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 the mandatory Accounting Standards (AS) [as notified under section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014], to the extent applicable, the provisions of the Companies Act, 2013 and these have been consistently applied. 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 at 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. REVENUE RECOGNITION (i) Revenue from sale of goods is recognised as under : a. In the case of FOR contracts, when the goods are handed over to the carrier for transmission to the buyer after prior inspection and acceptance, if stipulated, and in the case of FOR destination contracts, if there is a reasonable expectation of the goods reaching destination within the accounting period. Revenue is recognised even if goods are retained with the company at the request of the customer. b. In the case of ex-works contracts, when the specified goods are unconditionally appropriated to the contract after prior inspection and acceptance, if required. c. In the case of contracts for supply of complex equipments / systems where the normal cycle time of completion / delivery period is more than 24 months and the value of the equipment / system is more than Rs. 100 crores, revenue is recognised on the "percentage completion" method. Percentage completion is based on the ratio of actual costs incurred on the contract upto the reporting date to the estimated total cost of the contract. Since the outcome of such a contract can be estimated reliably only on achieving certain progress, revenue is recognised upto 25% progress only to the extent of costs. After this stage, 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. d. If the sale price is pending finalisation, revenue is recognised on the basis of price expected to be realised. Where break up prices of sub units sold are not provided for, the same are estimated. e. Price revisions and claims for price escalations on contracts are accounted on admittance. f. In case of a composite contract, where separate fee for installation and commissioning is not stipulated and the supply is effected and installation and commissioning work is pending, the estimated costs to be incurred on installation and commissioning activity is provided for and revenue is recognised as per the contract. g. Sales exclude Sales Tax / Value Added Tax (VAT) and include Excise Duty. (ii) Revenue from Service Income is recognised as under : a. Where installation and commissioning is stipulated and price for the same agreed separately, revenue relating to installation and commissioning is recognised on conclusion of installation and commissioning activity. b. Revenue in respect of Maintenance Contracts is recognized on accrual basis. c. Revenue in respect of other categories of services is recognized on rendering of service. (iii) Other income is recognised on accrual. 4. FIXED ASSETS, CAPITAL WORK-IN-PROGRESS AND INTANGIBLE ASSETS UNDER DEVELOPMENT : (i) Tangible Assets : Tangible Fixed Assets are stated at cost less accumulated debrciation / amortisation including where the same is acquired in full or in part with government grant. Cost for this purpose includes all attributable costs for bringing the asset to its location and condition, cost of computer software which is an integral part of the related hardware, and also includes borrowing costs during the acquisition / construction phase, if it is a qualifying asset requiring substantial period of time to get ready for intended use. The cost of Fixed Assets acquired from a place outside India includes the exchange differences if any, arising in respect of liabilities in foreign currency incurred for acquisition of the same upto 31 March 2007. Capital work-in-progress comprises supply-cum-erection contracts, the value of capital supplies received at site and accepted, capital goods in transit and under inspection and the cost of Fixed Assets that are not yet ready for their intended use as at the balance sheet date. (ii) Intangible Assets : The cost of software (which is not an integral part of the related hardware) acquired for internal use and resulting in significant future economic benefits, is recognised as an Intangible Asset in the books of accounts when the same is ready for use. Intangible Assets that are not yet ready for their intended use as at the Balance Sheet date are classified as "Intangible Assets under Development". (iii) Impairment of Assets : The Company assesses the impairment of assets with reference to each Cash Generating Unit (CGU) at each Balance Sheet date if events or changes in circumstances, based on internal and external factors, indicate that the carrying value may not be recoverable in full. The loss on account of impairment, which is the difference between the carrying amount and recoverable amount, is accounted accordingly. Recoverable amount of a CGU is its Net Selling Price or Value in Use whichever is higher. The Value in Use is arrived at on the basis of estimated future cash flows discounted at Company's br-tax borrowing rates. Reversal of impairment provision is made when there is an increase in the estimated service potential of an asset, either from use or sale, on reassessment after the date when impairment loss for that asset was last recognised. 