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Accounting Policies of Stovec Industries Ltd. Company
Dec 31, 2024
1 General Information
Stovec Industries Limited ("the Company") was incorporated on 5th June, 1973. The Company''s factory and registered office is located in Ahmedabad, Gujarat. The Company is listed on Bombay Stock Exchange. The ultimate parent company is Print Holdings B.V., Netherlands. The Company is engaged in the manufacturing and selling of textile machinery & consumables, graphics consumables and digital machines.
The Financial statements were approved for issuance in accordance with a resolution of the Board of Directors on 12th February, 2025.
2 Basis of preparation
(i) Compliance with Ind AS
The financial statements comply in all material aspects with the 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.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
⦠certain financial assets and liabilities and contingent consideration is measured at fair value
⦠defined benefit plans - plan assets measured at fair value
(iii) New and amended standards adopted by the company
The Ministry of Corporate Affairs vide notification dated 31st March, 2023 notified the Companies (Indian Accounting Standards) Amendment Rules, 2023, which amended certain accounting standards (see below), and are effective 1st April 2023:
⦠Disclosure of accounting policies -amendments to Ind AS 1
⦠Definition of accounting estimates -amendments to Ind AS 8
⦠Deferred tax related to assets and liabilities arising from a single transaction -amendments to Ind AS 12
The other amendments to Ind AS notified by these rules are primarily in the nature of clarifications. These amendments did not have any material impact on the amounts recognised in prior
periods and are not expected to significantly affect the current or future periods.
3 Material Accounting Policies
The following are the material accounting policies applied by the Company in preparing its financial statements:
3.01 Current versus non-current classification:
The Company presents assets and liabilities in the Balance Sheet based on current/non-current classification. An asset is current when it is:
⢠Expected to be realised or intended to be sold or consumed in the normal operating cycle;
⢠Held primarily for the purpose of trading;
⢠Expected to be realised within twelve months after the reporting period; or
⢠Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
⢠It is expected to be settled in the normal operating cycle;
⢠It is held primarily for the purpose of trading;
⢠It is due to be settled within twelve months after the reporting period; or
⢠There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Operating cycle
Operating cycle of the Company is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. The Company has considered 12 months as its operating cycle.
3.02 Property, plant and equipment (including capital work-in- progress):
Freehold land is carried at historical cost. All other property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Refer
note 3.13 for the other accounting policies relevant to property, plant and equipment. Depreciation
Depreciation on property, plant and equipment (except free hold land) is provided on straight line basis over their useful lives of the assets as prescribed under Part C of Schedule II to the Companies Act, 2013 except as estimated by management based on internal technical assessment in the following cases:
|
Useful Life (Years) |
|
|
Mollets |
5 |
|
Sewage Treatment Plant - RCC Structure |
10 |
The management believes that these estimated useful lives are realistic and reflect fair appropriation of the period over which the assets are likely to be used.
When parts of an item of property, plant and equipment have different useful life, they are accounted for as separate items (Major Components) and are depreciated over their useful life or over the remaining useful life of the principal assets whichever is less.
The residual values are not more than 5% of the original cost of asset. The useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if required.
3.03 Intangible Assets:
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.
Research and development expenditure
Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the company can demonstrate:
- The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
- Its intention to complete and its ability and intention to use or sell the asset
- How the asset will generate future economic benefits
- The availability of resources to complete the asset
- The ability to measure reliably the expenditure during development
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation expense is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
During the period of development, the asset is tested for impairment annually.
Subsequent expenditures are capitalised only when they increase the future economic benefits embodied in the specific asset to which they relate.
Amortisation
Amortisation on the intangible assets are provided on straight line basis over the useful lives of the assets. Based on management technical evaluation the useful life of all intangible assets are considered for 3 years.
The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the Statement of Profit and Loss.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in the statement of profit and loss when the asset is derecognised.
3.04 Financial instruments:
A financial instrument is any contract that gives rise to a financial asset of one entity and a
financial liability or equity instrument of another
entity.
a) Financial assets
(i) Initial recognition and measurement of financial assets
⦠The classification of financial assets at initial recognition depends on the financial asset''s contractual cash flow characteristics and the Company''s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient, the Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are âsolely payments of principal and interest (SPPI)'' on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.
Financial assets classified and measured at amortised cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows while financial assets classified and measured at fair value through OCI are held within a business model with the objective of both holding to collect contractual cash flows and selling.
(ii) Subsequent measurement of financial assets
For purposes of subsequent measurement, financial assets are classified in two categories:
⢠Financial assets at fair value through other comprehensive income (FVTOCI)
⢠Financial assets at fair value through profit or loss (FVTPL)
⢠Financial assets at fair value through other comprehensive income (FVTOCI)
A financial asset is classified as at the fair value through other comprehensive income if both the following criteria are met:
- the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and
- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
Instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. For debt instruments, at fair value through OCI, interest income, foreign exchange revaluation and impairment losses or reversals are recognised in the profit or loss and computed in the same manner as for financial assets measured at amortised cost. The remaining fair value changes are recognised in OCI. Upon derecognition, the cumulative fair value changes recognised in OCI is reclassified from the equity to profit or loss.
⢠Financial assets at fair value through profit or loss (FVTPL)
Any finance assets, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.
Financial assets at fair value through profit or loss are carried in the balance sheet at fair value with net changes in fair value recognised in the statement of profit and loss.
This category includes derivative instruments and equity investments which the Company had not irrevocably
elected to classify at fair value through OCI. Dividends on equity investments are recognised in the statement of profit and loss when the right of payment has been established.
In addition, the Company may elect to designate a financial asset, which otherwise meets amortized cost or fair value through other comprehensive income criteria, as at fair value through profit or loss. However, such election is adopted only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as âaccounting mismatch'').
After initial measurement, such financial assets are subsequently measured at fair value with all changes recognised in Statement of profit and loss
(iii) De-recognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the company''s balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset and has not transferred control of the asset, the Company continues to recognise the transferred asset to the extent
of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
(iv) Impairment of financial assets
In accordance with Ind-AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
- Trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115.
For trade receivables, the company applies a simplified approach in calculating ECLs. Therefore, the Company does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Company has established a provision matrix that is based on its historical credit loss experience, adjusted for forwardlooking factors specific to the debtors and the economic environment.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets whose credit risk has not significantly increased since initial recognition, loss allowance equal to twelve months expected credit loss is recognised. Loss allowance of equal to the lifetime expected credit losses is recognised if the credit risk of the financial asset has significantly increased since initial recognition.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as expense/ income in the Statement of Profit and Loss (P&L). This amount is reflected in a separate line under the head âOther expensesâ in the P&L. The balance sheet presentation for financial assets measured as at amortised cost: ECL is
presented as an allowance, i.e. as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
For assessing increase in credit risk and impairment loss, the Company combines financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increases in credit risk to be identified on a timely basis.
b) Financial liabilities and equity instruments
(i) I nitial recognition and measurement of financial liabilities
Financial liabilities such as loans, borrowings and payables are classified, at initial recognition, as financial liabilities, net of directly attributable transaction costs, at fair value through profit or loss, as appropriate.
The Company''s financial liabilities include trade and other payables and derivative financial instruments.
(ii) Subsequent measurement of financial liabilities
The measurement of financial liabilities depends on their classification, as described below:
⢠Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. Company has not designated any liability at fair value through profit or loss.
⢠Financial liabilities at amortised cost
After initial recognition, interestbearing borrowings are subsequently measured at amortised cost using the Effective Interest Rate - EIR method. Gains and losses are recognised in
profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
(iii) De-recognition of financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
c) Re-classification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities.
3.05 Inventories:
The costs of individual items of inventory are determined on a moving weighted average cost basis. Volume rebates or discounts are taken into account when estimating the cost of inventory if it is probable that they have been earned and will take effect. Refer note 3.19 for the other accounting policies for inventories.
3.06 Provisions and contingencies:
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects, when appropriate, the risks specific to the liability.
Provision for warranty costs are recongnised when product is sold to customers. Initial recognition is based on past experience. Contingent liabilities are disclosed for (i) when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company or (ii) a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or the amount of the obligation cannot be measured with sufficient reliability. The company does not recognize a contingent liability but discloses its existence in the financial statements.
Contingent assets are not recognised in the financial statements.
3.07 Revenue Recognition:
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company has generally concluded that it is the principal in its revenue arrangements.
Sale of goods and services
Revenue from the sale of goods is recognised at the point in time when control of the asset is transferred to the customer, generally on the dispatch / delivery of the product. In case of sale of Textile Machines, revenue recognised is based on the dispatch /delivery of machines on completion of manufacturing. Allocated portion of transactions price towards installation revenue is deferred and recognised when the installation is completed and acknowledged by the customers. The Company collects Goods and Services Tax (GST) on behalf of the Government which is not economic benefits flowing to the company and hence, is excluded from revenue.
The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. Transaction price is reasonably allocated based on amount of expenditure to be incurred to deliver separate performance obligation when standalone selling prices are not observable.
Service income is recognised at the point in time after completion of services in accordance with the terms of contracts. In case of Annual Maintenance Services, revenue recognised over period of time.
Contract liabilities
A contract liability is recognised if a payment is received or a payment is due (whichever is earlier) from a customer before the Company transfers the related goods or services. Contract liabilities are recognised as revenue when the Company performs its obligations under the contract (i.e., transfers control of the related goods or services to the customer).
Trade receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business and reflect the company''s unconditional right to consideration (that is, payment is due only on the passage of time).
Trade receivables are recognised initially at the transaction price as they do not contain significant financing components. The company holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method, less loss allowance.
For trade receivables and contract assets, the company applies the simplified approach required by Ind AS 109, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
Cost to obtain a contract and cost to fulfil a contract
The company recognise sales commission as an expense in the period in which related revenue is recognised and offset against revenue recognised.
Cost to fulfil a contract i.e. freight, insurance and other selling expenses are recognised as an expense in the period in which related revenue is recognised.
Commission income
Commission income is recognised and accounted on accrual basis.
3.08 Other Income:
Sale of Scrap
Revenue from the sale of scrap is recognised at the point in time when scrap has been dispatched / sold and control is transferred.
Export Benefits
Export benefits are recognized for export of goods, if the entitlement can be estimated with reasonable accuracy and conditions precedent to claim are fulfilled.
Interest income
Interest income on financial assets at amortised cost is recognised on time proportion basis using the effective interest rate method, based on the underlying interest rates.
Lease rental Income
Lease rental income from operating leases are recognised on accrual basis.
3.09 Retirement and other employee benefits:
a) Short Term Employee Benefits:
All employee benefits payable within twelve months of rendering the service are classified as short term benefits. Such benefits include salaries, wages, bonus, short term compensated absences, awards, ex-gratia, performance pay etc. and the same are recognised in the period in which the employee renders the related service.
b) Post-Employment Benefits :
(i) Defined contribution plan Contributions to retirement benefit plans in the form of provident fund and employee state insurance scheme as per regulations are charged as an expense on an accrual basis when employees have rendered the service. The Company has no further payment obligations once the contributions have been paid.
(ii) Defined benefit plan
The employee''s gratuity fund scheme is Company''s defined benefit plan. A defined benefit retirement plan covering eligible employees through Group Gratuity Scheme of Life Insurance Corporation of India. The present value of the obligation under such defined benefit plans is determined based on the actuarial valuation using
the Projected Unit Credit Method as at the date of the Balance sheet. The fair value of plan asset is reduced from the gross obligation under the defined benefit plans, to recognise the obligation on the net basis Re-measurements, comprising
of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to Statement of Profit and Loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the Statement of profit and loss:
⢠Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
⢠Net interest expense or income
c) Other long term employment benefits:
Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.
The Company treats accumulated leave expected to be carried forward beyond twelve months, as other long-term employee benefit for measurement purposes. 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 said 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.
3.10 Earnings Per Share:
Basic EPS is calculated by dividing the profit for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year.
Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
3.11 Segment reporting:
The operating segments are the segments for which separate financial information is available and for which operating profit / loss amounts are evaluated regularly by the Chief Operating Decision Maker (CODM) in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment.
Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under âunallocated revenue / expenses / assets / liabilitiesâ.
3.12 Significant Accounting judgments, estimates and assumptions:
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. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements. In addition, this note also explains where there have been actual adjustments this year as a result of changes to previous estimates.
