A. SIGNIFICANT ACCOUNTINGPOLICIES
1. Basis of Preparation of Financial Statements:
The financial statements are prepared under the historical cost convention in accordance with the generally accepted accounting principles in India. The applicable mandatory Accounting Standards notified under section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rule, 2014 have been followed in preparation of these financial statements.
2. Use of Estimates:
The preparation of financial statements in conformity with GAAP requires the management of the Company to make estimates and assumptions that affect the reported amounts of income and expenses of the period, the reported balances of assets and liabilities and the disclosures relating to contingent liabilities as of the date of the financial statements. These estimates are based upon management''''s best knowledge of current events and actions. Difference if any between the actual results and estimates is recognized in the period in which the results are known.
3. Fixed Assets and Depreciation:
i. Fixed Assets are stated at cost, net of Cenvat credit, where applicable, less accumulated depreciation and impairment losses. Cost includes financing and other costs incurred for bringing the assets to its working condition for the intended use. Borrowing costs related to the acquisition or construction of the qualifying fixed assets for the period up to the completion of their acquisition or construction are capitalized. Cost of fixed assets not ready for their intended use before such date is disclosed under capital work in progress.
ii. Depreciation on Fixed Assets (except those described below) is provided on the Straight Line Method at the rates not less than those specified from time to time in Schedule II to the Companies Act, 2013, which management considers as being representative of the useful economic life of such assets:
The management estimates the useful life of certain assets as follows:
Wire Enamelling Machines
Furniture and Fixtures
tecnnoiogy I ransrer uost is amortized over a period or b years.
Hi. Depreciation on additions to assets or on sale of assets as the case may be is calculated pro-rata from the month of such addition or up to the month of such sale.
iv. Assets scrapped / discarded from use and held for disposal, if any are stated at lower of book value or their estimated net realizable value.
4. Impairment of Assets:
An asset is treated as impaired when the carrying cost of assets exceeds its estimated recoverable value. The recoverable amount is greater of the Assets'''' Net Selling Price and Value in Use. An impairment loss is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long term investments. Current investments are carried at lower of cost and fair value. Long term investments are carried at cost. However, provision for diminution in value is made to recognize a decline other than temporary, if any, in the value of the investments.
i. Inventories are valued on FIFO basis at lower of cost or estimated net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost.
ii. Cost of Work in progress includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity.
iii. Closing stock of finished goods includes Excise duty payable there on wherever applicable.
7. Excise duty I Service Tax :
Credit availed of Excise duty / Service Tax paid on inputs is reduced from the cost of material / services and is carried forward in Current Assets, Loans and Advances pending utilization.
8. Income and Expenditure :
i. Revenue / Income and Cost / Expenditure are generally accounted on accrual basis as they are earned or incurred, except those with significant uncertainties.
ii. In cases where duty paid materials are consumed prior to duty-free import of material for manufacture of products for export, the estimated excess cost of such material over that of duty free materials is carried forward and charged to revenue on consumption ofsuch duty-free materials.
iii. Sales are recognized at the point of dispatch of goods to the customers. Sales are net of discounts, Sales Tax / VAT and Sales Returns.
iv. Interest income is recognized on time proportion basis.
v. Dividend on Investments is accounted when received.
vi. Insurance claim receivable is recognized in the year of the loss to the extent ascertainable.
POLICIES AND NOTES ON ACCOUNTS
9. Foreign Currency Transactions :
i. Monetary assets and liabilities related to foreign currency transactions remaining unsettled at the end of the year are translated at year end rates.
ii. The difference in translation of monetary assets and liabilities and realized gains and losses on foreign transactions are recognized in the Statement of Profit and Loss.
iii. Premium or discount on forward contracts are amortized over the life of the contract. Foreign Exchange Forward Contracts are re-expressed at the Balance Sheet date and Exchange difference between the spot rate at the date of contract and spot rate on the Balance Sheet date is recognized as gain/loss in the Statement of Profit and Loss Account, in terms of pronouncement of the Institute of Chartered Accountants of India.
10. Derivative Instruments:
The Company uses forward contracts to hedge its risks associated with foreign currency and commodity price fluctuations relating to firm commitment contracts and highly probable forecast transactions. The Company designates such forward contracts in hedging relationship by applying the hedge accounting principles as set out in the "Guidance Note on Accounting for Derivative Contracts" issued by ICAI. These forward contracts are stated at fair value at each reporting date. The contracts are marked to market and the gains and losses, if any, are recognized in the Statement of Profit and Loss, net of applicable deferred income taxes. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. For forecasted transactions, any gains or losses on the hedging instrument are recognized in the Statement of Profit and Loss as on the date of settlement of such transactions. If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss are recognized as income or expense for the period.
In accordance with Accounting Standard 11 ["Effects of changes in Foreign Exchange Rates"] and Accounting Standard 16 ["Borrowing Costs"] issued by the Institute of Chartered Accountants of India, on the Buyers Credits in Foreign Currency availed from time to time up to the time of their settlement or up to the time of creating hedge there against, the Foreign Exchange Gain / Loss applicable on the amount of difference in borrowing cost in Indian Currency and borrowing cost of Buyers'''' Credits in Foreign Currency is accounted as "Applicable loss on foreign currency transactions and translations" under Finance Cost in the Statement of Profit and Loss.
11. Employees Benefits:
i. Gratuity Benefits are accounted for on the basis of amount determined by actuarial valuation made by Life Insurance Corporation of India (LIC) using the Projected Unit Credit Method and are funded accordingly by the approved Trust. Contribution made to LIC is charged to Statement of Profit and Loss. Acturial gains and losses arising from experience adjustments and change in actuarial assumptions are recognized in the Profit and Loss in the period in which they arise.
In respect of certain employees who are not covered under approved Gratuity Fund, the liability is determined on the basis of Actuarial Valuation and is charged to Statement of Profit and Loss.
ii. The Company''''s provident fund and pension scheme are in form of defined contribution plans where contribution is made to funds / Government managed schemes. These are accounted on accrual basis and charged to the Statement of Profit and Loss of the year in which the employee renders the related service.
iii. The monetary value of leave encashment benefit is provided on the basis of actuarial valuation.
12. Taxes on Income:
In accordance with Accounting Standard AS 22 - Accounting for Taxes on Income, issued by the Institute of Chartered Accountants of India, the deferred tax for timing differences between the book and tax profits for the year is accounted for using the tax rates and the laws that have been enacted or substantively enacted as of the balance sheet date. Deferred Tax assets arising from temporary timing differences are recognized to the extent there is reasonable certainty that the asset can be realized in future.
13. Provisions, Contingent liabilities and Contingent Assets:
Provisions are recognized for liabilities that can be measured only by using a substantial degree of estimation, if
(a) The company has a present obligation as a result of a past event
(b) A probable outflow of resources is expected to settle the obligation; and
(c) The amount of the obligation can be reliably estimated.
Contingent liability is disclosed in case of
(a) A present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation
(b) A present obligation when no reliable estimate is possible
(c) A possible obligation arising from past events where the probability of outflow of resources is remote.
Contingent Assets are neither recognized, nor disclosed.
Provisions, Contingent Liabilities and Contingent Assets are reviewed at each Balance Sheet date.
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