1. Significant accounting judgments, estimates and assumptions
The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
The Company measures the cost of equity-settled transactions with employees by ultimate holding Company using a Black Scholes Options Pricing model to determine the fair value of the liability incurred. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. For equity-settled share-based payment transactions, the liability needs to be premeasured at the end of each reporting period up to the date of settlement, with any changes in fair value recognized in the profit or loss. This requires a reassessment of the estimates used at the end of each reporting period. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in note 34.
Defined benefit plans (gratuity benefits)
The cost of the defined benefit gratuity plan and other post-employment medical benefits and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates for the respective countries. Further details about gratuity obligations are given in note 33.
Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See note 40 and 41 for further disclosures.
Product warranties accruals
The provisions for product warranties, on account of goods sold, recorded in the balance sheet on the basis of actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate and failure rates. Due to the complexities involved in the valuation and its long-term nature, a provision for product warranty is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate, the management considers the interest rates of government bonds in currencies consistent with the currencies of the product warranty provision.
The failure rate is based on actual number of calls received by the Company from customers on account of complaints. Further details about provisions for product warranties are given in note 15.
2. Gratuity and other post-employment benefit plans
Gratuity (being administered by a Trust) is computed as 15 days salary, for every completed year of service or part thereof in excess of 6 months and is payable on retirement/termination/resignation. The benefit vests on the employee completing 5 years of service. The Gratuity plan for the Company is a defined benefit scheme where annual contributions as demanded by the insurer are deposited, to a Gratuity Trust Fund established to provide gratuity benefits. The Trust has taken an Insurance policy, whereby these contributions are transferred to the insurer. The Company makes provision of such gratuity asset/ liability in the books of account on the basis of actuarial valuation carried out by an independent actuary.
The Company also provide certain additional retirement benefits to the employees of the Faridabad Refrigeration Operations where INR 35,000 is paid to employee on his retirement. This retirement benefit is an unfunded defined benefit scheme. The Company makes provision of such liability on the basis of actuarial valuation carried out by an independent actuary.
The following tables summaries the components of net benefit expense recognized in the statement of profit or loss and the funded status and amounts recognized in the balance sheet for the respective plans:
The sensitivity analyses above have been determined based on a method that extrapolates the impact on defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period.
The following payments are expected contributions to the defined benefit plan in future years:
The average duration of the defined benefit plan obligation at the end of the reporting period is 13.22 years (31 March 2016: 13.51 years).
3. Share-based payments
The Company does not provide any share-based compensation to its employees. However, the ultimate holding Company, Whirlpool Corporation, USA has provided various share-based payment schemes to employees.
A. Details of these plans are given below:
I. Employee Stock Options
A stock option gives an employee, the right to purchase shares of Whirlpool Corporation at a fixed price for a specific period of time. The grant price (or strike price) is fixed based on the closing price of Whirlpool Corporation common stock on the date of grant. Stock options vest in three equal annual installments and expire in ten years from the date they are granted.
II. Restricted Stock Units (RSU)& Performance Stock Units (PSU)
a. Performance - These are the units of stock granted to employee at nil exercise price. It converts one for one shares of Whirlpool Corporation at the end of the vesting period of three years.
b. Time based - These are the units of stock granted to employee at nil exercise price. It converts one for one shares of Whirlpool Corporation at the end of the vesting period. One third of the option vests after one year, another one third vests after two years and final one third will vests after three years.
The expense recognized for employee services received during the year is shown in the following table:
Movements during the year
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements during the year:
1 The weighted average share price at the date of exercise of these options was $ 182.35 (31 March 2016: $ 165.65)
The weighted average remaining contractual life for the share options outstanding as at 31 March 2017 was 7.14 years (31 March 2016:7.42 years).
The weighted average fair value of options granted during the year was $ 38.67 (31 March 2016: $40.34).
The range of exercise prices for options outstanding at the end of the year was $ 31.82 to $ 213.23 (31 March 2016: $31.82 to $213.23).
