Notes to financial statements 1. Significant accounting policies The accounting policies set out below have been applied consistently to the periods brsented in these financial statements. 1.1 Basis of brparation of financial statements These financial statements have been brpared in accordance with the generally accepted accounting principles in India under the historical cost convention on accrual basis. Pursuant to section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014, till the standards of accounting or any addendum thereto are brscribed by Central Government in consultation with and recommendations of the National Financial Reporting Authority, the existing Accounting Standards notified under the Companies Act, 1956 shall continue to apply. Consequently, these financial statements have been brpared to comply in all material aspects with the accounting standards notified under Section 211 (3C) [Companies (Accounting Standard) Rules, 2006, amended] and other relevant provisions of the Companies Act, 2013. The Ministry of Corporate Affairs (MCA) has notified the Companies (Accounting Standards) Amendment Rules, 2016 vide its notification dated March 30, 2016.The said notification read with Rule 3(2) of the Companies (Accounting Standards) Rules, 2006 is applicable to accounting period commencing on or after the date of notification i.e. April 1, 2016. 1.2 Current / Non-Current classification All assets and liabilities have been classified as current and 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 services and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current and non-current classification of assets and liabilities. 1.3 Revenue Recognition Sale of Goods Revenue from sale of goods in the course of ordinary activities is recognised when property in the goods or all significant risks and rewards of their ownership are transferred to the customer and no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of the goods and regarding its collection. The amount recognised as revenue is exclusive of sales tax, value added tax (VAT) and service tax, and is net of returns, trade discounts and quantity discounts. Sale of Services Service Income is recognised on the completion of activity relating to services. Export Incentive Export Incentives are recognised when the right to receive credit as per the terms of Incentives is established in respect of the exports made and when there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds. Interest Income Interest income is recognised on time proportion base taking into account the amount outstanding and the rate applicable. 1.4 Fixed assets and Debrciation/ Amortization Tangible assets Tangible assets are carried at cost of acquisition or construction less accumulated debrciation and/or accumulated impairment loss, if any. The cost of an item of tangible fixed asset comprises its purchase price, including import duties and other non refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition for its intended use; any trade discounts and rebates are deducted in arriving at the purchase price. Subsequent expenditures related to an item of tangible 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. Exchange differences pertaining to long term foreign currency monetary items that are related to acquisition of debrciable assets are recognised as an expense in the Statement of Profit and Loss. Particulars Useful Life (in years) Buildings 33 Plant and equipments 5/10/14/16/20 Furniture and fixtures 4 Office equipments 3/4 Vehicles 5 Freehold land is not debrciated. Debrciation is provided on a pro-rata basis i.e. from the date on which asset is ready for use. Plant and equipment and furniture and fixtures, costing individually INR 5,000 or less, are debrciated at 100% Debrciation for the year is recognised in the Statement of Profit and Loss. The useful lives are reviewed by the management at each Balance Sheet date and revised, if appropriate. In case of a revision, the unamortised debrciable amount is charged over the revised remaining useful life. A fixed asset is eliminated from the financial statement on disposal or when no further benefit is expected from its use and disposal. Losses arising from retirement or gains or losses arising from disposal of fixed assets which are carried at cost are recognised in the Statement of Profit and Loss. Intangible assets Acquired intangible asset rebrsenting software is recorded at its acquisition price and is amortised over its estimated useful life on a straight line basis, commencing from the date the asset is available for its use. The management has estimated the useful life for such software as three years. The useful life of the asset is reviewed by the management at each Balance Sheet date. After initial recognition, an intangible asset is carried at its cost less any accumulated amortisation and any accumulated impairment loss. Subsequent expenditure is capitalised only when it increases the future economic benefits from the specific asset to which it relates. An intangible asset is derecognised on disposal or when no future economic benefits are expected from its use and disposal. Losses arising from retirement and gains or losses arising from disposal of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss. 1.5 Impairment of Assets I n accordance with AS 28 - Impairment of Assets, the carrying amounts of the Company's assets including intangible assets are reviewed at each Balance Sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated, as the higher of the net selling price the value in use. