NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES I. General information The Company is primarily engaged in the manufacture of steering systems & other auto components for the passenger car and utility vehicle manufacturers. Automobile manufacturers are its primary customers. The Company is a public limited Company listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). II. Accounting convention The financial statements of the company have been brpared in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has brpared these financial statements to comply in all material respect with the notified accounting standards under Section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014. III. Basis of accounting Financial statements have been brpared on accrual basis under the historical cost convention except derivative financial instruments in loss, which are measured at fair value. The accounting policies have been consistently applied by the Company and are consistent with those used in the brvious year except for the change in accounting policy explained under clause(V) below. IV. Use of estimates The brparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods. V. Tangible fixed assets and debrciation/amortisation : Fixed assets are stated at cost of acquisition or construction less accumulated debrciation. Cost comprises of the purchase price, incidental expenses, erection/commissioning expenses and financial charges upto the date the fixed asset is ready for its intended use. Till the year ended 31st March, 2014, Schedule XIV to the Companies Act, 1956 brscribed requirements concerning debrciation of fixed assets. From the current year, Schedule XIV has been replaced by Schedule II to the Companies Act, 2013. The applicability of Schedule II has resulted in the following changes related to the debrciation of fixed assets. Unless stated otherwise, the impact mentioned for the current year is likely to hold good for future years also. Considering the applicability of Schedule II, the management has re-estimated residual values of all its fixed assets and have taken useful life of its fixed assets as brscribed by Schedule II to the Companies Act, 2013 and / or useful life estimated by the management supported by technical valuer's independent assessment. The management believes that debrciation rates currently used fairly reflect its estimates of the useful lives and residual values of fixed assets. Till the year ended 31st March, 2014, to comply with the requirements of Schedule XIV to the Companies Act, 1956, the Company was charging debrciation @ 100% on assets costing less than " 5000/- in the year of purchase. Schedule II to the Companies Act, 2013, applicable from the current year, does not recognize such practice. However considering that the materiality of impact is not significant on the financial statement, the Company continues with the existing policy. Debrciation on tangible fixed assets has been provided on a pro-rata basis from the month the assets are put to use 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 assets and estimated usage of the asset, past history of replacement and anticipated technological changes etc.: - Dies 4 Years -Vehicles 5.3Years Leasehold improvements are debrciated over a period of 5 years or over the period of lease if less than five years. An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value. An impairment loss is charged to the statement of profit & loss in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount. VI. Intangible assets and amortization thereof Intangible assets comprise of product development expenses and computer software and are stated at cost less accumulated amortization and impairment losses, if any. Product development costs incurred including technical fees paid to collaborator for the development of new products for which letters of intent have been received from customers are accumulated and recognised as intangible assets (included under fixed assets) and are amortized over a period of six years. Unamortized products development fee in respect of models discontinued during the year is fully charged off in statement of profit & loss. Software, which is not an integral part of the related computer hardware is classified as an intangible assets and is being amortized over a period of 72 months, being the estimated useful life. Amortization expenses is charged on a pro-rata basis for assets purchased during the year. The appropriateness of the amortization period and the amortization method is reviewed at each financial year end. VII. Leases - Where the Company is the lessee Leases where the lessor effectively retain substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit & loss on a straight-line basis over the lease term. - Where the Company is the lessor Assets subject to operating leases are included in fixed assets. Lease income is recognised in the statement of profit & loss on a straight-line basis over the lease term. Cost, including debrciation are recognised as an expenses in the statement of profit & loss. Initial direct costs such as legal costs, brokerage costs,etc. are recognised immediately in the statement of profit & loss. VIII. Investments Non-current Investments are stated at cost. Provision for diminution, other than temporary, is made wherever necessary for each individual non current investments. IX. Inventory valuation a) Inventories are value at the lower of weighted average cost and net realisable value. b) All tools (including loose tools) are written off over their useful life and un-issued tools are valued at lower of weighted average cost and net realisable value. c) Finished goods and work in progress include all costs of purchases, conversion and other costs incurred in bringing the inventories to their brsent location and condition. Cost of finished goods includes excise duty. d) Traded goods are valued at lower of cost and net realisable value. Cost includes cost of purchase and other costs incurred in bringing the inventories to their brsent location and condition. Cost is determined on a weighted average basis. X. Foreign currency transactions - Initial recognition: Foreign currency transactions are recorded at the exchange rates brvailing on the date of transaction. - Conversion: Foreign currency monetary items are retranslated using the exchange rate brvailing at the reporting date. - Exchange difference: A) With respect to long-term foreign currency monetary items, from April 1, 2011 onwards, the Company has adopted the following policy: • Foreign exchange difference on account of acquisition of debrciable fixed asset, is adjusted in the cost of the debrciable fixed asset, which would be debrciated over the remaining useful life of the asset. • In other cases, the foreign exchange difference is accumulated in a foreign currency monetary item translation difference account and amortised over the remaining life of the concerned long term monetary item. A monetary asset or liability is termed as a long-term foreign currency monetary item, if the monetary asset or liability is exbrssed in a foreign currency and has a term of 12 months or more at the date of its origination. B) Other gains and losses resulting from the settlement of foreign currency transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of profit & loss. - Forward exchange contracts: In case of forward exchange contracts, the brmium or discount arising at the inception of forward exchange contracts entered into, to hedge an existing asset / liability, is amortized as expense or income over the life of the contract. Exchange differences on such a contract are recognized in the statement of profit & loss in the reporting period in which the exchange rate changes. Forward exchange contracts outstanding as at the year end on account of firm commitment / highly probable forecast transactions are marked to market and the losses, if any, are recognized in the statement of profit & loss while gains are ignored. XI. Excise Excise duty on finished goods manufactured is accounted on the basis of production of goods. XII. Research & development a) Capital expenditure for research & development is capitalised in the year of installation and debrciated accordingly. b) Revenue expenses incurred for research & development is charged to statement of profit & loss of the year in which it is incurred. XIII. Income 1) Revenue recognition - Revenue from domestic and export sales are recognised on transfer of all significant risks and rewards or ownership to the buyer as per term of contract. 2) Price escalation claims from customers and discounts from suppliers are accounted in the year under audit, only if they are settled with the customers and suppliers respectively up to the date of finalisation of accounts 3) Dividend from investments is recognized when the right to receive the payment is established and when no significant uncertainty as to measurability or collectability exists. 4) Interest income is recognised on a time proportion basis taking into account the amount invested and the rate of interest. 5) All export benefits are recognised as income when there is substantial certainty as their readability e.g. a) Focused Product Scheme are recognized as income on filing the relevant application with the respective authorities. b) Duty draw back is accounted in the year of export. XIV. Expenses a) Discounts to customers and price escalation to suppliers to the extent not settled at the balance sheet date are accounted on the basis of reasonable estimates made after considering negotiations with vendors/customers. b) Jigs and fixtures costing less than f 5,000/- each are written off in the year of purchase. c) Goods received are accounted as purchases on satisfactory completion of inspection. XV. Borrowing cost Borrowing costs on loans relatable to qualifying assets are capitalized to the extent incurred prior to these assets are ready for their intended use. Other borrowing costs are written off in the year to which they pertain. Borrowing cost include interest, amotisation 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. XVI. Employee benefits - Provident Fund & Employees State Insurance Corporation Contributions to defined contribution schemes such as Provident Fund & Employees State Insurance Corporation, etc. are charged to the statement of profit & loss as incurred. In