LG ELECTRONICS INDIA PRIVATE LIMITED
Notes forming part of the financial statements
1	BACKGROUND INFORMATION
	LG Electronics India Private Limited (the Company) was incorporated on January 20, 1997 to manufacture and trade in Televisions (Flat Panel, Signage, Projector, Monitor TV, etc.), Air Conditioners, Refrigerators, Microwave Ovens, Washing Machines, Combrssors, Vacuum Cleaners, Optical Disk Drive, Audio & Digital Video Display Systems, GSM Mobiles, Water Purifier, Air Purifier, Laptop and Security Camera. The manufacturing facilities of the Company are situated at Greater Noida in Uttar Pradesh and also in Ranjangaon near Pune in the State of Maharashtra. The Company is closely held with 113,128,726 shares held by LG Electronics Inc., South Korea and the balance 6 shares held by its nominees.
	The accompanying financial statements reflect the results of the activities undertaken by the Company during the year ended March 31, 2016.
2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1	Basis of Accounting and brparation of financial statements
	The financial statements of the Company have been brpared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013 ("the 2013 Act"), as applicable.  The financial statements have been brpared on accrual basis under the historical cost convention. The accounting policies adopted in the brparation of the financial statements are consistent with those followed in the brvious year.
2.2	Use of Estimates
	The brparation of financial statements in conformity with Indian GAAP requires the management to make estimates and assumptions in the reported amounts of assets and liabilities (including contingent liabilities) and reported income and expenses during the year. The management believes that the estimates used in brparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialise.
2.3	Cash and cash equivalents
	Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
2.4	Cash flow statement
	Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
2.5	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.
LG ELECTRONICS INDIA PRIVATE LIMITED
Notes forming part of the financial statements
2.5	Revenue Recognition (cont'd)
	Sale of Goods
	Revenue from sale of finished goods, traded goods, sub-assemblies, raw materials & components and service components & spares is recognised upon the passage of significant risks and rewards of ownership of the goods to the customers. Sales are recorded at invoice value, net of trade discount & incentives, sales taxes, returns but including excise duty.
	Sale, Installation and commissioning contracts of System Air Conditioners (SACs)
	Revenue from fixed price contract of sale and installation and commissioning of SACs is recognised on the percentage completion method and where no significant uncertainty exists regarding the amount of consideration that will be derived on completion of the contract. Percentage of completion is determined on the basis of survey of work performed upto the reporting date.
	A provision for anticipated loss is recognised where it is probable that the estimated contract costs are likely to exceed the total contract revenue. A provision is made for liquidated damages and penalties in terms of the contract wherever there is a delayed delivery attributable to the Company.
	Maintenance contracts
	Revenue from maintenance contracts are recognised on a pro-rata basis over the period of the contract.
2.6	Other Income
	Revenue from interest on bank deposits is recognised on the time proportion method taking into consideration the amount outstanding and the applicable interest rates.
	Export benefits in respect of Duty Drawback Scheme, Focus Market Scheme, Focus Product Scheme and Merchandise Export from India Scheme are accrued as income in the year in which goods are exported.
	Sales tax subsidy entitlements from the State Governments are recognized as income on accrual basis.
2.7	Fixed Assets (Tangible / Intangible)
	Tangible and Intangible assets are carried at cost less accumulated debrciation / amortisation and impairment losses, if any. The cost of fixed assets comprises its purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use, other incidental expenses and interest on borrowings attributable to acquisition of qualifying fixed assets up to the date the asset is ready for its intended use. Machinery spares which can be used only in connection with an item of fixed asset and whose use is expected to be irregular are capitalised and debrciated over the useful life of the principal item of the relevant assets. Subsequent expenditure on fixed assets after its purchase / completion is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its brviously assessed standard of performance.
LG ELECTRONICS INDIA PRIVATE LIMITED
Notes forming part of the financial statements
2.7	Fixed Assets (Tangible / Intangible) (cont'd)
	Fixed assets retired from active use and held for sale are stated at the lower of their net book value and net realisable value and are disclosed separately.
	Capital work-in-progress:
	Projects under which tangible fixed assets are not yet ready for their intended use are carried at cost, comprising direct cost, related incidental expenses and attributable interest.