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 as below:
i) Useful lives of property, plant and equipment/intangible assets:
The charge in respect of periodic depreciation is derived after determining an estimate of an asset''s expected useful life and the expected residual value at the end of its life. The useful lives and residual values of the Company''s assets are determined by management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology (refer notes 3.02, 3.03, 3.13 and 4).
ii) Defined benefit plans
The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of
the discount rate, future salary increases, attrition rate and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date (refer note no 28).
iii) Contingent liabilities
In the normal course of business, contingent liabilities may arise from litigation and other claims against the company. Potential liabilities that are possible but not probable of crystallising or are very difficult to quantify reliably are treated as contingent liabilities. Such liabilities are disclosed in the notes but are not recognised. Potential liabilities that are remote are neither recognized nor disclosed as contingent liability. The management judgement is involved in classification under âremote'', âpossible'' or âprobable'' which is carried out based on expert advice, past judgements, experiences etc. (refer note 31).
iv) Product warranties
Significant management judgments are involved in determining the estimates and provides for liability for product warranties in the year in which the products are sold. These estimates are established using historical information on the nature, frequency, quantum of warranty claims and corrective actions against product failures and the estimates are reviewed annually for any material changes in assumptions. Assumptions used to calculate the provision for warranties are based on current sales level and current information available about returns. The timing of outflows will vary based on the actual warranty claims (refer note 16).
v) Impairment of financial assets (loss allowance)
The Company follows the simplified approach for recognition of impairment loss allowance on trade receivables by using the expected credit loss (ECL) model for recognition and measurement of impairment losses (loss allowance) on the Trade receivables, contract assets or any contractual right to receive cash or another
financial asset that result from transactions that are within the scope of Ind AS 115 (refer note 7).
vi) Write down of inventories
An inventory obsolete provision and inventory written down is estimated taking into account various factors, including policy of the company, aging of inventory, past experience, current trend and future expectations (refer note 6).
vii) Allocation of transaction price for installation Revenue:
Transaction Price is allocated between sale of textile machinery and installation of machine as seperate performance obligation based on estimated cost to be incurred for installation services and it is compared with machine cost in absence of directly identifiable standalone rate. (refer note 33)
Other Accounting Policies
The following are the other accounting policies applied by the Company in preparing its financial statements:
3.13 Property, plant and equipment (including capital work-in-progress):
The cost comprises of its purchase price and other incidental expenses that are directly attributable to the acquisition of the asset. When significant parts of Property, plant and equipment are required to be replaced at intervals, the Company recognises such parts as individual assets with specific useful lives and depreciates them accordingly. Subsequent expenditure related to an item of property plant and equipment is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance.
Spare parts, and servicing equipment are recognised when they meet the definition of property, plant and equipment. Otherwise, such items are classified as inventory. Repairs and maintenance costs are recognised in profit or loss as incurred.Capital work-in-progress comprises cost of capital assets that are not yet installed and ready for their intended use at the balance sheet date.A Property Plant and equipment is derecognised upon disposal or when no future economic benefits are expected
from its use or disposal. Any gain or loss arising upon derecognition of the assets which is 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 derecognised.
3.14 Cash and cash equivalents:
Cash and cash equivalents in the balance sheet and for the purpose of cash flow statement, comprise cash at bank including demand deposits readily realisable with banks with an original maturity of three months or less, that are readily convertible to a known amount of cash and subject to an insignificant risk of changes in value and cash in hand.
3.15 Impairment of non-financial assets:
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cashgenerating unit''s (CGU) fair value less costs to sell 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 of the Company. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cashgenerating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. When 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. The impairment loss is recognized in the statement of profit and loss.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to disposal, recent market transactions are taken into account, if available. The Company bases its impairment calculation on future cash flows after considering economic condition and estimated future operating results which are prepared separately for each of the Company''s CGU.
After impairment, depreciation/ amortisation is provided on the revised carrying amount of the asset over its remaining useful life.
3.16 Borrowing Costs:
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
3.17 Operating Leases
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Company as a lessee:
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term. Company as a lessor:
Leases in which the company does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms. Initial direct costs incurred in negotiating and arranging an operating lease
are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.
3.18 Foreign currencies:
The Company''s financial statements are presented in Indian Rupee (INR), which is the functional and presentation currency of Company.
Transactions and balances
Transactions in foreign currencies are initially recorded in the Company''s functional currency using exchange rate prevailing on the date of transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency with closing rates of exchange at the reporting date. Exchange differences arising on settlement of such transaction and on translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rate are recognised in the Statement of Profit and Loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are recorded using the exchange rates at the date of transaction.
3.19 Inventories:
Raw materials and stores, work-in-progress, traded and finished goods.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
i) Raw materials, packing materials, stores, spares and tools and traded goods: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is computed on a moving weighted average cost basis.
ii) Finished goods and work-in-progress: Cost includes cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity, but excluding borrowing costs. Material cost is determined on moving weighted average cost basis.
Inventories of Raw material, Work-in-progress, Finished goods, packing materials, stores, spares and tools and stock-in-trade (traded
goods) are measured at the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
The Company writes down the inventory value where the realisable value is estimated to be lower than the inventory carrying value because of slow or non-moving inventories, as per policy consistently followed by the Company.
3.20 Taxation:
Tax expense comprises of current income tax and deferred tax.
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date. Current income tax are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation.
Deferred income tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
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 utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised 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 measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax 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 taxes relate to the same taxable entity and the same taxation authority.
Deferred tax relating to items recognised outside Statement of profit and loss is recognised outside Statement of profit and loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.
3.21 Rounding off amounts:
The financial statements are presented in '' in Millions and all values are disclosed in '' in million except when otherwise stated. Amounts below rounding off norms are represented as "0.00".
Dec 31, 2023
1 GENERAL INFORMATION
Stovec Industries Limited ("the Company") was incorporated on 5th June, 1973. The Company''s factory and registered office is located in Ahmedabad, Gujarat. The Company is listed on Bombay Stock Exchange. The ultimate parent company is Print Holdings B.V., Netherland. The Company is engaged in the manufacturing and selling of Textile Machinery & Consumables, Graphics Consumables and Digital Machines. The Company is a Technology and Market leader in Rotary Screen Printing Industry in India.
The Financial statements were approved for issuance in accordance with a resolution of the Board of Directors on 26th February, 2024.
The Financial statements of the Company have been prepared in accordance with Indian Accounting Standards (âInd ASâ) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) and presentation requirements of Division II of Schedule III to the Companies Act 2013, (Ind AS compliant Schedule III), as applicable to Financial statements.
The financial statements are prepared on a going-concern basis.
These Financial statements have been prepared on a historical cost convention and on an accrual basis, except for the following assets and liabilities which have been measured at fair value:
⢠Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments)
Historical cost is the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire assets at the time of their acquisition, or the amount of proceeds received in exchange for the obligation, or at the amount of cash or cash equivalents expected to be paid to satisfy the liability in the normal course of business.
The financial statements are presented in '' in Millions and all values are disclosed in '' in million except when otherwise stated.
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following are the significant accounting policies applied by the Company in preparing its financial statements:
3.01 Current versus non-current classification:
The Company presents assets and liabilities in the Balance Sheet based on current/non-current classification. An asset is current when it is:
⢠Expected to be realised or intended to be sold or consumed in the normal operating cycle;
⢠Held primarily for the purpose of trading;
⢠Expected to be realised within twelve months after the reporting period; or
⢠Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
⢠It is expected to be settled in the normal operating cycle;
⢠It is held primarily for the purpose of trading;
⢠It is due to be settled within twelve months after the reporting period; or
⢠There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Company classifies all other liabilities as noncurrent.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Operating cycle of the Company is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. The Company has considered 12 months as its operating cycle.
3.02 Property, Plant and Equipment:
Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises of its purchase price and other incidental expenses that are directly attributable to the acquisition of the asset. When significant parts of Property, plant and equipment are required to be replaced at intervals, the Company recognises such parts as individual assets with specific useful lives and depreciates them accordingly. Subsequent expenditure related to an item of property plant and equipment is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance.
The cost of stores and spares above the threshold determined by management and which qualify as property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. Repairs and maintenance costs are recognised in profit or loss as incurred.
Capital work-in-progress comprises cost of capital assets that are not yet installed and ready for their intended use at the balance sheet date.
A Property Plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the assets which is 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 derecognised.
Depreciation on property, plant and equipment (except free hold land) is provided on straight line basis over their useful lives of the assets as prescribed under Part C of Schedule II to the Companies Act 2013 or as estimated by management based on internal assessment in the following cases:
|
Useful Life (Years) |
||
|
Mollets |
5 |
|
|
Sewage Treatment Plant Structure |
RCC |
10 |
The management believes that these estimated useful lives are realistic and reflect fair appropriation
of the period over which the assets are likely to be used.
When parts of an item of property, plant and equipment have different useful life, they are accounted for as separate items (Major Components) and are depreciated over their useful life or over the remaining useful life of the principal assets whichever is less.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if required.
Intangible assets acquired separately by the company and that have finite useful lives are measured on initial recognition at cost. Following initial recognition, other Intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any.
Subsequent expenditures are capitalised only when they increase the future economic benefits embodied in the specific asset to which they relate.
Amortisation on the following intangible assets are provided on straight line basis over the useful lives of the assets as estimated by management based on internal assessment. The management estimates the useful lives as follows:
|
Useful Life (Years) |
|
|
Computer Software |
3 |
The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the Statement of Profit and Loss.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as
the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in the statement of profit and loss when the asset is derecognised.
3.04 Impairment of non-financial assets:
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (CGU) fair value less costs to sell 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 of the Company. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cashgenerating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. When 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. The impairment loss is recognized in the statement of profit and loss.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to disposal, recent market transactions are taken into account, if available.
The Company bases its impairment calculation on future cash flows after considering economic condition and estimated future operating results which are prepared separately for each of the Company''s CGU.
After impairment, depreciation/ amortisation is provided on the revised carrying amount of the asset over its remaining useful life.
Inventories of Raw material, Work-in-progress, Finished goods, packing materials, stores, spares and tools and stock in trade (traded goods) are measured at the lower of cost and net realisable
value. Raw 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.
Costs incurred in bringing each product to its present location and condition are accounted for as follows:
i) Raw materials, packing materials, stores, spares and tools and traded goods: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is computed on a moving weighted average cost basis.
ii) Finished goods and work in progress: cost includes cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity, but excluding borrowing costs. Material cost is determined on moving weighted average cost basis.
Net realisable value is determined based on estimated selling price, less estimated costs of completion.
The Company writes down the inventory value where the realisable value is estimated to be lower than the inventory carrying value because of slow or non-moving inventories, as per policy consistently followed by the Company.
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company has generally concluded that it is the principal in its revenue arrangements.
Revenue from the sale of goods is recognised at the point in time when control of the asset is transferred to the customer, generally on the dispatch / delivery of the product. In case of sale of Textile Machines, revenue recognised is based on the dispatch /delivery of machines on completion of manufacturing. A certain portion of revenue towards installation is also deferred and
recorded when the installation is completed to the satisfaction of the customers.
The Company collects Goods and Services Tax (GST) on behalf of the Government which is not economic benefits flowing to the company and hence, is excluded from revenue.
The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated.
Service income is recognised at the point in time after completion of services in accordance with the terms of contracts. In case of Annual Maintenance Services, revenue recognised over period of time. The same is recorded net of GST.
A contract liability is recognised if a payment is received or a payment is due (whichever is earlier) from a customer before the Company transfers the related goods or services. Contract liabilities are recognised as revenue when the Company performs its obligations under the contract (i.e., transfers control of the related goods or services to the customer).
A receivable is recognised if an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Refer to accounting policies of financial assets in section Financial instruments -initial recognition and subsequent measurement.
Rights of Return
A refund liability is recognized for the goods that are expected to be returned (i.e., the amount not included in the transaction price). A right of return asset (and corresponding adjustment to cost of sales) is also recognised for the right to recover the goods from a customer.
Cost to obtain a contract and cost to fulfil a contract
The company recognise sales commission as an expense in the period in which related revenue is recognised.
Cost to fulfil a contract i.e. freight, insurance and other selling expenses are recognised as an expense in the period in which related revenue is recognised.
Commission income is recognised and accounted on accrual basis.
Interest income primarily comprise of interest from deposit with bank. Interest Income is recorded using the effective interest rate (EIR). The EIR is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument but does not consider the expected credit losses.
Export benefits are recognized for export of goods, if the entitlement can be estimated with reasonable accuracy and conditions precedent to claim are fulfilled.
Lease rental income from operating leases are recognised on accrual basis.
Revenue from the sale of scrap is recognised at the point in time when scrap has been dispatched / sold.
3.07 Retirement and other employee benefits:
a) Short Term Employee Benefits:
All employee benefits payable within twelve months of rendering the service are classified as short term benefits. Such benefits include salaries, wages, bonus, short term compensated absences, awards, ex-gratia, performance pay etc. and the same are recognised in the period in which the employee renders the related service.
b) Post-Employment Benefits :
(i) Defined contribution plan
Retirement benefit in the form of provident fund are defined contribution scheme. Provident fund contribution is made to the Government administered provident fund. The company has no
obligation, other than the contribution payable to the provident fund. The company recognizes contribution payable to the provident fund as an expenditure, when an employee renders the related service.
The employee''s gratuity fund scheme is Company''s defined benefit plan. A defined benefit retirement plan covering eligible employees through Group Gratuity Scheme of Life Insurance Corporation of India. The present value of the obligation under such defined benefit plans is determined based on the actuarial valuation using the Projected Unit Credit Method as at the date of the Balance sheet. The fair value of plan asset is reduced from the gross obligation under the defined benefit plans, to recognise the obligation on the net basis
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to Statement of Profit and Loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the Statement of profit and loss:
⢠Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
⢠Net interest expense or income
c) Other long term employment benefits:
Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.
The Company treats accumulated leave expected to be carried forward beyond twelve months, as other long-term employee benefit for measurement purposes. Such other longterm compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. The Company presents the leave as a current liability in the balance sheet; to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date. Where Company has the unconditional legal and contractual right to defer the settlement for a period beyond 12 months, the same is presented as non-current liability. The classification of leave liability between current and non-current is based on actuarial report.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
(i) Initial recognition and measurement of financial assets
The classification of financial assets at initial recognition depends on the financial asset''s contractual cash flow characteristics and the Company''s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient, the Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or
for which the Company has applied the practical expedient are measured at the transaction price determined under Ind AS 115.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ''solely payments of principal and interest (SPPI)'' on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.
Financial assets classified and measured at amortised cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows while financial assets classified and measured at fair value through OCI are held within a business model with the objective of both holding to collect contractual cash flows and selling.
