Notes forming part of the Accounts Summary of Significant Accounting Policies I) Basis of brparation of financial statements The financial statements are brpared in accordance with the Generally Accepted Accounting Principles ("GAAP") in India under the historical cost convention on an accrual basis, and are in conformity with mandatory accounting standards, as brscribed under Section 133 of the Companies Act, 2013('Act') read with Rule 7 of the Companies (Accounts) Rules,2014, the provisions of the Act (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or to an revision an existing accounting standard requires a change in the accounting policy hitherto in use. All 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 II to the Companies Act, 2013. The Company has ascertained its operating cycle as twelve months for the purpose of current and non-current classification of assets and liabilities. ii) Use of estimates The brparation of the financial statements in conformity with GAAP requires the management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent assets and liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. Examples of such estimates include provisions for doubtful debts, future obligations under employee retirement benefit plans, income taxes, the useful lives and provision for impairment of fixed assets and intangible assets. Management believes that the estimates used in the brparation of financial statements are prudent and reasonable. Future results could differ from these estimates. iii) Fixed assets a) Tangible assets Tangible assets are stated at cost of acquisition, less accumulated debrciation/amortization and impairments, if any. Cost includes taxes, duties, freight and other incidental expenses related to acquisition and installation. Subsequent expenditures related to an item of fixed asset are added to its book value only if they increase the future benefits from the existing asset beyond its brviously assessed standard of performance. b) Intangible assets Costs incurred on acquisition, development or enhancement of intangible resources are recognised as intangible assets if these are identifiable, controlled by the Company and it is probable that future economic benefit attributable to the assets would flow to the Company. Intangible assets are stated at cost less accumulated amortisation and impairments, if any. Cost includes taxes, duties and other incidental expenses related to acquisition, development and enhancement. c) Capital work in progress Capital work-in-progress comprise of cost of fixed assets that are not yet ready for their intended use at the reporting date. d) Borrowing costs Borrowing costs directly attributable to acquisition, construction of qualifying asset are capitalised as part of the cost of those assets until such time as the assets are substantially ready for their intended use. Other borrowing costs are recognized as expense in the period in which they are incurred. e) Debrciation and amortization Tangible Assets Debrciation on tangible assets is provided on the straight-line method over the useful lives of assets as brscribed in Schedule II of the Companies Act 2013, or as assessed by the Management based on the technical evaluation of an independent valuer. Estimated useful life adopted on this basis is different from the useful life brscribed in Schedule II of the Companies Act 2013 in case of following assets: Asset Class Useful Life Adopted(Years) Useful Life as per Schedule –II(Years) Plant & Machinery :9.5: 7.5 Solar Plant :25 :7.5 Assets individually costing Rs. 5,000 or less are debrciated fully in the year of acquisition. Leasehold land is amortized over the primary period of the lease. Debrciation for assets purchased / sold during the period is proportionately charged. Intangible Assets Intangible assets are amortized over the estimated useful lives of respective assets on a straight line basis, commencing from the date the assets is available to the Company for its use. Estimate useful life of software is considered 4.75 years. Impairment The carrying amount of cash generating units / assets is reviewed at balance sheet date to determine whether there is any indication of impairment. In situations where any such indication exists, the recoverable amount is estimated as the higher of net selling price and value in use. In assessing value-in-use, the estimated future cash flows are discounted to their brsent value using a br-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. Impairment loss is recognised whenever carrying amount exceeds the recoverable amount. Conversely, brviously recognised losses are reversed when the estimated recoverable amount exceeds the carrying amount. iv) Investments: Investments that are readily realisable and are intended to be held for not more than one year from the date, on which such investments are made, are classified as current investments. All other investments are classified as long term investments. Current investments are carried at cost or fair value, whichever is lower, computed individually for each investment. In case of unquoted mutual funds, their net asset value on the reporting date is taken as their fair value. Long-term investments are carried at cost. Provision for diminution, if any, in the value of investments is made to recognise a decline in the value of the investments, other than temporary. v) Inventories: Inventories are stated at lower of cost and net realisable value. Cost of raw materials, packing materials and consumables stores and spares is determined using the weighted average cost method. Raw materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. The cost of finished goods and work in progress comprises cost of raw materials, direct labour, other direct costs and related production overheads. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. Scrap generated during the manufacturing process is valued at net realisable value. vi) Foreign Currency Translation: Initial recognition Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. Conversion Foreign currency monetary items are reported using the exchange rate brvailing at the reporting date. Non-monetary items, which are measured in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. Exchange differences Exchange differences arising on conversion/settlement of foreign currency monetary items are recognized as income or expenses in the period in which they arise. Exchange differences arising on long term foreign currency monetary items, related to acquisition of fixed assets are capitalised and debrciated over the remaining useful lives of the asset. Forward exchange contracts covered by AS 11 "The effects of changes in Foreign Exchange rates" The brmium or discount arising at the inception of forward exchange contracts is amortized and is recognized as an expense/income over the life of the contract. Exchange differences on such contracts 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 forward exchange contract is also recognized as income or as expense for the reporting period. vii) Revenue Recognition: a) Revenue from sale of goods is recognised on dispatches to customers which generally coincides with transfer of title, significant risk and rewards of ownership to customer. Sales are stated net of trade discounts, rebates, excise duty, sales tax and Value Added Tax. b) Interest and other income are recognised on accrual basis. c) Income from export incentives such as brmium on sale of import licences, duty