Notes to Financial Statements for the year ended March 31, 2015 1 Corporate Information SEAMEC Limited is a public Company incorporated under the Companies Act, 1956. The Company operates Multi Support Vessels for providing support services including marine, construction and diving services to offshore oilfields. 2 Basis of brparation The financial statements of the Company have been brpared in accordance with the generally accepted accounting principles in India (Indian GAAP). The Company has brpared these financial statements to comply in all material respects with the accounting standards notified under section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014. The financial statements have been brpared on an accrual basis and under the historical cost convention. The accounting policies adopted in the brparation of financial statements are consistent with those of brvious year, except for the change in accounting policy explained below in 3(a). 3 Summary of Significant Accounting Policies Change in Accounting Policy (a) Debrciation on fixed assets Till the year ended 31 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 From the current year, Schedule XIV has been replaced by Schedule II to the Companies Act, 2013.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 debrciation of fixed assets. Unless stated otherwise, the impact mentioned for the current year is likely to hold good for future years also. i. Useful lives / debrciation rates Till the year ended 31 March, 2014, debrciation rates brscribed under Schedule XIV were treated as minimum rates and the Company was not allowed to charge debrciation at lower rates even if such lower rates were justified by the estimated useful life of the asset. Schedule II to the Companies Act, 2013 brscribes useful lives for fixed assets which, in many cases, are different from lives brscribed under the erstwhile Schedule XIV. However, Schedule II allows Companies to use higher/ lower useful lives and residual values if such useful lives and residual values can be technically supported and justification for difference is disclosed in the financial statements. The management believes that debrciation rates currently used fairly reflect its estimate of the useful lives and residual values of fixed assets, and therefore no change in estimates is required pursuant to applicability of Schedule II, though these rates in certain cases are different from lives brscribed under Schedule II. Hence, this change in accounting policy did not have any impact on financial statements of the Company. ii. Debrciation on assets costing less than Rs. 5,000/- Till year ended 31 March 2014, to comply with the requirements of Schedule XIV to the Companies Act, 1956, the Company was charging 100% debrciation on assets costing less than Rs. 5,000/- in the year of purchase. However, Schedule II to the Companies Act, 2013, applicable from the current year, does not recognize such practice. Hence, to comply with the requirement of Schedule II to the Companies Act, 2013, the Company has changed its accounting policy for debrciations of assets costing less than Rs. 5,000/. As per the revised policy, the Company is debrciating such assets over their useful life as assessed by the management. The management has decided to apply the revised accounting policy prospectively from accounting periods commencing on or after 1 April 2014. The change in accounting for debrciation of assets costing less than Rs.5,000/- did not have any material impact on financial statements of the Company for the current year. iii. Component Accounting The Company has adopted Schedule II to the Companies Act, 2013, for debrciation purposes, from 1 April 2014. The Company was brviously not identifying components of fixed assets separately for debrciation purposes; rather, a single useful life / debrciation rate was used to debrciate each item of fixed asset. Now, the Company identifies and determines separate useful life for each major component of the fixed asset, if they have useful life that is materially different from that of the remaining asset. Accordingly, the Company now identifies expenditure incurred on dry-docking as a separate component which is capitalised as the cost of the relevant vessel and is amortized systematically over the interval until the subsequent scheduled dry-docking. Had the Company continued to use the earlier policy of expensing off major inspection / overhaul expenses, its financial statements for the year would have been impacted as below: Debrciation for the current year would have been lower by Rs. 34.55 million. Dry dock expenses for the current year would have been Rs.159.17 million. Profit for the current year would have been lower by Rs.124.62 million. Fixed asset would correspondingly have been lower by Rs.159.17 million. (b) Use of Estimates The brparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from these estimates. (c ) Tangible Fixed Assets Fixed assets are stated at cost, net of accumulated debrciation and impairment losses if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Gains or losses arising from derecognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized. When a major inspection/ overhaul is performed, its cost is recognized in the carrying amount of the related fixed asset as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred. Assets held for disposal are stated at lower of their net book value or net realisable value and are shown separately in financial statements. (d) Debrciation on tangible fixed assets Debrciation is provided using the Straight Line Method as per the useful lives of the assets estimated by the management, The Management estimates the useful life for Fixed Assets as follows. For these class of assets, based on technical evaluation carried out by the management the useful lives as given above best rebrsent the period over which the management expects to use these assets. The useful lives for these assets are different from the useful lives as brscribed under Part C of schedule II of the Companies Act, 2013. Machinery / insurance spares are debrciated over the balance useful life of the respective asset or the mother vessel, whichever is lower. (e) Intangible assets Computer software is capitalised and amortised on a straight-line basis over its useful life, which is estimated as five years. (f) Impairment of tangible and intangible assets The carrying amounts of all assets are reviewed at each balance sheet date, if there is any indication of impairment based on internal / external factors, whether they are recorded in excess of their recoverable amounts, and where carrying values exceed this estimated recoverable amount, assets are written down to their recoverable amount. The recoverable amount is the greater of the asset's net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their brsent value using a br-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. (g) Investments Investments which are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of the investments. (h) Inventories Inventories consist of stores and consumables for use in running of fleets. These are valued at lower of cost and net realizable value. Cost is determined on weighted average basis. Inventory items individually costing less than Rs. 5 thousand are charged to consumption. (i) Cash and cash equivalents Cash and cash equivalents in cash flow statement comprise cash in hand and at bank in current and foreign currency accounts. Term deposits having maturity of three months or less are considered as cash equivalents. (j) Retirement and other employee benefits i. Retirement benefits in the form of Provident Fund are a defined contribution scheme. The Company's contributions paid / payable towards these defined contribution plan is recognised as expense in the Statement of Profit