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Accounting Policies of Sharp India Ltd. Company
Mar 31, 2024
Note 1: General Information
Sharp India Limited (''the Company'') was incorporated on July 5, 1985. The registered office of the company is located in at Gat. No. 686/4, Koregaon Bhima, Shirur, Pune, 412 216. The equity shares of the company are listed on Bombay Stock Exchange. The Company is principally engaged in the manufacture and sale of light emitting diode televisions (âLED TVsâ) and Air-conditioners (âACsâ). The Company also provides feasibility study services to group companies in India.
Sharp Corporation (''Sharp'') incorporated in Japan, holds 75 per cent of the issued share capital of the Company. The Company has a technical collaboration with Sharp for the manufacture of âLED TVsâ and âACsâ.
Refer Note 32 of the financial statements.
Note 2: Material accounting policies
(a) Basis of preparation
(i) Compliance with Ind AS
The Companyâs financial statements have been prepared in accordance with the provisions of the Companies Act, 2013 and comply in all material aspects with Indian Accounting Standards (Ind AS) as issued under the Companies (Indian Accounting Standards) Rules, 2015 and amendments thereof issued by the Ministry of Corporate Affairs in exercise of the powers conferred by section 133 read with rule 7 of the Companies (Accounts) Rules, 2014. In addition, the guidance notes/announcements issued by the Institute of Chartered Accountants of India (ICAI) and the guidelines issued by the Securities and Exchange Board of India are also applied.
The accounting policies as set out below have been applied consistently to all years presented in these financial statements.
Amounts in the financial statements are presented in Indian Rupees in lakhs rounded off to two decimal places as permitted by Schedule III to the Companies Act, 2013 unless otherwise stated.
The Board of Directors have authorised these financial statements for issue on May 29, 2024.
(ii) Historical cost convention
The financial statements have been prepared on accrual and historical cost basis, except for the following:
⢠Defined benefit plans - plan assets measured at fair value.
(iii) Applicable Amendments from current financial year
The Ministry of Corporate Affairs (MCA) has vide notification dated 31 March 2023 notified Companies (Indian Accounting Standards) Amendment Rules, 2023 which amends certain Indian Accounting Standards, and are effective 1 April 2023. These amendments are duly taken into consideration and do not have a material impact on the Company in the current and future periods.
(b) Cashflow Statement:
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a noncash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows are segregated into operating, investing and financing activities based on the extent of information available.
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
(c) Current Vs. 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 equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as Non-current.
A liability is current when it is:
a) Expected to be settled in normal operating cycle
b) Held primarily for the purpose of trading
c) 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.
(d) Segment reporting
Ind AS 108 operating segment requires Management to determine the reportable segments for the purpose of disclosure in financial statements based on the internal reporting reviewed by the CODM to assess performance and allocate resource.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The board of directors of the Company are identified as the Chief operating decision maker.
Refer note 32 for segment information presented.
(e) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (''the functional currency''). The financial statements are presented in Indian rupee (INR), which is the Company''s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognised in profit or loss.
All foreign exchange gains and losses are presented in the statement of profit and loss on a net basis within other income or other expenses as the case may be.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss.
(f) Revenue recognition and Other Income
i) Sale of goods
The Company was engaged in manufacture and sale of a range of electronic items.
Sales are recognised when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customerâs acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the company has objective evidence that all criteria for acceptance have been satisfied.
A receivable is recognised when the goods are delivered, as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.
The Company has however, not had any sale transactions during the current and previous reporting period.
ii) Services rendered
The Company provides feasibility study services to certain Sharp Group companies in India. Revenue from such services is recognised as and when services are rendered as per the terms of contract.
Revenue from services measured at fair value which is usually the transaction value net of goods and service tax.
iii) Other Income
Other items of income are accounted as and when the right to receive such income arises and it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.
(g) Income tax & Deferred Tax
The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated based on the tax laws enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The Company measures its tax balances based on either the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss). Deferred income 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 income tax asset is realized or the deferred income tax liability is settled.
Deferred tax assets are recognized for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses.
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.
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. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Current and deferred tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
Refer Note 7 of the financial statements.
(h) Impairment of assets
Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
The management periodically assesses using external or internal source, whether there is an indication that an asset may be impaired.
(i) Inventories
Raw materials and stores, packing material, work in progress, traded and finished goods
Raw materials and components, stores and packing material, work in progress and finished goods are stated at the lower of cost and net realizable value. Cost of raw materials comprises cost of purchases. Cost of work-in-progress and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also include all other costs incurred in bringing the inventories to their present location and condition. Costs are assigned to individual items of inventory on the basis of weighted average basis. Costs of purchased inventory are determined after deducting rebates and discounts. 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.
Allowance is made to the carrying amount of inventory based on Managementâs assessment/technical evaluation and past experience of the Company taking into account its age, usability, obsolescence, expected realizable value etc.
(j) Financial assets
(i) Classification
The Company classifies its financial assets at amortized cost.
The classification depends on the entity''s business model for managing the financial assets and the contractual terms of the cash flows.
(ii) Recognition
Financial assets are initially recognized when the Company becomes a party to the contractual provisions of the instrument.
(iii) Measurement
At initial recognition, the Company measures a financial asset at fair value. Subsequently these assets are measured at amortised cost.
(iv) Impairment of financial assets
The Company assesses on a forward-looking basis the expected credit loss associated with its assets carried at amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Refer Note 26 of financial statements on how the Company determines whether there has been a significant increase in credit risk.
(v) Derecognition of financial assets
A financial asset is derecognized 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 entity 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 derecognized. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognized.
Where the entity neither has transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognized 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 recognized to the extent of continuing involvement in the financial asset.
(k) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
(l) Property, plant and equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Depreciation methods, estimated useful lives and residual value
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives:
|
Particulars |
Useful lives (in years) |
|
Buildings |
|
|
- Factory |
29.94 |
|
- Others |
60 |
|
Plant and machinery |
2-15 |
|
Furniture, fittings and equipment (including office equipment) |
4-10 |
|
Computers |
3-6 |
|
Vehicles |
5 |
An item of Property, plant and equipment 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.
The management has estimated, supported by independent assessment by professionals, the useful lives of certain Plant and machinery, Factory buildings, Moulds, jigs and fixtures, Vehicles and Office equipment as per table above, which are lower than those indicated in Schedule II.
The residual values are not more than 5% of the original cost of the asset. The assets'' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss within other income or other expenses as the case may be.
(m) Intangible assets
Intangible assets are recognized when it is probable that the future economic benefits that are attributable to the assets will flow to the Company and the cost of the asset can be measured reliably. And Intangible assets are recorded at the consideration paid for acquisition.
(i) Computer software
Computer softwares are shown at historical cost and are subsequently carried at cost less accumulated amortization and impairment losses.
(ii) Amortization methods and periods
The Company amortizes computer software over a period of 6 years on Straight Line Basis.
(iii) Derecognition
An Intangible asset is derecognized on disposal or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset is measured as the difference between the net disposal proceeds and the carrying amount of the asset and is recognized in the statement of profit and loss.
(n) Borrowings
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a prepayment for liquidity services and amortized over the period of the facility to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss as other income/expenses.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. Where there is a breach of a material provision of a long-term loan arrangement on or before the end of the reporting period with the effect that the liability becomes payable on demand on the reporting date, the entity does not classify the liability as current, if the lender agreed, after the reporting period and before the approval of the financial statements for issue, not to demand payment as a consequence of the breach.
Long-term debt is specified in Ind AS Schedule III as a borrowing having a period of more than twelve months at the time of origination. The portion of non-current borrowings, which is due for payments within twelve months of the reporting date is classified under âcurrent borrowingsâ while the balance amount is classified under non-current borrowings.