The following tables list the inputs to the models used for the options granted during the year ended 31 March 2017 and 31 March 2016, respectively:
The expected life of the share options is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.
4. Commitments and contingencies
i. Operating lease commitments - Company as lessee
Lease rent agreement for computer hardware devices, licenses and software’s, vehicles, offices, god owns and warehouses. There are no subleases and there are no restrictions imposed by lease arrangements. Leases are renewable on mutual consent of both the parties.
ii. Operating lease commitments - Company as less or
The Company has entered into operating lease for a specific area of its building located at Faridabad Plant (having net book value of INR 15 lacs as at 31 March 2017 and INR 17 lacs as at 31 March 2016). The lease is renewable with mutual consent of both the parties. The income recognized in the Statement of profit and loss is INR 120 lacs (31 March 2016: INR 72 lacs).
Capital work contracted but still under execution (net of advances) is estimated at INR 2,109 lacs (31 March 2016: INR 880 lacs,
1 April 2015: INR 765 lacs).
a) For AY 2003-04 to 2005-06, the assessing officer made disallowances amounting to INR 21,331 lacs (31 March 2016: INR 21,331 lacs, 1 April 2015: INR 21,331 lacs) on account of transfer pricing adjustment for differences between the arm’s length price and prices charged/received by the Company from associated enterprises.
For AY 2008-09 to 2012-13, Transfer Pricing Adjustments were made by the Transfer Pricing Officer / Assessing Officer amounting to INR 121,338 lacs (31 March 2016: INR 69,659 lacs, 1 April 2015: INR 87,107 lacs) on account of alleged excess expenditure on Advertisement, Marketing and Sales Promotion (AMP) expenses incurred by the Company for promotion of ‘Whirlpool’ Brand owned by the parent company.
b) In the Income-tax assessments for preceding assessment years, the Assessing Officer have made disallowances of various expenses. These matters pertains to AY 1994-95 to 2011-12.
All of the above mentioned matters are pending with various judicial/appellate authorities including DRP, CIT(A), ITAT, High court and Supreme court. For some of the matters, judicial/appellate authorities have decided the cases in favor of the Company. However, these are being contested again by the Department of Income tax.
The Company believes that it has merit in these cases and it is only possible, but not probable, that these cases may be decided against the Company. Hence, these have been disclosed as contingent liability and no provision for any liability has been deemed necessary in the financial statements.
d. Financial guarantees
Bank Guarantees given to Government Authorities for various tax litigations amounts to INR 1,466 lacs (31 March 2016: INR 1,665 lacs, 1 April 2015: INR 1,547 lacs).
5. Related party transactions
Following are the Related Parties and transactions entered with related parties for the relevant financial year:
Key Management Personnel 1. Mr. Arvind Uppal, Chairman
2. Mr. Sunil D’Souza, Managing Director (w.e.f. 22 June, 2015)
3. Mr. Anil Berera, Executive Director & Chief Financial Officer
4. Mr. Vikas Singhal, Executive Director
5. Mr. Ravi Kumar Sabharwal, Company Secretary (Till 30 May, 2016)
6. Mrs. Roopali Singh (w.e.f. 3 February, 2017)
7. Mr. SanjivVerma, Independent Director
8. Mr. Simon J. Scarff, Independent Director
9. Mr. Anand Bhatia, Independent Director
10. Mrs. Sonu Bhasin, Independent Director
Parties having direct or indirect control over the Company 1. Whirlpool Corporation (Ultimate Holding Company)
2. Whirlpool Mauritius Limited (Holding Company)
Group Companies / Enterprise where common control 1. WFC de Mexico S. de R.L. de C.V exists and with whom transactions have taken place 2. ComercialAcros Whirlpool, S.A. de C.V. dunng the year. 3. Whirlpool Technologia
