NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST MARCH 2016 1. CORPORATE INFORMATION WABCO INDIA LIMITED ("the Company") was incorporated originally as Auto (India) Engineering Limited on November 18, 2004. The name of the Company was changed to WABCO INDIA LIMITED on August 02, 2011. The Company is into its brsent business pursuant to the scheme of demerger of the brakes division of Sundaram-Clayton Limited into the Company. The Company is primarily engaged in the manufacture of air brake actuation systems for commercial vehicles. The Company also provides software development and other services to its group companies. On June 3, 2009, WABCO Holdings Inc., executed its step acquisition in WABCO and increased its percentage ownership to 75% by acquiring the shares from the other joint venture partner, TVS Group. Post-acquisition, the Company has become a subsidiary of WABCO Holdings Inc. On June 28, 2013, M/s. Clayton Dewandre Holdings Limited, Rotterdam holding 75% of the equity shares of the company transferred the entire holding to M/s. WABCO Asia Private Limited, Singapore, a subsidiary of M/s. Clayton Dewandre Holdings Limited, Rotterdam. 2. BASIS OF brPARATION The 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 adopted in the brparation of financial statements are consistent with those of brvious year. 2.1 Summary of Significant Accounting Policies (a) Use of estimates The brparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. (b) Tangible fixed assets Fixed assets are stated at cost, less accumulated debrciation and impairment losses if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. All expenses on existing fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred other than expenses which increase the future benefit of the existing assets. Gains or losses arising from de-recognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is de-recognized. The Company has evaluated the useful lives of its fixed assets consequent to the requirements of Schedule II of the Companies Act, 2013. The Company identifies and determines useful lives separately for each major component of its fixed assets if they have a useful life that is materially different from that of the remaining asset. The Company has, based on a technical review and assessment by the management, have concluded that there are no significant components with useful life that is materially different from that of the main asset. (c) Debrciation on tangible fixed assets Debrciation is provided using the Straight Line Method as per the useful lives of the assets estimated by the management, or at the rates brscribed under schedule II of the Companies Act, 2013. In respect of the assets falling under the Plant and machinery block, the useful life of the asset has been determined based on a technical assessment carried out by an expert during the year. In respect of other blocks, i.e., Tooling, Computers, and Vehicles, the Company believes that the existing useful life adopted by the Company is more rebrsentative of the useful life of the asset as compared to useful life brscribed in Schedule II and continues to debrciate these assets over the existing useful life which is shorter than the Schedule II useful life. Leasehold lands are amortised on a straight line basis over the primary lease period ranging from 30 to 99 years. (d) Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. Costs incurred towards purchase of computer software are debrciated using the straight-line method over a period of two years based on management's estimate of useful lives of such software, or over the license period of the software, whichever is shorter. Research costs are expensed as incurred. (e) Impairment of tangible and intangible assets The carrying amounts of assets are reviewed at each balance sheet date for any indication of impairment based on internal / external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset's net selling price and its value in use. In assessing value in use, the estimated future cash flows are discounted to their brsent value using a br-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. After impairment, debrciation is provided on the revised carrying amount of the asset over its remaining useful life. A brviously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have brvailed by charging usual debrciation if there was no impairment. (f) 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. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value, if any, is made to recognize a decline other than temporary in the value of the investments. (g) Leases As lessor Where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item the leases are classified as operating leases. Operating lease payments are recognised as an expense in the statement of Profit and loss on a straight-line basis over the lease term. Operating lease arrangements of the company are cancellable. As lessee Where the Company is the lessee, substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease term at the lower of the fair value of the leased property and brsent value of minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in the statement of profit and loss. Lease management fees, legal charges and other initial direct costs of lease are capitalized. (h) Inventories Raw materials, components, stores and spares are valued at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost is determined on a moving weighted average basis. Work-in-process and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty. Cost is determined on a moving weighted average basis. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. (i) Revenue recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured. The company collects sales tax and value added tax (VAT) on behalf of the Government and therefore, these are not economic benefits flowing to the company. Hence they are excluded from revenue. Sale of goods Revenue from sale of goods is recognised when all the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods. The company collects sales taxes and value added taxes (VAT) on behalf of the Government and, therefore, these are not economic benefits flowing to the company. Hence, they are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year. Claims on the Company for price revision are accounted when facts and circumstances indicate that a price reduction is probable and the amount are reasonable esteemable. The claims by the are recorded when it is accepted and it is reasonably certain that the amounts will be collected. Sale of tools Sale of tooling is recognised on completion of tooling program and its satisfactory performance and when the substantial risk and rewards of ownership in the tool is transferred to the buyer as per the terms of the contract. Income from services Revenues from services are recognised as per the terms of the contract as and when services are rendered. The company collects service tax on behalf of the Government and, therefore, it is not an economic benefit flowing to the company. Hence, it is excluded from revenue. Interest Interest income is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable. Profit on sale of investments Profit on sale of investment is recognized only at the time when