SIGNIFICANT ACCOUNTING POLICIES 1. Corporate Information Flexituff International Limited ('the Company'), is a public company domiciled in India. Its shares are listed in two stock exchanges in India. The Company is engaged in manufacturing of technical textile. Manufacturing units are located at Pithampur in Madhya Pradesh and at Kashipur in Uttarakhand. 2. Summary of significant accounting policies a. Basis of Preparation The financial statements have been brpared in accordance with generally accepted accounting principles in India (Indian GAAP) under the historical cost convention on an accrual basis in compliance with all material aspects of the Accounting Standards (AS) notified under section 133 of the Companies Act 2013, read together with Rule 7 of the Companies (Accounts) Rules 2014. The accounting policies adopted in the brparation of financial statements have been consistently applied. Changes in accounting policy Change in useful life of fixed assets During the brvious year, pursuant to the enactment of the Companies Act, 2013 ('the Act') being effective from April 1, 2014, the Company had revised debrciation rates of fixed assets as per useful life specified in Schedule II of the Act. For certain class of assets, the debrciation rates had been revised on the basis of internal technical evaluation and assessment. Consequently, in accordance with the requirement of Schedule II of the Act, debrciation of Rs. 26.26 had been adjusted in Reserves and Surplus for the assets whose remaining useful as per Schedule II / technical estimated had already been exhausted as on April 1, 2014. b. Use of estimates The brparation of financial statements requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and disclosure of contingent liabilities, at the end of the reporting period. Although, these estimates are based on the management's best knowledge of current events and actions, uncertainty about these assumption and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. 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 Schedule III to the Companies Act, 2013. Based on the nature of products and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current/ noncurrent classification of assets and liabilities. The accounting policies adopted in the brparation of financial statements are consistent with those of brvious year, except for the change in accounting policy explained above. c. Fixed assets Tangible fixed assets Tangible fixed assets are stated at cost, less accumulated debrciation. Cost comprises the purchase price, borrowing costs, if capitalization criteria are met and any cost attributable to bringing the assets to its working condition for its intended use which includes taxes, freight, and installation and allocated incidental expenditure during construction/ acquisition and exclusive of CENVAT credit or other tax credit available to the Company. When parts of an item of tangible fixed assets have different useful lives, they are accounted for as separate items (major components) of fixed asset. Subsequent expenditure relating to fixed assets is capitalized only if such expenditure results in an increase in the future benefits from such asset beyond its brviously assessed standard of performance. The company has adopted component accounting as required under Schedule II to the Companies Act, 2013 and AS 10 (R), from April 1, 2015. The company was brviously not identifying components of fixed assets separately for debrciation purposes; rather, a single useful life/ debrciation rate was used to debrciate each item of fixed assets. The company has not identified any components of fixed assets where the useful life is different than rest of plant and machinery and hence there is no impact on the statement of profit and loss due to adoption of component accounting. Intangible assets An intangible asset is recognized when it is probable that the future economic benefits attributable to the asset will flow to the enterprise and where its cost can be reliably measured. Intangible assets are stated at cost of acquisition less accumulated amortization. Subsequent expenditure relating to intangible assets is capitalized only if such expenditure results in an increase in the future benefits from such asset beyond its brviously assessed standard of performance. d. Debrciation on fixed asset Debrciation on fixed assets is calculated on a straight-line basis using the rates arrived at based on the useful lives brscribed under the schedule II to the Companies Act, 2013 except for plant and machinery and servers where useful life is estimated by the management, which is different as compared to those brscribed under the Schedule II to the Companies Act, 2013. Block of assets Useful life (in years) Factory building 30 Office equipment 5 Plant and machinery 15 Electrical installations 10 Furniture and fittings 10 Motor vehicles 8 Computers 3 Debrciation on addition to tangible fixed provided on pro-rata basis from the subsequent month of the assets are ready for intended use. Debrciation on sale/discard from tangible fixed assets is provided upto the brvious month of sale date, deduction or discard of tangible fixed assets as the case may be. e. Amortization of Intangible assets Amortization of intangible assets has been calculated on straight line basis at the following rates, based on management estimates, which in the opinion of the management are reflective of the estimated useful lives of the Intangible assets. Block of assets Useful life (in years) Development Assets 5 Computer Software 3 Patents 5 Amortization on