1. Summary of Significant accounting policies a) Basis of brparation of financial statements (i) 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 Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006, as amended (the 'Rules'), continue to be applicable, accordingly, these financial statements have been brpared to comply in all material aspects with the accounting standards notified under the Rules and other relevant provisions of the Companies Act, 2013. (ii) 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. (iii) 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. b) Fixed assets and debrciation (i) Tangible assets are stated at cost of acquisition or construction less accumulated debrciation. All significant costs relating to the acquisition and installation of Tangible assets are capitalised. 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 assets beyond its brviously assessed standard of performance. Debrciation is computed on straight line method based on useful lives, determined based on internal technical evaluation and are in line with the useful lives specified by Schedule II to the Companies Act, 2013. Consequent to this, where the Company has changed the estimate of useful life, the carrying amount of the asset as on April 1, 2014 is debrciated over the remaining useful life of the asset. Further where remaining useful life of an asset as on April 1, 2014 was Nil, the carrying amount of the asset after retaining the residual value has been recognised in the opening balance of retained earnings. Leasehold land is amortised on the straight line method over period of the lease. (ii) Intangible assets are recorded at the consideration paid for acquisition. Intangible assets are amortized over their respective useful lives ranging between three years to five years. (iii) Loss arising from the retirement of, and gains and losses arising from disposal of fixed assets which are carried at cost are recognised in the Statement of Profit and Loss. (iv) Items of fixed assets that have been retired from active use and are held for disposal are stated at the lower of their net book value and net realisable value and are classified under other current assets in financial statements. Any expected loss is recognised immediately in the Statement of Profit and Loss. c) 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 (excluding current portion of long-term investments) are carried at cost or fair value, whichever is lower. Long-term investments are carried at cost. However, provision for diminution is made to recognise a decline, other than temporary, in the value of investments. d) Inventories Inventories are stated at lower of cost and net realisable value after providing for obsolescence. The material costs are determined on weighted average basis and the valuation of finished goods and work in progress rebrsents the combined cost of material, labour and all manufacturing overheads. Net realisable value is estimated selling price in the ordinary course of business, less the estimated cost of completion and the estimated cost necessary to make the sale. Material in transit is valued at cost incurred till date. e) Foreign currency transactions Transactions in foreign currencies are accounted at the exchange rates brvailing on the date of transactions. Monetary foreign currency current assets and liabilities are translated at the year-end exchange rates. The resulting exchange differences are appropriately recognised in the Statement of Profit and Loss. The Company uses forward exchange contracts to cover its foreign currency cash flow risks, arising from exposures from export receivables and import payables, against movements in foreign exchange rates. Forward exchange contracts are not used for trading or speculation purpose. The brmium or discount arising at the inception of forward exchange contracts entered into, is amortised as expense or income over the life of the contract. Exchange differences on such a contract are recognised 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 a forward exchange contract are recognised as income or as expense for the period. f) Revenue recognition (i) Sales are recognised when the significant risks and rewards of ownership in the goods are transferred to the buyer as per the terms of the contract and are recognised net of sales tax/value added tax and excise duty. (ii) Revenue from Long Term Service Contracts is recognized using the proportionate completion method, and recognised net of service tax. Completion is determined as a proportion of cost incurred till date to the total estimated contract cost. Provision is made for any loss in the period in which it is foreseen. Billing in excess of contract revenue has been reflected as 'Unearned Revenue' under 'Liabilities' in the Balance Sheet. In case of other Service contracts, revenue is recognized when services are rendered or on receipt of confirmation from customers, as the case may be. (iii) Dividend income from investments is recognised when the right to receive payment is established. (iv) Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. (v) Rental income is recognised on a straight-line basis over the lease term. (vi) Export incentives are accounted for on export of goods if the entitlements can be estimated with reasonable accuracy and conditions brcedent to claim are fulfilled. g) Lease charges under operating leases Lease charges under operating leases are recognised as expense on straight-line basis over the lease term. h) Product warranty and New Engine Performance Inspection (NEPI) fees Product warranty costs and New Engine Performance Inspection fees are accrued in the year of sale of products, based on past experience. The Company periodically reviews the adequacy of above provisions and adjusts, if necessary, the accrued provision, based on actual experience. i) Employee benefits (i) Post-employment Benefits a) Defined Contribution Plans: The Company has Defined Contribution Plans for Post employment benefits in the form of Superannuation Fund for management employees and Provident Fund for non management employees which is administered by Life