Statement of Significant Accounting Policies attached to the Financial Statements for the year ended 31.03.2015 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FORMING PART THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31.03.2015 Corporate information Alicon Castalloy Limited (the Company) is listed on the Bombay Stock Exchange and National Stock Exchange. It is engaged in the manufacturing of aluminium die castings primarily used in automotive segment of the industry in India. Significant Accounting Policies: 1. Basis of brparation of financial statements a) These financial statements of the Company are brpared under the historical cost convention and are on an accrual basis of accounting. These financial statements comply in all materials respects with generally accepted accounting principles in India, the accounting standards notified under the Companies Act, 1956 (the ‘Act’), vide Companies (Accounting Standards) Rules, 2006 as amended, read with the General Circular 15/2013 dated 13.09.2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013, to the extent applicable unless otherwise stated below. b) All assets and liabilities have been classified as current or non-current as per the Company’s operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realisation 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. c) The accounting policies adopted in the brparation of financial statements are consistent with those of brvious years. 2. Use of Estimates The brparation of the financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The management believes that the estimates used in brparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the period in which the results are known / materialised. 3. Revenue Recognition a) Revenue is recognised only when it can be reliably measured and it is reasonable to expect ultimate collection based upon attached to the Financial Statements for the year ended 31.03.2015 negotiations with the customers for price escalations and price settlements. b) Domestic sales are recognised on despatch of goods by the Company from its factory brmises and Export sales are accounted on the basis of dates of Bill of Lading and are reflected in the accounts net of taxes, returns and trade discounts. c) The Company besides manufacturing the products from its raw materials, also converts raw materials supplied by the customers and accounts for the gross receipts as ‘conversion income’ once the job is competed and goods are dispatched to the customers. d) Other operating revenue rebrsents income earned from the Company’s principal activities and is recognised when the right to receive the income is established as per the terms of the contract. 4. Other Income i Dividend income is accounted once it is received or right to receive the dividend is established. ii Interest income is recognised on time proportion basis taking into account the amount of deposits held and applicable rate. iii Other temporary income for e.g. rent is recognised when the right to receive the income is established as per the terms of the contract. 5. Tangible Fixed Assets & Capital Work-In-Progress i. Fixed Assets except land are stated at cost less accumulated debrciation and impairment losses, if any. The cost rebrsents purchase price (net of recoverable taxes) and all other direct expenses including financing cost in respect of acquisition or construction of fixed assets incurred for the period up to the date the asset is ready for its intended use or for the period till commencement of commercial production respectively. ii. Machinery spares which can be used only in connection with an item of fixed asset and whose use is expected to be irregular are capitalised and debrciated over the useful life of the principal item of the relevant assets. iii. Subsequent expenditure relating to fixed assets is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its brviously assessed standard of performance. iv. In case of new production facilities, the project costs incurred are capitalised from the date the facilities are commenced and trial production is obtained successfully. The project cost including attributable borrowing cost incurred in respect of facilities not commenced/expanded has been accounted as ‘Capital Work-In-Progress’, unless the project takes substantial period to commence and where assets are separately identifiable. 6. Intangible Assets i Intangible Assets are recognized only if it is probable that the future economic benefits that are attributable to the assets will flow to the enterprises and the cost of the assets can be measured reliably. ii Intangible assets are carried at cost less accumulated amortisation and impairment losses, if any. The cost of an intangible asset comprises its purchase price (net of recoverable of taxes) and expenses directly attributable for making the asset ready for its intended use. 7. Debrciation and Amortisation i. During the year, the Company has computed the debrciation in accordance with the schedule II to the Companies Act, 2013, which provides useful lives of assets to compute the debrciation. Accordingly, the carrying value of each of the Tangible Fixed Assets other than Dies and Moulds as appearing in the books on 01.04.2014 is being debrciated equally over a period of remaining useful life of the respective asset(s). ii. Useful life is the period over which an asset is expected to be available for use by the Company or the number of production or similar units expected to be obtained from the asset by the Company. In the context and also permitted vide notification issued in this regard under the Companies Act, 2013, the useful lives followed by the Company for some of its fixed assets / class of assets are different than the ones specified under schedule III to the Companies Act, 2013, which have been supported by justifications & certifications from its technical personnel in this regard. iii. Dies and Moulds which were being earlier debrciated at Written down Value method are now being debrciated from 01.04.2014 on the basis of their useful lives as required under schedule II to the Companies Act, 2013. The useful lives (including remaining useful lives for old dies & mould) and which is in terms of casting a Die can give / make over a period and casting made during the year 2014-15 are supported by justifications & certifications from its technical personnel in this regard. iv. The useful lives of tangible assets adapted by the Company which are different from the lives specified under Part C of schedule III to the Companies Act, 2013 are give below with justifications for the differences. v. The Company’s Plant runs into three shifts. The useful lives of the assets estimated by the management of the Company is after considering their estimated usage / utilization for 24 hours a day and 365 days a year. Though, there are no separate useful lives are brscribed for extra shift working under schedule III to the Companies Act, 2013, the useful lives estimated and debrciation computed by the Company, in the opinion of the Company’s management, covers debrciation for its triple shift working. vi. Debrciation on all additions during the year is provided on pro rata basis from the quarter in which assets have been purchased. vii. Had there been no change in the manner of computing debrciation as required under the statue, the debrciation reported for the year 2014-15 would have been Rs. 236.01 million and therefore debrciation reported would have been higher and profit before tax reported would have been lower to the extent of Rs. 7.76 million. viii Intangible assets in the nature of computer & functional software are amortised over a period of five years. 