SIGNIFICANT ACCOUNTING POLICIES 1. Basis of Accounting The financial statements are brpared and brsented under the historical cost convention, in accordance with Generally Accepted Accounting Principles in India (GAAP), on the accrual basis of accounting, except as stated herein. GAAP comprises of the mandatory Accounting Standards (AS) specified under section 133 read with Rule 7 of Companies (Accounts) Rules, 2014 by the Central Government,to the extent applicable, and the provisions of the Companies Act, 2013. 2. Use of Estimates The brparation of the financial statements in conformity with GAAP requires that the Management make estimates and assumptions that affect the reported amounts of assets and liabilities,disclosure of contingent liability as on the date of financial statements and the reported amounts of revenue and expenses during the reporting period. Although such estimates are made on a reasonable and prudent basis taking into account all available information, actual results could differ from these estimates and such differences are recognised in the period in which the results are ascertained. 3. Fixed Asset A. Capitalisation (a) The Fixed Assets are stated at cost. (b) The cost of the Fixed Asset comprises its purchase price and any attributable cost of bringing the asset to its working condition for its intended use. (c) Expenditure on land development is capitalised. (d) Expenditure on reconditioning, rebuilding and major overhaul of an asset are capitalized if technical assessment indicates increase in future benefits from the existing assets beyond its brviously assessed standards of performance (increase in capacity or life or efficiency or productivity). (e) Jigs and fixtures of unit value of Rs. 5 lakhs and above are capitalized and those with unitvalue below Rs. 5 lakhs are charged off in the year of incurrence. B. Debrciation (a) Debrciation is charged on Straight Line Method basis adopting 'Useful Lives' as per Schedule-II of the Companies Act, 2013 (or such shorter useful lives which in the opinion of the management are appropriate), calculated from the month following the month of capitalisation. Debrciation on additions or extensions to existing assets is provided so as to co-terminate with the life of the original asset if it becomes integral part of the existing asset or on useful life of the asset if it is capable of independent use. (b) For Assets whose unit cost does not exceed Rs.5000/- debrciation is provided at the rate of hundred percent in the year of capitalization. (c) Cost of leasehold land is amortised over the period of lease on pro-rata basis. (d) Jigs & Fixtures which are capitalized are debrciated over a period of three years. C. Borrowing Cost Borrowing Costs that are directly attributable to the acquisition, construction or productionof a qualifying fixed asset are capitalised as part of the cost of the asset. D. Impairment of Assets The company assesses the impairment of assets at each Balance sheet date. The loss on account of impairment, if any, is accounted accordingly. 4. Intangible Assets a) Software The cost of software internally generated /purchased for internal use which is not an integral part of the related hardware is recognised as an Intangible Asset and is amortised on straight line method based on technical assessment for a period not exceeding ten years. Software which is an integral part of related hardware is capitalised along with the hardware. b) Technical Know-how Expenditure on Technical Know-how is recognised as an Intangible Asset and amortised on straight line method based on technical assessment for a period not exceeding ten years. For Sl.No. (a) & (b) above, amortization commences from the month following the month during which the asset is available for use. 5. Inventory Valuation (i) Raw materials, Components, Stores and Spare parts are valued at lower of Weighted Average Cost and estimated net realizable value. (ii) Work-in-progress is valued at lower of cost of materials, labour & production overheads based on normative capacity and estimated net realizable value. (iii) Finished stock is valued at lower of cost and estimated net realizable value. (iv) Estimated costs are considered wherever actual costs are not available. (v) The cost is adjusted for decline in value by writing down the value based on specific identification. Necessary provision is made for non-moving items. (vi) Based on technical assessment, provision is made for revalidation/refurbishment of finished goods. (vii) Scrap is valued at estimated net realizable value. 6. Advances from customers Advances from customers include advances / progress payments received as per letters of intent / sale contracts and are net after adjustments for sales accounted under respective contracts. 7. Sales / Other Income (i) Sales for products viz., equipment, aggregates, attachments, spares and ancillary products is recognised when risks and rewards of ownership pass on to the customer as per contractual terms. (ii) In the case of contracts for supply of complex equipment/systems where the normal cycle time of completion and delivery period is more than 12 months and the value of the equipment/system is more than Rs. 25 crores, revenue is recognised on the 'percentage completion method'. Percentage completion is based on the ratio of actual costs incurred on the contract up to the reporting date to the estimated total cost of the product. Since the outcome of such a contract can be estimated reliably only on achieving certain progress, revenue is recognised up to 25% progress only to the extent of costs, thereafter revenue is recognised on proportionate basis and a contingency provision equal to 20% of the surplus of revenue over costs is made while anticipated losses are recognised in full. (iii) Where sale prices are not established, sales are recognised provisionally at prices likely to be realised. Difference, if any, is accounted in the year of finalization of price. (iv) Sales include excise duty wherever applicable but exclude sales tax. (v) Duty drawback claims on exports are accounted on brferring the claims. (vi) Claims for escalation are recognised as per escalation formula provided in the contract. If the contract does not provide for escalation, claim for the same is recognized on acceptance by the customer. (vii) Where the contract provides for installation and commissioning and price for the same is agreed separately, revenue for installation and commissioning is recognised on conclusion of installation and commissioning. Where installation and commissioning fee is not separately stipulated, the revenue for the product is recognised, however, estimated cost as technically assessed for such installation and commissioning to be incurred, is provided for. 8. Employee Benefits (i) Short term employee benefits are recognised as an expense at the undiscounted amount in the profit and loss account of the year in which the related service is rendered. (ii) Post employment and other long term employee benefits are recognised as an expense in the profit and loss account for the year in which the employee has rendered services. The expense is recognised at the brsent value of the amounts payable, determined using actuarial valuation techniques. Actuarial gain and losses in respect of post-employment and other long term benefits are charged to the profit and loss account. 