calculating the EIR, the Company estimates
the estimated cash flows by considering all the
contractual terms of the financial instrument
but does not consider the expected credit
losses.
Interest income on bank deposits and
advances to vendors is recognized on a
time proportion basis taking into account
the amount outstanding and the applicable
interest rate. Interest income is included under
the head âother incomeâ in the statement of
profit and loss.
e) Dividend Income
Dividend on financial assets is recognized
when the Companyâs right to receive the
dividends is established, it is probable that
the economic benefits associated with the
dividend will flow to the entity, the dividend
does not represent a recovery of part of cost
of the investment and the amount of dividend
can be measured reliably.
L. Government grants
Government grants are recognized where there is
reasonable assurance that the grant will be received
and all the attached conditions will be complied
with. When the grant relates to an expense item,
it is recognized as income on a systematic basis
over the periods that the related costs, for which
it is intended to compensate, are expensed. When
the grant relates to an asset, the government grant
related to asset is presented by deducting the grant
in arriving at the carrying amount of the asset.
M. Retirement and other employee benefits
Retirement benefit in the form of provident fund is
a defined contribution scheme. The Company has
no obligation, other than the contribution payable
to the provident fund. The Company recognizes
contribution payable to the provident fund scheme
as an expense, when an employee renders the
related service. If the contribution payable to the
scheme for service received before the balance
sheet date exceeds the contribution already paid,
the deficit payable to the scheme is recognized as
a liability after deducting the contribution already
paid. If the contribution already paid exceeds the
contribution due for services received before the
balance sheet date, then excess is recognized as
an asset to the extent that the pre-payment will lead
to, for example, a reduction in future payment or a
cash refund.
The Company operates defined benefit plans for its
employees, viz., gratuity, which requires contributions
to be made to a separately administered fund. The
Company provides for its gratuity liability based on
actuarial valuation of the gratuity liability as at the
Balance Sheet date, based on Projected Unit Credit
Method, carried out by an independent actuary. The
contributions made are recognized as plan assets.
The defined benefit obligation as reduced by fair
value of plan assets is recognized in the Balance
Sheet. Re-measurements are recognized in the
Other Comprehensive Income, net of tax in the year
in which they arise.
Short-term employee benefits are expensed as the
related service is provided. A liability is recognized
for the amount expected to be paid if the Company
has a present legal or constructive obligation to pay
this amount as a result of past service provided by
the employee and the obligation can be estimated
reliably.
Accumulated compensated absences which are
expected to be settled wholly within twelve months
after the end of the period in which the employees
render the related service are treated as short-term
benefits. The Company measures the expected cost
of such absences as the additional amount that it
expects to pay as a result of the unused entitlement
that has accumulated at the reporting date.
The Company treats accumulated leave expected to
be carried forward beyond twelve months, as long¬
term employee benefit for measurement purposes.
Such long-term compensated absences are
provided for based on the actuarial valuation using
the projected unit credit method at the reporting
date. Remeasurement gains/losses are immediately
taken to the statement of profit and loss and are not
deferred. The obligations are presented as current
liabilities in the balance sheet if the entity does not
have an unconditional right to defer the settlement
for at least twelve months after the reporting date.
Remeasurements, comprising of actuarial gains
and losses, the effect of the asset ceiling,
excluding amounts included in net interest on
the net defined benefit liability and the return on
plan assets (excluding amounts included in net
interest on the net defined benefit liability), are
recognized immediately in the balance sheet with
a corresponding debit or credit to retained earnings
through OCI in the period in which they occur. Re¬
measurements are not reclassified to profit or loss
in subsequent periods.
Past service costs are recognized in profit or loss on
the earlier of:
a) The date of the plan amendment or curtailment,
and
b) The date that the Company recognizes related
restructuring costs
Net interest is calculated by applying the discount
rate to the net defined benefit liability or asset. The
Company recognizes the following changes in the
net defined benefit obligation as an expense in the
statement of profit and loss:
a) Service costs comprising current service
costs, past-service costs, gains and losses on
curtailments and non-routine settlements; and
b) Net interest expense or income.
Mar 31, 2024
1. Corporate information
Lumax Industries Limited (âthe Companyâ) is a Public Company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. Its shares are listed on two recognized stock exchanges in India. The registered office of the Company is located 2nd Floor, Harbans Bhawan-II, Commercial Complex, Nangal Raya, New Delhi- 110046.
The Company is principally engaged in the manufacturing of automotive components. Information on other related party relationships of the Company is provided in Note 41.
The financial statements were authorized for issue in accordance with a resolution of the directors on May 24, 2024.
2. Material accounting policies2.1 Basis of Preparation
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) and presentation requirements of Division II of Schedule III to the Companies Act, 2013, (Ind AS compliant Schedule III), as applicable to the financial statement.
The financial statements have been prepared on a historical cost basis, except for the certain financial assets and liabilities which have been measured at fair value or revalued amount (refer accounting policy regarding financial instruments).
The Company has prepared the financial statements on the basis that it will continue to operate as a going concern.
The Financial Statements are presented in Indian Rupees (?) and all values are rounded to the nearest Lakhs ('' 00,000), except wherever otherwise stated.
2.2 Summary of material accounting policies
A. Investment in subsidiary and associate
The investment in subsidiary are carried at cost as per Ind AS 27. The Company regardless of the nature of its involvement with an entity (the investee), determines whether it is a parent by assessing whether it controls the investee. The Company controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Thus, the Company controls an investee if and only if it has all the following:
(a) power over the investee
(b) exposure, or rights, to variable returns from its involvement with the investee and
(c) the ability to use its power over the investee to affect the amount of the returns.
An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
The considerations made in determining whether significant influence are similar to those necessary to determine control over the subsidiary
Investment in associate is recorded at cost
B. Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification.
An asset is treated as current when it is:
a) Expected to be realized or intended to be sold or consumed in normal operating cycle
b) Held primarily for the purpose of trading
c) Expected to be realized within twelve months after the reporting period, or
d) Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current. Liabilities
A liability is current when:
(a) It is expected to be settled in normal operating cycle
(b) It is held primarily for the purpose of trading
(c) It is due to be settled within twelve months after the reporting period, or
(d) There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
Functional and presentational currency
The Companyâs financial statements are presented in Indian Rupees (?) which is also the Companyâs functional currency.
Transactions and balances
Tran sactions in foreign currencies are initially recorded by the Company at the functional currency spot rates at the date the transaction first qualifies for recognition. However, for practical reasons, the Company uses average rate if the average approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Exchange differences arising on settlement or translation of monetary items are recognized in statement of profit and loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognized in OCI or profit or loss are also recognized in OCI or profit or loss, respectively).
I n determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a nonmonetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which the Company initially recognizes the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, the Company determines the transaction date for each payment or receipt of advance consideration.
D. Property, plant and equipment
Capital work in progress, property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced at intervals, Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the property, plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.
Items of stores and spares that meet the definition of plant, property and equipment are capitalized at cost and depreciated over their useful life. Otherwise, such items are classified as inventories.
An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognized.
Depreciation on property, plant and equipment
Depreciation is calculated on a straight-line basis over the estimated useful lives as estimated by the management which is in line with the Schedule II to the Companies Act, 2013. The Company has used the following useful lives to provide depreciation on its property, plant and equipment which is in line with schedule II:
|
Assets |
Useful Lives estimated by the management (in years) |
|
Factory Building |
30 |
|
Other Building |
60 |
|
Office equipments |
5 |
|
Furniture and fixtures |
10 |
|
Vehicles |
5 |
The management has estimated, supported by independent assessment by professionals, the useful life of the following class of asset, which are higher/different than that indicated in Schedule II.
|
Assets |
Useful Lives estimated by the management (in years) |
|
Plant and equipments |
3-21 |
The residual value of property, plant and equipment is considered at 2%.
Depreciation on additions/ (disposals) is provided on a pro-rata basis i.e. from/ (upto) the date on which asset is ready for use/ (disposed of).
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at the end of each financial year and adjusted prospectively, if appropriate.
Recognition and measurement
I ntangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred.
Amortization and useful lives
Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible assets may be impaired. The amortization period and amortization method of the intangible asset with a useful finite life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the assets are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement of profit and loss unless such expenditure forms part of carrying value of another assets, as follows:
|
Intangible Assets |
Estimated Useful Life (Years) |
|
Computer Software |
Over the estimated economic useful lives ranging from 3.5 to 4 years |
An intangible asset is derecognized upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Gain or loss arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognized as an intangible asset when the Group can demonstrate:
⢠The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
⢠Its intention to complete and its ability and intention to use or sell the asset
⢠How the asset will generate future economic benefits
⢠The availability of resources to complete the asset
⢠The ability to measure reliably the expenditure during development
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete, and the asset is available for use. It is amortized over the period of expected future benefit. Amortization expense is recognized in the statement of profit and loss unless such expenditure forms part of carrying value of another asset. During the period of development, the asset is tested for impairment annually.
Property that is held for long term rental yields or for capital appreciation or for both, and that is not occupied by the Company, is classified as investment property. Investment property is measured initially at its cost, including related transaction cost and where applicable borrowing costs. Subsequent to initial recognition, investment property are stated at cost less accumulated depreciation and accumulated impairment loss, if any. Subsequent expenditure is capitalized to assets carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably.
Though the Company measures investment property using cost based measurement, the fair value of investment property is disclosed in the notes. Fair values are determined based on an annual evaluation performed by an external independent valuer applying a valuation model as per Ind AS 113 âFair value measurementâ.
Investment property are derecognized either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period of recognition.
Transfer of property from investment property to the property, plant and equipment is made when the property is no longer held for long term rental yields or for capital appreciation or both at carrying amount of the property transferred.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognizes lease liabilities to make lease payments and right-to-use assets representing the right to use the underlying assets.
The Company recognizes right-to-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-to-use assets are measured
at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-to-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-to-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets as follows
Leasehold Land-99 years
Solar Panel-15 years
Vehicle-5 years
Building-10-15 years
I f ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
The right-to-use assets are also subject to impairment. Refer to the accounting policies section âImpairment of non-financial assetsâ.
ii. Lease Liabilities
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognized as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the
lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
iii. Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognized as expense on a straight-line basis over the lease term.
Leases in which the Company does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.
Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Companyâs net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.
I. Inventories
Inventories which comprise raw materials,
components, work in progress, finished goods, traded goods, moulds and stores and spares are valued at the lower of cost and net realizable value.
The basis of determining costs for various categories of inventories is as follows:
⢠Raw materials, components, stores and
spares: Cost of inventories comprises all cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted moving average basis.
⢠Work-in-progress and finished goods: Cost includes direct material plus appropriate share of labor, manufacturing overheads based on normal operating capacity. Cost is determined on a weighted moving average basis.
⢠Traded goods: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on moving weighted average basis.
⢠Moulds: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition.
Stores and spares which do not meet the definition of Property, plant and equipment are accounted as inventories.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
Scraps are valued at net realizable value.
The net realizable value of work-in-progress is determined with reference to the selling prices of related finished goods. Raw materials and other supplies held for use in production of finished goods are not written down below cost, except in cases where material prices have declined, and it is estimated that the cost of the finished goods will exceed its net realizable value. The comparison of cost and net realizable value is made on an item-byitem basis.
J. Impairment of non-financial assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required,
the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or cash-generating unitsâ (CGU) net selling price and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely ind ependent of th ose from oth er assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.
I mpairment losses on non-financial asset, including impairment on inventories, are recognized in the statement of profit and loss.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Company CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, the Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified. In any case, this growth rate does not exceed the long-term average growth rate for the products, industries, or country or countries in which the Company operates, or for the market in which the asset is used.
An assessment is made at each reporting date to determine whether there is an indication that previously recognized impairment losses no longer exist or have decreased. If such indication exists, the Company estimates the assetâs or CGUâs recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine
the assetâs recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amoun t of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.
Intangible assets with indefinite useful lives are tested for impairment annually at the CGU level, as appropriate, and when circumstances indicate that the carrying value may be impaired.
The Company assesses where climate risks could have a significant impact, such as the introduction of emission-reduction legislation that may increase manufacturing costs. These risks in relation to climate-related matters are included as key assumptions where they materially impact the measure of recoverable amount, These assumptions have been included in the cash-flow forecasts in assessing value-in-use amounts.
K. Revenue from contracts with customers
Revenue from contracts with customers is recognized when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company has generally concluded that it is the principal in its revenue arrangements, because it typically controls the goods before transferring them to the customer.
However, Goods and services tax (GST), is not received by the Company on its own account. Rather, it is tax collected on value added to the commodity by the seller on behalf of the government. Accordingly, it is excluded from revenue.
a) Sale of products including moulds
Customers obtain control of goods when the goods are delivered to and have been accepted at their premises. However, few customers accepts the goods when goods have been dispatched by the Company.
I nvoices are generated at that point in time. Invoices are usually payable within 30-120 days. No discounts are usually provided for goods, but few customers may avail cash
discount on prompt payment of the goods. Some contracts permit the customer to return an item. Returned goods are exchanged only for new goods - i.e. no cash refunds are offered.
Reven ue arising from th e sale of goods (including moulds) is recognized when the customer obtains control of the promised asset, i.e. either at the delivery or dispatch of goods (based on the agreed terms of sale with the respective customers), which is the point in time when the customer has the ability to direct the use of the goods and obtain substantially all of the remaining benefits of the goods.
For contracts that allow the customers to avail the cash discount, the Company estimates the value of discount by applying the âMost likely amountâ method and past experience of the Company.
For contracts that permit the customer to return an item, revenue is recognized to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur.
b) Sale of services
Revenue from sale of services is recognized in accordance with the terms of contract when the services are rendered and the related costs are incurred.
c) Contract balances
i) Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognized for the earned consideration that is conditional.
ii) Trade receivables
A receivable represents the Companyâs right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Refer to accounting policies of financial assets in section financial instruments - initial recognition and measurement.
iii) Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognized when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognized as
revenue when the Company performs under the contract.
d) Interest Income
For all debt instruments measured at
amortized cost or at fair value through other comprehensive income, interest income is
recorded using the Effective Interest Rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or
receipts over the expected life of the financial instruments or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortized cost of a financial liability. When calculating the effective interest rate, the Company estimates the expected estimated cash flows by considering all the contractual terms of the financial instrument but does not consider the expected credit loss. Interest income is included under the head âother incomeâ in the statement of profit and loss.
Interest income on bank deposits and advances to vend ors is recog nized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head âother incomeâ in the statement of profit and loss.
e) Dividend Income
Dividend is recognized when the Companyâs right to receive the payment is established, which is generally when shareholders approve the dividend.
f) Rental Income
Rental income arising from operating leases are accounted for on a straight-line basis over the lease terms and is included under the head âother incomeâ in the statement of profit & loss.
Government grants are recognized where there is reasonable assurance that the grant will be received and all the attached conditions will be complied with. When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognized as income in equal amounts over the expected useful life of the related asset.
When the Company receives grants of non-monetary assets, the asset and the grant are recorded at fair value amounts and released to profit or loss over the expected useful life in a pattern of consumption of the benefit of the underlying asset i.e. by equal annual instalments. When loans or similar assistance are provided by governments or related institutions, with an interest rate below the current applicable market rate, the effect of this favorable interest is regarded as government grant. The loan or assistance is initially recognized and measured at fair value and the government grant is measured as the difference between the initial carrying value of the loan and the proceeds received. The loan is subsequently measured as per the accounting policy applicable to financial liabilities.
M. Retirement and other employee benefits
Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
The Company operates defined benefit plans for its employees, viz., gratuity. The costs of providing benefits under these plans are determined on the basis of actuarial valuation at each year-end. Separate actuarial valuation is carried out for each plan using the projected unit credit method.
Actuarial gains and losses for both defined benefit plans are recognized in full in the period in which they occur in the statement of profit and loss.
Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. The Company recognizes expected cost of short-term employee benefit as an expense, when an employee renders the related service.
The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purpose. Such long term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. The Company presents the leave as a current liability in the balance sheet to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date. Where the Company has the unconditional legal and contractual right to defer the settlement for a period beyond 12 months, the same is presented as non-current liability.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Past service costs are recognized in profit or loss on the earlier of:
a) The date of the plan amendment or curtailment, and
b) The date that the Company recognizes related restructuring costs
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognizes the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
a) Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
b) Net interest expense or income
A provision is recog nized when the Company has a present obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
I f the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
I f the Company has a contract that is onerous, the present obligation under the contract is recognized and measured as a provision. However, before a separate provision for an onerous contract is established, the Company recognizes any impairment loss that has occurred on assets dedicated to that contract.
An onerous contract is a contract under which the unavoidable costs (i.e., the costs that the Company cannot avoid because it has the contract) of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it. The cost of fulfilling a contract comprises the costs that relate directly to the contract (i.e., both incremental costs and an allocation of costs directly related to contract activities).
The Group provides warranties for general repairs of defects that existed at the time of sale, as required by law. Provisions related to these assurance-type warranties are recognized when the product is sold, or the service is provided to the customer. Initial recognition is based on historical experience. The initial estimate of warranty-related costs is revised annually.
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in OCI or in equity). Current tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
⢠When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss
⢠In respect of taxable temporary differences associated with investments in subsidiaries and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future
Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except:
⢠When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss
⢠In respect of deductible temporary differences associated with investments in subsidiaries and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
In assessing the recoverability of deferred tax assets, the Company relies on the same forecast assumptions used elsewhere in the financial statements and in other management reports, which, among other things, reflect the potential impact of climate-related development on the business, such as increased cost of production as a result of measures to reduce carbon emission.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recogn ized outsid e profit or loss is recognized outside profit or loss (either in OCI or in equity). Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity.
The Company offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future
period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax for the year. The deferred tax asset is recognized for MAT credit available only to the extent that it is probable that the concerned company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the Company recognizes MAT credit as an asset, it is created by way of credit to the statement of profit and loss and shown as part of deferred tax asset. The Company reviews the âMAT credit entitlementâ asset at each reporting date and writes down the asset to the extent that it is no longer probable that it will pay normal tax during the specified period.
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Companyâs cash management.
Basic EPS amounts are calculated by dividing the profit for the year attributable to the shareholders of the Company by the weighted average number of equity shares outstanding as at the end of reporting period.
Diluted EPS amounts are calculated by dividing the profit attributable to the shareholders of the Company by the weighted average number of equity shares outstanding during the year plus the weighted average number of Equity shares that would be issued on conversion of all the dilutive potential equity shares into equity shares.
R. Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable
that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
Contingent assets are only disclosed when it is probable that the economic benefits will flow to the entity.
The Company recog nizes a l iability to make cash dividend to equity holders of the Company when the distribution is authorized and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorized when it is approved by the shareholders. A corresponding amount is recognized directly in equity.
The Company classifies non-current assets as held for sale if their carrying amounts will be recovered principally through a sale rather than through continuing use. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the sale expected within one year from the date of classification.
For these purposes, sale transactions include exchanges of non-current assets for other noncurrent assets when the exchange has commercial substance. The criteria for held for sale classification is regarded met only when the assets is available for immediate sale in its present condition, subject only to terms that are usual and customary for sales of such assets, its sale is highly probable; and it will genuinely be sold, not abandoned. The Company treats sale of the asset to be highly probable when:
⢠The appropriate level of management is committed to a plan to sell the asset,
⢠An active program to locate a buyer and complete the plan has been initiated,
⢠The asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value,
⢠The sale is expected to qualify for recognition as a completed sale within one year from the date of classification, and
⢠Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
Non-current assets held for sale to owners and disposal groups are measured at the lower of their carrying amount and the fair value less costs to sell. Assets and liabilities classified as held for sale are presented separately in the balance sheet.
Property, plant and equipment and intangible assets once classified as held for sale to owners are not depreciated or amortized.
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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
(a) In the principal market for the asset or liability, or
(b) I n the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement
as a whole:
Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recogn ized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The Companyâs management determines the policies and procedures for both recurring fair value measurement, such as derivative instruments and u nquoted financial assets measured at fair value, and for non-recurring measurement, such as assets held for distribution in discontinued operations.
External valuers are involved for valuation of significant assets and significant liabilities, if any.
At each reporting date, the management analyses the movements in the values of assets and liabilities which are required to be re-measured or reassessed as per the Companyâs accounting policies. For this analysis, the management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents, if any.
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 as explained above.
This note summarizes accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
⢠Quantitative disclosure of fair value
measurement hierarchy
⢠Investment property
⢠Financial instruments (including those carried
at amortized cost)
A financial instrument is a contract that gives rise to a financial asset for one entity and a financial liability or equity instrument for another entity.
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortized cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial assetâs contractual cash flow characteristics and the Companyâs business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient, the Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.
Trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient are measured at the transaction price determined under Ind AS 115. Refer to the accounting policies in section âRevenue from contracts with customersâ.
I n order for a financial asset to be classified and measured at amortized cost or fair value through OCI, it needs to give rise to cash flows that are âsolely payments of principal and interest (SPPI)â on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.
The Companyâs business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets classified and measured at amortized cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows while financial assets classified and measured at fair value through OCI are held within a business model with the objective of both holding to collect contractual cash flows and selling.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
For purposes of subsequent measurement, financial assets are classified in four categories:
⢠Debt instruments at amortized cost
⢠Debt instruments at fair value through other comprehensive income (FVTOCI)
⢠Debt instruments, derivatives and equity instruments at fair value through profit and loss (FVTPL)
⢠Equity instruments measured at fair value through other comprehensive income (FVTOCI)
Debt Instruments at amortized cost
A financial assets is measured at the amortized cost if both the following conditions are met
(i) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows and
(ii) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding
After initial measurement, such financial asset
Mar 31, 2023
1. Corporate information
Lumax Industries Limited (âthe Companyâ) is a Public Company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. Its shares are listed on two recognized stock exchanges in India. The registered office of the Company is located 2nd Floor, Harbans Bhawan-II, Commercial Complex, Nangal Raya, New Delhi- 110046.
The Company is principally engaged in the manufacturing of automotive components. Information on other related party relationships of the Company is provided in Note 41. The financial statements were authorized for issue in accordance with a resolution of the directors on May 27, 2023.
2. Significant accounting policies2.1 Basis of Preparation
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) and presentation requirements of Division II of Schedule III to the Companies Act, 2013, (Ind AS compliant Schedule III), as applicable to the financial statement.