and Loss during the period in which the employee renders the related service. There are no other obligations other than the contribution payable to the respective fund. ii. Contribution to Superannuation Fund, a defined contribution scheme, is made to the Life Insurance Corporation of India, as per the arrangement with them, and the contributions are charged to the Statement of Profit and Loss for the year when the contributions to the respective funds are due. iii. Gratuity, a defined benefit scheme is covered by a Group Gratuity cum Life Assurance Policy with Life Insurance Corporation of India ("LIC"). Annual contribution to the fund is as determined by LIC. The shortfall between the accumulated funds available with LIC and liability as determined on the basis of an actuarial valuation is provided for as at the year-end. The actuarial valuation is done as per projected unit credit method. Actuarial gains/losses are immediately taken to statement of profit and loss as on the balance sheet date and are not deferred. iv. Short term compensated absences are provided for based on estimates. The Company brsents these as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date. v. The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. (k) Foreign Currency 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 the foreign currency at the date of the transaction. ii. Conversion Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. iii. Exchange differences Exchange differences arising on the settlement of 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. iv. Forward Exchange Contracts not intended for trading or speculation purposes The brmium or discount arising at the inception of forward exchange contracts is amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the statement of profit and loss in the period 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 period. (l) Income Tax Tax expense comprises of Current Tax. Current Income tax liability on shipping income is determined based on the net tonnage of each of its vessels, in accordance with section 115VT of the Income Tax Act, 1961. Income other than shipping income is taxed in accordance with the other provisions of the Income Tax Act, 1961. Further, with the applicability of above section, there is no timing difference between taxable and book profit. Therefore, there is no deferred tax. (m) Revenue Recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. i. Charter hire income Charter hire income comprises income from charter hire of multi-support vessels and income from supply of marine and diving crew and services. Charter hire revenues are recognised at contracted rates over the charter period. Revenues from supply of crew and services are classified as other operating revenue and recognised on rendering of the service, based on day rate charges as per the terms of the agreements. The Company collects service tax on behalf of the government and, therefore, it is not an economic benefit flowing to the Company. Hence, it is excluded from revenue. ii. Interest Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable. iii. Claims Claims are accounted when it is reasonably certain that the ultimate collections will be received. iv. Rental income Rental income is accrued on time basis, by reference to agreements entered. (n) Operating lease Leases where the lessor effectively retains substantially all the risks and benefits of the ownership are classified as operating leases. Operating lease payments are recognised as an expense in the Profit and Loss Account on a straight line basis over the lease term. (o) Provisions 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 embodying economic benefits, will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions 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. (p) Segment Reporting i. Primary Business Segments The Company is primarily engaged in a single segment business of providing support services including marine, construction and diving services to offshore oilfields in India and abroad, and accordingly, this is the only primary reportable segment. ii. Secondary Geographical Segments Secondary segmental reporting is based on geographical location of the client. The geographical segment has been disclosed based on revenues within India and revenues outside India. (q) Earnings per Share Basic earnings per share are calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of diluted potential equity shares, if any. The Company does not have any diluted equity shares as at the period end. (r) Contingent liabilities A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a brsent obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements. 4 CAPITAL COMMITMENTS Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. Nil million (Previous year Rs. 38.15 million). 5 TRADE RECEIVABLE (a) The Company withdrew one of its vessels from a charter hire contract due to commercial disputes. The Company has not recognised revenue of Rs. 281.99 million in respect of contract for the period January 2010 to March 2010 on account of uncertainty relating to acceptance and realisability of claims. Further, the Company has also made a provision of Rs. 239.39 million towards outstanding receivables from the same client on grounds of prudence. The Company has been pursuing legal recourse in Mexican Court. (b) The Company had entered into a charter party agreement with a customer, for chartering of a vessel and provision of services. The customer was in turn, retained by other parties. In the normal course of providing services to the customer, there was an incident that resulted in alleged damage to undersea property of a third party, and such damage was sought to be attributed to the Company, although the subsea assets continue to be fully functional. In terms of the charter party contract, the Company is not liable to the customer or third parties, and it has also not received notice of claims, nor does it incur liability under law. As of March 31, 2015, the customer has withheld payment of Rs. 237.21 million due to the Company, of which Rs. 38.35 million is disputed by the customer as being not payable by it, and the balance t198.86 million is withheld until settlement of the matter relating to damage to undersea property. The Company is in discussions with the customer to reconcile the amount disputed by it. In respect of Rs.198.86 million that is withheld, it is in discussions with the customer and other parties involved, to jointly agree on a course of action to undertake repairs, if necessary, and conclude the matter. On the basis of information available with Company, it expects recovery of a substantial portion of the amount and as a matter of prudence, has made a provision of Rs.75.50 million in this regard. 6 The Company made application to the Central Government towards waiver of managerial remuneration in excess of the limits brscribed under Schedule XIII of the Companies Act, 1956 paid to the Managing Director for FY 2011-12 & FY 2013-14 amounting to Rs. 6.31 million and Rs. 9.42 million on 12th August, 2014 and 17th December, 2014 respectively. The Company believes that approval will be obtained in due course and would not have any material impact upon the financial statements. 7 Previous year figures Previous Year figures have been regrouped / reclassified, where necessary, to conform to this year's classification. As per our report of even date For S R B C & CO LLP Chartered Accountants ICAI Firm Registration No: 324982E per Vinayak Pujare Partner Membership No: 101143 For and on behalf of the Board of Directors of SEAMEC Limited Jagdish Persad Suri Director Captain C.J. Rodricks Managing Director Virendra Kumar Gupta President & Chief Financial Officer S N MohantyChief Legal Officer & Company Secretary Place: Mumbai Date: 27 May, 2015 |