Insurance Corporation / Regional Provident Fund Commissioner. In case of Superannuation Fund for management employees and Provident Fund for non management employees, the Company has no further obligation beyond making the contributions. b) Defined Benefit Plans: Funded Plan: The Company has defined benefit plans for Post-employment benefits in the form of Gratuity for all employees, pension for non management employees and Provident Fund for management employees which are administered through Company managed Trust. Unfunded Plan: The Company has unfunded Defined Benefit plans in the form of Post Retirement Medical Benefits and Ex-gratia benefits as per the policy of the Company. Liability for above defined benefit plans is provided on the basis of valuation, as at the Balance Sheet date, carried out by independent actuary. The actuarial method used for measuring the liability is the Projected Unit Credit method. In case of Provident Fund for management employees, the Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate. The Company's contributions and such shortfall are charged to the Statement of Profit and Loss as and when incurred. (ii) Other Long-term Employee Benefits (Unfunded): Liability for Compensated Absences is provided on the basis of valuation, as at the Balance Sheet date, carried out by independent actuary. The Actuarial valuation method used for measuring the liability is the Projected Unit Credit method. Under this method, " projected accrued benefit " is calculated at the beginning of the year and again at the end of the year for each benefit that will accrue for active members of the Plan. The " projected accrued benefit" is based on the Plan's accrual formula and upon service as of the beginning or end of the year, but using a member's final compensation, projected to the age at which the employee is assumed to leave active service. The Plan liability is the actuarial brsent value of the "projected accrued benefits" as at the end of the year for active members. (iii) Termination benefits are recognized in the Statement of Profit and Loss as an expense as and when incurred. (iv) The Actuarial gains and losses arising during the year are recognized in the Statement of Profit and Loss of the year without resorting to any amortization. j) Research and development costs Revenue expenditure incurred for research activities is expensed off in the year in which it is incurred. k Income Tax Current tax is measured at the amount expected to be paid to the tax authorities in accordance with the taxation laws brvailing and applicable for the relevant assessment year. Deferred income taxes are recognised for the future tax consequences attributable to timing differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The effect on deferred tax assets and liabilities of a change in the tax rates is recognised using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets arising from unabsorbed debrciation or carry forward of losses under tax laws are recognised only to the extent that there is virtual certainty of realization supported by convincing evidence. Other deferred tax assets are recognised and carried forward to the extent that there is reasonable certainty of realization. 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 reverse during the tax holiday period, to the extent the Company's gross total income is subject to the deduction 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. However, the Company restricts recognition of deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized. For recognition of deferred taxes, the timing differences which originate first are considered to reverse first. Minimum Alternate Tax Minimum Alternate Tax ('MAT') credit is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. Such asset is reviewed at each Balance Sheet date and the carrying amount of MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period. l) Provisions and Contingent Liabilities A provision is recognised when there is a brsent obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, and in respect of which a reliable estimate can be made. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. A disclosure for a contingent liability is made where there is a possible obligation arising out of past event, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the company or a brsent obligation arising out of past event where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made. m) Impairment of Assets The Company tests for impairments at the close of the accounting period if and only if there are indications that suggest a possible reduction in the recoverable value of an asset. If the recoverable value of an Asset, i.e. the net realizable value or the economic value in use of a cash generating unit, is lower than the carrying amount of the asset the difference is provided for as impairment. However, if subsequently the position reverses and the recoverable amount becomes higher than the then carrying value the provision to the extent of the then difference is reversed, but not higher than the amount provided for. 3. As set out in section 135 of the Companies Act, 2013, the Company is required to contribute Rs.1,602 lacs (March 31, 2015; Rs. 1,590 lacs) towards Corporate Social Responsibility activities, as calculated basis 2 % of its average net profits of the last three financial years. Accordingly, during the current year, the Company has contributed Rs. 1,200 lacs (March 31, 2015; Rs. 810 Lacs) to Cummins India Foundation towards the eligible projects as mentioned in Schedule VII (including amendments thereto) of the Companies Act, 2013. 4. Previous year's figures have been regrouped / reclassified, wherever necessary. For Price Waterhouse Firm Registration No. 301112E Chartered Accountants Sharmila A. Karve Partner Membership Number 43229 For and on behalf of the Board Nasser Munjee Director DIN : 00010180 Anant J. Talaulicar Chairman & Managing Director DIN : 00031051 K. Venkata Ramana Group Vice President Legal & Company Secretary PAN : AEJPR9444L Rajiv Batra Chief Financial Officer PAN : AAFPB4485K Place : Mumbai Date: May 25, 2016 |