4. Whirlpool S.A.
5. Whirlpool Southeast Asia Pte
6. Whirlpool (Hong Kong) Limited
7. Whirlpool Greater China Inc.
8. Whirlpool (China) Investment Co. Ltd.
9. Guangdong Whirlpool Electrical Appliances Co. Ltd.
10. Whirlpool Product Development (Shenzhen) Co. Ltd
11. Whirlpool (Australia) Pty. Limited
12. Whirlpool Asia LLP
13. Whirlpool Asia Private Limited
14. Whirlpool Europe S.R.L.
15. Whirlpool Poland SA
16. Whirlpool South Africa (Pty) Limited
17. Beijing Embraco Snowflake Compressor Company Ltd
18. Indesit Company SPA
19. Whirlpool EMEA SPA
20. Whirlpool Maroc S.a.r.l
21. Whirlpool Taiwan Ltd.
22. Whirlpool Slovakia SpolSro
23. Whirlpool UK Appliances Limited
24. Whirlpool Properties Inc.
25. Whirlpool Microwave Products Development Limited
26. Whirlpool France S.A.S.
27. Bauknecht Hausgerate GmbH
28. Kitchen Aid Europa Inc.
* Exclusive of reinstatement due to exchange fluctuation.
# Amount is below the round off norm adopted by the Company.
Terms and conditions of transactions with related parties
All the above mentioned transactions with the related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash.
There have been no guarantees provided or received for any related party receivables or payables other than the letter of comfort which has been given by the ultimate holding company, Whirlpool Corporation, to respective banks against bank overdraft, cash credit, letter of credit etc. facilities provided to the Company.
The amounts disclosed above are the amounts recognized as an expense during the reporting period related to key management personnel.
6. Segment information
The Company’s operations predominantly comprise of only one segment i.e. Home Appliances. The management also reviews and measures the operating results taking the whole business as one segment and accordingly, makes decision about resource allocation. In view of the same, separate segmental information is not required to be given as per the requirements of Ind AS 108 on “Operating Segments”.
7. Hedging activities and derivatives Derivatives not designated as hedging instruments
The Company uses foreign exchange forward contracts to manage some of its transaction exposures. The foreign exchange forward contracts are not designated as hedge instrument and are entered into for periods consistent with foreign currency exposure of the underlying transactions, generally for the following period:
a. From one to three month sin case of vendor payments
b. From one to three years in case of investment in senior notes (including interest).
40. Fair values
Set out below, is a comparison by class of the carrying amounts and fair value of the Company’s financial instruments, other than those with carrying amount that are reasonable approximations of fair values:
The management assessed that cash and cash equivalents, trade receivables, other receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
The loss allowance on the financial assets as at 31 March 2017: INR 134 lacs (31 March 2016:INR 140 lacs, 1 April 2015: INR 157 lacs) provided in the books on account of uncertainty of recoverability for the amount.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:
a. Security Deposits disclosed under loans are evaluated by the Company based on parameters such as interest rates, risk factors, risk characteristics and individual creditworthiness of the counterparty. Based on this evaluation, allowances are taken into account for the expected credit losses of these security deposits.
8. Financial risk management objectives and policies
The Company’s principal financial liabilities, other than derivatives, comprise trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations and to provide guarantees to support its operations. The Company’s principal financial assets include loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company also enters into derivative transactions.
The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks and also ensure that the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company’s policy that no trading in derivatives for speculative purposes may be undertaken.
The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized below:
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as commodity risk. Financial instruments affected by market risk include deposits and derivative financial instruments.
The sensitivity analysis in the following sections relate to the position as at 31 March 2017 and 31 March 2016.
The analysis exclude the impact of movements in market variables on the carrying values of gratuity, other post-retirement obligations and provisions.
The sensitivity of the relevant profit and loss item is the effect of the assumed changes in the respective market risks. This is based on the financial assets and financial liabilities held as of 31 March 2017 and 31 March 2016.
a. Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the overdraft, letter of credit, cash credit etc. facilities provided by the respective banks to the Company carrying variable interest rates.
Since, the Company has not availed any long-term credit facilities, therefore there is no need for the Company to enter into hedge contract to mitigate the possible exposure risk.
b. Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense is denominated in a foreign currency).