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating units exceed its recoverable amount. If at the Balance Sheet date, there is an indication that a brviously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is assessed at the recoverable amount subject to a maximum of debrciable historical cost. 1.6 Operating lease Assets acquired under leases other than finance lease are classified as operating lease. Assets given by the Company under operating lease are included in Tangible Assets/Investment Property. Lease income from operating leases is recognised in the Statement of Profit and Loss on a straight line basis over the lease term unless another systematic basis is more rebrsentative of the time pattern in which benefit derived from the leased asset is diminished. Costs, including debrciation, incurred in earning the lease income are recognised as expenses. 1.7 Inventories Inventories which comprise raw materials, work-in-progress, finished goods, stock-in-trade, and stores and spares are carried at the lower of cost or net realisable value. Cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their brsent location and condition. Cost is determined on First-in-First-out (FIFO) basis. In the case of manufactured inventories and work in progress, fixed production overheads are allocated on the basis of normal capacity of production facilities. 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. The net realisable value of work-in-progress is determined with reference to the selling prices of related finished products. Raw materials and other supplies held for use in the production of finished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realisable value. The comparison of cost and net realisable value is made on class of item. Excise duty is included in the value of Finished Products." 1.8 Employee Benefits Short term employee benefits Employee benefits payable wholly within twelve months of receiving employee services are classified as short-term employee benefits. These benefits include salaries and wages, bonus and ex-gratia. The undiscounted amount of short-term employee benefits to be paid in exchange for employee services is recognised as an expense as the related service is rendered by employees. Post employment benefits (defined benefit plans) The employees' gratuity scheme is a defined benefit plan. The brsent value of the obligation under such defined benefit plan is determined at each Balance Sheet date based on an actuarial valuation carried out by an independent actuary using the projected unit credit method. The liability for gratuity is funded annually to a gratuity fund maintained with an approved trust managed by the Company. Actuarial gains and losses and service costs are recognised immediately in the Statement of Profit and Loss. With respect to employees who are members of SKF India Limited Provident Fund Scheme ('the Trust') contribution for provident fund to the Trust is a defined benefit plan as the Company has an obligation to make good the shortfall, if any, between the return from investments made by the Trust and notified interest rate. Both the employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the employee's salary. The rate at which the annual interest is payable to the beneficiaries by the trust is being administered by the government. Post employment benefits (defined contribution plans) Contributions to the Provident Fund and Superannuation Fund which are defined contribution schemes, are recognised as an expense in the Statement of Profit and Loss in the period in which the contribution is due. For employees other than members of SKF India Limited Provident Fund Scheme, both the Company's and employees' contribution is paid to Regional Provident Fund Commissioner (RPFC) on a monthly basis. Compensated absences The employees can carry-forward a portion of the unutilised accrued compensated absences and utilise it in future service periods or receive cash compensation on termination of employment. Since the compensated absences do not fall due wholly within twelve months after the end of the period in which the employees render the related service and are also not expected to be utilised wholly within twelve months after the end of such period, the benefit is classified as a long-term employee benefit. The Company records an obligation for such compensated absences in the period in which the employee renders the services that increase this entitlement. The obligation is measured on the basis of independent actuarial valuation using the projected unit credit method at each balance sheet date. Termination benefits Voluntary Retirement Scheme costs are charged off to the Statement of Profit and Loss in the year in which they are incurred. 