addition to intangible assets is provided on pro-rata basis from the the subsequent month of the assets are ready for intended use. Amortization on sale/discard from intangible assets is provided upto the brvious month of sale, deduction or discard of intangible assets as the case may be. f. Impairment of Assets The carrying amounts of assets are reviewed at each balance sheet date for if there is any indication of impairment based on internal/external factors. An impairment loss is recognised 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 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. In determining net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. After impairment, debrciation/amortization is provided on the revised carrying amount of the asset over its remaining useful life. g. Borrowing Costs Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that takes a substantial period of time to get ready for its intended use are capitalized. All other borrowing costs are recognised as expenditure in the period in which they are incurred. h. Assets taken on lease (i) Operating leases - where Company is a lessee Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Rentals and all other expenses in respect of assets taken on lease are debited to statement of Profit and Loss on straight line basis over the lease term. (ii) Finance leases Assets acquired under finance leases which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized and a corresponding loan liability is recognized. The lease rentals paid are bifurcated into principal and interest component by applying an implicit rate of return. The interest is charged as a period cost and the principal amount is adjusted against the liability recognized in respect of assets taken on financial lease. i. Foreign currency translation Initial recognition: Foreign currency transactions are recorded in the reporting currency by applying the exchange rate between the reporting currency and the foreign currency at the date of the transaction. Measurement of foreign currency monetary items as on Balance Sheet date Foreign currency monetary items (other than derivative contracts) of the Company and its net investment in non-integral foreign operations outstanding at the Balance Sheet date are restated at the year-end rates. A monetary asset or liability is termed as a long-term foreign currency monetary item, if the asset or liability is exbrssed in a foreign currency and has a term of 12 months or more at the date of origination of the asset or liability. Exchange differences: Exchange differences arising on the settlement of monetary items or on reporting the Company's monetary items at rates different from those at which they were initially recorded during the year, or reported in brvious financial statements, are recognised as income or as expenses in the year in which they occur. The exchange differences arising on restatement / settlement of long-term foreign currency monetary items are capitalized as part of the debrciable fixed assets to which the monetary item relates and debrciated over the remaining useful life of such assets. j. Investments Accounting treatment Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments. Current investments are carried in the financial statements 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 is made to recognize a decline other than temporary in the value of the investments. On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the Statement of Profit and Loss. Classification in the financial statements Investments that are realisable within the period of twelve months from the balance sheet date are classified as current investment. All other investments are classified as non-current investments. k. Sale of trade receivables Sale of insured trade receivables to banks whereby significant risks and rewards are transferred is treated as "true sale" for both legal and financial reporting purposes and accordingly, these receivables are not reflected on the balance sheet of the Company. l. Export Benefits Duty free imports of raw materials under Advance License for imports as per the Import and Export Policy are matched with the exports made against the said licenses and the net benefit / obligation is accounted by making suitable adjustments in raw material consumption. The benefit accrued under the Duty Drawback, Focus March 31st, 2016 Market Scheme, Merchandise Exports from India Scheme and other schemes as per the Import and Export Policy in respect of exports made under the said schemes is included as "Export Incentives' under the head "Other operating revenue'. m. Revenue recognition Revenue is recognised to the extent, that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue from sale of goods Revenue from sale of goods is recognised when the significant risks and rewards of ownership of the goods are transferred to the buyer and are recorded net of trade discounts, rebates, Sales Tax, Value Added Tax and gross of Excise Duty. Revenue from sale of services Income from services are recognized as and when the 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 Income Interest Income is recognised on a time proportion basis taking into account the amount outstanding and applicable interest rate. n. Retirement and other employee benefits Defined contribution plan The Company makes defined contribution to Government Employee Provident Fund, Employee Deposit Linked Insurance, Employee state insurance and labour welfare funds which are recognised in the Statement of Profit and Loss on accrual basis. The Company