Notes to Financial Statements 

1. Corporate Information

Artson Engineering Limited ("the Company'') is a company limited by shares incorporated under the Companies Act, 2013. The Company's Registered Office is situated at Mumbai. The Company's shares are listed on the Bombay Stock Exchange (BSE) and the Scrip Code is 522134.

The Company was incorporated in the year 1978 and since inception, the Company has commissioned, on turn-key basis, several fuel storage and handling facility systems. The Company is in the business of Engineering, Procurement & Construction contract in Oil, Gas & Hydrocarbon (OG&H) Sector and ancillary services, including manufacturing activity.

The Company was referred to the BIFR as a sick company under the provisions of Section 3 (1) (O) of the Sick Industrial Companies (Special Provisions) Act, 1985. The Company's reference as a sick company was registered under Case No. 152/ 2004 with the BIFR. At the hearing held on 27th November 2007, the BIFR sanctioned the Rehabilitation Scheme of the Company and the Order sanctioning the scheme of rehabilitation was received by the Company on 18th December 2007 (Sanctioned Scheme). The Company has made an application on 17th October 2013 for extension of the Rehabilitation Scheme as referred above and pending the final hearing, the Sanctioned Scheme is under implementation.

2. Significant Accounting Policies:

The Significant Accounting Policies have been brdominantly brscribed below in order of the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014.

i) Method of Accounting and brparation of the Financial Statements:

These financial statements have been brpared in accordance with the generally accepted accounting principles (GAAP) in India under the historical cost convention on accrual basis. These financial statements have been brpared to comply with all material aspects of the accounting standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014. Accounting policies not specifically referred to otherwise are consistent with the generally accepted accounting principles followed by the company.

All assets and liabilities have been classified as current or 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 services offered, the Company has ascertained its operating cycle as 12 months for the purpose of current / non-current classification of assets and liabilities.

ii) Revenue Recognition

a. Manufacturing activities:

Sales of Goods is recognised when significant risks and rewards of ownership are transferred to buyer. Sales exclude amount recovered towards Excise Duty and Sales Tax.

b. Erection / Construction activities: Revenues from execution of contract is recognized on the Percentage Completion method. The stage of completion is determined on the basis of actual work executed during the year. Running bills are accounted as sales on monthly basis. No profit is recognised till a minimum of 10% progress is achieved on the contract except in case of contracts executed on cost-plus basis. Costs incurred and invoices raised in respect of such contracts are carried in the Balance Sheet as contracts-in-progress and advance billing respectively. When it is probable at any stage of the contract that the total cost will exceed the total contract revenue, the expected loss is recognised immediately. In case of arbitration awards which are granted in favour of the Company, any amount to be received is treated as income in the year of receipt of such award. Liquidated damages/Penalties are accounted for as cost when such delays and causes are attributable to the Company or when deducted by the client.

c. Work done but not billed: Value of work executed, billed subsequent to the Balance Sheet date, is valued at the contract price.

d. i Income and Expenses are accounted on accrual basis except capital incentive from Government authorities and liquidated damages to the extent under negotiation.

ii VAT set-off is based on returns filed with appropriate authorities.

e. Bank Guarantee commission is accounted in the year of execution/renewal of guarantee.

iii) Use of Estimates:

The brparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities as at the date of the financial statements and the reported amounts of revenues and expenses during the year. The Management believes that the estimates used in the brparation of the financial statements are prudent and reasonable. Future results could differ from those estimates and the difference between the actual results and the estimates are recognised in the periods in which the results are known / materialise. 

iv) Fixed Assets: Tangible

All tangible fixed assets are stated at historical cost (as reduced by CENVAT credit) less accumulated debrciation. The cost of fixed assets comprises its purchase price and other attributable expenditure incurred in making the asset ready for its intended use and interest on borrowings attributable to acquisition of qualifying fixed assets up to the date the asset is ready for its intended use.

Intangible

Intangible Assets are initially recognised at cost and are stated at cost less debrciation and impairment (if any). The cost of an internally generated intangible asset comprises all expenditure that can be directly attributed, or allocated on a reasonable and consistent basis, to creating, producing and making the asset ready for its intended use. These Intangible Assets comprise of Computer Softwares.

v) Debrciation /Amortization on Fixed Assets:

a. Debrciation has been provided for on the written down value method as per the useful life brscribed in Schedule II to the Companies Act, 2013.

b. Leasehold Land, for 99 years and Leasehold Improvements are amortised over the period of the lease.

vi) Impairment of Assets:

As at each Balance Sheet date, the Company assesses the realisable value of all the assets. If there is any indication of fall in the realisable value over the carrying cost of the assets, impairment in value of the assets is recognised.

