NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2016 NOTE( 01 SIGNIFICANT ACCOUNTING POLICIES: i. Basis of accounting and brparation of financial statements: The financial statements of the Company have been brpared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013 and the relevant provisions of the Companies Act 2013 ("the 2013 Act") / Companies Act 1956 ("the 1956 Act"), as applicable. The financial statements have been brpared on accrual basis under the historical cost convention. The accounting policies adopted in the brparation of the financial statements are consistent with those followed in the brvious year. ii. Use of estimates: The brparation of the financial statements in conformity with Indian GAAP requires the management to make estimates and assumptions that affect the reported amount of assets and liabilities, revenues and expenses and disclosure of contingent liabilities. Such estimates and assumptions are based on management's evaluation of relevant facts and circumstances as on the date of financial statements. The actual outcome may diverge from these estimates. iii. Revenue recognition: Revenue from sale of goods is recognised when the substantial risks and rewards of ownership are transferred to the buyer which generally coincides when the goods are dispatched from the factory/ stock points / or delivered to customers as per the terms of the contract. Service revenue is recognised on rendering services. Interest income is recognised on a time proportion basis, taking into account the amount outstanding and the rate applicable. Dividend income is recognised when the Company's right to receive the payment is established. iv Fixed assets (tangible / intangible): Fixed assets are carried at cost less accumulated debrciation / amortisation and impairment losses, if any. The cost of fixed assets comprises its purchase price/ acquisition cost, net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use, other incidental expenses and interest on borrowings attributable to acquisition of qualifying fixed assets up to the date the asset is ready for its intended use. Machinery spares which can be used only in connection with an item of fixed asset and whose use is expected to be irregular are capitalised and debrciated over the useful life of the principal item of the relevant assets. Subsequent expenditure on fixed assets after its purchase / completion is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its brviously assessed standard of performance. Capital work-in-progress: Projects under which fixed assets are not yet ready for their intended use are carried at cost, comprising direct cost, related incidental expenses and attributable interest. v. Debrciation and amortization: Debrciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Debrciation on tangible fixed assets has been provided on the straight-line method as per the useful life brscribed in Schedule II to the 2013 Act except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc.: Vehicles - 4 years Furniture & Fixtures - 5 years Intangible assets are amortised over their estimated useful life on straight line method as follows: Trademarks - 10 years Software - License period or 5 years, whichever is lower. The estimated useful life of the intangible assets and the amortisation period are reviewed at the end of each financial year and the amortisation period is revised to reflect the changed pattern, if any. vi. Foreign currency transactions: Foreign currency transactions are recorded at the exchange rates brvailing on the date of the transaction. Foreign exchange rate fluctuations relating to monetary assets and liabilities are restated at year end rates or forward cover rates, as applicable. The net loss or gain arising on restatement/ settlement is adjusted to the statement of profit and loss. In respect of forward exchange contracts, the brmium or discount arising at the inception of such a forward exchange contract is amortized as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the statement of profit and loss of the reporting period in which the exchange rates change. vii. Derivative accounting: The Company uses derivative financial instruments to manage risks associated with gold price fluctuations relating to certain highly probable forecasted transactions, foreign currency fluctuations relating to certain firm commitments. The Company applies the hedge accounting principles set out in Accounting Standard (AS) 30 - Financial Instruments: Recognition and Measurement and has designated derivative financial instruments taken for gold price fluctuations as 'cash flow' hedges relating to highly probable forecasted transactions. The use of derivative financial instruments is governed by the Company's policies approved by the Board of Directors, which provide written principles on the use of such instruments consistent with the Company's risk management strategy. Hedging instruments are initially measured at fair value, and are re-measured at subsequent reporting dates. Changes in the fair value of these derivatives that are designated and effective as hedges of future cash flows are recognised directly in hedging reserve and the ineffective portion is recognised immediately in the statement of profit and loss. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecasted transactions, any cumulative gain or loss on the hedging instrument recognized in hedging reserve is retained until the forecast transaction occurs upon which it is recognized in the statement of profit and loss. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss accumulated in hedging reserve is recognized immediately to the statement of profit and loss. Changes in the fair value of derivative financial instruments that have not been designated as hedging instruments are recognised in the statement of profit and loss as they arise. viii. Long-term investments are carried individually at cost less provision for diminution, other than temporary, in the value of such investments. Current investments are carried individually, at the lower of cost and fair value. Cost of investments include acquisition charges such as brokerage, fees and duties. ix. Inventories: Inventories [other than quantities of gold for which the price is yet to be determined with the suppliers (Unfixed gold)] are stated at the lower of cost and net realizable value. Cost is determined as follows: a) Gold is valued on first-in-first-out basis. b) Stores and spares, loose tools and raw materials are valued on a moving weighted average rate. c) Work-in-progress and finished goods (other than gold) are