NOTES forming part of the Financial Statements for the year ended March 31, 2015 Note 1: Company overview V.S.T. Tillers Tractors Limited (VTTL) was incorporated on December 18, 1967 in Bangalore, India. It was promoted by the VST Group, a well-known business house in South India, in technical collaboration and joint venture with Mitsubishi Heavy Industries and Mitsubishi Corporation, Japan for the manufacture of Power Tillers and Diesel Engines. The plant went into production in the year 1970. In 1984, an additional technical and financial collaboration with Mitsubishi Agricultural Machinery Company Ltd, Japan for the manufacture of 18.5 HP, 4 wheel drive Tractor was entered into. The company was incorporated for the purpose of manufacture and or deal with Tractor, Tillers, Diesel Engines, Harvestors, Reapers, Binders, Transplanters/ planters, Trench Cutters, Front end Loaders and all kinds of allied agricultural, plantation and horticultural machinery including attachments, components, accessories, spares implements and other equipments required for the satisfactory functioning of the agricultural equipments. Note 2: Significant Accounting Policies a) Basis of brparation These 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 have been consistently applied by the Company and are consistent with those used in the brvious year. b) Use of estimates The brparation of financial statements in conformity with generally accepted accounting principles in India 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) Fixed Assets - Tangible Fixed Assets are stated at cost net of cenvat credit less accumulated debrciation. Cost of acquisition is inclusive of freight, duties, levies and all incidental expenditure attributable to bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fixed assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use. Assets under installation or under construction as at the balance sheet date are shown as capital work in progress. d) Debrciation: 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. 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 change 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. Considering the applicability of Schedule II, the management has re-estimated useful lives and residual values of all its fixed assets. The management believes that debrciation rates currently used fairly reflect its estimate of the useful lives and residual values of fixed assets, though these rates in certain cases are different from lives brscribed under Schedule II. Hence, this change in accounting estimate did not have any material impact on financial statements of the company. Leasehold improvements are amortised over shorter of estimated useful lives or Lease period. Debrciation on tangible fixed assets: Debrciation is provided on straight line method at the rates based on the estimated useful lives of the assets or those brscribed under Schedule II of the Companies Act, 2013, whichever is higher. e) Borrowing Costs: Borrowing costs that are attributable to acquisition construction or production of a qualifying asset are capitalized as a part of cost of such asset. All other borrowing costs are recognized as an expense in the year in which they are incurred. f) Impairment of Assets All fixed assets are assessed for any indication of impairment at each balance sheet date based on internal / external factors. On any such indication the impairment loss (being the excess of carrying value over the recoverable value of the asset) is immediately charged to the Statement of Profit and Loss. 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 cashflows are discounted to their brsent value at theweighted average cost of capital. After impairment, debrciation is provided on the revised carrying amount of the asset over its remaining useful life. g) Investments Investments that 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. Long-term investments are stated at cost except where there is a diminution in value other than temporary,in which case the carrying value is reduced to recognize the decline. Current investments are valued at lower of cost and fair value determined on an individual investment basis. h) Inventories Inventories are valued at the lower of cost and net realisable value. Cost of inventories comprises of cost of purchase, cost of conversion and other costs including manufacturing overheads incurred in bringing them to their respective brsent location and condition. Cost of raw materials, consumables, stores and spares, trading and other products are determined on weighted average basis. i) Foreign exchange transaction Foreign currency transactions are recorded in the reporting currency, at the exchange rates brvailing on the date of the transaction. Current assets and current liabilities are translated at the exchange rate brvailing on the balance sheet date and the resultant gain / loss is recognised in the financial statements. 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; and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined. In case of Forward Exchange Contracts or any financial instruments i.e. in substance a forward exchange contract to hedge the foreign currency risk which is on account of firm commitment and/ or is a highly probable forecast transaction the brmium or discount arising at the inception of the contract is amortized as expense or income over the life of the contract. j) Revenue recognition Revenue is recognized only when it can be reliably measured and it is reasonable to expect ultimate collection. Revenue from operations includes sale of goods and services is net of Excise Duty, Service tax, VAT/ CST and trade discounts. Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. Dividend is recognised when the shareholders' right to receive payment is established by the balance sheet date. k) Retirement benefits to employees i) Defined Contribution Plans Contributions paid/payable to defined contribution plans comprising of provident fund and pension fund, employees state insurance etc., are charged to the Statement of profit and loss on accrual basis. The Company has no obligation, other than the contribution payable to the funds. ii) Defined Benefit Plan Gratuity for employees is generally covered under a scheme of Life Insurance Corporation of India, except the employees in Mysore Unit and contributions in respect of such scheme are recognised in the Statement of Profit and Loss. The liability as at the Balance Sheet date is provided for based on the actuarial valuation,based on Projected Unit Credit Method at the balance sheet date, carried out by an independent actuary. Actuarial Gains and Losses comprise experience adjustment sand the effect of changes in the actuarial assumptions and are recognised immediately in the Statement of Profit and Loss as income or expense. iii) Other Long term employee benefits Other Long term employee benefits comprise of 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 asa liability at the brsent value of the defined benefit obligation at the balance sheet date based on actuarial valuation carried out at each balance sheet date. Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss as income or expense. iv) Short term employee benefits Short term employee benefits, including accumulated compensated absences as at the Balance Sheet date, are recognized as an expense as per Company's schemes based on the expected obligation on an undiscounted basis. l) Research and Development Revenue expenditure on Research and Development are included under respective heads of expenditure. Capital expenditure on Research and Development are treated in the same manner as expenditure on other fixed assets. m) Taxes on Income Provision for income tax comprises current taxes and deferred taxes. Current tax is determined on the amount of tax payable in respect of taxable income for the year. Deferred tax is recognized on timing differences being the differences between taxable income and accounting income that originate in one year and are capable of reversal in one or more subsequent years. Deferred tax assets and liabilities are measured on the timing differences applying the tax rate and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent that there is reasonable/virtual certainty supported by convincing evidence that sufficient future tax income will be available against which such deferred tax assets can be realized. n) Provisions A provision is recognized when an enterprise hasa brsent obligation as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions,other than employee defined benefits, are not discounted to their brsent value and are determined based on management 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 management estimates. o) Leases Assets acquired under Leases, where the Company has substantially all the risks and rewards of ownership, are classified as finance leases. Such leases are capitalised at the inception of the lease at lower of the fair value or the brsent value of the minimum lease payments and a liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost, so as to obtain a constant periodic rate of interest on the outstanding liability for each period. Assets acquired as leases, where a significant portion of the risk and rewards of ownership are retained by the lessor, are classified as operating leases. Lease rentals are charged to the Statement of Profit and Loss on accrual basis as per terms of the lease. p) Warranty The company periodically assesses and provides for the estimated liability on warranty given on sale of its products based on past experience of claims. q) Segment Reporting The Company has only one reportable business segment, which is manufacturing and trading of agriculture machinery and operates in a single business segment. Accordingly, the amounts appearing in the financial statements relate to the company's single business segment. r) Earnings per share The basic earnings per share are computed by dividing the net profit/(loss) after tax for the year by the weighted average number of equity shares outstanding during the year. Diluted earnings per share, if any are computed using the weighted average number of equity shares and dilutive potential equity share outstanding during the year. 2 Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act): Based on the information available with the company, there are no Micro, Small and Medium enterprises, to which the company owes dues, which are outstanding for more than 45 days as at March 31, 2015. Further, no interest during the year has been paid or payable under the terms of the MSMED Act, 2006. 3 These financial statements have been brpared in the format brscribed by the Revised Schedule III to the Companies Act, 2013. Previous year figures have been recast/restated to confirm to the classification of the current year. As per our report of even date For Brahmayya & Co., Chartered Accountants ICAI Firm Registration No: 000515S G. Srinivas Partner Membership No: 086761 For and on behalf of the Board of Directors V.P Mahendra Vice Chairman, Managing Director & CEO V.Ramachandran Director R.Thiyagarajan Executive Vice President & Chief Financial Officer Chinmaya Khatua Company Secretary Place : Bengaluru Date : May 29, 2015 |