1. Corporate Information
Ausom Enterprise Limited ("the Company") is a public limited Company incorporated in India with a registered office at 11-B, New Ahmedabad Industrial Estate, Sarkhej Bavla Road, Moraiya, Ahmedabad - 382 213, Gujarat and principal place of business at 606, 'Swagat', Near Lal Bunglow, C. G. Road, Ahmedabad - 380 006, Gujarat. The equity shares of the Company are listed on two recognized stock exchanges in India. The Company is principally engaged in the business of trading in Commodities, Bullions, Gold Jewellery, Diamonds, Derivatives, Shares, and Securities and manufacturing Gold Jewellery.
2 (A) Material accounting policies
2.1 Basis of Preparation
Statement of Compliance with Indian Accounting Standards (referred to as "Ind AS") :
The standalone financial statements have been prepared in accordance with Ind AS prescribed under Section 133 of the Companies Act, 2013 ("the Act") read with Companies (Indian Accounting Standards) Rules as amended from time to time and other relevant provisions of the Act and other accounting principles generally accepted in India.
The standalone financial statements have been prepared on the historical cost basis, except for certain financial assets and liabilities measured at fair value at the end of each reporting period, as explained in the accounting policies below. The standalone financial statements are presented in Indian Rupee which is the functional currency and presentation currency of the Company, and all values are rounded off to the nearest two decimal lakhs, except when otherwise indicated.
The Company has prepared the financial statements on the basis that it will continue to operate as a going concern.
Current versus non-current classification
The operating cycle is considered to have duration of 12 months. Accordingly, all assets and liabilities have been classified as current or non-current as per the Company's operating cycle and other criteria set out in Ind AS-1 'Presentation of Financial Statements' and Schedule III to the Companies Act, 2013. Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively.
2.2 Revenue Recognition
Revenue is measured based on the transaction price, which is the consideration, adjusted for discounts if any. Revenue is recognised when it is earned, and no significant uncertainty exists as to its realisation or collection.
A. Revenue from sale of goods is recognised when the control of the same is transferred to the customers and it is probable that the Company will collect the consideration to which it expects to be entitled in exchange for those goods. Sales are inclusive of freight wherever it is charged. Performance obligations in respect of contracts for sale of manufactured and traded goods is considered as satisfied at a point in time when the control of the same is transferred to the customer and where there is an alternative use of the asset, or the company does not have either explicit or implicit right of payment for performance completed till date.
B. Shares Transactions
(i) Where share trading purchase and share trading sales is settled within the same settlement, only net gain or loss is booked.
(ii) Where share trading purchase and share trading sales is not settled within the same settlement, each transaction is accounted as purchase and sale respectively at its transaction price.
C. Units of Mutual Funds
Units of Mutual Fund transactions are accounted as sale or purchase at its transaction price as and when it is committed.
D. Income from duty credit script is recognised on utilisation of the same for duty payment or on transferred to the customers.
E. Revenue Recognition in case of non-operational income
> Dividend income is recognised when the right to receive the dividend is established.
> Interest income on FDR is recognised on the time proportion basis taking into account of the amount outstanding and rate applicable.
> Revenue in respect of other income is recognized when no significant uncertainty as to its determination or realization exist.
2.3 Property, Plant & Equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises the purchase price (Net of GST input credit wherever applicable) and any attributable cost of bringing the assets to their working condition for their intended use. Such costs also include the borrowing costs if the recognition criteria are met.
Depreciation on tangible assets has been provided on straight line method as per useful life prescribed in Schedule II to the Companies Act, 2013.
Depreciable amount for assets is the cost of an asset or other amount substituted for cost less its estimated residual value.
2.4 Investment in Joint ventures
Investments in Joint ventures are carried at cost less impairment loss, if any and after adjustment in the cost towards share of profit/loss from such Joint ventures. At the end of each reporting period the Company assesses whether there are indicators of diminution in the value of its investments and provides for impairment loss, where necessary.
2.5 Inventories
(i) Trading goods are valued at cost or net realizable value whichever is lower. Cost is arrived at by using FIFO method.
(ii) Shares and Securities are valued at fair value through profit and loss account.
(iii) Raw materials and work in progress are valued at cost or net realizable value whichever is lower. Cost is arrived at by using FIFO method.
(iv) Finished goods are valued at cost or net realizable value whichever is lower. Cost comprises of purchase price of Raw materials, conversion cost and other costs incurred in bringing them to their present location and condition. FIFO method is used to arrive at cost.