5. DEbrCIATION / AMORTISATION Tangible debrciable Fixed Assets are generally debrciated on straight-line method over the useful life of the assets estimated by the Management and in the manner brscribed in Schedule II to the Companies Act, 2013. Where cost of a part of the asset is significant to total cost of the asset and useful life of that part is different from the useful life of the remaining asset, useful life of that significant part is determined separately and the significant part debrciated on straight-line method over its estimated useful life. Special instruments are amortized over related production. Intangible Assets are amortized over a period of three years on straight-line method. Prorata debrciation / amortization is charged from / upto the date on which the assets are ready to be put to use / are deleted or discarded. Leasehold land is amortised over the period of lease. 6. BORROWING COSTS Borrowing costs that are specifically attributable to qualifying assets as defined in Accounting Standard AS 16 are added to the cost of such assets until use or sale and the balance expensed in the year in which the same is incurred. 7. RESEARCH & DEVELOPMENT EXPENDITURE (i) Research and Development expenditure (other than on specific development- cum sales contracts and R&D projects initiated at customer's request), is charged off as expenditure when incurred. R&D expenditure on development - cum - sale contracts and on R&D projects initiated at customer's request are treated at par with other sales contracts. (ii) Where R&D projects are initiated at customer's request, and such projects do not fructify into a customer order, the total expenditure booked in respect of such projects is charged off in the year the project is closed. (iii) R&D expenditure on Fixed Assets is capitalised. 8. GOVERNMENT GRANTS All Grants from Government are initially recognised as Deferred Income. The amount lying in Deferred Income on account of acquisition of Fixed Assets is transferred to the credit of Statement of Profit and Loss in proportion to the debrciation charged on the respective assets to the extent attributable to Government Grants utilised for the acquisition. The amount lying in Deferred Income on account of Revenue Expenses is transferred to the credit of Statement of Profit and Loss to the extent of expenditure incurred in the ratio of the funding to the total sanctioned cost, limited to the grant received. Grants in the nature of promoter's contribution are credited to Capital Reserve. 9. INVESTMENTS (i) Investments are categorised as Trade Investments or Other Investments. Trade investments are the investments made to enhance the Company's business interests. (ii) Investments are further classified either as long-term or current based on the Management's intention at the time of purchase. Long term investments are valued at acquisition cost. Any diminution in the value other than of temporary nature is provided for. Current investments are carried at lower of cost or fair value. 10. INVENTORY VALUATION All inventories of the Company other than disposable scrap are valued at lower of cost or net realisable value. Disposable scrap is valued at estimated net realisable value. Cost of materials is ascertained by using the weighted average cost formula. Cost of work in progress and finished goods include Materials, Direct Labour and appropriate overheads. Finished goods at factories include applicable excise duty. Adequate provision is made for inventory which are more than five years old which may not be required for further use. 11. TRADE RECEIVABLES AND OTHER RECEIVABLES (i) Full provision is made for all Trade Receivables and Other Receivables considered doubtful of recovery having regard to the following considerations : a. Time barred dues from the government / government departments / government companies are generally not treated as doubtful. b. Where dues are disputed in legal proceedings, provision is made if any decision is given against the Company even if the same is taken up on appeal to higher authorities / courts. (ii) Provision for bad and doubtful dues is generally made for dues outstanding for more than three years, excepting those which are contractually not due as per the terms of the contract or those which are considered realisable based on a case to case review. 12. INCOME TAX Tax expense comprising current tax after considering deferred tax as determined under the brvailing tax laws are recognised in the Statement of Profit and Loss for the period. Certain items of income and expenditure are not considered in tax returns and financial statements in the same period. The net tax effect calculated at the current enacted tax rates of this timing difference is reported as deferred income tax asset / liability. The effect on deferred tax assets and liabilities due to change in such assets / liabilities as at the end of the accounting period as compared to the beginning of the period and due to a change in tax rates are recognised in the Statement of Profit and Loss for the period. 