1 SIGNIFICANT ACCOUNTING POLICIES (a) Basis of brparation The financial statements are brpared on a going concern basis under the historical cost convention on accrual basis of accounting in accordance with the generally accepted accounting principles and Accounting Standards notified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules 2014. (b) Use of estimates The brparation of financial statements requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and notes thereto. The management believes that these estimates and assumptions are reasonable and prudent. However, actual results could differ from these estimates. Any revision to accounting estimates is recognised prospectively in the current and future period. (c) Revenue recognition The Company recognises revenue from the sale of products net of trade discounts, when the products are delivered to the dealer / customer or when delivered to the carrier, when risks and rewards of ownership pass to the dealer / customer. Export incentives are accounted on accrual basis. Sales include income from services. Sale of products and services is brsented gross of excise duty and service tax where applicable and excludes other indirect taxes. Dividend from investments is recognised when the right to receive the payment is established. Interest income is recognised on time proportion basis, determined by the amount outstanding and the rate applicable. (d) Fixed assets Fixed assets are stated at cost of acquisition or construction less accumulated debrciation / amortization and impairment, if any. Cost includes purchase price, taxes and duties, labour cost and directly attributable overhead expenditure incurred upto the date the asset is ready for its intended use. However, cost excludes Excise duty, VAT & Service tax, wherever credit of the duty or tax is availed of. (e) Borrowing costs Borrowing cost incurred for qualifying assets is capitalised upto the date the asset is ready for intended use, based on borrowings incurred specifically for financing the asset or the weighted average rate of all other borrowings, if no specific borrowings have been incurred for the asset. Borrowing costs also include exchange differences relating to long term foreign currency borrowings attributable to the acquisition of debrciable asset w.e.f. April 1, 2007. All other borrowing costs are recognised as an expense in the period for which they relate to. (f) Debrciation and amortisation (i) Debrciation on tangible fixed assets is charged over the estimated useful life of the asset or part of the asset (after considering double/triple shift) as evaluated by a Chartered Engineer, on straight line method, in accordance with Part A of Schedule II to the Companies Act 2013. (ii) Keeping in mind the rigorous and periodic maintenance programme followed by the Company, the estimated useful life of the tangible fixed assets as assessed by the Chartered Engineer and followed by the Company is given below: Description Years Factory building and other buildings 5 to 61 Material handling equipment 5 Plant and machinery 5 to 21 Electrical equipment 15 Furniture and fixtures 10 Computers and information systems 3 to 4 Mobile phone 2 Vehicles 6 iii. Tools and dies used for two wheelers are amortised based on quantity of components manufactured and the life of tools and dies, subject to a maximum of 3 years. Tools and dies used for three wheeler operations are debrciated at 11.31 per cent. iv. On tangible fixed assets added / disposed of during the year, debrciation is charged on pro-rata basis from the date of addition / till the date of disposal. v. Debrciation in respect of tangible assets costing less than Rs.5,000/- is provided at 100%. (g) Intangible assets Intangible assets acquired are recorded at their acquisition cost and are amortised over 2 years in the case of software and 6 years in the case of technical knowhow. Other intangible assets are amortised over their useful life or 10 years, whichever is earlier. (h) Impairment At each Balance Sheet date, the Company ascertains whether there is any impairment of the fixed / intangible assets based on internal / external factors. An impairment loss is recognised, wherever the carrying amount of the assets exceeds its recoverable amount. Any such impairment loss is recognised by charging it to the Profit and Loss Statement. (i) Transactions in foreign currencies (i) Transactions in foreign currencies are recorded at the exchange rates brvailing on the date of transaction. (ii) Foreign currency monetary assets and liabilities such as cash, receivables, payables, etc., are translated at year end exchange rates. (iii) Non-monetary items denominated in foreign currency such as investments, fixed assets, etc., are valued at the exchange rate brvailing on the date of transaction. (iv) Exchange differences arising on settlement of transactions and translation of monetary items other than those covered by (v) below are recognised as income or expense in the year in which they arise. (v) Exchange differences relating to long term foreign currency monetary assets / liabilities are accounted for with effect from April 1, 2007 in the following manner: - Differences relating to borrowings attributable to the acquisition of debrciable capital asset are added to / deducted from the cost of such capital assets. - Other differences are accumulated in Foreign Currency Monetary Item Translation Difference Account, to be amortized over the period till the date of maturity or March 31, 2020, whichever is earlier, in accordance with the notification issued by the Ministry of Corporate Affairs on December 29, 2011. (vi) Exchange differences relating to forward exchange contracts entered into for hedging i.e., for mitigating the foreign currency fluctuation risk on an underlying asset or liability other than those covered under (v) above are recognised in the Profit and Loss Statement. Premium or discount on forward contracts other than those covered in (v) above is amortised over the life of such contracts and is recognised as income or expense. (j) Hedge accounting With effect from 1st April 2008, the Company has adopted the principles of hedge accounting brscribed by Accounting Standard (AS30) - "Financial Instruments Recognition and Measurement". Accordingly, the company designates certain br shipment credit limits (PCFC) as hedging instruments and uses foreign currency derivative contracts to hedge its risks associated with foreign currency fluctuations relating to highly probable forecast transactions. Recognition and Measurement These derivative contracts are stated at fair value at each reporting date. Changes in the fair value of these contracts that are designated and effective as hedges of future cash flows are recognized directly in Hedging Reserve Account under Reserves and Surplus, net of applicable deferred income taxes and the ineffective portion is recognised immediately in the Profit and Loss Statement. Amounts accumulated in Hedging Reserve Account are transferred to Profit and Loss Statement in the respective periods in which the forecasted transactions are consummated. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecasted transactions, any cumulative gain or loss on the hedging instrument recognised in Hedging Reserve Account is retained there until the forecasted transaction is consummated. (k) Inventories Inventories are valued at the lower of cost and net realisable value. Cost of raw materials and consumables are ascertained on a moving weighted average / basis. Attributable costs are allocated to work-in-process, stock-in-trade and finished goods. (l) Investments Long term investments are stated at cost. The carrying amount is reduced to recognise a decline, other than temporary, in the value of the investment. Current investments are stated at lower of cost and market value. (m) Employee benefits (i) Provident fund The eligible employees of the Company are entitled to receive benefits in respect of provident fund, a defined contribution plan, in which both employees and the Company make monthly contributions at a specified percentage of the covered employees' salary. The contributions as specified under the law are made to the provident fund set up as irrevocable trust by the Company. The Company is generally liable for annual contributions and any shortfall in the fund assets based on the Government specified minimum rates of return and recognises such contributions and shortfall, if any, as an expense in the year in which it is incurred. (ii) Pension The Company has a pension plan which is a defined benefit plan, for its senior managers of the company. The liability for the pension benefits payable in future under the said plan, is provided for based on an independent actuarial valuation as at Balance Sheet date. (iii) Gratuity The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The company has created an Employees' Group Gratuity Fund which has taken a Group Gratuity Assurance Scheme with the Life Insurance Corporation of India. Company's contributions are based on actuarial valuation arrived at the end of each year and charged to Profit and Loss Statement. (iv) Leave encashment The Company provides for the encashment of leave or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits, for future encashment. The liability is provided based on the number of days of unutilised leave at each balance sheet date on the basis of an independent actuarial valuation. (n) Taxes on income Tax expense comprises of current and deferred taxes. Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of the Income Tax Act, 1961. Current tax is net of credit for entitlement for Minimum Alternative Tax (MAT), which is recognised where there is a convincing evidence that the Company will pay normal Income tax during the specified period. Deferred tax is recognised, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets in respect of unabsorbed debrciation and carry forward of losses are recognised if there is virtual certainty that there will be sufficient future taxable income available to realise such losses. Other deferred tax assets are recognised only to the extent there is reasonable certainty of realisation in future. Deferred tax assets and liabilities are measured based on the tax rates that are expected to be applied in the period when asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantially enacted by the Balance Sheet date. (o) Government Grants Government grants are recognised on receipt. Grants identifiable to specific fixed assets are shown as a deduction from the gross value of the asset concerned in arriving at its book value. Where the government grants cannot be identified with any specific identifiable fixed assets, such amount is credited to capital reserve. (p) Provisions and contingent liabilities (i) Provision A provision arising out of a brsent obligation, is recognised only when it is probable that an outflow of resources will be required to settle the obligation and the amount can be reasonably estimated. The estimated liability for product warranties is recorded when products are sold based on technical evaluation. (ii) Contingent liabilities Wherever there is a possible obligation that may, but probably will not require an outflow of resources, the same is disclosed by way of contingent liability. Show cause notices are not considered as Contingent Liabilities unless converted into demand. 2 Additional provision for Bonus for Financial Year 2014-15 of Rs.5.68 crores, was made in the accounts of the third quarter ended 31st December, 2015, pursuant to the amendment made to the Payment of Bonus Act. In view of subsequent stay granted by the Hon'ble Karnataka High Court, to the retrospective application of the amendment to the Payment of Bonus Act, the said provision towards additional bonus has been reversed in the accounts. 3 During the year the company received a net amount of Rs.10.36 crores by way of insurance claim (included under other operating revenue) which, in the Company's view, is a capital receipt and hence not includible as book profit under Section 115JB of the Income Tax Act, 1961. 4 During the year ended 31st March 2016, in accordance with Part A of Schedule II to the Companies Act, 2013, the management, based on Chartered Engineer's technical evaluation, has reassessed the remaining useful life of tangible fixed assets and part of the fixed assets with effect from 1st April 2015. As a result of the same, debrciation for the year is higher by Rs.0.73 crores. Wherever the useful life of parts of the tangible fixed assets as on 1st April 2015 is nil, the carrying amount of Rs.0.30 crores has been adjusted to reserves. 5 Previous year's figures have been regrouped wherever necessary to conform to the current year's classification. VENU SRINIVASAN Chairman & Managing Director SUDARSHAN VENU Joint Managing Director H. LAKSHMANAN Director As per our report annexed For V. Sankar Aiyar & Co. Chartered Accountants Firm Regn. No.: 109208W S. VENKATRAMAN Partner Membership No.: 34319 S.G. MURALI Chief Financial Officer K.S. SRINIVASAN Company Secretary Place : Bengaluru Date :3rd May 2016 |