has no further obligations under these plans beyond its monthly contributions. Defined Benefit Plan - Gratuity The Company provides for retirement benefits in the form of Gratuity. Benefits payable to eligible employees of the company with respect to gratuity, a defined benefit plan is accounted for on the basis of an actuarial valuation as at the Balance Sheet date. In accordance with the Payment of Gratuity Act, 1972, the plan provides for lump sum payments to vested employees on retirement, death while in service or on termination of employment an amount equivalent to 15 days basic salary for each completed year of service. Vesting occurs upon completion of five years of service. The brsent value of such obligation is determined by the projected unit credit method and adjusted for past service cost and fair value of plan assets as at the balance sheet date through which the obligations are to be settled. The resultant actuarial gain or loss on change in brsent value of the defined benefit obligation or change in return of the plan assets is recognised as an income or expense in the Statement of Profit and Loss. The expected return on plan assets is based on the assumed rate of return of such assets. The Company contributes to a fund set up by Life Insurance Company of India. Other long term benefits Leave encashment - Encashable The company provides for the liability at year end on account of unavailed leave as per the actuarial valuation using the Projected Unit Credit Method. Actuarial gains and losses are recognised in the Statement of Profit and Loss as and when incurred. o. Cash and cash equivalents Cash and cash equivalents include cash in hand, demand deposits with banks, other short term highly liquid investments with original maturities of three months or less. p. Research and Development expenditure Research Costs are charged as an expense in the year in which they are incurred and are reflected under the appropriate heads of account. Development expenditure is carried forward when its future recoverability can reasonably be regarded as assured and is amortized over the period of expected future benefit. q. Inventories Raw materials, components, stores and spares, and packing material are valued at lower of cost or net realizable value. Cost of inventories is computed on a moving weighted-average basis. Cost includes purchase price, freight inwards and other expenditure incurred in bringing such inventories to their brsent location and condition. Work in progress and manufactured finished goods are valued at the lower of cost and net realisable value. Cost of work in progress and manufactured finished goods is determined on the moving weighted average basis and comprises direct material, cost of conversion and other costs incurred in bringing these inventories to their brsent location and condition. Cost of traded goods is valued at lower of cost or net realiasble value. Cost includes cost of purchase and other costs incurred in bringing the inventories to their brsent location and condition. Cost is determined on moving weighted average basis. Excise duty liability, wherever applicable, is included in the valuation of closing inventory of finished goods. Provision of obsolescence on inventories is considered on the basis of management's estimate based on demand and market of the inventories. March 31st, 2016 Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and the estimated costs necessary to make the sale. The comparison of cost and net realizable value is made on item by item basis. r. Income taxes Tax expense for the period comprises of current tax, deferred tax and Minimum alternate tax credit. Provision for current tax is made on the basis of estimated taxable income for the current accounting year in accordance with the Income-tax Act, 1961. Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts, and there is an intention to settle the asset and the liability on a net basis. The deferred tax for timing differences between the book and tax profits for the year is accounted for, using the tax rates and laws that have been substantively enacted as of the reporting date. Deferred tax charge or credit reflects the tax effects of timing differences between accounting income and taxable income for the period. The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed debrciation or carry forward of losses, deferred tax assets are recognised only if there is a virtual certainty of realization of such assets. Deferred tax assets are reviewed at each balance sheet date and are written-down or written up to reflect the amount that is reasonably/virtually certain (as the case may be) to be realised. At each reporting date, the Company reassesses the unrecognized deferred tax assets, if any. Minimum alternate tax (MAT) paid in a year is charged to the Statement of Profit and Loss as current tax. The Company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the Company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-tax Act, 1961, the said asset is created by way of credit to the Statement of Profit and Loss and shown as "MAT Credit Entitlement." The Company reviews the "MAT credit entitlement" asset at each reporting date and writes down the asset to the extent the company does not have convincing evidence that it will pay normal tax during the specified period. s. Contingent Liability, Provisions and Contingent Asset The Company creates a provision when there is 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 obligation. A disclosure for a contingent liability is made when there is a possible