the investments are realised. Export incentive Income from export incentives such as duty drawback and served from India scheme (SFIS) are recognised on accrual basis based on eligibility under the terms of the scheme. (j) Foreign currency translation Initial recognition Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. Conversion Foreign currency monetary items are re-translated using the exchange rate brvailing at the reporting date. Non-monetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction. Exchange differences Exchange differences arising on the settlement of monetary items or on reporting such monetary items of company at rates different from those at which they were initially recorded during the year, or reported in brvious financial statements, are recognized as income or as expenses in the year in which they arise. (k) Retirement and other 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 contribution and shortfall, if any, as an expense in the year in which it is incurred. ii. Employee state insurance The Company has no obligation other than the contribution payable to the fund. The company recognises the contribution payable to the above schemes as expenditure when the employee renders related service. If the contribution payable to the schemes for services received before the Balance Sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognised as a liability after deducting the contribution already paid. If on the other hand the contribution already paid exceeds the contribution due for the services received before the Balance Sheet date, then the excess is recognised as an asset to the extent that the brpayment will lead to reduction in future payment or cash refund. iii. Gratuity and Pension The Company operates two defined benefits plans viz. gratuity and pension for its employees. Under the gratuity plan, every employee who has completed at least five years of service gets a gratuity on separation at 15 days of last drawn salary for each completed year of service. The scheme is funded with Life Insurance Corporation of India. The company also operates a pension plan for selected senior managers, the eligibility and the terms and conditions of payment are at the discretion of the company. Gratuity and pension liabilities are defined benefit obligations and are provided for on the basis of an actuarial valuation done as per the projected unit credit method as at the end of each financial year. iv. Compensated absence Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation at the year end. The actuarial valuation is done as per projected unit credit method. Actuarial gains/losses are taken to the statement of Profit and loss and are not deferred. v. Voluntary retirement The Company has a scheme of voluntary retirement applicable to certain employees. The amount payable under such scheme is expensed to the statement of profit and loss when the option under such scheme is exercised by eligible employees and accepted by the Company. (l) Income tax Tax expense comprises of current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-tax Act, 1961. Deferred income taxes reflects the net 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. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the taxes on income levied by same governing taxation laws. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In situations where the company has unabsorbed debrciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits. At each Balance Sheet date the company re-assesses unrecognised deferred tax asset. The company recognises all unrecognised deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realised. (m) Earnings Per Share Basic earnings per share are calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares if any. (n) Provisions A provision is recognised when an enterprise has a brsent obligation as a result of past event; 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 are not discounted to their brsent value and are determined based on best 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 best estimates or on actuarial valuation where applicable. Warranty provisions Provisions for warranty related costs are recognized when the product is sold or service provided. Provision is based on historical experience. The estimate of such warranty related costs is reviewed annually. A provision is recognized for expected warranty claims on products sold, based on past experience of the level of repairs and returns. Assumptions used to calculate the provision for warranties are based on current sales levels and current information available about returns. (o) Contingent liabilities A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the company. It includes a brsent obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. It also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The company does not recognize a contingent liability but discloses its existence in the financial statements. (p) Government grants and subsidies Grants and subsidies from the government are recognized when there is reasonable assurance that (i) the company will comply with the conditions attached to them, and (ii) the grant/subsidy will be received. When the grant or subsidy relates to revenue, it is recognized as income on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs, which they are intended to compensate. Where the grant relates to an asset, it is recognized as deferred income and released to income in equal amounts over the expected useful life of the related asset. Where the Company receives non-monetary grants, the asset is accounted for on the basis of its acquisition cost. In case a non-monetary asset is given free of cost, it is recognized at a nominal value. Government grants of the nature of promoters' contribution are credited to capital reserve and treated as a part of the shareholders' funds. (q) Cash and Cash equivalents Cash and cash equivalents for the purpose of cash flow statement comprise cash at bank and in hand and short-term investments with an original maturity of three months or less. 2. TRANSFER PRICING The Company has entered into transactions with related parties. For the year ended March 31, 2015, the Company had obtained the Accountant's Report from a Chartered Accountant as required by the relevant provisions of the Income-tax Act, 1961. For the year ended March 31, 2016, management confirms that it maintains documents as brscribed by the Income-tax Act, 1961 to prove that these transactions are at arm's length, however the study / audit has not yet been completed. The management believes that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation for period up to March 31, 2016. 3. brVIOUS YEAR FIGURES Previous year's figures have been regrouped and reclassified where necessary to conform to this year's classification. For and on behalf of the board of directors of WABCO INDIA LIMITED As per our report of even date For S.R. BATLIBOI & ASSOCIATES LLP Chartered Accountants ICAI Firm Registration No. 101049W / E300004 Per S BALASUBRAHMANYAM Partner Membership No. 053315 M LAKSHMINARAYAN Chairman M C GOKUL Company Secretary P KANIAPPAN Managing Director R S RAJAGOPAL SASTRY Chief Financial Officer PLACE : Chennai, DATE : 19th May, 2016 |