drawback etc, are recognised on accrual basis to the extent the ultimate realization is reasonably certain. d) Dividend income is recognised when right to receive dividend is established. viii) Employee Benefits: a) Gratuity Liabilities with regard to the gratuity benefits payable in future are determined by actuarial valuation at each Balance Sheet date using the Projected Unit Credit method and contributed to Employees Gratuity Funds managed by insurance companies and estimated terms of the defined benefit obligation. Actuarial gains and losses are recognised in the Statement of Profit and Loss in the period in which they arise. b) Superannuation The Company's contribution to the Superannuation Scheme, a defined contribution scheme, administered by an insurance company is recognised as expense in the Statement of Profit and Loss, for the services rendered by the employees. The Company has no obligation to the Scheme beyond its annual contributions. c) Leave encashment / Compensated absences The Company provides for the encashment of leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits, for future encashment / availment. The Company's liability is provided based on actuarial valuation at each balance sheet date and recognised as expense in Statement of Profit and Loss. d) Provident fund The Company contributes to the Provident Fund, a defined contribution scheme, which is administered by the Government. The rate at which the contributions are made as per the statutory requirements and is recognised as expense in the Statement of Profit and Loss, of the period in which the services are rendered by employees. ix) Taxation: a) Provision for current tax is made, based on the tax payable under the Income Tax Act, 1961. Minimum Alternative Tax (MAT) credit, which is equal to the excess of MAT (calculated in accordance with provisions of Section 115JB of the Income Tax Act, 1961) over normal income-tax, is recognised as an asset by crediting the Statement of Profit and Loss only when and to the extent there is convincing evidence that the Company will be able to avail the said credit against normal tax payable during the period of ten succeeding assessment years. b) Deferred tax on timing differences between taxable income and accounting income is accounted for, using the tax rates and the tax laws enacted or substantively enacted as on the balance sheet date. Deferred tax assets on unabsorbed tax losses and unabsorbed tax debrciation are recognised only when there is a virtual certainty of their realisation. Other deferred tax assets are recognised only when there is a reasonable certainty of their realisation. x) Provisions and Contingent Liabilities: a) A provision is made based on a reliable estimate when it is probable that an outflow of resources embodying economic benefits will be required to settle an obligation and in respect of which a reliable estimate can be made. Provision is not discounted and is determined based on best estimate required to settle the obligation at the reporting date. b) Contingent Liabilities are disclosed in respect of: i) Possible obligations that arise from past events but their existence will be confirmed by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company. ii) Any brsent obligation, where it is not probable that an outflow of resources embodying economic benefit will be required to settle the obligations or a reliable estimate of the amount of obligation cannot be made. However, in situations where the likelihood of an outflow of resources is assessed to be remote, no disclosure is made as such items are not in the nature of Contingent liabilities. Contingent Assets are not recognised or disclosed in the financial statements. xi) Cash and Cash Equivalents In the cash flow statement, cash and cash equivalents include cash in hand, demand deposits with banks, other short-term highly liquid investments with original maturities of three months or less. xii) Earnings Per Share Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Weighted average number of equity shares outstanding during the period and for all periods brsented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares. xiii)Segment Reporting Identification of segments The Company's operating businesses are organized and managed separately according to the nature of products produced and sold, with each segment rebrsenting a strategic business unit that offers different products. The analysis of geographical segments is based on the location of customers within India and outside India. Inter-segment transfers The Company generally accounts for intersegment sales and transfers at cost plus appropriate margins. Allocation of common costs Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs. Unallocated items Unallocated items include general corporate income and expense items which are not allocated to any business segment. Segment accounting policies The Company brpares its segment information in conformity with the accounting policies adopted for brparing and brsenting the financial statements of the Company as a whole. xiv) Lease Rent The Company has taken residential accommodation, office brmises and warehouses on lease / rental basis. Lease period varies from one month to twelve months. These lease are cancellable in nature. Lease rentals recognised in the Statement of Profit and Loss is Rs 18.57 million (Previous Year Rs 12.66 million). 2 (a) Other Provisions: i Provision for derivatives as at the year-end is Rs. Nil million (Previous year Rs. 525.2 million) including provided during the year of Rs. Nil million (Previous year Rs. Nil million). ii Other provision for duties and taxes rebrsents provision for disputed duties and taxes. Movements during the year are on account of payments / write back of provisions no longer required. Outflow on account of said provision depends on the settlement of the pending disputes. (b) CSR EXPENSES During the year the Company has incurred CSR expenses of Rs. 1.1 Million which is eligible under Section 135 of Companies Act, 2013 read with Schedule VII. 3. Foreign Exchange differences a. In terms of the circular issued by Ministry of Corporate Affairs ("MCA"), in respect of changes to Accounting Standard 11 and subsequent amendments thereto, the Company had in earlier years exercised the option of capitalising foreign exchange difference arising on long term foreign currency borrowings taken for acquisition of fixed assets. Accordingly, foreign exchange loss of Rs 11.3 million (Previous year: Rs 46.1 million) arising during the year has been added to the cost of fixed assets. 4. CFL Manufacturing Facility During the year the Company carried out an impairment review of CFL manufacturing facilities and recognised impairment provision Rs 76 million in respect of low voltage segment plant which is impacted by rapidly changing shift over to LED bulbs. Debrciation, amortisation and impairment charge for the year includes aforesaid provision. (Refer Note 24) The privileged leave liability is not funded 5. Previous year figures have been regrouped / reclassified to conform to current year's classification As per our report of even date For B. K. KHARE & COMPANY Chartered Accountants Firm Registration No. 105102W NARESH KUMAR KATARIA Partner Membership No. 37825 Dr. H. S. Vachha P. R. Rathi S. B. Pandit P. G. Pawar A. J. Engineer D. K. Chhabria Executive Chairman M. Viswanathan Executive Director & Chief Financial Officer R.G.D'SILVA Company Secretary & President (Legal) Pune: 12th May 2015 |