SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS 1 SIGNIFICANTACCOUNTTNGPOLICIES a) Basis of Preparation of Financial Statements These financial statements are brpared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on the accrual basis except for certain fixed assets which are stated at revalued amounts. GAAP comprises mandatory accounting standards as brscribed under Section 133 of the Companies Act,2013 ('Act')read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. All the Assets and Liabilities have been classified as Current and Non-Current as per the Company's normal operating cycle and other criteria set out in Schedule III to the Companies Act, 2013. Based on the nature of activities, the Company has ascertained its operating cycle as 12 months for the purpose of Current and Non Current classification of Assets and Liabilities. b) Use of Estimates The brparation of the financial statements is in conformity with Indian GAAP which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures relating to contingent liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. The estimates and assumptions used in the accompanying financial statements are based upon management's evaluation of relevant facts and circumstances as of the date of financial statement. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods. c) Tangible Fixed Assets and Capital Work in Progress (i) Recognition Tangible assets are stated at their original cost net of recoverable taxes, duties, trade discounts and rebates less accumulated debrciation and impairment, if any except in case of certain fixed assets which have been revalued and stated at revalued amounts less accumulated debrciation.The cost of fixed asset comprises its purchase price, borrowing costs and any directly attributable cost of bringing the assetto its working condition for its intended use. Capital work-in-progress comprises the cost of fixed assets that are not yet ready for their intended use as at the reporting date. (ii) Debrciation Debrciation on tangible fixed assets is charged on straight line method over the useful life/remaining useful life of the asset as per Schedule II of the Companies Act 2013. Debrciation on assets purchased / acquired during the year is charged from the date of addition / purchase of the asset. Similarly, debrciation on assets sold / discarded during the year is charged up on the sale/ discard of the assets. Where debrciable assets are disposed of, discarded, demolished or destroyed, the net surplus or deficiency, if material, is disclosed separately. d) Intangible Fixed Assets (i) Recognition Intangible fixed assets acquired separately are measured on initial recognition at cost. Following initial recognition, Intangible Assets are carried at cost less accumulated ammortisation and accumulated impairment losses, if any. (ii) Amortization Intangible assets are amortized on straight line basis over the estimated useful economic life of the asset. The company brsumes that the useful economic life of Technical Knowhow and Computer Software is five years from the year in which it is acquired and is ready to use and therefore, Technical Knowhow and Computer Software is amortized on straight line basis over a period of five years from the year in which it is acquired and is ready to use. The amortisation charge for each period is recognised as an expense. e) Non-Current/Long Term Investment Non- Current/ Long-term investments are stated at cost. Provision is made for dimunition in the value of investments, if the same is considered to be other than temporary in nature. The carrying amount of long-term investments is determined on an individual investment basis. f) Inventories Inventories are valued at the lower of cost and net realisable value. The cost of inventories comprises of costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their brsent location and condition. Estimates of net realisable value are based on the most reliable evidence available at the time the estimates are made as to the amount the inventories are expected to realise. The cost of inventories are arrived at by applying the weighted average cost formula. Scrap is valued at net realizable value. Excise duty payable on finished goods lying in the factory is provided for and included in closing stock of finished goods. g) Employee Benefits 1 Short term employee benefits : Short-term employee benefits are employee benefits (other than termination benefits) such as salary, wages and performance incentive which fall due wholly within twelve months after the end of the period in which the employees render the related service and are recognised as expense in the period in which the related service is rendered. 2 Post- employment Benefits Post-employment benefits are employee benefits (other than termination benefits) which are payable after the completion of employment. a. Defined Contribution Plans The Company has Defined Contribution Plans for Post employment benefits in the form of Superannuation Fund and Provident & Pension Fund for all employees which are administered by Life Insurance Corporation (LIC) and Regional Provident Fund Commissioner respectively. Superannuation Fund and Provident Fund are classified as defined contribution plans as the Company pays fixed contributions into a separate entity (a fund) and has no further obligation beyond making contributions. The Company's contributions to Defined Contribution plans are charged to the Statement of Profit and Loss as and when incurred. b. Defined Benefit Plans Funded Plan: The Company has a defined benefit plan for Post-employment benefit in the form of Gratuity, which is administered through Life Insurance Corporation (LIC). Liability for the above defined benefit plan is provided on the basis of valuation, as at the Balance Sheet date, carried out by an independent actuary. The actuarial method used for measuring the liability is the Projected Unit Credit method. c. Other Long-term Employee Benefit Liability for Compensated Absences is provided on the basis of valuation, as at the Balance Sheet date, carried out by an independent actuary. The Actuarial valuation method used for measuring the liability is the Projected Unit Credit method. 