vii) Valuation of Inventories:

a. Stage of completion and cost of completion in respect of engineering and construction contracts-in-progress, being technical matters, are estimated and certified by the Company's technical personnel.

b. Stock of all the raw materials, construction materials, stores and spares lying at store, sites/ factory have been valued at the lower of cost (FIFO) and the net realisable value.

c. Work-in Progress are valued at the lower of cost and the net realisable value.

viii) Investments:

a. Investments intended to be held for more than one year are classified as long term investments and are carried at cost of acquisition inclusive of other attributable expenses. Diminution in the value of investment is provided for, if such diminution is of other than temporary nature in the value of such investments.

b. Current Investments is carried at the lower of cost and the fair value.

ix) Foreign Currency Transactions:

a. Transactions in foreign currency are recorded at the exchange rates brvailing on the date of transaction.

b. Monetary assets and liabilities denominated in foreign currencies at the year-end are translated at the year-end exchange rates.

c. The exchange difference on conversion are credited or charged to the Statement of Profit and Loss.

d. Financial statement of foreign operations, which are integral operations are translated using the same principles as stated above except following items which are translated as below: 

Sr. No. Nature of the account Policy 

 1. Opening and Closing Work-in-progress Exchange Rate at the commencement and close of the year respectively. 

 2. Fixed Assets and Debrciation Exchange Rate used for the translation of the respective date of purchase of fixed assets. 

x) Employee benefits:

a. The Company's contribution to Provident Fund is charged to the Statement of Profit and Loss.

b. Other long-term employee benefits comprise compensated absences which is provided based on an actuarial valuation carried out in accordance with AS 15 as at the Balance Sheet date.

c. The gratuity liability, which is a defined benefit plan, is provided on the basis of actuarial valuation as at the Balance Sheet date on the projected unit credit method and the same is funded with Life Insurance Corporation of India. 

xi) Segment Reporting:

The Company is in the business of Engineering, Procurement & Construction contract in Oil, Gas & Hydrocarbon (OG&H) Sector and ancillary services, including manufacturing activity. More than 90% of the income is only from Engineering & Construction contracts in OG&H Sector and ancillary services. The projects are executed both in India and abroad. Considering the core activity of the Company as above, the primary segment is geographical segment. Accordingly, the reportable segments of the Company are:

1. Domestic

2. Overseas

xii) Earnings Per Share:

The Company reports basic earnings per share in accordance with the Accounting Standard 20 'Earnings per share'. Basic earnings per share, is computed by dividing the net profit or loss for the year, by the weighted average number of equity shares outstanding during the year.

xiii) Taxation (including Deferred Tax):

Provision for Income Tax is made for both current and deferred taxes. Current tax is provided on the basis of the taxable income in accordance with and at the applicable tax rates and tax laws. Deferred tax assets and liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognised using the tax rates, and tax laws that have been enacted or substantively enacted, subject to prudence. Deferred tax assets on unabsorbed debrciation and carry forward of losses are not recognised unless there is a virtual certainty that there will be sufficient future taxable income available to realise such assets.

xiv) Borrowing Costs:

Borrowing costs which are directly attributable to acquisition, construction and production of qualifying assets, are capitalised.

xv) Provisions, Contingent Liabilities and Contingent Assets:

Provisions are recognised for liabilities that can be measured only by using substantial degree of estimation, if:

a. The Company has a brsent obligation as a result of past events.

b. A probable outflow of resources is expected to settle the obligation.

c. The amount of the obligation is best estimate required to settle the obligation at the Balance Sheet date.

d. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimate.

Reimbursement expected in respect of the expenditure required to settle a provision is recognized only when it is virtually certain that reimbursement will be received.

a. A brsent obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation,

b. A brsent obligation when no reliable estimate is possible, and

c. A possible obligation arising from past events where the probability of outflow of resources is not remote.

Contingent Assets are neither recognised, nor disclosed. Provision, Contingent Liabilities and Contingent Assets are reviewed at each Balance Sheet date.

xvi) Extraordinary Items:

The Extraordinary items are Income or Expenses that arise from events of transactions that are clearly distinct from the ordinary activities and therefore, are not expected to recur frequently or regularly.

The nature and amount of each extra ordinary item is identified and disclosed in the Statement of Profit and Loss in a manner that its impact on current profit or loss can be perceived.

xvii) Operating Leases:

Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor, are recognised as operating leases. Lease rents under operating leases are recognised in the profit and loss account on a straight line. 

