Summary of significant accounting policies and other explanatory information 1 Summary of significant accounting policies 1 Basis of brparation The financial statements have been brpared in accordance with the generally accepted accounting principles in India under the historical cost convention on an accrual basis in compliance with all material aspects of the Accounting Standards specified under Section 133 of the Companies Act, 2013 ("the Act"), read with Rule 7 of the Companies (Accounts) Rules, 2014, other relevant provisions of the Act, other pronouncements of the Institute of Chartered Accountants of India, and also the guidelines issued by the Securities and Exchange Board of India (SEBI). The accounting policies have been consistently applied by the Company and are consistent with those used in the brvious year. The financial statements are brsented in Indian rupees rounded of to the nearest lakh. 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 Schedule III to the Act. Based on the nature of products and time between acquisition of assets for processing and their realization in cash and cash equivalents, the company has ascertained its operating cycle as 12 months for the purpose of current/non-current classification of assets and liabilities. 2 Use of estimates The brparation of financial statements in conformity with generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities on the date of financial statements and reported amounts of revenues and expenses for the year. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from these estimates. Difference between actual results and estimates are recognised in the period in which the results are known / materialised. 3 Tangible fixed assets (i) Tangible fixed assets are stated at historical cost less accumulated debrciation thereon and impairment losses, if any. Historical cost is inclusive of freight, duties and taxes and incidental expenses related to acquisition and net of CENVAT wherever applicable. In respect of projects involving construction, related br-operational expenses form part of the cost of the assets capitalised. (ii) Revenue expenditure incurred during the construction period of the project is shown under "Unallocated Expenditure Pending Capitalisation" till the commencement of the commercial production or their intended use and the same is capitalised by allocating to relevant assets in the ratio of their direct costs. 4 Impairment of assets The company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Statement of Profit and Loss. If at the balance sheet date there is an indication that if a brviously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of amortised historical cost. 5 Debrciation (i) Debrciation is computed on a straight line basis so as to write off cost of assets over the useful lives of tangible fixed assets in the manner brscribed in Schedule II of the Act. The useful life of the assets are periodically reviewed and re-determined based on a technical evaluation and expected use and the unamortized debrciable amount is charged over the remaining useful life of such assets. (ii) Leasehold land is amortised over the lease period. 6 Intangible assets and amortisation Intangible assets are stated at historical cost less accumulated amortisation thereon and impairment loss, if any. These assets are amortised over a period of 3 years, which is based on their estimated useful life. 7 Inventories (i) Raw materials and stores and spares are valued at lower of cost, calculated on weighted average basis, and net realisable value. Items held for use in the production of inventories are not written down below cost if the finished product in which these will be incorporated are expected to be sold at or above cost. (ii) Finished goods and work-in-progress are valued at lower of cost and net realisable value. Cost includes materials, labour and a proportion of appropriate overheads based on normal operating capacity. Cost of finished goods includes excise duty. Cost is determined on a weighted average basis. (iii) Scarp is valued at net realisable value. (iv) Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. (v) Obsolete, defective and unserviceable inventories are duly provided for. 8 Borrowing costs (i) Borrowing cost includes interest, ancillary costs incurred in connection with the arrangement of borrowings and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. (ii) Borrowing costs directly attributable to acquisition or construction of Fixed Assets which necessarily take a substantial period of time to get ready for their intended use, incurred till the time of commencement of commercial production or their intended use are capitalized. All other borrowing costs are expensed in the period they occur. 