Notes to financial statements for the year ended March 31, 2015 NOTE 1: CORPORATE INFORMATION Sterling Tools Limited (the company) is a public limited company incorporated in the year 1979 under the provisions of the Companies Act, 1956. Its shares are listed on Bombay Stock Exchange and National Stock Exchange in India. The Company is engaged in the manufacturing and marketing of high tensile cold forged fasteners. It is one of the progressive Original Equipment Manufacturer (OEM) suppliers in India with a client base that spans automotive companies in India, Europe and USA. NOTE 2: SIGNIFICANT ACCOUNTING POLICIES a. Basis of Accounting The financial statements have been brpared in accordance with applicable accounting standards and relevant brsentation requirements of the Companies Act, 2013 and are based on the historical cost convention. The financial statements have been brpared on accrual basis and under the historical cost convention. b. Uses of Estimates The brparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management's best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. c. Fixed Assets and Debrciation Fixed assets are stated at cost of acquisition inclusive of freight, duties & taxes and incidental expenses related to acquisition up to the date of installation. Cost of Fixed assets are further adjusted by the amount of Modvat/Cenvat credit availed and Vat credit wherever applicable. Interest and finance charges incurred are allocated to the respective fixed assets on installation. Fixed assets under construction, and cost of assets not put to use before year end are shown as capital work in progress while advance paid towards acquisition of fixed assets are shown as capital advance under the head long term loans & Advances. Software which are not an integral part of related hardware, is treated as intangible asset and amortized over a period of three years or its licensed period, whichever is less. Leasehold Improvements are amortized over period of lease. Debrciation is provided as per useful life specified in schedule II to the Companies Act, 2013. Debrciation is calculated on a pro-rata basis from the date of additions. On assets sold, discarded, etc. during the year, debrciation is provided up to the date of sale/discard. d. Revenue recognition Domestic and export sales are recognised on transfer of significant risks and rewards to the customer, which takes place on dispatch of goods from the factory/ storage area and port respectively. The sales are accounted for net of trade discount, sales tax; sale returns but includes excise duty and price variations. Income from Export Incentives viz. Duty Drawback and Focus Product Scheme is recognized at year end on accrual basis. Interest Income is recognized on time proportion basis taking into account the amount outstanding and the applicable interest rate. Dividend Income is recognized when the company's right to receive dividend is established by the reporting date. e. Inventories Inventories are valued at the lower of cost and net realizable value. The cost of raw material is determined on the basis of First-in-First-Out (FIFO) method. The cost of manufactured finished goods and work-in-progress includes raw material value determined on the basis of First-in-First-Out (FIFO) method and includes conversion and other costs incurred in bringing the inventories to their brsent location and condition. Finished manufactured goods also include excise duty. Provision is made for cost of obsolescence and other anticipated losses wherever considered necessary. Stores & Consumables, Packing Materials and Tools & Dies are valued at lower of net realizable value or cost on the basis of Weighted Average Method. Stock in Transit is valued at lower of cost and net realizable value. Scrap is valued at estimated net realizable value. f. Employee's Benefits Expenses and Liabilities in respect of employee benefits are recorded in accordance with Revised Accounting Standard 15 - Employees Benefits (Revised 2005) issued by the Company (Accounting Standard) Rules, 2006. Short Term Employee Benefits: All employees' benefits falling due wholly within twelve months of rendering the services are classified as short term employee benefits. The benefits like salaries, wages, short term compensated absences etc. and the expected cost of bonus, ex-gratia are recognized in the period in which the employee renders the related services at undiscounted amount. Post Employment Benefit Plans: Payments to Defined Contribution Retirements Benefit Schemes are charged as an expense as they fall due. For Defined Benefit Schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognized in full in the statement profit and loss for the period in which they occur. Past service cost is recognized immediately to the extent that the benefits are already vested, and otherwise is amortized on a straight line basis over the average period until the benefit become vested. The retirement benefit obligation recognized in the balance sheet rebrsents the brsent value of the defined benefit obligation as adjusted for unrecognized past service cost and as reduced by the fair value of scheme assets. Terminal Benefits are recognized as an expense immediately. g. Borrowing Cost Borrowing costs that are attributable to the acquisition for construction of qualifying asset are capitalized as part of the cost of such asset. