1. Corporate Information Carborundum Universal Limited (CUMI) was incorporated as a Public Limited Company in 1954 and the shares of the Company are listed in National and Bombay Stock Exchanges in India. CUMI manufactures and sells mainly Abrasives, Ceramics (Industrial Ceramics, Refractories) and Electro minerals. 2. Significant accounting policies : 2.1 Basis of accounting and brparation of financial statements The financial statements of the Company have been brpared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013 ("the 2013 Act"). The financial statements have been brpared on accrual basis under the historical cost convention. The accounting policies adopted in the brparation of the financial statements are consistent with those followed in the brvious year. 2.2 Use of estimates The brparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in brparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known/materialise. 2.3 Inventories Inventories are valued at lower of cost and net realizable value. Cost includes freight, taxes and duties net of CENVAT/ VAT credit wherever applicable. Customs duty payable on material in bond is added to the cost. In respect of raw materials, stores and spare parts, cost is determined on weighted average basis. In respect of Work in Process and Finished goods, cost includes all direct costs and applicable production overheads, to bring the goods to the brsent location and condition. 2.4 Cash and cash equivalents (for purposes of Cash Flow Statement) Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value. 2.5 Cash flow statement Cash flows are reported using the indirect method, whereby profit/(loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information. 2.6 Debrciation and amortisation Debrciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Debrciation on tangible fixed assets has been provided on the straight-line method as per the useful life brscribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc.: - leased vehicles are debrciated over four years; - Building and other assets on lease hold land are debrciated over the lease period; - Individual assets costing less than Rs.5,000 are debrciated in full in the year of acquisition. The difference between the debrciation for the year on the revalued assets and the debrciation calculated on the original cost is transferred directly to the General Reserve from the Fixed Assets Revaluation Reserve. Debrciation on additions to fixed assets is provided on a prorata basis from the date of commissioning of the individual asset. Premium on Lease hold Land is amortised over the tenure of the lease. Intangible assets are amortised over their estimated useful life upto a maximum of 5 years on a straight line basis. The estimated useful life of the intangible assets and the amortisation period are reviewed at the end of each financial year and the amortisation period is revised to reflect the changed pattern, ifany. 2.7 Revenue recognition Sale of goods: Sales are accounted on transfer of significant risks and rewards of ownership to the buyer which generally coincides with despatch of products to customers in case of domestic sales and on the basis of bill of lading in the case of export sales. Sales are accounted net of Sales Tax/VAT, Discounts and Returns as applicable. Income from Contracts The revenues from divisible contracts are recognized on the percentage completion method in respect of service contracts and in respect of supplies on despatch. In respect of indivisible contracts, the revenues are recognized on a percentage completion method, synchronized to the billing schedules agreed by the customers. 2.8 Other income Interest income is accounted on accrual basis. Dividend income is accounted for when the right to receive is established. 2.9 Fixed Assets (Tangible/Intangible) Fixed assets are stated at historical cost except land and buildings added up to 31st August 1984 which are shown as per the revaluation done in that year, less accumulated debrciaion/amorisaion. Cost comprises of direct cost, related taxes, duties, freight and attributable finance costs (Refer 2.15 below) till such assets are ready for its intended use and net of CENVAT/VAT wherever applicable. Subsidy received from Government towards specific assets is reduced from the cost of fixed assets. Fixed assets taken on finance lease are capitalised. Machinery spares used in connection with a particular item of fixed asset and the use of which is irregular, are capitalized at cost net of CENVAT/VAT, as applicable. Expenditure directly relating to new projects prior to commencement of commercial production is capitalised. Indirect expenditure (net of income) attributable to the new projects or which are incidental thereto are also capitalised. Fixed assets retired from active use and held for sale are stated at the lower of their net book value and net realisable value and are disclosed separately. Capital work-in-progress: Projects under which fixed assets are not yet ready for their intended use are carried at cost, comprising direct cost, related incidental expenses and attributable interest. 2.10 Foreign currency transactions and translations Foreign currency transactions are recorded at the rates of exchange brvailing on the date of the transactions. Monetary assets & liabilities outstanding at the year-end are translated at the rate of exchange brvailing at the year-end and the gain or loss, is recognised in the statement of profit and loss. Foreign currency monetary items (other than derivative contracts) of the Company, outstanding at the balance sheet date are restated at the year-end rates. Non-monetary items of the Company are carried at historical cost. Exchange differences arising on settlement/restatement of short-term foreign currency monetary assets and liabilities of the Company are recognised as income or expense in the Statement of Profit and Loss. Premium/discount on forward exchange contracts, which are not intended for trading or speculation purposes, are amortised over the period of the contracts if such contracts relate to monetary items as at the balance sheet date. Any profit or loss arising on cancellation or renewal of such a forward exchange contract is recognised as income or as expense in the period in which such cancellation or renewal is made. Refer Notes 2.24 and 2.25 for accounting for forward exchange contracts relating to firm commitments and highly probable forecast transactions. 2.11 Government grants, subsidies and export incentives Lump-sum capital subsidies, not relating to any specific fixed asset, received from Governments for setting up new projects are accounted as capital reserve. Export Benefits on account of entitlement to import goods free of duty under' Exports Benefits Scheme' are accounted based on eligibility and when there is no uncertainty in receiving the same. 2.12 Investments Long-term investments are carried individually at cost less provision for diminution, other than temporary, in the value of such investments. Current investments are carried individually, at the lower of cost and fair value. Cost of investments include acquisition charges such as brokerage, fees and duties. 