NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31st MARCH 2016 1 Corporate Information LGB Forge Limited was incorporated on 07.06.2006. The Company is into manufacturing of Cold and Hot forged components and has its manufacturing unit at Coimbatore, Tamilnadu and Mysore, Karnataka. The Company concentrates in manufacturing high volume Auto, Electrical & Transmission forged components for automobiles, non automotive segments like Valve Industry and infrastructure equipment industry including machining for customers in automotive, off-road and non-automotive segments. 2 SIGNIFICANT ACCOUNTING POLICIES i. Basis of brparation The financial statements of the Company have been brpared in accordance with the generally accepted accounting principles in India (Indian GAAP) and comply in all material respects with the accounting standards specified under Section133 of Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014. The financial statements have been brpared under the historical cost convention on an accrual basis. The accounting policies have been consistently applied by the Company and are consistent with those used in the brvious year. ii. Use of estimates The brparation of financial statements in conformity with Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, disclosures relating to contingent liabilities and assets as at the balance sheet date and the reported amounts of income and expenses during the year. Difference between the actual amounts and the estimates are recognized in the year in which the events become known / are materialized. iii. Fixed Assets, Debrciation and Impairment a) Fixed Assets are stated at original cost net of tax / duty credits availed, if any, less accumulated debrciation, accumulated amortization and cumulative impairment. Costs include br-operative expenses and all expenses related to acquisition and installation of the assets concerned. b) Own manufactured assets are capitalized at cost including an appropriate share of overheads. c) Intangible assets are stated at cost (net of CENVAT wherever applicable) less accumulated debrciation/ amortization. Cost comprises of direct cost, related taxes, duties, freight and attributable finance cost till such assets are ready for its intended use. d) Debrciation on tangible assets has been provided on Straight line method at useful lives specified in the Schedule II of the Companies Act, 2013. Where the cost of part of the asset is significant to the total cost of asset and if the part of the asset has a different useful life than the main asset, useful life of that part is determined separately for debrciation. Intangible assets, being computer software, are amortized as debrciation over a period of 3 years. e) As at each balance sheet date, the carrying values of tangible and intangible assets are reviewed to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable value of the asset is estimated in order to determine the extent of impairment loss. An impairment loss is charged to Statement of Profit and Loss in the year in which an asset/ group of assets is identified as impaired. iv. Valuation of Inventories a) Inventories are valued at lower of cost and estimated net realizable value. Cost is arrived at on weighted average basis. b) Excise Duty is added in the Closing Inventory of Finished Goods and Scrap. c) The basis of determining cost for various categories of inventories are as follows: i) Raw Materials, Packing Materials and Stores and spares: Weighted Average basis. ii) Finished Goods and Work-in-Progress: Cost of Direct Material, Labour and other Manufacturing overheads. v. Revenue Recognition a) The Company generally follows the mercantile system of accounting and recognizes income and expenditure on an accrual basis except those with significant uncertainties. b) Sale of goods is recognized when the risk and rewards of ownership are passed on to the customers, which is generally on despatch of goods. c) Claims made by the Company and those made on the Company are recognized in the statement of profit and loss as and when the claims are accepted. d) Interest income is recognized on time proportion basis taking into account the amount outstanding and the rate applicable. vi. Foreign Currency Transactions a) Foreign currency transactions are recorded at exchange rates brvailing on the date of such transaction. b) Foreign currency monetary assets and liabilities at the year end are realigned at the exchange rate brvailing at the year end and difference on realignment is recognized in the Statement of Profit and Loss. vii. Employee Benefits a) Short term employee benefits are recognized as an expense at the undiscounted amount in the Statement of Profit and Loss for the year in which the related service is rendered. b) Post employment and other long term benefits which are defined benefit plans are recognized as an expense in the Statement of Profit and Loss for the year in which the employee has rendered service. The expense is recognized based on the brsent value of the obligation determined in accordance with Revised Accounting Standard 15 on Employee Benefits. Actuarial gains & losses are charged to the Statement of Profit and Loss. c) Payments to defined contribution schemes are charged as expense as and when incurred. d) Termination benefits are recognized as an expense as and when