NOTES FORMING PART OF THE FINANCIAL STATEMENTS for the year ended 30th June, 2015 (1) Nature of Business Symphony Limited, a brmier air cooling company was established in the year 1988. The company is in the field of residential, commercial and industrial air cooling both in the domestic and international markets. (2) Signiicant Accounting Policies The significant accounting policies have been brdominantly brsented below in the order of the Accounting Standards (AS) specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014. i) Basis of Accounting and Preparation 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") / Companies Act, 1956 ("the 1956 Act"), as applicable. The financial statements have been brpared on accrual basis under the historical cost convention. The accounting policies adopted in the brparation of the financia statements are consistent with those followed in the brvious year except for change in the accounting policy for debrciation. ii) 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. iii) Revenue Recognition Revenue is recognised when consideration can be measured reliably and there exists reasonable certainty of its recovery. a) Sales Sales is inclusive of VAT and Central Sales Tax, wherever applicable and after making adjustments towards price variations, discounts etc. Revenue is recognised on transfer of significant risks and rewards to the customer which normally occurs. In case of Domestic Sales - On dispatch of products to customers. In case of Export Sales - On Shipment / Air lift of products. b) Interest Interest on investments is booked on a time proportion basis taking into account the amounts invested and the rate of interest. c) Export Benefits Export Incentives are estimated and accounted for in the year of export. d) Dividend Income Dividend income on investments is accounted for when the right to receive the payment is established. iv) Tangible Fixed Assets Tangible Fixed Assets are stated at cost of acquisition / construction less accumulated debrciation, amortization and impairment loss (if any). Cost comprises of purchase price, import duties and other non-refundable taxes or levies and any directly attributable cost to bring the assets ready for their intended use. Direct expenses, as well as pro rata identifiable indirect expenses on projects during the year of construction are capitalized. Only expenditures that increase the future economic benefits from the existing asset beyond its brviously assessed standard of performance is included in the gross book value, e.g., an increase in capacity. The cost of an addition or extension to an existing asset which is of a capital nature and which becomes an integral part of the existing asset is added to its gross book value. Any addition or extension, which has a separate identity and is capable of being used after the existing asset is disposed off, is accounted for separately. The fixed assets retired from active use are stated at net book value or net realisable value, whichever is lower. The loss arising due to write-down is recognised in the statement of profit and loss. An item of fixed asset is eliminated from the financial statements on disposal. Gains or losses arising on disposal are recognised in the statement of profit and loss. v) Intangible Fixed Assets Intangible Fixed assets are stated at cost less accumulated amortization and accumulated impairment. Cost comprises of purchase price and any directly attributable cost to bring the assets ready for their intended use. An expenditure is regarded as an intangible asset if such expenditure give rise to an identifiable non-monetary resource without physical substance controlled by the company as a result of past events which is expected to result in future economic benefits in the form of either of higher cash inflows or lower cash outflows over the useful life of the resource and such resource is held for use in the production or supply of goods or services, for rental to others, or for administrative purposes. An intangible asset is derecognised on disposal or when no future economic benefits are expected from its use and subsequent disposal. Gain or losses arising from disposals are determined as the difference between the net disposal proceeds and the carrying amount of the asset and is recognised as income or expense in the Statement of Profit and Loss. vi) Debrciation / Amortization Debrciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Debrciation on all tangible fixed assets is provided on Straight Line Method as per the useful life brscribed in Schedule II to the Companies Act, 2013. Any addition or extension to an existing asset which is of a capital nature and which becomes an integral part of the existing asset is debrciated at the rate which is applied to the existing asset. Debrciation on sale of assets is provided till the date of sale. Debrciation on tangible assets is ceased when a fixed asset is retired from active use and held for disposal or is dispo sed off. ntangible fixed assets in the nature of software are amortized over a period of 6 years and Intellectua Property Rights (IPR) are amortized over a period of 5 years from the date of addition. Amortization of an intangible asset commences when the asset is available for use and ceases when the asset is retired from active use or is disposed off. Residual value for the purpose of amortization is taken as zero. At each balance sheet date, the company reviews the amortization period and amortization method. vii) Investments Investments which are intended for sale / maturing within twelve months are classified as Current nvestments. Others are classified as Long Term Investments. Cost of Investments comprises of the purchase price and any directly attributable expenses incurred. Current Investments are carried at the lower of cost and fair value computed individually. Long term investments are stated at cost. Provision for diminution in the value of long term investments is made, only if, in the opinion of the management, such a decline is regarded as being other than temporary. viii) Inventories Raw materials and traded goods are valued at lower of cost or net realizable value. The costs of these items of inventory comprises of cost of purchase and other incidental costs incurred to bring the inventories to their brsent location and condition. However, raw materials are written down below cost only when the finished product to which they belong are written down below cost and the replacement cost of that raw material is lower than cost. Cost of raw materials and traded goods are determined on "First in First out" basis. Work-in-process and Finished goods are valued at lower of cost or net realizable value. The cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost is determined on "First in First out" basis. Excise duty in respect of finished goods lying at the factory brmises have been provided for and included in valuation of inventory where the excise duty is payable. ix) Research and Development Research costs incurred for new / existing products / process including manpower cost are recognised