The financial statements have been prepared on a historical cost basis, except for the certain financial assets and liabilities which have been measured at fair value or revalued amount (refer accounting policy regarding financial instruments).
The Company has prepared the financial statements on the basis that it will continue to operate as a going concern.
The Financial Statements are presented in Indian Rupees (?) and all values are rounded to the nearest Lakhs ('' 00,000), except wherever otherwise stated.
2.2 Summary of significant accounting policiesA. Investment in subsidiary and associate
The investment in subsidiary are carried at cost as per Ind AS 27. The Company regardless of the nature of its involvement with an entity (the investee), determines whether it is a parent by assessing whether it controls the investee. The Company controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Thus,
the Company controls an investee if and only if it has all the following:
(a) power over the investee;
(b) exposure, or rights, to variable returns from its involvement with the investee; and
(c) the ability to use its power over the investee to affect the amount of the returns.
An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
The considerations made in determining whether significant influence are similar to those necessary to determine control over the subsidiary
Investment in associate is recorded at cost
B. Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification.
An asset is treated as current when it is:
(a) Expected to be realized or intended to be sold or consumed in normal operating cycle
(b) Held primarily for the purpose of trading
(c) Expected to be realized within twelve months after the reporting period, or
(d) Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current. Liabilities
A liability is current when:
(a) It is expected to be settled in normal operating cycle
(b) It is held primarily for the purpose of trading
(c) It is due to be settled within twelve months after the reporting period, or
(d) There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Operating cycle
The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
C. Foreign currencies
Functional and presentational currency
The Companyâs financial statements are presented in Indian Rupees (?) which is also the Companyâs functional currency.
Transactions and balances
Tran sactions in foreign currencies are initially recorded by the Company at the functional currency spot rates at the date the transaction first qualifies for recognition. However, for practical reasons, the Company uses average rate if the average approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Exchange differences arising on settlement or translation of monetary items are recognized in statement of profit and loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognized in OCI or profit or loss are also recognized in OCI or profit or loss, respectively).
I n determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a nonmonetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which the Company initially recognizes
the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, the Company determines the transaction date for each payment or receipt of advance consideration.
D. Property, plant and equipment
Capital work in progress, property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced at intervals, Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the property, plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.
Items of stores and spares that meet the definition of plant, property and equipment are capitalized at cost and depreciated over their useful life. Otherwise, such items are classified as inventories.
An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognized.
Depreciation on property, plant and equipment Depreciation is calculated on a straight-line basis over the estimated useful lives as estimated by the management which is in line with the Schedule II to the Companies Act, 2013. The Company has used the following useful lives to provide depreciation on its property, plant and equipment which is in line with schedule II:
|
Assets |
Useful Lives estimated by the management (in years) |
|
Factory Building |
30 |
|
Other Building |
60 |
|
Office equipments |
5 |
|
Furniture and fixtures |
10 |
|
Vehicles |
5 |
The management has estimated, supported by independent assessment by professionals, the useful life of the following class of asset, which are higher/different than that indicated in Schedule II.
|
Assets |
Useful Lives estimated by the management (in years) |
|
Plant and equipment |
3-21 |
The residual value of property, plant and equipment is considered at 2%.
Depreciation on additions/ (disposals) is provided on a pro-rata basis i.e. from / (upto) the date on which asset is ready for use/ (disposed of).
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at the end of each financial year and adjusted prospectively, if appropriate.
E. Intangible assets
Recognition and measurement
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred.
Amortization and useful lives
Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible assets may be impaired. The amortization period and amortization method of the intangible asset with a useful finite life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the assets are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized
in the statement of profit and loss unless such expenditure forms part of carrying value of another assets, as follows:
|
Intangible Assets |
Estimated Useful Life (Years) |
|
Computer Software |
Over the estimated economic useful lives ranging from 3.5 to 4 years |
An intangible asset is derecognized upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Gain or loss arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
Research and development costs Research costs are expensed as incurred. Development expenditures on an individual project are recognized as an intangible asset when the Company can demonstrate:
⢠The technical feasibility of completing the intangible asset so that the asset will be available for use or sale.
⢠Its intention to complete and its ability and intention to use or sell the asset.
⢠How the asset will generate future economic benefits.
⢠The availability of resources to complete the asset.
⢠The ability to measure reliably the expenditure during development.
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete, and the asset is available for use. It is amortized over the period of expected future benefit. Amortization expense is recognized in the statement of profit and loss unless such expenditure forms part of carrying value of another asset. During the period of development, the asset is tested for impairment annually.
Property that is held for long term rental yields or for capital appreciation or for both, and that is not occupied by the Company, is classified as investment property. Investment property is measured initially at
its cost, including related transaction cost and where applicable borrowing costs. Subsequent to initial recognition, investment property are stated at cost less accumulated depreciation and accumulated impairment loss, if any. Subsequent expenditure is capitalized to assets carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably. Though the Company measures investment property using cost based measurement, the fair value of investment property is disclosed in the notes. Fair values are determined based on an annual evaluation performed by an external independent valuer applying a valuation model as per Ind AS 113 âFair value measurementâ.
I nvestment property is derecognized either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period of recognition.
Transfer of property from investment property to the property, plant and equipment is made when the property is no longer held for long term rental yields or for capital appreciation or both at carrying amount of the property transferred.
G. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value
assets. The Company recognizes lease liabilities
to make lease payments and right-to-use assets
representing the right to use the underlying assets.
i. Right-to-use assets
The Company recognizes right-to-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-to-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-to-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-to-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets as follows:
Leasehold Land: 99 years Solar Panel: 15 years Vehicle: 5 years Building: 10-15 years
I f ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
The right-to-use assets are also subject to impairment. Refer to the accounting policies section âImpairment of non-financial assetsâ.
ii. Lease Liabilities
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognized as expenses (unless they are
incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
iii. Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognized as expense on a straight-line basis over the lease term. Company as a lessor
Leases in which the Company does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.
Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables
at the Companyâs net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant period ic rate of return on the net investment outstanding in respect of the lease.
I. Inventories
Inventories which comprise raw materials, components, work in progress, finished goods, traded goods, moulds and stores and spares are valued at the lower of cost and net realizable value. The basis of determining costs for various categories of inventories is as follows:
⢠Raw materials, components, stores and spares: Cost of inventories comprises all cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted moving average basis.
⢠Work-in-progress and finished goods: Cost includes direct material plus appropriate share of labour, manufacturing overheads based on normal operating capacity. Cost is determined on a weighted moving average basis.
⢠Traded goods: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on moving weighted average basis.
⢠Moulds: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition.
Stores and spares which do not meet the definition of Property, plant and equipment are accounted as inventories.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
Scraps are valued at net realizable value.
The net realizable value of work-in-progress is determined with reference to the selling prices of related finished goods. Raw materials and other supplies held for use in production of finished goods are not written down below cost, except in cases where material prices have declined, and it is estimated that the cost of the finished goods will exceed its net realizable value. The comparison of cost and net realizable value is made on an item-byitem basis.
J. Impairment of non-financial assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or cash-generating unitsâ (CGU) net selling price and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.
I mpairment losses on non-financial asset, including impairment on inventories, are recognized in the statement of profit and loss.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Company CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, the Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified. In any case, this growth rate does not exceed the long-term average growth rate for the products, industries, or country or countries in which the Company operates, or for the market in which the asset is used.
An assessment is made at each reporting date to determine whether there is an indication that
previously recognized impairment losses no longer exist or have decreased. If such indication exists, the Company estimates the assetâs or CGUâs recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the assetâs recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amoun t of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.
Intangible assets with indefinite useful lives are tested for impairment annually at the CGU level, as appropriate, and when circumstances indicate that the carrying value may be impaired.
The Company assesses where climate risks could have a significant impact, such as the introduction of emission-reduction legislation that may increase manufacturing costs. These risks in relation to climate-related matters are included as key assumptions where they materially impact the measure of recoverable amount, These assumptions have been included in the cash-flow forecasts in assessing value-in-use amounts.
K. Revenue from contracts with customers
Revenue from contracts with customers is recognized when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company has generally concluded that it is the principal in its revenue arrangements, because it typically controls the goods before transferring them to the customer.
However, Goods and services tax (GST), is not received by the Company on its own account. Rather, it is tax collected on value added to the commodity by the seller on behalf of the government. Accordingly, it is excluded from revenue.
a) Sale of products including moulds
Customers obtain control of goods when the goods are delivered to and have been accepted at their premises. However, few customers accepts the goods when goods
have been dispatched by the Company.
I nvoices are generated at that point in time. Invoices are usually payable within 30-120 days. No discounts are usually provided for goods, but few customers may avail cash discount on prompt payment of the goods. Some contracts permit the customer to return an item. Returned goods are exchanged only for new goods - i.e. no cash refunds are offered.
Revenue arising from the sale of goods (including moulds) is recognized when the customer obtains control of the promised asset, i.e. either at the delivery or dispatch of goods (based on the agreed terms of sale with the respective customers), which is the point in time when the customer has the ability to direct the use of the goods and obtain substantially all of the remaining benefits of the goods.
For contracts that allow the customers to avail the cash discount, the Company estimates the value of discount by applying the âMost likely amountâ method and past experience of the Company.
For contracts that permit the customer to return an item, revenue is recognized to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur.
b) Sale of services
Revenue from sale of services is recognized in accordance with the terms of contract when the services are rendered and the related costs are incurred.
c) Contract balances
i) Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognized for the earned consideration that is conditional.
ii) Trade receivables
A receivable represents the Companyâs right to an amount of consideration that is unconditional (i.e., only the passage of
time is required before payment of the consideration is due). Refer to accounting policies of financial assets in section financial instruments - initial recognition and measurement.
iii) Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognized when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognized as
revenue when the Company performs under the contract.
d) Interest Income
For all debt instruments measured at
amortized cost or at fair value through other comprehensive income, interest income is
recorded using the Effective Interest Rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or
receipts over the expected life of the financial instruments or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortized cost of a financial liability. When calculating the effective interest rate, the Company estimates the expected estimated cash flows by considering all the contractual terms of the financial instrument but does not consider the expected credit loss. Interest income is included under the head âother incomeâ in the statement of profit and loss.
Interest income on bank deposits and advances to vend ors is recog nized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head âother incomeâ in the statement of profit and loss.
e) Dividend Income
Dividend is recognized when the Companyâs right to receive the payment is established, which is generally when shareholders approve the dividend.
Rental income arising from operating leases are accounted for on a straight-line basis over the lease terms and is included under the head âother incomeâ in the statement of profit & loss.
Government grants are recognized where there is reasonable assurance that the grant will be received and all the attached conditions will be complied with. When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognized as income in equal amounts over the expected useful life of the related asset.
When the Company receives grants of non-monetary assets, the asset and the grant are recorded at fair value amounts and released to profit or loss over the expected useful life in a pattern of consumption of the benefit of the underlying asset i.e. by equal annual installments. When loans or similar assistance are provided by governments or related institutions, with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as government grant. The loan or assistance is initially recognized and measured at fair value and the government grant is measured as the difference between the initial carrying value of the loan and the proceeds received. The loan is subsequently measured as per the accounting policy applicable to financial liabilities.
M. Retirement and other employee benefits Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
The Company operates defined benefit plans for its employees, viz., gratuity. The costs of providing benefits under these plans are determined on the basis of actuarial valuation at each year-end. Separate actuarial valuation is carried out for each plan using the projected unit credit method. Actuarial gains and losses for both defined benefit plans are recognized in full in the period in which they occur in the statement of profit and loss. Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. The Company recognizes expected cost of short-term employee benefit as an expense, when an employee renders the related service.
The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purpose. Such long term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. The Company presents the leave as a current liability in the balance sheet to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date. Where the Company has the unconditional legal and contractual right to defer the settlement for a period beyond 12 months, the same is presented as non-current liability.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Past service costs are recognized in profit or loss on the earlier of:
a) The date of the plan amendment or curtailment, and
b) The date that the Company recognizes related restructuring costs.
Net interest is calculated by applying the discount
rate to the net defined benefit liability or asset. The Company recognizes the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
a) Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
b) Net interest expense or income.
A provision is recognized when the Company has a present obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
I f the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
I f the Company has a contract that is onerous, the present obligation under the contract is recognized and measured as a provision. However, before a separate provision for an onerous contract is established, the Company recognizes any impairment loss that has occurred on assets dedicated to that contract.
An onerous contract is a contract under which the unavoidable costs (i.e., the costs that the Company cannot avoid because it has the contract) of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfill it. The cost of fulfilling a contract comprises the costs that relate directly to the contract (i.e., both incremental costs and an allocation of costs directly related to contract activities).
Warranty provisions
The Group provides warranties for general repairs of defects that existed at the time of sale, as required by law. Provisions related to these assurance-type
warranties are recognized when the product is sold, or the service is provided to the customer. Initial recognition is based on historical experience. The initial estimate of warranty-related costs is revised annually.
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in OCI or in equity). Current tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognized for all taxable temporary differences, except:
⢠When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
⢠In respect of taxable temporary differences associated with investments in subsidiaries and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the
carry forward of unused tax credits and unused tax losses can be utilized, except:
⢠When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
⢠In respect of deductible temporary differences associated with investments in subsidiaries and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
In assessing the recoverability of deferred tax assets, the Company relies on the same forecast assumptions used elsewhere in the financial statements and in other management reports, which, among other things, reflect the potential impact of climate-related development on the business, such as increased cost of production as a result of measures to reduce carbon emission. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in OCI or in equity). Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity.
The Company offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax for the year. The deferred tax asset is recognized for MAT credit available only to the extent that it is probable that the concerned company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the Company recognizes MAT credit as an asset, it is created by way of credit to the statement of profit and loss and shown as part of deferred tax asset. The Company reviews the âMAT credit entitlementâ asset at each reporting date and writes down the asset to the extent that it is no longer probable that it will pay normal tax during the specified period.
P. Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Companyâs cash management.
Q. Earnings per share (EPS)
Basic EPS amounts are calculated by dividing the profit for the year attributable to the shareholders of the Company by the weighted average number of equity shares outstanding as at the end of reporting period.
Diluted EPS amounts are calculated by dividing the profit attributable to the shareholders of the Company by the weighted average number of
equity shares outstanding during the year plus the weighted average number of Equity shares that would be issued on conversion of all the dilutive potential equity shares into equity shares.
R. Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
Contingent assets are only disclosed when it is probable that the economic benefits will flow to the entity.
The Company recog nizes a l iability to make cash dividend to equity holders of the Company when the distribution is authorized and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorized when it is approved by the shareholders. A corresponding amount is recognized directly in equity.
The Company classifies non-current assets as held for sale if their carrying amounts will be recovered principally through a sale rather than through continuing use. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the sale expected within one year from the date of classification.
For these purposes, sale transactions include exchanges of non-current assets for other noncurrent assets when the exchange has commercial substance. The criteria for held for sale classification is regarded met only when the assets is available for immediate sale in its present condition, subject only to terms that are usual and customary for sales of such assets, its sale is highly probable; and it will genuinely be sold, not abandoned. The Company treats sale of the asset to be highly probable when:
⢠The appropriate level of management is committed to a plan to sell the asset,
⢠An active program to locate a buyer and complete the plan has been initiated,
⢠The asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value,
⢠The sale is expected to qualify for recognition as a completed sale within one year from the date of classification, and
⢠Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
Non-current assets held for sale to owners and disposal groups are measured at the lower of their carrying amount and the fair value less costs to sell. Assets and liabilities classified as held for sale are presented separately in the balance sheet. Property, plant and equipment and intangible assets once classified as held for sale to owners are not depreciated or amortized.
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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
(a) In the principal market for the asset or liability, or
(b) I n the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recogn ized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The Companyâs management determines the policies and procedures for both recurring fair value measurement, such as derivative instruments and u nquoted financial assets measured at fair value, and for non-recurring measurement, such as assets held for distribution in discontinued operations. External valuers are involved for valuation of significant assets and significant liabilities, if any.
At each reporting date, the management analyzes the movements in the values of assets and liabilities which are required to be re-measured or reassessed as per the Companyâs accounting policies. For this analysis, the management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents, if any.
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 as explained above.
This note summarizes accounting policy for fair value. Other fair value related disclosures are given
in the relevant notes.
⢠Quantitative disclosure of fair value measurement hierarchy
⢠Investment property
⢠Financial instruments (including those carried at amortized cost).
A financial instrument is a contract that gives rise to a financial asset for one entity and a financial liability or equity instrument for another entity.
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortized cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial assetâs contractual cash flow characteristics and the Companyâs business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient, the Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.
Trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient are measured at the transaction price determined under Ind AS 115. Refer to the accounting policies in section âRevenue from contracts with customersâ.
I n order for a financial asset to be classified and measured at amortized cost or fair value through OCI, it needs to give rise to cash flows that are âsolely payments of principal and interest (SPPI)â on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.
The Companyâs business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets
classified and measured at amortized cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows while financial assets classified and measured at fair value through OCI are held within a business model with the objective of both holding to collect contractual cash flows and selling.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
For purposes of subsequent measurement, financial assets are classified in four categories:
⢠Debt instruments at amortized cost;
⢠Debt instruments at fair value through other comprehensive income (FVTOCI);
⢠Debt instruments, derivatives and equity instruments at fair value through profit and loss (FVTPL); and
⢠Equity instruments measured at fair value through other comprehensive income (FVTOCI).
Debt Instruments at amortized cost
A financial assets is measured at the amortized cost if both the following conditions are met
(i) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows and
(ii) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding
After initial measurement, such financial assets are subsequently measured at amortized cost using the Effective Interest Rate (EIR) method. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The accretion of EIR is recorded as an income or expense in statement of profit and loss. The losses arising from impairment are recognized in the statement of profit and loss. This category generally applies to trade and other receivables.
Debt Instruments at fair value through OCI (FVTOCI)
A âfinancial assetâ is classified as at the FVTOCI if both of the following criteria are met:
a) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
b) The assetâs contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. For debt instruments, at fair value through OCI, interest income, foreign exchange revaluation and impairment losses or reversals are recognized in the profit or loss and computed in the same manner as for financial assets measured at amortized cost. The remaining fair value changes are recognized in OCI. U
Mar 31, 2022
1 Reporting entity
Lumax Industries Limited (âthe Companyâ) is engaged in the business of manufacture, trading and supply of auto components, mainly automotive lighting systems for four wheeler and two wheeler vehicles. The Company is domiciled in India, with its registered office situated at 2nd Floor, Harbans Bhawan-II, Commercial Complex, Nangal Raya, New Delhi -110046. The Company has been incorporated under the provisions of the Companies Act 1956 and its equity shares are listed on both National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) in India.
a. Statement of compliance
The standalone financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under Section 133 of Companies Act, 2013, (the âActâ) and other relevant provisions of the Act. These standalone financial statements are approved by the Companyâs Board of Directors on 24 May 2022. Details of Company''s accounting policies are included in Note 3.
B. Functional and presentation currency
These standalone financial statements are presented in Indian Rupees (''), which is also the Companyâs functional currency. All amounts have been rounded-off to nearest Lakhs and two decimals thereof, unless otherwise indicated.
C. Basis of measurement
The standalone financial statements have been prepared on a historical cost basis, except for the following items:
a. Certain financial assets and liabilities (including derivative instruments) - measured at fair value.
b. Net defined benefit (asset)/ liability - measured at fair value of plan assets less present value of defined benefit obligations.
c. Other financial assets and liabilities - measured at amortized cost.
D. Use of estimates and judgements
The preparation of financial statements in conformity with Ind AS requires management to make estimates, judgements and assumptions. In preparing these financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.
Assumptions and estimation uncertainties and judgements
Information about judgements, assumptions and estimation uncertainties that have significant risk of resulting in a material adjustment in the year ended 31 March 2022 and judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the standalone financial statements is included in the following notes:
i) Recognition of deferred tax assets - note 22- The Company has recognised deferred tax assets and concluded that the deferred tax assets will be recoverable using the estimated future taxable income based on the experience and future projections. The Company is expected to generate adequate taxable income for liquidating these assets in due course of time.
ii) Write down of inventories - note 13 - Inventories measured at the lower of cost and net realizable value. Write-down of inventories are calculated based on an analysis of foreseeable changes in demand, technology or market conditions to determine obsolete or excess inventories.
iii) Impairment of financial assets - note 37 - The impairment provisions for financial assets are based on certain judgements made by the Management in making assumptions and selecting the inputs to the impairment calculation, based on the Companyâs history, existing market conditions as well as forward looking estimates at the end of each reporting period. Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances.
iv) Provision for employee benefits - note 21 & 36 - The measurement of obligations and assets related to defined benefit plans makes it necessary to use several statistical and other factors that attempt to anticipate future events. These factors include assumptions about the discount rate, the rate of future compensation increases, withdrawal etc. The management has used the past trends and future expectations in determining the assumptions which are used in measurements of obligations.
v) Other liabilities - note 19 - The Company creates accrual of price adjustments based on agreed
terms, negotiations with customers and various commercial considerations, which involves significant judgement and estimates to arrive at the amount of price adjustments to be accrued for adjustment to revenue.
A number of the Companyâs accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Company has an established control framework with respect to the measurement of fair values. The Company regularly reviews significant unobservable inputs and valuation adjustments.
Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in 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 asset or liability that are not based on observable market data (unobservable inputs)
When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Further information about the assumptions made in measuring fair values is included in the following notes: Note 37 - financial instruments 3 Significant accounting policies a. Current versus non-current classification
The Company presents assets and liabilities in the Balance Sheet based on current / non-current classification. The Company has presented non-current assets and current assets before equity, non-current liabilities and current liabilities in accordance with Schedule III, Division II of Companies Act, 2013 notified by the Ministry of Corporate Affairs.
An asset is classified as current when it is :
a) Expected to be realized or intended to be sold or consumed in normal operating cycle,
b) Held primarily for the purpose of trading,
c) Expected to be realized within twelve months after the reporting period, or
d) Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is classified as current when:
a) It is expected to be settled in normal operating cycle,
b) It is held primarily for the purpose of trading,
c) It is due to be settled within twelve months after the reporting period, or
d) There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
All other liabilities are classified as non-current.
All assets and liabilities have been classified as current or non- current as per the Companyâs operating cycle and other criteria set out in Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle to be less than 12 months for the purpose of current and noncurrent classification of assets and liabilities.
Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.
b. property, plant & equipment (ppE)
i) Recognition and Measurement
The cost of an item of Property, plant and equipment is recognised as an asset if, and only if:
(a) it is probable that future economic benefits associated with the item will flow to the entity; and
(b) the cost of the item can be measured reliably. Items of property, plant and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and accumulated impairment losses, if any. Cost of an item of property, plant and equipment comprises its purchase price, including import duties and nonrefundable purchase taxes, after deducting trade discounts and rebates, any directly attributable cost of bringing the item to its working condition for its intended use and estimated cost of dismantling and
removing the item and restoring the site on which it is located.
The cost of a self-constructed item of property, plant and equipment comprises the cost of materials and direct labor, any other costs directly attributable to bringing the item to working condition for its intended use, and estimated costs of dismantling and removing the item and restoring the site on which it is located.
I f significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the Statement of Profit and Loss as incurred.
Spare parts are capitalized when they meet the definition of PPE, i.e., when the Company intends to use these during more than a period of 12 months and whose use is expected to be irregular are capitalized as PPE.
Gains or losses arising from the retirement or disposal of an property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Statement of Profit and Loss.
The cost of fixed assets not ready for their intended use is recorded as capital work-in-progress before such date. Cost of construction that relate directly to specific fixed assets and that are attributable to construction activity in general and can be allocated to specific fixed assets are included in capital work-in-progress.
Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
ii) Depreciation methods, estimated useful lives and residual value
Depreciation is calculated on cost of items of property, plant and equipment less their estimated residual values over their estimated useful lives using the straight-line method, and is recognised in the statement of profit and loss. Depreciation is charged on a pro-rata basis for assets acquired/
sold during the year from/to the date of acquisition/ sale. Freehold land is not depreciated.
The estimated useful lives of items of property, plant and equipment in years for the current and comparative periods are as follows:
|
Assets |
Estimated useful lives |
Useful lives as per schedule II |
|
Factory building |
30 years |
30 years |
|
Other building |
60 years |
60 years |
|
Plant and machinery |
3-21 years |
15 years |
|
Furniture & fixtures |
10 years |
10 years |
|
Vehicles |
5 years |
8 years |
|
Office equipment |
5 years |
5 years |
Based on technical evaluation and internal assessment of useful lives, the management believes that its estimate of useful lives as given above best represent the period over which management expects to use these assets. Depreciation method, assets residual values and useful lives are reviewed at each financial year end considering the physical condition of the assets for review and adjusted residual life prospectively.
iii) Reclassification to investment property
When the use of property changes from owner occupied property to investment property the property is reclassified as investment property at its carrying value on the date of reclassification.
c. Intangible assets
I ntangible assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. The cost of such assets includes purchase price, licensee fee, import duties and other taxes and any directly attributable expenditure to bring the assets to their working condition for intended use.
Amortization methods, estimated useful lives and residual value.
I ntangible assets are amortized on a straight-line basis over their estimated useful lives. The amortization period, residual value and the amortization method are reviewed at least at each financial year end. If the expected useful life of the asset is significantly different from previous estimates, the amortization period is changed accordingly.
The estimated useful lives are as follows:
|
Computer software |
Over the estimated lives ranging from 3.5 years to 4 years |
|
Technical knowhow |
Over the period of technical assistance agreement i.e. 8 years |
Gains or losses arising from the retirement or disposal of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Statement of Profit and Loss.
Investment property is property held either to earn rental income or for capital appreciation or both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Upon, Initial recognition, an investment property is measured at cost. Subsequent to initial recognition, investment property is measured at cost less accumulated depreciation and accumulated impairment loss, if any.
Gains or losses arising from the retirement or disposal of an investment property are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Statement of Profit and Loss. The fair values of investment property is disclosed in the notes.
Non-current assets are classified as held for sale, if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable.
These assets are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets, which are specifically exempt from this requirement. Losses on initial classification as held for sale and subsequent gains and losses on remeasurement are recognised in Statement of Profit and Loss.
Once classified as held-for-sale, intangible assets, property, plant and equipment and investment properties are no longer amortized or depreciated.
I nventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the moving weighted average method and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs in bringing them to their present condition and location. In the case of manufactured inventories and work-in-progress, cost includes an appropriate share of fixed production overheads based on normal operating capacity.
Net realizable value is the estimated sellin g price in the ordinary course of business, less estimated costs
of completion and selling expenses. The net realizable value of work-in-progress is determined with reference to the selling prices of related finished products.
Raw materials, components and other supplies held for use in production of finished products are not written down below cost except in cases where material prices have declined, and it is estimated that the cost of the finished goods will exceed their net realizable value.
The Comparison of cost and net realizable value is made on an item-by-item basis.
Obsolete, defective and unserviceable stocks are duly provided for, wherever required.
g. Cash and Cash equivalents
Cash and cash equivalents includes cash in hand, demand deposits with banks, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value plus transaction costs that are attributable to the acquisition of the financial asset except in the case of financial assets recorded at fair value through profit and loss. Classification
On Initial recognition, a financial asset is classified as measured at:
⢠Amortized cost
⢠Fair value through other comprehensive income (FVTOCI)
⢠Fair value through profit or loss (FVTPL)
Financial assets are not reclassified subsequent to their initial recognition, except if and in the period the Company changes its business model for managing financial assets.
A financial asset being âdebt instrumentâ is measured at the amortized cost if both of the following conditions are met and is not designated as at FVTPL:
⢠The financial asset is held within a business model whose objective is to hold assets for collecting 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 (SPPI) on the principal amount outstanding.
A financial asset being âdebt instrumentâ is measured at the FVOCI if both of the following criteria are met and is not designated as at FVTPL:
⢠The asset is held within the business model, whose objective is achieved both by collecting contractual cash flows and selling the financial assets, and
⢠The contractual terms of the financial asset give rise on specified dates to cash flows that are SPPI on the principal amount outstanding.
On initial recognition of an equity investment that is not h eld for tradin g, th e Company may irrevocably elect to present subsequent changes in the investmentâs fair value in OCI (designated as FVOCI - equity investment). This election is made on an investment- by- investment basis.
All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Financial assets: Business model assessment
The Company makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:
a) the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether managementâs strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets;
b) how the performance of the portfolio is evaluated and reported to the Companyâs management;
c) the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;
d) how managers of the business are compensated - e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and
e) the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.
Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Companyâs continuing recognition of the assets.
Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.
Financial assets: Assessment whether contractual cash flows are solely payments of principal and interest:
For the purposes of this assessment, âprincipalâ is defined as the fair value of the financial asset on initial recognition. âInterestâ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Company considers:
a) contingent events that would change the amount or timing of cash flows;
b) terms that may adjust the contractual coupon rate, including variable interest rate features;
c) prepayment and extension features; and
d) terms that limit the Companyâs claim to cash flows from specified assets (e.g. non- recourse features)
Financial assets: Subsequent measurement and gains and losses
Financial assets at FVTPL
These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in Statement of Profit and Loss. Financial assets at amortized cost These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in Statement of Profit and Loss. Any gain or loss on derecognition is recognised in Statement of Profit and Loss.
Debt investments at FVOCI
These assets are subsequently measured at fair value. Interest income under the effective interest method, foreign exchange gains and losses and impairment are recognised in Statement of Profit and Loss. Other net gains and losses are recognised in OCI . On derecognition, gains and losses accumulated in OCI are reclassified to Statement of Profit and Loss.
Equity investments at FVOCI
These assets are subsequently measured at fair value. Dividends are recognised as income in Statement of Profit and Loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are not reclassified to Statement of Profit and Loss.
Financial liabilities: Classification, subsequent measurement and gains and losses
Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held- for- trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in Statement of Profit and Loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in Statement of Profit and Loss. Any gain or loss on derecognition is also recognised in Statement of Profit and Loss. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down.
Derecognition Financial asset
A financial asset is derecognised only when:
⢠the Company has transferred the rights to receive cash flows from the financial asset or
⢠retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the Company has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the Company has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised. Where the Company has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
Financial liability
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows under the modified terms are substantially different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognised in Statement of Profit and Loss.
Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.
Derivative financial instruments
The Company uses derivative financial instruments to hedge its certain foreign currency risks. Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value at the end of each period. Any gains or losses arising from changes in
the fair value of derivatives are taken directly to profit or loss.
i. Impairment
i) Impairment of financial assets
The Company recognizes loss allowances for expected credit losses on financial assets measured at amortized cost and financial assets measured at FVOCI- debt investments. At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit- impaired. A financial asset is âcredit- impaired'' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit- impaired includes the following observable data:
- significant financial difficulty of the borrower or issuer; or
- a breach of contract such as a default or being past due.
The Company measures loss allowances at an amount equal to lifetime expected credit losses, except for the following, which are measured as 12 month expected credit losses:
- debt securities that are determined to have low credit risk at the reporting date; and
- other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.
Loss allowances for trade receivables are always measured at an amount equal to lifetime expected credit losses.
Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument. 12-month expected credit losses are the portion of expected credit losses that result from default events that are possible within 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months). In all cases, the maximum period considered when estimating expected credit losses is the maximum contractual period over which the Company is exposed to credit risk.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected
credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Companyâs historical experience and informed credit assessment and including forward- looking information.
Measurement of expected credit losses Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive).
The Company follows âsimplified approachâ for recognition of impairment loss allowance on trade receivable. Under the simplified approach, the Company does not track changes in credit risk for individual customers. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from initial recognition. The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates and delays in realizations over the expected life of the trade receivable and is adjusted for forward looking estimates. At every balance sheet date, the historical observed default rates are updated and changes in the forward-looking estimates are analyzed. Presentation of allowance for expected credit losses in the balance sheet Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is charged to Statement of Profit and Loss and is recognised in OCI. Write-off
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Companyâs procedures for recovery of amounts due.
ii) Impairment of non-financial assets
The Company''s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the assetâs recoverable amount is estimated.
For impairment testing, assets that do not generate independent cash inflows are grouped together into cash-generating units (CGUs). Each CGU represents the smallest group of assets that generates cash inflows that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.
The recoverable amount of a CGU (or an individual asset) is the higher of its value in use an d its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the CGU (or the asset).
The Company''s corporate assets do not generate independent cash inflows. To determine impairment of a corporate asset, recoverable amount is determined for the CGUs to which the corporate asset belongs.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its estimated recoverable amount. Impairment losses are recognised in the Statement of Profit and Loss. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assetâs carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortization, if no impairment loss had been recognised.
An impairment loss in respect of goodwill is not subsequently reversed. In respect of other assets for which impairment loss has been recognised in prior periods, the Company reviews at each reporting date whether there is any indication that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. Such a reversal is made only to
the extent that the assetâs carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognised.
j. Provisions (other than for employee benefits) and contingent liabilities
A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows (representing the best estimate of the expenditure required to settle the present obligation at the balance sheet date) at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. Expected future operating losses are not provided for. Warranties
A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and weighting of all possible outcomes by their associated probabilities. Provisions for warranties are adjusted regularly to take account of new circumstances and the impact of any changes recognised in the income statement.
Rate decrease
The Liabilities for rate decrease is recognised on the basis of firm commitments with the customers and past trends . The Liabilities are adjusted to regularly during the year as soon as the obligating event occurs. Contingent liabilities
A provision arising from claims, litigation, assessment, fines, penalties, etc. is recognised when the Company has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. These are reviewed at each Balance Sheet date and adjusted to reflect current management estimates.
Contingent liabilities are disclosed in respect of possible obligations that have risen from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise. When there is a possible obligation or present obligation where the likelihood of an outflow is remote, no disclosure or provision is made.
Sale of goods (including moulds)
Nature and timing of satisfaction of performance obligations, including significant payment terms
Customers obtain control of goods when the goods are delivered to and have been accepted at their premises. However, few customers accepts the goods when goods have been dispatched by the Company.
Invoices are generated at that point in time. Invoices are usually payable within 45 days. No discounts are usually provided for goods, but few customers may avail cash discount on prompt payment of the goods.
Some contracts permit the customer to return an item. Returned goods are exchanged only for new goods - i.e. no cash refunds are offered.
Revenue recognition
Revenue arising from the sale of goods (including moulds) is recognised when the customer obtains control of the promised asset, i.e. either at the delivery or dispatch of goods (based on the agreed terms of sale with the respective customers), which is the point in time when the customer has the ability to direct the use of the goods and obtain substantially all of the remaining benefits of the goods.
For contracts that allow the customers to avail the cash discount, the Company estimates the value of discount by applying the âMost likely amountâ method and past experience of the Company.
For contracts that permit the customer to return an item, revenue is recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur.
Sale of services
Nature and timing of satisfaction of performance obligations, including significant payment terms Customers obtain control of services when the services are completed to the satisfaction of the Customer. Invoices for services are usually payable within 45 days. Revenue recognition
Revenue arising from the sale of services is recognised at the point in time when the Company satisfies the performance obligation and the services are completely rendered to the customer.
l. Recognition of dividend income, interest income or expense
Dividend income is recognised in Statement of Profit and Loss on the date on which the Company''s right to receive payment is established.
Interest income or expense is recognised using the effective interest rate method.
The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument to the gross carrying amount of the financial asset or amortized cost of the financial liability.
In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortized cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortized cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.
m. Borrowing cost
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds (including exchange differences relating to foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs).
For general borrowing used for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalization is determined by applying a capitalization rate to the expenditures on that asset. The capitalization rate is the weighted average of the borrowing costs applicable to the borrowings of the Company that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs capitalized during a period does not exceed the amount of borrowing cost incurred during that period. Capitalization of borrowing costs ceases when substantially all the activities necessary to prepare the qualifying assets for their intended uses are complete All other borrowing costs are expensed in the period in which they occur.
n. Leases
The Company as a lessee
The Companyâs lease asset classes primarily consist of leases for land, buildings and plant and machinery. The
Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, 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. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use asset (âROUâ) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements include the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised. The right-of-use assets are initially recognised at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs. The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use
asset if the Company changes its assessment if whether it will exercise an extension or a termination option. Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
The Company as a lessor
When the Company acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.
To classify each lease, th e Company makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset.
The Company recognizes lease payments received under operating leases as income on a straight- line basis over the lease term as part of âother incomeâ.
The accounting policies applicable to the Company as a lessor in the comparative period were not different from Ind AS 116.
o. Employee benefits
i) Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid e.g., wages and salaries, short-term cash bonus, etc., if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the amount of obligation can be estimated reliably.
ii) Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts.
Provident Fund and Employee State Insurance: The Company makes specified monthly contributions towards Government administered provident fund and Employee State Insurance scheme in respect of certain employees. Obligations for contributions to defined contribution plans are recognised as an employee benefit expense in Statement of Profit and Loss in the periods during which the related services are rendered by employees.
Superannuation Fund: Contributions are made to a scheme administered by the Life Insurance Corporation of India to discharge superannuating liabilities to the employees, a defined contribution plan, and the same is expensed to the Statement of Profit and Loss. The Company has no liability other than its annual contribution.
iii) Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Companyâs net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan (âthe asset ceilingâ). In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements.
Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised in other comprehensive income (OCI). The Company determines the net interest expense / (income) on the net defined benefit liability / (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability / (asset), taking into account any changes in the net defined benefit liability / (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in Statement of Profit and Loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service (''past service cost'' or ''past service gain'') or the gain or loss on curtailment is recognised immediately in Statement of Profit and Loss. The Company recognizes gains and losses on
the settlement of a defined benefit plan when the settlement occurs.
iv) Other long-term employee benefits
The Companyâs net obligation in respect of long-term employee benefits other than postemployment benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any related assets is deducted. The obligation is measured on the basis of an annual independent actuarial valuation using the projected unit credit method. Remeasurements gains or losses are recognised in Statement of Profit and Loss in the period in which they arise.
Income tax comprises current and deferred tax. It is recognised in Statement of Profit and Loss except to the extent that it relates to a business combination or to an item recognised directly in equity or in other comprehensive income.
i) Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. It is measured using tax rates (and tax laws) enacted or substantively enacted by the reporting date.
Current tax assets and current tax liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realize the asset and settle the liability on a net basis or simultaneously.
ii) Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes. Deferred tax is also recognised in respect of carried forward tax losses and tax credits. Deferred tax is not recognised for:
- temporary differences arising on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time of the transaction; and
- temporary differences related to investment in associate to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future. Deferred tax is measured at th e tax rates th at are expected to apply to the period when the asset is realized or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
Minimum Alternative Tax (''MAT'') under the provisions of the Income Tax Act, 1961 is recognised as current tax in the Statement of Profit and Loss. The credit available under the Act in respect of MAT paid is recognised as deferred tax asset.
Deferred tax assets (including MAT credit) are recognised to the extent that it is probable that future taxable profits will be available against which they can be used. The existence of unused tax losses is strong evidence that future taxable profit may not be available. Therefore, in case of a history of recent losses, the Company recognizes a deferred tax asset only to the extent that it has sufficient taxable temporary differences or there is convincing evidence that sufficient taxable profit will be available against which such deferred tax asset can be realized. Deferred tax assets - unrecognised or recognised, are reviewed at each reporting date and are recognised/ reduced to the extent that it is probable/ no longer probable respectively that the related tax benefit will be realized.
Where the grant or subsidy relates to an asset, it is recognised by deducting the grant in arriving at the carrying amount of asset. However, when the grant or subsidy relates to an expenses item, it is recognised as income over the periods necessary to match them on
a systematic basis to the costs, which it is intended to compensate.
Grants and subsidies from the government are recognised when there is reasonable assurance that the grant/subsidy will be received and all attaching conditions will be complied with.
When the Company receives grants of non-monetary assets, the asset is recognised by deducting the fair value of grant from gross value of asset.
r. Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per equity share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
s. Segment reporting
An operating segment is a component that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the other components, and for which discrete financial information is available. The Company is engaged in the business relating to manufacture, trading and supply of auto components, mainly automotive lighting systems for four wheeler and two wheeler vehicles. Accordingly, the Company''s activities/business is reviewed regularly by the Company''s Man
Mar 31, 2018
1. Significant accounting policies
a. Current versus non-current classification
The Company presents assets and liabilities in the Balance Sheet based on current / non-current classification. The Company has presented noncurrent assets and current assets before equity, noncurrent liabilities and current liabilities in accordance with Schedule III, Division II of Companies Act, 2013 notified by the Ministry of Corporate Affairs.
An asset is classified as current when it is :
a) Expected to be realised or intended to be sold or consumed in normal operating cycle,
b) Held primarily for the purpose of trading,
c) Expected to be realised within twelve months after the reporting period, or
d) Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current
A liability is classified as current when:
a) It is expected to be settled in normal operating cycle,
b) It is held primarily for the purpose of trading,
c) It is due to be settled within twelve months after the reporting period, or
d) There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
All other liabilities are classified as non-current.
All assets and liabilities have been classified as current or non- current as per the Companyâs operating cycle and other criteria set out in Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle to be less than 12 months for the purpose of current and non- current classification of assets and liabilities.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
b. Property, plant & equipment (PPE)
i) Recognition and Measurement
The cost of an item of Property, plant and equipment is recognised as an asset if, and only if:
(a) it is probable that future economic benefits associated with the item will flow to the entity; and
(b) the cost of the item can be measured reliably.
Items of property, plant and equipment are measured at cost, which includes capitalised borrowing costs, less accumulated depreciation and accumulated impairment losses, if any. Cost of an item of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates, any directly attributable cost of bringing the item to its working condition for its intended use and estimated cost of dismantling and removing the item and restoring the site on which it is located.
The cost of a self-constructed item of property, plant and equipment comprises the cost of materials and direct labour, any other costs directly attributable to bringing the item to working condition for its intended use, and estimated costs of dismantling and removing the item and restoring the site on which it is located.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the Statement of Profit and Loss as incurred.
Spare parts are capitalized when they meet the definition of PPE, i.e., when the company intends to use these during more than a period of 12 months and whose use is expected to be irregular are capitalized as PPE.
Gains or losses arising from the retirement or disposal of an property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Statement of Profit and Loss.
The cost of fixed assets not ready for their intended use is recorded as capital work-in-progress before such date. Cost of construction that relate directly to specific fixed assets and that are attributable to construction activity in general and can be allocated to specific fixed assets are included in capital work-in-progress.
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
ii) Transition to IND AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment recognized as at 01 April 2016, measured as per previous GAAP, and use that carrying value as the deemed cost of such property, plant and equipment.
iii) Depreciation methods, estimated useful lives and residual value
Depreciation is calculated on cost of items of property, plant and equipment less their estimated residual values over their estimated useful lives using the straight-line method, and is generally recognised in the statement of profit and loss. Depreciation is charged on a pro-rata basis for assets acquired/sold during the year from/to the date of acquisition/sale. Freehold land is not depreciated.
The estimated useful lives of items of property, plant and equipment for the current and comparative periods are as follows:
Based on technical evaluation and assessment of useful lives, the management believes that its estimate of useful lives as given above best represent the period over which management expects to use these assets.
Freehold land is not depreciated. Leasehold assets are amortised over the period of the lease or the estimated useful life whichever is lesser.
Depreciation method, assets residual values and useful lives are reviewed at each financial year end considering the physical condition of the assets for review and adjusted residual life prospectively.
iv) Reclassification to investment property
When the use of property changes from owner occupied property to investment property the property is reclassified as investment property at its carrying value on the date of reclassification.
c. Intangible assets
Intangible assets are stated at acquisition cost, net of accumulated amortisation and accumulated impairment losses, if any. The cost of such assets includes purchase price, licensee fee, import duties and other taxes and any directly attributable expenditure to bring the assets to their working condition for intended use.
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its intangible assets recognized as at 01 April 2016, measured as per previous GAAP, and use that carrying value as the deemed cost of such intangible assets.
Amortization methods, estimated useful lives and residual value.
Intangible assets are amortised on a straight-line basis over their estimated useful lives. The amortisation period, residual value and the amortisation method are reviewed at least at each financial year end. If the expected useful life of the asset is significantly different from previous estimates, the amortisation period is changed accordingly.
Gains or losses arising from the retirement or disposal of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Statement of Profit and Loss.
d. Investment property
Investment property is property held either to earn rental income or for capital appreciation or both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Upon, Initial recognition, an investment property is measured at cost. Subsequent to initial recognition, investment property is measured at cost less accumulated depreciation and accumulated impairment loss, if any.
Gains or losses arising from the retirement or disposal of an investment property are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Statement of Profit and Loss.
The fair values of investment property is disclosed in the notes. Fair values is determined by an independent valuer who holds a recognised and relevant professional qualification and has recent experience in the location and category of the Investment property being valued.
e. Assets held for sale
Non-current assets are classified as held for sale, if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable.