(o) Borrowing costs
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.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Other borrowing costs are expensed in the period in which they are incurred.
(p) Provisions
Provisions for legal claims are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of managementâs best estimate of the expenditure required to settle the present obligation at the end of the reporting period. Provisions are discounted only if the impact of discounting is considered material.
However, a disclosure for contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Commitments are future liabilities for contractual expenditure, classified and disclosed as estimated amount of contracts remaining to be extracted on capital account and not provided for.
(q) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognized in respect of employees'' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
(ii) Other long-term employee benefit obligations
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. These are recognized on the basis of the actual obligations calculated and are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
(iii) Post-employment obligations
The Company operates the following post-employment schemes:
(a) defined benefit plans such as gratuity and
(b) defined contribution plans such as provident & pension fund, superannuation fund and employee deposit linked insurance scheme.
Gratuity obligations
The Company, on a prudent basis, accrues its gratuity obligations on the basis of actual liability using gross undiscounted basis. Accordingly, the changes in the gratuity obligations are recognized in profit or loss.
Refer Note 25 of the financial statements.
Defined contribution plans
The Company pays provident, pension, superannuation and employee deposit linked insurance scheme contributions to publicly administered provident & pension fund, contribution to superannuation fund and employee deposit linked insurance scheme as per local regulations. The Company has no further payment obligations once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognized as employee benefit expense when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.
(r) Earnings/ (Loss) per share
(i) Basic earnings/ (loss) per share
Basic earnings per share is calculated by dividing:
⢠the profit/(loss) attributable to owners of the Company
⢠by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year.
(ii) Diluted earnings/ (loss) per share
Diluted earnings/ (loss) per share adjusts the figures used in the determination of basic earnings/ (loss) per share to take into account:
⢠the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
⢠the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
Note 3: Critical estimates and judgements
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Company''s accounting policies.
This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed.
Judgements
In the process of applying the Companyâs accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognized in the financial statements:
1. Going concern
Refer Note 33 of the financial statements
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
1. Fair valuation measurement of unquoted financial instruments
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Refer note 26 for further disclosures.
2. Events after the Reporting Period
Adjusting events are events that provide further evidence of conditions that existed at the end of the reporting period. The financial statements are adjusted for such events before authorization for issue. Non-adjusting events are events that are indicative of conditions that arose after the end of the reporting period. Non-adjusting events after the reporting date are not accounted, but disclosed if material.
Mar 31, 2023
Significant accounting policies
(a) Basis of preparation
(i) Compliance with Ind AS
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section
133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant
provisions of the Act.
The Board of Directors have authorised these financial statements for issue on November 25, 2023.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
⢠Defined benefit plans - plan assets measured at fair value.
(iii) New Amendments issued but not effective
The Ministry of Corporate Affairs (MCA) has wide notification dated 31 March 2023 notified Companies (Indian Accounting
Standards) Amendment Rules, 2023 which amends certain accounting Standards, and are effective 1 April 2023. These
amendments are not expected to have a material impact on the Company in the current or future reporting periods and
on foreseeable future transactions.
(iv) Applicable Amendments from Current year
The Ministry of Corporate Affairs (MCA) has wide notification dated 23 March 2022 notified Companies (Indian Accounting
Standards) Amendment Rules, 2022 which amends certain accounting Standards, and are effective 1 April 2022. These
amendments are duly taken in to consideration and do not have a material impact on the Company in the current or future
reporting periods.
(b) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker.
The board of directors of the Company are identified as the Chief operating decision maker. Refer note number 32 for segment
information presented.''
(c) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary economic
environment in which the entity operates (''the functional currency''). The financial statements are presented in Indian rupee
(INR), which is the Company''s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation
of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognised in profit
or loss.
All foreign exchange gains and losses are presented in the statement of profit and loss on a net basis within other income
or other expenses as the case may be.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the
date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported
as part of the fair value gain or loss.
(d) Revenue recognition
Sale of goods
The Company was engaged in manufacture and sale of a range of electronic items.
Sales are recognised when control of the products has transferred, being when the products are delivered to the customer, the
customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect
the customerâs acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the
risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in
accordance with the sales contract, the acceptance provisions have lapsed, or the company has objective evidence that all
criteria for acceptance have been satisfied.
A receivable is recognised when the goods are delivered, as this is the point in time that the consideration is unconditional
because only the passage of time is required before the payment is due.
The Company has however, not had any sale transactions during the current and previous reporting period.
Services rendered
The Company provides feasibility study services to certain Sharp Group companies in India. Revenue from such services is
recognised as and when services are rendered as per the terms of contract.
Revenue from services measured at fair value which is usually the transaction value net of goods and service tax.
(e) Income tax
The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable
income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused
tax losses.
The current income tax charge is calculated based on the tax laws enacted or substantively enacted at the end of the reporting
period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax
regulation is subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax
treatment. The Company measures its tax balances based on either the most likely amount or the expected value, depending
on which method provides a better prediction of the resolution of the uncertainty.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognised
if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition
of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither
accounting profit nor taxable profit (tax loss). Deferred income 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 income
tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses 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. Current tax assets and tax liabilities are offset where
the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle
the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
(f) Impairment of assets
Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset''s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes
of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which
are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets
that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
The management periodically assesses using external or internal source, whether there is an indication that an asset may be
impaired.
(g) Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits
held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less
that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and
bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
(h) Inventories
Raw materials and stores, packing material, work in progress, traded and finished goods
Raw materials and components, stores and packing material, work in progress and finished goods are stated at the lower of cost
and net realisable value. Cost of raw materials comprises cost of purchases. Cost of work-in-progress and finished goods comprises
direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated
on the basis of normal operating capacity. Cost of inventories also include all other costs incurred in bringing the inventories to
their present location and condition. Costs are assigned to individual items of inventory on weighted average basis. Costs of
purchased inventory are determined after deducting rebates and discounts. 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.
(i) Financial assets
(i) Classification
The Company classifies its financial assets at amortised cost.
The classification depends on the entity''s business model for managing the financial assets and the contractual terms of
the cash flows.
(ii) Recognition
Financial assets are initially recognized when the Company becomes a party to the contractual provisions of the
instrument.
(iii) Measurement
At initial recognition, the Company measures a financial asset at fair value. Subsequently these assets are measured at
amortised cost.
(iv) Impairment of financial assets
The Company assesses on a forward-looking basis the expected credit loss associated with its assets carried at amortised
cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Note
26 details how the Company determines whether there has been a significant increase in credit risk.
(v) Derecognition of financial assets
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 entity 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 entity has not transferred
substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the entity neither has 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.
(j) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable
right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability
simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal
course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
(k) Property, plant and equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less
depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it
is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be
measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced.
All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
(l) Intangible assets
(i) Computer software
Computer softwares are shown at historical cost and are subsequently carried at cost less accumulated amortization and
impairment losses.
(ii) Amortisation methods and periods
The Company amortises computer software over a period of 6 years
(m) Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are
unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented
as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their
fair value and subsequently measured at amortised cost using the effective interest method.
(n) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in
profit or loss over the period of the borrowings using the effective interest method. 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. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable
that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised
over the period of the facility to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired.
The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and
the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other
income/expenses.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability
for at least 12 months after the reporting period. Where there is a breach of a material provision of a long-term loan arrangement
on or before the end of the reporting period with the effect that the liability becomes payable on demand on the reporting date,
the entity does not classify the liability as current, if the lender agreed, after the reporting period and before the approval of the
financial statements for issue, not to demand payment as a consequence of the breach.
