NOTES TO FINANCIAL STATEMENTS 1. Background Eastern Treads Limited was incorporated on 02/07/1993. Its shares are listed in Bombay Stock Exchange. The company is primarily engaged in the business of manufacturing and dealing of tread rubber and rubber based adhesives and retreading services. 2. Accounting Policies Significant Accounting Policies The significant Accounting Policies followed by the company are as stated below: General The financial statements are brpared under historical cost convention and in accordance with the applicable Accounting Standards in India. Use of Estimates The brparation of financial statements in conformity with the Generally Accepted Accounting Principle (GAAP) requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities on the date of the financial statements and reported amount of income and expenses during the period. Actual figures may differ from these estimates. Any revision to accounting estimates is recognised prospectively in current and future periods. Fixed Assets Fixed Assets are stated at historical cost less accumulated debrciation. Advances paid towards acquisition of fixed assets and contractors are disclosed under ‘Capital Advances’ Debrciation Debrciation on tangible assets has been provided under Straight Line Method over the useful life of the assets estimated by the management which is in line with the terms brscribed in Schedule II to The Companies Act, 2013. Debrciation for assets purchased/sold during the period is proportionately charged. The useful life of plant & equipment given under lease is taken as 3 years and 5 years based on the lease agreements. The residual value of the same has been considered as the amount guaranteed by the lessees as per the lease agreements at the end of the lease period. Hence the useful lives and residual values for these assets are different from the useful lives/residual value as brscribed under Part C of Schedule II of the Companies Act 2013. Amortisation of Intangible Assets Intangible assets, being Computer Software are written off over a period of five years under Straight Line Method. Revenue Recognition Revenue from sale of goods is recognized at the point of dispatch to the customers. Revenue from job work is recognized at the completion of the agreed services. Revenue from retreading services is recognized at the completion of the agreed services. Interest income is recognized on a time proportion basis taking into account the amount outstanding and the interest rate applicable. Inventories and Tools & Spares Raw materials are valued at cost on FIFO basis. Finished Goods are valued at lower of cost or net realizable value. Cost includes indirect costs. 25% of Tools & Spares are written off to revenue. Employee Benefits (a) Short term employee benefits such as salaries, wages, bonus and incentives which fall due within 12 months of the period in which the employee renders the related services which entitles him to avail such benefits are recognised on an undiscounted basis and charged to the profit and loss account. (b) Defined Contribution Plans - Contributions made to the Recognised Provident Fund & Employee State Insurance Corporation are expensed to the Profit & Loss Account. The Company’s obligation is limited to the amount contributed by it. (c) Defined Benefit Plans - Gratuity liability is a defined benefit obligation and provided for on the basis of an actuarial valuation on Projected Unit Credit Method calculated at the end of each financial year. Actuarial gains/losses are immediately taken to Profit and Loss Account. The Company is a member of Group Gratuity Scheme administered by LIC of India. Foreign Exchange Transactions Revenue denominated in foreign currencies is translated into relevant functional currencies using the exchange rate in effect on the date of transaction. Transaction gain or loss realized upon the settlement of foreign currency transactions are included in determining net profit for the period in which transaction is settled. The forward exchange contracts taken to hedge existing assets/liabilities are translated at the closing exchange rates and resultant exchange differences are recognized in the same manner as those on the underlying foreign currency asset/liability. Borrowing Costs Borrowing costs are expensed in the absence of outlay on qualifying assets. Segment Reporting In the absence of more than one distinguishable business/ geographical segment, segment information is not given. Taxes on Income Income tax expense comprises current tax and deferred tax charge or credit. The current tax is determined as the amount of tax payable in respect of the estimated taxable income of the period. The deferred tax charge or credit is recognized using brvailing enacted or substantively enacted tax rates. Where there are unabsorbed debrciation or carry forward losses, deferred tax asset are recognised only if there is virtual certainty of realisation of such assets. Other deferred tax assets are recognised only to the extent there is reasonable certainty of realisation in future. Deferred tax assets are reviewed at each Balance Sheet date based on the developments during the period. 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 period. In the year in which the MAT credit becomes eligible to be recognised as an asset in accordance with the recommendations contained in the 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. Impairment of Assets The carrying amount of assets is reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors. An impairment loss will be recognised wherever the carrying amount of an asset exceeds its estimated recoverable amount. The recoverable amount is greater of the assets net selling price and value in use. In assessing the value in use, the estimated future cash flows are discounted to the brsent value using the weighted average cost of capital. Provisions, Contingent Liabilities and Contingent Assets. The company creates a provision when there is a brsent obligation as a result of past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of obligation. A disclosure for a contingent liability is made when there is a possible obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a brsent obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent assets are neither recognised nor disclosed in the financial statements 1. The management has initiated the1 process of identifying enterprises which have provided goods and services to the company and which qualify under the definition of micro and small enterprises, as defined under Micro, Small and Medium Enterprises Development Act, 2006. The company has not received any intimation from its vendors regarding their status under Micro, Small and Medium Enterprises Development Act, 2006. Further in the view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act is not expected to be material. 2. Previous year figures have been regrouped /reclassified wherever necessary to suit the current year’s layout. As per our report of even date attached For JVR & Associates Chartered Accountants Navas M. Meeran : Chairman Rajesh S. : Chief Financial Officer Baiju T. : Company Secretary Jomon K. George: Partner Place: Kochi Date : 13/04/2016 |