These assets are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets, which are specifically exempt from this requirement. Losses on initial classification as held for sale and subsequent gains and losses on re-measurement are recognised in Statement of Profit and Loss.
Once classified as held-for-sale, intangible assets, property, plant and equipment and investment properties are no longer amortised or depreciated.
f. Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the moving weighted average method and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs in bringing them to their present condition and location. In the case of manufactured inventories and work-in-progress, cost includes an appropriate share of fixed production overheads based on normal operating capacity.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and selling expenses. The net realizable value of work-in-progress is determined with reference to the selling prices of related finished products.
Raw materials, components and other supplies held for use in production of finished products are not written down below cost except in cases where material prices have declined, and it is estimated that the cost of the finished goods will exceed their net realisable value.
The Comparison of cost and net realisable value is made on an item-by-item basis.
Obsolete, defective and unserviceable stocks are duly provided for, wherever required.
g. Cash and Cash equivalents
In the cash flow statement, cash and cash equivalents includes cash in hand, demand deposits with banks, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
h. Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement All financial assets are recognised initially at fair value plus transaction costs that are attributable to the acquisition of the financial asset except in the case of financial assets recorded at fair value through profit and loss.
Classification
On Initial recognition, a financial asset is classified as measured at:
- Amortised cost
- Fair value through other comprehensive income (FVTOCI)
- Fair value through profit or loss (FVTPL)
Financial assets are not reclassified subsequent to their initial recognition, except if and in the period the Company changes its business model for managing financial assets.
A financial asset being âdebt instrumentâ is measured at the amortised cost if both of the following conditions are met and is not designated as at FVTPL:
- The financial asset is held within a business model whose objective is to hold assets for collecting 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 (SPPI) on the principal amount outstanding.
A financial asset being âdebt instrumentâ is measured at the FVOCI if both of the following criteria are met and is not designated as at FVTPL:
- The asset is held within the business model, whose objective is achieved both by collecting contractual cash flows and selling the financial assets, and
- The contractual terms of the financial asset give rise on specified dates to cash flows that are SPPI on the principal amount outstanding.
On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investmentâs fair value in OCI (designated as FVOCI - equity investment). This election is made on an investment- by- investment basis.
All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Financial assets: Business model assessment
The Company makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:
a) the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether managementâs strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale of the assets;
b) how the performance of the portfolio is evaluated and reported to the Companyâs management;
c) the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;
d) how managers of the business are compensated - e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and
e) the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.
Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Companyâs continuing recognition of the assets.
Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.
Financial assets: Assessment whether contractual cash flows are solely payments of principal and interest:
For the purposes of this assessment, âprincipalâ is defined as the fair value of the financial asset on initial recognition. âInterestâ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Company considers:
a) contingent events that would change the amount or timing of cash flows;
b) terms that may adjust the contractual coupon rate, including variable interest rate features;
c) prepayment and extension features; and
d) terms that limit the Companyâs claim to cash flows from specified assets (e.g. non- recourse features).
Financial assets: Subsequent measurement and gains and losses
Financial assets at FVTPL
These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in Statement of Profit and Loss.
Financial assets at amortised cost
These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in Statement of Profit and Loss. Any gain or loss on derecognition is recognised in Statement of Profit and Loss.
Debt investments at FVOCI
These assets are subsequently measured at fair value. Interest income under the effective interest method, foreign exchange gains and losses and impairment are recognised in Statement of Profit and Loss. Other net gains and losses are recognised in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to Statement of Profit and Loss.
Equity investments at FVOCI These assets are subsequently measured at fair value. Dividends are recognised as income in Statement of Profit and Loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are not reclassified to Statement of Profit and Loss.
Financial liabilities: Classification, subsequent measurement and gains and losses Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held- for-trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in Statement of Profit and Loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in Statement of Profit and Loss. Any gain or loss on derecognition is also recognised in Statement of Profit and Loss. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down.
Derecognition
Financial asset
A financial asset is derecognised only when:
- the Company has transferred the rights to receive cash flows from the financial asset or
- retains the contractual rights to receive the cash flows of the financial asset, but assumes
a contractual obligation to pay the cash flows to one or more recipients.
Where the Company has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the Company has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the Company has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
Financial liability
The Company derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. The Company also derecognises a financial liability when its terms are modified and the cash flows under the modified terms are substantially different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognised in Statement of Profit and Loss.
Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
Derivative financial instruments The Company uses derivative financial instruments to hedge its certain foreign currency risks. Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value at the end of each period. Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss.
i. Impairment
i) Impairment of financial assets
The Company recognises loss allowances for expected credit losses on financial assets measured at amortised cost and financial assets measured at FVOCI- debt investments. At each reporting date, the Company assesses whether financial assets carried at amortised cost and debt securities at FVOCI are credit-impaired. A financial asset is âcredit- impaired âwhen one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable data:
- significant financial difficulty of the borrower or issuer; or
- a breach of contract such as a default or being past due.
The Company measures loss allowances at an amount equal to lifetime expected credit losses, except for the following, which are measured as 12 month expected credit losses:
- debt securities that are determined to have low credit risk at the reporting date; and
- other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.
Loss allowances for trade receivables are always measured at an amount equal to lifetime expected credit losses.
Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument. 12-month expected credit losses are the portion of expected credit losses that result from default events that are possible within 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months). In all cases, the maximum period considered when estimating expected credit losses is the maximum contractual period over which the Company is exposed to credit risk.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Companyâs historical experience and informed credit assessment and including forward- looking information.
Measurement of expected credit losses Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive).
The Company follows âsimplified approachâ for recognition of impairment loss allowance on trade receivable. Under the simplified approach, the Company does not track changes in credit risk for individual customers. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from initial recognition.
The Company uses a provision matrix to determine impairment loss allowance on the portfolio of trade receivables. The provision matrix is based on its historically observed default rates and delays in realisations over the expected life of the trade receivable and is adjusted for forward looking estimates. At every balance sheet date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
Presentation of allowance for expected credit losses in the balance sheet
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is charged to Statement of Profit and Loss and is recognised in OCI.
Write - off
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write- off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Companyâs procedures for recovery of amounts due.
ii) Impairment of non-financial assets
The Companyâs non-financial assets, other than inventories are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the assetâs recoverable amount is estimated.
For impairment testing, assets that do not generate independent cash inflows are grouped together into cash-generating units (CGUs). Each CGU represents the smallest group of assets that generates cash inflows that are largely independent of the cash inflows of other assets or CGUs. The recoverable amount of a CGU (or an individual asset) is the higher of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the CGU (or the asset).
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its estimated recoverable amount. Impairment losses are recognised in the Statement of Profit and Loss. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assetâs carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortisation, if no impairment loss had been recognised.
j. Provisions (other than for employee benefits) and contingent liabilities
A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows (representing the best estimate of the expenditure required to settle the present obligation at the balance sheet date) at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. Expected future operating losses are not provided for.
Warranties
A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes by their associated probabilities. Provisions for warranties are adjusted regularly to take account of new circumstances and the impact of any changes recognised in the income statement.
Rate decrease
A provision for rate decrease is recognised on the basis of firm commitments with the customers and past trends . The provisions are adjusted to regularly during the year as soon as the obligating event occurs.
Contingent liabilities
A provision arising from claims, litigation, assessment, fines, penalties, etc. is recognised when the Company has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. These are reviewed at each Balance Sheet date and adjusted to reflect current management estimates.
Contingent liabilities are disclosed in respect of possible obligations that have risen from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise. When there is a possible obligation or present obligation where the likelihood of an outflow is remote, no disclosure or provision is made.
k. Revenue
Revenue is recognised to the extent it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable net of any discount, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government.
i) Sale of goods
Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are inclusive of excise duty and net of returns, trade discounts, volume rebates and value added taxes. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing effective control over, or managerial involvement with, the goods, and the amount of revenue can be measured reliably.
ii) Rendering of Services
The Company recognizes revenue from services rendered based on a service agreement between the Company and its customers in the accounting period in which the services are rendered.
iii) export incentives
Export incentives are accounted for in the year of exports based on eligibility and when there is no uncertainty in receiving the same.
l. Recognition of dividend income, interest income or expense
Dividend income is recognised in Statement of Profit and Loss on the date on which the Companyâs right to receive payment is established.
Interest income or expense is recognised using the effective interest rate method.
The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument to the gross carrying amount of the financial asset or amortised cost of the financial liability.
When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.
m. Borrowing cost
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds (including exchange differences relating to foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs).
For general borrowing used for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalization is determined by applying a capitalization rate to the expenditures on that asset. The capitalization rate is the weighted average of the borrowing costs applicable to the borrowings of the Company that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs capitalized during a period does not exceed the amount of borrowing cost incurred during that period.
All other borrowing costs are expensed in the period in which they occur.
n. Leases
i) Determining whether an arrangement contains a lease
At inception of an arrangement, it is determined whether the arrangement is or contains a lease.
At inception or on reassessment of the arrangement that contains a lease, the payments and other consideration required by such an arrangement are separated into those for the lease and those for other elements on the basis of their relative fair values. If it is concluded for a finance lease that it is impracticable to separate the payments reliably, then an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. The liability is reduced as payments are made and an imputed finance cost on the liability is recognised using the Companyâs incremental borrowing rate.
ii) Finance lease
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.
iii) Operating lease
Assets acquired under leases other than finance leases are classified as operating leases. In case of operating lease, lease rentals are recognized as expense on a straight line basis with reference to lease terms and other considerations except where-
(i) Another systematic basis is more representative of the time pattern of the benefit derived from the asset taken on lease.; or
(ii) The payments to the lessor are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases.
Contingent rentals are recognised as expenses in the periods in which they are incurred. Initial direct costs incurred specifically for an operating lease are deferred and charged to the Statement of Profit and Loss over the lease term.â
o. Employee benefits
i) Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid e.g., wages and salaries, short-term cash bonus, etc., if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the amount of obligation can be estimated reliably.
ii) Defined contribution plans
A defined contribution plan is a postemployment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts.
Provident Fund and Employee State Insurance : The Company makes specified monthly contributions towards Government administered provident fund and Employee State Insurance scheme in respect of certain employees. Obligations for contributions to defined contribution plans are recognised as an employee benefit expense in Statement of Profit and Loss in the periods during which the related services are rendered by employees.
Superannuation Fund: Contributions are made to a scheme administered by the Life Insurance Corporation of India to discharge superannuating liabilities to the employees, a defined contribution plan, and the same is expensed to the Statement of Profit and Loss. The Company has no liability other than its annual contribution.
iii) Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Companyâs net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan (âthe asset ceilingâ). In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements.
Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised in other comprehensive income (OCI). The Company determines the net interest expense / (income) on the net defined benefit liability / (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability / (asset), taking into account any changes in the net defined benefit liability / (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in Statement of Profit and Loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service (âpast service costâ or âpast service gainâ) or the gain or loss on curtailment is recognised immediately in Statement of Profit and Loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
Gratuity: The Company funds gratuity benefits for its employees within the limits prescribed under The Payment of Gratuity Act, 1972 through contributions to a Scheme administered by the Life Insurance Corporation of India (âLICâ).
iv) Other long-term employee benefits
The Companyâs net obligation in respect of long-term employee benefits other than postemployment benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any related assets is deducted. The obligation is measured on the basis of an annual independent actuarial valuation using the projected unit credit method. Remeasurements gains or losses are recognised in Statement of Profit and Loss in the period in which they arise.
Long term compensated absences: Long term compensated absences are provided for on the basis of its actuarial valuation as per the projected unit credit method as on the Balance Sheet date.
p. Income tax
Income tax comprises current and deferred tax. It is recognised in Statement of Profit and Loss except to the extent that it relates to a business combination or to an item recognised directly in equity or in other comprehensive income.
i) Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. It is measured using tax rates (and tax laws) enacted or substantively enacted by the reporting date.
Current tax assets and current tax liabilities are offset only if there is a legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
ii) Deferred tax
Deferred tax is provided in full, using the balance sheet method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for all deductible temporary differences only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.
Minimum Alternative Tax (âMATâ) under the provisions of the Income Tax Act, 1961 is recognised as current tax in the Statement of Profit and Loss. The credit available under the Act in respect of MAT paid is recognised as deferred tax asset. Deferred tax assets (including MAT credit) are recognised to the extent that it is probable that future taxable profits will be available against which they can be used. The existence of unused tax losses is strong evidence that future taxable profit may not be available. Therefore, in case of a history of recent losses, the Company recognises a deferred tax asset only to the extent that it has sufficient taxable temporary differences or there is convincing evidence that sufficient taxable profit will be available against which such deferred tax asset can be realised.
Deferred tax assets - unrecognised or recognised, are reviewed at each reporting date and are recognised/ reduced to the extent that it is probable/ no longer probable respectively that the related tax benefit will be realised.
q. Grant
Where the grant or subsidy relates to an asset, the cost of the asset is shown at gross value and grant thereon is treated as Capital Grants which are recognized as income in the Statement of Profit and Loss over the period and in the proportion in which depreciation is charged. However, when the grant or subsidy relates to an expenses item, it is recognised as income over the periods necessary to match them on a systematic basis to the costs, which it is intended to compensate.
Grants and subsidies from the government are recognized when there is reasonable assurance that the grant/subsidy will be received and all attaching conditions will be complied with.
When the Company receives grants of non-monetary assets, the asset and the grant are recorded at fair value amounts and released to Statement of Profit and Loss over the expected useful life in a pattern of consumption of the benefit of the underlying asset i.e. by equal annual instalments.
r. earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per equity share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
s. Segment reporting
An operating segment is a component that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the other components, and for which discrete financial information is available. The Company is engaged in the business relating to manufacture, trading and supply of auto components, mainly automotive lighting systems for four wheeler and two wheeler applications. Accordingly, the Companyâs activities/business is reviewed regularly by the Companyâs Managing Director assisted by an executive committee from an overall business perspective, rather than reviewing its products/ services as individual standalone components.
Based on the dominant source and nature of risks and returns of the Company, management has identified its business segment as its primary reporting format. The Company is engaged in the business relating to products, projects and systems for electricity transmission and related activities only, which has been defined as one business segment.
t. Dividend Distribution
The Company recognises a liability to make cash distributions to equity holders when the distribution is authorized and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorized when it is approved by the shareholders. A corresponding amount is recognized directly in equity.
u. Foreign currency transactions
Initial recognition and settlement
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions or an average rate if the average rate approximates the actual rate at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions are generally recognised in profit or loss.
Subsequent recognition
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary assets and liabilities that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.
Exchange differences are recognised in profit or loss, except exchange differences arising from the translation of the following items which are recognised in OCI.
- equity investments at fair value through OCI (FVOCI);
- a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; and
- qualifying cash flow hedges to the extent that the hedges are effective.
Mar 31, 2017
1. CORPORATE INFORMATION
Lumax Industries Limited (''the Company'') is a leading manufacturer and supplier of auto components, mainly automotive lighting systems for four wheeler and two wheeler applications. The Company has technical as well as financial collaboration with Stanley Electric Co. Ltd., Japan. Its shares are listed on two exchanges in India.
2. BASIS OF PREPARATION
The financial statements of the Company have been prepared and presented in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply with all material respects with the accounting standards specified under section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 and Companies (Accounting Standards) Amendment Rules, 2016. The financial statements have been prepared on an accrual basis and under the historical cost convention.
The accounting policies adopted in the preparation of financial statements are consistent with those of previous year, except for the change in accounting policy explained below.
2.1 Summary of significant accounting policies Change in Accounting Policies
1. Classification of items of stores and spares
Pre-revised AS 10 required that stand-by and servicing equipment should normally be capitalized as property, plant and equipment. It required that machinery spares are usually treated as inventory and charged to profit or loss on consumption. However, spares parts that can be only used in connection with a particular item of property, plant and equipment, and whose use is expected to be irregular, are capitalized. Such spare parts are depreciated over a period, not exceeding the remaining useful life of the principal asset.
According to revised AS 10, all spare parts, stand-by and servicing equipment qualify as property, plant and equipment (PPE) if they meet the definition of PPE i.e. if the company intends to use these during more than a period of 12 months, the spare parts capitalized in this manner are depreciated as per revised AS 10.
The company has changed its accounting policy of property, plant and equipment to comply with changes in AS 10. The company has applied transitional provisions that requires previously recognized stores and spares as inventory be capitalized as PPE at its carrying amount and be depreciated prospectively over its remaining useful life.
Spare Parts having useful life for more than one year are capitalized w.e.f. 01.04.2016.
Had the company continued to use the earlier policy of classifying stores and spares as inventories, its financial statements for the period would have been impacted as below:
Inventories would have been higher by Rs. 9,521,290, property, plant and equipment would have been lower by Rs. 9,521,290 (gross), depreciation would have been lower by Rs. 1,329,029. Profit before tax for the current period would have been higher by Rs. 1,329,029.
2. Accounting of Proposed Dividend
As per the requirements of pre-revised AS 4, the Company used to create a liability for dividend proposed/ declared after the balance sheet date for dividend related to periods covered by the financial statements. Going forward, as per revised AS 4, the company cannot create provision for dividend proposed / declared after the balance sheet date unless a statute requires otherwise. However, the company need to disclose the same in notes to the financial statements.
Accordingly, the company has disclosed dividend proposed by board of directors after the balance sheet date in the notes.
Had the company continued with creation of provision for proposed dividend, its surplus in the statement of profit and loss account would have been lower by Rs. 163,135,299 and current provision would have been higher by Rs. 163,135,299 (including dividend distribution tax of Rs. 27,593,185).
3. Accounting for assets earlier carried at revalued amount
The Company had revalued Land, Building and Plant & Machinery and was carried at revalued amount under the pre-revised AS 10. Under the revised AS 10, the Company has applied cost model on all the items of property, plant and equipment. As per the transitional provision under revised AS 10, where a Company does not adopt the revaluation model as its accounting policy but the carrying amount of item(s) of PPE reflects any previous revaluation, the Company should adjust the amount outstanding in the revaluation reserve against the carrying amount of that item. However, the carrying amount of that item should not be less than residual value. Any excess of the amount outstanding as revaluation reserve over the carrying amount of that item should be adjusted in revenue reserves. Accordingly, the Company has adjusted the balance of revaluation reserve against land and building, resulting in reduction in land and building and revaluation reserve by Rs. 77,067,268.
a. Use of estimates
The preparation of financial statements are in conformity with Indian GAAP which requires the management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets, liabilities, revenue and expenses in future periods. Changes in estimates are reflected in the financial statements in the period in which changes are made and if material, their effects are disclosed in notes to accounts.
b. Property, Plant and Equipment Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price. Such cost includes the cost of replacing part of the plant and equipment. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred.
Items of stores and spares that meet the definition of property, plant and equipment are capitalized at cost and depreciated over their useful life. Otherwise, such items are classified as inventories.
Gains or losses arising from derecognition of property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
If a component / part of an asset has a cost which is significant to the total cost of asset and has a useful life that is materially different from that of the remaining component/part of the asset, the Company identifies and determines cost of such component/part of the asset separately.
Property, plant and equipment held for sale is valued at lower of their carrying amount and net realizable value. Any write-down is recognized in the statement of profit and loss.
c. Depreciation on Property, plant and Equipment
Leasehold land is amortized over the period of lease ranging from 90 years to 99 years.
Depreciation on other property, plant and equipment is calculated on a straight line basis using rates arrived at based on the useful lives estimated by the management. The identified components are depreciated separately over their useful lives; the remaining components are depreciated over the life of the principal asset.. The Company has used following estimated useful life to provide depreciation on its property, plant and equipment:
Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred.
Intangibles assets are amortized using straight-line method over their estimated useful lives as follows:
i) The management has estimated supported by independent assessment, the useful life of certain plant and machinery as 21 years, which is higher than those indicated in schedule II of the Companies Act 2013.
ii) The management has estimated, based on past experience, the useful life of these blocks of assets as lower than the life indicated for respective block of assets in schedule II of the Companies Act 2013.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
d. Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost.
The amortization period and the amortization method are reviewed at least at each financial year end. If the expected useful life of the asset is significantly different from previous estimates, the amortization period is changed accordingly. If there has been a significant change in the expected pattern of economic benefits from the asset, the amortization method is changed to reflect the changed pattern. Such changes are accounted for in accordance with AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies.
Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
e. Research costs
Research costs are expensed as incurred.
f. Leases
Where the Company is the lessee Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the lower of the fair value of leased property and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets.
Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in the statement of profit and loss. Lease management fees, legal charges and other initial direct costs are capitalized.
A leased asset is depreciated on a straight-line basis over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, the capitalized asset is depreciated on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term.
Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term.
Where the Company is the lessor Leases in which the Company transfers substantially all the risks and benefits of ownership of the asset are classified as finance leases. Assets given under finance lease are recognized as a receivable at an amount equal to the net investment in the lease. After initial recognition, the Company apportions lease rentals between the principal repayment and interest income so as to achieve a constant periodic rate of return on the net investment outstanding in respect of the finance lease. The interest income is recognized in the statement of profit and loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the statement of profit and loss.
Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Assets subject to operating leases are included in property, plant and equipment. Lease income on an operating lease is recognized in the statement of profit and loss on a straight-line basis over the lease term. Costs, including depreciation, are recognized as an expense in the statement of profit and loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the statement of profit and loss.
g. Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur.
h. Government Grant and subsidies
Grants and subsidies from the government are recognized when there is reasonable assurance that (i) the Company will comply with the conditions attached to them, and
(ii) the grant/subsidy will be received.
When the grant or subsidy relates to revenue, it is recognized as income on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs, which they are intended to compensate. Where the grant relates to an asset, the grant is shown as a deduction from the gross value of the asset concerned in arriving at its book value. The grant is thus recognized in the statement of profit and loss over the useful life of a depreciable asset by way of a reduced depreciation charge.
i. Impairment of property, plant and equipment
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) net selling price and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
Impairment losses of continuing operations, including impairment on inventories, are recognized in the statement of profit and loss, except for previously revalued property, plant and equipment, where the revaluation was taken to revaluation reserve. In this case, the impairment is also recognized in the revaluation reserve up to the amount of any previous revaluation.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the company estimates the asset''s or cash-generating unit''s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit and loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.
j. Investments
Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties. If an investment is acquired, or partly acquired, by the issue of shares or other securities, the acquisition cost is the fair value of the securities issued.
