NOTES TO FINANCIAL STATEMENT FOR THE YEAR ENDED ON MARCH 31, 2015 NOTE 1: CORPORATE INFORMATION Sharda Motor Industries Limited ("the Company") is primarily engaged in the manufacturing and assembly of Auto Components and White Goods Components. The company serves as a 'Tier I' vendor for some of the major Automobiles and Electronics Original Equipment Manufacturers (OEMs). It has got a 'State of Art' manufacturing facilities across thirteen locations in seven states of India. Their production range includes Exhaust Systems, Catalytic Convectors, Suspension Systems, Sheet Metal Components and Plastic parts for the Automotive and White Goods Industries NOTE 2: BASIS OF brPARATION OF FINANCIAL STATEMENTS The financial statements of the company have been brpared in accordance with generally accepted accounting principles in India (Indian GAAP), and mandatory Accounting Standards as brscribed under section 133 of the Companies Act 2013 read with rule 7 of companies ( Accounts) Rules, 2014 issued by the Ministry of Corporate Affairs. The company has complied in all material respects with the Accounting Standards notified under the Companies Act 2013.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. NOTE 2.1: SIGNIFICANT ACCOUNTING POLICIES (a) Use of Estimates The brparation of financial statements in conformity with Generally Accepted Accounting Principles requires making of estimates and assumptions that affect the reported amounts of assets & liabilities and disclosure of contingent assets & liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Differences between the actual results and estimates are recognized in the year in which the results are known / materialized. (b) Curent-non-current classification All assets and liabilities has been classified as current and non-current as under : Assets An asset is classifiesd as cuurent when its satisfies any of the following criteria: a it is expected to be realised in,or is intended for sale or consumption in, the company's normal operating cycle; b. it is held primarily for the purpose of being traded; c. it is expected to be realised within 12 months after the reporting date; or d. it is cash or cash equivalent unless it is restricted from being exchanmged or used to settle a liability for at least 12 months after the reporting date; Liabilities An liability is classifiesd as cuurent when its satisfies any of the following criteria: a. it is expected to be settled in the Company's normal operating cycle; b. it is held primarily for the purpose of being traded; c. it is due to be settled within 12 months after the reporting date; or d. the company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instrument do not affect its classification" Current Assets/ liabilities include the current portion of non-current financial assets/liabilities respectively. All other assets/ liabilities are classified as non- current. Operating cycle Operating Cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. (c) Fixed Assets i) Tangible Assets The cost of an item of fixed asset comprises its purchase price, inclusive of incidental expenses related to acquisition, less debrciation and any directly or indirectly attributable cost of bringing the asset to its working condition for its intended use; any trade discounts and rebates are deducted in arriving at the purchase price. All other expenses on existing fixed assets, including day to day repair and maintenance expenditure and cost of replacing parts, are charged to the statements of profit and loss for the period during which such expenses are incurred. ii) Intangible Assets Intangible assets rebrsenting computer software ( which does not an integral part of related hardware ), Technical Know-How and Guidance Fee. Computer software which is acquired separately, is recognized initialy at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any. (d) (i) Debrciation on tangible fixed assets Debrciation is provided using the written down value method as per the useful life specified in Part "C" of Schedule II of the Companies Act,2013 and after retaining the residual value of 5% of the original cost of the assets as specified in the said Schedule. Further as per Note No.7 of Part "C" of the said Schedule the carrying amount of the assets as at April 1,2014 has been debrciated as follow: a) Carrying value of asset has been debrciated over the remaining useful life of assets and recognised in the Statement of Profit & Loss. In case where the remaining useful life of an asset is nil the carrying amount of the assets after retaining the residual value has been recognised in the opening balance of retained earnings. However some assets has been debrciated over useful life different from life specified in Schedule II of Companies Act, 2013 based on the technical estimates as details given below (d) (ii) Amortisation of Intangible Assets Intangible assets other than Technical Know-How and Guidance Fee are amortized on a straight line basis over the estimated life of three years and Technical Know-How and Guidance Fee is amortised on straight line method over the estimated life of 6 years from the date of capitalisation. Assets costing up to Rs. 5,000 are fully debrciated in the period of acquisition. (e) Inventories Raw material, Consumable Stores and spare parts are valued at lower of cost or net realizable value. Cost includes purchase price (excluding taxes which are subsequently