(o) Borrowing costs
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.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is
deducted from the borrowing costs eligible for capitalisation.
Other borrowing costs are expensed in the period in which they are incurred.
Mar 31, 2018
Note 1 : Significant accounting policies
(a) Basis of preparation
(i) Compliance with Ind AS
The financial statements comply in all material aspects with Indian Accounting Standards (IndAS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.
The financial statements up to year ended 31 March 2017 were prepared in accordance with the accounting standards notified under Companies (Accounting Standard) Rules, 2006 (as amended) and other relevant provisions of the Act.
These financial statements are the first financial statements of the Company under Ind AS. Refer note 35 for an explanation of how the transition from previous GAAP to Ind AS has affected the Company''s financial position, financial performance and cash flows.
The Board of Directors have authorised these financial statements for issue on May 11, 2018.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
- Defined benefit plans - plan assets measured at fair value.
(iii) Amended standards adopted by the Company
The amendments to Ind AS 7 require disclosure of changes in liabilities arising from financing activities, see note 12.
(iv) Current/non-current classification
All assets and liabilities have been classified as current or non-current as per the Companyâs operating cycle and other criteria set out in the 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 realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current/non-current classification of assets and liabilities.
(b) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The board of directors of the Company are identified as the Chief operating decision maker. Refer note 30 for segment information presented.
(c) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (''the functional currency''). The financial statements are presented in Indian rupee (INR), which is the Company''s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognised in profit or loss.
All foreign exchange gains and losses are presented in the statement of profit and loss on a net basis within other income or other expenses as the case may be.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss.
(d) Revenue recognition
Revenue 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 allowances, rebates, value added taxes and Goods and Service Tax (GST) and amounts collected on behalf of third parties. The Company recognizes revenue when the amount can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for the activities as described below:
Sale of goods
Revenue is recognised when all the significant risks and rewards of ownership of the goods have passed to the buyer,on the basis of terms of sale.
Interest income
Interest income is recognised on a time proportion basis taking into account the amount outstanding and the interest rate applicable. Interest income is included under the head âother incomeâ in the statement of profit and loss.
(e) Government grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions.
Government grants relating to income are deferred and recognized in the statement of profit or loss over the period necessary to match them with the costs that they are intended to compensate and presented within other income.
Government grants relating to property, plant and equipment are included in non-current liabilities as deferred income and are credited to profit or loss on a straight-line basis over the expected lives of the related assets and presented within other income.
(f) Income tax
The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss). Deferred income 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 income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses 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. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
(g) Leases
As a lessee
Leases of property, plant and equipment where the Company, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease''s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in borrowings or other financial liabilities as appropriate. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases.
(h) Impairment of assets
The management periodically assesses using external or internal source, whether there is an indication that an asset may be impaired. An impairment loss is recognised for the amount by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
(i) Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
(j) Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
(k) Inventories
Raw materials and stores, packing material, work in progress, traded and finished goods
Raw materials and components, stores and packing material, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost of raw materials comprises cost of purchases. Cost of work-in-progress and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also include all other costs incurred in bringing the inventories to their present location and condition. Costs are assigned to individual items of inventory on the basis of weighted average basis. Costs of purchased inventory are determined after deducting rebates and discounts. 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.
(l) Financial assets
(i) Classification
The Company classifies its financial assets at amortised cost.
The classification depends on the entity''s business model for managing the financial assets and the contractual terms of the cash flows.
(ii) Measurement
At initial recognition, the Company measures a financial asset at fair value. Subsequently these assets are measured at amortised cost.
(iii) Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 28 details how the Company determines whether there has been a significant increase in credit risk.
(iv) Derecognition of financial assets
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 entity 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 entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the entity 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.
(m) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
(n) Property, plant and equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
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 recognised as at 1 April 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment.
Depreciation methods, estimated useful lives and residual value
Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives:
The management has estimated, supported by independent assessment by professionals, the useful lives of certain Plant and machinery, Factory buildings, Moulds, jigs and fixtures, Vehicles and Office equipments as per table above, which are lower than those indicated in Schedule II. The residual values are not more than 5% of the original cost of the asset. The assets'' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss within other income or other expenses as the case maybe.
(0) Intangible assets
(1) Computer software
Computer softwares are shown at historical cost and are subsequently carried at cost less accumulated amortization and impairment losses.
(ii) Amortisation methods and periods
The Company amortises computer software over a period of 6 years
(iii) Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all of intangible assets recognised as at 1 April 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of intangible assets.
(p) Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
(q) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. 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. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income/expenses.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. Where there is a breach of a material provision of a long-term loan arrangement on or before the end of the reporting period with the effect that the liability becomes payable on demand on the reporting date, the entity does not classify the liability as current, if the lender agreed, after the reporting period and before the approval of the financial statements for issue, not to demand payment as a consequence of the breach.
(r) Borrowing costs
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.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
Other borrowing costs are expensed in the period in which they are incurred.
(s) Provisions
Provisions for legal claims are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of managementâs best estimate of the expenditure required to settle the present obligation at the end of the reporting period. Provisions are discounted only if the impact of discounting is considered material.
(t) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees'' services up to the end of the reporting period and are measured atthe amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
(ii) Other long-term employee benefit obligations
The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
(iii) Post-employment obligations
The Company operates the following post-employment schemes:
(a) defined benefit plans such as gratuity and
(b) defined contribution plans such as provident & pension fund, superannuation fund and employee deposit linked insurance scheme. Gratuity obligations
The Company, on a prudent basis, accrues its gratuity obligations on the basis of actual liability using gross undiscounted basis. Accordingly, the changes in the gratuity obligations are recognized in profit or loss.
Defined contribution plans
The Company pays provident, pension, superannuation and employee deposit linked insurance scheme contributions to publicly administeredprovident & pension fund, contribution to superannuation fundand employee deposit linked insurance scheme as per local regulations. The Company has no further payment obligations once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
(u) Contributed equity
Equity shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
(v) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
- the profit attributable to owners of the Company
- by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
- the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
- the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
(w) Rounding of amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest lakhs as per the requirement of Schedule III, unless otherwise stated.
Mar 31, 2016
Note- 1 : Corporate Information
Sharp India Limited (''the Company'') was incorporated on July 5, 1985. The company is principally engaged in the manufacture and sale of colour televisions (''CTVs''), light emitting diode televisions (''LED TVs'') and Air-conditioners (''ACs'').
Sharp Corporation (''Sharp''), a company incorporated in Japan, holds 75 per cent of the issued share capital of the company. The company has a technical collaboration with Sharp for the manufacture of colour televisions (''CTVs'') and (''LED TVs'') & air conditioners (''ACs'').
Note- 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 under Section 133 of the Companies Act 2013, read together with Paragraph 7 of the Companies (Accounts) Rule, 2014. The financial statements have been prepared under the historical cost convention on an accrual basis.
The accounting policies adopted in the preparation of financial statements are consistent with those of previous year, except for the change in the accounting policy explained below :
Note- 2.1 : Summary of significant accounting policies
Change in accounting policies
The company has adopted component accounting as required under Schedule II to the Companies Act, 2013 from 1 April 2015. The company was previously not identifying components of fixed asset separately for depreciation purposes; rather, a single useful life/ depreciation rate was used to depreciate each item of fixed asset.
Due to application of Schedule II to the Companies Act, 2013, the Company has changed the manner of depreciation for its fixed asset. Now, the company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset. These components are depreciated separately over their useful lives; the remaining components are depreciated over the life of the principal asset.