3 Termination benefits are recognised as an expense as and when incurred. 4 The Actuarial gains and losses arising during the year are recognised in the Statement of Profit and Loss. h) Research and Development: No intangible asset arising from research (or from the research phase of an internal project) is recognised. Revenue expenditure on research (or on the research phase of an internal project) is recognised as an expense when it is incurred. Development costs of products are charged to the Statement of Profit and Loss unless a product's technological feasibility has been established, in which case such expenditure is capitalised. i) Revenue Recognition Sale of goods Sales are recognised net of returns, trade discounts and rebates when the seller has transferred the property in the goods to the buyer for a consideration. The transfer of property in goods, in most cases, results in or coincides with the transfer of significant risks and rewards of ownership to the buyer. However, there may be situations where transfer of property in goods does not coincide with the transfer of significant risks and rewards of ownership. Revenue in such situations is recognised at the time of transfer of significant risks and rewards of ownership to the buyer. Sales include excise duty but excludes value added tax and central sales tax collected. Rendering of services Revenue from maintenance contracts are recognized pro-rata over the period of contract. Revenue from other service contracts are recognized when services are rendered and related costs are incurred. Other income Interest accrues on the time basis determined by the amount outstanding and the rate applicable. Dividend income is recognised in the Statement of Profit and Loss when the right to receive dividend is established. Other items of income are recognized on accrual basis, j) Borrowing Cost. Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost of that asset upto the date the asset is ready for use. Other borrowing costs are recognised as an expense in the period in which they are incurred, k) Foreign Currency Transactions. Initial recognition A 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. Measurement of foreign currency monetary items at Balance Sheet date Foreign currency monetary items are reported using the closing rate. However, in certain circumstances, where the closing rate may not reflect with reasonable accuracy the amount in reporting currency that is likely to be realised or where the closing rate is unrealistic and it is not possible to effect an exchange of currencies at that rate at the balance sheet date, the relevant monetary item is reported in the reporting currency at the amount which is likely to be realised from, or required to disburse, such item at the balance sheet date. Exchange difference Exchange differences arising on the settlement of monetary items or on reporting an enterprise's monetary items at rates different from those at which they were initially recorded during the period, or reported in brvious financial statements, are recognised as income or as expenses in the period in which they arise (except Net Investment in a Non-integral Foreign Operation. I) Earnings Per Share: Basic earnings per share is calculated by dividing the net profit or loss forthe period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The net profit or loss for the period attributable to equity shareholders is the net profit or loss for the period after deducting brference dividends and any attributable tax thereto for the period. The weighted average number of equity shares is the number of equity shares outstanding at the beginning of the period, adjusted by the number of equity shares bought back or issued during the period multiplied by the time-weighing factor. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.The number of equity shares is the aggregate of the weighted average number of equity shares and the weighted average number of equity shares which would be issued on the conversion of all the dilutive potential equity shares into equity shares. Dilutive potential equity shares are deemed to have been converted into equity shares at the beginning of the period or, if issued later, the date of the issue of the potential equity shares. Potential equity shares are treated as dilutive when, and only when, their conversion to equity shares would decrease net profit per share from continuing ordinary operations, m) Taxation: Tax expense for the period, comprising current tax and deferred tax, is included in the determination of the net profit or loss for the period. Provision is made for current tax based on tax liability computed in accordance with relevant tax rates and tax laws. Provision is made for deferred tax for all the timing differences arising between taxable income and accounting income at currently or substantively