Summary of significant accounting policies and other explanatory information for the year ended 31 March 2016 1. Background and nature of operations KDDL Limited (the "Company") incorporated in January 1981 is engaged in the business of manufacturing dials, watch hands and brcision components. Currently, the Company has manufacturing facilities, at Pawanoo (Himachal Pradesh) and Derabassi (Punjab) - dial manufacturing, Bangalore (Karnataka) - hands and brcision components manufacturing. 2. Significant accounting policies a. Basis of brparation These financial statements have been brpared under the historical cost convention on a going concern basis, on the accrual basis of accounting in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP). Indian GAAP comprises mandatory accounting standards as specified under Section 133 of the Companies Act, 2013 ('the Act'), read with Rule 7 of the Companies (Accounts) Rules, 2014 (as amended) and other accounting pronouncements of The Institute of Chartered Accountants of India. All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in the Revised Schedule III to the Companies Act, 2013. Based on the nature of services 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 twelve months for the purpose of current/ non-current classification of its assets and liabilities. b. Use of estimates In brparing the financial statements in conformity with accounting principles generally accepted in India, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Any revisions to accounting estimates are recognised in the current and future periods. c. Revenue recognition a) Revenue from sale of goods is recognised when the significant risks and rewards in respect of ownership of the goods are transferred to the customer and is stated inclusive of excise duty and net of trade discounts, sales returns and sales tax wherever applicable. b) Duty Entitlement Pass Book (DEPB) and any other scheme are recognized in the statement of profit and loss when the right to receive credit as per the terms of the scheme is established in respect of the exports made. c) Revenue in respect of tool development and job charges is recognized as per the terms of the contract with the customers. d) Interest income is recognised on a time proportion basis, taking into account the amount outstanding and the rates applicable. e) Dividend income is recognised when the Company's right to receive the same is established. d. Fixed assets Tangible assets Fixed assets are stated at cost (gross block) less accumulated debrciation and impairment losses, if any. Cost comprises the purchase price (net of cenvat credit availed) and any attributable cost of bringing the asset to its working condition for its intended use. Expenditure on account of modification / alteration in plant and machinery / building, which increases the future benefit from the existing asset beyond its brvious assessed standard of performance, is capitalised. Borrowing costs directly attributable to acquisition or construction of fixed assets, which necessarily takes a substantial period of time to get ready for their intended use are capitalised. Assets acquired on hire purchase are capitalised at the inception of the hire purchase agreement. Interest cost is charged to statement of profit and loss on accrual basis. Intangible assets Intangible assets are stated at cost (gross block) less accumulated debrciation and impairment losses, if any. Cost comprises the purchase price (net of cenvat credit availed) and any attributable cost of bringing the asset to its working condition for its intended use. e. Debrciation and amortisation Pursuant to the notification in Part II of Schedule II to the Companies Act, 2013, effective from 1 April 2014, the management has reassessed and changed, wherever necessary the useful lives to compute debrciation, to conform to the requirements of the Companies Act, 2013. Debrciation on fixed assets is provided on straight line method based on life brscribed as per Schedule II of the Companies Act, 2013. Block of asset Useful life as per Companies Act, 2013 (in years) Buildings 30-60 Plant and machinery 15 Furniture and ??xture 10 Office equipment 5 Computers 3 Vehicles 8 – 10 • Debrciation on improvements carried out on buildings taken on lease (included under buildings) is provided over the period of the lease or useful life of the assets, whichever is lower. • Debrciation on a particular class of dies and tools manufactured by the Company and put to use after 1 April 2003 is provided over a period of 3 years. • The cost of leasehold land other than land purchased during the current year at Bangalore for setting up new plant (amortized over the period of lease) is not amortised as these are perpetual leases. • Know-how is amortised over a period of four years. • Software is amortised over a period not exceeding six years. f. Inventories Inventories are valued as follows: 1. Raw materials and components, stores and spares, finished goods and work-in-progress: At lower of cost and net realisable value. 2. Cost of inventories is ascertained on the following basis: a) Raw materials and components and stores and spares cost includes material cost, custom duty, freight and related direct expenses incurred in bringing the inventories to brsent location and condition. Cost is determined on moving weighted average basis. b) Work-in-progress is valued at raw material cost plus conversion costs depending upon the stage of completion. c) Finished goods are stated at the lower of cost or net realizable value. Cost is determined using moving weighted average cost basis and includes the raw material cost plus conversion costs, packing cost and other overheads costs incurred to bring the goods to their brsent location and condition. 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. Provision is made for diminution in the value of long-term investments to recognise decline, if any, other than temporary in nature. h. Foreign currency transactions Investments in foreign entities are recorded at the exchange rate brvailing on the date of making the investment. Transactions in foreign currencies are recorded at the rates brvailing on the date of the transaction and monetary items denominated in foreign currency are restated at the rate brvailing on the balance sheet date. Differences arising on foreign currency translations of transactions settled during the year are recognised in the statement of profit and loss. Forward exchange contracts not covered under Accounting Standard 11 'Effect of change in Foreign Exchange Rates', that are entered to hedge the foreign currency risk of highly probable forecast transactions and unrecognized firm commitments are marked to market at the balance sheet date and exchange loss is recognised in the statement of profit and loss immediately. Any gain is ignored and not recognised in the financial statements, in accordance with the principles of prudence enunciated in Accounting Standard 1- Disclosure of Accounting Policies. The brmium or discount arising at the inception of the forward contracts other than those