The Company has also changed its policy on recognition of cost of major inspection/ overhaul. Earlier company used to charge such cost of major inspection/ overhaul directly to statement of profit and loss, as incurred. On application of component accounting, the major inspection/ overhaul is identified as a separate component of the asset at the time of purchase of new asset and subsequently. The cost of such major inspection/overhaul is depreciated separately over the period till next major inspection/ overhaul. Upon next major inspection/ overhaul, the costs of new major inspection/ overhaul are added to the asset''s cost and any amount remaining from the previous inspection/overhaul is derecognized.
On the date of component accounting becoming applicable, i.e., 1 April 2015, there was no component having zero remaining useful life. Hence, no amount has been directly adjusted against retained earnings.
There is no impact of the above change in accounting policy on the financial statements as at and for the year ended March 31, 2016.
(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 disclosure of contingent liabilities, at the end of 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, 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.
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.
The company adjusts exchange differences arising on translation/ settlement of long-term foreign currency monetary items pertaining to the acquisition of a depreciable asset to the cost of the asset and depreciates the same over the remaining life of the asset. In accordance with MCA circular dated 09 August 2012, exchange differences adjusted to the cost of fixed assets are total differences, arising on long-term foreign currency monetary items pertaining to the acquisition of a depreciable asset, for the period. In other words, the company does not differentiate between exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost and other exchange difference.
Gains or losses arising from 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.
The company identifies and determines cost of asset significant to the total cost of the asset having useful life that is materially different from that of the remaining life.
(c) Depreciation on tangible fixed assets
Depreciation on tangible assets is calculated on a straight-line basis using the rates arrived at based on the useful lives estimated by the management. The company has used the following rates to provide depreciation on its fixed assets:
The management has estimated, supported by independent assessment by professionals, the useful lives of certain Plant and machinery, Factory buildings, Moulds, jigs and fixtures, Vehicles and Office equipments as per table above, which are lower than those indicated in Schedule II.
(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 are reflected in the statement of profit and loss in the year in which the expenditure is incurred.
Intangible assets amortized on straight line basis over the estimated useful economic life. The company uses a rebuttable presumption that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use. If persuasive evidence exists to the effect that useful life of an intangible asset exceeds ten years, the company amortizes the intangible asset over the best estimate of its useful life. Such intangible assets and intangible assets not yet available for use are tested for impairment annually, either individually or at the cash-generating unit level. All other intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired.
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 the previous estimates, the amortization period is changed accordingly. The amortization period of the intangible assets are given below:
SAP software - 6 years
Technical know-how and Model fees for Air conditioner 3 years and LCD-1 year
Gains or losses arising from de-recognition of intangible 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.
(e) 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. 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.
The company bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the company''s cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering 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.
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.
(f) Borrowing costs
Borrowing cost includes interest and 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.
(g) Leases
Operating lease- Where company is the lessee
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.
(h) Inventories
Raw materials, components, stores and spares are valued at lower of cost and net realizable value. 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 of raw materials, components and stores and spares is determined on a weighted average basis.
Work-in-progress and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty. Cost is determined on a weighted average basis.
Traded goods are valued at lower of cost and net realizable value. Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on a weighted average basis.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
(i) Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the company and that the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized:
Sale of goods
Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer, on the basis of terms of sale and are recorded net of trade discounts and sales taxes, but including excise duty. 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.
Interest income
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the interest rate applicable. Interest income is included under the head "other income" in the statement of profit and loss.
Export incentives
Export incentives consist of duty drawback income which is recognized in statement of profit and loss on the basis of realisation of claims from the concerned authority.
(j) Foreign currency translation
Foreign currency transactions
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.
Conversion
Foreign currency monetary items are retranslated using the exchange rate prevailing at the reporting date. Non-monetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction.
Exchange differences
Exchange differences arising on the settlement of monetary items of the company at rates different from those at which they were initially recorded are recognized as income or expenses, in the period in which they arise.
Forward exchange contracts not intended for trading or speculation purposes
The premium or discount arising at the inception of forward exchange contract is amortized and recognized as an 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 period 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.
(k) Retirement and other employee benefits
Retirement benefits to employees comprise of gratuity, contributions to superannuation, pension fund, provident fund and employee deposit linked insurance as per the approved scheme of the company.
Retirement benefit in the form of provident fund, pension fund and employee deposit linked insurance are defined contribution scheme. The company has no obligation, other than the contribution payable to the provident fund, pension fund and employee deposit linked insurance. The company recognizes contribution payable to the provident fund, pension fund and employee deposit linked insurance as expenditure, when an employee renders the related service. If the contribution payable to provident fund, pension fund and employee deposit linked insurance for services 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 contributions already paid. If the contributions 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.
Contributions to superannuation fund with LIC through its employees'' trust are charged to the statement of profit and loss on an accrual basis. There are no obligations other than the contribution made each year.
Gratuity liability is a defined benefit obligation and is provided on the basis of an actuarial valuation made at the end of each financial year. The actuarial valuation is done as per projected unit credit method. Actuarial gains and losses are recognized in full in the period in which they occur in the statement of profit and loss.
Long term compensated absences are provided for based on actuarial valuation at the end of each financial year. The actuarial valuation is done as per projected unit credit method. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. The Company presents the entire leave as current in the balance sheet, since it does not have an unconditional right to defer its settlement for more than 12 months after the reporting date.
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.
Expenses incurred towards voluntary retirement scheme are charged to the statement of profit and loss immediately.
(l) Income tax
Tax expense comprises of 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. The tax rates used to compute the amount are those that are enacted or substantially enacted, at the reporting date.
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.
At each reporting date the company re-assesses unrecognized deferred tax assets. It recognizes unrecognized 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.
The carrying amount of deferred tax assets are reviewed at each balance sheet date. The company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer virtually certain, 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 virtually certain, 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 tax liabilities 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.
(m) Earnings per share
Basic earnings/loss 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 share, the net profit or loss for the year attributable to equity shareholders and the weighted average numbers of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
(n) Provisions
A provision is recognized when the company has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to their present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These estimates are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
(o) Cash and cash equivalents
Cash and cash equivalents in the balance sheet and for the purposes of cash flow statement comprise of cash at bank and in hand and short-term investments with an original maturity of three months or less.
(p) 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. The company does not recognise a contingent liability but discloses its existence in the financial statements.
(q) Segment reporting
Identification of segments
The company''s operating businesses are organized 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 areas in which major operating divisions of the company operate.
Inter-segment transfers
The company generally accounts for intersegment sales and transfers at cost plus appropriate margins.
Allocation of common costs
Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs.
Unallocated items
Unallocated items include general corporate income and expense items which are not allocated to any business segment. Segment accounting policies
The company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the company as a whole.
(r) 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 cost, 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 / (loss) from continuing operations. In its measurement, the company does not include depreciation and amortization expenses, finance cost and tax expense.
Mar 31, 2014
(a) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make estimates and assumptions that affect
the reported amounts of revenues, expenses, assets and liabilities and
disclosure of contingent liabilities, at the end of reporting period.
Although these estimates are based on the management''s best knowledge
of current events and actions, actual results could differ from these
estimates.
(b) Tangible fixed assets
Fixed assets are stated at cost less accumulated depreciation and
impairment losses, if any. The cost comprises of purchase price,
borrowing costs if capitalisation criteria are met and directly
attributable costs of bringing the asset to its working condition for
its intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price.
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 de-recognition of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognised in the statement of
profit and loss when the asset is derecognised.
(c) Borrowing costs
Borrowing cost includes interest and 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.