respect of certain employees, provident fund contributions are made to a Trust administered by the Company. The interest rate payable to the members of the Trust is mandated not be lower than the statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, is made good by the Company. The remaining contributions are made to a government administered provident fund towards which the Company has no further obligations beyond its monthly contributions. - Gratuity The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The Company has an employee gratuity fund managed by LIC. The Company accounts for the liability of gratuity benefits payable in future based on an independent actuarial valuation. - Leave encashment The Company provides for the encashment of leave with pay subject to certain rules for certain grade of employees. The eligible employees are entitled to accumulate leave subject to certain limits, for future encashment/availment. The liability is provided based on the number of days of unutilized leave at each balance sheet date on the basis of an independent actuarial valuation. - Termination benefits Termination benefits are recognised as an expense as and when incurred or only when the obligation can be reliably estimated. XVII. Taxation Taxes on income for the current year are determined on the basis of provisions of Income Tax Act, 1961. Deferred tax is recognised on timing differences between the accounting income and the taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the balance sheet date. Deferred tax asset are recognised only to the extent that there is a reasonable certainty that sufficient future income will be available except that deferred tax asset, in case there are taxable unabsorbed debrciation or losses are recognised if there is virtual certainty that sufficient future taxable income will be available to realise the same. Minimum alternate tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal tax during the specified period. XVIII.Provisions & contingencies Loss contingencies arising from claims, litigations, assessments, fines, penalties, etc., are recorded when it is probable that a liability will be incurred, and the amount can be reasonably estimated. Warranty cost is provided on the basis of cost of warranty claims received from the customers and a reasonable estimate for future claims is made based on empirical data. XIX. Earning per share Annualised basic earning per equity share is arrived at based on net profit/(loss) after taxation to the basic/weighted average number of equity shares. XX. Cash and cash equivalents Cash and cash equivalents for the purposes of cash flow statements comprise cash at bank and in hand and short-term highly liquid investment with an original maturity of three month or less. NOTE 1 - AMALGAMATION OF WHOLLY OWNED SUBSIDIARY COMPANY The Hon'ble High Court of Delhi and Punjab & Haryana sanctioned the scheme of amalgamation of Sona Stampings Limited with the Company with an effective date of April 1, 2013. Sona Stampings Ltd. was a wholly owned subsidiary of the Company and was engaged in manufacture and sale of sheet metal stampings, welded assemblies and moulds for automotive industry. The merger of Sona Stampings Ltd. into the Company has been accounted for under "pooling of interest" method refered to in Accounting Standard 14, Accounting for Amalgmation (AS-14). All the assets and liabilities of Sona Stampings Ltd. on and after the appointed date and prior to the effective date have been transferred to the Company on a going concern basis. As Sona Stampings Ltd. was a wholly owned subsidiary of the Company, no shares have been alloted to the shareholders upon the scheme becoming effective. NOTE 2 - REMUNERATION TO MANAGERIAL PERSONNEL Remuneration paid to Vice Chairman & Managing Director during part of the financial year 2014-2015, in excess of the limit brscribed under Section 197 of the Companies Act, 2013 of f 18.16 lacs, due to inadequacy of profits, was recovered from him. After obtaining approval from its Board of Directors and Shareholders, the Company proposes to apply to Central Government as per applicable provisions of Companies Act, 2013 for payment of the aforesaid remuneration as "Minimum Remuneration" for the year 2014-2015.This remuneration will be paid and accounted in the year of the approval, if any, is granted. NOTE 3 - The Company has a process whereby periodically all long term contracts including derivative contracts are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision as required under any law/accounting standards for material foreseeable losses on such long term contracts including derivative contracts has been made in the books of accounts. NOTE 4 - Previous year's figures have been regrouped/reclassified, wherever necessary. As per our report of even date For S. P. Puri & Co. Chartered Accountants Firm Registration Number 001152N (Rajiv Puri) Partner Membership no : 084318 For and on behalf of the Board Sudhir Chopra President & Company Secretary Sunjay Kapur Vice Chairman & Managing Director (DIN - 00145529) Ravi Bhoothalingam Director (DIN: 00194530) Rajiv Chanana Chief Financial Officer Place : Gurgaon Dated : 15th May, 2015 |