The Company manages its foreign currency risk by hedging transactions that are expected to occur within a maximum period of three month for hedges of forecasted purchases and a maximum period of three year period for hedges of forecasted cash inflow relating to senior notes (including interest).
When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure. For hedges of forecast transactions, the derivatives cover the period of exposure from the point the cash flows of the transactions are forecasted up to the point of settlement of the resulting receivable or payable that is denominated in the foreign currency.
Foreign currency sensitivity
The following tables demonstrate the sensitivity to a reasonably possible change in USD and Euro exchange rates, with all other variables held constant. The impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities.
The Company’s exposure to foreign currency changes for all other currencies is not material.
c. Commodity price risk
The Company is affected by the price volatility of certain commodities. Its operating activities require the ongoing purchase and manufacture of various electronic parts which consist of copper element and therefore require a continuous supply of the same. However, due to the non-significant movement in the prices of the copper, the Company has not entered into any forward contracts for commodity hedging purpose.
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
a. Trade receivables
Customer credit risk is managed subject to the Company’s established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an extensive credit rating scorecard and individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored and any shipments to major customers are generally covered by letters of credit or other forms of credit insurance.
An impairment analysis is performed at each quarter end on an individual basis for major customers. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in note 8. The Company does not hold collateral as security. The Company evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several jurisdictions and industries and operate in largely independent markets.
b. Financial instruments and cash deposits
Credit risk from balances with banks and financial institutions is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with approved banks and within limits assigned to each bank by the ultimate holding Company.
The Company’s maximum exposure to credit risk for the components of the balance sheet at 31 March 2017, 31 March 2016 and 1 April 2015 is the carrying amounts as illustrated in note 8 except for financial guarantees. The Company’s maximum exposure relating to financial guarantees is noted in note 35.
The Company monitors its risk of a shortage of funds through fund management exercise at regular intervals.
The table below summarizes the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments.
9. Capital management
For the purpose of the Company’s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to maximize the shareholder value.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants, if any. To maintain or adjust the capital structure, the Company reviews the fund management at regular intervals and take necessary actions to maintain the requisite capital structure.
No changes were made in the objectives, policies or processes for managing capital during the years ended 31 March 2017 and 31 March 2016.
10. First-time adoption of Ind AS
These financial statements, for the year ended 31 March 2017, are the first the Company has prepared in accordance with Ind AS. For periods up to and including the year ended 31 March 2016, the Company prepared its financial statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).
Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on 31 March 2017, together with the comparative period data as at and for the year ended 31 March 2016, as described in the summary of significant accounting policies. In preparing these financial statements, the Company’s opening balance sheet was prepared as at 1 April 2015, the Company’s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at 1 April 2015 and the financial statements as at and for the year ended 31 March 2016.
Ind AS 101 (First-time Adoption of Indian Accounting Standards) allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions:
a. Use of previous GAAP values as deemed cost
The Company has elected to consider previous GAAP values of its property, plant and equipment and intangible assets as its deemed cost on the date of transition to Ind AS.
b. Share based payments reserve
Ind AS 102 (Share based payments) has not been applied to equity instruments in share based payment transactions that vested before 1 April 2015.
a. Measurement of Financial assets
Interest free security deposits paid were carried at nominal cost under IGAAP. On application of Ind AS 109, all such financial assets are now being measured at amortized cost using effective rate of interest. At the date of transition to Ind AS, difference between the amortized cost and Indian GAAP carrying amount has been transferred to prepaid rent amounting to INR 293 lacs, except the amount pertaining prior to 1 April 2015 which has been recognized in retained earnings, net of deferred taxes. Further for the year ending 31 March 2016, the Company has recognized prepaid rent amounting to INR 2 lacs, interest income under the head other income amounting to INR 77 lacs as the unwinding effect of such remeasurement and has also recognized expenses amounting to INR 85 lacs towards amortization of prepaid expenditure.
b. Share based compensation
Under Indian GAAP, the Company was not required to account for share based compensation received by its employees from the ultimate holding company i.e. Whirlpool Corporation. However, Ind AS 102 requires the Indian subsidiary company to recognize the cost of share based payments to its employees from the ultimate holding company. Accordingly, cost of vested shared payments amounting to INR 1,163 lacs has been accounted for as ‘share-based payment reserve’ as on the transition date with corresponding debit to the retained earnings. Further, INR 928 lacs has been accounted as employee stock option expense in the statement of profit and loss for the year ending 31 March 2016.