2.13 Employee benefits Employee benefits include provident fund, superannuation fund, employee state insurance scheme, gratuity fund, compensated absences, long service awards and post-employment medical benefits. a. Defined contribution plan Fixed contributions to the Superannuation Fund which is administered by Company nominated trustees and managed by Life Insurance Corporation of India and to Employee State Insurance Corporation [ESI] are charged to the Statement of profit and loss, based on the amount of contribution required to be made and when services are rendered by the employees. Company also contributes to a government administered Pension fund on behalf of its employees, which are charged to the Statement of profit and loss. The employees and the Company make monthly fixed contributions to the Carborundum Universal Limited Employee's Provident Fund Trust, equal to a specified percentage of the covered employee's salary. The interest rate payable by the Trust to the beneficiaries is being notified by the Government every year. The Company obtains an independent actuarial valuation of the Interest Guarantees as at the Balance sheet date and provides for the shortfall, if any, in the brsent value of obligation of interest over the fair value of the surplus in the Fund. b. Defined benefit plan The liability for Gratuity to employees as at the Balance Sheet date is determined on the basis of actuarial valuation using Projected Unit Credit method. The liability is funded to a Gratuity fund administered bythe trustees and managed by Life Insurance Corporation of India and SBI Life Insurance Company Limited. The liability there of paid/payable is absorbed in the accounts. The actuarial gains/losses are recognised in the Statement of Profit and Loss. c. Long term compensated absences In respect of long term portion of compensated absences [Leave benefits], the liability is determined on the basis of actuarial valuation and is provided for. d. Short term employee benefits Short term employee benefits including accumulated compensated absences determined as per Company's policy/scheme are recognized as expense based on expected obligation on undiscounted basis. e. Voluntary retirement compensation Compensation to employees who have retired under voluntary retirement scheme is charged off to revenue. 2.14 Employee share based payments The Company has formulated Employee Stock Option Schemes (ESOP) in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The Schemes provide for grant of options to employees of the Company and its subsidiaries to acquire equity shares of the Company that vest in a graded manner and that are to be exercised within a specified period. In accordance with the SEBI Guidelines; the excess, if any, of the closing market price on the day prior to the grant of the options under ESOP over the exercise price is amortised on a straight-line basis over the vesting period. 2.15 Borrowing costs Borrowing costs include interest, amortisation of ancillary costs incurred and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Costs in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the Statement of Profit and Loss over the tenure of the loan. Borrowing costs, allocated to and utilised for qualifying assets, pertaining to the period from commencement of activities relating to construction/development of the qualifying asset up to the date of capitalization of such asset is added to the cost of the assets. Capitalisation of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted. 2.16 Segment reporting The accounting policies adopted for segment reporting are in line with the accounting policies of the Company with the following additional policies: a. Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market/fair value factors b. Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis have been included under "Unallocated Corporate Expenses". 2.17 Leases Assets leased by the Company in its capacity as a lessee, where substantially all the risks and rewards of ownership vest in the Company are classified as finance leases. Such leases are capitalised at the inception of the lease at the lower of the fair value and the brsent value of the minimum lease payments and a liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each year. 2.18 Earnings per share Basic earnings per share is computed by dividing the profit/ (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit/(loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period brsented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits/reverse share splits and bonus shares, as appropriate. 2.19 CENVAT/Service Tax/VAT CENVAT/VAT credit on materials purchased/Input services are taken into account at the time of purchase. Service tax input credit is accounted for in the books in the period in which the underlying service received is accounted and when there is no uncertainity in availing/utilising the credits. CENVAT/VAT credit on purchase of capital items wherever applicable are taken into account as and when the assets are acquired. The CENVAT credits so taken are utilised for payment of excise duty on goods manufactured/Service tax on Output services. The unutilised CENVAT/VAT credit is carried forward in the books. 2.20 Taxes on income Current tax is determined on income for the year chargeable to tax in accordance with the Income Tax Act, 1961 and other applicable tax laws. Deferred tax is recognised for all the timing differences and is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred Tax assets in respect of unabsorbed debrciation and carry forward of losses are recognized if there is virtual certainty that there will be sufficient future taxable income available to realize such losses. Other deferred tax assets are recognized if there is reasonable certainty that there will be sufficient future taxable income available to realise such assets. Current and deferred tax relating to items directly recognised in reserves are recognised in reserves and not in the Statement of Profit and Loss. 2.21 Research and development expenses All revenue expenditure related to research and development are charged to the respective heads in the Statement of profit and loss. Capital expenditure incurred on research and development is capitalised as fixed assets and debrciated in accordance with the debrciation policy of the Company. 