NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 MARCH 2016 NOTE 1: CORPORATE INFORMATION Kirloskar Industries Limited ("the Company") is a public company incorporated under the provisions of the Companies Act, 1956. Its shares are listed on two stock exchanges in India, namely the BSE Limited and the National Stock Exchange of India Limited. The Company is engaged in wind-power generation. The Company has seven windmills in Maharashtra with total installed capacity of 5.6 Mega Watt (MW). The windmills are located at Tirade Village, Tal-Akole, Dist. - Ahmednagar. The Company sells wind power units generated, to third party as per the approval from the Maharashtra State Electricity Distribution Company Limited (MSEDCL) and in the absence of such approval to MSEDCL. The Company has investments in properties and securities. NOTE 2: BASIS OF brPARATION OF FINANCIAL STATEMENTS The Financial Statements have been brpared in conformity with Generally Accepted Accounting Principles in India (Indian GAAP) to comply in all material respects with the notified Accounting Standards as brscribed under Section 133 of the Companies Act, 2013, (the Act), read with Rule 7 of the Companies (Accounts) Rules, 2014, the relevant provisions of the Act and the guidelines issued by Securities and Exchange Board of India (SEBI). The Financial Statements have been brpared under the historical cost convention on an accrual basis. The accounting policies have been consistently applied by the Company and are consistent with those used in the brvious year. Summary of Significant Accounting Policies a. Use of Estimates The brparation of Financial Statements in conformity with Indian GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent assets and liabilities at the end of the reporting period. The estimates and assumptions used in the accompanying Financial Statements are based upon management's evaluation of the relevant facts and circumstances as of the date of the Financial Statements. Actual results may differ from the estimates and assumptions used in brparing the accompanying Financial Statements. Any revisions to accounting estimates are recognised prospectively in current and future periods. b. Fixed Assets, Debrciation/Amortisation and Impairment of Assets I. Tangible Fixed Assets and Intangible Assets Tangible Fixed Assets and Intangible Assets are stated at cost less accumulated debrciation / amortisation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. II. Debrciation/Amortisation Debrciation is provided on all assets (except land, being a non debrciable asset) equally over the useful life of the individual assets as brscribed under Part C of Schedule II to the Act. These lives also reflect the management's estimate of the useful life of the respective fixed asset. 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. In case of windmills, useful life of 20 years (instead of 22 years as brscribed in Part C of Schedule II to the Act), has been estimated by the management of the Company for the purpose of charging debrciation on the basis of technical assessment by independent external valuers. Computer software recognised as intangible asset is amortised over an estimated useful life of 5 years. All fixed assets individually costing X 5,000 or less are fully debrciated in the year of installation. Debrciation is recognised in the Statement of Profit and Loss from the month in which the asset is acquired while the debrciation on assets sold during the year is recognised in the Statement of Profit and Loss till the month prior to the month in which the asset is sold. c. Impairment of assets At each balance sheet date, based on internal / external factors, if there is any indication of impairment, the carrying amount of assets is reviewed. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the, net selling price and value of the assets 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. After impairment, debrciation is provided on the revised carrying amount of the asset over its remaining useful life. A brviously recognised impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have brvailed by charging usual debrciation if there was no impairment. d. Inventories Inventories in the nature of Renewable Energy Certificates (RECs) are accounted for in accordance with the Guidance Note on Accounting for Self-Generated Certified Emission Reductions issued by the Institute of Chartered Accountants of India. Accordingly, the RECs are recognised upon application for certification to the respective authorities till such units are sold and valued at lower of cost and net realisable value. Cost comprises of costs incurred for certification of RECs. Net realisable value of RECs is the estimated selling price in the ordinary course of business. e. Investments Investments intended to be held for not more than a year are classified as 'Current investments'. Current investments are carried at lower of cost and fair value determined on an individual investment basis. All other investments are classified as 'Long term investments'. Long term investments are carried at cost. However, provision for diminution in value is made to recognise a decline, other than temporary, in the value of the investments. On disposal of an investment, the difference between its weighted average carrying amount and the net disposal proceeds is charged or credited to the Statement of Profit and Loss. Investment Property An investment in land or buildings that are not intended to be occupied substantially for use by or in the operations of the Company is classified as investment property. Investment properties are stated at cost less accumulated debrciation / amortisation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the investment property to its working condition for its intended use. Debrciation on the building component of the investment property is calculated on the basis of the