9. Accounting for Foreign Currency Transactions (i) Transactions in foreign currency are recorded in rupees by applying to the foreign currency amount, the exchange rate brvailing as on the date of transaction. (ii) The outstanding balances of monetary items relating to foreign currency transactions are stated in rupees by adopting the rate of exchange brvailing on the date of Balance Sheet. (iii) Exchange rate differences consequent to restatement / settlement are recognised as income / expenditure. (iv) In the case of forward exchange contracts, the brmium or discount arising at the inception of the contract is accounted for over the life of the contract. Exchange differences on such a contract are recognised in the statement of profit or loss in the reporting period in which the exchange rate changes. 10. Contractual Obligations Warranty liability for contractual obligation in respect of equipment / spares sold to customers is ascertained on the basis of an annual technical assessment. 11. Research & Development Research expenditure is charged off in the year of incurrence. The expenditure on development of new products is capitalized or where the same is intended for sale, it is inventorised. Amortization of the capitalised expenditure is on straight line method based on technical assessment for a period not exceeding ten years. The amortization commences from the month following the month during which the asset is available for use. Expenditure on fixed assets relating to Research & Development is capitalised. 12. Prior Period Items Prior period adjustments are those adjustments, which are over Rs. 1 lakh in each case, arising out of correction of errors and omissions made in the past years. 13. Under / Over Absorption of Cost Adjustments for under / over absorption of costs on jobs, is made only if the extent of under / over recovery exceeds one percent of turnover. 14. Taxes on Income The tax expense comprises of current tax and deferred tax. The provision for current tax is ascertained on the basis of assessable profits computed in accordance with provisions of the Income Tax Act, 1961. The deferred tax is recognised on all timing differences resulting from the recognition of items in the financial statements and in estimating current income tax provision, subject to consideration of prudence in respect of deferred tax assets. The carrying amount of deferred tax asset/ liability is reviewed at each balance sheet date. 15. Leased Assets Lease rentals recovered on assets given under operating leases are recognised in the Profit & Loss Account. Initial direct costs are expensed on incurrence. 16. Investments Long-term investments are carried at cost. Permanent decline in the value of such investments is recognised and provided for. Current investments are carried at lower of cost and fair value. 17. Provisions, Contingent Liabilities and Contingent Assets A provision is recognized when - A brsent obligation arises as a result of past events. - It is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions are determined based on the best estimates required to fulfill the obligations on the balance sheet date. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent Liabilities are not recognized but are disclosed in the notes. Contingent Assets are neither recognized nor disclosed in the financial statements. 18. Others (i) Special Tools up to the unit value of Rs.5000 are charged off in the year of incurrence and those above unit value of Rs. 5000 are amortized over a period of three years. (ii) Hand tools are charged to expenses at the time of issue. (iii) Expenditure on Voluntary Retirement Scheme is expensed in the year of incurrence. NOTES FORMING PART OF FINANCIAL STATEMENTS Basis of Preparation of Financial Statements Assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company's operating cycle is considered as twelve months for the purpose of current / non current classification of assets and liabilities. Other Disclosures A. In terms of Notification No. S.O.301(E) Dt. 08-02-2011 of Ministry of Corporate Affairs, the Board was vested with powers with regard to non-disclosure of quantitative information in the Annual accounts, relating to purchases, sales, consumption of raw materials etc., to be shown under broad heads, as required under paragraphs 5(ii)(d), 5(iii) and 5 (viii) (a) to (e) except (d) of Part-II of Schedule VI of the Companies Act, 1956. As per part-II of Schedule III of the Companies Act, 2013, company has to disclose the information covered under Para 5 (ii) (d), Para 5(iii), Para 5(viii) (a), (b), (c) and (e). Considering that the Company is a Defence Public Sector Undertaking and due to security and strategic consideration, Ministry of Defence has requested Ministry of Corporate Affairs to consider granting exemption from publication of the above information in the financial statements from FY 2014-15 and response of the Ministry of Corporate Affairs is awaited. In view of the above, disclosure as per Para 5 (ii) (d), Para 5(iii), Para 5(viii) (a), (b), (c) and (e) of part-II to Schedule III of the Companies Act, 2013 have not been made. G. Advances, Balances with government departments, Trade Payables and receivables, Other loans and advances and deposits classified under non current and current are subject to confirmation. There are certain old balances pending review / adjustment. The management does not expect any significant impact upon such reconciliation. H. Figures of brvious year have been regrouped/ reclassified/ recast wherever necessary to conform to current year's brsentation. J. The Financial Statements for the year as approved by the Board of Directors and the report thereon issued by the Statutory Auditors were revised pursuant to C&AG’s audit observation during the course of audit under Sec 143(6)(a) of the Companies Act, 2013 by amending Note No. 17e. This amendment has no impact on the reported figures in the Financial Statements. Refer our report of even date attached For M/s. S.R.R.K SHARMA ASSOCIATES Chartered Accountants Firm Registration Number: 003790S CA. S.R.R.K SHARMA Partner Membership No.: 018088 For and on behalf of the Board of Directors PRADEEP SWAMINATHAN Director (Finance) P. DWARAKANATH Chairman & Managing Director M E V SELVAMM Company Secretary Bengaluru 16.07.2015 |