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue. Borrowing Cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings to the extent they are regarded as an adjustment to the interest cost. h. Foreign Currency Transactions Initial Recognition: The transactions in foreign currency are initially accounted for at the rate brvailing as on the transaction date. Conversion: The monetary items denominated in the foreign currency are stated at the exchange rate brvailing at the year end and the overall net gain/ (loss) is adjusted to the statement of profit & loss. 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 transaction. Exchange Difference: The Exchange difference arising on the settlement of monetary items or reporting these items at rates different from rates at which these were initially recorded/ reported in brvious financial statements are recognized as income/expense in the period in which they arise. Forward contracts, other than those entered into hedge currency risk on unexpected firm commitments or highly probable forecast transactions, are treated as foreign currency transactions and accounted accordingly as per Accounting Standard (AS) 11 ["The Effects of Changes in Foreign Exchange Rates"}. i. Investments Investments, which are readily realizable and intended to be held for more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as Non-Current Investments. Current Investments are carried in the financial statements at lower of cost and fair value. Non-Current Investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of the Investments. j. Taxes on Income Tax expense comprises current and deffered tax Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961 enacted in India and tax laws brvailing in the respective tax jurisdictions where the company operates. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss. Deferred income taxes (asset/ liability) reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences for the earlier years. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred income tax relating to items recognized directly in equity is recognized in equity and not in the statement of profit and loss. Deferred taxassets and deferred tax liabilities are offset, if a legally enforceable right exists to set-off current tax assets against current tax liabilities and the deferred tax assets and deferred taxes relate to the same taxable entity and the same taxation authority. k. 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 and the reduction is treated as an impairment loss and is recognized in the statement of profit and loss . If at the balance sheet date there is an indication that a brviously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to the maximum of debrciated historical cost and is accordingly reversed in the statement of profit and loss. l. Provisions, Contingent Liabilities and Contingent Assets Provisions are recognized in the accounts in respect of brsent probable obligations arising as a result of past events and it is probable that there will be an outflow of resources, the amount of which can be reliably estimated. Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company. Contingent Assets are neither recognized nor disclosed in the financial statements. m. Leases Lease arrangements where the risks and rewards incident to the ownership of assets substantially vests with the lessor, are recognized as operating leases. Lease rent under operating leases are recognized under statment of profit and loss on a straight line basis over the lease term. n. Earning per share Basic earning per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the year. For the purpose of calculating Diluted Earning per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares. o. Cash Flow Statement Cash flows are reported using the indirect method as specified in Accounting Standard (AS-3) "Cash Flow Statement". p. Segmental Reporting Primary Segment: The Company is engaged in manufacture of high tensile fasteners. The entire operations are governed by same set of risk and returns; hence, the same has been considered rebrsenting a single primary segment. The said treatment is in accordance with the guiding principles enunciated in the Accounting Standard-17 on Segment Reporting issued by Company (Accounting Standard) Rules, 2006. Geographical Segment: The Company sells its products mostly within India with insignificant export income and does not have any operations in economic environments with different risks and returns, hence, its considered operating in single geographical segment. Note 1: In view of the management, the current assets, loans and advances have a value on realization in the ordinary course of business at least equal to the amount at which they are stated in the balance sheet as at 31.03.2015 Note 2.Since the Company's business activity falls within a single primary business segment and also there is no significant reportable geographical segment, hence no disclosure have been made as specified in Accounting Standard (AS-17) "Segment Reporting" Note 3.The closing balances of debtors, creditors and loans and advances are subject to confirmation. Note 4.The figures are rounded off to nearest rupees. Note 5.Previous year figures have been regrouped/ rearranged wherever considered necessary. For & on behalf of Board of Directors of Sterling Tools limited (M. L. Aggarwal) Chairman DIN No.00027380 (Anil Aggarwal) Managing Director DIN No.00027214 (Atul Aggarwal) Chief Financial Officer PAN No.: AAUPA6243R (Vaishali Singh) Company Secretary PAN No.: AVIPS7863A Place: New Delhi Date: 25 MAY 2015 |