3 The Company is registered with the Board for Industrial and Financial Reconstruction (BIFR) as a sick company and BIFR has vide its order dated 18th December 2007 sanctioned the rehabilitation scheme ("the Sanctioned Scheme"). While most of the provisions of the Sanctioned Scheme have been implemented, the Company was not able to achieve positive net worth as at 31st March 2013; accordingly, the Company has filed application on 17th October 2013 to BIFR seeking an extension and modification of the Sanctioned Scheme. The modification also includes conversion of Loans of Rs. 4418 Lakh (including interest up to 31st March 2013 and loan of Rs. 300 Lakh taken during the three months period ended 30th June 2013, but excluding interest of Rs. 94.27 Lakh for the three months period ended 30th June 2013) of the Holding Company as at 31st March 2013 into 4% Optionally Convertible Cumulative Redeemable Preference Shares of Rs. 1/-each, which is pending for approval from BIFR. In view of this, and based on written confirmation from the Holding Company, no provision has been made for interest payable to it amounting to Rs. 705.60 Lakh for the period 1st July 2013 to 31st March 2015 (including Rs. 403.04 Lakh for year ended 31st March 2015 ). The Management is considering various alternatives for achieving profitability and positive cash flow. Based on the current order book position, operating results for the current year and considering the continued support of the Holding Company, barring unforeseen circumstances, the Management is confident about the Company's ability to continue as a going concern and the Auditors of the Company have put an "emphasis of matter" paragraph on the aforesaid matter in the Auditor's Report for the year ended 31st March 2015.

4 a. In the opinion of the Management, all Current Assets, Loans & Advances are approximately of the same value if realized in the ordinary course of business. Provision for all the known liabilities and doubtful receivables is adequately made.

b. Trade receivables include retention of Rs. 270.42 Lakh (Previous Year Rs. 146.18 Lakh) receivable on completion of projects.

c. Balance outstanding against Trade Receivable and Trade Payable (including debit balances), are subject to reconciliation and confirmation with respective parties. Provision of Rs. 276.23 Lakh (Previous Year Rs. 43.37 Lakh) for doubtful debts is made during the year; resulting in total provision of Rs. 497.60 Lakh as at 31st March 2015.(Previous Year Rs. 221.37 Lakh).

d. Long term Loans and Advances includes Rs. 300.90 Lakh reimbursement receivable from client. Provision of Rs. 300.90 Lakh (Previous Year Rs. 162.63 Lakh) has been made during the year. 

5 The net Gain on account of exchange rate difference amounting to Rs. 2.84 Lakh (Previous Year Loss of Rs. 14.54 Lakh) has been accounted in the Statement of Profit and Loss in compliance with AS-11.

6 Effective 1st April 2014, the Company has changed the estimated useful life of group of assets in line with the recommended useful life as per Part C of Schedule II to the Companies Act, 2013. As per para 7 (b) of Notes of Part C of Companies Act, 2013, where the remaining useful life of an asset as on the effective date is nil, the carrying amount of the asset should be recognised in the retained earnings. Such carrying amount as on 1st April 2014 for the Company is Rs. 16.33 Lakh.

7  The Company has not contributed any amount towards Corporate Social Responsibility (CSR) in terms of Section 135 as there are no profits attributable to CSR.

8  The Company has taken factory brmises under cancelable and non-cancelable operating lease. The lease agreement is for two years and option of renewal on expiry of lease period is based on mutual agreement. Rental expenses towards cancelable and non cancelable operating lease charged to Statement of Profit and Loss amount to Rs. 6.00 Lakh ( Previous Year Rs. 4.00 Lakh).

9 In line with accepted practice in construction business, certain revisions of costs and billing of brvious year which have crystallised during the year have been dealt with during the current year.

10  The Company has filed in October 2013 a Miscellaneous Application (No.536 of 2013)("MA") with the Board for Industrial and Financial Reconstruction ("BIFR") containing various proposals for modifications to the Sanctioned Scheme. The said MA is pending with the BIFR. Vide one of the proposals contained in the said MA, the Company has sought exemption from the appointment of Managing Director (MD)/Manager (M)/Whole-time Director (WD). During the course of the proceedings before the BIFR, a legal opinion has also been submitted on the matter. Accordingly, the Company has not appointed any MD/M/WD, which is one of the categories of the Key Managerial Personnel (KMP) under the Companies Act, 2013. The Company has appointed qualified and experienced KMP in other categories viz.Company Secretary and Chief Financial Officer.

11 Previous year's figures have been regrouped and restated wherever necessary to make their classification comparable with that of the current year. 

As per our report of even date

for Chokshi & Chokshi LLP

Chartered Accountants

FRN : 101872W/W100045

Pooja Mehta

Partner

Membership No. 133578

For and on behalf of the Board 

Rajesh Mandale Chief Financial Officer

Vinayak Deshpande Chairman 

Nalin M. Shah Director

Pralhad Pawar Director 

 Anuja Bhate Company Secretary 

Place : Mumbai

Date : 4th May 2015