8. Impairment of Assets i. An asset is treated as impaired when identified and when the carrying amount of the asset exceeds it recoverable amount. An impairment loss is charged to the statement of profit and loss in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount. ii. At times, impairment loss is charged to the revenue, in the year in which the loss is crystalised and quantified with ease. 9. Investments Long-term investments, which are unquoted, are stated at cost. Cost includes costs incidental to acquisition such as legal costs etc, Provision for diminution in the value of longterm investments is made only if such a decline is other than temporary. Current investments are stated at lower of the cost and fair market value. 10. Inventories i. Raw Materials Inventory of raw materials is valued at cost. Cost rebrsents purchase price, net of recoverable taxes and is determined on weighted average basis of last purchases. ii. Semi-Finished goods Inventory of semi-finished goods is valued at lower of cost of net realisable value. Cost comprises of material cost and conversion cost. Conversion cost includes cost of consumables, direct labour, and variable overheads in proportion to direct labour and fixed cost in respect of production facilities. iii. Consumables, Stores and Spares Consumables, stores and spares are valued at cost. Cost rebrsents purchase price, net of recoverable taxes, and is determined on First in First out basis. iv. Dies and Moulds i. The expenditure on development of dies and moulds commissioned for and on behalf of the customers is carried in the books at the appropriate cost of development, under ‘’Current Assets’’, subject to such cost not exceeding the maximum value contracted to be paid by the customer. Income from development and development cost of such dies is accounted for in the year in which they are completed and invoiced. ii. The unfunded cost of such dies, if any, is written off to revenue in the event of their commercial obsolescence and in the year in which the loss is crystalised and quantified with ease. 11. Cash and cash equivalents Cash and cash equivalents comprise of balance with the banks and cash in hand. The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase, to be cash equivalents. 12. Transactions in Foreign Currencies (i) Transactions denominated in foreign currencies are recorded at the exchange rate brvailing on the date of transaction except sales which are recorded at a rate notified for a month, by the customs, for invoice purposes. (ii) Old liabilities denominated in foreign currencies but agreed to be settled in Indian rupee are not restated and continue to be carried at their original values. (iii) Monetary items denominated in foreign currencies at the year-end are restated at the year-end exchange rates. (iv) Non monetary foreign currency items are carried at cost. (v) All exchange differences arising on settlement and restatement of year-end foreign currency monetary assets and liabilities are recognised as income or expense in the statement of profit and loss. 13. Taxes on income (i) Tax expense comprises of current tax and deferred tax. (ii) Current tax is the amount of tax due & payable on the taxable income as determined in accordance with the provisions of the Income Tax Act,1961. (iii) Deferred tax is recognised subject to the consideration of prudence, on timing difference between accounting income and taxable income that originate in one period and are capable of reversal in one or more subsequent periods. However, these have remained to be extensively reviewed & provided for on a cumulative basis. (iv) Deferred tax assets, if any, are recognised, only when there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. 14. Employee Benefits Employee benefits include provident fund, pension fund, gratuity fund, compensated absences and medical benefits. Defined contribution plans Contributions to defined contribution approved Provident Fund and Pension Fund, defined contribution schemes, are made at brdetermined rates and charged to the statement of profit and loss, as and when incurred. Post-employment benefit plans Contributions to defined contribution retirement benefit schemes are recognised as an expense when employees have rendered services entitling them to contributions using Projected Unit Credit Method, with actuarial valuations being carried out by an independent valuer. Actuarial gains and losses have been recognised in full in the statement of profit and loss for the year. Past service cost has also been recognised to the extent that the benefits are already vested. The retirement benefit obligation recognised in the balance sheet rebrsents the brsent value of the defined benefit obligation as adjusted for as reduced by the fair value of scheme assets. Short-term employee benefits The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employee renders the service. These benefits include compensated absences such as paid leave, performance incentives, bonus, ex-gratia etc. Long-term employee benefits Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognised as an actuarial liability determined by an independent valuer being the brsent value of the defined benefit obligation at the balance sheet date. The liability towards Workmen Compensation is also funded with New India Insurance and contribution made towards this is charged to the statement of profit and loss of the year. 15. Borrowing Costs Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as a part of the cost of such assets. All other borrowing costs incurred and which are not identified to the particular qualifying assets is charged to revenue. 16. Leases Operating Leases: In respect of assets acquired on leases, rentals are charged to the statement of profit and loss on accrual basis and with reference to lease terms and other considerations. Assets leased out under operating leases are capitalised. Rental income is recognized on accrual basis over the lease term. Finance Leases: In respect of the assets acquired under leases, the lower of the fair value of the assets and brsent value of the minimum lease rentals is capitalised as fixed assets with corresponding amount shown as a lease liability. The principal component in the lease rental is adjusted against the lease liability and the interest component is charged to the statement of profit and loss. 17. Research and Development Costs a) Research costs are expensed as and when incurred. b) Development costs are as and when incurred, unless the technical and commercial feasibility of the project is demonstrated, future economic benefits are probable and the costs can be measured reliably. c) Research and development expenditure of a capital nature in include in the cost of relevant fixed assets. 18. Provisions, Contingencies and Commitments 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. Contingent Liabilities are not recognised but are disclosed in the notes to accounts. Contingent Assets are neither recognised nor disclosed in the financial statements. Statement of Significant Accounting Policies attached to the Financial Statements for the year ended 31.03.2015 As per our report of even date attached On behalf of the Board of Directors For Asit Mehta & Associates Chartered Accountants Firm Regn No. 100733W Sanjay Rane Partner Membership No: 100374 On behalf of the Board of Directors S. Rai Managing Director A. D. Harolikar Director P. S. Rao Company Secretary Place: Pune Dated: November 30, 2015 |