(d) Depreciation on tangible fixed assets
Depreciation on tangible assets is calculated on a straight-line basis
using the rates arrived at based on the useful lives estimated by the
management, or those prescribed under Schedule XIV to the Companies
Act, 1956, whichever is higher. The company has used the following
rates to provide depreciation on its fixed assets :
Depreciation on fixed assets added during the year is provided on pro
rata basis with reference to date of addition except in case of assets
individually costing below Rs 5,000 which are fully depreciated in the
year of purchase.
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 amortisation and accumulated
impairment losses, if any. Internally generated intangible assets
excluding capitalised development costs are not capitalised and are
reflected in the statement of profit and loss in the year in which the
expenditure is incurred.
Intangible assets amortised on straight line basis over the estimated
useful economic life.
The amortisation period 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 the previous estimates, the
amortisation period is changed accordingly. The amortisation period of
the intangible assets are given below :
SAP software - 6 years
Technical know-how -10 years
Model fees - 4 years
Gains or losses arising from de-recognition of intangible assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognised in the statement of
profit and loss when the asset is derecognised.
(f) Impairment
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 recognised wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the asset''s net selling price and value in use. 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 risks
specific to the asset. After impairment, depreciation is provided on
the revised carrying amount of the asset over its remaining useful
life.
(g) Leases
Operating lease-Where company is the lessee
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 recognised as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
(h) Inventories
Inventories are valued as follows:
Raw materials, components, : Stores, Packing Material and Spares
Lower of cost and net realisable value. However, material 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 a weighted average basis.
Work-in-progress and Finished Goods
Lower of cost and net realisable value. Cost includes direct materials
and labour and a proportion of manufacturing overheads based on normal
operating capacity. Cost of finished goods includes excise duty. Cost
is determined on a weighted average basis.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
(i) Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the company and that the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognised :
Sale of goods
Revenue is recognised when the significant risks and rewards of
ownership of the goods have passed to the buyer, on the basis of terms
of sale and are recorded net of trade discounts and sales taxes, but
including excise duty. 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.
Income from services
Revenue from service contracts are recognised pro-rata over the period
of the contract 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 the
revenue.
Interest income
Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the interest rate applicable.
Interest income is included under the head "other income" in the
statement of profit and loss.
Export incentives
Export incentives consists of duty drawback income which is recognised
in statement of profit and loss on the basis of realisation of claims
from the concerned authority.
(j) Foreign currency translation
Foreign currency transactions
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.
Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items, which are
measured in terms of historical cost denominated in a foreign currency,
are reported using the exchange rate at the date of the transaction.
Exchange differences
Exchange differences arising on the settlement of monetary items of the
company at rates different from those at which they were initially
recorded are recognised as income or expenses, in the period in which
they arise.
Forward exchange contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of forward exchange
contract is amortised and recognised as an expense or income over the
life of the contract. Exchange differences on such contracts are
recognised in the statement of profit and loss in the period in which
the exchange rates change. Any profit or loss arising on cancellation
or renewal of forward exchange contract is recognised as income or as
expense for the period.
(k) Retirement benefits
Retirement benefits to employees comprise of gratuity, contributions to
superannuation, pension fund, provident fund and employee deposit
linked insurance as per the approved scheme of the company.
Retirement benefit in the form of provident fund, pension fund and
employee deposit linked insurance are defined contribution scheme. The
company has no obligation, other than the contribution payable to the
provident fund, pension fund and employee deposit linked insurance. The
company recognizes contribution payable to the provident fund, pension
fund and employee deposit linked insurance as expenditure, when an
employee renders the related service. If the contribution payable to
provident fund, pension fund and employee deposit linked insurance for
services 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 contributions already
paid. If the contributions already paid exceeds the contribution due
for services received before the balance sheet date, then excess is
recognised as an asset to the extent that the pre-payment will lead to,
for example, a reduction in future payment or a cash refund.
Contributions to superannuation fund with LIC through its employees''
trust are charged to the statement of profit and loss on an accrual
basis. There are no obligations other than the contribution made each
year.
Gratuity liability is a defined benefit obligation and is provided on
the basis of an actuarial valuation made at the end of each financial
year. The actuarial valuation is done as per projected unit credit
method. Actuarial gains and losses are recognised in full in the period
in which they occur in the statement of profit and loss.
Long term compensated absences are provided for based on actuarial
valuation at the end of each financial year. The actuarial valuation is
done as per projected unit credit method.Actuarial gains/losses are
immediately taken to the statement of profit and loss and are not
deferred. The Company presents the entire leave as current in the
balance sheet, since it does not have an unconditional right to defer
its settlement for more than 12 months after the reporting date.
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.
Expenses incurred towards voluntary retirement scheme are charged to
the statement of profit and loss immediately.
(l) Income tax
Tax expense comprises of 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. The tax
rates used to compute the amount are those that are enacted or
substantially enacted, at the reporting date.
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 situations 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 they can be realised against
future taxable profits.
At each reporting date the company re-assesses unrecognised deferred
tax assets. It recognises unrecognised 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 realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer virtually certain, that
sufficient future taxable income will be available against which
deferred tax asset can be realised. Any such write-down is reversed to
the extent that it becomes virtually certain, 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 tax
liabilities relate to the taxes on income levied by same governing
taxation laws.
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.
(m) Earnings per share
Basic earnings/loss 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 share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average numbers of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
(n) Provisions
A provision is recognised when the company has a present obligation as
a result of past event; 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 their
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These estimates are
reviewed at each balance sheet date and adjusted to reflect the current
best estimates.
(o) Cash and cash equivalents
Cash and cash equivalents in the balance sheet and for the purposes of
cash flow statement comprises of cash at bank and cash in hand.
(p) 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 recognised
because it is not probable that an outflow of resources will be
required to settle the obligation. The company does not recognise a
contingent liability but discloses its existence in the financial
statements.
(q) Measurement of EBFTDA
As permitted by the guidance note on the Revised Schedule VI to the
Companies Act 1956,the company has elected to present earnings before
finance cost, tax, depreciation and amortisation (EBFTDA) as a separate
line item on the face of the statement of profit and loss. The company
measures EBFTDA on the basis of profit / (loss) from continuing
operations. In its measurement, the company does not include
depreciation and amortisation expenses, finance cost and tax expense.
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.
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 share
holders.
Defined benefit plans -
The company has a defined benefit gratuity plan. Every employee who has
completed five years or more of service is eligible for gratuity on
departure, computed based on the company''s gratuity scheme for each
completed year of service. The scheme is funded with an insurance
company. The following tables summarises the components of net benefit
expense recognised in the statement of profit and loss and the funded
status and the amount recognised in the balance sheet for the
respective plans.
The estimates of future salary increases considered in actuarial
valuation, take account of inflation, seniority, promotion and other
relevant factors, such as supply and demand in the employment market.
The overall expected rate of return on assets is based on the
expectation of the average long term rate of return expected on
investments of the fund during the estimated term of the obligation.
Mar 31, 2013
(a) Use of estimates
The preparation of financial statements in conformity with the Indian
GAAP requires the management to make estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and
liabilities and disclosure of contingent liabilities, at the date of
the financial statements and the results of operations during the
reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, actual
results could differ from these estimates.
(b) Tangible fixed assets
Fixed assets are stated at cost less accumulated depreciation and
impairment losses, if any. The cost comprises of purchase price,
borrowing costs if capitalisation criteria are met and directly
attributable costs of bringing the asset to its working condition for
its intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price.
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 de- recognition of fixed assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognised in the statement of
profit and loss when the asset is derecognised.
(c) Borrowing Cost:
Borrowing cost includes interest and 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.