13. PROVISION FOR WARRANTIES Provision for expenditure on account of performance guarantee & replacement / repair of goods sold is made on the basis of trend based estimates. 14. FOREIGN CURRENCY TRANSACTIONS Foreign exchange transactions including that of integral foreign branches are recorded using the exchange rates brvailing on the dates of the respective transactions. Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at period-end rates. The resultant exchange difference arising from settlement of transactions during the period and translations at the period end, except those upto 31 March 2007 relating to acquisition of Fixed Assets from a place outside India, is recognised in the Statement of Profit and Loss. Exchange differences relating to the acquisition of Fixed Assets were adjusted in the carrying cost of the Fixed Assets till 31 March 2007. Premium or discount arising at the inception of the forward exchange contract is amortised as income / expenditure over the life of the contract. Premium arising at the time of entering into an Options contract is charged off at the time of inception of the Contract. The exchange rate differences on the amount of forward exchange contracts between the rate on the last reporting date / the rate at the time of entering into a contract during the period and the rate on the settlement date / reporting date are recognised in the Statement of Profit and Loss in the reporting period in which the exchange rates change. In accordance with the announcement of ICAI on Accounting for Derivatives, Forward Exchange Contracts / Options Contracts entered into to Hedge the Foreign Currency Risk of a "Firm Commitment" or a Highly Probable forecast transaction and outstanding as on reporting date are valued on Marked to Market basis and losses, if any, are adjusted in the Statement of Profit and Loss. Any gain on Marked to Market valuation is not recognized by the company keeping in view the principle of prudence as enunciated in AS-1- Disclosure of Accounting Policy. Any profit or loss arising on cancellation or renewal of a forward exchange contract is recognised as income or as expense in the period when the cancellation or renewal occurs. 15. EMPLOYEE BENEFITS (i) All employee benefits payable wholly within twelve months of rendering the related services are classified as short term employee benefits and they mainly include (a) Wages & Salaries; (b) Short-term compensated absences; (c) Profit-sharing, incentives and bonuses and (d) Non-monetary benefits such as medical care, subsidised transport, canteen facilities etc., which are valued on undiscounted basis and recognised during the period in which the related services are rendered. Incremental liability for payment of long term compensated absences such as Annual Leave, Sick Leave and Half Pay Leave is determined as the difference between brsent value of the obligation determined annually on actuarial basis using Projected Unit Credit method and the carrying value of the provision contained in the balance sheet and provided for. (ii) (a) Defined contribution to Employee Pension Scheme is made on monthly accrual basis at the applicable rates. (b) Defined contribution to Superannuation Pension Scheme is made on Annual basis at the applicable rates. (iii) Incremental liability for payment of Gratuity and Employee Provident fund to employees is determined as the difference between brsent value of the obligation determined annually on actuarial basis using Projected Unit Credit Method and the Fair Value of Plan Assets funded in an approved trust set up for the purpose for which monthly contributions are made in the case of provident fund and lump sum contributions in the case of gratuity. (iv) Incremental liability under BEL Retired Employees Contributory Health Scheme (BERECHS) is determined annually on actuarial basis using Projected Unit Credit Method and provided for. (v) Actuarial liability for the year is determined with reference to employees at the end of January of each year. (vi) Payments of voluntary retirement benefits are charged off to revenue on incurrence. 16. PRIOR PERIOD ADJUSTMENTS AND EXTRAORDINARY ITEMS Prior period adjustments and extraordinary items having material impact on the financial affairs of the Company are disclosed. 17. TECHNICAL KNOW - HOW Revenue Expenditure incurred on technical know-how is charged off to Statement of Profit and Loss on incurrence. 