obligation or a brsent obligation that probably will not require an outflow of resources or where a reliable estimate of the obligation cannot be made. Contingent assets are neither recorded nor disclosed in the financial statements. t. Earnings Per Share Basic earnings per share are calculated by dividing the net profit or loss 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 or loss for the year 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. u. Government Grants and Subsidies Grants and subsidies from the government are recognised 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 related to revenue, it is netted off from respective expenditure 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 is related to an asset, it is recognised as deferred income and released to income in equal amounts over the expected useful life of the related asset. v. Employee stock compensation cost Employees (including senior executives) of the company receive remuneration in the form of share based payment transactions, whereby employees render services as consideration for equity instruments (equity-settled transactions). In accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and the Guidance Note on Accounting for Employee Share-based Payments, the cost of equity-settled transactions is measured using the intrinsic value method. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the company's best estimate of the number of equity instruments that will ultimately vest. The expense or credit recognized in the statement of profit and loss for a period rebrsents the movement in cumulative expense recognized as at the beginning and end of that period and is recognized in employee benefits expense. Where the terms of an equity-settled transaction award are modified, the minimum expense recognized is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognized for any modification that increases the total intrinsic value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification. w. Segment Reporting The accounting policies adopted for segment reporting are in conformity with the accounting policies adopted for the Company. The Company's operating businesses are organized and managed separately according to the nature of products and services provided, with each segment rebrsenting a strategic business unit that offers different products and serves different markets. The analysis of geographical segments is based on the areas in which major operating divisions of the Company operate. Further, inter-segment revenue have been accounted for based on the transaction price agreed to between segments which is primarily market based. Unallocated items include general corporate income and expense items, which are not allocated to any business segment. x. Corporate Social Responsibility All expenditure are recognized in Statement of profit on loss on accrual basis and hence no provision is made against unspent amount, if any. 3. Disclosure required under Section 22 of the Micro, Small and Medium Enterprises Development Act, 2006 The Company is the process of rolling out confirmation to suppliers in order to ascertain whether they are micro, small and mediumas per the Micro, Small and Medium Enterprises Development Act, 2006. Hence disclosures, if any relating to amounts unpaid as at the yearend along with interest paid / payable have not been provided by the Company. 4. Current assets and loans and advance In the opinion of the Board, the Current assets and loans and advances are approximately of the value stated, if realized in theordinary course or business, except otherwise stated. The provision for all the known liabilities is adequate and not in excess of amount considered reasonably necessary. 5. Managerial remuneration receivable Employee benefit expenses include Rs. 9.69 paid/payable during the year towards remuneration paid to one of its whole time director. The maximum remuneration payable under the provisions of section 197 read with Schedule V to the Companies Act, 2013 is Rs 6.41.The Company is in the process of obtaining necessary approval from shareholders for remuneration payable to one of its whole time director. Pending receipt of such approval, the excess remuneration amounting to Rs. 3.28 paid to one of its whole time director is held in trust by the said director, which is shown as recoverable under loans and advances. 6. MAT credit The Company has an unexpired MAT credit entitlement amounting to Rs. 258.67 as at March 31, 2016 which is classified under current asset based on management’s estimation. The management believes that the unexpired MAT credit entitlement will be utilised in the near future. 7. Segment Information (AS 17) As per Accounting Standard 17 on “Segment Reporting”, segment information has been provided under the Notes to Consolidated Financial Statement 48. Previous year figures 8. Previous year figures have been regrouped/ reclassified, where necessary, to conform to this year’s classification. As per our report of even date For MZSK & Associates Chartered Accountants Firm Registration No.: 105047W Amrish Vaidya Partner Membership No: 101739 For L.K. Maheshwari & Co. Chartered Accountants Firm Registration No.: 000780C Abhay Singi Partner Membership No.: 079873 For and on behalf of the Board of Directors of Flexituff International Limited CIN – L25202MP1993PLC034616 Saurabh Kalani Whole Time Director DIN: 0699380 Ajay Mundra Chief Finance Officer D. K. Sharma Whole Time Director DIN: 00028152 Rishabh Kumar Jain Company Secretary Membership No: F7271 Place: Pithampur Date: May 20, 2016 |