(d) Depreciation on tangible fixed assets
Depreciation on tangible assets is calculated on a straight-line basis
using the rates arrived at based on the useful lives estimated by the
management, or those prescribed under Schedule XIV to the Companies
Act, 1956, whichever is higher. The company has used the following
rates to provide depreciation on its fixed assets:
Rates applied by the company Rates as per Schedule XIV
Buildings
- Factory 3.34% 3.34%
- Others 1.63% 1.63% Plant and machinery 5.38*% 5.38% Moulds, jigs and
fixtures 16.21*% 16.21% Furniture, fittings and equipment 4.75 - 6.33%
4.75%-6.33% Computers 16.21 - 25.00% 16.21% Vehicles 20% 9.5%
* Plant and machinery, moulds, jigs and fixtures identified and
evaluated technically as obsolete by management are stated at lower of
their net book value and estimated net realisable values. Any loss is
recognised immediately in the statement of profit and loss.
Depreciation on fixed assets added during the year is provided on pro
rata basis with reference to date of addition except in case of assets
individually costing below Rs 5,000 which are fully depreciated in the
year of purchase.
(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 amortisation and accumulated
impairment losses, if any. Internally generated intangible assets are
not recorded, are not capitalised and expenditure is reflected in the
statement of profit and loss in the year in which the expenditure is
incurred.
Intangible assets amortised on straight line basis over the estimated
useful economic life.
The amortisation period 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 the previous estimates, the
amortisation period is changed accordingly. The amortisation period of
the intangible assets are given below:
SAP software - 6 years Technical know-how - 10 years Model fees - 4
years
Gains or losses arising from derecognition of intangible assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognised in the statement of
profit and loss when the asset is derecognised.
(f) Impairment
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 recognised wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the asset''s net selling price and value in use. 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 risks
specific to the asset. After impairment, depreciation is provided on
the revised carrying amount of the asset over its remaining useful
life.
(g) Leases
Operating lease-Where company is the lessee
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 recognised as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
(h) Inventories
Inventories are valued as follows:
Raw materials, components, : Lower of cost and net realisable value.
However, material and other items held for use in the Stores, Packing
Material and production of inventories are not written down below cost
if the finished products in Spares which they will be incorporated are
expected to be sold at or above cost. Cost is determined
on a weighted average basis.
Work-in-progress and : Lower of cost and net realisable value. Cost
includes direct materials and labour and a proportion
Finished Goods of manufacturing overheads based on normal operating
capacity. Cost of finished goods includes excise duty. Cost is
determined on a weighted average basis.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
(i) Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the company and that the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognised:
Sale of goods
Revenue is recognised when the significant risks and rewards of
ownership of the goods have passed to the buyer, on the basis of actual
despatch and are recorded net of trade discounts and sales taxes, but
including excise duty. 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.
Income from services
Revenue from service contracts are recognised pro-rata over the period
of the contract 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 the
revenue.
Interest
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable. Interest income is
included under the head "other income" in the statement of profit and
loss.
(j) Foreign currency translation
Foreign currency transactions
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.
Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting rate. Non-monetary items, which are
measured in terms of historical cost denomination in a foreign
currency, are reported using the exchange rate at the date of the
transaction.
Exchange differences
Exchange differences arising on the settlement of monetary items of the
company 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 expenses, in the year in which they arise.
Forward exchange contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of forward exchange
contract is amortised and recognised as an expense or income over the
life of the contract. Exchange differences on such contracts are
recognised 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 recognised as income or as
expense for the year.
(k) Retirement benefits
Retirement benefits to employees comprise of contributions to gratuity,
superannuation, pension fund, provident fund and employee deposit
linked insurance as per the approved scheme of the company.
Retirement benefit in the form of provident fund, pension fund and
employee deposit linked insurance is a defined contribution scheme. The
company has no obligation, other than the contribution payable to the
provident fund, pension fund and employee deposit linked insurance. The
company recognizes contribution payable to the provident fund, pension
fund and employee deposit linked insurance as expenditure, when an
employee renders the related service. If the contribution payable to
provident fund, pension fund and employee deposit linked insurance for
services 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 contributions already
paid. If the contributions already paid exceeds the contribution due
for services received before the balance sheet date, then excess is
recognised as an asset to the extent that the pre payment will lead to,
for example, a reduction in future payment or a cash refund.
Contributions to superannuation fund with LIC through its employees''
trust are charged to the statement of profit and loss on an accrual
basis. There are no other obligations other than the contribution made
each year.
Gratuity liability is a defined benefit obligation and is provided on
the basis of an actuarial valuation on projected unit credit method
made at the end of each financial year. The actuarial valuation is done
as per projected unit credit method. Actuarial gains and losses are
recognised in full in the period in which they occur in the statement
of profit and loss.
Long term compensated absences are provided for based on actuarial
valuation at the end of each financial year. The actuarial valuation is
done as per projected unit credit method. 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.
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.
(l) Income tax
Tax expense comprises of 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. The tax
rates used to compute the amount are those that are enacted or
substantially enacted, at the reporting date.
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
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 tax liabilities relate to the
taxes on income levied by same governing taxation laws. 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 situations
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 they can be realised
against future taxable profits.
At each reporting date the company re-assesses unrecognised deferred
tax assets. It recognises unrecognised 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 realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer virtually certain, that
sufficient future taxable income will be available against which
deferred tax asset can be realised. Any such write-down is reversed to
the extent that it becomes virtually certain, that sufficient future
taxable income will be available.
(m) Earnings per share
Basic earnings/loss 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 share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average numbers of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
(n) Provisions
A provision is recognised when the company has a present obligation as
a result of past event, 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 their
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These estimates are
reviewed at each balance sheet date and adjusted to reflect the current
best estimates.
(o) Cash and cash equivalents
Cash and cash equivalents in the balance sheet and for the purposes of
cash flow statement comprises of cash at bank and cash in hand.
(p) 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 recognised because it
is not probable that an outflow of resources will be required to settle
the obligation. The company does not recognise a contingent liability
but discloses its existence in the financial statements.
(q) 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.
(r) Measurement of EBFTDA
As permitted by the guidance note on the Revised Schedule VI to the
Companies Act 1956, the company has elected to present earnings before
finance cost, tax, depreciation and amortisation (EBFTDA) as a separate
line item on the face of the statement of profit and loss. The company
measures EBFTDA on the basis of profit / (loss) from continuing
operations. In its measurement, the company does not include
depreciation and amortisation expenses, interest income, finance cost
and tax expense.
Mar 31, 2012
(a) 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
under Companies (Accounting Standards) Rules 2006 (as amended)('the
rules') and the relevant provisions of the Companies Act ,1956. The
financial statements have been prepared under the historical cost
convention on an accrual basis.
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.
(b) Change in accounting policy Presentation and disclosures of
financial statements
During the year ended 31 March 2012, the revised schedule VI under the
Companies Act 1956, has become applicable to the company, for
preparation and presentation of its financial statements. The adoption
of revised schedule VI does not impact the recognition and measurement
principles followed for preparation of financial statements. However it
has significant impact on presentation 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.
(c) Use of estimates
The preparation of financial statements in conformity with the Indian
GAAP requires the management to make estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and
liabilities and disclosure of contingent liabilities, at the date of
the financial statements and the results of operations during the
reporting period. Although these estimates are based on the
management's best knowledge of current events and actions, actual
results could differ from these estimates.
(d) Tangible fixed assets
Fixed assets are stated at cost less accumulated depreciation and
impairment losses, if any. The cost comprises of purchase price,
borrowing costs if capitalisation criteria are met and directly
attributable costs of bringing the asset to its working condition for
its intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price.
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 derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognised in the statement of profit and
loss when the asset is derecognised.