18. PROVISIONS AND CONTINGENT LIABILITIES Provisions for losses and contingencies arising as a result of a past event where the Management considers it probable that a liability may be incurred, are made on the basis of the best reliable estimate of the expenditure required to settle the brsent obligation on the Balance Sheet date, and are not discounted to its brsent value. Provisions are reviewed at each Balance Sheet date and adjusted to reflect the current best estimate. Significant variations thereof are disclosed. Contingent liabilities to the extent the Management is aware, are disclosed by way of notes to the accounts. 19. CASH FLOW STATEMENT Cash flow statement has been brpared in accordance with the indirect method brscribed in Accounting Standard - 3 on Cash Flow Statements. For Badari, Madhusudhan & Srinivasan Chartered Accountants Firm Regn. No. 005389S N Srinivasan Partner S K Sharma Chairman & Managing Director P R Acharya Director (Finance) S Sreenivas Company Secretary Membership No. 027887 Bengaluru 29 May 2015 NOTE - 30 GENERAL NOTES TO ACCOUNTS 1) As per the requirement of Schedule III to the Companies Act, 2013, the Operating Cycle has been determined at Strategic Business Unit (SBU) / Unit level, as applicable. 2) The Company has changed the following Accounting Policies with effect from FY 2014-15 : A) Basis of Accounting (Policy No. 1) - to take cognizance of the Companies Act, 2013. B) Revenue Recognition (Policy No. 3) - to bring clarity on Accounting Policy relating to recognition of Service Income. C) Debrciation / Amortisation (Policy No. 5) - to take cognizance of Schedule II to the Companies Act, 2013. The financial impact of the change in above Accounting Policies during the Financial Year is as follows : NIL in respect of A & B above and reduction in expenditure by Rs. 145.29 in respect of C above. 3) The Company has analysed indications of impairment of assets of each geographical composite manufacturing unit considered as Cash Generating Units (CGU). On the basis of assessment of internal and external factors, none of the Unit has found indications of Impairment of its Assets and hence no provision is considered necessary. 4) A) The Company has been sanctioned working capital limit of Rs. 290,000 by Consortium Bankers (SBI Lead Bank). The sanctioned limit includes a sub limit of Rs. 20,000 of fund based limit (interchangable with non fund based LC limits). B) The interest rate payable on fund based limit is linked to SBI Base Rate plus 0.40%. (Interest rate payable as on 31 March 2015 is 10.40% p.a.). C) The amount utilised is repayable on demand. Utilisation as on 31 March 2015 is NIL ( NIL). D) The above sanction limit is secured by hypothecation of Inventories and Trade Receivables. 5) Letters requesting confirmation of balances have been sent in respect of Trade Receivables, Trade Payables, Advances and Deposits. Wherever replies have been received, reconciliation is under process and provisions / adjustments will be made wherever considered necessary. 6) In respect of Labour matters, as the matters are yet to be adjudicated, the liability, if any, is not ascertainable. However, such liability is not expected to be material. 7) "Excise Duty" which is paid during the year in respect of turnover is shown as a deduction from Turnover (Gross) in the Statement of Profit and Loss. "Excise Duty - Others" which is included in Note No. 27 - "Other Expenses" rebrsents incremental provision of Excise Duty on Finished Goods, Excise Duty paid on Sale of Scrap and Others. 8) The Company is engaged in manufacture and supply of strategic electronic products primarily to Defence Services and hence, it would not be in public interest for the Company to brsent segment information. For similar reasons, the Company is being granted exemption from publication in the Annual Accounts, certain disclosures (Refer Note 30(6)). The SEBI has also granted exemption, for these reasons, to the Company from publication of segment information required under Accounting Standard 17 (AS 17) in quarterly unaudited financial results. Hence, Segment information required under AS 17 is not disclosed. Such non disclosure has no financial effect. 9) The Value of Retention Sales (i.e., Goods retained with the Company at the Customers’ request and at their risk) included in Gross Turnover during the year is Rs. 1,01,116.92 (Rs. 42,539.00). 10) BEL Multitone Pvt. Ltd. (Joint Venture Company) was under liquidation consequent to Special Resolution passed by its Members on 25.11.2013 for Members' Voluntary winding up. As on 31 March 2015, all the assets of the Company have been disposed off and all dues settled. Approval for closure of winding up procedure has been accorded by its Members at General Meeting held on 31 March 2015. The liquidator has sent the report to Registrar of Companies & Official Liquidator for issuance of winding up order. 11) Previous year's figures have been regrouped/reclassified wherever necessary. Figures in brackets relate to Previous Year. For Badari, Madhusudhan & Srinivasan Chartered Accountants Firm Regn. No. 005389S N Srinivasan Partner Membership No. 027887 S K Sharma Chairman & Managing Director P R Acharya Director (Finance) S Sreenivas Company Secretary Bengaluru 29 May 2015 |