NOTES TO THE FINANCIAL STATEMENTS_ 1 ) General Information Stovec Industries was incorporated in 1973, in Ahmedabad, Gujarat. The Company is listed on Bombay Stock Exchange and Ahmedabad Stock Exchange. The Company has three major Business segments : Textile Machinery and Consumables, Graphics Consumables and Galvanic. "Textile Machinery and Consumables" segment includes Perforated Rotary Screens, Laquer & Auxiliary Chemicals, Digital Ink, Rotary Screen Printing Machine, Engraving Equipment, Components and Spares. "Graphics Consumables" segment includes Anilox Rollers, Rotamesh screens and RotaPlate. "Galvanic" Segment includes Galvano Consumables. 2 ) Statement of significant accounting policies a) Basis of brparation of financial statements These Financial Statements have been brpared in accordance with generally accepted accounting principles in India under the historical cost convention on accrual basis. Pursuant to circular 15/2013 dated September 13, 2013 read with circular 08/2014 dated April 4, 2014, till the standard of accounting or any addendum thereto are brscribed by Central Government in consultation and recommendation 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 the Companies Act, 1956 of India (the "Act") read with the General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013. All the assets and liabilities have been classified as current or non-current as per the normal operating cycle of the Company and other criteria set out in Schedule VI to the Act. Based on the nature of products 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. b) Inventories Inventories are valued at lower of cost and net realisable value. i) Cost of raw materials, packing materials, stores, spares and tools are computed on a moving weighted average cost basis. ii) Cost of work-in-progress/ finished goods are determined on moving weighted average cost basis comprising material, labour and related factory overheads. c) Revenue Recognition Sale of Goods Revenue is recognised when the property and all significant risks and rewards of ownership are transferred to the buyer and no significant uncertainty exists regarding the amount of consideration that is derived from the sale of goods. Sales are recorded net of trade discount, rebates and sales tax / value added tax is inclusive of excise duty. Sale of Services Service income is recognised on completion of rendering of services and is recorded net of service tax. Cost incurred during the pendency of the contract is carried forward as job in progress at lower of cost and net realisable amounts. Commission Commission income is recognised and accounted on accrual basis. Interest Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. d) Fixed Assets and Debrciation / Amortisation Tangible Assets i) Fixed assets are stated at historical cost less debrciation / amortisation. Cost includes all expenses relating to acquisition and installation of the concerned assets. ii) Debrciation has been provided on a straight-line method (pro-rata from the date of additions) over the useful life of the assets as stated below. Debrciation has been provided at the rates stipulated in Schedule XIV to the Act, or at the rates determined based on the useful life of assets, as estimated by managament, whichever is higher. 1 ) General Information Stovec Industries was incorporated in 1973, in Ahmedabad, Gujarat. The Company is listed on Bombay Stock Exchange and Ahmedabad Stock Exchange. The Company has three major Business segments : Textile Machinery and Consumables, Graphics Consumables and Galvanic. "Textile Machinery and Consumables" segment includes Perforated Rotary Screens, Laquer & Auxiliary Chemicals, Digital Ink, Rotary Screen Printing Machine, Engraving Equipment, Components and Spares. "Graphics Consumables" segment includes Anilox Rollers, Rotamesh screens and RotaPlate. "Galvanic" Segment includes Galvano Consumables. 2 ) Statement of significant accounting policies a) Basis of brparation of financial statements These Financial Statements have been brpared in accordance with generally accepted accounting principles in India under the historical cost convention on accrual basis. Pursuant to circular 15/2013 dated September 13, 2013 read with circular 08/2014 dated April 4, 2014, till the standard of accounting or any addendum thereto are brscribed by Central Government in consultation and recommendation 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 the Companies Act, 1956 of India (the "Act") read with the General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013. All the assets and liabilities have been classified as current or non-current as per the normal operating cycle of the Company and other criteria set out in Schedule VI to the Act. Based on the nature of products 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. b) Inventories Inventories are valued at lower of cost and net realisable value. i) Cost of raw materials, packing materials, stores, spares and tools are computed on a moving weighted average cost basis. ii) Cost