Current investments are carried in the financial statements at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.
On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss.
l. Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must be met before revenue is recognized.
Sale of goods
Revenue from sale of Goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer usually on delivery of goods to the customer. The Company collects sales taxes and value added taxes (VAT) on behalf of the government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year.
Sale of services
Revenues from service contracts are recognized as and when services are rendered. The Company collects service tax on behalf of the government and, therefore, it is not an economic benefit flowing to the Company. Hence, it is excluded from revenue.
Interest
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head "other income" in the statement of profit and loss.
Dividends
Dividend income is recognized when the Company''s right to receive dividend is established by the reporting date.
Export Incentives
Export benefits are accounted for in the year of exports based on eligibility and when\ there is no uncertainty in receiving the same.
m. Foreign Currency Translation
Foreign currency transactions
i. Initial Recognition
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
ii. Conversion
Foreign currency monetary items are reported using the closing rate. Nonmonetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction.
iii. Exchange Differences
Exchange differences arising on the settlement of monetary items or on reinstatement of monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses.
iv. Forward exchange contracts entered into to hedge foreign currency risk of an existing asset/ liability
The premium or discount arising at the inception of forward exchange contracts is amortized as expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of profit and loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the period.
n. Retirement and other Employee Benefits
i. Retirement benefit in the form of provident fund is a defined contribution scheme. The company has no obligation, other than the contribution payable to the provident fund. The company recognizes contribution payable to the provident fund scheme as expenditure, when an employee renders the related service.
ii. Gratuity Liability is a defined benefit plan and is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year.
Actuarial gain and loss for defined benefit plan is recognized in full in the period in which it occur in the statement of profit and loss.
iii. Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.
iv. The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/ losses are immediately taken to the statement of profit and loss and are not deferred. The company presents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
Where company has the unconditional legal and contractual right to defer the settlement for a period beyond 12 months, the same is presented as noncurrent liability.
o. Income Taxes
Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India and tax laws prevailing in the respective tax jurisdictions where the Company operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.
Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized for deductible timing differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
In the situations where the Company is entitled to a tax holiday under the Income-tax Act, 1961 enacted in India or tax laws prevailing in the respective tax jurisdictions where it operates, no deferred tax (asset or liability) is recognized in respect of timing differences which reverse during the tax holiday period, to the extent the Company''s gross total income is subject to the deduction during the tax holiday period. Deferred tax in respect of timing differences which reverse after the tax holiday period is recognized in the year in which the timing differences originate. However, the Company restricts recognition of deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized. For recognition of deferred taxes, the timing differences which originate first are considered to reverse first.
At each reporting date, the Company reassesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each reporting date. The Company writes-down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax assets can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set-off current tax assets against current tax liabilities and the deferred tax assets and deferred taxes relate to the same taxable entity and the same taxation authority.
Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. The Company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the Company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the Company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-tax Act, 1961, the said asset is created by way of credit to the statement of profit and loss and shown as "MAT Credit Entitlement." The Company reviews the "MAT credit entitlement" asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will pay normal tax during the specified period.
p. Segment Reporting Policies Business Segment
The Company is engaged in the business of manufacture of various types of Automotive Lighting Equipment. The entire operations are governed by the same set of risks and return hence the entire operations represent a single primary segment.
Geographical Segment
The analysis of geographical segments is based on the geographical location of the customers i.e. customers located within India and customers located outside India.
q. Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per equity share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
r. Provisions
A provision is recognized when an enterprise has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best management estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best management estimates.
Warranty provisions
Provisions for warranty-related costs are recognized when the product is sold or service provided. Provision is based on historical experience. The estimate of such warranty-related costs is revised annually.
s. Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably.The Company does not recognize a contingent liability but discloses its existence in the financial statements.
t. Cash and Cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash at bank and in hand and short- term investments with an original maturity of three months or less.
Mar 31, 2016
1. Corporate Information
Lumax Industries Limited (âthe Company'') is a leading manufacturer and supplier of auto components, mainly automotive lighting systems for four wheeler and two wheeler applications. The Company has technical as well as financial collaboration with Stanley Electric Co. Ltd., Japan. Its shares are listed on two exchanges in India.
2. Basis of preparation
The financial statements of the Company have been prepared and presented in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply with all material respects with the accounting standards specified under section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014. The financial statements have been prepared on an accrual basis and under the historical cost convention. The accounting policies adopted in the preparation of financial statements are consistent with those of previous year.
2.1 Summary of significant accounting policies
a. Use of estimates
The preparation of financial statements are in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses during the reported period. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets, liabilities, revenue and expenses in future periods. Changes in estimates are reflected in the financial statements in the period in which changes are made and if material, their effects are disclosed in notes to accounts.
b. Tangible Fixed Assets
Fixed assets, are stated at cost (or revalued amounts, as the case may be), net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price.
The Company has revalued some of the Land, Building and Plant & Machinery existing on different dates. These Land, Building and Plant & Machinery are measured at fair value less accumulated depreciation and impairment losses, if any, recognized after the date of the revaluation. In case of revaluation of fixed assets, any revaluation surplus is credited to the revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognized in the statement of profit and loss, in which case the increase is recognized in the statement of profit and loss. A revaluation deficit is recognized in the statement of profit and loss, except to the extent that it offsets an existing surplus on the same asset recognized in the asset revaluation reserve.
Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.
Gains or losses arising from the de-recognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
c. Depreciation on Tangible fixed assets
Leasehold land is amortized over the period of lease ranging from 90 years to 99 years.
Depreciation on other fixed assets is calculated on a straight line basis using rates arrived at based on the useful lives estimated by the management. The Company has used following estimated useful life to provide depreciation on its fixed assets:
i) The management has estimated supported by independent assessment, the useful life of certain plant and machinery as 21 years, which is higher than those indicated in schedule II of the Companies Act 2013.
ii) The management has estimated, based on past experience, the useful life of these blocks of assets as lower than the life indicated for respective block of assets in schedule II of the Companies Act 2013.
d. Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in the statement of profit and loss in the year in which the expenditure is incurred.
Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
e. Research costs
Research costs are expensed as incurred.
f. Leases
Where the Company is the lessee
Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the lower of the fair value of leased property and present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets.
Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in the statement of profit and loss. Lease management fees, legal charges and other initial direct costs are capitalized.
A leased asset is depreciated on a straight-line basis over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain the ownership by the end of the lease term, the capitalized asset is depreciated on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term.
Leases, where the less or effectively retains substantially all the risks and benefits of ownership of the leased item are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term.
Where the Company is the less or
Leases in which the Company transfers substantially all the risks and benefits of ownership of the asset are classified as finance leases. Assets given under finance lease are recognized as a receivable at an amount equal to the net investment in the lease. After initial recognition, the Company apportions lease rentals between the principal repayment and interest income so as to achieve a constant periodic rate of return on the net investment outstanding in respect of the finance lease. The interest income is recognized in the statement of profit and loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the statement of profit and loss.
Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Assets subject to operating leases are included in fixed assets. Lease income on an operating lease is recognized in the statement of profit and loss on a straight-line basis over the lease term. Costs, including depreciation, are recognized as an expense in the statement of profit and loss. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the statement of profit and loss.
g. Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur.
h. Government Grant and subsidies
Grants and subsidies from the government are recognized when there is reasonable assurance that (i) the Company will comply with the conditions attached to them, and (ii) the grant/ subsidy will be received.
When the grant or subsidy relates to revenue, it is recognized as income on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs, which they are intended to compensate. Where the grant relates to an asset, the grant is shown as a deduction from the gross value of the asset concerned in arriving at its book value. The grant is thus recognized in the statement of profit and loss over the useful life of a depreciable asset by way of a reduced depreciation charge.
i. Impairment of tangible and intangible assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating units (CGU) net selling price and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
Impairment losses of continuing operations, including impairment on inventories, are recognized in the statement of profit and loss, except for previously revalued tangible fixed assets, where the revaluation was taken to revaluation reserve. In this case, the impairment is also recognized in the revaluation reserve up to the amount of any previous revaluation.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the company estimates the asset''s or cash-generating unit''s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset''s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit and loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.
j. Investments
Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost comprises purchase price and directly attributable acquisition charges such as brokerage, fees and duties. If an investment is acquired, or partly acquired, by the issue of shares or other securities, the acquisition cost is the fair value of the securities issued.
Current investments are carried in the financial statements at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the investments.
On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the statement of profit and loss.
l. Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must be met before revenue is recognized.
Sale of goods
Revenue from sale of Goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer usually on delivery of Goods to the customer. The Company collects sales taxes and value added taxes (VAT) on behalf of the government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year.
Sale of services
Revenues from service contracts are recognized as and when services are rendered. The Company collects service tax on behalf of the government and, therefore, it is not an economic benefit flowing to the Company. Hence, it is excluded from revenue.
Interest
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate.
Interest income is included under the head âother incomeâ in the statement of profit and loss.
Dividends
Dividend income is recognized when the Company''s right to receive dividend is established by the reporting date.
m. Foreign Currency Translation
Foreign currency transactions
i. Initial Recognition
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
ii. Conversion
Foreign currency monetary items are reported using the closing rate. Nonmonetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction.
iii. Exchange Differences
Exchange differences arising on the settlement of monetary items or on reinstatement of monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses.
iv. Forward exchange contracts entered into to hedge foreign currency risk of an existing asset/ liability
The premium or discount arising at the inception of forward exchange contracts is amortized as expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of profit and loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the period.
n. Retirement and other Employee Benefits
i. Retirement benefit in the form of provident fund is a defined contribution scheme. The company has no obligation, other than the contribution payable to the provident fund. The company recognizes contribution payable to the provident fund scheme as expenditure, when an employee renders the related service.
ii. Gratuity Liability is a defined benefit plan and is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year.
Actuarial gain and loss for defined benefit plan is recognized in full in the period in which it occur in the statement of profit and loss.
iii. Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.
iv. The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred.
v. Retirement benefit in the form of âLumax Industries Limited Employees Superannuation Schemeâ administered by the trustees is a defined contribution scheme. The contribution for the scheme is charged to the statement of profit and loss for the year when the contributions are due. The Company has no obligation, other than the contribution payable to the scheme.
o. Income Taxes
Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India and tax laws prevailing in the respective tax jurisdictions where the Company operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.
Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized for deductible timing differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the Company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
In the situations where the Company is entitled to a tax holiday under the Income-tax Act, 1961 enacted in India or tax laws prevailing in the respective tax jurisdictions where it operates, no deferred tax (asset or liability) is recognized in respect of timing differences which reverse during the tax holiday period, to the extent the Company''s gross total income is subject to the deduction during the tax holiday period. Deferred tax in respect of timing differences which reverse after the tax holiday period is recognized in the year in which the timing differences originate. However, the Company restricts recognition of deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized. For recognition of deferred taxes, the timing differences which originate first are considered to reverse first.
At each reporting date, the Company reassesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each reporting date. The Company writes-down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax assets can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set-off current tax assets against current tax liabilities and the deferred tax assets and deferred taxes relate to the same taxable entity and the same taxation authority.
Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax. The Company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the Company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the Company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-tax Act, 1961, the said asset is created by way of credit to the statement of profit and loss and shown as âMAT Credit Entitlement.â The Company reviews the âMAT credit entitlementâ asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will pay normal tax during the specified period.
p. Segment Reporting Policies Business Segment
The Company is engaged in the business of manufacture of various types of Automotive Lighting Equipment. The entire operations are governed by the same set of risks and return hence the entire operations represent a single primary segment.
Geographical Segment
The analysis of geographical segments is based on the geographical location of the customers i.e. customers located within India and customers located outside India.
q. Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per equity share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
r. Provisions
A provision is recognized when an enterprise has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best management estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best management estimates.
Warranty provisions
Provisions for warranty-related costs are recognized when the product is sold or service provided. Provision is based on historical experience. The estimate of such warranty-related costs is revised annually.
s. Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
t. Cash and Cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash at bank and in hand and short- term investments with an original maturity of three months or less.
u. Derivative instruments
In accordance with the ICAI announcement, derivative contracts, other than foreign currency
forward contracts covered under AS 11, are marked to market on a portfolio basis, and the net loss, if any, after considering the offsetting effect of gain on the underlying hedged item, is charged to the statement of profit and loss. Net gain, if any, after considering the offsetting effect of loss on the underlying hedged item, is ignored.
Mar 31, 2015
A. Change in Accounting Policies Depreciation on fixed assets
Till the year ended 31 March 2014, Schedule XIV to the Companies Act,
1956, prescribed requirements concerning deprecia- tion of fixed
assets. From the current year, Schedule XIV has been replaced by
Schedule II to the Companies Act, 2013. The applicability of Schedule
II has resulted in the following changes related to depreciation of
fixed assets. Unless stated otherwise, the impact mentioned for the
current year is likely to hold good for future years also.
i) Useful Lives / Depreciation Rates
Till the year ended 31 March 2014, depreciation rates prescribed under
Schedule XIV were treated as minimum rates and the company was not
allowed to charge depreciation at lower rates even if such lower rates
were justified by the estimated useful life of the asset. Schedule II
to the Companies Act 2013 prescribes useful lives for fixed assets
which, in many cases, are different from lives prescribed under the
erstwhile Schedule XIV. However, Schedule II allows companies to use
higher/ lower useful lives and residual values if such useful lives and
residual values can be technically supported and justification for
difference is disclosed in the financial statements. Considering the
applicability of Schedule II, the management has re-estimated useful
lives and residual values of all its fixed assets. The management
believes that depreciation rates currently used fairly reflect its
estimate of the useful lives and residual values of fixed assets,
though these rates in certain cases are different from lives prescribed
under Schedule II. Hence, this change in accounting policy did not have
any material impact on financial statements of the company.
ii) Assets for a value not exceeding Rs. 5000/-
The depreciation on assets for a value not exceeding Rs. 5000/- which
were written off in the year of purchase as per erstwhile Companies
Act, 1956, are being charged on the basis of their useful lives
prescribed in the Schedule II of the Companies Act, 2013.
b. Use of estimates
The preparation of financial statements are in conformity with Indian
GAAP requires the management to make judgments, estimates and
assumptions that affect the reported amounts of assets, liabilities,
revenue and expenses during the reported period. Although these
estimates are based on the management''s best knowledge of current
events and actions, uncertainty about these assumptions and estimates
could result in the outcomes requiring a material adjustment to the
carrying amounts of assets, liabilities, revenue and expenses in future
periods. Changes in estimates are reflected in the financial statements
in the period in which changes are made and if material, their effects
are disclosed in notes to accounts.
c. Tangible Fixed Assets
Fixed assets, are stated at cost (or re-valued amounts, as the case may
be), net of accumulated depreciation and accumulated impairment losses,
if any. The cost comprises purchase price, borrowing costs if
capitalization criteria are met and directly at- tributable cost of
bringing the asset to its working condition for the intended use. Any
trade discounts and rebates are deducted in arriving at the purchase
price.
The Company has revalued some of the Land, Building and Plant &
Machinery existing on different dates. These Land, Building and Plant &
Machinery are measured at fair value less accumulated depreciation and
impairment losses, if any, recognised after the date of the
revaluation. In case of revaluation of fixed assets, any revaluation
surplus is credited to the revaluation reserve,
except to the extent that it reverses a revaluation decrease of the
same asset previously recognized in the statement of profit and loss,
in which case the increase is recognized in the statement of profit and
loss. A revaluation deficit is recognized in the statement of profit
and loss, except to the extent that it offsets an existing surplus on
the same asset recognized in the asset revaluation reserve.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from the derecognition of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
d. Depreciation on Tangible fixed assets
Leasehold land is amortized over the period of lease ranging from 90
years to 99 years.
Depreciation on other fixed assets is calculated on a straight line
basis using rates arrived at based on the useful lives estimated by the
management. The Company has used following estimated useful life to
provide depreciation on its fixed assets:
Particulars Estimated useful life (years)
-Factory building 30
-Other building 60
-Plant and Machinery(i,ii) 3-21
-Furniture and fixtures 10
-Vehicles (ii) 5
-Office equipment 5
(i) The management has estimated supported by independent assessment,
the useful life of certain plant and machinery as 21 years, which is
higher than those indicated in schedule II of the Companies Act, 2013.
(ii) The management has estimated, based on past experience, the useful
life of these blocks of assets as lower than the life indicated for
respective block of assets in schedule II of the Companies Act, 2013.
e. Intangible Assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intagible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
Intangibles assets are amortized using straight-line method over their
estimated useful lives as follows:
Intangible Assets Estimated Useful Life (Years)
Computer Software Over the estimated economic useful
lives ranging from 3.5 to 4 years
Technical Know-how Over the period of Technical Assistance
Agreement i.e. 8 years
Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecog -nized.
f. Research costs
Research costs are expensed as incurred.
g. Leases
Where the Company is the lessee
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalized at the lower of the fair value of leased property and
present value of the minimum lease payments at the inception of the
lease term and disclosed as leased assets.
Lease payments are apportioned between the finance charges and
reduction of the lease liability so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance charges are
recognized as finance costs in the statement of profit and loss. Lease
management fees, legal charges and other initial direct costs are
capitalised.
A leased asset is depreciated on a straight-line basis over the useful
life of the asset. However, if there is no reasonable certainty that
the Company will obtain the ownership by the end of the lease term, the
capitalized asset is depreciated on a straight-line basis over the
shorter of the estimated useful life of the asset or the lease term.
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight- line basis over the
lease term.
Where the Company is the lessor
Leases in which the Company transfers substantially all the risks and
benefits of ownership of the asset are classified as finance leases.
Assets given under finance lease are recognized as a receivable at an
amount equal to the net investment in the lease. After initial
recognition, the Company apportions lease rentals between the principal
repayment and interest income so as to achieve a constant periodic rate
of return on the net investment outstanding in respect of the finance
lease. The interest income is recognized in the statement of profit and
loss. Initial direct costs such as legal costs, brokerage costs, etc.
are recognized immediately in the statement of profit and loss.
Leases in which the Company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income on an operating lease is recognized in the
statement of profit and loss on a straight-line basis over the lease
term. Costs, including depreciation, are recognized as an expense in
the statement of profit and loss. Initial direct costs such as legal
costs, brokerage costs, etc. are recognized immediately in the
statement of profit and loss.
h. Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substan- tial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
i. Government Grant and subsidies
Grants and subsidies from the government are recognized when there is
reasonable assurance that (i) the Company will comply with the
conditions attached to them, and (ii) the grant/subsidy will be
received.
When the grant or subsidy relates to revenue, it is recognized as
income on a systematic basis in the statement of profit and loss over
the periods necessary to match them with the related costs, which they
are intended to compensate. Where the grant relates to an asset, the
grant is shown as a deduction from the gross value of the asset
concerned in arriving at its book value. The grant is thus recognised
in the statement of profit and loss over the useful life of a
depreciable asset by way of a reduced depreciation charge.
j. Impairment of tangible and intangible assets
The Company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the Company
estimates the asset''s recoverable amount. An asset''s recoverable
amount is the higher of an asset''s or cash-generating unit''s (CGU) net
selling price and its value in use. The recoverable amount is
determined for an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from other assets or
groups of assets. Where the carrying amount of an asset or CGU exceeds
its recoverable amount, the asset is considered impaired and is written
down to its recoverable amount.
Impairment losses of continuing operations, including impairment on
inventories, are recognized in the statement of profit and loss, except
for previously revalued tangible fixed assets, where the revaluation was
taken to revaluation reserve. In this case, the impairment is also
recognized in the revaluation reserve up to the amount of any previous
revaluation.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer
exist or may have decreased. If such indication exists, the company
estimates the asset''s or cash-gen- erating unit''s recoverable amount. A
previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset''s
recoverable amount since the last impairment loss was recognized. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss
been recognized for the asset in prior years. Such reversal is
recognized in the statement of profit and loss unless the asset is
carried at a revalued amount, in which case the reversal is treated as
a revaluation increase.
k. Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acqui- sition
charges such as brokerage, fees and duties. If an investment is
acquired, or partly acquired, by the issue of shares or other
securities, the acquisition cost is the fair value of the securities
issued.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
l. Inventories
Inventories are valued as follows:
Raw materials and components, Stores and spares
( including packing materials)
At Cost and Net Realizable Value, whichever is lower. However, mater-
ials and other items held for use in the production of inventories are
not written down below cost if the finished products in which they will
be incorporated are expected to be sold at or above cost . Cost is
determined on moving weighted average basis. Cost of raw materials and
components lying in bonded warehouse includes custom duty accounted for
on accrual basis.
Finished goods &Traded goods, Work-in- progress and Moulds, tools and
dies in process
At Cost and Net Realizable Value, whichever is lower. Cost of Finis- hed
goods and Work-in-progress (including moulds, tools and dies
in process) includes direct materials, labour and a proportion of man
ufacturing overheads based on normal operating capacity. Cost of traded
goods includes cost of purchase and other costs incurred in bringing
the inventories to their present location and condition. Cost is
determined on moving weighted average basis. Cost of finished goods
includes excise duty.
Scrap
At net realizable value.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and to make the
sale.
m. Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The following specific recognition criteria must be
met before revenue is recognised.
Sale of goods
Revenue from sale of Goods is recognised when the significant risks and
rewards of ownership of the goods have passed to the buyer usually on
delivery of Goods to the customer. The Company collects sales taxes and
value added taxes (VAT) on behalf of the government and, therefore,
these are not economic benefits flowing to the Company. Hence, they are
excluded from revenue. Excise duty deducted from revenue (gross) is the
amount that is included in the revenue (gross) and not the entire amount
of liability arising during the year.
Sale of services
Revenues from service contracts are recognized as and when services are
rendered. The Company collects service tax on behalf of the government
and, therefore, it is not an economic benefit flowing to the Company.
Hence, it is excluded from revenue.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
Dividends
Dividend income is recognized when the Company''s right to receive
dividend is established by the reporting date.
n. Foreign Currency Translation Foreign currency transactions
i. Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
ii. Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
iii. Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reinstatement of monetary items at rates different from those at which
they were initially recorded during the year, or reported in previous
financial statements, are recog- nised as income or as expenses .
iv. Forward exchange contracts entered into to hedge foreign currency
risk of an existing asset/ liability
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognized in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognized as income or as expense for the
period.
o. Retirement and other Employee Benefits
i. Retirement benefit in the form of provident fund is a defined
contribution scheme. The company has no obligation, other than the
contribution payable to the provident fund. The company recognizes
contribution payable to the provident fund scheme as expenditure, when
an employee renders the related service.
ii. Gratuity Liability is a defined benefit plan and is provided for
on the basis of an actuarial valuation on projected unit credit method
made at the end of each financial year.