As per the provisions of AS 19, lease rentals were accounted for on a straight line basis for certain premises obtained on lease having an escalation clause in the lease agreement. However, as per Ind AS 17, straight lining of lease rental is not required in case lese rent escalation reflects expected inflation cost. The Company has determined that escalation rates in the existing agreements of leased premises are broadly in line with the inflation rates. Hence, lease equalization reserve as on the date of transition amounting to INR 132 lacs has been reversed with a corresponding credit to retained earnings. Further, for the year ended 31 March 2016, impact of straight lining of lease rentals amounting to INR 81 lacs has also been reversed in the statement of profit and loss.
Under Indian GAAP, provisions, including long-term provision are accounted at the undiscounted amount. In contrast, Ind AS 37 requires that where the effect of time value of money is material, the amount of provision should be recognized at the present value of the expenditure expected to settle the obligation. Accordingly, provision for warranty costs has been reduced by INR 933 lacs at the date of transition with a corresponding net of tax adjustment against the retained earnings. Similarly, provision for warranty costs recognized during the year ended 31 March 2016 has also been reduced by INR 358 lacs. Further, interest expense of INR 431lacs representing unwinding of discount due to passage of time has been recorded during the year ended 31 March 2016.
e. Deferred tax
Indian GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not required under Indian GAAP.
In addition, the various transitional adjustments lead to temporary differences. According to the accounting policies, the Company has to account for such differences. Deferred tax adjustments are recognized in correlation to the underlying transaction either in retained earnings or a separate component of equity. On the date of transition, the net impact on deferred tax liabilities is of INR 775 lacs (31 March 2016: INR 624 lacs).
f. Government grant
As per the provisions of AS 20, grants received against fixed assets were accounted as a deduction from the gross value of the related asset. However, as per Ind AS 20, grant received against fixed assets is required to be recognized in the profit and loss on a systematic basis over the useful life of the assets. Accordingly, net book value fixed assets has been increased by INR 484 lacs (i.e. value of grant net of depreciation till date) on the date of transition with a corresponding credit to the deferred grant as a separate line item in the balance sheet. Also, grant received during the year ended 31 March 2016 amounting to INR 348 lacs has also been accounted for in the similar manner. Further, for the year ending 31 March2016, depreciation charge and amortization of deferred grant amounting to INR 38 lacs have been recognized in the statement of profit and loss.
g. Sale of goods
Under Indian GAAP, sale of goods was presented as net of excise duty. However, under Ind AS, sale of goods includes excise duty. Excise duty on sale of goods is presented on the face of statement of profit and loss as a separate line item. Thus, sale of goods under Ind AS has increased by INR 36,770 lacs with a corresponding increase in other expense. This has no resulting impact on the equity.
h. Cash Discount
Under Indian GAAP, cash discount amounting to INR 4,818 lacs was recognized as part of other expenses in the financial statements. However, the same has been reclassified as part of trade discounts under Ind AS which is netted off from revenue from operations for the year ending 31 March 2016.This has no resulting impact on the equity.
i. Defined benefit liabilities
Under Indian GAAP, the entire expense amount of post-employment defined benefit plan, including actuarial gains and losses, is charged to statement of profit or loss. Under Ind AS, remeasurements [comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets excluding amounts included in net interest on the net defined benefit liability] are recognized immediately in the balance sheet through Other Comprehensive Income (OCI). Thus, the employee benefit cost recognized in the statement of profit and loss is reduced by INR 475 lacs with a corresponding (net of tax) charge in the OCI.