of work-in-progress/ finished goods are determined on moving weighted average cost basis comprising material, labour and related factory overheads. c) Revenue Recognition Sale of Goods Revenue is recognised when the property and all significant risks and rewards of ownership are transferred to the buyer and no significant uncertainty exists regarding the amount of consideration that is derived from the sale of goods. Sales are recorded net of trade discount, rebates and sales tax / value added tax is inclusive of excise duty. Sale of Services Service income is recognised on completion of rendering of services and is recorded net of service tax. Cost incurred during the pendency of the contract is carried forward as job in progress at lower of cost and net realisable amounts. Commission Commission income is recognised and accounted on accrual basis. Interest Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. d) Fixed Assets and Debrciation / Amortisation Tangible Assets i) Fixed assets are stated at historical cost less debrciation / amortisation. Cost includes all expenses relating to acquisition and installation of the concerned assets. ii) Debrciation has been provided on a straight-line method (pro-rata from the date of additions) over the useful life of the assets as stated below. Debrciation has been provided at the rates stipulated in Schedule XIV to the Act, or at the rates determined based on the useful life of assets, as estimated by managament, whichever is higher. Description of the asset Useful Life (Years) Building 30 Plant and Machinery 9 Patterns/Tools/Mollet 3 Computers 4 Furniture and Fixtures 10 Office Equipments, Air Conditioners and Cooler etc. 3 to 6 Intangible Assets Intangible Assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible Assets are amortized on a straight - line basis (pro-rata from the date of additions) over there estimated useful lives. The useful lives are as under: Description of the asset Useful Life (Years) Computer Software 3 Trademark 5 Technical/ Commercial Know-how 5 e) Foreign Currency Transactions Foreign currency transactions are accounted at the exchange rates brvailing on the date of the transaction. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Profit and Loss. f)Investments Investments that are readily realisable and are intended to be held for not more than one year from the date, on which such investment are made, are classified as Current Investment. All other Investments are classified as Long Term Investments. Current Investments are carried at cost or fair value, whichever is lower. Long Term Investments are carried at cost. However, provision for dimunition is made to recognise a decline, other than temporary, in the value of the investments, such reduction being determined and made for investment individually. g)Employee Benefits i) Short Term Employee Benefits: The employees of the Company are entitled to leave encashment as per the leave policy of the Company. The liability in respect of leave encashment of short term nature is provided, based on an actuarial valuation carried out by an independent actuary as at the year-end. ii) Long Term Employee Benefits: Defined Contribution Plans The Company has Defined Contribution plans for post employment benefits namely Provident Fund. The Company contributes to a Government administered Provident Fund and has no further obligation beyond making its contribution. The Company makes contributions to state plans namely Employee's State Insurance Fund and Employee's Pension Scheme 1995 and has no further obligation beyond making the payment to them. The Company's contributions to the above funds are charged to Statement of Profit and Loss every year. Defined Benefit Plans The Company has Defined Benefit Plan comprising of Gratuity and Leave Encashment. The Company contributes to the Gratuity Fund which is recognised by the Income Tax Authorities and administered through its trustees. Liability for Defined Benefit Plans is provided on the basis of actuarial valuation, as at the Balance Sheet date, carried out by an independent actuary using the Projected Unit Credit Method. Foreign Currency Transactions Foreign currency transactions are accounted at the exchange rates brvailing on the date of the transaction. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Profit and Loss. Investments Investments that are readily realisable and are intended to be held for not more than one year from the date, on which such investment are made, are classified as Current Investment. All other Investments are classified as Long Term Investments. Current Investments are carried at cost or fair value, whichever is lower. Long Term Investments are carried at cost. However, provision for dimunition is made to recognise a decline, other than temporary, in the value of the investments, such reduction being determined and made for investment individually. Employee Benefits i) Short Term Employee Benefits: The employees of the Company are entitled to leave encashment as per the leave policy of