(ii) Subsequent measurement of financial assets
For purposes of subsequent measurement, financial assets are classified in three categories:
⢠Financial assets at amortised cost
⢠Financial assets at fair value through other comprehensive income (FVTOCI)
⢠Financial assets at fair value through profit or loss (FVTPL)
Financial assets at amortised cost (debt instruments)
A Financial asset is measured at amortised cost if both the following condition are met:
- the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows, and;
- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss.
⢠Financial assets at fair value through other comprehensive income (FVTOCI)
A financial asset is classified as at the fair value through other comprehensive income if both the following criteria are met:
- the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and
- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
I nstruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. For debt instruments, at fair value through OCI, interest income, foreign exchange revaluation and impairment losses or reversals are recognised in the profit or loss and computed in the same manner as for financial assets measured at amortised cost. The remaining fair value changes are recognised in OCI. Upon
derecognition, the cumulative fair value changes recognised in OCI is reclassified from the equity to profit or loss.
The Company has equity investments in two entities which are not held for trading. The Company has elected the FVTOCI irrevocable option for these investments (refer note 5). Fair value is determined in the manner described in below note. Dividends on equity investments are recognised in the statement of profit and loss when the right of payment has been established.
⢠Financial assets at fair value through profit or loss (FVTPL)
Any finance assets, which does not meet the criteria for categorization as at amortized cost or as FVTOCI, is classified as at FVTPL.
Financial assets at fair value through profit or loss are carried in the balance sheet at fair value with net changes in fair value recognised in the statement of profit and loss.
This category includes derivative instruments and equity investments which the Company had not irrevocably elected to classify at fair value through OCI. Dividends on equity investments are recognised in the statement of profit and loss when the right of payment has been established.
I n addition, the Company may elect to designate a financial asset, which otherwise meets amortized cost or fair value through other comprehensive income criteria, as at fair value through profit or loss. However, such election is adopted only if doing so reduces or eliminates a measurement or recognition inconsistency (referred to as ''accounting mismatch'').
After initial measurement, such financial assets are subsequently measured at fair value with all changes recognised in Statement of profit and loss
(iii) De-recognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the company''s balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset and has not transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
(iv) Impairment of financial assets
In accordance with Ind-AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
- Financial assets that are debt instruments, and are measured at amortised cost e.g., trade receivables and bank balance.
- Trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115.
For trade receivables, the company applies a simplified approach in calculating ECLs. Therefore, the Company does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Company has established a provision matrix that is based on its historical credit loss experience, adjusted for forwardlooking factors specific to the debtors and the economic environment.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets whose credit risk has not significantly increased since initial recognition, loss allowance equal to twelve months expected credit loss is recognised. Loss allowance of equal to the lifetime expected credit losses is recognised if the credit risk of the financial asset has significantly increased since initial recognition.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as expense/ income in the Statement of Profit and Loss (P&L). This amount is reflected in a separate line under the head "Other expensesâ in the P&L. The balance sheet presentation for financial assets measured as at amortised cost: ECL is presented as an allowance, i.e. as an integral part of the measurement of those assets in the balance sheet.
The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
For assessing increase in credit risk and impairment loss, the Company combines financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increases in credit risk to be identified on a timely basis.
B) FINANCIAL LIABILITIES AND EQUITYINSTRUMENTS
(i) Initial recognition and measurement of financial liabilities
Financial liabilities such as loans, borrowings and payables are classified, at initial recognition, as financial liabilities, net of directly attributable transaction costs, at fair value through profit or loss, as appropriate.
The Company''s financial liabilities include trade and other payables and derivative financial instruments.
(ii) Subsequent measurement of financial liabilities
The measurement of financial liabilities depends on their classification, as described below:
⢠Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial l iabil ities are cl assified as h el d for trading if they are incurred for the purpose of repurchasing in the near term. Company has not designated any liability at fair value through profit or loss.
⢠Financial liabilities at amortised cost
After initial recognition, interest-bearing borrowings
are subsequently measured at amortised cost using the Effective Interest Rate - EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
(iii) De-recognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
C) DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments, such as forward currency contract to hedge its foreign currency risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss.
D) RE-CLASSIFICATIONOFFINANCIALASSETS
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities.
E) OFFSETTING OF FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
The Company measures financial instruments such as derivatives at fair value at the end of each reporting period.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
⢠In the principal market for the asset or liability, or
⢠I n the absence of a principal market, in the most advantageous market for the asset or liability.
The fair value of an asset or a liability is measured using the assumptions that market participants act in their economic best interest.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
⢠Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
⢠Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
⢠Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the company determines whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
At each reporting date, management analyses the movements in the values of assets and liabilities which are required to be re-measured or reassessed as per the Company''s accounting policies.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy, as explained above.
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 capitalised as part of the cost of the respective asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
Company as a lessor:
Leases in which the company does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.
The Company''s financial statements are presented in Indian Rupee (''), which is the functional currency of Company.
Transactions in foreign currencies are initially recorded in the Company''s functional currency using exchange rate prevailing on the date of transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency with closing rates of exchange at the reporting date. Exchange differences arising on settlement of such transaction and on translation of monetary assets and liabilities denominated in
foreign currencies at year end exchange rate are recognised in the Statement of Profit and Loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are recorded using the exchange rates at the date of transaction.
Tax expense comprises of current income tax and deferred tax.
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date.
Current income tax are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation.
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
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 utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised 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 measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax 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 taxes relate to the same taxable entity and the same taxation authority.
Deferred tax relating to items recognised outside Statement of profit and loss is recognised outside Statement of profit and loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed.
The Company identifies primary segments based on the dominant source, nature of risks and returns and the internal organisation and management structure. The operating segments are the segments for which separate financial information is available and for which operating profit / loss amounts are evaluated regularly by the Chief Operating Decision Maker (CODM) in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities
have been identified to segments on the basis of their relationship to the operating activities of the segment.
Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under "unallocated revenue / expenses / assets / liabilitiesâ
3.16 Research and development expenditure
Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the company can demonstrate:
- The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
- I ts intention to complete and its ability and intention to use or sell the asset
- How the asset will generate future economic benefits
- The availability of resources to complete the asset
- The ability to measure reliably the expenditure during development
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation expense is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
During the period of development, the asset is tested for impairment annually.
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects, when appropriate, the risks specific to the liability.
The Company estimates and provides for liability for product warranties in the year in which the products are sold. These estimates are established using historical information on the nature, frequency, quantum of warranty claims and corrective actions against product failures and the estimates are reviewed annually for any material changes in assumptions. Assumptions used to calculate the provision for warranties are based on current sales level and current information available about returns. The timing of outflows will vary based on the actual warranty claims.
Contingent liabilities are disclosed for (i) when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company or (ii) a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or the amount of the obligation cannot be measured with sufficient reliability. The company does not recognize a contingent liability but discloses its existence in the financial statements.
3.19 Cash and cash equivalents
Cash and cash equivalents in the balance sheet and for the purpose of cash flow statement, comprise cash at bank including demand deposits readily realisable with banks with an original maturity of three months or less, that are readily convertible to a known amount of cash and subject to an insignificant risk of changes in value and cash in hand.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Company''s cash management.
3.20 Cash dividend distribution to equity holders
The Company recognises a liability to pay dividend to equity holders of the Company when the distribution is authorised and the distribution is no longer at the discretion of the Company. As per the Companies Act, 2013, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.
Basic EPS is calculated by dividing the profit for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year.
Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
3.22 Significant Accounting judgments, estimates and assumptions:
The preparation of the Company''s financial statements as per Ind AS requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Actual results may differ from these estimates that require a material adjustment to the carrying amount of assets or liabilities. Revisions to accounting estimates are recognised prospectively.
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 as below:
i) Useful lives of property, plant and equipment/ intangible assets:
Determination of the estimated useful lives of property, plant and equipment/ intangible assets and the assessment as to which components of the cost may be capitalized.
Useful lives of property, plant and equipment/ intangible assets are based on the life prescribed in Schedule II of the Companies Act, 2013.
ii) Fair value measurement of financial instruments:
I n estimating the fair value of financial assets and financial liabilities, the Company uses market observable data to the extent available. Where such Level 1 inputs are not available, the Company establishes appropriate valuation techniques and inputs to the model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements 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 to note no 35 for the details of financial instruments valued at fair value.
The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, attrition rate and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. Information about the various estimates and assumptions made in determining the present value of defined benefit obligations are disclosed in note no 27.
iv) Taxes
Significant management judgement is required to determine the amounts of current taxes, deferred taxes and tax credits that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies (refer note 25).
v) Product warranties
Significant management judgments are involved in determining the estimates and provides for liability for product warranties in the year in which the products are sold. These estimates are established using historical information on the nature, frequency, quantum of warranty claims and corrective actions against product failures and the estimates are reviewed annually for any material changes in assumptions. Assumptions used to calculate the provision for warranties are based on current sales level and current information available about returns. The timing of outflows will vary based on the actual warranty claims (refer note 16).
vi) Impairment of financial assets
The impairment provisions for Financial Assets are based on assumptions about risk of default and expected cash loss. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Company''s past history, existing market conditions as well as forward looking estimates at the end of each reporting period (refer note 7).
vii) Write down of inventories
An inventory obsolete provision is recognised where the realisable value is estimated to be lower than the inventory carrying value. The inventory written down is estimated taking into account various factors, including policy of the company, aging of inventory, past experience, current trend and future expectations (refer note 6).
viii) Recognition of revenue from contracts with customers for sale of textile machinery:
Revenue from sale of textile machinery is recognized in accordance with Ind AS 115, Revenue from Contracts with Customers, based on the dispatch/delivery of machines on completion of manufacturing (at a point in time). A certain portion of revenue is also deferred and recognised when the installation is completed to the satisfaction of the customers.
ix) Refundable liabilities and returnable assets:
A refundable liability is the obligation to refund some or all of the consideration received (or receivable) from the customer and is measured at the amount the Company ultimately expects it will have to return to the customer. The Company updates its estimates of refundable liabilities at the end of each reporting period based on historical trend. A returnable asset is measured at the expected cost of goods to be recovered on such returns estimated on the basis of historic trends of gross margin. Assumptions used to estimate refundable liabilities and returnable assets are based on current sales level and current information available about sales returns. The timing of outflows will vary based on the actual sales returns (refer notes 10 and 15).
3.23 New Standards, Interpretations and amendments adopted by the Company
The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the preparation of the Company''s annual financial statements for the year ended 31st December, 2022, except for amendments to the existing Indian Accounting standards (Ind AS).
The Ministry of Corporate Affairs has notified Companies (Indian Accounting Standard) Amendment Rules 2022 dated 23rd March, 2022, to amend the following Ind AS which are effective from annual periods beginning on or after 1st April, 2022. The Company applied for the first time these amendments.
1. Onerous Contracts - Costs of Fulfilling a Contract - Amendments to Ind AS 37
2. Reference to the Conceptual Framework - Amendments to Ind AS 103
3. Property, Plant and Equipment: Proceeds before Intended Use - Amendments to Ind AS 16
4. Ind AS 109 Financial Instruments - Fees in the ''10 per cent'' test for derecognition of financial liabilities
The Company applies for the accounting period beginning on or after 1st April 2022 and these do not have a material impact on the financial statements of the Company.
3.24 Standards notified but not yet effective
The amendments to standards that are issued, but not yet effective, up to the date of issuance of the Company''s financial statements are disclosed below. The Company intends to adopt these standards, if applicable, as and when they become effective. The Ministry of Corporate affairs (MCA) has notified certain amendments to Ind AS, through Companies (Indian Accounting Standards) Amendment Rules, 2023 on 31st March, 2023. The amendments have been made in the following standards:
Ind AS 1: Presentation of Financial Statements is amended to replace the term "significant accounting policiesâ with "material accounting policy informationâ and providing guidance relating to immaterial transactions, disclosure of entity specific transactions and more
Ind AS 8: Accounting Policies, Changes in Accounting Estimates and Errors to include the definition of accounting estimates as "monetary amounts in financial statements that are subject to measurement uncertaintyâ
Ind AS 12: Income Taxes relating to initial recognition exemption of deferred tax related to assets and liabilities arising from a single transaction.