Actuarial gain and loss for defined benefit plan is recognized in full
in the period in which it occur in the statement of profit and loss.
iii. Accumulated leave, which is expected to be utilized within the
next 12 months, is treated as short-term employee benefit. The Company
measures the expected cost of such absences as the additional amount
that it expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
iv. The Company treats accumulated leave expected to be carried
forward beyond twelve months, as long-term employee benefit for
measurement purposes. Such long-term compensated absences are provided
for based on the actuarial valuation using the projected unit credit
method at the year-end. Actuarial gains/losses are immediately taken to
the statement of profit and loss and are not deferred.
v. Retirement benefit in the form of "Lumax Industries Limited
Employees Superannuation Scheme" administered by the trustees is a
defined contribution scheme. The contribution for the scheme is charged
to the statement of profit and loss for the year when the contributions
are due. The Company has no obligation, other than the contribution
payable to the scheme.
p. Income Taxes
Tax expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India and tax laws
prevailing in the respective tax juris- dictions where the Company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized directly in equity is
recognized in equity and not in the statement of profit and loss.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date. Deferred income tax
relating to items recognized directly in equity is recognized in equity
and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
In the situations where the Company is entitled to a tax holiday under
the Income-tax Act, 1961 enacted in India or tax laws prevailing in the
respective tax jurisdictions where it operates, no deferred tax (asset
or liability) is recognized in respect of timing differences which
reverse during the tax holiday period, to the extent the Company''s
gross total income is subject to the deduction during the tax holiday
period. Deferred tax in respect of timing differences which reverse
after the tax holiday period is recognized in the year in which the
timing differences originate. However, the Company restricts
recognition of deferred tax assets to the extent that it has become
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. For recognition of deferred taxes,
the timing differences which originate first are considered to reverse
first.
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax assets can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The Company recog- nizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to
be carried forward. In the year in which the Company recognizes MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as "MAT Credit Entitlement." The
Company reviews the "MAT credit entitlement" asset at each reporting
date and writes down the asset to the extent the Company does not have
convincing evidence that it will pay normal tax during the specified
period.
q. Segment Reporting Policies
Business Segment
The Company is engaged in the business of manufacture of various types
of Automotive Lighting Equipment. The entire oper- ations are governed
by the same set of risks and return hence the entire operations
represent a single primary segment.
Geographical Segment
The analysis of geographical segments is based on the geographical
location of the customers i.e. customers located within India and
customers located outside India.
r. Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per equity share, the
net profit or loss for the period attributable to equity share- holders
and the weighted average number of shares outstanding during the period
are adjusted for the effects of all dilutive potential equity shares.
s. Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted to
its present value and are determined based on best management estimate
required to settle the obligation at the balance sheet date. These are
reviewed at each balance sheet date and adjusted to reflect the current
best management estimates.
Warranty provisions
Provisions for warranty-related costs are recognized when the product
is sold or service provided. Provision is based on historical
experience. The estimate of such warranty-related costs is revised
annually.
t. Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The Company does
not recognize a contingent liability but discloses its existence in the
financial statements.
u. Cash and Cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash at
bank and in hand and short- term investments with an original maturity
of three months or less.
v. Derivative instruments
In accordance with the ICAI announcement, derivative contracts, other
than foreign currency forward contracts covered under AS 11, are marked
to market on a portfolio basis, and the net loss, if any, after
considering the offsetting effect of gain on the underlying hedged
item, is charged to the statement of profit and loss. Net gain, if any,
after considering the offsetting effect of loss on the underlying
hedged item, is ignored.
Mar 31, 2014
1. Corporate Information
Lumax Industries Limited (''the Company'') is a leading manufacturer and
supplier of auto components, mainly automotive lighting systems for
four wheeler and two wheeler applications. The Company has technical as
well as financial collaboration with Stanley Electric Co. Ltd., Japan.
Its shares are listed on two exchanges in India.
2. Basis of preparation
The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP). The Company has prepared these financial statements to
comply in all material respects with the accounting standards notified
by Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956 read with General
Circular 8/2014 dated 4 April 2014 issued by the Ministry of Corporate
Affairs. The financial statements have been prepared under the
historical cost convention on an accrual basis except in case of assets
for which revaluation is carried out and derivative financial
instruments which have been measured at fair value.
The accounting policies adopted in preparation of financial statements
are consistent with those of previous year.
2.1 Summary of significant accounting policies
a. Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
b. Tangible Fixed Assets
Fixed assets, are stated at cost (or re-valued amounts, as the case may
be), net of accumulated depreciation and accumulated impairment losses,
if any. The cost comprises purchase price, borrowing costs if
capitalization criteria are met and directly attributable cost of
bringing the asset to its working condition for the intended use. Any
trade discounts and rebates are deducted in arriving at the purchase
price.
The Company has revalued some of the Land, Building and Plant &
Machinery existing on different dates. These Land, Building and Plant &
Machinery are measured at fair value less accumulated depreciation and
impairment losses, if any, recognised after the date of the
revaluation. In case of revaluation of fixed assets, any revaluation
surplus is credited to the revaluation reserve, except to the extent
that it reverses a revaluation decrease of the same asset previously
recognized in the statement of profit and loss, in which case the
increase is recognized in the statement of profit and loss. A
revaluation deficit is recognized in the statement of profit and loss,
except to the extent that it offsets an existing surplus on the same
asset recognized in the asset revaluation reserve.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from the derecognition of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
c. Depreciation on Tangible fixed assets
Depreciation on fixed assets is provided on Straight Line basis as per
the rates computed based on estimated useful life of the assets which
are equal to the corresponding rates prescribed in Schedule XIV to the
Companies Act, 1956.
Leasehold land is amortized over the period of lease ranging from 90
years to 99 years.
Assets individually costing less than or equal to Rs. 5,000 are fully
depreciated in the year of purchase.
d. Intangible Assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
e. Research costs
Research costs are expensed as incurred.
f. Leases
Where the Company is the lessee
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalized at the lower of the fair value of leased property and
present value of the minimum lease payments at the inception of the
lease term and disclosed as leased assets.
Lease payments are apportioned between the finance charges and
reduction of the lease liability so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance charges are
recognized as finance costs in the statement of profit and loss. Lease
management fees, legal charges and other initial direct costs are
capitalised.
A leased asset is depreciated on a straight-line basis over the useful
life of the asset or the useful life envisaged in Schedule XIV to the
Companies Act, 1956, whichever is lower. However, if there is no
reasonable certainty that the Company will obtain the ownership by the
end of the lease term, the capitalized asset is depreciated on a
straight-line basis over the shorter of the estimated useful life of
the asset, the lease term or the useful life envisaged in Schedule XIV
to the Companies Act, 1956.
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight- line basis over the
lease term.
Where the Company is the lessor
Leases in which the Company transfers substantially all the risks and
benefits of ownership of the asset are classified as finance leases.
Assets given under finance lease are recognized as a receivable at an
amount equal to the net investment in the lease. After initial
recognition, the Company apportions lease rentals between the principal
repayment and interest income so as to achieve a constant periodic rate
of return on the net investment outstanding in respect of the finance
lease. The interest income is recognized in the statement of profit and
loss. Initial direct costs such as legal costs, brokerage costs, etc.
are recognized immediately in the statement of profit and loss.
Leases in which the Company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income on an operating lease is recognized in the
statement of profit and loss on a straight-line basis over the lease
term. Costs, including depreciation, are recognized as an expense in
the statement of profit and loss. Initial direct costs such as legal
costs, brokerage costs, etc. are recognized immediately in the
statement of profit and loss.
g. Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
h. Government Grant and subsidies
Grants and subsidies from the government are recognized when there is
reasonable assurance that (i) the Company will comply with the
conditions attached to them, and (ii) the grant/subsidy will be
received.
When the grant or subsidy relates to revenue, it is recognized as
income on a systematic basis in the statement of profit and loss over
the periods necessary to match them with the related costs, which they
are intended to compensate. Where the grant relates to an asset, the
grant is shown as a deduction from the gross value of the asset
concerned in arriving at its book value.
The grant is thus recognised in the statement of profit and loss over
the useful life of a depreciable asset by way of a reduced depreciation
charge.
i. Impairment of tangible and intangible assets
The Company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the Company
estimates the asset''s recoverable amount. An asset''s recoverable amount
is the higher of an asset''s or cash-generating unit''s (CGU) net selling
price and its value in use. The recoverable amount is determined for an
individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount.
Impairment losses of continuing operations, including impairment on
inventories, are recognized in the statement of profit and loss, except
for previously revalued tangible fixed assets, where the revaluation
was taken to revaluation reserve. In this case, the impairment is also
recognized in the revaluation reserve up to the amount of any previous
revaluation.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer
exist or may have decreased. If such indication exists, the company
estimates the asset''s or cash-generating unit''s recoverable amount. A
previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset''s
recoverable amount since the last impairment loss was recognized. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss
been recognized for the asset in prior years. Such reversal is
recognized in the statement of profit and loss unless the asset is
carried at a revalued amount, in which case the reversal is treated as
a revaluation increase.
j. Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties. If an investment is acquired, or
partly acquired, by the issue of shares or other securities, the
acquisition cost is the fair value of the securities issued.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
k. Inventories
l. Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The following specific recognition criteria must be
met before revenue is recognised.
Sale of goods
Revenue from sale of Goods is recognised when the significant risks and
rewards of ownership of the goods have passed to the buyer usually on
delivery of Goods to the customer. The Company collects sales taxes and
value added taxes (VAT) on behalf of the government and, therefore,
these are not economic benefits flowing to the Company. Hence, they are
excluded from revenue. Excise duty deducted from revenue (gross) is the
amount that is included in the revenue (gross) and not the entire
amount of liability arising during the year.
Sale of services
Revenues from service contracts are recognized as and when services are
rendered. The Company collects service tax on behalf of the government
and, therefore, it is not an economic benefit flowing to the Company.
Hence, it is excluded from revenue.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
Dividends
Dividend income is recognized when the Company''s right to receive
dividend is established by the reporting date.
m. Foreign Currency Translation
Foreign currency transactions
i. Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
ii. Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
iii. Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reinstatement of monetary items at rates different from those at which
they were initially recorded during the year, or reported in previous
financial statements, are recognised as income or as expenses .
iv. Forward exchange contracts entered into to hedge foreign currency
risk of an existing asset/ liability
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognized in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognized as income or as expense for the
period.
n. Retirement and other Employee Benefits
i. Retirement benefit in the form of provident fund is a defined
contribution scheme. The company has no obligation, other than the
contribution payable to the provident fund. The company recognizes
contribution payable to the provident fund scheme as expenditure, when
an employee renders the related service.
ii. Gratuity liability is a defined benefit plan and is provided for on
the basis of an actuarial valuation on projected unit credit method
made at the end of each financial year.
Actuarial gain and loss for defined benefit plan is recognized in full
in the period in which it occur in the statement of profit and loss.
iii. Accumulated leave, which is expected to be utilized within the
next 12 months, is treated as short-term employee benefit. The Company
measures the expected cost of such absences as the additional amount
that it expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
iv. The Company treats accumulated leave expected to be carried forward
beyond twelve months, as long-term employee benefit for measurement
purposes. Such long-term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
year-end. Actuarial gains/losses are immediately taken to the statement
of profit and loss and are not deferred.
v. Retirement benefit in the form of "Lumax Industries Limited
Employees Superannuation Scheme" administered by the trustees is a
defined contribution scheme. The contribution for the scheme is charged
to the statement of profit and loss for the year when the contributions
are due. The Company has no obligation, other than the contribution
payable to the scheme.
o. Income Taxes
Ta x expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961 enacted in India and tax laws
prevailing in the respective tax jurisdictions where the Company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, as at the reporting
date. Current income tax relating to items recognized directly in
equity is recognized in equity and not in the statement of profit and
loss.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date. Deferred income tax
relating to items recognized directly in equity is recognized in equity
and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
In the situations where the Company is entitled to a tax holiday under
the Income-tax Act, 1961 enacted in India or tax laws prevailing in the
respective tax jurisdictions where it operates, no deferred tax (asset
or liability) is recognized in respect of timing differences which
reverse during the tax holiday period, to the extent the Company''s
gross total income is subject to the deduction during the tax holiday
period. Deferred tax in respect of timing differences which reverse
after the tax holiday period is recognized in the year in which the
timing differences originate. However, the Company restricts
recognition of deferred tax assets to the extent that it has become
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. For recognition of deferred taxes,
the timing differences which originate first are considered to reverse
first.
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax assets can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The Company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to
be carried forward. In the year in which the Company recognizes MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Ta x under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as "MAT Credit Entitlement." The
Company reviews the "MAT credit entitlement" asset at each reporting
date and writes down the asset to the extent the Company does not have
convincing evidence that it will pay normal tax during the specified
period.
p. Segment Reporting Policies
Business Segment
The Company is engaged in the business of manufacture of various types
of Automotive Lighting Equipment. The entire operations are governed by
the same set of risks and return hence the entire operations represent
a single primary segment.
Geographical Segment
The analysis of geographical segments is based on the geographical
location of the customers i.e. customers located within India and
customers located outside India.
q. Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per equity share, the
net profit or loss for the period attributable to equity shareholders
and the weighted average number of shares outstanding during the period
are adjusted for the effects of all dilutive potential equity shares.
r. Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted to
its present value and are determined based on best management estimate
required to settle the obligation at the balance sheet date. These are
reviewed at each balance sheet date and adjusted to reflect the current
best management estimates.
Warranty provisions
Provisions for warranty-related costs are recognized when the product
is sold or service provided. Provision is based on historical
experience. The estimate of such warranty-related costs is revised
annually.
s. Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The Company does
not recognize a contingent liability but discloses its existence in the
financial statements.
t. Cash and Cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash at
bank and in hand and short- term investments with an original maturity
of three months or less.
u. Derivative instruments
In accordance with the ICAI announcement, derivative contracts, other
than foreign currency forward contracts covered under AS 11, are marked
to market on a portfolio basis, and the net loss, if any, after
considering the offsetting effect of gain on the underlying hedged
item, is charged to the statement of profit and loss. Net gain, if any,
after considering the offsetting effect of loss on the underlying
hedged item, is ignored.
b Terms/rights attached to equity shares
The Company has only one class of equity shares having a par value of
Rs. 10 per share. Each holder of equity shares is entitled to
one vote per share. The Company declares and pays dividends in Indian
rupees. The dividend proposed by the Board of Directors is subject to
the approval of the shareholders in the ensuing Annual General Meeting.
During the year ended March 31, 2014, the amount of per share dividend
recognized as distributions to equity shareholders was Rs. 3.50
(Previous year: Rs. 4.50).
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive remaining assets of the Company,
after distribution of all preferential amounts. The distribution will
be in proportion to the number of equity shares held by the shareholders.
1 Indian Rupee Loan from Bank includes:
(a) Rs. Nil (Previous year Rs. 67,546,915/-) taken in the Financial
Year 2008-09 carried interest @ base Rate 10.25 3.75% i.e. 14% p.a.
The loan was repayable in 16 equal quarterly installments of Rs.
16,875,000/- (excluding interest) after one year moratorium period from
the disbursement date i.e. from 01.11.2009. The Loan was secured by
extension of charges by way of hypothecation on the plant and machinery
alongwith the UREM on land and building, situated at Chakan-II Unit.
This facility was further secured by UREM of land and building of
Dharuhera Unit along with hypothecation on plant & machinery of
Dharuhera (both present and future) and those of Gurgaon Unit (acquired
from proceeds of this facility). The Loan has been repaid during the
year.
(b) Rs. 89,400,000/- (Previous year Rs. Nil) taken in the Financial
Year 2013-14 carries interest @ 10% p.a. at present. The loan is
repayable in 16 equal quarterly installments of Rs. 5,587,500/-
(excluding interest) after one year moratorium period from the
disbursement date i.e. from 04.04.2013. The Loan is secured by way of
first pari passu charge on the land and building situated at Sohna,
Gurgaon (Haryana) unit.
(c) Rs. 52,044,266/- (Previous year Rs. 93,687,266/-) taken in the
financial year 2010-11 carries interest @ base Rate 10.25 3% i.e.
13.25% p.a. at present. The loan is repayable in 16 equal quarterly
installments of Rs. 10,410,750/- (excluding interest) after one year
moratorium period from the disbursement date i.e. from 10.05.2011. The
Loan is secured by way of first pari passu charge on the land and
building along with all the plant and machineries, situated at Sanand
(Gujarat) unit both present and future.
(d) Rs. 12,442,265/- (Previous year Rs. 8,806,058/-) vehicle loans from
banks at interest @ 8% - 12% aggregating to are secured by way of
hypothecation of the respective vehicles acquired out of the proceeds
thereof. These loans are repayable over a period of three years from
the date of availment.
2 Foreign Currency Loan from Bank includes:
(a) Rs. 168,510,935/- (Previous year Rs. 221,812,500/-) taken in the
financial year 2011-12 carries interest @ LIBOR plus 260 BSP. The loan
is repayable in 16 quarterly installments of Rs. 14,026,563/- after one
year moratorium period from the disbursement date i.e. from
03.06.2012. The loan is secured by way of first & exclusive charge on
the land and building along with all the plant and machineries,
situated at Bawal (Haryana) unit both present and future.
(b) Rs. 374,468,750/- (Previous year Rs. 477,750,000/-) taken in the
financial year 2011-12 carries interest @ LIBOR plus 260 BSP. The loan
is repayable in 16 quarterly installments of Rs. 30,568,750/- after one
year moratorium period from the disbursement date i.e. from
29.09.2012. The loan is secured by way of first & exclusive charge on
the land and building along with all the plant and machineries,
situated at Bawal (Haryana) unit both present and future.
(c) Rs. 224,681,250/- (Previous year Rs. 273,000,000/-) taken in the
financial year 2011-12 carries interest @ LIBOR plus 350 BSP. The loan
is repayable in 16 quarterly installments of Rs. 15,521,875/- after one
year moratorium period from the disbursement date i.e. from
31.01.2013. The loan is secured by way of first and exclusive pari
passu charge on the land and building along with all other moveable
fixed assets, situated at Pant Nagar (Uttrakhand) unit both present and
future.
(d) Rs. 262,128,125/- (Previous year Rs. 273,000,000/-) taken in the
financial year 2012-13 carries interest @ LIBOR plus 350 BSP. The
loan is repayable in 16 quarterly installments of Rs. 17,437,500/-
after one year moratorium period from the disbursement date i.e. from
28.08.2013. The loan is secured by way of first and exclusive pari
passu charge on the land and building along with all other moveable
fixed assets, situated at Haridwar (Uttrakhand) and all other movable
fixed assets of Bangalore (Karnataka) unit both present and future.
3 Indian Rupee Loan from other than Bank includes Vehicle loans at
interest @ 8% - 12% aggregating to Rs. 14,546/- (Previous year Rs.
7,22,080/-) are secured by way of hypothecation of the respective
vehicles acquired out of the proceeds thereof. These loans are
repayable over a period of three years from the date of a ailment.
4 Deferred sales tax loan is interest free and repayable monthly after
seven year from its due months respectively starting from July, 2007.
Provision for warranties
A provision is recognized for expected warranty claims on products sold
during the last one year, based on past experience of the level of
repairs and returns. It is expected that all of these costs will be
incurred in the next financial year after the reporting date.
Assumptions used to calculate the provision for warranties were based
on current sales levels and current information available about
warranty based on the one-year period for all products sold.
(a) Cash credit facility of Rs. 50,081,965/- (Previous year Rs. Nil) is
secured by way of first pari passu charge on all current assets of the
Company. This facility is further secured by way of equitable mortgage
on Land and Buildings and first pari passu charges against movable
Fixed Assets at Chinchwad Unit of the Company, repayable on demand &
carries interest @ 13.50%.
(b) Cash credit facility of Rs. 35,079,855/- (Previous year Rs. Nil) is
secured by way of first pari passu charge on all current assets of the
Company. This facility is further secured by way of equitable mortgage
on Land and Buildings and first pari passu charges against movable
Fixed Assets at Chinchwad Unit of the Company, repayable on demand &
carries interest @ 12.30% .
(c) Cash credit facility of Rs. 97,714,016/- (Previous year Rs.
76,047,687/-) is secured by way of first pari passu charge on all
current assets of the Company. This facility is further secured by
extension of charge by way of hypothecation on the Plant and Machinery
along with the UREM on Land and Building situated at Chakan Unit of the
Company, repayable on demand & carries interest @ 13.50%.
(d) WCDL Facility of Rs. 75,000,000/- (Previous year Rs. 75,000,000/-)
& Cash Credit facility of Rs. 23,630,829/- (Previous year Rs.
24,541,737/-) is secured by way of first pari passu charge on all
current assets of the Company. This facility is further secured by way
of equitable mortgage on Land and Buildings and first pari passu
charges against movable Fixed Assets at Chinchwad Unit of the Company,
repayable on demand & carries interest @ 10.60% & 11.50% respectively.
e) Cash Credit Facility of Rs. 98,458,752/- (Previous year Rs.
95,948,807/-) is secured by way of first pari passu charge on all
current assets of the Company. This facility is further secured by way
of equitable mortgage on Land and Buildings and first pari passu
charges against movable Fixed Assets at Chinchwad Unit of the Company,
repayable on demand & carries interest @ 11.75%.
Mar 31, 2013
A. Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments'' estimates and assumptions
that affect the reported amounts of revenues'' expenses'' assets and
liabilities and the disclosure of contingent liabilities'' at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions'' uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjust- ment to the carrying amounts of assets or
liabilities in future periods.
b. Tangible Fixed Assets
Fixed assets'' are stated at cost (or re-valued amounts'' as the case may
be)'' net of accumulated depreciation and accumulated impairment losses''
if any. The cost comprises purchase price'' borrowing costs if
capitalization criteria are met and directly attrib- utable cost of
bringing the asset to its working condition for the intended use. Any
trade discounts and rebates are deducted in arriving at the purchase
price.