the Company. The liability in respect of leave encashment of short term nature is provided, based on an actuarial valuation carried out by an independent actuary as at the year-end. ii) Long Term Employee Benefits: Defined Contribution Plans The Company has Defined Contribution plans for post employment benefits namely Provident Fund. The Company contributes to a Government administered Provident Fund and has no further obligation beyond making its contribution. The Company makes contributions to state plans namely Employee's State Insurance Fund and Employee's Pension Scheme 1995 and has no further obligation beyond making the payment to them. The Company's contributions to the above funds are charged to Statement of Profit and Loss every year. Defined Benefit Plans The Company has Defined Benefit Plan comprising of Gratuity and Leave Encashment. The Company contributes to the Gratuity Fund which is recognised by the Income Tax Authorities and administered through its trustees. Liability for Defined Benefit Plans is provided on the basis of actuarial valuation, as at the Balance Sheet date, carried out by an independent actuary using the Projected Unit Credit Method. iii) Termination benefits are recognised as an expense as and when incurred. iv) Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial assumptions and are recognised immediately in the Statement of Profit and Loss as income or expense. h) Research and Development Expenditure Research and development expenditure is charged to revenue under the natural heads of account in the year in which it is incurred. However, development expenditure qualifying as an intangible asset, if any, is capitalised, to be amortized over the economic life of the product. Research and development expenditure on fixed asset is debrciated in accordance with the useful life specified in paragraph (d) above. i) Operating Leases As a lessee: Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the Statement of Profit and Loss on a straight-line basis over the period of the lease. As a lessor: The Company has leased certain tangible assets and such leases where the Company has substantially retained all the risks and rewards of ownership are classified as operating leases. Lease income on such operating leases are recognised in the Statement of Profit and Loss on a straight line basis over the lease term. j) Taxes on Income Provision for tax for the year is made on the assessable income at the tax rate applicable to the relevant assessment year. Deferred tax is recognised for all the timing differences, subject to the consideration of prudence in respect of deferred tax assets. Deferred tax assets are recognised and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. At each Balance Sheet date, the Company re-assesses unrecognised deferred tax assets, if any. k) Warranty A provision is recognised for expected warranty claims on products sold, based on past experience of level of repairs and returns. Assumptions used to calculate the provision for warranties are based on current sales level and current information available about returns. l) Impairment of Assets The Company assesses at each Balance Sheet date whether there is any indication that asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Statement of Profit and Loss. m) Provisions and Contingent Liabilities Provisions: Provisions are recognised when there is a brsent obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the brsent obligation at the Balance sheet date and are not discounted to its brsent value. Contingent Liabilities: Contingent liabilities are disclosed when there is a possible obligation arising from past events, 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 that arises from past events 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, is termed as a contingent liability. n) Accounting Estimates The brparation of financial statements requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of financial statements and the reported amounts of revenue and expenses during the reporting period. Difference between the actual results and the estimates are recognised in the year in which the results are known/ materialised. 3) The tax year for the Company being the year ending March 31, the provision for taxation for the year is arrived at on the basis of year ending on December 31, the ultimate tax liability of which will be determined on the basis of the taxable income for the year April 1, 2014 to March 31, 2015. 4) Previous year figures have been reclassified to conform to this year's classification. Signatures to Notes 1 to 40 forming part of the Balance Sheet and Statement of Profit and Loss. For Price Waterhouse Firm Registration Number: 301112E Chartered Accountants Sd/- Priyanshu Gundana Partner Membership Number: 109553 For and on behalf of the Board of Directors Sd/- K. M. Thanawalla (DIN: 00201749) Chairman Sd/- Shailesh Wani (DIN: 06474766) Managing Director Sd/- Varsha Adhikari (M.No.: A17604) Company Secretary Place : Ahmedabad Date : February 19, 2015 |