2.6 Cash Flow
The cash flow statement is reported using indirect method and present cash flows by operating, investing and financing activities of the Company. Cash and cash equivalents presented in the cash flow statement consist of cash on hand and balances in current and demand deposit with banks. Bank overdrafts that are repayable on demand and form an integral part of the Company's cash management are included as a component of cash and cash equivalent for the purpose of statement of cash flow.
2.7 Retirement and other Employee Benefits
Short-term employee benefits are recognized as expenses in the Statement of Profit and Loss of the year in which the related service is rendered at the undiscounted amount as and when it accrues.
Defined contribution plans: Provident fund
Eligible employees of the Company receive benefits from a provident fund, which is defined contribution plan. Both the eligible employees and the Company make monthly contributions to the provident fund equal to a specified percentage of the covered employee's salary. Company's contributions are charged as an expense in the Statement of Profit and Loss as
they fall due based on the amount of contribution required to be made and when services are rendered by the employee.
Defined benefit plans: Gratuity
The Company provides for gratuity, a defined benefit retirement plan ('the Gratuity Plan') covering eligible employees. The Gratuity plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on respective employee's salary and tenure of employment with the Company.
Liabilities with regard to Gratuity plan are determined by actuarial valuation, performed by an independent actuary, at each Balance Sheet date using projected unit credit method.
The Company recognises the obligation of a defined benefit plan in its Balance Sheet as a liability by corresponding recognised as an expense in the Statement of Profit and Loss.
Gains and losses through re-measurements of the defined benefit liability are recognised in other comprehensive income.
2.8 Taxes
Income tax expense comprises current income tax and deferred income tax. Income tax expense is recognised in the Statement of Profit and Loss except to the extent it relates to items recognised directly in equity, in which case it is recognised in other comprehensive income or other equity as the case may be.
Current income tax
Current tax is the amount of tax payable based on the taxable profit for the year as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Financial Statements and the corresponding tax bases used in the computation of taxable profits.
Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off tax assets against tax liabilities.
2.9 Financial instruments
(a) Non-derivative financial instruments:
Initial recognition and measurement
All financial assets and liabilities are initially recognised at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and liabilities, which are not at fair value through profit or loss, are adjusted to the fair value on initial recognition. Purchase and sale of financial assets are recognised using trade date accounting.
Subsequent measurement
Financial assets carried at amortised cost
A financial asset is measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at fair value through other comprehensive income (FVOCI)
A financial asset is measured at FVOCI if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at fair value through profit or loss (FVTPL)
A financial asset which is not classified in any of the above categories are measured at FVTPL.
Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest method or at FVTPL.
(b) Derivative financial instruments
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value
at the end of each reporting period. The resulting gain or loss is recognised in the Statement of Profit and Loss immediately.
Derecognition of financial instrumentsFinancial assets
The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay.
On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in Statement of Profit and Loss if such gain or loss would have otherwise been recognised in Statement of Profit and Loss on disposal of that financial asset.
Financial liabilities
The Company derecognises financial liabilities when, and only when, the Company's obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in the Statement of Profit or Loss.
Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability, if market participants would take those characteristics into account when pricing the asset or liability, at the measurement date.
For financial reporting purposes, fair value measurements are categorized into Level 1, 2, or 3 based on the degree to which inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
> Level 1 : Quoted price in active markets for identical assets or liabilities,
> Level 2 : Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly,
> Level 3 : Inputs for the assets or liabilities that are not based on observable market data (unobservable data).
2.10 Impairments Impairment of financial assets
The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to life time ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised is recognized as an impairment gain or loss in the Statement of Profit and Loss.
Impairment of non-financial assets:
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the assets is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the statement of profit and loss. When an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash generating unit) in prior years. A reversal of impairment loss is recognised immediately in the Statement of Profit and Loss.
2.11 Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) 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 a reliable estimate can be made of the amount of the obligation. The expense relating to a provision is presented in the Statement of Profit and Loss.
2.12 Contingent liabilities
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliably. The Company does not recognise a contingent liability but discloses its existence in the financial statements.
2.13 Foreign Currency Transactions and Translations Functional currency
The functional currency of the Company is the Indian rupee. These financial statements are presented in Indian rupees.
Transactions and balances
Foreign currency transactions are recorded in the functional currency by applying to the foreign currency amount the exchange rate between the functional currency and the foreign currency at the date of the transaction. All foreign currency monetary assets and monetary liabilities as at the Balance Sheet date are translated into the functional currency at the applicable exchange rates prevailing on that date. All exchange differences arising on translation, are recognised in the Statement of Profit and Loss. Non-monetary assets and non-monetary liabilities denominated in foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of the transaction.
