NOTE 27 A- SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements relate to Dixon Technologies (India) Private Limited (Parent Company), all its subsidiaries and its interest in joint venture and Associates (together referred to as ?The Group?). The Consolidated financial statements have been brpared on following Basis:
a)
The financial statements of the Parent Company and its subsidiary have been combined on a line by line basis by adding together the book values of the like items of assets, liabilities, income and expenses, after eliminating intra-group balances and intra-group transactions and any unrealized profits / losses included therein, if any.
b)
Investments in Associate are accounted for using the equity method as per Accounting Standard-23 on Accounting for Investments in Associates in Consolidated Financial Statements. All unrealized surplus and deficit on transactions between the group companies are eliminated
c)
Interests in jointly controlled entities, where the Company is a direct venturer, are accounted for using Proportionate consolidation in accordance with AS-27. The difference between costs of the Company?s interests in jointly controlled entities over its share of net assets in the jointly controlled entities, at the date on which interest is acquired, is recognized in the Consolidated Financial Statements as Goodwill or Capital Reserve, as the case may be.
d)
The consolidated Financial Statements are brpared by adopting uniform policies for like transactions and other events in similar circumstances and are brsented to the extent required and possible, in the same manner as the Parent Company's separate financial statements.
e)
Minority's interest in net profit of Subsidiary for the year is identified and adjusted against the income of the group in order to arrive at the net income attributable to Shareholders of the parent Company.
f)
Minority's interest in net assets of Subsidiary is identified and brsented in the Consolidated Balance Sheet separate from liabilities and the equity of the Parent's Shareholders.
g)
The excess/shortfall of cost to the Company of its investments in the subsidiary companies, over the net assets at the time of acquisition in the subsidiaries as on the date of investment is recognized in the financial statements as goodwill/capital reserve as the case may be.
h)
The financial statements of the group entities used for the purpose of consolidation are drawn up to the same reporting date as that of the parent Company.
Companies included in consolidation
| | | |
Dixon Appliances Private Limited | | | |
Dixon Bhurji Moulding Private Limited | | | |
Dixon Global Private Limited | | | |
Padget Electronics Private Limited | | | |
My Box Technologies Private Limited. | | | |
Summary of Significant Accounting Policies:
Basis of brparation of Accounts
The financial statements of the Company have been brpared in accordance with 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 as brscribed under section 133 of the Companies Act, 2013 (The 'Act') read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of The Act, to the extent notified. The financial statements have been brpared under the historical cost convention on an accrual basis. The accounting policies applied by the Company are consistent with those used in the brvious year.
Use of Estimates: The brparation of financial statements, in conformity with Generally Accepted Accounting Principles (GAAP), requires management to make estimates and assumptions that affect the reported balances of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements and the reported amount of revenues and expenses during the year. Actual results could differ from those estimated. Any revision to accounting estimates is recognized prospectively in current and future periods.
Fixed assets are carried at cost of acquisition less accumulated debrciation and impairment loss, if any. Cost is inclusive of freight, applicable duties, taxes (excluding Cenvat & surcharge and cess thereon) and other directly attributable costs to bring the assets to their working condition /for intended use.
Debrciation & Amortization
Debrciation on tangible asset is provided over useful life of an asset on straight line methods brscribed in Schedule II to the Companies Act, 2013. Assets costing Rs. 5,000/- or below are fully debrciated in the year of purchase.
Computer software are amortized over period of three years from date of purchase as per Accounting standard 26 as notified by companies (Accounts) rules, 2014.
Premium paid on lease hold land is for 99 years and not amortized over the period of lease.
Upfront fee on ECB loans is being amortized over the period of loan.
In case the cost of part of a tangible asset is significant to the total cost of the assets and useful life of that part is different from the remaining useful life of the asset, debrciation has been provided on straight line method based on internal assessment and independent technical evaluation carried out by the external valuers which the management believes that the useful lives of the component best rebrsent the period over which the management expects to use those components.
Foreign exchange transaction
Transactions in foreign currencies are recorded at the rates brvailing on the date of the transactions. At the year end monetary items denominated in foreign currencies are re-instated at the rates brvailing on the balance sheet date or the forward cover rates as applicable, and exchange gains / losses are dealt with in the Profit & Loss account.