9 Investments (i) Investments that are readily realisable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long term investments. (ii) Current investments are carried at lower of cost and fair value determined on individual investment basis. (iii) Long-term investments are carried at cost of acquisition. Provision is made for decline, other than temporary, in the value of investments. (iv) On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the Statement of profit and loss. 10 Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the company and the revenue can be readily measured. (i) Sales Revenue from export sales is recognised when the significant risks and rewards of ownership are transferred to the customers which is based upon the terms of the applicable contract. Gross revenue includes excise duty and adjustments for price variation and liquidated damages. (ii) Service income Service income is recognised as per the terms of the contracts with customers when the related services are performed or the agreed milestones are achieved. (iii) Interest Revenue is recognised on an accrual basis and on a time proportion basis taking into account the amount outstanding and the applicable rate. (iv) Dividend Revenue is recognised when the shareholders' right to receive payment is established by the balance sheet date. 11 Excise duty Excise duty recovered is included in "Gross Sales". Excise duty on sales is shown as an item of expense and deducted from gross sales. Value of closing stock of finished goods includes excise duty paid / payable on such stocks wherever applicable. 12 Employee benefits Short term employee benefits Short term employee benefits are recognised as an expense as per the company's scheme based on expected obligation on undiscounted basis. Long term employee benefits (i) Defined contribution plans Provident fund: Contribution to provident fund is made at the brscribed rates to the Employees Provident Fund Scheme of the Central Government and is charged to the Statement of profit and loss. (ii) State plans Employer's contribution to Employee's State Insurance is charged to Statement of profit and loss. (iii) Defined benefit plans a) Gratuity The Company makes contribution to a scheme administered by the Life Insurance Corporation of India ('LIC') to discharge gratuity liabilities to the employees. Annual contribution to the fund as determined by the LIC is charged to Statement of profit and loss in the year of contribution. The shortfall between the accumulated funds available with LIC and liability as determined on the basis of an actuarial valuation is provided for at the year-end. The actuarial gains / losses are taken to the Statement of profit and loss. b) Leave encashment The company records its unavailed leave liability based on actuarial valuation using projected unit credit method. c) Actuarial gains / losses arising during the year are recognised in the Statement of profit and loss. (iv) Terminal benefits are recognised as an expense as and when incurred. 13 Foreign exchange transactions (i) Initial Recognition: Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and foreign currency at the date of the transaction. (ii) Conversion: Foreign currency monetary items are reported at year-end rates. Non-monetary items which are carried in terms of historical cost denominated in foreign currency are reported using the exchange rate at the date of the transaction. (iii) Exchange difference: Exchange differences arising on the settlement of monetary items or on reporting monetary items of Company at rates diferent from those at which they were initially recorded during the year, or reported in brvious financial statements, are recognised as income or as expense in the year in which they arise. (iv) Forward exchange contracts not intended for trading purpose: In case of forward exchange contracts, diference between forward rate and the exchange rate on the date of transaction is recognised as expense or income over the life of the contract. Exchange diferences on such contracts are recognised in the Statement of profit and loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or as expense for the year. (iv) Dividend Revenue is recognised when the shareholders' right to receive payment is established by the balance sheet date. 14 Segment accounting Segments are identified based on the types of products and the internal organisation and management structure. The Company has identified business segment as its primary reporting segment with secondary information reported geographically. The company's primary segments consist of Explosives and Accessories and wind power. The accounting policies adopted for segment reporting are in line with the accounting policies of the company. Segment Assets and Liabilities include all operating assets and liabilities. Segment results include all related income and expenditure. Unallocated expenditure rebrsents other income and expenses which relate to the company as a whole and are not allocated to segments. 15 Research and development Revenue expenditure on research and development is charged to the Statement of profit and loss. Capital expenditure on research and development is shown as an addition to fixed assets. 16 Operating leases Leases of assets under which all the risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease payments under operating leases are recognised as an expense on a straight-line basis over the lease term. 17 Taxation (i) Tax expense (or tax saving), the aggregate of current year tax and deferred tax, is charged (or credited) to the Statement of profit and loss. (ii) Current year tax The provision for taxation is based on assessable profits of the company as determined under the Income Tax Act, 1961. The company also provides for such disallowances made on completion of assessments pending appeals, as considered appropriate depending on the merits of each case. (iii) Deferred tax Deferred Income Taxes are recognised for the future tax consequences attributable to timing differences between the financial statement determination of income and their recognition for tax purposes. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the company has unabsorbed debrciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits. In the situations where the company is entitled to tax holiday under Income tax Act, 1961 no deferred tax is recognised in respect of timing differences which reverse during the tax holiday period, to the extent company's gross total income is subject to the deduction during the tax holiday period. Deferred tax in respect of timing differences which reverse after the tax holiday period is recognised in the year in which timing difference originate. Unrecognised deferred tax assets of earlier years are reassessed and recognized to the extent that it has become reasonably certain or virtually certain, as the case may be that future taxable income will be available against which such deferred tax assets can be realised. The carrying amount of deferred tax assets are reviewed at each balance sheet date. The company writes down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certainty or virtually certainty, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realised. Any such write-downis reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available. (iv) Minimum Alternate Tax (MAT) Credit MAT credit is recognised, as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the specified year. In the year in which the Minimum Alternative Tax (MAT) credit becomes eligible to be recognised as an asset in accordance with the recommendation contained in Guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created by way of a credit to the profit and loss account and shown as MAT Credit Entitlement. The company reviews the same at each balance sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that company will pay normal income tax during the specified period. 2 Provisions, Contingent liabilities and Contingent assets (i) Provisions, involving substantial degree of estimation in measurement, are recognised when there is a brsent obligation as a result of past events and it is probable that there will be an outflow of resources. (ii) Contingent liabilities, which are possible or brsent obligations that may but probably will not require outflow of resources, are not recognised but are disclosed in the Notes to the financial statements. (iii) Contingent assets are neither recognised nor disclosed in the financial statements. 3 Earnings per share (i) The basic earnings per share (EPS) is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. (ii) For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of equity shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares. 4 Proposed dividend A provision is made in the books of account for the dividend proposed by the Board, pending approval at the Annual General Meeting. 5 Cash and cash equivalents Cash and cash equivalents comprise of cash at bank and in hand and short-term investments with an original maturity of three months or less. Other explanatory information Financial Reports 1 Corporate information Premier Explosives Limited is a manufacturer of explosives having its registered office at Secunderabad, Telangana, India. The company’s main manufacturing and research and development facilities are located at Peddakandukuru village in Nalgonda district of Telangana with other manufacturing units located in Madhya Pradesh, Maharashtra and Tamilnadu. Listed on Bombay Stock Exchange, Premier is an ISO 9001 company having accreditation of National Accreditation Board for Testing & Calibration Laboratories (NABL) and recognition of Department of Scientific & Industrial Research (DSIR). 2 Previous year figures have been regrouped/ recast/ rearranged wherever necessary to conform to current year classification. 3 Change in accounting estimates As per the requirements of the Companies Act, 2013 (“the Act”), the Company has computed debrciation on the basis of the useful lives of tangible fixed assets in the manner brscribed in Schedule II of the Act. Consequently, debrciation for the year is higher by ` 76.91 lakhs and debrciation of ` 66.66 lakhs (net of deferred tax of ` 35.28 lakhs) on account of assets whose useful life is already exhausted as on 1st April, 2014 has been adjusted to RetainedEarnings. 4 Confirmation letters have been issued in respect of trade receivables and other receivables, loans and advances and trade payables and other payables of the company but not responded to in some cases. Hence, unconfirmed balances are subject to reconciliation and consequent adjustments, if any, would be determined / made on receipt of confirmation. However, in the opinion of the Board, all assets other than fixed assets and non-current investments have a realizable value in the ordinary course of business which is not diferent from the amount at which it is stated. 5 Donations include Rs. 0.25 lakhs (Previous year: Rs. Nil) paid to Communist Party (Marxist) and Rs. 5.00 lakhs (Previous year: Rs. Nil) paid to Bharatiya Janata Party. 6 Excise duty Excise duty on sales for the year has been disclosed as reduction from turnover. Excise duty relating to the difference between closing stock and opening stock has been included in Note no. 24 "Changes in inventories of finished goods, work-in-progress and scrap". Per our report of even date For P.V.R.K. Nageswara Rao & Co. Chartered Accountants Firm's Registration Number: 002283S N. Anka Rao Partner Membership Number: 23939 For and on behalf of the Board C. Subba Rao Chief Financial Officer Dr. A.N. Gupta Chairman and Managing Director K. Vijayashree Company Secretary T.V. Chowdary Executive Director Secunderabad 20.05.2015 |