in Statement of Profit and Loss as incurred. Development costs relating to the design and testing of new or improved materials, products or processes are recognized as intangible assets to the extent that it is expected that such assets will generate future economic benefits. Research and development expenditure of capital nature is added to fixed assets. The carrying value of development costs is reviewed for impairment annually when the asset is not available for use, and other wise when events and change in circumstances indicate that the carrying value may not be recoverable. x) Foreign currency transactions Initial Recognition and Measurement: Foreign currency transaction is recorded, on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. Subsequent Measurement: Foreign currency receivables and payables are subsequently measured as stated below: a) At each balance sheet date i) Foreign currency monetary items are reported using the closing rate. ii) Non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rate that existed when the values were determined. b) Treatment of exchange differences arising on settlement of monetary items or on reporting monetary items at rates different from those at which they were initially recorded during the period: i) Exchange differences arising on a monetary item that is receivable from, or payable to, a non-integral foreign operation, the settlement of which is neither planned nor likely to occur in the foreseeable future are accumulated in Foreign Currency Translation Reserve (FCTR). The exchange differences so accumulated in FCTR are reclassified to the Statement of Profit and Loss as and when settlement occurs. ii) Exchange differences arising on reporting of long-term foreign currency monetary items, in so far as they relate to the acquisition of a debrciable capital asset, are added to or deducted from the cost of the asset. iii) Exchange differences arising on reporting of long-term foreign currency monetary items other than those related to debrciable capital assets are parked in a separate account titled "Foreign currency monetary item translation difference account". This account is amortised on a systematic basis to reflect the amortisation of the corresponding long term foreign currency monetary item. iv) All other exchange differences are recognised as income or as expenses in the period in which they arise in the Statement of Profit and Loss. c) The brmium or discount arising at the inception of a forward contract entered into to hedge the foreign currency risk of existing assets and / or liabilities is amortised as expense or income over the life of the contract. Exchange differences on such a contract is 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 is recognised as income or as expense for the period. xi) Employee Beneits a) Short term Employee Beneits Short-term employee benefits are recognized as an expense at the undiscounted amount in the Statement of Profit and Loss of the year in which the related service is rendered. b) Post Employment Beneits i) Defined Contribution Plan:- The Company's contribution paid / payable during the year to Provident Fund are considered as defined contribution plans. The Contribution paid / payable under these plans are recognized during the period in which the employee render services. ii) Defined Benefit Plan:- Employee benefits in the nature of Gratuity are recognized as an expense in the Statement of Profit and Loss for the period in which the employee has rendered services. Estimated liability on account of Gratuity is discounted to the current value, using the yield on government bonds, as on the date of balance sheet, at the discounting rate. Actuarial gains and losses in respect of post employment and other benefits are charged to the Statement of Profit and Loss. xii) Leases All leases are classified into Operating and Financial Lease at the inception of the lease. Leases that transfer substantially all risks and reward from lessor to lessee are classified as Finance Lease and others being classified as Operating Lease. Rent Expense and Rent Income rebrsent operating leases which are recognized as an expense or ncome respectively in the Statement of Profit and Loss on a Straight Line basis over the lease terms. xiii) Borrowing Costs Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs are charged to Statement of Profit and loss. xiv) Provision for tax Tax expenses for a year comprise of current tax and deferred tax. Provision for current tax is determined based on taxable profits of the company as determined under the Income Tax Act,1961. Provision for deferred tax is determined based on the effect of timing difference between the taxable profits under the Income Tax Act and the profits as per the Statement of Profit and Loss and it is accounted for using the tax rates and laws that are enacted or substantively enacted as on the balance sheet date. In the event of unabsorbed debrciation and carry forward of losses, deferred tax assets are recognised only to the extent that there is virtual certainty that sufficient future taxable income will be available to realise such assets. In other situations, deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available to realise these assets. Provision for Wealth Tax is calculated on taxable wealth at the rate specified under the Wealth Tax Act, 1957. xv) Impairment of Fixed Assets The carrying amount of tangible and intangible fixed assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exist, the assets recoverable amount is estimated. An impairment loss is recognized in the Statement of Profit and Loss whenever the carrying amount of assets exceeds its recoverable amount. An impairment loss can be reversed if there are changes in estimates to determine the recoverable amount in future period. An impairment loss is reversed only to the extent that the carrying amount of the assets does not exceed the net book value that would have been determined, if no impairment loss has been recognized. The value of assets that are not available for use are reviewed at each balance sheet date to assess the probability of continuing future benefits. If there is any indication that the value of such assets is impaired, the resulting impairment loss is recognized in the financial statement. xvi) Warranty Provision for the estimated liability in respect of warranty on Domestic sale of products is made in the year in which the revenues are recognised, based on historical information on the nature, frequency and average cost of warranty claims and management estimates regarding possible future incidence based on corrective actions on product failures. xvii) Provisions and Contingent Liabilities A provision is recognised when the Company has a brsent obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which reliable estimate can be made. Provisions (excluding retirement benefits) 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. Contingent liabilities are not recognised in the financial statements. A contingent asset is neither recognised nor disclosed in the financial statement. |