The Company has revalued some of the Land'' Building and Plant &
Machinery existing on different dates. These Land'' Building and Plant &
Machinery are measured at fair value less accumulated depreciation and
impairment losses'' if any'' recognised after the date of the
revaluation. In case of revaluation of fixed assets'' any revaluation
surplus is credited to the revaluation reserve'' except to the extent
that it reverses a revaluation decrease of the same asset previously
recognized in the statement of profit and loss'' in which case the
increase is recognized in the statement of profit and loss. A
revaluation deficit is recognized in the statement of profit and loss''
except to the extent that it offsets an existing surplus on the same
asset recognized in the asset revaluation reserve.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets'' including day- to-day
repair and maintenance expenditure and cost of replacing parts'' are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from the derecognition of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
c. Depreciation on Tangible fixed assets
Depreciation on fixed assets is provided on Straight Line basis as per
the rates computed based on estimated useful life of the assets which
are equal to the corresponding rates prescribed in Schedule XIV to the
Companies Act'' 1956.
Leasehold land is amortized over the period of lease ranging from 90
years to 99 years.
Assets individually costing less than or equal to Rs. 5''000 are fully
depreciated in the year of purchase.
d. Intangible Assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition'' intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses'' if any. Internally generated intangible assets''
excluding capitalized development costs'' are not capitalized and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
Intangibles assets are amortized using straight-line method over their
estimated useful lives as follows:
Intangible Assets Estimated Useful Life (Years)
Computer Software Over the estimated economic useful lives ranging from
3.5 to 4 years
Technical Know-how Over the period of Technical Assistance Agreement
i.e. 8 years
Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
e. Research & development costs
Research costs are expensed as incurred. Development expenditure
incurred on an individual project is recognized as an intangible asset.
f. Leases
Where the Company is the lessee
Finance leases'' which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased item''
are capitalized at the lower of the fair value of leased property and
present value of the minimum lease payments at the inception of the
lease term and disclosed as leased assets.
Lease payments are apportioned between the finance charges and
reduction of the lease liability so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance charges are
recognized as finance costs in the statement of profit and loss. Lease
management fees'' legal charges and other initial direct costs are
capitalised.
A leased asset is depreciated on a straight-line basis over the useful
life of the asset or the useful life envisaged in Schedule XIV to the
Companies Act'' 1956'' whichever is lower. However'' if there is no
reasonable certainty that the Company will obtain the ownership by the
end of the lease term'' the capitalized asset is depreciated on a
straight-line basis over the shorter of the estimated useful life of
the asset'' the lease term or the useful life envisaged in Schedule XIV
to the Companies Act'' 1956.
Leases''where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss Account on a straight-line basis over the lease
term.
Where the Company is the lessor
Leases in which the Company transfers substantially all the risks and
benefits of ownership of the asset are classified as finance leases.
Assets given under finance lease are recognized as a receivable at an
amount equal to the net investment in the lease. After initial
recognition'' the Company apportions lease rentals between the principal
repayment and interest income so as to achieve a constant periodic rate
of return on the net investment outstanding in respect of the finance
lease. The interest income is recognized in the statement of profit and
loss. Initial direct costs such as legal costs'' brokerage costs'' etc.
are recognized immediately in the statement of profit and loss.
Leases in which the Company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income on an operating lease is recog- nized in the
statement of profit and loss on a straight-line basis over the lease
term. Costs'' including depreciation'' are recognized as an expense in
the statement of profit and loss. Initial direct costs such as legal
costs'' brokerage costs'' etc. are recognized immediately in the
statement of profit and loss.
g. Borrowing costs
Borrowing cost includes interest'' amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition'' construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
h. Impairment of tangible and intangible assets
The Company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists'' or
when annual impairment testing for an asset is required'' the Company
estimates the asset''s recoverable amount. An asset''s recoverable amount
is the higher of an asset''s or cash-generating unit''s (CGU) net selling
price and its value in use. The recoverable amount is determined for an
individual asset'' unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset or CGU exceeds its recover- able
amount'' the asset is considered impaired and is written down to its
recoverable amount.
Impairment losses of continuing operations'' including impairment on
inventories'' are recognized in the statement of profit and loss'' except
for previously revalued tangible fixed assets'' where the revaluation
was taken to revaluation reserve. In this case'' the impairment is also
recognized in the revaluation reserve up to the amount of any previous
revaluation.
After impairment'' depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer
exist or may have decreased. If such indication exists'' the company
estimates the asset''s or cash-generating unit''s recoverable amount. A
previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset''s
recoverable amount since the last impairment loss was recognized. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount'' nor exceed the carrying amount that
would have been determined'' net of depreciation'' had no impairment loss
been recognized for the asset in prior years. Such reversal is
recognized in the statement of profit and loss unless the asset is
carried at a revalued amount'' in which case the reversal is treated as
a revaluation increase.
i. Investments
Investments'' which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made'' are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition'' all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisi- tion
charges such as brokerage'' fees and duties. If an investment is
acquired'' or partly acquired'' by the issue of shares or other
securities'' the acquisition cost is the fair value of the securities
issued.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However'' provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.
On disposal of an investment'' the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
j. Inventories
Inventories are valued as follows:
Raw materials and components'' Stores and spares (including packing
materials)
At Cost and Net Realizable Value'' whichever is lower. However''
materials and other items held for use in the production of inventories
are not written down below cost if the finished products in which they
will be incorporated are expected to be sold at or above cost.
Cost is determined on moving weighted average basis. Cost of raw
materials and components lying in bonded warehouse includes custom duty
accounted for on accrual basis.
Finished goods &Traded goods'' Work-in-progress and Moulds'' tools and
dies in process
At Cost and Net Realizable Value'' whichever is lower. Cost of Finished
goods and Work-in-progress (including moulds'' tools and dies in
process) includes direct materials'' labour and a proportion of
manufacturing overheads based on normal operating capacity. Cost of
traded goods includes cost of purchase and other costs incurred in
bringing the inventories to their present location and condi- tion.
Costis determined on moving weighted average basis. Cost of finished
goods includes excise duty.
Scrap At net realizable value.
Net realizable value is the estimated selling price in the ordinary
course of business'' less estimated costs of completion and to make the
sale.
k. Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The following specific recognition criteria must be
met before revenue is recognised.
Sale of goods
Revenue from sale of Goods is recognised when the significant risks and
rewards of ownership of the goods have passed to the buyer usually on
delivery of Goods to the customer. The Company collects sales taxes and
value added taxes (VAT) on behalf of the government and'' therefore''
these are not economic benefits flowing to the Company. Hence'' they are
excluded from revenue. Excise duty deducted from revenue (gross) is
the amount that is included in the revenue (gross) and not the entire
amount of liability arising during the year.
Sale of services
Revenues from service contracts are recognized as and when services are
rendered. The Company collects service tax on behalf of the government
and'' therefore'' it is not an economic benefit flowing to the Company.
Hence'' it is excluded from revenue.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
Dividends
Dividend income is recognized when the Company''s right to receive
dividend is established by the reporting date.
l. Foreign Currency Translation
Foreign currency transactions
i. Initial Recognition
Foreign currency transactions are recorded in the reporting currency''
by applying to the foreign currency amount the ex- change rate between
the reporting currency and the foreign currency at the date of the
transaction.
ii. Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
iii. Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reinstatement of monetary items at rates different from those at which
they were initially recorded during the year'' or reported in previous
financial statements'' are recognised as income or as expenses .
iv. Forward exchange contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognized in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognized as income or as expense for the
period.
m. Retirement and other Employee Benefits
i. Retirement benefit in the form of provident fund is a defined
contribution scheme. The contributions to the provident fund are
charged to the statement of profit and loss for the year when the
contributions are due. The Company has no obligation'' other than the
contribution payable to the provident fund.
ii. The Company operates defined benefit plan for its employees i.e.
gratuity. The costs of providing benefits under the plan are determined
and recognised on the basis of actuarial valuation at each year-end.
Actuarial valuation is carried out for the plan using the projected
unit credit method. The Company has a policy with Life Insurance
Corporation of India (LIC) in the nature of funding arrangement for
gratuity plan and the difference between the future gratuity liability
and the fair value of the plan assets as at the end of the year is
deposited with the LIC. Actuarial gains and losses for the defined
benefit plan is recognized in full in the period in which they occur in
the statement of profit and loss.
iii. Accumulated leave'' which is expected to be utilized within the
next 12 months'' is treated as short-term employee benefit. The Company
measures the expected cost of such absences as the additional amount
that it expects to pay as a result of the unused entitlement that has
accumulated at the reporting date.
iv. The Company treats accumulated leave expected to be carried forward
beyond twelve months'' as long-term employee benefit for measurement
purposes. Such long-term compensated absences are provided for based on
the actuarial valuation using the projected unit credit method at the
year-end. Actuarial gains/losses are immediately taken to the statement
of profit and loss and are not deferred.
v. Retirement benefit in the form of "Lumax Industries Limited
Employees Superannuation Scheme" administered by the trustees is a
defined contribution scheme. The contribution for the scheme is charged
to the statement of profit and loss for the year when the contributions
are due. The Company has no obligation'' other than the contribution
payable to the scheme.
n. Income Taxes
Tax expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act'' 1961 enacted in India and tax laws
prevailing in the respective tax jurisdictions where the Company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted'' at the reporting date.
Current income tax relating to items recognized directly in equity is
recognized in equity and not in the statement of profit and loss.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date. Deferred income tax
relating to items recognized directly in equity is recognized in equity
and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the Company
has unabsorbed depreciation or carry forward tax losses'' all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
In the situations where the Company is entitled to a tax holiday under
the Income-tax Act'' 1961 enacted in India or tax laws prevailing in the
respective tax jurisdictions where it operates'' no deferred tax (asset
or liability) is recognized in respect of timing differences which
reverse during the tax holiday period'' to the extent the Company''s
gross total income is subject to the deduction during the tax holiday
period. Deferred tax in respect of timing differences which reverse
after the tax holiday period is recognized in the year in which the
timing differences originate. However'' the Company restricts
recognition of deferred tax assets to the extent that it has become
reasonably certain or virtually certain'' as the case may be'' that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. For recognition of deferred taxes''
the timing differences which originate first are considered to reverse
first.
At each reporting date'' the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain'' as the case
may be'' that sufficient future taxable income will be available against
which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain'' as the case may be'' that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain'' as the case may be'' that
sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset'' if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The Company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period'' i.e.'' the period for which MAT credit is allowed to
be carried forward. In the year in which the Company recognizes MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act'' 1961'' the said asset is created by way of credit to the
statement of profit and loss and shown as "MAT Credit Entitlement." The
Company reviews the "MAT credit entitlement" asset at each reporting
date and writes down the asset to the extent the Company does not have
convincing evidence that it will pay normal tax during the specified
period.
o. Segment Reporting Policies
Business Segment
The Company is engaged in the business of manufacture of various types
of Automotive Lighting Equipment. The entire opera- tions are governed
by the same set of risks and return hence the entire operations
represent a single primary segment.
Geographical Segment
The analysis of geographical segments is based on the geographical
location of the customers i.e. customers located within India and
customers located outside India.
p. Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per equity share'' the
net profit or loss for the period attributable to equity sharehold- ers
and the weighted average number of shares outstanding during the period
are adjusted for the effects of all dilutive potential equity shares.
q. Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation'' in respect of
which a reliable estimate can be made. Provisions are not dis- counted
to its present value and are determined based on best management
estimate required to settle the obligation at the balance sheet date.
These are reviewed at each balance sheet date and adjusted to reflect
the current best management esti- mates.
Warranty provisions
Provisions for warranty-related costs are recognized when the product
is sold or service provided. Provision is based on historical
experience. The estimate of such warranty-related costs is revised
annually.
r. Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The Company does not
recognize a contingent liability but discloses its existence in the
financial statements.
s. Cash and Cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash at
bank and in hand and short- term investments with an original maturity
of three months or less.
t. Derivative instruments
In accordance with the ICAI announcement'' derivative contracts'' other
than foreign currency forward contracts covered under AS 11'' are marked
to market on a portfolio basis'' and the net loss'' if any'' after
considering the offsetting effect of gain on the underlying hedged
item'' is charged to the statement of profit and loss. Net gain'' if any''
after considering the offsetting effect of loss on the underlying
hedged item'' is ignored.
u. Measurement of EBITDA
As permitted by the Guidance Note on the Revised Schedule VI to the
Companies Act'' 1956'' the Company has elected to present earnings before
interest'' tax'' depreciation and amortization (EBITDA) as a separate
line item on the face of the statement of profit and loss. The Company
measures EBITDA on the basis of profit from continuing operations. In
its measurement'' the Company does not include depreciation and
amortization expense'' finance costs and tax expense.
Mar 31, 2012
A. Change in accounting policy Presentation and disclosure of
financial statements
During the year ended 31 March 2012, the revised Schedule VI notified
under the Companies Act 1956, has become applicable to the Company, for
preparation and presentation of financial statements. The adoption of
revised Schedule VI does not impact recognition and measurement
principles followed for preparation of financial statements. However,
it has significant impact on presentations and disclosures made in the
financial statements. The Company has also reclassified the previous
year figures in accordance with the requirements applicable in the
current year.
b. Use of Estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management's best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material , adjustment to the carrying amounts of assets or
liabilities in future periods.
c. Tangible Fixed Assets
Fixed assets, are stated at cost (or re-valued amounts, as the case may
be), net of accumulated depreciation and accumulated impairment losses,
if any. The cost comprises purchase price, borrowing costs if
capitalization criteria are met and directly attributable cost of
bringing the asset to its working -condition for the intended use. Any
trade discounts and rebates are deducted in arriving at the purchase
price.
The Company has revalued some of the Land, Building and Plant &
Equipment existing on different dates in earlier years. These Land,
Building and Plant & Equipment are measured at fair value less
accumulated depreciation and impairment losses, if any, recognized
after the date of the revaluation. In case of 'revaluation of fixed
assets, any revaluation surplus is credited to the revaluation reserve,
except to the extent that it reverses a revaluation decrease of the
same asset previously recognized in the statement of profit and loss,
in which case the increase is recognized in the statement of profit and
loss. A revaluation deficit is recognized in the statement of profit
and loss, except to the extent that it offsets an existing surplus on
the same asset recognized in the asset revaluation reserve.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from the derecognition of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
d. Depreciation on Tangible fixed assets
Depreciation on fixed assets is provided on Straight Line basis as per
the rates computed based on estimated useful life of the assets which
are equal to the corresponding rates prescribed in Schedule XIV to the
Companies Act, 1956.
Leasehold land is amortized over the period of lease ranging from 90
years to 99 years.
Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
e. Intangible Assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and
expenditure is reflected in the statement of profit and loss in the
year in which the expenditure is incurred.
Gains or losses arising from derecognition of an intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
f. Research & development costs
Research costs are expensed as incurred. Development expenditure
incurred on an individual project is recognized as an intangible asset.
g. Leases
Where the Company is the lessee
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalized at the lower of the fair value and present value of the
minimum lease payments at the inception of the lease term and disclosed
as leased assets.
Lease payments are apportioned between the finance charges and
reduction of the lease liability so as to achieve a constant 'ate of
interest on the remaining balance of the liability. Finance charges are
recognized as finance costs in the statement of profit and loss. Lease
management fees, legal charges and other initial direct costs are
capitalized.
A leased asset is depreciated on a straight-line basis over the useful
life of the asset or the useful life envisaged in Schedule XIV to the
Companies Act, 1956, whichever is lower. However, if there is no
reasonable certainty that the Company will obtain the ownership by the
end of the lease term, the capitalized asset is depreciated on a
straight-line basis over the shorter of the estimated useful life of
the asset, the lease term or the useful life envisaged in Schedule XIV
to the Companies Act, 1956.
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss Account on a straight-line basis over the lease
term.
Where the Company is the lessor
Leases in which the Company transfers substantially all the risks and
benefits of ownership of the asset are classified as finance leases.
Assets given under finance lease are recognized as a receivable at an
amount equal to the net investment in the lease. After initial
recognition, the Company apportions lease rentals between the principal
repayment and interest income so as to achieve a constant periodic rate
of return on the net investment outstanding in respect of the finance
lease. The interest income is recognized in the statement of profit and
loss. Initial direct costs such as legal costs, brokerage costs, etc.
are recognized immediately in the statement of profit and loss.
Leases in which the Company does not transfer substantially all the
risks and benefits of ownership of the asset are classified as
operating leases. Assets subject to operating leases are included in
fixed assets. Lease income on an operating lease is recognized in the
statement of profit and loss on a straight-line basis over the lease
term. Costs, including depreciation, are recognized as an expense in
the statement of profit and loss. Initial direct costs such as legal
costs, brokerage costs, etc. are recognized immediately in the
statement of profit and loss.
h. Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
i. Impairment of tangible and intangible assets
The Company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the Company
estimates the asset's recoverable amount. An asset's recoverable amount
is the higher of an asset's or cash-generating units (CGU) net selling
price and its value in use. The recoverable amount is determined for an
individual asset, unless the asset does not generate cash inflows that
are largely independent of those from other assets or groups of assets.
Where the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount.
Impairment losses of continuing operations, including impairment on
inventories, are recognized in the statement of profit and loss, except
for previously revalued tangible fixed assets, where the revaluation
was taken to revaluation reserve. In this case, the impairment is also
recognized in the revaluation reserve up to the amount of any previous
revaluation.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
An assessment is made at each reporting date as to whether there is any
indication that previously recognized impairment losses may no longer
exist or may have decreased. If such indication exists, the company
estimates the asset's or cash-generating unit's recoverable amount. A
previously recognized impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset's
recoverable amount since the last impairment loss was recognized. The
reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss
been recognized for the asset in prior years. Such reversal is
recognized in the statement of profit and loss unless the asset is
carried at a revalued amount, in which case the reversal is treated as
a revaluation increase.
j. Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties. If an investment is acquired, or
partly acquired, by the issue of shares or other securities, the
acquisition cost is the fair value of the securities issued.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
k. Inventories
Inventories are valued as follows:
I. Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The following specific recognition criteria must be
met before revenue is recognized.
Sale of goods
Revenue from sale of Goods is recognized when the significant risks and
rewards of ownership of the goods have passed to the buyer usually on
delivery of Goods to the customer. The Company collects sales taxes and
value added taxes (VAT) on behalf of the government and, therefore,
these are not economic benefits flowing to the Company. Hence, they are
excluded from revenue. Excise duty deducted from revenue (gross) is the
amount that is included in the revenue (gross) and not the entire
amount of liability arising during the year.
Sale of services
Revenues from service contracts are recognized- as and when services
are rendered. The Company collects service tax on behalf of the
government and, therefore, it is not an economic benefit flowing to the
Company. Hence, it is excluded from revenue.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
Dividends
Dividend income is recognized when the Company's right to receive
dividend is established by the reporting date, m. Foreign Currency
Translation
Foreign currency transactions
i. Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
ii. Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction. .
iii. Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reinstatement of monetary items at rates different from those at which
they were initially recorded during the year, or reported in previous
financial statements, are recognized as income or as expenses .
iv. Forward exchange contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of forward exchange
contracts is amortized as expense or income over the life of the
contract. Exchange differences on such contracts are recognized in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognized as income or as expense for the
period.
n. Retirement and other Employee Benefits
i. Retirement benefit in the form of provident fund is a defined
contribution scheme. The contributions to the provident fund are
charged to the statement of profit and loss for the year when the
contributions are due. The Company has no obligation, other than the
contribution payable to the provident fund.
ii. The Company operates defined benefit plan for its employees i.e.
gratuity. The costs of providing benefits under the plan are determined
and recognized on the basis of actuarial valuation at each year-end.
Actuarial valuation is carried out for the plan using the projected
unit credit method. The Company has a policy with Life insurance
Corporation of India (LIC) in the nature of funding arrangement for
gratuity plan and the difference between the future gratuity liability
and the fair value of the plan assets as at the end of the year is
deposited with the LIC.
iii. Accumulated leave, which is expected to be utilized within the
next 12 months, is treated as short-term employee benefit.
The Company measures the expected cost of such absences as the
additional amount that it expects to pay as a result of the unused
entitlement that has accumulated at the reporting date.
iv. The Company treats accumulated leave expected to be carried
forward beyond twelve months, as long-term employee benefit for
measurement purposes. Such long-term compensated absences are provided
for based on the actuarial valuation using the projected unit credit
method at the year-end. Actuarial gains/losses are immediately taken
to the statement of profit and loss and are not deferred. The Company
presents the entire leave as a current liability in the balance sheet,
since it does not have an unconditional right to defer its settlement
for 12 months after the reporting date.
v. Retirement benefit in the form of "Lumax Industries Limited
Employees Superannuation Scheme" administered by the trustees is a
defined contribution scheme. The contribution for the scheme is charged
to the statement of profit and loss for the year when the contributions
are due. The Company has no obligation, other than the contribution
payable to the scheme.
o. Income Taxes
Tax expense comprises current and deferred tax. Current income-tax is
measured at the amount expected to be paid to the tax authorities' in
accordance with the Income-tax Act, 1961 enacted in India and tax laws
prevailing in the respective tax jurisdictions where the Company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized directly in equity is
recognized in equity and not in the statement of profit and loss.
Deferred income taxes reflect the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date. Deferred income tax
relating to items recognized directly in equity is recognized in equity
and not in the statement of profit and loss.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
In the situations where the Company is entitled to a tax holiday under
the Income-tax Act, 1961 enacted in India or tax laws prevailing in the
respective tax jurisdictions where it operates, no deferred tax (asset
or liability) is recognized in respect of timing differences which
reverse during the tax holiday period, to the extent the Company's
gross total income is subject to the deduction during the tax holiday
period. Deferred tax in respect of timing differences which reverse
after the tax holiday period is recognized in the year in which the
timing differences originate. However, the Company restricts
recognition of deferred tax assets to the extent that it has become
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. For recognition of deferred taxes,
the timing differences which originate first are considered to reverse
first.
At each reporting date, the Company re-assesses unrecognized deferred
tax assets. It recognizes unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
Minimum alternate tax (MAT) paid in a year is charged to the statement
of profit and loss as current tax. The Company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period, i.e., the period for which MAT credit is allowed to
be carried forward. In the year in which the Company recognizes MAT
credit as an asset in accordance with the Guidance Note on Accounting
for Credit Available in respect of Minimum Alternative Tax under the
Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as "MAT Credit Entitlement." The
Company reviews the "MAT credit entitlement" asset at each reporting
date and writes down the asset to the extent the Company does not have
convincing evidence that it will pay normal tax during the specified
period.
p. Segment Reporting Policies
The Company is engaged in the business of manufacture of various types
of Automotive Lighting Equipment. The entire operations are governed by
the same set of risks and return hence the entire operations represent
a single primary segment. The analysis of geographical segments is
based on the geographical location of the customers i.e. customers
located within India and customers located outside India,
q. Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per equity share, the
net profit or loss for the period attributable to equity shareholders
and the weighted average number of shares outstanding during the period
are adjusted for the effects of all dilutive potential equity shares.
r. Provisions
A provision is recognized when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted to
its present value and are determined based on best management estimate
required to settle the obligation at the balance sheet date. These are
reviewed at each balance sheet date and adjusted to reflect the current
best management estimates.