Dec 31, 2018
1) Statement of significant accounting policies 1.1 Basis of preparation of Financial Statements The Standalone Ind AS Financial Statements of the Company as at December 31, 2018 has been prepared under Indian Accounting Standards (''Ind AS'') notified under Section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015. The financial statements have been prepared on the historical cost convention, except for certain financial instruments that are measured at fair value at the end of each reporting period in accordance with Ind AS. Fair value measurements under Ind AS are categorised as below based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety: - Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the company can access at measurement date; - Level 2 inputs are inputs, other than quoted prices included in level 1, that are observable for the asset or liability, either directly or indirectly; and - Level 3 inputs are unobservable inputs for the valuation of assets/liabilities. 2.2 Significant Accounting judgments, estimates and assumptions: The preparation of the Company''s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures and the disclosure of contingent liabilities. The estimates and assumptions are based on historical experience and other factors that are considered to be relevant. The estimates and underlying assumptions are reviewed on an ongoing basis and any revisions thereto are recognized in the period in which they are revised or in the period of revision and future periods if the revision affects both the current and future periods. Actual results may differ from these estimates which could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities in future periods. Estimates and assumptions: Key Sources of estimation uncertainty: 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. Existing circumstances and assumptions about future developments 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. i) Useful lives of property, plant and equipment/ intangible assets: Determination of the estimated useful lives of property, plant and equipment/ intangible assets and the assessment as to which components of the cost may be capitalized. Useful lives of property, plant and equipment/ intangible assets are based on the life prescribed in Schedule II of the Companies Act, 2013. In cases, where the useful lives are different from that prescribed in Schedule II, they are based on technical advice / evaluation, taking into account the nature of the asset, the estimated usage of the asset, operating conditions of the asset. Refer Note no 2.6 and 2.7 for useful life of each type of property, plant and equipment/ intangible assets. ii) Fair value measurement of financial instruments: In estimating the fair value of financial assets and financial liabilities, the Company uses market observable data to the extent available. Where such Level 1 inputs are not available, the Company establishes appropriate valuation techniques and inputs to the model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements 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 to Note no 36(A) for the details of financial instruments valued at fair value. iii) Defined benefit plans (gratuity benefits) The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, attrition rate and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. Information about the various estimates and assumptions made in determining the present value of defined benefit obligations are disclosed in Note no 29B. iv) Taxes Significant management judgement is required to determine the amounts of current taxes, deferred taxes and tax credits that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies (Refer Note no 17). v) Product warranties Significant management judgments are involved in determining the estimates and provides for liability for product warranties in the year in which the products are sold. These estimates are established using historical information on the nature, frequency, quantum of warranty claims and corrective actions against product failures and the estimates are reviewed annually for any material changes in assumptions.Assumptions used to calculate the provision for warranties are based on current sales level and current information available about returns. The timing of outflows will vary based on the actual warranty claims (Refer Note no 38). vi) Impairment of financial assets The impairment provisions for Financial Assets are based on assumptions about risk of default and expected cash loss. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Company''s past history, existing market conditions as well as forward looking estimates at the end of each reporting period (Refer note 9). 2.3 Inventories Inventories are valued at lower of cost and net realisable value, less any provision for obsolescence. i) Cost of raw materials, packing materials, stores, spares and tools and traded goods are computed on a moving weighted average cost basis. ii) Cost of work-in-progress/ finished goods are determined on moving weighted average cost basis comprising material, labour and related factory overheads. iii) Net realisable value is determined based on estimated selling price, less further costs expected to be incurred to completion and disposal. 2.4 Cash and cash equivalents (for purposes of Cash Flow Statement) Cash comprises cash on hand and balances in current accounts with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value. 2.5 Revenue Recognition Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Sale of Goods and Services Sales are recognized, net of returns and trade discounts, on transfer of significant risks and rewards of ownership to the buyer, which generally coincides with the delivery of goods to customers. Sales include excise duty but exclude sales tax, value added tax and goods and service tax. Service income is recognised on completion of rendering of services and also on proportionate basis in case of installation part. The same is recorded net of service tax and goods and service tax. Other Revenue Commission income is recognised and accounted on accrual basis. Interest income is recognised on a time proportion basis taking into account the amount outstanding and the effective interest rate applicable. Eligible export incentives are recognised in the year in which the conditions precedent are met and there is no significant uncertainty about the collectability. Lease rental income from operating leases are recognised on accrual basis. Dividend income is accounted for in the year in which the right to receive the same is established. 2.6 Property, Plant & Equipment Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses, if any. Freehold land is not depreciated. Properties in the course of construction for production, supply or administrative purposes are carried at cost, less recognised impairment loss, if any. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Company''s accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Plant and equipment, furniture & fixtures, office equipments and computers are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation has been provided (other than freehold land and properties under construction) on a straight-line method (pro-rata from the date of additions) over the useful life as prescribed in Schedule II to the Companies Act 2013 or as per techinical evaluation. The estimated useful life of the assets are as mentioned below: The management believes that these estimated useful lives are realistic and reflect fair appropriation of the period over which the assets are likely to be used. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement of profit and loss. 2.7 Intangible Assets Intangible assets acquired separately Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses. Intangible assets acquired in a business combination Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Derecognition of intangible assets An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in the statement of profit and loss when the asset is derecognised. Useful lives of intangible assets Intangible Assets are amortized on a straight - line basis(pro-rata from the date of additions) over their estimated useful lives. The useful lives are as under: 2.8 Impairment of tangible and intangible assets other than goodwill At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs of disposal 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 the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the statement of profit and loss. When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in statement of profit and loss. 2.9 Employee Benefits Defined Benefit Plans : The company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees through Group Gratuity Scheme of Life Insurance Corporation of India. The Company accounts for the liability for the gratuity benefits payable in future based on an independent actuarial valuation carried out using Projected Unit Credit Method considering discounting rate relevant to Government Securities at the Balance Sheet Date. Defined Benefit costs in the nature of current and past service cost and net interest expense or income are recognised in the statement of Profit and Loss in the period in which they occur. Actuarial gains and losses on re-measurement is reflected immediately in the Balance Sheet with a charge or credit recognised in other comprehensive income in the period in which they occure and is reflected immediately in retained earnings and not reclassified to profit or loss. Past service cost is recongised in profit or loss in the period of a plan amendment. Defined Contribution Plans : Retirement Benefits in the form of Provident Fund, which is a Defined Contribution Scheme, is charged to the Statement of Profit and Loss for the period in which the contributions of fund accrue. Compensated Absences : Provision for Compensated Absences and its classifications between current and non-current liabilities are based on independent actuarial valuation. The actuarial valuation is done as per the Projected Unit Credit Method as at the reporting date. Short term employee benefits : They are recognised at an undiscounted amount in the Statement of Profit and Loss for the year in which the related services are rendered. 2.10 Research and Development Expenditure Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss. Development costs of products are also charged to the Statement of Profit and Loss unless a product''s technical feasibility has been established, in which case such expenditure is capitalised. The amount capitalised comprises expenditure that can be directly attributed or allocated on a reasonable and consistent basis to creating, producing and making the asset ready for its intended use. PPE utilised for research and development are capitalised and depreciated in accordance with the policies stated for PPE. 2.11 Operating Leases As a lessee: Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the Statement of Profit and Losson a straight-line basis over the period of the lease. Rental expense from operating leases is generally recognised on a straight-line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases, such increases are recognised in the year in which such benefits accrue. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. As a lessor: The Company has leased certain tangible assets and such leases where the Company has substantially retained all the risks and rewards of ownership are classified as operating leases. Lease income on such operating leases are recognised in the Statement of Profit and Loss on a straight line basis over the lease term. Rental income from operating leases is generally recognised on a straight-line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the Company''s expected inflationary cost increases, such increases are recognised in the year in which such benefits accrue. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term. 2.12 Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from ''profit before tax'' as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company''s current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Current and Deferred tax for the year Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. 2.13 Warranty The Company estimates and provides for liability for product warranties in the year in which the products are sold. These estimates are established using historical information on the nature, frequency, quantum of warranty claims and corrective actions against product failures and the estimates are reviewed annually for any material changes in assumptions. Assumptions used to calculate the provision for warranties are based on current sales level and current information available about returns. The timing of outflows will vary based on the actual warranty claims. 2.14 Provisions and Contingent Liabilities Provisions: Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Contingent Liabilities: Contingent liabilities are disclosed for (i) when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company or (ii) a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made. Contingent assets: Contingent assets are not recognised but disclosed in the Financial Statements, if an inflow of economic benefits is probable. 2.15 Financial instruments Financial assets and financial liabilities are recognised when a Company entity becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss. Financial assets All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets. Classification of financial assets Debt instruments that meet the following conditions are subsequently measured at amortised cost (except for debt instruments that are designated as at fair value through profit or loss on initial recognition): - the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and - the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. For the impairment policy on financial assets measured at amortised cost, refer note below. Debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income (except for debt instruments that are designated as at fair value through profit or loss on initial recognition): - the asset is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets; and - the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Interest income is recognised in profit or loss for FVTOCI debt instruments. For the purposes of recognising foreign exchange gains and losses, FVTOCI debt instruments are treated as financial assets measured at amortised cost. Thus, the exchange differences on the amortised cost are recognised in profit or loss and other changes in the fair value of FVTOCI financial assets are recognised in other comprehensive income and accumulated under the heading of ''Reserve for debt instruments through other comprehensive income''. When the investment is disposed of, the cumulative gain or loss previously accumulated in this reserve is reclassified to profit or loss. For the impairment policy on debt instruments at FVTOCI, refer note below. All other financial assets are subsequently measured at fair value. Effective interest method The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Interest income is recognised in profit or loss and is included in the "Other income" line item. Investments in equity instruments at FVTOCI On initial recognition, the Company can make an irrevocable election (on an instrument-by-instrument basis) to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instruments. This election is not permitted if the equity investment is held for trading. These elected investments are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the ''Reserve for equity instruments through other comprehensive income''. The cumulative gain or loss is not reclassified to profit or loss on disposal of the investments. A financial asset is held for trading if: - it has been acquired principally for the purpose of selling it in the near term; or - on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or - it is a derivative that is not designated and effective as a hedging instrument or a financial guarantee. The Company has equity investments in two entities which are not held for trading. The Company has elected the FVTOCI irrevocable option for these investments (refer note 5). Fair value is determined in the manner described in note 36. Dividends on these investments in equity instruments are recognised in profit or loss when the Company''s right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably. Dividends recognised in profit or loss are included in the ''Other income'' line item. Financial assets at fair value through profit or loss (FVTPL) Investments in equity instruments are classified as at FVTPL, unless the Company irrevocably elects on initial recognition to present subsequent changes in fair value in other comprehensive income for investments in equity instruments which are not held for trading (refer note 2.2 (ii)). Debt instruments that do not meet the amortised cost criteria or FVTOCI criteria (see above) are measured at FVTPL. In addition, debt instruments that meet the amortised cost criteria or the FVTOCI criteria but are designated as at FVTPL are measured at FVTPL. A financial asset that meets the amortised cost criteria or debt instruments that meet the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. The Company has not designated any debt instrument as at FVTPL. Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the ''Other income'' line item. Dividend on financial assets at FVTPL is recognised when the Company''s right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably. Financial assets at cost Investments in subsidiaries are accounted for at cost. Impairment of financial assets The Company applies the expected credit loss model for recognising impairment loss on financial assets measured at amortised cost, debt instruments at FVTOCI, lease receivables, trade receivables, other contractual rights to receive cash or other financial asset, and financial guarantees not designated as at FVTPL. Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights. Credit loss is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets). The Company estimates cash flows by considering all contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) through the expected life of that financial instrument. The Company measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. If the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. 12-month expected credit losses are portion of the life-time expected credit losses and represent the lifetime cash shortfalls that will result if default occurs within the 12 months after the reporting date and thus, are not cash shortfalls that are predicted over the next 12 months. If the Company measured loss allowance for a financial instrument at lifetime expected credit loss model in the previous period, but determines at the end of a reporting period that the credit risk has not increased significantly since initial recognition due to improvement in credit quality as compared to the previous period, the Company again measures the loss allowance based on 12-month expected credit losses. When making the assessment of whether there has been a significant increase in credit risk since initial recognition, the Company uses the change in the risk of a default occurring over the expected life of the financial instrument instead of the change in the amount of expected credit losses. To make that assessment, the Company compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information, that is available without undue cost or effort, that is indicative of significant increases in credit risk since initial recognition. For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 11 and Ind AS 18, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses. Further, for the purpose of measuring lifetime expected credit loss allowance for trade receivables, the Company has used a practical expedient as permitted under Ind AS 109. This expected credit loss allowance is computed based on a provision matrix which takes into account historical credit loss experience and adjusted for forward-looking information. The impairment requirements for the recognition and measurement of a loss allowance are equally applied to debt instruments at FVTOCI except that the loss allowance is recognised in other comprehensive income and is not reduced from the carrying amount in the balance sheet. Derecognition of financial assets The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. On derecognition of a financial asset in its entirety, the difference between the asset''s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss if such gain or loss would have otherwise been recognised in profit or loss on disposal of that financial asset. On derecognition of a financial asset other than in its entirety (e.g. when the Company retains an option to repurchase part of a transferred asset), the Company allocates the previous carrying amount of the financial asset between the part it continues to recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss if such gain or loss would have otherwise been recognised in profit or loss on disposal of that financial asset. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts. Foreign exchange gains and losses The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period. - For foreign currency denominated financial assets measured at amortised cost and FVTPL, the exchange differences are recognised in profit or loss except for those which are designated as hedging instruments in a hedging relationship. - Changes in the carrying amount of investments in equity instruments at FVTOCI relating to changes in foreign currency rates are recognised in other comprehensive income. - For the purposes of recognising foreign exchange gains and losses, FVTOCI debt instruments are treated as financial assets measured at amortised cost. Thus, the exchange differences on the amortised cost are recognised in profit or loss and other changes in the fair value of FVTOCI financial assets are recognised in other comprehensive income. Financial liabilities and equity instruments Classification as debt or equity Debt and equity instruments issued by a Company entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by a Company entity are recognised at the proceeds received, net of direct issue costs. Repurchase of the Company''s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company''s own equity instruments. Financial liabilities All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL. However, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies, financial guarantee contracts issued by the Company, and commitments issued by the Company to provide a loan at below-market interest rate are measured in accordance with the specific accounting policies set out below. Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL when the financial liability is either contingent consideration recognised by the Company as an acquirer in a business combination to which Ind AS 103 applies or is held for trading or it is designated as at FVTPL. A financial liability is classified as held for trading if: - it has been incurred principally for the purpose of repurchasing it in the near term; or - on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or - it is a derivative that is not designated and effective as a hedging instrument. A financial liability other than a financial liability held for trading or contingent consideration recognised by the Company as an acquirer in a business combination to which Ind AS 103 applies, may be designated as at FVTPL upon initial recognition if: - such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; - the financial liability forms part of a Company of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company''s documented risk management or investment strategy, and information about the Companying is provided internally on that basis; or - it forms part of a contract containing one or more embedded derivatives, and Ind AS 109 permits the entire combined contract to be designated as at FVTPL in accordance with Ind AS 109. Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability and is included in the ''Other income'' line item. However, for non-held-for-trading financial liabilities that are designated as at FVTPL, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognised in other comprehensive income, unless the recognition of the effects of changes in the liability''s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss, in which case these effects of changes in credit risk are recognised in profit or loss. The remaining amount of change in the fair value of liability is always recognised in profit or loss. Changes in fair value attributable to a financial liability''s credit risk that are recognised in other comprehensive income are reflected immediately in retained earnings and are not subsequently reclassified to profit or loss. Gains or losses on financial guarantee contracts and loan commitments issued by the Company that are designated by the Company as at fair value through profit or loss are recognised in profit or loss. Fair value is determined in the manner described in note 36. Financial liabilities subsequently measured at amortised cost Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included in the ''Finance costs'' line item. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition. Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument. Financial guarantee contracts issued by a Company entity are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of: - the amount of loss allowance determined in accordance with impairment requirements of Ind AS 109; and - the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of Ind AS 18. Foreign exchange gains and losses For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the instruments and are recognised in ''Other income''. The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. For financial liabilities that are measured as at FVTPL, the foreign exchange component forms part of the fair value gains or losses and is recognised in profit or loss. Derecognition of financial liabilities The Company derecognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or have expired. An exchange between with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability (whether or not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. Derivative financial instruments The Company enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including foreign exchange forward contracts. Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedging relationship and the nature of the hedged item. Embedded derivatives Derivatives embedded in non-derivative host contracts that are not financial assets within the scope of Ind AS 109 are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL. 2.16 Segment reporting The Company identifies primary segments based on the dominant source, nature of risks and returns and the internal organisation and management structure. The operating segments are the segments for which separate financial information is available and for which operating profit / loss amounts are evaluated regularly by the Chief Operating Decision Maker (CODM) in deciding how to allocate resources and in assessing performance. The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis have been included under "unallocated revenue / expenses / assets / liabilities". 2.17 Earnings Per Share Basic earnings per share is computed by dividing the profit / (loss) after tax by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit / (loss) after tax as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. 2.18 Recent accounting standards issued but not applicable Ind As 115 revenue from contracts with customers Ind AS 115 was notified on 28th March, 2018 and establishes a five-step model to account for revenue arising from contracts with customers. Under Ind AS 115, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard will supersede all current revenue recognition requirements under Ind AS. This new standard requires revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the Company expects to be entitled in exchange for those goods or services. Adoption of the new rules could affect the timing of revenue recognition for certain transactions of the Company. Ind AS 115 is effective for the Company in the first quarter of fiscal 2019 using either one of two methods: (i) retrospectively to each prior reporting period presented in accordance with Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors, with the option to elect certain practical expedients as defined within Ind AS 115 (the full retrospective method); or (ii) retrospectively with the cumulative effect of initially applying Ind AS 115 recognized at the date of initial application (1st January, 2019) and providing certain additional disclosures as defined in Ind AS 115 (the modified retrospective method). The Company continues to evaluate the available transition methods and its contractual arrangements. The ultimate impact on revenue resulting from the application of Ind AS 115 will be subject to assessments that are dependent on many variables, including, but not limited to, the terms of the contractual arrangements and the mix of business. A reliable estimate of the quantitative impact of Ind AS 115 on the financial statements will only be possible once the implementation project has been completed. Ind As 116 Leases Ind AS 116 "Leases" is expected to replace Ind AS 17 from its proposed effective date, being annual periods beginning on or after 1 April 2019. Ind AS 116 will primarily change lease accounting for lessees; lease agreement will give rise to the recognition of an asset representing the right to use the leased item and a loan obligation for future lease payables. Lease costs will be recongised in the form of depreciation of the right to use asset and interest on the lease liability. Lessee accounting under Ind AS 116 will be similar in many respects to existing Ind AS 17 accounting for finance leases, but will be substantively different to existing accounting for operating leases where rental charges are currently recognised on a straight-line basis and no lease asset or related lease creditor is recognised. Lessor accounting under Ind AS 116 is similar to existing Ind AS 17 and is not expected to have any material impact on the company. 3) First-time adoption of Ind AS The Company has adopted Ind AS from January 1, 2018 and the date of transition to Ind AS is January 1, 2017. These being the first financial statements in compliance with Ind AS, the impact of transition has been accounted for in opening reserves and comparable periods have been restated in accordance with Ind AS 101 - "First time Adoption of Indian Accounting Standards". The Company has presented a reconciliation of equity under Previous GAAP to its equity under Ind AS as at December 31, 2017 and as at January 1, 2017 and of total comprehensive income for the year ended December 31, 2017 as required by Ind AS 101. Following are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS: 1. Deemed cost of Property, plant and equipment and intangible assets: As permitted by Ind AS 101, the Company has elected to continue with the carrying values under previous GAAP as ''deemed cost'' for all the items of property, plant & equipment and intangible assets. 2. Derecognition of financial assets and financial liabilities: The Company has applied the derecognition requirements of financial assets and financial liabilities prospectively for transactions occurring on or after transition date. 3. Classification and measurement of financial assets: The Company has assessed classification and measurement of financial assets on the basis of facts and circumstances that exist as on transition date. 4. Impairment of financial assets: The Company has applied impairment requirements of Ind AS 109 retrospectively: however, as permitted by Ind AS 101, it has used reasonable and supportable information that is available without undue cost or effort to determine the credit risk at the date that financial instruments were initially recognised in order to compare it with the credit risk at the transition date. 5. Assessment of embedded derivatives: The Company has assessed whether an embedded derivative as required to be separated from the host contract and accounted for as a derivative on the basis of the conditions that existed at the late of the date it first became a party to the contract and the date when there has been a change in the terms of the contract that significantly modifies the cash flows that otherwise would not be required under the contract. 6. Valuation of investment in equity shares at FVTOCI: The Company has designated investment in equity shares of investees to be valued at fair value through other comprehensive income on the basis of facts and circumstances that existed at the transaction date. 7. Deemed cost of investments: The Company has elected to continue with the carrying value of its investment in subsidiary recognised as of 1st January, 2017 measured as per the previous GAAP and use that carrying value as its deemed cost at transition date.
Dec 31, 2016
1) General Information
Stovec Industries Limited ("the Company") was incorporated on 5th June, 1973. The Company''s factory and registered office is presently located in Ahmadabad, Gujarat. The Company is listed on BSE Ltd and Ahmadabad Stock Exchange Ltd. The Company has three major Business Segments: Textile Machinery & Consumables, Graphics Consumables and Galvanic. The Company is a Technology and Market leader in Rotary Screen Printing Industry in India.
2) Statement of significant accounting policies
a) Basis of preparation of financial statements
These financial statements have been prepared in accordance with the generally accepted accounting principles in India under the historical cost convention on accrual basis. Pursuant to section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules 2014, till the standards of accounting or any addendum thereto are prescribed by Central Government in consultation and recommendation of the National Financial Reporting Authority, the existing Accounting Standards notified under the Companies Act, 1956 shall continue to apply. Consequently, these financial statements have been prepared to comply in all material aspects with the accounting standards notified under Section 211(3C) [Companies (Accounting Standards) Rules, 2006, as amended] and other relevant provisions of the Companies Act, 2013.
All assets and liabilities have been classified as current or non-current as per the Company''s 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 realization in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current â noncurrent classification of assets and liabilities.
b) Inventories
Inventories are valued at lower of cost and net realizable value.
i) Cost of raw materials, packing materials, stores, spares and tools are computed on a moving weighted average cost basis.
ii) Cost of work-in-progress/ finished goods are determined on moving weighted average cost basis comprising material, labour and related factory overheads.
c) Revenue Recognition
i) Sale of Goods and Services
Revenue is recognized when the property and all significant risks and rewards of ownership are transferred to the buyer and no significant uncertainty exists regarding the amount of consideration that is derived from the sale of goods. Sales are recorded net of trade discount, rebates and sales tax / value added tax is inclusive of excise duty.
Service income is recognized on completion of rendering of services and is recorded net of service tax. Cost incurred during the pendency of the contract is carried forward as job in progress at lower of cost and net realizable amounts.
ii) Other Revenue
Commission income is recognized and accounted on accrual basis.
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.
Eligible export incentives are recognized in the year in which the conditions precedent are met and there is no significant uncertainty about the collectability.
Lease rental income is recognized on accrual basis.
Dividend income is accounted for in the year in which the right to receive the same is established.
d) Fixed Assets and Depreciation / Amortization Tangible Assets
i) Fixed assets are stated at historical cost less depreciation / amortization. Cost includes all expenses relating to acquisition and installation of the concerned assets.
ii) Depreciation has been provided on a straight-line method (pro-rata from the date of additions) over the useful life as prescribed in Schedule II to the Companies Act 2013 or as per technical evaluation.
e) Foreign Currency Transactions Initial Recognition
On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Subsequent Recognition
As at the reporting date, 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. All monetary assets and liabilities in foreign currency are restated at the end of accounting period.
Exchange differences on restatement of all monetary items are recognized in the Statement of Profit and Loss.
Forward Exchange Contracts
The premium or discount arising at the inception of forward exchange contracts entered into to hedge an existing asset / liability, is amortized as expense or income over the life of the contract. Exchange differences on such a contract are recognized in the Statement of Profit and Loss in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such a forward exchange contract are recognized as income or as expense for the period.
f) Investments
Investments that are readily realizable and are intended to be held for not more than one year from the date, on which such investment are made, are classified as Current Investment. All other Investments are classified as Long Term Investments. Current Investments are carried at cost or fair value, whichever is lower. Long Term Investments are carried at cost. However, provision for diminution is made to recognize a decline, other than temporary, in the value of the investments, such reduction being determined and made for investment individually.
g) Employee Benefits
i) Short Term Employee Benefits:
The employees of the Company are entitled to leave encashment as per the leave policy of the Company. The liability in respect of leave encashment of short term nature is provided, based on an actuarial valuation carried out by an independent actuary as at the year-end.
ii) Long Term Employee Benefits:
Defined Contribution Plans
The Company has Defined Contribution plans for post employment benefits namely Provident Fund.
The Company contributes to a Government administered Provident Fund and has no further obligation beyond making its contribution.
The Company makes contributions to state plans namely Employee''s State Insurance Fund and Employee''s Pension Scheme 1995 and has no further obligation beyond making the payment to them.
The Company''s contributions to the above funds are charged to Statement of Profit and Loss every year.
Defined Benefit Plans
The Company has Defined Benefit Plan comprising of Gratuity and Leave Encashment. The Company contributes to the Gratuity Fund which is recognized by the Income Tax Authorities and administered through its trustees.
Liability for Defined Benefit Plans is provided on the basis of actuarial valuation, as at the Balance Sheet date, carried out by an independent actuary using the Projected Unit Credit Method.
iii) Termination benefits are recognized as an expense as and when incurred.
iv) Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial assumptions and are recognized immediately in the Statement of Profit and Loss as income or expense.
h) Research and Development Expenditure
Research and development expenditure is charged to revenue under the natural heads of account in the year in which it is incurred. However, development expenditure qualifying as an intangible asset, if any, is capitalized, to be amortized over the economic life of the product. Research and development expenditure on fixed asset is depreciated in accordance with the useful life specified in paragraph (d) above.
i) Operating Leases As a lessee:
Leases in which a significant portion of the risks and rewards of ownership are retained by the less or are classified as operating leases. Payments made under operating leases are charged to the Statement of Profit and Loss on a straight-line basis over the period of the lease.
As a less or:
The Company has leased certain tangible assets and such leases where the Company has substantially retained all the risks and rewards of ownership are classified as operating leases. Lease income on such operating leases are recognized in the Statement of Profit and Loss on a straight line basis over the lease term.
j) Taxes on Income
Provision for tax for the year is made on the assessable income at the tax rate applicable to the relevant assessment year.
Deferred tax is recognized for all the timing differences, subject to the consideration of prudence in respect of deferred tax assets. Deferred tax assets are recognized and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.
Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. At each Balance Sheet date, the Company re-assesses unrecognized deferred tax assets, if any.
k) Warranty
A provision is recognized for expected warranty claims on products sold, based on past experience of level of repairs and returns. Assumptions used to calculate the provision for warranties are based on current sales level and current information available about returns.
l) Impairment of Assets
The Company assesses at each Balance Sheet date whether there is any indication that asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Statement of Profit and Loss.
m) Provisions and Contingent Liabilities
Provisions: Provisions are recognized when there is a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance sheet date and are not discounted to its present value.
Contingent Liabilities: Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made, is termed as a contingent liability.
n) Accounting Estimates
The preparation of financial statements requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of financial statements and the reported amounts of revenue and expenses during the reporting period. Difference between the actual results and the estimates are recognized in the year in which the results are known/ materialised.
Dec 31, 2014
A) Basis of preparation of financial statements
These Financial Statements have been prepared in accordance with
generally accepted accounting principles in India under the historical
cost convention on accrual basis. Pursuant to circular 15/2013 dated
September 13, 2013 read with circular 08/2014 dated April 4, 2014, till
the standard of accounting or any addendum thereto are prescribed by
Central Government in consultation and recommendation of the National
Financial Reporting Authority, the existing Accounting Standards
notified under the Companies Act, 1956 shall continue to apply.