incurred. viii. Borrowing Costs Borrowing costs attributable to the acquisition or construction of qualifying assets are capitalized as part of such assets. All other borrowing costs are charged to revenue. A qualifying asset is an asset that necessarily requires substantial period of time to get ready for its intended use or sale. ix. Taxes on Income Current tax on income for the period is determined on the basis of taxable income and tax credits computed in accordance with the provisions of the Income Tax Act, 1961 and based on the expected outcome of assessment / appeals. Deferred tax is recognized on timing differences between the accounting income and the taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date. Deferred tax assets are recognized and carried forward to the extent that there is a virtual certainity that sufficient future income will be available against which such deferred tax assets can be realized. x. Leases Leases are classified as finance or operating leases depending upon the terms of the lease agreements. Assets held under finance leases are recognised as assets of the Company on thedate of acquisition and debrciated over their estimated useful lives. Finance costs are treated as period cost using effective interest rate method and are expensed accordingly. Rentals payable under operating leases are expensed as incurred. xi. CENVAT/Service Tax CENVAT credit on materials purchased / services availed for production / Input services are taken into account at the time of purchase. CENVAT credit on purchase of capital items wherever applicable are taken into account as and when the assets are acquired. The CENVAT credits so taken are utilized for payment of excise duty on goods manufactured / Service tax on Output services. The unutilized CENVAT credit is carried forward in the books. xii. Earnings Per Share Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting brference dividends and attributable taxes if any) by the weighted average number of equity shares outstanding during the period. Partly paid equity shares (if any) are treated as a fraction of an equity share to the extent that they were entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average number of equity shares outstanding during the period are adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and consolidation of shares if any.For the purpose of calculating diluted earnings per share, the net profit or loss 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. xiii. Provisions, Contingent Liabilities and Contingent Assets Provisions are recognised only when there is a brsent obligation as a result of past events and when a reliable estimate of the amount of obligation can be made. Contingent liability is disclosed for (i) Possible obligation which will be confirmed only by future events not wholly within the control of the Company or (ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Contingent assets are not recognised in the financial statements since this may result in the recognition of income that may never be realized. xiv. Cash and Cash equivalents Cash flows are reported using the indirect method, where by net profit before tax is adjusted for the effects of transaction of a non cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flow comprises regular revenue generating, investing and financing activities of the company. Cash and cash equivalents in the balance sheet comprise of cash at bank and in hand and short term, highly liquid investments having a original maturity of less than 3 months and that is readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. 24 The Company has not recognised the net deferred tax assets, in respect of accumulated losses and unabsorbed debrciation in view of absence of virtual certainty of availing the benefit in the future. 25 The balance in parties accounts are subject to confirmation and reconciliation, if any. In the opinion of the management all current assets including stock in- trade/sundry debtors and loans and advances in the normal course of business would realize the value at least to the extent stated in the Balance sheet. 26 Micro, Small and Medium Enterprises There are no amounts payable to Micro, Small and Medium Enterprise as at 31st March 2016. Further,there are no interest payable on account of overdue payments. The above information regarding Micro, Small and Medium enterprises have been determined to the extent such parties have been identified on the basis of information available with the Company and relied upon by the auditors. 27 The Company has only one reportable business segment namely manufacture of forged and machined components. 35 Profit on sale of land (Rs. 211.55 Lakhs) at Pillaiappampalayam has been shown under exceptional items. 38 The amounts and disclosures included in the financial statements of the brvious year have been reclassified/regrouped wherever necessary to conform to current years’ classification. “As per our Report of even date” For Haribhakti & Co. LLP Chartered Accountants Firm Registration No. 103523W C.S. SATHYANARAYANAN Membership No. 028328 Partner For and on Behalf of the Board K. KARTHIK Executive Director DIN: 06846794 R. RAMAKRISHNAN Chief Financial Officer R. PONMANIKANDAN Company Secretary Membership No. 40886 P. SHANMUGASUNDARAM Director DIN: 00119411 Coimbatore 30.04.2016 |