In case of monetary items which are covered by forward exchange contract, the difference between the booking rates and the rate on the date of contract is also recognized and dealt with in the Profit & Loss Account.
The company has exercise option under notification no. GSR 914 (E) dated 29th December'2011 issued by Ministry of Corporate Affairs and accordingly net exchange difference on long term foreign currency borrowing has been added / reduced to the debrciable fixed assets acquired & Work in Progress.
Investments that are readily realizable and are 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 at cost or fair value, whichever is lower. Long-term investments are carried at cost. However, provision for diminution is made to recognize a decline, other than temporary, in the value of the investments, such reduction being determined and made for each investment individually.
Inventories are valued as under:
a.
Raw Materials, Packing Materials and Stores& Spares - at lower of cost or net realizable value.
b.
Work - in - Progress - at lower of cost or net realizable value.
c.
Finished Goods - at lower of cost or net realizable value.
Cost referred to above rebrsent cost (based on moving first in first out method) incurred in bringing the inventories to their brsent location and condition inclusive of customs duty, freight, normal demurrage, insurance net of discounts/ incentive recoverable from suppliers.
In case of Work in Progress and Finished goods, cost includes appropriate portion of overheads and where applicable, excise duty.
The net realizable value of work-in-progress is determined with reference to the selling price of related finished goods. Raw materials and other supplies held for use in production of finished goods are not written down below costs, except in cases where material prices have declined, and it is estimated that the cost of the finished products will exceed their net realizable value. In such cases, the materials are valued at the lower of replacement cost or the ultimate net releasable value of finished goods.
a.
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.
b.
Revenue from sale of goods is recognized when the significant risks and rewards of ownership of goods are passed on to the buyers. Sales are net of taxes, but before trade and quantity discounts.
c.
Sale of consignment is recognized as income when good sold by Consignment agent behalf of consignor.
d.
Interest revenue is recognized on a time proportion basis taking into account the rate applicable and amount outstanding.
e.
Insurance claims are accounted for on acceptance / or to the extent amounts have been received.
General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognized as expenses in Statement of Profit and Loss in the period in which they are incurred.
Export incentives are accounted for on accrual basis.
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. An earnings considered in ascertaining the Company?s earnings per share is the net profit (loss) for the period. The weighted average number of equity shares outstanding during the period and for all periods brsented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares that have changed the number of equity shares outstanding, without a corresponding change in resources. 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 equity shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
Provision is made for both current and deferred tax. Provision for current tax is made on the basis of assessable profits computed in accordance with the provisions of Income tax Act, 1961.
Deferred income taxes are recognized for the future tax on components attributable to timing differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax status. The effect on deferred taxes of a change in tax rates is recognized using the tax rates and tax laws that have been enacted by the balance sheet date Deferred Tax assets are recognized to the extent that they will originate in one period and are capable of reversal in one or more subsequent periods. Where there is unabsorbed debrciation or carried forward losses, deferred tax assets are recognized only if there is virtual certainty of realization of such assets. Such assets are reviewed as at each balance sheet date to reassess realization.
Accounting for credit available in respect of MAT under Income Tax Act
As per the Guidance note, issued by the Institute of Chartered Accountants of India, on accounting for credit available in respect of Minimum Alternative Tax (MAT) under the Income Tax Act 1961, MAT credit is source controlled by the Company as a result of past event,(viz., payment of MAT).MAT credit has expected future economic benefits in the form of its adjustments against the discharge of the normal tax liability if the same arises during the specified period and accordingly MAT credit is an asset. And it should be recognized as asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. The Company has recognized MAT credit asset as there is convincing evidence to the effect that the Company will pay normal income tax during the specified period.
a)
Provident fund contributions are accounted for on accrual basis with corresponding contribution to the authorities.
b)
Provision for gratuity liability is determined on the basis of actuarial valuation at the balance sheet date carried out by an independent actuary and charged to revenue each year.
c)
In respect of leave, as the leave accrued, if any, laps at the end of the year and hence, no liability in respect of accrued leave arises.
d)
In joint venture company has commence its production w.e.f. 1st January 2016 and the same being small period of operations on the current financial year, the provision for liability towards gratuity has not been made in the financial statements.