2.8	Debrciation
	Debrciation on all tangible assets is provided on the straight-line method over the estimated useful life of the assets at rates which are higher / lower than the rates specified in Schedule II to the Companies Act, 2013. The life of the assets has been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc. The useful lives considered by the Company are as follows:
	Category of Fixed Assets						Useful Life (Schedule II)		Estimated Useful Life (Years)
	Building
	- Factory						30		20
	- Utilities						30		10
	- Other than Factory						30		20
	Plant & Machinery
	- Home Appliances Division						15		10
	- Air Conditioning Division						15		10
	- Home Entertainment Division						15		5
	- Mobile Communication Division						15		5
	Moulds, Jigs & Fixtures
	- Home Appliances Division						15		3
	- Air Conditioning Division						15		3
	- Home Entertainment Division						15		1
	- Other Jigs / General Tools						15		5
	Furniture & Fixtures						10		5
	Office Equipment						5		5
	Computers						3		5
	Vehicles						8		5
	Debrciation on addition to fixed assets is provided on pro-rata basis from the month the assets are acquired/installed. Debrciation on sale/deduction from fixed assets is provided for upto the month prior to the month of sale, deduction, discards as the case may be. Premium paid on leasehold land is amortised over the period of lease.
LG ELECTRONICS INDIA PRIVATE LIMITED
Notes forming part of the financial statements
2.8	Debrciation (cont'd)
	Intangible assets are amortised over their estimated useful life as follows:
	Computer software - 3 years
	The estimated useful life of the intangible assets and the amortization period are reviewed at the end of each financial year and the amortization method is revised to reflect the changed pattern.
2.9	Impairment of Assets
	Whenever events indicate that assets may be impaired, the assets are subject to a test of recoverability based on estimates of future cash flows arising from continuing use of such assets and from its ultimate disposal. A provision for impairment loss is recognised where it is probable that the carrying value of an asset exceeds the amount to be recovered through use or sale of the asset. When there is an indication that an impairment loss recognised for an asset in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of Profit and Loss, except in case of revalued assets.
2.10	Borrowing costs
	Borrowing costs include interest and  exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Costs in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the Statement of Profit and Loss over the tenure of the loan. Capitalisation of borrowing costs is suspended and charged to the Statement of profit and Loss during the extended periods when active development activity on the qualifying assets is interrupted.
2.11	Inventories
	Inventories are valued at lower of cost and net realisable value after providing for obsolescence and other losses, wherever considered necessary. Cost includes all charges in bringing the goods to the point of sale. Goods in transit are valued at cost excluding import duties. The basis for determination of cost of various categories of inventory is as follows:
	Raw Materials & Components, Stores & spares, Packing materials and Service components & spares						Monthly weighted average
	Traded Goods						Monthly weighted average
	Finished goods (manufactured), work in progress and sub-assemblies						Material cost plus an appropriate share of labour and manufacturing overheads wherever applicable.
	A provision for obsolescence on surplus stores & spares, loose tools, components for sale and service of finished goods held to support servicing of discontinued models and cost of certain obsolete/dormant models is accrued at lower of book value/estimated fair value. The recoverability of all other inventories is periodically reviewed and an impairment loss is recognised for the difference between estimated fair value and carrying value.
LG ELECTRONICS INDIA PRIVATE LIMITED
Notes forming part of the financial statements
2.12	Provision for Doubtful Debts
	A provision for doubtful debts on trade receivables is accrued at the close of the financial year based upon the aging of the trade receivables and past historical trend of amounts recovered from customers appearing in the various aging band.
2.13	Provision for Other Assets/Advances
	A provision for doubtful assets/advances is accrued based upon the aging of these assets/advances and past historical trend of amounts recovered in the various aging band.
2.14	Leases
	Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating leases. Lease rentals under operating leases are recognised in the Statements of Profit and Loss on a straight-line basis.
2.15	Foreign currency transactions and translations
	Initial recognition
	Transactions denominated in foreign currencies are accounted at the rates brvailing on the date of the transaction.
	Measurement of foreign currency monetary items at the Balance Sheet date
	Monetary items denominated in foreign currencies (other than derivative contracts) at the year-end are restated at the exchange rates brvailing on the date of the Balance Sheet. Non-monetary items denominated in foreign currencies are carried at cost.