recoverable by the enterprise from the Concerned revenue authorities), freight inwards and other expenditure incurred in bringing such inventories to their brsent location and condition. In determining the cost, FIFO method is used. Work in progress, manufactured finished goods and traded goods are valued at the lower of cost or net realizable value. The comparison of cost and net realizable value is made on an item by item basis. Cost of work in progress and manufactured finished goods is determined on FIFO basis and comprises direct material, cost of conversion and other costs incurred in bringing these inventories to their brsent location and condition. Scrap is valued at "Net Realizable Value". Excise duty liability is included in the valuation of closing inventory of finished goods. (f) Revenue Recognition Domestic Sales are recognized on transfer of significant risk and rewards to customer, which takes place on dispatch of goods to the customers from factory. The sales are accounted for net of trade discount, sales tax; sale returns but includes excise duty. Export Sales are recognized at the time of the clearance of goods and approval of excise authorities. Sales include revision in prices received from customers with retrospective effect. Interest Income is accounted for on time proportional basis. Dividend income is recognized when the right to receive the Dividend is established. (g) Purchases Purchase of material is recognized on the basis of acceptance of material at the respective location. Price revision of material purchased has also been included in purchases. Further adjustments, if any, are made in the year of final settlement. (h) Foreign Exchange Transactions Transactions in foreign currency are recorded on initial recognition at the exchange rate brvailing at the time of transaction. Exchange differences arising on foreign currency transactions settled during the year are recognised in the Statement of Profit and Loss. Monetary items (i.e. receivables, payables, loans etc.) denominated in foreign currencies as at the Balance sheet Date are translated at year end rates.The resultant exchange differences are recognised in the Statement of Profit and Loss. Non-Monetary assets are recorded at the rates brvailing on the date of transaction. The exchange differences arising on the settlement of monetary items or on reporting these items at rates different from rates at which these were initially recorded/reported in brvious financial statement are recognized as income/expense in the period in which they arise. Company has one branch office outside India is classified as integral foreign operation as those carry on their operations as if they were an extension of Company's operation according to the provision of Accounting Standard (AS) 11, The effects of Changes in foreign exchange rates. The financial statement of an integral foreign operation are translated into Indian Rupees as if the transaction of the foreign operation were those of company itself.Monetary assets and liabilities denominated in foreign currencies as at the Balance Sheet date are translated at year end rates.The resultant exchnage differences are recognised in the Statement of Profit & Loss. Non-monetary asstes are recorded at the rates brvailing at the rates on the date of the transction. In case of forward exchange contracts, the brmium or discount arising at the inception of such contracts, is amortized as income or expense over the life of contract as well as exchange difference on such contracts i.e. difference between the exchange rate at the reporting/settlement date and the exchange rate on the date of inception/the last reporting date, is recognized as income/expense for the period. (i) Borrowing Costs Borrowing costs that are attributable to the acquisition for construction of qualifying asset are capitalized as part of the cost of such asset. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue. (j) Investments Long Term Investments are stated at cost unless there is a diminution of permanent nature, if any. Current Investments are carried at lower of cost or fair value. (k) Expenditure on Research and Development The revenue expenditure on research and development is charged as an expense in the year in which it is incurred. However Expenditure on development activities, whereby research findings are applied to a future plan or design for the production of new or substantially improved products and process and has got future benefits is capitalized. Such capitalization includes cost of materials, direct labor and an appropriate proportion of overheads that are directly attributable to brparing the assets for its intended use. Capitalized development expenditure is stated at cost less accumulated amortization and impairment losses. Debrciation on such capital assets is followed in accordance with the Company's Policy. (l) Employee Benefit i) Short term employee benefits are recognized as an expense at the undiscounted amount in the Statement of Profit and Loss of the year in which related service is rendered. ii) The Company has Defined Contribution plans for post employment benefits' namely Provident Fund and Employee State Insurance Scheme. The Company's contributions in the above plans are charged to revenue every year. iii) The Company has Defined benefits plans namely Leave Encashment / Compensated Absence and Gratuity for employees. Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation made at the end of each Financial Year by using 'Projected Unit Credit' (PUC) method. However, the company through its Trust has taken a policy with 'Life Insurance Corporation of India' to cover the gratuity liability of the employees. The difference between the actuarial valuation of the gratuity of employees at the year end and the balance of funds with Life Insurance Corporation of India is provided for as liability in the books. iv) Provision for Leave Encashment is accrued and provided for on the basis of an actuarial valuation made at the end of each Financial Year by using 'Projected Unit Credit' (PUC) method. v) Actuarial gains / losses are immediately taken to Statement of Profit and Loss. vi) Terminal benefits are recognized as an expense immediately. (m) Taxes on Income (i) Current Tax Current tax is amount of tax payable on taxable income for the year as determined in accordance with the provisions of the Income Tax Act, 1961. (ii) Deferred Tax Deferred tax resulting from "timing difference between book and taxable profit is accounted for using the tax rates and laws that have been enacted or substantively enacted as on the balance sheet date. Deferred tax assets subject to consideration of prudence, are recognized and carried forward 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 realized. (n) Contingency/Provisions Provision is recognized when a company has a brsent obligation as a result of past event, it is probable that an outflow of resources embodying benefit will be required to settle the obligation, in respect of which a reliable estimate can be made. Contingent Liabilities, if material are disclosed by way of notes, contingent assets are not recognized or disclosed in the financial statements. (o) Leases Lease arrangements where the risks and rewards incident to the ownership of assets substantially vests with the lesser, are recognized as operating leases. Lease payments under operating leases are recognized as an expense in the Statement of Profit and Loss. (p) Earnings Per Share Basic earning per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting brference dividends and attributable (taxes) by the weighted average number of equity shares outstanding during the year. For the purpose of calculating Diluted Earning per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares. The dilutive potential equity shares are deemed converted as of the beginning of the period, unless they have been issued at a later date. (q) Cash Flow Cash Flow statement is brpared as per the indirect method brscribed under "Accounting Standard-3" "Cash Flow Statement". (r) Cash and cash equivalents Cash and Cash equivalents comprise cash balances on hand, cash balance with bank, and highly liquid investments with original maturities, at the date of purchase/ investment, of three months or less. (s) Warranty Warranty expenses are provided for in the year of sales based on technical estimates. In addition, specific provision is also made against customer claims for manufacturing. (t) Impairment of Assets The company assesses whether there is any indication that any asset may be impaired at the balance sheet date. If any indication exists, the company estimates the recoverable amount. If the carrying amount of the fixed assets exceeds the recoverable amount, an impairment loss is recognized in the accounts; to the extent the carrying amount exceeds the recoverable amount. NOTE 1 As per the requirements of sub section (5) of section 135 of the Companies Act, 2013 the Company was required to spend at least two per cent of its average net profits for the three immediately brceding financial years, in pursuance of its Corporate Social Responsibility (CSR) Policy. Accordingly, the Company had to spend a minimum of Rs. 59.44 Lacs during the current financial year towards CSR activities. During the current year, the Company has adopted a strategy whereby certain long term programmes will be undertaken by the Company for the social and economic welfare. As the process of evaluating and identifying specific programme is in progress, no amount was incurred on CSR during the year ended 31 March 2015. NOTE 2 The Compnay has w.e.f. 01.04.2014, computed debrciation in accordance with the useful life of the fixed assets as per Schedule II of the Companies Act 2013. Consequantly Debrciation charged for the year is higher by Rs. 351.43 Lacs and carrying value of assets amounting to Rs. 137.96 Lacs ( Net of Deferred Tax Rs. 66.26 Lacs ) after retaining the residual value, whose remaining useful life is NIL has been adjusted from the opening balance of retained earnings. NOTE 3 In the opinion of the Board, the current assets, loans and advances are approximate of the value stated if realised in the ordinary course of business. The provision for all known liabilities are adequate and not in excess of the amount reasonably necessary. NOTE 4 The balances of debtors, creditors and loans and advances are awaiting confirmation. NOTE 5 Figures are rounded off to nearest rupee in Lacs . Previous year figures has been re-grouped or re-classified where ever considered necessary. For and on Behalf of the Board of Directors Pradeep Rastogi President-Legal & CFO M.No. 085838 N. D. Relan Co-Chairman DIN 00240280 Nitin Vishnoi Company Secretary M. No. F3632 Ajay Relan Managing Director DIN 00257584 PLACE : New Delhi DATED : 26th May, 2015 |