enacted tax rates, subject to the consideration of prudence in respect of deferred tax assets. Whenever there exists any unabsorbed debrciation or carry forward of losses under tax laws, deferred tax assets are recognised only to the extent that there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realised and are reviewed for the appropriateness of their respective carrying values at each Balance Sheet Date, n) Provisions, Contingent Liabilities and Contingent Assets 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 a reliable estimate can be made of the amount of the obligation. A contingent liability is a possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the enterprise; or a brsent obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or a reliable estimate of the amount of the obligation cannot be made. A contingent liability is disclosed, unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent Assets are neither recognised nor disclosed in the Financial Statements. o) Impairment of Assets: Impairment is ascertained at each Balance Sheet date in respect of cash generating units. An impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount. Recoverable amount is the higher of an asset's net selling price and its value in use. Value in use is the brsent value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. P) Leases Leases which effectively transfer to the Company substantially all the risks and benefits incidental to the ownership of the leased item are classified as 'Finance Lease'. Assets acquired on Finance Lease which substantially transfer all the risks and rewards of ownership to the Company are capitalized as assets by the Company at the lower of the fair value and the brsent value of the minimum lease payment and a liability is created for an equivalent amount. Amortization of capitalized Leased asset is computed on Straight Line Method over the useful life of the asset. Lease rentals payable is apportioned between the liability and finance charge so as to obtain a constant periodic rate of interest on the outstanding liability for each year. Lease arrangements where the risks and rewards incidental to the ownership of an asset substantially vest with the lessor are recognized as operating leases. Lease rentals under operating leases are recognized in the Statement of Profit and Loss on a straight line basis. q) Cash and Cash Equivalents Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. An investment normally qualifies as a cash equivalent only when it has a short maturity of three months or less from the date of acquisition. r) Cash Flow Statement The cash flow statement reports cash flows during the period classified by operating, investing and financing activities. Cash flows from operating activities are reported using the indirect method, whereby net profit or loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with investing or financing cash flows, s) Post-sales client support and warranties The Company provides its clients with a fixed-period warranty for corrections of errors and support on all its fixed-price, fixed-time frame contracts. Costs associated with such support services are accrued at the time when related revenues are recorded and included in statement of profit and loss.The Company estimates such costs based on historical experience and the estimates are reviewed annually for any material changes in assumptions. (2.31) Land, Building, Plant and Machinery, Office equipment and major portion of otherfixed assets acquired before 4th October 1999 were revalued on the basis of the valuation of these assets carried out by a firm of registered valuer. According to the Valuer's Report these fixed assets were valued on the following basis: Land : Market value basis Building : Present day cost less debrciation Machinery & Other Assets : Market value basis, brsent cost less debrciation The surplus arising thereon as compared to net book value amounting to Rs.468.73 lacs was credited to Revaluation Reserve. (2.2) The Company is engaged in the manufacturing and sale of hydraulic brss machine and related equipments, which as per the Accounting Standard AS-17 is considered the only reportable business segment. The geographical segment is not relevant as exports are insignificant. (2.3) In accordance with the provisions of Accounting Standard on Impairment of Assets (AS 28), the management has made an assessment of assets in use and considering the business prospects related thereto, no provision is considered necessary on account of impairment of Assets. 2.4) Warranty expenses on rectification work are accounted for on natural heads as and when incurred & charged to provision on year end. Warranty expenses include Rs. 4,88,310/- (P.Y. Rs. Nil/-) on account of free supplies of materials under warranty period. (2.5)Previous period figures have been recast/restated wherever necessary. (2.6)The company had issued 4,00,000 Equity Shares of Rs. 10/- each at a brmium of Rs. 60/- per share on brferential basis to Promoters and Non-Promoters aggregating to Rs. 280 lakhs during the year. The funds raised on brferential basis has been utilised for repayment of unsecured loans. As Per our Report of Even Date for M/s A.C. BHUTERIA & CO. Chartered Accountants firm Regn No.:303105E Mohit Bhuteria Partner Membership No.:056832 Place: Kolkata Date: 29/05/2015 Mamta D Jain Company Secretary ACS - 25022 R B Patil CFO PAN:AANPP9374M Anirudh Mohta Managing Director DIN:00065302 M M MohtaChairmanDIN:00068884 Place: Belgaum Date: 29/05/2015 |