(e) Depreciation on tangible fixed assets
Depreciation on tangible assets is calculated on a straight-line basis
using the rates arrived at based on the useful lives estimated by the
management, or those prescribed under Schedule XIV to the Companies
Act, 1956, whichever is higher. The company has used the following
rates to provide depreciation on its fixed assets:
* Plant and machinery, moulds, jigs and fixtures identified and
evaluated technically as obsolete by management are stated at lower of
their net book value and estimated net realisable values. Any loss is
recognised immediately in the statement of profit and loss.
Depreciation on fixed assets added during the year is provided on pro
rata basis with reference to date of addition except in case of assets
individually costing below Rs 5,000 which are fully depreciated in the
year of purchase.
(f) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortisation and accumulated
impairment losses, if any. Internally generated intangible assets are
not recorded, excluding capitalised development costs, are not
capitalised and expenditure is reflected in the statement of profit and
loss in the year in which the expenditure is incurred.
Intangible assets amortised on straight line basis over the estimated
useful economic life.
The amortisation period 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 the previous estimates, the
amortisation period is changed accordingly. The amortisation period of
the intangible assets are given below:
SAP software - 6 years
Technical know-how - 10 years
Model fees - 3 years
Gains or losses arising from derecognition of intangible assets are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognised in the statement of
profit and loss when the asset is derecognised.
(g) Impairment
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 recognised wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the asset's net selling price and value in use. 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 risks
specific to the asset. After impairment, depreciation is provided on
the revised carrying amount of the asset over its remaining useful
life.
(h) Leases
Operating lease - Where company is the lessee
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 recognised as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
(i) Inventories Inventories are valued as follows:
Raw materials, components, Stores, packing Material and Spares : Lower
of cost and net realisable value. However, material 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 a
weighted average basis.
Work-in-progress and Finished Goods : Lower of cost and net realisable
value. Cost includes direct materials and labour and a proportion of
manufacturing overheads based on normal operating capacity. Cost of
finished goods includes excise duty. Cost is determined on a weighted
average basis.
Traded goods : Traded goods are valued at lower of cost and net
realisable value. Cost is determined on weighted average basis and
includes all costs of purchase, and other costs incurred in bringing
the inventories to their present location and condition.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
(j) Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the company and that the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognised:
Sale of goods
Revenue is recognised when the significant risks and rewards of
ownership of the goods have passed to the buyer, on the basis of actual
despatch and are recorded net of trade discounts and sales taxes, but
including excise duty. 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.
Income from services
Revenue from service contracts are recognised pro-rata over the period
of the contract 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 the
revenue.
Interest
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable. Interest income is
included under the head "other income" in the statement of profit and
loss.
(k) Foreign currency translation
Foreign currency transactions
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.
Conversion
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting rate. Non-monetary items, which are
measured in terms of historical cost denomination in a foreign
currency, are reported using the exchange rate at the date of the
transaction.
Exchange differences
Exchange differences arising on the settlement of monetary items of the
company 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 expenses, in the year in which they arise.
Forward exchange contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of forward exchange
contract is amortised and recognised as an expense or income over the
life of the contract. Exchange differences on such contracts are
recognised 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 recognised as income or as
expense for the year.
(l) Retirement benefits
Retirement benefits to employees comprise of contributions to gratuity,
superannuation, pension fund, provident fund and employee deposit
linked insurance as per the approved scheme of the company.
Retirement benefits in the form of provident fund, pension fund and
employee deposit linked insurance is a defined contribution scheme and
the contributions to the provident fund, pension fund and employee
deposit linked insurance are charged to the statement of profit and
loss for 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.
Contributions to superannuation fund with LIC through its employees'
trust are charged to the statement of profit and loss on an accrual
basis. There are no other obligations other than the contribution made
each year.
Gratuity liability is a defined benefit obligation and is provided on
the basis of an actuarial valuation on projected unit credit method
made at the end of each financial year. The actuarial valuation is done
as per projected unit credit method.
Long term compensated absences are provided for based on actuarial
valuation at the end of each financial year. The actuarial valuation is
done as per projected unit credit method.
Actuarial gains/losses are immediately taken to the statement of profit
and loss and are not deferred.
Expenses incurred towards voluntary retirement scheme are charged to
the statement of profit and loss immediately.
(m) Income tax
Tax expense comprises of 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. The tax
rates used to compute the amount are those that are enacted or
substantially enacted, at the reporting date.
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
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 tax liabilities relate to the
taxes on income levied by same governing taxation laws. 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 situations
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 they can be realised
against future taxable profits.
At each reporting date the company re-assesses unrecognised deferred
tax assets. It recognises unrecognised 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 realised.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer virtually certain, that
sufficient future taxable income will be available against which
deferred tax asset can be realised. Any such write-down is reversed to
the extent that it becomes virtually certain, that sufficient future
taxable income will be available.
(n) Earnings per share
Basic earnings/loss 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 share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average numbers of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
(o) Provisions
A provision is recognised when the company has a present obligation as
a result of past event, 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 their
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These estimates are
reviewed at each balance sheet date and adjusted to reflect the current
best estimates.
Warranty Provisions:
Product warranty costs have been determined and provided on the basis
of expected claims as estimated by management. Provision is based on
historical experience.
(p) Cash and cash equivalents
Cash and cash equivalents in the balance sheet and for the purposes of
cash flow statement comprises of cash at bank and cash in hand.
(q) 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 recognised because it
is not probable that an outflow of resources will be required to settle
the obligation. The company does not recognise a contingent liability
but discloses its existence in the financial statements.
(r) 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.
(s) Measurement of EBFTDA
As permitted by the guidance note on the Revised Schedule VI to the
Companies Act 1956, the company has elected to present earnings before
finance cost, tax, depreciation and amortisation (EBFTDA) as a separate
line item on the face of the statement of profit and loss. The company
measures EBFTDA on the basis of profit / (loss) from continuing
operations. In its measurement, the company does not include
depreciation and amortisation expenses, finance cost and tax expense.
Mar 31, 2011
(a) Basis of Preparation
The financial statements have been prepared to comply in all material
respects with the Accounting Standards notified by Companies
(Accounting Standards) Rule, 2006 (as amended) ("the Rules") and the
relevant provisions of the Companies Act, 1956. The financial
statements have been prepared under the historical cost convention on
an accrual basis. Accounting policies have been consistently applied by
the Company; and are consistent with those used 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. Although these estimates are based upon management's best
knowledge of current events and actions, actual results could differ
from these estimates.
(c) Fixed assets, Intangible Assets and depreciation
Fixed assets are stated at cost less accumulated depreciation and
impairment loss if any. Costs comprises the purchase price and any
attributable cost of bringing the assets to its working condition for
its intended use.
Intangible assets are recorded at the consideration paid for their
acquisition. They are amortised on straight line method as given
below:- SAP Software - 6 years Technical Know-how - 10 years
Depreciation on tangible assets is provided using the straight line
method as per useful lives of the asset estimated by the management or
at the rates specified in Schedule XIV to the Act, whichever is higher.
* Plant and machinery, Moulds, jigs and fixtures identified and
evaluated technically as obsolete by management are stated at lower of
their net book value and estimated net realisable values. Any loss is
recognised immediately in the profit and loss account.
Depreciation on fixed assets added during the year is provided on pro
rata basis with reference to date of addition except in case of assets
individually costing below Rs 5,000 which are fully depreciated in the
year of purchase.
(d) Impairment
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 asset's net selling price and value in use. 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 risks
specific to the asset. After impairment, depreciation is provided on
the revised carrying amount of the asset over its remaining useful
life.
(e) Leases Operating Lease -
Where Company is the Lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased term, 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.
(f) Inventories
Inventories are valued as follows :
Raw Material, Components, : Lower of cost and net realizable value.