Consequently, these Financial Statements have been prepared to comply
in all material aspects with the Accounting Standards notified under
the Companies Act, 1956 of India (the "Act") read with the General
Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate
Affairs in respect of section 133 of the Companies Act, 2013.
All the assets and liabilities have been classified as current or
non-current as per the normal operating cycle of the Company and other
criteria set out in Schedule VI to the Act. 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
and non-current classification of assets and liabilities.
b) Inventories
Inventories are valued at lower of cost and net realisable value.
i) Cost of raw materials, packing materials, stores, spares and tools
are computed on a moving weighted average cost basis.
ii) Cost of work-in-progress/ finished goods are determined on moving
weighted average cost basis comprising material, labour and related
factory overheads.
c) Revenue Recognition Sale of Goods
Revenue is recognised when the property and all significant risks and
rewards of ownership are transferred to the buyer and no significant
uncertainty exists regarding the amount of consideration that is
derived from the sale of goods. Sales are recorded net of trade
discount, rebates and sales tax / value added tax is inclusive of
excise duty.
Sale of Services
Service income is recognised on completion of rendering of services and
is recorded net of service tax. Cost incurred during the pendency of
the contract is carried forward as job in progress at lower of cost and
net realisable amounts.
Commission
Commission income is recognised and accounted on accrual basis.
Interest
Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the rate applicable.
d) Fixed Assets and Depreciation / Amortisation Tangible Assets
i) Fixed assets are stated at historical cost less depreciation /
amortisation. Cost includes all expenses relating to acquisition and
installation of the concerned assets.
ii) Depreciation has been provided on a straight-line method (pro-rata
from the date of additions) over the useful life of the assets as
stated below. Depreciation has been provided at the rates stipulated in
Schedule XIV to the Act, or at the rates determined based on the useful
life of assets, as estimated by managament, whichever is higher.
Description of the asset Useful Life (Years)
Building 30
Plant and Machinery 9
Patterns/Tools/Mollet 3
Computers 4
Furniture and Fixtures 10
Office Equipments, Air Conditioners
and Cooler etc. 3 to 6
Vehicles 5
Intangible Assets
Intangible Assets are stated at acquisition cost, net of accumulated
amortization and accumulated impairment losses, if any. Intangible
Assets are amortized on a straight - line basis (pro-rata from the date
of additions) over there estimated useful lives. The useful lives are
as under:
Description of the asset Useful Life (Years)
Computer Software 3
Trademark 5
Technical/ Commercial Know-how 5
e) Foreign Currency Transactions
Foreign currency transactions are accounted at the exchange rates
prevailing on the date of the transaction. Gains and losses resulting
from the settlement of such transactions and from the translation of
monetary assets and liabilities denominated in foreign currencies are
recognised in the Statement of Profit and Loss.
f) Investments
Investments that are readily realisable and are intended to be held for
not more than one year from the date, on which such investment are
made, are classified as Current Investment. All other Investments are
classified as Long Term Investments. Current Investments are carried at
cost or fair value, whichever is lower. Long Term Investments are
carried at cost. However, provision for dimunition is made to recognise
a decline, other than temporary, in the value of the investments, such
reduction being determined and made for investment individually.
g) Employee Benefits
i) Short Term Employee Benefits:
The employees of the Company are entitled to leave encashment as per
the leave policy of the Company. The liability in respect of leave
encashment of short term nature is provided, based on an actuarial
valuation carried out by an independent actuary as at the year-end.
ii) Long Term Employee Benefits:
Defined Contribution Plans
The Company has Defined Contribution plans for post employment benefits
namely Provident Fund.
The Company contributes to a Government administered Provident Fund and
has no further obligation beyond making its contribution.
The Company makes contributions to state plans namely Employee''s State
Insurance Fund and Employee''s Pension Scheme 1995 and has no further
obligation beyond making the payment to them.
The Company''s contributions to the above funds are charged to Statement
of Profit and Loss every year.
Defined Benefit Plans
The Company has Defined Benefit Plan comprising of Gratuity and Leave
Encashment. The Company contributes to the Gratuity Fund which is
recognised by the Income Tax Authorities and administered through its
trustees.
Liability for Defined Benefit Plans is provided on the basis of
actuarial valuation, as at the Balance Sheet date, carried out by an
independent actuary using the Projected Unit Credit Method.
iii) Termination benefits are recognised as an expense as and when
incurred.
iv) Actuarial gains and losses comprise experience adjustments and the
effects of changes in actuarial assumptions and are recognised
immediately in the Statement of Profit and Loss as income or expense.
h) Research and Development Expenditure
Research and development expenditure is charged to revenue under the
natural heads of account in the year in which it is incurred. However,
development expenditure qualifying as an intangible asset, if any, is
capitalised, to be amortized over the economic life of the product.
Research and development expenditure on fixed asset is depreciated in
accordance with the useful life specified in paragraph (d) above.
i) Operating Leases
As a lessee:
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to the
Statement of Profit and Loss on a straight-line basis over the period
of the lease.
As a lessor:
The Company has leased certain tangible assets and such leases where
the Company has substantially retained all the risks and rewards of
ownership are classified as operating leases. Lease income on such
operating leases are recognised in the Statement of Profit and Loss on
a straight line basis over the lease term.
j) Taxes on Income
Provision for tax for the year is made on the assessable income at the
tax rate applicable to the relevant assessment year.
Deferred tax is recognised for all the timing differences, subject to
the consideration of prudence in respect of deferred tax assets.
Deferred tax assets are recognised and carried forward only to the
extent that there is a reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realised.
Deferred tax assets and liabilities are measured using the tax rates
and tax laws that have been enacted or substantively enacted by the
Balance Sheet date. At each Balance Sheet date, the Company re-assesses
unrecognised deferred tax assets, if any.
k) Warranty
A provision is recognised for expected warranty claims on products
sold, based on past experience of level of repairs and returns.
Assumptions used to calculate the provision for warranties are based on
current sales level and current information available about returns.
l) Impairment of Assets
The Company assesses at each Balance Sheet date whether there is any
indication that asset may be impaired. If any such indication exists,
the Company estimates the recoverable amount of the asset. If such
recoverable amount of the asset or the recoverable amount of the cash
generating unit to which the asset belongs is less than its carrying
amount, the carrying amount is reduced to its recoverable amount. The
reduction is treated as an impairment loss and is recognised in the
Statement of Profit and Loss.
m) Provisions and Contingent Liabilities
Provisions: Provisions are recognised when there is a present
obligation as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation at the Balance
sheet date and are not discounted to its present value.
Contingent Liabilities: Contingent liabilities are disclosed when there
is a possible obligation arising from past events, the existence of
which will be confirmed only by the occurrence or non occurrence of one
or more uncertain future events not wholly within the control of the
Company or a present obligation that arises from past events where it
is either not probable that an outflow of resources will be required to
settle or a reliable estimate of the amount cannot be made, is termed
as a contingent liability.
n) Accounting Estimates
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amounts of assets and
liabilities on the date of financial statements and the reported
amounts of revenue and expenses during the reporting period. Difference
between the actual results and the estimates are recognised in the year
in which the results are known/ materialised.
Dec 31, 2013
1) General Information
Stovec Industries was incorporated in 1973, in Ahmadabad, Gujarat. The
Company is listed on Bombay Stock Exchange and Ahmadabad Stock
Exchange. The Company has three major Business segments : Textile
Machinery and Consumables, Graphics Consumables and Galvanic. "Textile
Machinery and Consumables" segment includes Perforated Rotary Screens,
Laquer & Auxiliary Chemicals, Digital Ink, Rotary Screen Printing
Machine, Engraving Equipment, Components and Spares. "Graphics
Consumables" segment includes Anilox Rollers, Rotamesh screens and
Rota Plate. "Galvanic" Segment includes Galvano Consumables.
2) Statement of significant accounting policies
a) Basis of preparation of financial statements
These Financial Statements have been prepared under historical cost
convention from the books of account maintained on accrual basis to
comply in all material aspects with all the applicable accounting
principles in India, the applicable accounting standards as notified
under the Companies Act, 1956, of India (the "Act") read with the
General Circular 15/2013 dated September 13, 2013 of the Ministry of
Corporate Affairs in respect of Section 133 of the Companies Act, 2013.
All the assets and liabilities have been classified as current or
non-current as per the normal operating cycle of the Company and other
criteria set out in Schedule VI to the Act. 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
and non-current classification of assets and liabilities.
b) Inventories
Inventories are valued at lower of cost and net realisable value.
i) Cost of raw materials, packing materials, stores, spares and tools
are computed on a moving weighted average cost basis.
ii) Cost of work-in-progress/ finished goods are determined on moving
weighted average cost basis comprising material, labor and related
factory overheads.
c) Revenue Recognition
Sale of Goods
Revenue is recognised when the property and all significant risks and
rewards of ownership are transferred to the buyer and no significant
uncertainty exists regarding the amount of consideration that is
derived from the sale of goods. Sales are recorded net of trade
discount, rebates and sales tax / value added tax and inclusive of
excise duty.
Sale of Services
Service income is recognised on completion of rendering of services and
is recorded net of service tax. Cost incurred during the pendency of
the contract is carried forward as job in progress at realisable
amounts.
Interest
Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the rate applicable.
d) Fixed Assets and Depreciation / Amortisation
Tangible Assets
i) Fixed assets are stated at historical cost less depreciation /
amortisation. Cost includes all expenses relating to acquisition and
installation of the concerned assets.
ii) Depreciation has been provided on a straight-line method (pro-rata
from the date of additions) over the useful life of the assets as
stated below. Depreciation has been provided at the rates stipulated in
Schedule XIV to the Act, or at the rates determined based on the useful
life of assets, as estimated by management, whichever is higher.
Intangible Assets
Computer software is capitalised and amortised on a straight  line
basis over its useful life, which is estimated as three years.
e) Foreign Currency Transactions
Foreign currency transactions are accounted at the exchange rates
prevailing on the date of the transaction. Gains and losses resulting
from the settlement of such transactions and from the translation of
monetary assets and liabilities denominated in foreign currencies are
recognised in the Statement of Profit and Loss.
f) Investments
Long term investments are stated at cost less diminution in value which
is other than temporary.
g) Employee Benefits
i) Short Term Employee Benefits:
The employees of the Company are entitled to leave encashment as per
the leave policy of the Company. The liability in respect of leave
encashment of short term nature is provided, based on an actuarial
valuation carried out by an independent actuary as at the year-end.
ii) Long Term Employee Benefits:
Defined Contribution Plans
The Company has Defined Contribution plans for post employment benefits
namely Provident Fund.
The Company contributes to a Government administered Provident Fund and
has no further obligation beyond making its contribution.
The Company makes contributions to state plans namely Employee''s State
Insurance Fund and Employee''s Pension Scheme 1995 and has no further
obligation beyond making the payment to them.
The Company''s contributions to the above funds are charged to Statement
of Profit and Loss every year.
Defined Benefit Plans
The Company has Defined Benefit Plan comprising of Gratuity and Leave
Encashment. The Company contributes to the Gratuity Fund which is
recognised by the Income Tax Authorities and administered through its
trustees.
Liability for Defined Benefit Plans is provided on the basis of
actuarial valuation, as at the Balance Sheet date, carried out by an
independent actuary using the Projected Unit Credit Method.
iii) Termination benefits are recognised as an expense as and when
incurred.
iv) Actuarial gains and losses comprise experience adjustments and the
effects of changes in actuarial assumptions and are recognised
immediately in the Statement of Profit and Loss as income or expense.
h) Research and Development Expenses
Research and development expenses of revenue nature are charged to the
Statement of Profit and Loss when incurred. Expenditure of capital
nature is capitalised and depreciated in accordance with the rates
specified in paragraph (d) above.
i) Operating Leases
As a lessee:
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to the
Statement of Profit and Loss on a straight-line basis over the period
of the lease.
As a lessor:
The Company has leased certain tangible assets and such leases where
the Company has substantially retained all the risks and rewards of
ownership are classified as operating leases. Lease income on such
operating leases are recognised in the Statement of Profit and Loss on
a straight line basis over the lease term.
j) Taxes on Income
Provision for tax for the year is made on the assessable income at the
tax rate applicable to the relevant assessment year.
Deferred tax is recognised for all the timing differences, subject to
the consideration of prudence in respect of deferred tax assets.
Deferred tax assets are recognised and carried forward only to the
extent that there is a reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realised.
Deferred tax assets and liabilities are measured using the tax rates
and tax laws that have been enacted or substantively enacted by the
Balance Sheet date. At each Balance Sheet date, the Company re-assesses
unrecognised deferred tax assets, if any.
k) Warranty
A provision is recognised for expected warranty claims on products
sold, based on past experience of level of repairs and returns.
Assumptions used to calculate the provision for warranties are based on
current sales level and current information available about returns.
l) Impairment of Assets
The Company assesses at each Balance Sheet date whether there is any
indication that asset may be impaired. If any such indication exists,
the Company estimates the recoverable amount of the asset. If such
recoverable amount of the asset or the recoverable amount of the cash
generating unit to which the asset belongs is less than its carrying
amount, the carrying amount is reduced to its recoverable amount. The
reduction is treated as an impairment loss and is recognised in the
Statement of Profit and Loss.
m) Provisions and Contingent Liabilities
Provisions: Provisions are recognised when there is a present
obligation as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation at the Balance
sheet date and are not discounted to its present value.