1.9 Foreign Currency Transactions Foreign currency transactions are recorded at the rate of exchange brvailing on the date of the respective transactions. Monetary foreign currency assets and liabilities remaining unsettled at the Balance Sheet date are translated at the rates of exchange brvailing on that date. Gains / losses arising on account of realisation / settlement of foreign exchange transactions and on translation of foreign currency assets and liabilities are recognised in the Statement of Profit and Loss. 1.10 Provisions A provision is recognised if, as a result of a past event, the Company has a brsent obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recognised at the best estimate of the expenditure required to settle the brsent obligation at the balance sheet date. The provisions are measured on an undiscounted basis. Warranties Warranty costs are estimated by the Management on the basis of a technical evaluation and past experience. Provision is made for estimated liability in respect of warranty cost in the year of sale. Disputed statutory matters Provision in respect of disputed statutory matters relating to claims, litigation, assessment, fines, penalties, etc. are recognised when it is probable that a liability has been incurred, and the amount can be estimated reliably. 1.11 Contingent liabilities and contingent assets A contingent liability exists when there is a possible but not probable obligation, or a brsent obligation that may, but probably will not, require an outflow of resources, or a brsent obligation whose amount cannot be estimated reliably. Contingent liabilities do not warrant provisions, but are disclosed unless the possibility of outflow of resources is remote. Contingent assets are neither recognised nor disclosed in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs. 1.12 Use of estimates The brparation of financial statements in conformity with generally accepted accounting principles 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. 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. 1.13 Income taxes Income tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income-tax law) and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period). The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are recognised only to the extent that there is reasonable certainty that the assets can be realised in future; however where there is unabsorbed debrciation or carried forward losses under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each Balance Sheet date and written down or written-up to reflect the amount that is reasonably / virtually certain (as the case may be ) to be realised. 1.14 Earnings per share (EPS) The basic earnings per share is computed by dividing the net profit attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting period. Diluted EPS is computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity and equivalent diluted equity shares outstanding during the year, except where the result would be anti dilutive. 1.15 Cash and Cash Equivalents I n 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. 1.16 Investment Property Investment in buildings that are not intended to be occupied substantially for use by, or in the operations of the Company, have been classified as investment property. Investment properties are carried at cost less accumulated debrciation. Refer note 1.4 for debrciation rates. 2. The net exchange difference arising during the year recognised in the Statement of Profit and Loss is Rs. 50.7 million gain (Previous Year Rs. 65.8 million gain). 3. Certain employees of SKF India Limited have been granted stock options under AB SKF Performance Share Award Agreement. Pursuant to this, AB SKF has debited Rs. 2.0 million (Previous year Rs. 1.0 million) to its Statement of Profit and Loss. During the current year, the Company has reimbursed the cost incurred by AB SKF Rs NIL (Previous year Rs. 4.6 million) for stock options granted to certain employees under AB SKF Performance Share Award. 4. The Company has facility from banks for working capital / working capital demand loans which are secured by pari passu charge of : a) all tangible movable properties and assets, both brsent and future, including stocks of Raw Materials, Semi-finished goods and Finished goods, excluding movable Machinery Spares, Tools and Accessories and Stores and Spares b) all brsent and future Book Debts outstanding, Monies receivable, Claims and Bills There are no borrowings outstanding as at March 31, 2016 under the above said facility. 5. Consequent to change in the financial year of the Company from January - December to April - March with effect from current year, the current year's financial statements are for 15 months from January 1, 2015 to March 31, 2016. The brvious year's amounts relate to the 12 months ended December 31, 2014. In view of the above, the current year's amounts are accordingly not comparable to those of the brvious year. 6. Previous year's figures have been reclassified, wherever necessary, to conform to this year's classification. In terms of our report of even date For Price Waterhouse & Co Bangalore LLP Firm Regn. No. 007567S/S-200012 Chartered Accountants Jeetendra Mirchandani Partner Membership No. 48125 For and on behalf of the Board of Directors of SKF India Limited Rakesh Makhija Chairman Chandramowli S. Finance Director P. R. Men Directors H. Hattan Directors P. M. Telang Directors P. Bhandari Company Secretary Bengaluru Date - 10th May, 2016 |