However, material and other items held for use in the Stores, Packing
Material production of inventories are not written down below cost if
the finished products in which and spares they will be incorporated are
expected to be sold at or above cost. Cost is determined on a weighted
average basis.
Work-in-progress and : Lower of cost and net realizable value. Cost
includes direct materials and labour and a finished goods proportion of
manufacturing overheads based on normal operating capacity. Cost of
finished goods includes excise duty. Cost is determined on a weighted
average basis.
Traded Goods : Traded goods are valued at lower of cost and net
realizable value. Cost is determined on weighted average basis and
includes all costs of purchase, and other costs incurred in bringing
the inventories to their present location and condition.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
(g) Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and that the revenue can be
reliably measured.
Sale of Goods and Services
Revenue is recognised when the significant risks and rewards of
ownership of the goods have passed to the buyer, on the basis of actual
despatch and are recorded net of discounts and sales taxes, but
including excise duty. Revenue from service contracts are recognised
pro-rata over the period of the contract as and when services are
rendered.
Interest
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
(h) Product Warranty Costs
Product warranty costs have been provided in the books of account on
the basis of expected claims as estimated by management.
(i) Foreign currency translation
Foreign currency transactions:
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.
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.
Exchange Differences
Exchange differences arising on the settlement of monetary items of the
company 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 in the year in which they
arise.
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 recognised 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 recognised as income or as expense for the
year.
(j) Retirement benefits
Retirement benefits to employees comprise contributions to gratuity,
superannuation and provident funds as per the approved scheme of the
Company.
Retirement benefits in the form of Provident Fund is a defined
contribution scheme and the contributions are charged to the Profit and
Loss Accounts 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.
Contributions to superannuation fund with LIC through its employees'
trust are charged to the profit and loss account on an accrual basis.
There are no other obligations other than the contribution made each
year.
Gratuity liability is a defined benefit obligation and is provided on
the basis of an actuarial valuation on projected unit credit method
made at the end of each financial year. The actuarial valuation is done
as per projected unit credit method.
Long term compensated absences are provided for based on actuarial
valuation at the end of each financial year. The actuarial valuation is
done as per projected unit credit method.
Actuarial gains/losses are immediately taken to profit and loss account
and are not deferred.
(k) Income tax
Tax expense comprises of 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. 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 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 tax
liabilities relate to the taxes on income levied by same governing
taxation laws. 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 situations 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 they 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 has become 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 writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer virtually certain, that
sufficient future taxable income will be available against which
deferred tax asset can be realised. Any such write-down is reversed to
the extent that it becomes virtually certain, that sufficient future
taxable income will be available.
(l) Earnings per share
Basic earnings/loss 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 share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average numbers of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
(m) Provisions
A provision is recognised when the Company has a present obligation as
a result of past events 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 their
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates. Contingent Liabilities are disclosed by way of Notes to the
accounts. Contingent assets are not recognised.
(n) Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet and for the purposes of
cash flow statement comprises of cash at bank and in hand.
Mar 31, 2010
(a) Basis of Preparation
The financial statements have been prepared to comply in all material
respects with the Accounting Standards notified by Companies
(Accounting Standards) Rule, 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.
Accounting policies have been consistently applied by the Company and
are consistent with those used 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. Although these estimates are based upon managements best
knowledge of current events and actions, actual results could differ
from these estimates.
(c) Fixed assets, Intangible Assets and depreciation
Fixed assets are stated at cost less accumulated depreciation and
impairment loss if any. Costs comprises the purchase price and any
attributable cost of bringing the assets to its working condition for
its intended use.
Intangible assets are recorded at the consideration paid for their
acquisition. They are amortised on straight line method as given
below:-
SAP Software - 6 years
Technical Know-how - 10 years
Depreciation on tangible assets is provided using the straight line
method as per useful lives of the asset estimated by the management or
at the rates specified in Schedule XIV to the Act, whichever is higher.
* Plant and machinery, Moulds, jigs and fixtures identified and
evaluated technically as obsolete by management are stated at their
estimated net realisable values.
Depreciation on fixed assets added during the year is provided on pro
rata basis with reference to date of addition except for assets
individually costing below Rs 5,000 are fully depreciated in the year
of purchase.
(d) Impairment
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.
(e) Leases
Operating Lease
Where Company is Lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased term, 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.
(f) Inventories
Inventories are valued as follows :
Raw Material, Components, : Lower of cost and net realizable value.
However, material and other items held for
use in the
Stores, Packing Material production of inventories are not written
down below cost if the finished products
in which
and spares they will be incorporated are expected to
be sold at or above cost. Cost is determined
on a weighted average basis.
Work-in-progress and : Lower of cost and net realizable value. Cost
includes direct materials and labour and a
finished goods proportion of manufacturing overheads based
on normal operating capacity. Cost of
finished goods includes excise duty. Cost
is determined on a weighted average basis.
Traded Goods : Traded goods are valued at lower of cost
and net realizable value. Cost is determined
on weighted average basis and includes
all costs of purchase, and other costs
incurred in bringing the inventories to
their present location and condition.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
(g) 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 and Services
Sales is recognised on the basis of actual despatch to customers and
are recorded net of discounts and sales taxes, but including excise
duty. Revenue from service contracts are recognised pro-rata over the
period of the contract as and when services are rendered.
Interest
Revenue is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
(h) Product Warranty Costs
Product warranty costs have been provided in the books of account on
the basis of expected claims as estimated by management.
(i) Foreign currency translation
Foreign currency transactions :
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.
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.
Exchange Differences
Exchange differences arising on the settlement 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 in the year in which they arise.
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 recognised 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 recognised as income or as expense for the
year.
(j) Retirement benefits
Retirement benefits to employees comprise contributions to gratuity,
superannuation and provident funds as per the approved scheme of the
Company.
Retirement benefits in the form of Provident Fund is a defined
contribution scheme and the contributions are charged to the Profit and
Loss Accounts 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.
Contributions to superannuation fund with LIC through its employees
trust are charged to the profit and loss account on an accrual basis.
There are no other obligations other than the contribution made each
year.
Gratuity liability is a defined benefit obligation and is provided on
the basis of an actuarial valuation on projected unit credit method
made at the end of each financial year.
Long term compensated absences are provided for based on actuarial
valuation. The actuarial valuation is done as per projected unit credit
method.
Actuarial gains/losses are immediately taken to profit and loss account
and are not deferred.
(k) Income tax
Tax expense comprises of current & 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. 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 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 tax
liabilities relate to the taxes on income levied by same governing
taxation laws. 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 situations 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 they 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 has become 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 writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer virtually certain, that
sufficient future taxable income will be available against which
deferred tax asset can be realised. Any such write-down is reversed to
the extent that it becomes virtually certain, that sufficient future
taxable income will be available.
(l) Earnings per share
Basic earnings/loss 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 share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average numbers of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
(m) Provisions
A provision is recognised when the Company has a present obligation as
a result of past events 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 their
present value and are determined based on best estimate required to
settle the obligation at the balance sheet date. These are reviewed at
each balance sheet date and adjusted to reflect the current best
estimates. Contingent Liabilities are disclosed by way of Notes to the
accounts. Contingent assets are not recognised.
Note :
(a) Perquisites have been determined on actual cost basis.
(b) The Company has made payments for managerial remuneration for which
Central Government approval has been received.
(c) There are no amounts payable to directors towards gratuity and
compensated absences and therefore not included above.
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Sharp India Ltd. Tools
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Sharp India Ltd. Company Details
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Company History
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Sharp India Ltd. Key Financial Ratios
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Sharp India Ltd. Results
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Sharp India Ltd. Financial Data
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Sharp India Ltd. Reports
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Sharp India Ltd. Corporate Announcements
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