Contingent Liabilities: Contingent liabilities are disclosed when there
is a possible obligation arising from past events, the existence of
which will be confirmed only by the occurrence or non occurrence of one
or more uncertain future events not wholly within the control of the
Company or a present obligation that arises from past events where it
is either not probable that an outflow of resources will be required to
settle or a reliable estimate of the amount cannot be made, is termed
as a contingent liability.
n) Accounting Estimates
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amounts of assets and
liabilities on the date of financial statements and the reported
amounts of revenue and expenses during the reporting period. Difference
between the actual results and the estimates are recognised in the year
in which the results are known/ materialised.
Dec 31, 2012
A) Basis of preparation of financial statements
These Financial Statements have been prepared under historical cost
convention from the books of account maintained on accrual basis to
comply in all material aspects with all the applicable accounting
principles in India, the applicable accounting standards as notified
under Section 211(3C) of the Companies Act, 1956, of India (the "Act")
and the relevant provisions of the Act.
All the assets and liabilities have been classified as current or
non-current as per the normal operating cycle of the Company and other
criteria set out in Schedule VI to the Act. 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
and non-current classification of assets and liabilities.
b) Inventories
Inventories are valued at lower of cost and net realisable value.
i) Cost of raw materials, packing materials, stores, spares and tools
are computed on a moving weighted average cost basis.
ii) Cost of work-in-progress/ finished goods are determined on moving
weighted average cost basis comprising material, labour and related
factory overheads.
c) Revenue Recognition
Sale of Goods
Revenue is recognised when the property and all significant risks and
rewards of ownership are transferred to the buyer and no significant
uncertainty exists regarding the amount of consideration that is
derived from the sale of goods. Sales are recorded net of trade
discount, rebates and sales tax.
In respect of sale transaction involving installation/ commissioning
services, the composite revenue is recognised based on transfer of
significant risks and rewards.
Sale of Services
Service income is recognised on completion of rendering of services and
is recorded net of service tax. Cost incurred during the pendency of
the contract is carried forward as job in progress at realisable
amounts.
Interest
Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the rate applicable.
d) Fixed Assets and Depreciation / Amortisation Tangible Assets
i) Fixed assets are stated at historical cost less depreciation /
amortisation. Cost includes all expenses relating to acquisition and
installation of the concerned assets.
ii) Depreciation has been provided on a straight-line method (pro-rata
from the date of additions) over the useful life of the assets as
stated below. Depreciation has been provided at the rates stipulated in
Schedule XIV to the Act, or at the rates determined based on the useful
of life of assets, as estimated by managament, whichever is higher.
Intangible Assets
Computer software is capitalised and amortised on a straight - line
basis over its useful life, which is estimated as three years.
e) Foreign Currency Transactions
Foreign currency transactions are accounted at the exchange rates
prevailing on the date of the transaction. Gains and losses resulting
from the settlement of such transactions and from the translation of
monetary assets and liabilities denominated in foreign currencies are
recognised in the Statement of Profit and Loss.
f) Investments
Long term investments are stated at cost less diminution in value which
is other than temporary.
g) Employee Benefits
i) Short Term Employee Benefits:
The employees of the Company are entitled to leave encashment as per
the leave policy of the Company. The liability in respect of leave
encashment of short term nature is provided, based on an actuarial
valuation carried out by an independent actuary as at the year-end.
ii) Long Term Employee Benefits:
Defined Contribution Plans
The Company has Defined Contribution plans for post employment benefits
namely Provident Fund and Superannuation Fund.
The Company contributes to a Government administered Provident Fund and
has no further obligation beyond making its contribution.
The Company makes contributions to state plans namely Employee''s State
Insurance Fund and Employee''s Pension Scheme 1995 and has no further
obligation beyond making the payment to them.
The Company''s contributions to the above funds are charged to Statement
of Profit and Loss every year.
Defined Benefit Plans
The Company has Defined Benefit Plan comprising of Gratuity and Leave
Encashment. The Company contributes to the Gratuity Fund which is
recognised by the Income Tax Authorities and administered through its
trustees.
Liability for Defined Benefit Plans is provided on the basis of
actuarial valuation, as at the Balance Sheet date, carried out by an
independent actuary using the Projected Unit Credit Method.
iii) Termination benefits are recognised as an expense as and when
incurred.
iv) Actuarial gains and losses comprise experience adjustments and the
effects of changes in actuarial assumptions and are recognised
immediately in the Statement of Profit and Loss as income or expense.
h) Research and Development Expenses
Research and development expenses of revenue nature are charged to the
Statement of Profit and Loss when incurred. Expenditure of capital
nature is capitalised and depreciated in accordance with the rates
specified in paragraph (d) above.
i) Operating Leases
Lease Income
Lease rentals in respect of operating lease arrangements are recognised
in Statement of Profit and Loss in accordance with Accounting Standard
- 19 "Leases". Costs, including depreciation, incurred in earning the
lease income are recognised as expenses.
Lease Expense
Assets acquired as leases where a significant portion of the risks and
rewards of the ownership are retained by the lessor are classified as
Operating Leases. Lease rentals are charged to Statement of Profit and
Loss on an accrual basis.
j) Taxes on Income
Provision for tax for the year is made on the assessable income at the
tax rate applicable to the relevant assessment year.
Deferred tax is recognised for all the timing differences, subject to
the consideration of prudence in respect of deferred tax assets.
Deferred tax assets are recognised and carried forward only to the
extent that there is a reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realised.
Deferred tax assets and liabilities are measured using the tax rates
and tax laws that have been enacted or substantively enacted by the
Balance Sheet date. At each Balance Sheet date, the Company re-assesses
unrecognised deferred tax assets, if any.
k) Warranty
A provision is recognised for expected warranty claims on products
sold, based on past experience of level of repairs and returns.
Assumptions used to calculate the provision for warranties are based on
current sales level and current information available about returns.
l) Impairment of Assets
The Company assesses at each Balance Sheet date whether there is any
indication that asset may be impaired. If any such indication exists,
the Company estimates the recoverable amount of the asset. If such
recoverable amount of the asset or the recoverable amount of the cash
generating unit to which the asset belongs is less than its carrying
amount, the carrying amount is reduced to its recoverable amount. The
reduction is treated as an impairment loss and is recognised in the
Statement of Profit and Loss.
m) Provisions and Contingent Liabilities
Provisions: Provisions are recognised when there is a present
obligation as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and there is a reliable estimate of the amount of the
obligation. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation at the Balance
sheet date and are not discounted to its present value.
Contingent Liabilities: Contingent liabilities are disclosed when there
is a possible obligation arising from past events, the existence of
which will be confirmed only by the occurrence or non occurrence of one
or more uncertain future events not wholly within the control of the
company or a present obligation that arises from past events where it
is either not probable that an outflow of resources will be required to
settle or a reliable estimate of the amount cannot be made, is termed
as a contingent liability.
n) Accounting Estimates
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amounts of assets and
liabilities on the date of financial statements and the reported
amounts of revenue and expenses during the reporting period. Difference
between the actual results and the estimates are recognised in the
period in which the results are known/ materialised.
Dec 31, 2011
A) Basis of preparation of financial statements
These Financial Statements have been prepared under historical cost
convention from the books of account maintained on accrual basis to
comply in all material aspects with all the applicable accounting
principles in India, the applicable accounting standard as notified
under section 211(3C) of the Companies Act, 1956, of India (the ACI
-Act ACI-) and the relevant provisions of the Act.
b) Inventories
Inventories are valued at lower of cost and net realisable value.
Cost of raw materials, packing materials, stores, spares and tools are
computed on a weighted average basis.
Cost of work-in-progress/ finished goods are determined on weighted
average basis comprising material, labour and related factory
overheads.
c) Revenue Recognition
Sale of Goods
Revenue is recognised when the property and all significant risks and
rewards of ownership are transferred to the buyer and no significant
uncertainty exists regarding the amount of consideration that is
derived from the sale of goods. Sales are recorded net of trade
discount, rebates and sales tax.
In respect of sale transaction involving installation/ commissioning
services, the composite revenue is recognised based on transfer of
significant risks and rewards.
Sale of Services
Service income is recognised on completion of rendering of services and
is recorded net of service tax. Cost incurred during the pendency of
the contract is carried forward as job in progress.
Others
Other income is recognised on accrual basis except where receipt of
income is uncertain. Commission income is recognised on the basis of
confirmation received.
d) Fixed Assets and Depreciation/ Amortisation
i) Fixed assets are stated at historical cost less depreciation /
amortisation. Cost includes all expenses relating to acquisition and
installation of the concerned assets.
ii) Self constructed assets are stated at cost of construction relating
directly to the specific asset and other costs attributable to the
construction activity.
iii) Depreciation on all assets is provided on a straight line method
at the rates and in the manner specified in Schedule XIV to the Act
except in respect of the following:
Computer software is capitalised and amortised on a straight - line
basis over its useful life, which is estimated as three years.
iv) Depreciation of Assets acquired during the year is being provided
on pro-rata basis from the date of acquisition.
e) Foreign Currency Transactions
Foreign currency transactions are accounted at the exchange rates
prevailing on the date of the transaction. Gains and losses resulting
from the settlement of such transactions and from the translation of
monetary assets and liabilities denominated in foreign currencies are
recognised in the Profit and Loss Account.
f) Investments
Long term investments are stated at cost less diminution in value which
is other than temporary.
g) Employee Benefits
i) Short Term Employee Benefits:
The employees of the Company are entitled to leave encashment as per
the leave policy of the Company. The liability in respect of leave
encashment of short term nature is provided, based on an actuarial
valuation carried out by an independent actuary as at the year-end.
ii) Long Term Employee Benefits:
Defined Contribution Plans
The Company has Defined Contribution plans for post employment benefits
namely Provident Fund and Superannuation Fund.
The Company contributes to a Government administered Provident Fund and
has no further obligation beyond making its contribution.
The Company makes contributions to state plans namely Employee's State
Insurance Fund and Employee's Pension Scheme 1995 and has no further
obligation beyond making the payment to them.
The Company's contributions to the above funds are charged to Profit
and Loss Account every year.
Defined Benefit Plans
i) The Company has Defined Benefit Plan comprising of Gratuity and
Leave Encashment. The Company contributes to the Gratuity Fund which is
recognised by the Income Tax Authorities and administered through its
trustees.
ii) Liability for Defined Benefit Plan is provided on the basis of
actuarial valuation, as at the Balance Sheet date, carried out by an
independent actuary using the Projected Unit Credit Method.
iii) Termination benefits are recognised as an expense as and when
incurred.
iv) Actuarial gains and losses comprise experience adjustments and the
effects of changes in actuarial assumptions and are recognised
immediately in the Profit and Loss Account as income or expense.
h) Research and Development Expenses
Research and development expenses of revenue nature are charged to the
Profit and Loss Account when incurred. Expenditure of capital nature is
capitalised and depreciated in accordance with the rates specified in
paragraph (d) above.
i) Operating Leases
Lease Income
Lease rentals in respect of operating lease arrangements are recognised
in Profit and Loss Account in accordance with Accounting Standard - 19
ACI-Leases ACI-. Costs, including depreciation, incurred in earning
the lease income are recognised as expenses.
Lease Expense
Assets acquired as leases where a significant portion of the risks and
rewards of the ownership are retained by the lesser are classified as
Operating Leases. Lease rentals are charged to Profit and Loss Account
on an accrual basis.
j) Taxes on Income
Provision for tax for the year is made on the assessable income at the
tax rate applicable to the relevant assessment year.
Deferred tax is recognised, subject to the consideration of prudence,
on timing differences, being the difference between taxable income and
accounting income that originate in one period and are capable of
reversal in one or more subsequent periods.
k) Warranty
A provision is recognised for expected warranty claims on products
sold, based on past experience of level of repairs and returns.
Assumptions used to calculate the provision for warranties are based on
current sales level and current information available about returns.
l) Impairment of Assets
The Company assesses at each Balance sheet Date whether there is any
indication that asset may be impaired. If any such indication exists,
the Company estimates the recoverable amount of the asset. If such
recoverable amount of the asset or the recoverable amount of the cash
generating unit to which the asset belongs is less than its carrying
amount, the carrying amount is reduced to its recoverable amount. The
reduction is treated as an impairment loss and is recognised in the
Profit and Loss Account.
m) Provision for Contingent Liabilities
The Company recognises a provision when there is a present obligation
as a result of a past event that probably requires an outflow of
resources and a reliable estimate can be made of the amount of the
obligation. A disclosure for a 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. Where there is a possible
obligation or a present obligation that the likelihood of outflow of
resources is remote, no provision or disclosure is made.
n) Accounting Estimates
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amounts of assets and
liabilities on the date of financial statements and the reported
amounts of revenue and expenses during the reporting period. Difference
between the actual results and the estimates are recognised in the
period in which the results are known/ materialised.
Dec 31, 2010
A) Basis of preparation of financial statements
These Financial Statements have been prepared under historical cost
convention from the books of account maintained on accrual basis to
comply in all material aspects with all the applicable accounting
principles in India, the applicable accounting standard as notified
under section 211(3C) of the Companies Act, 1956, of India (the "Act")
and the relevant provisions of the Act.
b) Inventories
Inventories are valued at lower of cost and net realisable value.
Cost of raw materials, packing materials, stores, spares and tools are
computed on a weighted average basis.
Cost of work-in-progress/ finished goods are determined on weighted
average basis comprising material, labour and related factory
overheads.
c) Revenue Recognition
Sale of Goods
Revenue is recognised when the property and all significant risks and
rewards of ownership are transferred to the buyer or no significant
uncertainty exists regarding the amount of consideration that is
derived from the sale of goods. Sales are accounted net of trade
discount, rebates and sales tax.