	Treatment of exchange differences
	Exchange differences arising on settlement / restatement of short-term foreign currency monetary assets and liabilities of the Company are recognized as income or expense in the Statement of Profit and Loss.
	The exchange differences arising on settlement / restatement of long-term foreign currency monetary items are amortised on settlement / over the maturity period of such items if such items do not relate to acquisition of debrciable fixed assets.
	Accounting of forward contracts
	Premium / discount on forward exchange contracts, which are not intended for trading or speculation purposes, are amortised over the period of the contracts if such contracts relate to monetary items as at the balance sheet date. Any income or expense on account of exchange differences either on settlement of the contract or on translation of the unmatured foreign currency contract at the rate brvailing on the date of the Balance Sheet date is recognised in the Statement of Profit and Loss.
LG ELECTRONICS INDIA PRIVATE LIMITED
Notes forming part of the financial statements
2.16	Employee Benefits
	Employee benefits include provident fund, gratuity fund, employee state insurance scheme and compensated absences.
	Defined contribution plans
	In accordance with the provisions of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, eligible employees of the Company are entitled to receive benefits with respect to provident fund, a defined contribution plan in which both the Company and the employee contribute monthly at a determined rate (currently 12% of employees basic salary). Companys contribution to Provident Fund is charged to the Statement of Profit and Loss.
	Defined benefit plans
	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 Company contributes all the ascertained liabilities to a fund set up by the Company and administered by a board of trustees. 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.
	Short-term employee benefits
	The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognised during the year when the employees render the service.
	Long-term employee benefits
	Leave encashment benefits payable to employees of the Company on retirement, death while in service or on termination of employment with respect to accumulated leaves outstanding at the year end are accounted for on the basis of an actuarial valuation as at the balance sheet.
2.17	Segment reporting
	The Company identifies primary segments based on the dominant source, nature of risks and returns and the internal organization and management structure. The operating segments are the segments for which separate financial information is available and for which operating profit / loss amounts are evaluated regularly by the executive management in deciding how to allocate resources and in assessing performance.
	The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment.
LG ELECTRONICS INDIA PRIVATE LIMITED
Notes forming part of the financial statements
2.17	Segment reporting (cont'd)
	Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors.
	Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis are included under unallocated revenue / expenses / assets / liabilities.
2.18	Excise Duty
	Excise duty payable on finished goods is accounted for upon manufacture and transfer of finished goods to the stores. Payment of excise duty is deferred till the clearance of goods from the factory brmises. Incremental difference in excise duty on opening and closing stock of finished goods are recorded under cost of materials in Note 20.C.
2.19	Customs Duty
	Customs duty (including countervailing duty) payable on stocks lying with customs or in bonded warehouses as at the balance sheet date is accrued and included in the valuation of closing stock. Payment of customs duty is deferred till clearance of goods.
2.20	Earnings per Share
	Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.
	Diluted earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of shares outstanding during the year as adjusted for the effects of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. Dilutive potential equity shares are determined independently for each period brsented.
2.21	Taxes on income
	Income taxes consist of current taxes and changes in deferred tax liabilities and assets.
	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. Income taxes are accounted for on the basis of estimated taxes payable and adjusted for timing differences between the taxable income and accounting income as reported in the financial statements.
	Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as the reporting date.
LG ELECTRONICS INDIA PRIVATE LIMITED
Notes forming part of the financial statements
2.22	Research and Development
	Revenue expenditure pertaining to research and development is charged to the Statement of Profit and Loss. Fixed assets utilised for research and development are capitalised and debrciated in accordance with the policies stated for tangible fixed assets and intangible assets.
2.23	Provisions and contingencies
	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 the obligation. A disclosure for a contingent liability is made when there is 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.
	Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed.
	Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an economic benefit will arise, the asset and the related income are recognized in the year in which the change occurs.
2.24	Derivative contracts
	Derivative contracts which are closely linked to the existing assets and liabilities are accounted as per the policy stated for Foreign Currency Transactions and Translations.