entered into to hedge the foreign currency risk of firm commitments or highly probable forecast transactions is amortised as expense or income over the life of the contract. Any profit or loss arising on cancellation or renewal of forward exchange contracts is recognised as income or expense for the year. i. Employee benefits Short term employee benefits All employee benefits payable/available within twelve months of rendering the service are classified as short term employee benefits. Benefits such as salaries, wages, bonus, etc are recognized in the statement of profit and loss in the period in which the employee renders the related service. Post-employment benefits Defined contribution plan The company makes specified contribution towards employee provident fund to Employees Provident Fund administered by the Regional Provident Commissioner. The Company's contribution to provident fund, being a defined contribution plan, is recognized in the statement of profit and loss in the financial year to which it relates. In respect of superannuation, the Company makes contribution to Life Insurance Corporation of India ("LIC") of an amount payable by the trusts to LIC, which is charged to the statement of profit and loss. Defined benefit plan Gratuity is a post-employment defined benefit plan. The brsent value of obligation for gratuity is determined based on actuarial valuation using the Projected Unit Credit Method, less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. Gratuity and superannuation funds are administered by trustees of independently constituted trusts. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to the statement of profit and loss in the year in which such gains or losses arise. Other long term liability 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 recognized as a liability determined based on actuarial valuation using the Projected Unit Credit Method at the balance sheet date. Actuarial Gains/Losses Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to the statement of profit and loss in the year in which such gains or losses arise. j. Employee Stock Option Plan (ESOP) Stock options granted to the employees under the stock options schemes are accounted at intrinsic value as per the accounting treatment brscribed by the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ('Guidelines') and guidance note on Employee share based payments issued by the Institute of Chartered Accountants of India. Accordingly, the excess of market price, determined as per the Guidelines and guidance note, of underlying equity shares (market value), over the exercise price of the options is recognised as deferred stock compensation expense and is charged to statement of profit and loss on a straight line basis over the vesting period of the options. The amortised portion of the cost is shown under shareholders' funds. k. Taxes on income Tax expense comprises current tax and deferred income tax. Current tax is determined as the amount of tax payable in respect of taxable income for the year. Deferred income taxes reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. In respect of carry forward losses and unabsorbed debrciation, deferred tax assets are recognized only to the extent there is virtual certainty that sufficient future taxable income will be available against which such losses can be realised. l. Earnings per share The earnings considered in ascertaining the Company's earnings per share comprise the net profit or loss for the year attributable to the equity shareholders. Earnings per share are computed using the weighted average number of 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 share holders and the weighted average number of shares outstanding during the period are adjusted for the effect of all dilutive potential equity shares. m. Leases Leases of assets under which significant risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease rentals in respect of assets taken under an operating lease are charged to the statement of profit and loss on a straight line basis over the lease term. In respect of assets given on operating lease, income is being recognised on a straight line basis over the lease term. n. Contingent liabilities and provisions A provision is created when there is a brsent obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation at the reporting date. A disclosure for a contingent liability is made when there is a possible obligation or a brsent 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. The company does not recognize assets which are of contingent nature until there is virtual certainty of realisability of such assets. However, if it has become virtually certain that an inflow of economic benefits will arise, asset and related income is recognized in the financial statements of the period in which the change occurs. o. Impairment of assets The Company on an annual basis makes an assessment of any indicator that may lead to impairment of assets. If any such indication exists, the Company estimates the recoverable amount of the assets. If such recoverable amount is less than the carrying amount, then the carrying amount is reduced to its recoverable amount by treating the difference as impairment loss and is charged to the statement of profit and loss. p. Cash and cash equivalents Cash and cash equivalents comprise cash and deposit with banks. The Company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents. 3. Segment information, as required under AS-17"Segment Reporting", has been provided in the consolidated financial statements of the Company and therefore no separate disclosure on segment information is given in these standalone financial statements. 4. As per the transfer pricing legislation under sections 92-92F of the Income Tax Act, 1961, the Company is required to use certain specific methods in computing arm's length prices of transactions with associated enterprises and maintain adequate documentation in this respect. Since law requires existence of such information and documentation to be contemporaneous in nature, the Company is in the process of appointing independent consultants for conducting a Transfer Pricing Study (the 'Study') to confirm that the transaction with associate enterprises undertaken during the financial year are on "arms length basis". Management is of the opinion that the company's transactions are at arm's length and that the results of the proposed study will not have any impact on the financial statements and that they do not expect any transfer pricing adjustments. 5. Previous year figures have been regrouped/recasted, wherever considered necessary to make them comparable with those of the current year. For Walker Chandiok & Co LLP (formerly Walker, Chandiok & Co) Chartered Accountants Per Lalit Kumar Partner For and on behalf of the Board of Directors of KDDL Limited Yashovardhan Saboo Chief Executive Officer & Vice Chairman (DIN: 00012158) Anil Khanna Director (DIN: 00012232) Sanjeev Masown Chief Financial Officer Raman Sood Company Secretary (Membership No. F3722) Place: Chandigarh Date: 30 May 2016 |