management's estimate of the useful lives of the respective fixed assets and is equal to the corresponding useful lives brscribed in Schedule II of the Act. On disposal of an investment property, the difference between its carrying amount and the net disposal proceeds is charged or credited to the Statement of Profit and Loss. f. Employee Benefits I. Provident Fund and Superannuation Scheme The eligible employees of the Company are entitled to receive benefits under the Provident Fund and Superannuation Scheme, which are defined contribution plans. In case of Provident Fund, both the employee and the Company contribute monthly at a stipulated rate to the government provident fund, while in case of superannuation, the Company contributes to Life Insurance Corporation of India at a stipulated rate. The Company has no liability for future Provident Fund or Superannuation benefits other than its annual contributions which are recognised as an expense in the year on an accrual basis. II. Gratuity The Company provides for the gratuity, a defined benefit retirement plan covering all employees. The plan provides for lump sum payments to employees upon death while in employment or on separation from employment after serving for the stipulated years mentioned under 'The Payment of Gratuity Act, 1972'. The Company accounts for liability of future gratuity benefits based on an external actuarial valuation on 'projected unit credit method' carried out for assessing liability as at the reporting date. III. Leave Encashment Long term and Short term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per 'projected unit credit method' as at the reporting date. Actuarial gains / losses are immediately taken to the Statement of Profit and Loss and are not deferred. g. Revenue Recognition I. Income from power generation is recognised on supply of power to the grid and recognised in accordance with the terms and conditions of the contract with the Open Access Consumer. The unutilised units by the Open Access Consumer are initially recognised at an rate which is estimated on the basis of latest available rates as per MSEDCL circulars / orders.The same are subsequently billed upon determination of the billable rate / units after verification by MSEDCL in accordance with the rules and regulations. The difference between the initial accrual and final billing is adjusted with the revenue of the year in which the billing is done. II. Income from the sale of Renewable Energy Certificates (RECs) is recognised on an accrual basis at the time when the contract to sale is entered. III. Income from property licensing is recognised as rentals, as accrued over the period of the Leave and License Agreements. IV. Dividend is recognised as income when right to receive it is established. V. Interest on fixed deposits with banks, debentures, bonds, etc. is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. In case of significant uncertainty of receiving interest, the same is not recognised though accrued and is recognised only when received. VI. Profit / loss on the sale / redemption of investments is dealt with at the time of actual sale / redemption. h. Expenditure on Corporate Social Responsibility Activities (CSR Activities) The expenditure on CSR activities is recognised in the Statement of Profit and Loss upon utilisation by the Trust / NGO to which the funding is made by the Company. The expenditure on CSR activities conducted by the Company is recognised in the Statement of Profit and Loss, on an accrual basis as and when the activities are undertaken. i. Income Tax I. Tax expense comprises current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. II. Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted, at the reporting date. Deferred tax liabilities are recognised for all taxable timing differences. Deferred tax assets are recognised for deductible timing differences only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In situations where the Company has unabsorbed debrciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits. In the situations where the Company is entitled to a tax holiday under the Income Tax Act, 1961, no deferred tax (asset or liability) is recognised in respect of timing differences which originate and are likely to reverse during the tax holiday period. Deferred tax in respect of timing differences which reverse after the tax holiday period is recognised in the year in which the timing differences originate. For recognition of deferred taxes, the timing differences which originate first are considered to reverse first. At each reporting date, the Company re-assesses unrecognised deferred tax assets of the earlier years. It recognises unrecognised deferred tax asset to the extent that it has become reasonably or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realised. Based on the reassessment, the asset of deferred tax is then restated by crediting to the Statement of Profit and Loss. The carrying amount of deferred tax assets are reviewed at each reporting date. The Company writes down the carrying amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realised. Any such write down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case maybe, that sufficient future taxable income will be available. 