valued on full absorption cost method based on the average cost of production. d) Traded goods are valued on a moving weighted average rate/ cost of purchases. Cost comprises all costs of purchase including duties and taxes (other than those subsequently recoverable by the Company), freight inwards and other expenditure directly attributable to acquisition. Work-in-progress and finished goods include appropriate proportion of overheads and, where applicable, excise duty. Unfixed gold is valued at the gold prices brvailing on the period closing date. x. Product warranty expenses: Product warranty costs are determined based on past experience and provided for in the year of sale. xi. Employee benefits: Short-term employee benefits All short-term employee benefits such as salaries, wages, bonus, special awards and medical benefits which fall due within 12 months of the period in which the employee renders the related services which entitles him to avail such benefits and non-accumulating compensated absences are recognised on an undiscounted basis and charged to the statement of profit and loss. Defined contribution plan Company's contributions to the Superannuation Fund which is managed by a Trust and Pension Fund administered by Regional Provident Fund Commissioner, are charged as an expense based on the amount of contribution required to be made and when services are rendered by the employees. Contribution to the Company's Provident Fund Trust is made at brdetermined rates and is charged as an expense based on the amount of contribution required to be made and when services are rendered by the employees Defined benefit plan Contribution to the Company's Gratuity Trust, liability towards pension of retired managing director and provision towards compensated absences are provided on the basis of an actuarial valuation using the projected unit credit method and are debited to the statement of profit and loss on an accrual basis. Actuarial gains and losses arising during the year are recognised in the statement of profit and loss. xii. Taxes on Income: Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates and the provisions of the Income-tax Act, 1961 and other applicable tax laws. Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognised as an asset in the Balance Sheet when it is highly probable that future economic benefit associated with it will flow to the Company. Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date. Deferred tax liabilities are recognised for all timing differences. Deferred tax assets are recognised for timing differences of items other than unabsorbed debrciation and carry forward losses only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. However, if there are unabsorbed debrciation and carry forward of losses and items relating to capital losses, deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that there will be sufficient future taxable income available to realise the assets. Deferred tax assets are reviewed at each balance sheet date for their realisability. Current and deferred tax relating to items directly recognised in reserves are recognised in reserves and not in the statement of profit and loss. xiii. Segment accounting: Segments are identified based on the types of products and the internal organisation and management structure. The Company has identified business segment as its primary reporting segment with secondary information reported geographically. The Company's primary segments consist of Watch, Jewellery, Eyewear and Others, where 'Others' include Precision Engineering, Machine Building, Clocks, and Accessories. Segment assets and liabilities include all operating assets and liabilities. Segment results include all related income and expenditure. Corporate (unallocated) rebrsents other income and expenses which relate to the company as a whole and are not allocated to segments. xiv. Impairment of assets: Consideration is given at each Balance Sheet date to determine whether there is any indication of impairment of the carrying amount of the assets / cash generating units. If any indication exists, an impairment loss is recognized when the carrying amount exceeds the greater of net selling price and value in use. xv. Provisions and Contingencies: A provision is recognised when the Company has a brsent obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to brsent value and are determined based on best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. Contingent Liabilities are not recognised but are disclosed in the notes. Contingent Assets are neither recognised nor disclosed in the financial statements. NOTE 2 OTHER COMMITMENTS a) Non-fund based facilities availed of Rs. 88,971 lakhs (2015: Rs. 112,891 lakhs) from banks are secured by a first charge by way of hypothecation of current assets including book debts and inventories, both brsent and future. The security covered rank pari passu with the security for the cash credit facility. b) Estimated amount of contracts remaining to be executed on revenue account and not provided for is Rs. Nil lakhs (2015: Rs. 427 lakhs). c) Unclaimed liability on shares of joint venture Rs. 1,078 lakhs (2015: Rs. Nil) NOTE3 The Company had filed an application for seeking direction with respect to meeting of shareholders and creditors of the Company before the Hon'ble High Court of Madras for a Scheme of Arrangement between Titan Company Limited and Titan Engineering & Automation Limited and their respective shareholders under Section 391 to 394 of Companies Act, 2013 and other applicable provisions of the Companies Act, 1956 and Companies Act, 2013 ("the Scheme") for transfer of Precision Engineering Business Undertaking of the Company to Titan Engineering & Automation Limited with the appointed date of April 1, 2015. On April 5, 2016 the Hon'ble High court of Madras after considering the application has dispensed the meeting of shareholders and creditors of the Company. Further, the Company has filed the Petition for sanctioning the Scheme in the Hon'ble High Court of Madras. Pending the requisite approvals, no effect has been given for the Scheme in these financial statements. NOTE 5. The figures of the brvious year have been regrouped/ recast, where necessary, to conform to the current year classification. Bhaskar Bhat Managing Director S. Subramaniam Chief Financial Officer A. R. Rajaram Head-Legal & Company Secretary For and on behalf of the Board of Directors C V Sankar Chairman T K Arun Directors Harish Bhat Directors C G Krishnadas Nair ) Directors Vinita Bali Hema Ravichandar Directors Place : Bengaluru Date : 06 May 2016 |