In respect of sale transaction involving installation/ commissioning
services, the composite revenue is recognised based on transfer of
significant risks and rewards.
Sale of Services
Service income is recognised on completion of rendering of services and
is recorded net of service tax. Cost incurred during the pendency of
the contract is carried forward as job in progress.
Others
Other income is accounted on accrual basis except where receipt of
income is uncertain. Commission income is recorded on the basis of
confirmation received.
d) Fixed Assets and Depreciation/ Amortisation
i) Fixed assets are stated at historical cost less depreciation /
amortisation. Cost includes all expenses relating to acquisition and
installation of the concerned assets.
ii) Self constructed assets are stated at cost of construction relating
directly to the specific asset and other costs attributable to the
construction activity.
iii) Depreciation on all assets is provided on a straight line method
at the rates and in the manner specified in Schedule XIV to the
Companies Act, 1956 except in respect of the following:
Assets acquired after April 1, 2004, costing more than Rs. 5,000 and
upto Rs. 299,050 (equivalent to EURO 5,000) are depreciated pro-rata
over the period of 12 months.
Computer software is capitalised and amortised on a straight à line
basis over its useful life, which is estimated as three years.
With effect from October 1, 2009, the ÃNew Generation Technical
Know-How is amortised over revised period of 2 years as estimated by
the Management.
iv) Depreciation of Assets acquired during the year is being provided
on pro-rata basis from the date of acquisition.
e) Foreign Currency Transactions
Foreign currency transactions are accounted at the exchange rates
prevailing on the date of the transaction. Gains and losses resulting
from the settlement of such transactions and from the translation of
monetary assets and liabilities denominated in foreign currencies are
recognised in the Profit and Loss Account.
f) Investments
Long term investments are stated at cost less diminution in value which
is other than temporary.
g) Employee Benefits
i) Short Term Employee Benefits:
The employees of the Company are entitled to leave encashment as per
the leave policy of the Company. The liability in respect of leave
encashment of short term nature is provided, based on an actuarial
valuation carried out by an independent actuary as at the year end.
ii) Long Term Employee Benefits:
Defined Contribution Plans
The Company has Defined Contribution plans for post employment benefits
namely Provident Fund and Superannuation Fund.
The Company contributes to a Government administered Provident Fund and
has no further obligation beyond making its contribution.
The Company makes contributions to state plans namely Employees State
Insurance Fund and Employees Pension Scheme 1995 and has no further
obligation beyond making the payment to them.
The Companys contributions to the above funds are charged to Profit
and Loss Account every year.
Defined Benefit Plans
Liability for Defined Benefit plans (except for Provident fund which is
charged based on contributions) is provided on the basis of valuations,
as at the Balance Sheet date, carried out by an independent actuary.
The actuarial valuation method used for measuring the liability is the
Projected Unit Credit method. The obligations are measured as the
present value of estimated future cashflows discounted at rates
reflecting the prevailing market yields of Indian Government securities
as at the Balance Sheet date for the estimated term of the obligations.
The estimate of future salary increases considered takes into account
the inflation, seniority, promotion and other relevant factors. The
expected rate of return of plan assets is the Companys expectation of
the average long term rate of return expected on investments of the
fund during the estimated term of the obligations. Plan assets are
measured at fair value as at the Balance Sheet date. The liability for
leave encashment and compensated absenses is provided on the basis of
valuation, as at Balance Sheet date, carried out by an independent
actuary.
The Company has partly funded the same through a Group Gratuity scheme
with Life Insurance Corporation of India (LIC), SBI Life Insurance and
deposit with State Bank of India.
iii) Termination benefits are recognised as an expense as and when
incurred.
iv) Actuarial gains and losses comprise experience adjustments and the
effects of changes in actuarial assumptions and are recognised
immediately in the Profit and Loss Account as income or expense.
h) Borrowing Costs
Borrowing costs that are attributable to the acquisition, construction
or production of qualifying assets are capitalised as part of the cost
of such assets till the assets is put to use. A qualifying asset is an
asset that necessarily takes a substantial period of time to get ready
for its intended use. All other borrowing costs are recognised as
expense in the period in which they are incurred.
i) Operating Leases
Lease Income
Lease rentals in respect of operating lease arrangements are recognised
in Profit and Loss Account in accordance with Accounting Standard à 19
"Leases". Costs, including depreciation, incurred in earning the lease
income are recognised as expenses.
Lease Expense
Assets acquired as leases where a significant portion of the risks and
rewards of the ownership are retained by the lessor are classified as
Operating Leases. Lease rentals are charged to Profit and Loss Account
on an accrual basis.
j) Taxes on Income
Provision for tax for the year is made on the assessable income at the
tax rate applicable to the relevant assessment year.
Deferred tax is recognised, subject to the consideration of prudence,
on timing differences, being the difference between taxable income and
accounting income that originate in one period and are capable of
reversal in one or more subsequent periods.
k) Warranty
A provision is recognised for expected warranty claims on products sold
during the last one year, based on past experience of level of repairs
and returns. Assumptions used to calculate the provision for warranties
were based on current sales level and current information available
about returns.
l) Impairment of Assets
The Company assesses at each Balance Sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. The
recoverable amount is higher of the assets net selling price or
estimated future cash flows which are discounted to their present value
based on appropriate discount rates. If such recoverable amount of the
asset or recoverable amount of the cash generating unit to which the
asset belongs is less than its carrying amount, the carrying amount is
reduced to its recoverable amount. The reduction is treated as an
impairment loss and is recognised in the Profit and Loss Account. If at
the Balance Sheet date there is an indication that if a previously
assessed impairment loss no longer exists, the recoverable amount is
reassessed and the asset is reflected at the recoverable amount.
m) Provision for Contingent Liabilities
The Company recognises a provision when there is a present obligation
as a result of a past event that probably requires an outflow of
resources and a reliable estimate can be made of the amount of the
obligation. A disclosure for a 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. Where there is a possible
obligation or a present obligation that the likelihood of outflow of
resources is remote, no provision or disclosure is made.
n) Accounting Estimates
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amounts of assets and
liabilities on the date of financial statements and the reported
amounts of revenue and expenses during the reporting period. Difference
between the actual results and the estimates are recognised in the
period in which the results are known/ materialised.
Dec 31, 2009
1. METHOD OF ACCOUNTING
1.1 Basis of Preparation of Financial Statements
These financial statements have been prepared under the historical cost
convention from the books of account maintained on accrual basis which
is in conformity with accounting principles generally accepted in
India, relevant provision of the Companies Act, 1956 and the mandatory
Accounting Standards as specified in the (Accounting Standards) Rules,
2006, prescribed by the Central Government.
1.2 Use of estimates
The preparation of financial statements are in conformity with
Generally Accepted Accounting Policy (GAAP) which requires the
management to make estimates and assumptions that affect the reported
amount of assets & liabilities and disclosures of contingent assets and
liabilities as at the date of financial statements and reported amount
of revenues and expenses during the reported period. Actual results
could differ from those estimates. Any revision to accounting estimates
is recognised in the current and future periods.
2. FIXED ASSETS
2.1 All tangible/intangible assets are stated at cost less
depreciation.
2.2 Self constructed assets are stated at cost of construction relating
directly to the specific asset and other costs attributable to the
construction activity.
3. DEPRECIATION/AMORTIZATION
3.1 Depreciation has been provided under the "Straight-Line Method
(SLM)" in accordance with the provisions of Section 205(2)(b) of the
Companies Act, 1956.
3.2 Depreciation on all assets acquired before 2nd April, 1987 is
provided at SLM rates of depreciation corresponding to the rates as per
Income-tax Rules prevalent at the time of acquisition of the assets in
accordance with Circular No.l of 1986 (1/1/86-CI-V) dated 21st May,
1986 of the Company Law Board.
3.3 Depreciation on all assets acquired on or after 2nd April, 1987 is
provided at the rates and in the manner specified in Schedule XIV to
the Companies Act, 1956 except in respect of the following (such rates
not being lower than the rates prescribed under Schedule XIV):-
3.3.1 Plant and Machinery relating to Graphics Segment are depreciated
over the useful life of the same as determined by the management.
3.3.2 Assets acquired after 1st April 2004, costing more than Rs 5,000
and upto EURO 5,000 (equivalent Rs 318,500/- @ Rs 63.70 per EURO) are
depreciated pro-rata over the period of 12 months
3.3.3 Patterns are written off over a period of three years.
3.3.4 Cost of Computer Software is amortised over a period of three
years.
3.3.5 With effect from 1st October 2009, the "New Generation Technical
Know-How is amortised over revised period of 2 years as estimated by
the management. (Also refer note 4 to part II of Schedule T)
3.4 Extra Shift depreciation is provided on "Segment" basis.
4. IMPAIRMENT OF ASSETS
At each balance sheet date, the Company reviews the carrying amounts of
its fixed assets to determine whether there is any indication that
those assets suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to
determine the extent of impairment loss. In assessing the value in use,
the estimated future cash flows expected from the continuing use of the
asset and from its disposal are discounted to their present value using
pre tax discount rate that reflects the current market assessments of
time value of money and the risks specific to the assets.
5. INVESTMENTS
Long term investments are stated at cost less diminution in value which
is other than temporary.
6. INVENTORIES
6.1 Raw & packing materials and stores, spares & tools are valued at
cost or net realisable value whichever is less. Cost is computed on a
weighted average basis, after providing for the cost of obsolescence.
6.2 The work in progress/finished goods inventories are valued at lower
of cost and net realisable value.
6.3 The work in progress/finished goods are determined on average cost
basis considering material, labour and related factory overheads.
7. FOREIGN CURRENCY TRANSACTIONS
7.1 Transactions in foreign currency are recorded at the respective
exchange rate prevailing on the date of transactions.
Assets/liabilities denominated in foreign currency are restated using
the closing rate.
7.2 Exchange differences arising on year end conversion or actual
realisation/payment are recognized as income or expense in the period
in which they arise, including the exchange difference related to
acquisition of fixed assets from a country outside India.
8. REVENUE RECOGNITION
8.1 Sales are recognised on dispatch of goods and are-recorded net of
trade discount, rebates and sales tax.
8.2 In respect of sale transaction involving installation/commissioning
services, the composite revenue is recognised based on dispatch of
machinery. Necessary provision based on management estimates are made
for the cost to be incurred for the installation and commissioning
service.
8.3 Service income is recognised on completed service contract method
when complete services are rendered and are recorded net of service
tax. Cost incurred during the pendency of the contract is carried
forward as job in progress.
8.4 Other income is accounted on accrual basis except where receipt of
income is uncertain.
8.5 Commission income is booked on the basis of confirmation received.
9. EMPLOYEE BENEFITS
9.1 Company is having Group Gratuity cum-Life Insurance Scheme with
Life Insurance Corporation of India (LIC of India), for future payment
of Gratuity to retiring employees. Additional provision is made for
shortfall between liability as per actuarial valuation and the amount
funded with LIC of India.
9.2 Liability for leave encashment is actuarially determined and
provided on accrual basis.
9.3 Employee benefits in the form Provident Fund, Family Pension Fund
and Superannuation Schemes, which are defined contribution schemes, are
charged to Profit and Loss Account of the year when the contributions
to the respective funds accrue.
10. BORROWING COST
Borrowing cost attributable to the acquisition or construction of
qualifying assets is capitalised as part of the cost of that assets.
Other borrowing costs are recognised as an expense in the period in
which they are incurred.
11. OPERATING LEASE
11.1 Lease Income
Lease rentals in respect of Operating Lease arrangements are recognised
in Profit & Loss Account in accordance with AS - 19 " Leases". Costs,
including depreciation, incurred in earning the lease income are
recognised as expenses.
11.2 Lease Expense
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 Profit & Loss Account on a straight line basis over the lease
period.
12. TAXATION
12.1 Provision for Current Tax has been determined on the basis of
relief and deduction available under the Income Tax Act, 1961.
12.2 The deferred tax for timing difference between the books and tax
profits for the year is accounted for, using the tax rates and laws
that have been substantively enacted as of the balance sheet date.
Deferred tax asset other than on unabsorbed losses are realized only
when there is reasonable certainty of their realization. Deferred tax
asset on unabsorbed tax losses and unabsorbed tax depreciation and
carried forward losses are recognized only when there is virtual
certainty that this would be realized in future.
13. EXCISE / CUSTOM DUTY ON UNCLEARED GOODS
13.1 Excise duty on manufactured goods lying in the factory premises as
at year end are provided for in the accounts and corresponding amount
is included in the valuation of inventories.
13.2 Customs duty in respect of goods lying in customs bonded warehouse
is accounted at the time of clearance of goods.
14. SEGMENT REPORTING
Segments have been identified taking into account the nature of the
products, geographical locations, the differing risk and returns, the
organisation structure and internal reporting system. The accounting
principles consistently used in the preparation of the financial
statements are also consistently applied to record income and
expenditure in individual segments.
15. PROVISIONS AND CONTINGENT LIABILITIES
15.1 Provisions involving substantial degree of estimation in
measurement are recognized when there is a present obligation as a
result of past events and it is probable that there will be an outflow
of resources.
15.2 Contingent liabilities are disclosed when the Company has a
possible obligation or a present obligation and it is probable that a
cash outflow will not be required to settle the obligation.
16. DEFERRED REVENUE EXPENDITURE
Compensation to employees under Voluntary Retirement
Schedule/Retrenchment is written off in the year of payment.
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