Warranty provisions
Provisions for warranty-related costs are recognized when the product
is sold or service provided. Provision is based or historical
experience. The estimate of such warranty-related costs is revised
annually.
s. Contingent liabilities
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The Company does
not recognize a contingent liability but discloses its existence in the
financial statements.
t. Cash and Cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash at
bank and in hand and short- term investments with an original maturity
of three months or less.
u. Derivative instruments
In accordance with the ICAI announcement, derivative contracts, other
than foreign currency forward contracts covered under AS 11, are marked
to market on a portfolio basis, and the net loss, if any, after
considering the offsetting effect of gain on the underlying hedged
item, is charged to the statement of profit and loss. Net gain, if any,
after considering the offsetting effect of loss on the underlying
hedged item, is ignored.
v. Measurement of EBITDA
As permitted by the Guidance Note on the Revised Schedule VI to the
Companies Act, 1956, the Company has elected to present earnings before
interest, tax, depreciation and amortization (EBITDA) as a separate
line item on the face of the statement of profit and loss. The Company
measures EBITDA on the basis of profit from continuing operations. In
its measurement, the Company does not include depreciation and
amortization expense, finance costs and tax expense.
Mar 31, 2011
A) Basis of preparation
The financial statements have been prepared to comply in all material
respects in accordance with the notified Accounting Standards issued
under Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared under the historical cost convention on
an accrual basis except in case of assets for which revaluation is
carried out. The accounting policies have been consistently applied by
the Company and are consistent with those applied in the previous year.
b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period end. Although these estimates are based upon managements best
knowledge of current events and actions, actual results could differ
from these estimates.
c) Fixed Assets
i) Fixed assets are stated at cost (or revalued amounts, as the case
may be) less accumulated depreciation and impairment losses, if any.
Cost comprises the purchase price and any attributable cost of bringing
the asset to its working condition for its intended use. Borrowing
costs relating to acquisition of fixed assets which take substantial
period of time to get ready for its intended use are included to the
extent they relate to the period till such assets are ready to be put
to use.
ii) Insurance spares / stand by equipments are capitalized as part of
respective mother assets.
iii) In respect of accounting periods commencing on or after 7th
December, 2006, exchange differences arising on reporting of the
long-term foreign currency monetary items at rates different from those
at which they were initially recorded during the period, or reported in
the previous financial statements are added to or deducted from the
cost of the asset and are depreciated over the balance life of the
asset, if these monetary items pertain to the acquisition of a
depreciable fixed asset.
d) Depreciation
i) Depreciation is provided using the Straight Line Method as per the
useful lives of assets estimated by the management, or at the rates
prescribed under schedule XIV of the Companies Act, 1956, whichever is
higher. The rates prescribed under schedule XIV of the Companies Act,
1956 are considered fair representation for the life estimated by the
management.
ii) Cost of Leasehold land is amortized over the period of lease and
leased plant and machinery is amortized over the period of lease or
their useful lives whichever is lower.
iii) Individual assets costing up-to Rs.5000/- are depreciated fully in
the month of purchase.
iv) Insurance spares / standby equipments are depreciated prospectively
over the remaining useful lives of the respective mother assets.
v) In respect of the revalued assets, the difference between the
depreciation calculated on the revalued amount and that calculated on
the original cost is recouped from the Revaluation Reserve Account.
e) Intangibles
Intangibles assets are amortized using straight-line method over their
estimated useful lives as follows:
S.
No. Intangible Assets Estimated Useful Life (Years)
1 Computer Software Over the estimated economic useful lives ranging
from 3.5 to 4 years
2 Technical Know-how Over the period of Technical Assistance
Agreement i.e. 8 years
Research & development costs
Research cost are expensed as incurred. Development expenditure
incurred on an individual project is recognized as an intangible asset.
f) Impairment
i) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on internal /
external factors. An impairment loss is recognized wherever the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the assets net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value at the weighted average
cost of capital.
ii) After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
g) Leases
Where the Company is the lessee
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalized at the lower of the fair value and present value of the
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are charged directly against income. Lease
management fees, legal charges and other initial direct costs are
capitalised.
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss Account on a straight-line basis over the lease
term.
Where the Company is the lessor
Assets given under a finance lease are recognised as a receivable at an
amount equal to the net investment in the lease. Lease rentals are
apportioned between principal and interest on the IRR method. The
principal amount received reduces the net investment in the lease and
interest is recognised as revenue. Initial direct costs such as legal
costs, brokerage costs, etc. are recognised immediately in the Profit
and Loss Account.
Assets subject to operating leases are included in fixed assets. Lease
income is recognised in the Profit and Loss Account on a straight-line
basis over the lease term. Costs, including depreciation are recognised
as an expense in the Profit and Loss Account. Initial direct costs
such as legal costs, brokerage costs, etc. are recognised immediately
in the Profit and Loss Account.
h) Investments
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long - term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long - term investments are carried at
cost. However, provision for diminution in value is made to recognize a
decline other than temporary in the value of such investments.
i) Inventories
Inventories are valued as follows:
Raw materials and components, Stores and spares (including packing
materials)
At Cost and Net Realizable Value, whichever is lower. However,
materials and other items held for use in the production of inventories
are not written down below cost if the finished products in which they
will be incorporated are expected to be sold at or above cost.
Cost is determined on moving weighted average basis. Cost of raw
materials and components lying in bonded warehouse includes custom duty
accounted for on accrual basis.
Finished goods & Traded goods, Work-in-progress and Moulds, tools and
dies in process At Cost and Net Realizable Value, whichever is lower.
Cost of Finished goods and Work-in-progress (including moulds, tools
and dies in process) includes direct materials, labour and a proportion
of manufacturing overheads based on normal operating capacity. Cost of
traded goods is determined on moving weighted average basis. Cost of
finished goods includes excise duty.
Waste At Net Realizable Value.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and to make the
sale.
j) Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Sale of goods
Revenue is recognised when the significant risks and rewards of
ownership of the goods have passed to the buyer, which coincides with
their delivery to the customer. Excise Duty, Sales Tax and VAT deducted
from turnover (gross) are the amount that is included in the amount of
turnover (gross) and not the entire amount of liability arised during
the year.
Interest
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
Dividend
Revenue is recognised when the shareholders right to receive payment
is established by the balance sheet date.
k) Foreign Currency Translation
Foreign currency transactions
i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
iii) Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reinstatement of monetary items at rates different from those at which
they were initially recorded during the year, or reported in previous
financial statements, are recognised as income or as expenses .
Exchange differences, in respect of accounting periods commencing on or
after 7th December, 2006, arising on reporting of long-term foreign
currency monetary items at rates different from those at which they
were initially recorded during the period, or reported in previous
financial statements, in so far as they relate to the acquisition of a
depreciable capital asset, are added to or deducted from the cost of
the asset and are depreciated over the balance life of the asset, and
in other cases, are accumulated in a "Foreign Currency Monetary Item
Translation Difference Account" in the enterprises financial
statements and amortized over the balance period of such long-term
asset/liability but not beyond accounting period ending on or before
31st March, 2011.
Exchange differences arising on the settlement of monetary items not
covered above, or on reporting such monetary items of company at rates
different from those at which they were initially recorded during the
year, or reported in previous financial statements, are recognized as
income or as expenses in the year in which they arise.
iv) Forward exchange contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognized in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognized as income or as expense for the
year.
l) Retirement and other Employee Benefits
i) Short term compensated absences are provided for based on estimates.
Long term compensated absences are provided for based on actuarial
valuation at the end of each year. The actuarial valuation is done as
per projected unit credit method.
ii) Gratuity liability is a defined benefit obligation and is provided
for on the basis of an actuarial valuation on projected unit cost
method made at the end of each financial year. The liability as at the
year end represents the differences between the actuarial valuation of
the future gratuity liability of continuing employees and the fair
value of the plan assets with the Life insurance Corporation of India
(LIC) as at the end of the year.
iii) Actuarial gains/losses are immediately taken to profit and loss
account.
iv) The Company has superannuation obligation towards "Lumax Industries
Limited Employees superannuation Scheme" administered by the trustees.
There are no other obligations other than the contribution payable to
the respective trusts.
v) Retirement benefits in the form of Provident Fund is a defined
benefit contribution scheme and the contributions are charged to Profit
and Loss Account of the year when the contributions to the respective
funds are due. There are no other obligations other than the
contribution payable to the respective funds.
m) Income Taxes
Tax expense comprises of current, deferred and fringe benefit tax.
Current income tax and fringe benefit tax is measured at the amount
expected to be paid to the tax authorities in accordance with the
Indian Income Tax Act. Deferred income taxes reflects the impact of
current year timing differences between taxable income and accounting
income for the year and reversal of timing differences of earlier
years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. In situation
where the company has unabsorbed depreciation or carry forward tax
losses, all deferred tax assets are recognised only if there is virtual
certainty supported by convincing evidence that such deferred tax
assets can be realised against future taxable profits.
At each balance sheet date, the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it becomes reasonably certain or virtually certain, as
the case may be, that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company recognises / writes-down the carrying amount of
a deferred tax asset to the extent that it is no longer reasonably
certain or virtually certain, as the case may be, that sufficient
future taxable income will be available against which deferred tax
asset can be realised. Any such write-down is subsequently reversed to
the extent that it becomes reasonably certain or virtually certain, as
the case may be, that sufficient future taxable income will be
available against which deferred tax asset can be realized.
MAT credit is recognised as an asset only when and to the extent there
is convincing evidence that the company will pay normal income tax
during the specified period. In the year in which the Minimum
Alternative tax (MAT) credit becomes eligible to be recognized as an
asset in accordance with the recommendations contained in guidance Note
issued by the Institute of Chartered Accountants of India, the said
asset is created by way of a credit to the profit and loss account and
shown as MAT Credit Entitlement. The Company reviews the same at each
balance sheet date and writes down the carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the
effect that Company will pay normal Income Tax during the specified
period.
n) Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
o) Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted to
its present value and are determined based on best management estimate
required to settle the obligation at the balance sheet date. These are
reviewed at each balance sheet date and adjusted to reflect the current
best management estimates.
Accordingly, warranty costs are provided on an accrual basis, taking
into account the past trend of warranty claims received by the Company,
to settle the obligation at the balance sheet date.
p) Expenditure on new projects and substantial expansion
Expenditure directly relating to construction activity is capitalised.
Indirect expenditure incurred during construction period is capitalised
as part of the construction cost to the extent to which the expenditure
is indirectly related to construction or is incidental thereto. Other
indirect expenditure (including borrowing costs) incurred during the
construction period which is not related to the construction activity
nor is incidental thereto is charged to the Profit and Loss Account.
Income earned, if any, during construction period is deducted from the
total of the indirect expenditure.
All direct capital expenditure on expansion are capitalised. As regards
indirect expenditure on expansion, only that portion is capitalised
which represents the marginal increase in such expenditure involved as
a result of capital expansion. Both direct and indirect expenditure are
capitalised only if they increase the value of the asset beyond its
original standard of performance.
q) Segment Reporting Policies
The Companys operating businesses are organised and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the geographical location of the customers.
r) Cash and Cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash at
bank and in hand and short- term investments with an original maturity
of three months or less.
s) Derivative instruments
As per the ICAI Announcement, accounting for derivative contracts,
other than those covered under AS-11, are marked to market on a
portfolio basis, and the net loss after considering the offsetting
effect on the underlying hedge item is charged to the income statement.
Net gains are ignored.
Mar 31, 2010
A) Basis of preparation
The financial statements have been prepared to comply in all material
respects in accordance with the notified Accounting Standards issued
under Companies (Accounting Standards) Rules, 2006 (as amended) and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared under the historical cost convention on
an accrual basis except in case of assets for which revaluation is
carried out. The accounting policies have been consistently applied by
the Company and are consistent with those applied in the previous year.
b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period end. Although these estimates are based upon managements best
knowledge of current events and actions, actual results could differ
from these estimates.
c) Fixed Assets
i) Fixed assets are stated at cost (or revalued amounts, as the case
may be) less accumulated depreciation and impairment losses if any.
Cost comprises the purchase price and any attributable cost of bringing
the asset to its working condition for its intended use. Borrowing
costs relating to acquisition of fixed assets which take substantial
period of time to get ready for its intended use are included to the
extent they relate to the period till such assets are ready to be put
to use.
ii) Insurance spares / stand by equipments are capitalized as part of
respective mother assets.
iii) In respect of accounting periods commencing on or after 7th
December, 2006, exchange differences arising on reporting of the
long-term foreign currency monetary items at rates different from those
at which they were initially recorded during the period, or reported in
the previous financial statements are added to or deducted from the
cost of the asset and are depreciated over the balance life of the
asset, if these monetary items pertain to the acquisition of a
depreciable fixed asset.
d) Depreciation
i) Depreciation is provided using the Straight Line Method as per the
useful lives of assets estimated by the management, or at the rates
prescribed under schedule XIV of the Companies Act, 1956, whichever is
higher. The rates prescribed under schedule XIV of the Companies Act,
1956 are considered fair representation for the life estimated by the
management.
ii) Cost of Leasehold land is amortized over the period of lease and
leased plant and machinery is amortized over the period of lease or
their useful lives whichever is lower.
iii) Individual assets costing up-to Rs.5000/- are depreciated fully in
the month of purchase.
iv) Insurance spares / standby equipments are depreciated prospectively
over the remaining useful lives of the respective mother assets.
v) In respect of the revalued assets, the difference between the
depreciation calculated on the revalued amount and that calculated on
the original cost is recouped from the Revaluation Reserve Account.
e) Intangibles
Intangibles assets are amortized using straight-line method over their
estimated useful lives as follows:
S.
No. Intangible Assets Estimated Useful Life (Years)
1 Computer Software Over the estimated economic useful
lives ranging from 3.5 to 4 years
2 Technical Know-how Over the period of Technical
Assistance Agreement i.e. 8 years
Research & Development Costs
Research cost are expensed as incurred. Development expenditure
incurred on an individual project is recognized as an intangible asset.
f) Impairment
i) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on
internal / external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the assets net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value at the weighted average
cost of capital.
ii) After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
g) Leases
Where the Company is the lessee
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalized at the lower of the fair value and present value of the
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are charged directly against income. Lease
management fees, legal charges and other initial direct costs are
capitalised.
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss Account on a straight-line basis over the lease
term.
Where the Company is the lessor
Assets given under a finance lease are recognised as a receivable at an
amount equal to the net investment in the lease. Lease rentals are
apportioned between principal and interest on the IRR method. The
principal amount received reduces the net investment in the lease and
interest is recognised as revenue. Initial direct costs such as legal
costs, brokerage costs, etc. are recognised immediately in the Profit
and Loss Account.
Assets subject to operating leases are included in fixed assets. Lease
income is recognised in the Profit and Loss Account on a straight-line
basis over the lease term. Costs, including depreciation are recognised
as an expense in the Profit and Loss Account. Initial direct costs
such as legal costs, brokerage costs, etc. are recognised immediately
in the Profit and Loss Account.
h) Investments
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long - term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long - term investments are carried at
cost. However, provision for diminution in value is made to recognize a
decline other than temporary in the value of such investments.
i) Inventories
Inventories are valued as follows:
Raw materials and components, Stores and spares (including packing
materials)
At Cost and Net Realizable Value, whichever is lower. However,
materials and other items held for use in the production of inventories
are not written down below cost if the finished products in which they
will be incorporated are expected to be sold at or above cost.
Cost is determined on moving weighted average basis. Cost of raw
materials and components lying in bonded warehouse includes custom duty
accounted for on accrual basis.
Finished goods & Traded goods, Work-in-progress and Moulds, tools and
dies in process
At Cost and Net Realizable Value, whichever is lower. Cost of Finished
goods and Work-in-progress (including moulds, tools and dies in
process) includes direct materials, labour and a proportion of
manufacturing overheads based on normal operating capacity. Cost of
traded goods is determined on moving weighted average basis. Cost of
finished goods includes excise duty.
Waste At Net Realizable Value.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and to make the
sale.
j) Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Sale of goods
Revenue is recognised when the significant risks and rewards of
ownership of the goods have passed to the buyer, which coincides with
their delivery to the customer. Excise Duty, Sales Tax and VAT deducted
from turnover (gross) are the amount that is included in the amount of
turnover (gross) and not the entire amount of liability arised during
the year.
Interest
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
Dividend
Revenue is recognised when the shareholders right to receive payment
is established by the balance sheet date.
k) Miscellaneous Expenditure
Payments made under the Voluntary Retirement Scheme are amortised over
a period of five years or by March 31, 2010, whichever is earlier.
l) Foreign Currency Translation
Foreign currency transactions
i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction.
iii) Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reinstatement of monetary items at rates different from those at which
they were initially recorded during the year, or reported in previous
financial statements, are recognised as income or as expenses .
Exchange differences, in respect of accounting periods commencing on or
after 7th December, 2006, arising on reporting of long- term foreign
currency monetary items at rates different from those at which they
were initially recorded during the period, or reported in previous
financial statements, in so far as they relate to the acquisition of a
depreciable capital asset, are added to or deducted from the cost of
the asset and are depreciated over the balance life of the asset, and
in other cases, are accumulated in a ÃForeign Currency Monetary Item
Translation Difference Accountà in the enterprises financial
statements and amortized over the balance period of such long-term
asset/liability but not beyond accounting period ending on or before
31st March, 2011.
Exchange differences arising on the settlement of monetary items not
covered above, or on reporting such monetary items of company at rates
different from those at which they were initially recorded during the
year, or reported in previous financial statements, are recognized as
income or as expenses in the year in which they arise
iv) Forward exchange contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognized in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognized as income or as expense for the
year.
m) Retirement and other Employee Benefits
i) Short term compensated absences are provided for based on estimates.
Long term compensated absences are provided for based on actuarial
valuation at the end of each year. The actuarial valuation is done as
per projected unit credit method.
ii) Gratuity liability is a defined benefit obligation and is provided
for on the basis of an actuarial valuation on projected unit cost
method made at the end of each financial year. The liability as at the
year end represents the differences between the actuarial valuation of
the future gratuity liability of continuing employees and the fair
value of the plan assets with the Life insurance Corporation of India
(LIC) as at the end of the year.
iii) Actuarial gains/losses are immediately taken to profit and loss
account.
iv) The Company has superannuation obligation towards ÃLumax Industries
Limited Employees superannuation Schemeà administered by the trustees.
There are no other obligations other than the contribution payable to
the respective trusts.
n) Income Taxes
Tax expense comprises of current, deferred and fringe benefit tax.
Current income tax and fringe benefit tax is measured at the amount
expected to be paid to the tax authorities in accordance with the
Indian Income Tax Act. Deferred income taxes reflects the impact of
current year timing differences between taxable income and accounting
income for the year and reversal of timing differences of earlier
years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. In situation
where the company has unabsorbed depreciation or carry forward tax
losses, all deferred tax assets are recognised only if there is virtual
certainty supported by convincing evidence that such deferred tax
assets can be realised against future taxable profits.
At each balance sheet date, the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it becomes reasonably certain or virtually certain, as
the case may be, that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company recognises / writes-down the carrying amount of
a deferred tax asset to the extent that it is no longer reasonably
certain or virtually certain, as the case may be, that sufficient
future taxable income will be available against which deferred tax
asset can be realised. Any such write-down is subsequently reversed to
the extent that it becomes reasonably certain or virtually certain, as
the case may be, that sufficient future taxable income will be
available against which deferred tax asset can be realized.
MAT credit is recognised as an asset only when and to the extent there
is convincing evidence that the company will pay normal income tax
during the specified period. In the year in which the Minimum
Alternative tax (MAT) credit becomes eligible to be recognized as an
asset in accordance with the recommendations contained in guidance Note
issued by the Institute of Chartered Accountants of India, the said
asset is created by way of a credit to the profit and loss account and
shown as MAT Credit Entitlement. The Company reviews the same at each
balance sheet date and writes down the carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the
effect that Company will pay normal Income Tax during the specified
period.
o) Earnings per share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
p) Provisions
A provision is recognised when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Provisions are not discounted to
its present value and are determined based on best management estimate
required to settle the obligation at the balance sheet date. These are
reviewed at each balance sheet date and adjusted to reflect the current
best management estimates.
Accordingly, warranty costs are provided on an accrual basis, taking
into account the past trend of warranty claims received by the Company,
to settle the obligation at the balance sheet date.
q) Expenditure on new projects and substantial expansion
Expenditure directly relating to construction activity is capitalised.
Indirect expenditure incurred during construction period is capitalised
as part of the construction cost to the extent to which the expenditure
is indirectly related to construction or is incidental thereto. Other
indirect expenditure (including borrowing costs) incurred during the
construction period which is not related to the construction activity
nor is incidental thereto is charged to the Profit and Loss Account.
Income earned, if any, during construction period is deducted from the
total of the indirect expenditure.
All direct capital expenditure on expansion are capitalised. As regards
indirect expenditure on expansion, only that portion is capitalised
which represents the marginal increase in such expenditure involved as
a result of capital expansion. Both direct and indirect expenditure are
capitalised only if they increase the value of the asset beyond its
original standard of performance.
r) Segment Reporting Policies
The Companys operating businesses are organised and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the geographical location of the customers.
s) Cash and Cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash at
bank and in hand and short- term investments with an original maturity
of three months or less.
t) Derivative instruments
As per the ICAI Announcement, accounting for derivative contracts,
other than those covered under AS-11, are marked to market on a
portfolio basis, and the net loss after considering the offsetting
effect on the underlying hedge item is charged to the income statement.
Net gains are ignored.
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Lumax Industries Ltd. Company Details
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Lumax Industries Ltd. Key Financial Ratios
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Lumax Industries Ltd. Results
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Lumax Industries Ltd. Financial Data
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Lumax Industries Ltd. Reports
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Lumax Industries Ltd. Corporate Announcements
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