An impairment loss, if any, is recognized whenever the carrying amount of the fixed assets (tangible or intangible) exceeds the recoverable amount i.e. the higher of the assets net selling price and value in use.
Provisions and Contingencies
Provisions:
Provisions are recognized when there is a brsent obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the brsent obligation at the Balance Sheet date and are not discounted to its brsent value.
Contingent Liabilities:
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a brsent obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.
Reserch & Development Expenses
The revenue expenditure on research and development is charged to Statement of Profit & Loss of the year in which it is incurred. Expenditure which results in creation of capital assets is treated similar to other fixed assets.
Provision for Dividend (including income tax thereon) as proposed by the Board of Directors are accounted for in the Financial Statements, pending approval at the Annual General Meeting.
Product warranty liability and warranty expenses are recorded at the time the product is sold, if the claims of the customers under warranty are probable and the amount can be reasonably estimated.
Classification of Assets and Liabilities as Current and Non-Current
All assets and liabilities are classified as current or non-current as per the Company?s normal operating cycle and other criteria set out in Revised Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, 12 months has been considered by the Company for the purpose of current/ non-current classification of assets and liabilities.
Pre-Operative Expenditures
Pre-operative expenditure are apportioned to fixed assets and debrciation on br-operative is provided over useful life of an assets on straight line method brscribed in schedule II to the Companies? Act 2013.
i. In accordance with the revised accounting standard 15, ?Employee Benefits? the requisite disclosures are as follows:-
(a)
Gratuity
: The Company has defined benefit gratuity plan. Expenses are recognized under head ?Contribution to Provident and Other Funds?. Every employee who has rendered continuous service of five years or more is entitled to get gratuity at 15 days salary (15/26 X last drawn basic salary plus variable dearness allowance) for each completed year of service subject to a maximum of Rs.1,000,000 on resignation, termination, disablement or on death. The liability for the same is recognized on the basis of actuarial valuation.
(b)
Actuarial Assumptions:
Principal assumptions used for actuarial valuations are:
i) Method Used | Projected Unit Credit Method |
| | Prev. Year |
ii) Discount Rate | 8.00% | 8.00% |
iii) Expected rate of return on assets (Gratuity only) | 0.00% | 0.00% |
iv) Future Salary Increase | 6.00% | 6.00% |
The estimates of future salary increases considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
(c)
Expenses recognized in Statement of Profit & Loss:
(Amount in Rupees)
| |
Descriptions | | Previous Year |
Current Service Cost | 2,704,675 | 1,632,097 |
Past Service Cost | | - |
Interest Cost on benefit obligation | 1,357,499 | 1,172,682 |
Expected return on plan assets | | - |
Net actuarial gain / (loss) recognized in the year | 3,872,211 | 1,180,764 |
Expenses recognized in the Profit & Loss A/c | 7,934,385 | 3,985,543 |
(d)
Amount recognized in the Balance Sheet
: (Amount in Rupees)
| |
Descriptions | | Previous Year |
Present value of obligation as at 31.03.2016 (i) | 24,287,048 | 16,968,739 |
Fair value of plan assets as at 31.03.2016 (ii) | | - |
Difference (ii) - (I) | (24,287,048 ) | (16,968,739) |
Net assets / (liability) recognized in the Balance Sheet | (24,287,048 ) | (16,968,739) |
(e)
Change in the brsent value of the defined benefit obligations:
(Amount in Rupees)
| |
| | Previous Year |
Present value of obligation as at 01.04.2015 | 16,968,739 | 14,658,530 |
Interest Cost | 1,357,499 | 1,172,682 |
Current service Cost | 2,704,675 | 1,632,097 |
Past service Cost | | - |
Benefits paid | (616,076) | (1,675,334) |
Net actuarial gain / (loss) on obligation | 3,872,211 | 1,180,764 |
Present value of the defined benefit Obligation as at 31.03.2016 | 24,287,048 | 16,968,739 |