j. Depreciation of property, plant and equipment
Subsequent to the transition date, the Company has changed the depreciation method for the assets categorized as ‘Plant and Equipment used for production’ from straight line to MUOP method. The management believes that the depreciation accounting under MUOP method reflects the best expected pattern for the consumption of future economic benefits embodied in these assets. This has resulted in an increase in the depreciation expense by INR 787 lacs for the year ended 31 March 2016.
k. Revaluation reserve
In earlier years, the Company carried out a revaluation of a part of its fixed assets which resulted in an upward valuation of fixed assets amount. As per the requirements of IGAAP, a revaluation reserve amounting to INR 1,269 lacs was lying under the head ‘reserves and surplus’ as on the date of the transition. Under Ind AS, the Company has adopted cost model approach for the measurement of the cost of the fixed assets. Accordingly, revaluation reserve of INR 1,269 lacs has been transferred to retained earnings as on the date of the transition. This has no resulting impact on the equity.
l. Cash incentive reserve
Under Indian GAAP, the Company was not required to account for cash incentive received by its employees from the ultimate holding company i.e. Whirlpool Corporation. However, as per the concept of deemed equity under Ind AS, the Indian subsidiary company requires to recognize the cost of cash incentives to its employees from the ultimate holding company with a corresponding credit to cash incentive reserve under the head other equity. Accordingly, INR 82 lacs has been accounted as cash incentives expense in the statement of profit and loss for the year ending 31 March 2016.
m. Other comprehensive income
Under Indian GAAP, the Company has not presented other comprehensive income (OCI) separately. Hence, it has reconciled Indian GAAP profit or loss to profit or loss as per Ind AS. Further, Indian GAAP profit or loss is reconciled to total comprehensive income as per Ind AS.
n. Statement of cash flows
The transition from Indian GAAP to Ind AS has not had a material impact on the statement of cash flows.
11. During the previous year, finished goods, spare parts and fixed assets of INR 1,491 lacs were destroyed on account of flood in Chennai. These assets were fully insured and the Company had recovered INR 941 lacs as a part settlement of the Insurance claim and sale of damaged goods. The Company had also estimated a deduction of INR 80 lacs which was charged off to the statement of profit and loss and recorded an insurance claim receivable of INR 470 lacs. These were recorded as exceptional items in the financial statements. Further, during the current year, the Company has received an amount of INR 464 lacs through full and final settlement from the insurer and sale of damaged goods. The balance amount of INR 6 has been recorded as loss in the financial statements.
Also, during the current year a fire broke out in the paint shop of the Faridabad Plant of the Company which resulted in the damage of the part of the fixed assets lying at the location. The Company is in the process of filing the insurance claim for such loss and has filed an interim claim of INR 54 lacs till 31 March 2017. The Company expects that the entire value of fixed assets lost will be recovered through the insurance claim and has accordingly recorded the claim so filed as insurance claim receivable.
12. During the current year, the Company had a vacancy in the office of Company Secretary with effect from 30 May 2016 which was filled up in the month of February 2017. This resulted in delay as per the relevant provisions of the Companies Act, 2013, which requires the filling-up of such vacancy within a period of six months from the date of vacancy. The management has already initiated necessary actions in this regard with the regulatory authority.
13. Standards issued not yet effective
The amendments to standards that are issued, but not yet effective, up to the date of issuance of the Company’s financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective.
The Ministry of Corporate Affairs (MCA) has issued the Companies (Indian Accounting Standards) Amendment Rules, 2017 and has amended the following standard:
Amendments to Ind AS 7, Statement of Cash Flows
The amendments to Ins AS 7 requires an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. On initial application of the amendment, entities are not required to provide comparative information for preceding periods. These amendments are effective for annual periods beginning on or after 1 April 2017.
Amendments to Ind AS 102, Share-based payments
The MCA has issued amendments to Ind AS 102 that address three main areas: the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction, the classification of a share-based payment transaction with net settlement features for withholding tax obligations, an accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash settled to equity settled. The amendments are effective for annual periods beginning on or after 1 April 2017. The said amendment will not be applicable to the Company due to the fact that, no cash settled shared based transactions exist.