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 tax assets and deferred taxes relate to the same taxable entity and the same taxation authority. III. Minimum Alternate Tax (MAT) paid in a year is charged to the Statement of Profit and Loss as current tax. The Company recognises MAT credit available as an asset only to the extent that it is reasonably certain that the Company will pay normal income tax during the specified period, i.e the period for which MAT credit is allowed to be carried forward. In the year in which the Company recognises MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income Tax Act, 1961, issued by the Institute of Chartered Accountants of India, the said asset is created by way of credit to the Statement of Profit and Loss and shown as "MAT Credit Entitlement". The Company reviews the "MAT Credit Entitlement" asset at each reporting date and writes down the asset to the extent the Company does not have reasonable certainty that it will pay normal tax during the specified period. j. Earnings Per Share Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares. k. Cash Flow Statement Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non cash nature and any deferral or accruals of past or future cash receipts or payments. The cash flows from regular operating, investing and financing activities of the Company are segregated. I. Cash and Cash Equivalents Cash and Cash equivalents in the Cash Flow Statement comprise cash at bank and in hand, cheques on hand, remittances in transit and short term investments with an original maturity of three months or less. m. Segment Reporting I Identification of segments The Company's operating businesses are organised and managed separately according to the nature of products and services provided, with each segment rebrsenting a strategic business unit that offers different products and serves different markets. II Allocation of common costs Common allocable costs are allocated to each segment pro-rata on the basis of revenue of each segment to the total revenue of the Company. III Unallocated items Unallocated items include income and expenses which are not allocated to any reportable business segment. IV Segment 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. n. Foreign Currency Translation I. Initial recognition Transactions in foreign currency entered into during the year are recorded at the exchange rates brvailing on the date of the transaction. II. Conversion Monetary assets and liabilities denominated in foreign currency are translated in to Rupees at exchange rate brvailing on the date of the Balance Sheet. III. Exchange differences All exchange differences are dealt with in the Statement of Profit and Loss, o. Provisions A provision is recognised when the Company has a brsent obligation as a result of past event; it is probable that 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 its 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. p. Contingent Liability A contingent liability is a possible obligation that arises from past events and the existence of which will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or brsent obligation that arises from past events that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. The contingent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliably. The Company does not recognise a contingent liability butdiscloses its existence in the Financial Statements. NOTE 2: Consequent to demerger of Kirloskar Brothers Investments Limited (KBIL) during the year, the Company has been allotted 100 equity shares of Pneumatic Holdings Limited (PHL) (face value X10) and 1,520 equity shares of Kirloskar Oil Engines Limited (KOEL) (face value X 2). The carrying cost of equity shares in KBIL has been allocated proportionately to shares of PHL and KOEL on the basis of face value. NOTE 3: EMPLOYEE BENEFITS: (a) Defined Contribution Plans: The Company has contributed Rs. 10.40 Lakhs (Rs. 10.34 Lakhs for 31 March 2015) towards Defined Contribution Plans i.e., Provident Fund Contribution and Superannuation Scheme. (b) Gratuity The Company has an unfunded defined benefit gratuity plan. Every employee who has completed five years or more of service is eligible for a gratuity on separation at 15 days basic salary (last drawn salary) for each completed year of service. Where service is in excess of 15 years, full month's basic salary is considered for the calculation of gratuity. NOTE 4: The Company is satisfying all the conditions of Section 115-0(1 A) of the Income TaxAct, 1961; for claiming reduction of the dividend, if any, declared by the subsidiary viz. Kirloskar Ferrous Industries Limited from the dividend, if any, declared by the Company. For the current year, accounting for Dividend Distribution Tax (DDT) made is arrived at after considering the Company's share in Dividend Distribution Tax on dividend declared by the subsidiary. NOTE 5: On the basis of information available with the Company regarding the status of suppliers as defined under the "Micro Small and Medium Enterprises Development Act, 2006", there are no suppliers covered under the above mentioned Act and hence the question of provision or payment of interest and related disclosures under the said Act does not arise. NOTE 6: DEFERRED TAX LIABILITIES /(ASSETS) (NET) As required by Accounting Standard (AS 22) "Accounting for Taxes on Income" brscribed under Section 133 of the Companies Act, 2013, the Company has recognised deferred taxes on timing differences excluding the timing difference which reverse fully during the tax holiday period in view of Accounting Standards Interbrtation (ASI) - 3 (Revised) "Accounting for Taxes on Income in the situations of Tax Holiday under Sections 80-IAand 80-IB of the Income Tax Act, 1961". NOTE 6: Investment in Kothrud Power Equipment Limited of X 99.21 Lakhs has been written off and provision for diminution in value of the said investment of X 99.21 Lakhs has been written back as no longer required. NOTE 7: Previous year's figures have been regrouped wherever considered necessary to make them comparable with those of the current year. As per our attached report of even date For and on behalf of the Board of Directors For G. D. APTE & CO. Chartered Accountants Firm Registration Number: 100515W C. M. DIXIT Partner Membership Number: 17532 ATUL C. KIRLOSKAR Chairman DIN 00007387 ADITI V. CHIRMULE Executive Director DIN 01138984 ASHWINI V. MALI Company Secretary ACS 19944 JASVANDI M. DEOSTHALE Chief Financial Officer ACA111693 Place ; Pune date : : 24 May 2016 |