Gain or losses upon settlement of foreign currency transactions are recognised in the Statement of Profit and Loss for the period in which the transaction is settled.
2.14 Borrowing Costs
Borrowing costs are interest and other cost incurred in connection with borrowing of fund. Borrowing cost attributable to acquisition or construction of an asset which necessary takes a substantial period of time to get ready for their intended use are capitalised as part of cost of asset. All other borrowing costs are recognised to the Statement of Profit and Loss as an expense in the period in which they are incurred.
2.15 Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders after adjusting for costs associated with dilutive potential equity shares by the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.
2.16 Leases Company as a lessee
The determination of whether a contract contains a lease, is based on the substance of the contract at the inception of the lease. The contract contains a lease if such contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. In case of short term or low value leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease.
The Company applies the short-term lease recognition exemption to its shortterm leases of Property, Plant and Equipment i.e. those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option. It also applies the lease of low-value assets recognition exemption to leases that are considered of low value. Lease payments on shortterm leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term or another systematic basis if that basis is more representative of the pattern of the lessee's benefit.
2.17 Investment properties
Investment properties are land and buildings that are held for capital appreciation. Investment properties are initially recognised at cost including transaction costs. Subsequently, investment properties comprising buildings are carried at cost less accumulated depreciation and accumulated impairment losses, if any.
An investment property is de-recognised when either the investment property has been disposed of or do not meet the criteria of investment property i.e. when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the Standalone Statement of Profit and Loss in the period of de-recognition.
Depreciation on buildings is provided on straight-line method as per useful life prescribed in Schedule II to the Companies Act, 2013.
2 (B) Significant accounting judgments, assumptions and key sources of estimation uncertainty
The preparation of financial statements requires management to make judgments, estimates, and assumptions in the application of accounting policies that affect the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates. The difference between the actual results and estimates is recognized in the period in which the results are known or materialized. Continuous evaluation is done on the estimation and judgments based on historical experience and other factors, including expectations of future events that are believed to be reasonable. Revisions to accounting estimates are recognized prospectively.
The following are the critical judgements and estimations that have been made by the Management in the process of applying the accounting policies and that have the most significant effect on the amounts recognised in the standalone financial statement and/or key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
i. Useful life of Property, plant & equipment
The residual values, useful lives, and methods of depreciation of Property, plant, and equipment are reviewed by the Management at the end of each reporting period and adjusted prospectively, if appropriate to determine the amount of depreciation to be recorded during the reporting period. The depreciation for future periods is revised, if there are significant changes from previous estimates and accordingly, the depreciable amount is charged over the remaining useful life of the assets.
ii. Investment properties
The residual values, estimated useful lives and depreciation method of investment properties are reviewed, and adjusted on prospective basis as appropriate, at each reporting date. The effects of any revision are included in the Standalone Statement of Profit and Loss when the changes arise.
iii. Taxes
The Company's tax jurisdiction is India. Significant judgments are involved in determining the provision for income taxes including amounts to be recovered or paid for uncertain tax positions. Management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.
Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
iv. Provisions
Provisions and liabilities are recognised in the period when it becomes probable that there will be a future outflow of funds resulting from past operations or events and the amount of cash outflow can be reliably estimated. The timing of recognition and quantification of the liability requires the application of judgement to existing facts and circumstances, which can be subject to change. The carrying amounts of provisions and liabilities are reviewed regularly and revised to take account of changing facts and circumstances.
v. Contingencies
In the normal course of business, contingent liabilities may arise from litigation and other claims against the Company. Potential liabilities that are possible but not probable of crystallizing or are very difficult to quantify reliably are treated as contingent liabilities. Such liabilities are disclosed in the notes but are not recognized. Potential liabilities that are remote are neither recognised nor disclosed as contingent liabilities.
vi. Evaluation of Indicators for Impairment of Property, Plant and Equipment
The evaluation of applicability of indicators of impairment of assets requires assessment of external factors those are significant decline in asset's value, economic or legal environment etc, and internal factors those are obsolescence or physical damage of an asset, poor economic performance of the idle assets etc. which could result in significant change in recoverable amount of the Property, plant and equipment and such assessment is based on estimates, future plans as envisaged by the Company.
vii. Fair value measurement
In estimating the fair value of financial assets and financial liabilities, the Company uses market observable data i.e. quoted prices in the active market, to the extent available. Where such market observable data is not available, 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.
viii. Defined benefit plans
The cost of the defined benefit gratuity plan 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. Information about the various estimates and assumptions made in determining the present value of defined benefit obligations are disclosed in notes to the financial statement.
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