2.22 Impairment of assets The carrying values of assets/cash generating units at each balance sheet date are reviewed for impairment if any indication of impairment exists. The following intangible assets are tested for impairment each financial year even if there is no indication that the asset is impaired: (a) an intangible asset that is not yet available for use; and (b) an intangible asset that is amortised over a period exceeding ten years from the date when the asset is available for use. If the carrying amount of the assets exceed the estimated recoverable amount, an impairment is recognised for such excess amount. The impairment loss is recognised as an expense in the Statement of Profit and Loss, unless the asset is carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation decrease to the extent a revaluation reserve is available for that asset. The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their brsent value based on an appropriate discount factor. When there is indication that an impairment loss recognised for an asset (otherthan a revalued asset) in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of Profit and Loss, to the extent the amount was brviously charged to the Statement of Profit and Loss. In case of revalued assets such reversal is not recognised. 2.23 Provisions and contingencies Provisions are recognised only when there is a brsent obligation as a result of past events and when a reliable estimate of the amount of obligation can be made. Contingent liability is disclosed for (i) Possible obligation which will be confirmed only by future events not wholly within the control of the Company or (ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Contingent assets are not recognised in the financial statements. 2.24 Hedge accounting The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to highly probable forecast transactions. The Company designates such forward contracts in a cash flow hedging relationship by applying the hedge accounting principles set out in "Accounting Standard 30 Financial Instruments: Recognition and Measurement". These forward contracts are stated at fair value at each reporting date. Changes in the fair value of these forward contracts that are designated and effective as hedges of future cash flows are recognised directly in "Hedging reserve account" under Reserves and surplus, net of applicable deferred income taxes and the ineffective portion is recognised immediately in the Statement of Profit and Loss. Amounts accumulated in the "Hedging reserve account" are reclassified to the Statement of Profit and Loss in the same periods during which the forecasted transaction affects profit and loss. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecasted transactions, any cumulative gain or loss on the hedging instrument recognised in "Hedging reserve account" is retained until the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss recognised in "Hedging reserve account" is immediately transferred to the Statement of Profit and Loss. 2.25 Derivative contracts The Company enters into derivative contracts in the nature of foreign currency swaps, currency options, forward contracts with an intention to hedge its existing assets and liabilities, firm commitments and highly probable transactions. Derivative contracts which are closely linked to the existing assets and liabilities are accounted as per the policy stated for Foreign Currency Transactions and Translations. Derivative contracts designated as a hedging instrument for highly probable forecast transactions are accounted as per the policy stated for Hedge Accounting. 2.26 Insurance claims Insurance claims are accounted for on the basis of claims admitted/expected to be admitted and to the extent that the amount recoverable can be measured reliably and it is reasonable to expect ultimate collection. 2.27 Operating cycle Based on the nature of the products/activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non -current. 1. (a) Segmental Reporting i) Business Segments The Company has considered business segment as the primary segment for disclosure. The business segments are: abrasives, ceramics and electro minerals. Abrasive segment comprise of bonded, coated, processed cloth, polymers, powertools and coolants. Ceramics comprise of super refractoriness, industrial ceramics, anti-corrosives and bioceramics. Electro minerals include abrasive/ refractory grains, micro grits for the photovoltaic industry and captive power generation from hydel power plant. The above segments have been identified taking into account the organisation structure as well as the differing risks and returns of the se segments. ii) Geographical Segments The geographical segments considered for disclosure are : India and Rest of the world. All the manufacturing facilities and sales offices are located in India. Sales to the rest of the world are also serviced by Indian sales offices. Geographical revenues are segregated based on the location of the customer who is invoiced or in relation to which the revenue is otherwise recognised. iii) Segmental assets includes all operating assets used by respective segment and consists principally of operating cash, debtors, inventories and fixed assets, net of allowances and provisions. Segmental liabilities include all operating liabilities and consist primarily of creditors and accrued liabilities. Segment assets and liabilities do not include income tax assets and liabilities. 2. Dividend Tax on the second Interim Dividend (March 2016) has been paid after availing the credit amounting to Rs.2.06 million (Previous year - Nil) in respect of the tax paid on the dividends received from a domestic subsidiary. Dividend Tax on the first Interim Dividend (Feb 2016) has been paid after availing the credit amounting to Rs.35.89 million (Previous year - Rs.26.83 million) in respect of the tax paid on the dividends received from an overseas subsidiary. Dividend tax paid on the final dividend approved during last AGM held in 2015 is Nil (brvious year Rs.8.91 million) after considering an amount of Rs.15.39 million (brvious year Rs.4.83 million) relating to the dividends received from two overseas subsidiaries and Rs.3.77 million (brvious year Rs.2.23 million) relating to dividends received from two domestic subsidiaries. 3. Disclosures in respect of Derivatives A. The Company has entered into forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecast transactions. The company designates them as effective cash flow hedges. The company does not use derivative financial instruments for speculative purposes. The Company has adopted the measurement principles as laid down in the AS - 30 -Financial Instruments - Recognition and Measurement with respect to above mentioned effective cash flow hedges. 4.brvious year figures have been regrouped wherever necessary to conform to current year grouping the brvious year financial do not include the figures of cellars refractors India limited |