2.25	Warranty
	The estimated liability for product warranties is recorded when products are sold. These estimates are established using historical information on the nature, frequency and average cost of warranty claims and management estimates regarding possible future incidence based on corrective actions or product failures. The timing of outflows will vary as and when warranty claim will arise ranging from 1 to 3 years.
2.26	Service tax input credit
	Service tax input credit is accounted for in the books based on the CENVAT credit rules in the period in which the services are received or accounted and when there is no uncertainty in availing / utilizing the credits.
2.27	Insurance claims
	Insurance claims are accounted for on the basis of claims admitted and to the extent that there in no uncertainty in receiving the claims.
2.28	Material Events
	Material events occurring after the Balance Sheet date are taken into cognisance.
LG ELECTRONICS INDIA PRIVATE LIMITED
Notes forming part of the financial statements
2.29	Classification of current / non-current liabilities and assets
	Liability
	A liability has been classified as current when it satisfies any of following criteria:
	a)     It is expected to be settled in the Companys normal operating cycle;
	b)     It is held primarily for the purpose of being traded;
	c)     It is due to be settled within twelve months after reporting date; or
	d)    The Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by issue of equity instrument do not affect its classification.
	e)     All other liabilities are classified as non-current.
	Asset
	An asset has been classified as current when it satisfies any of following criteria:
	a)     It is expected to be realised in, or is intended for sale or consumption in the Companys normal operating cycle;
	b)     It is held primarily for the purpose of being traded;
	c)     It is expected to be realised within twelve months after reporting date; or
	d)    It is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date.
	e)     All other assets are classified as non-current.
	Based on the nature of products / activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.

BACKGROUND INFORMATION
LG Electronics India Private Limited (‘the Company’) was incorporated on January 20, 1997 to manufacture and trade in Televisions (Flat Panel, Signage, Projector, Monitor TV, etc.), Air Conditioners, Refrigerators, Microwave Ovens, Washing Machines, Combrssors, Vacuum Cleaners, Optical Disk Drive, Audio & Digital Video Display Systems, GSM Mobiles, Water Purifier, Air Purifier, Laptop and Security Camera. The manufacturing facilities of the Company are situated at Greater Noida in Uttar Pradesh and also in Ranjangaon near Pune in the State of Maharashtra. The Company is closely held with 113,128,726 shares held by LG Electronics Inc., South Korea and the balance 6 shares held by its nominees.
The accompanying financial statements reflect the results of the activities undertaken by the Company during the year ended March 31, 2016.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting and brparation of financial statements
The financial statements of the Company have been brpared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013 ("the 2013 Act"), as applicable.  The financial statements have been brpared on accrual basis under the historical cost convention. The accounting policies adopted in the brparation of the financial statements are consistent with those followed in the brvious year.
Use of Estimates
The brparation of financial statements in conformity with Indian GAAP requires the management to make estimates and assumptions in the reported amounts of assets and liabilities (including contingent liabilities) and reported income and expenses during the year. The management believes that the estimates used in brparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialise.
Cash and cash equivalents
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
Cash flow statement
Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
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.

Employee Benefits
Employee benefits include provident fund, gratuity fund, employee state insurance scheme and compensated absences.
Defined contribution plans
In accordance with the provisions of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, eligible employees of the Company are entitled to receive benefits with respect to provident fund, a defined contribution plan in which both the Company and the employee contribute monthly at a determined rate (currently 12% of employee’s basic salary). Company’s contribution to Provident Fund is charged to the Statement of Profit and Loss.
Defined benefit plans
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 Company contributes all the ascertained liabilities to a fund set up by the Company and administered by a board of trustees. 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.
Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognised during the year when the employees render the service.
Long-term employee benefits
Leave encashment benefits payable to employees of the Company on retirement, death while in service or on termination of employment with respect to accumulated leaves outstanding at the year end are accounted for on the basis of an actuarial valuation as at the balance sheet.

Segment reporting
The Company identifies primary segments based on the dominant source, nature of risks and returns and the internal organization and management structure. The operating segments are the segments for which separate financial information is available and for which operating profit / loss amounts are evaluated regularly by the executive management in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment.
Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors.
Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on reasonable basis are included under unallocated revenue / expenses / assets / liabilities.