2. Summary of material accounting policies
a. Current and non-current classification
The Company presents assets and liabilities in the balance
sheet based on current/ non-current classification.
Assets:
An asset is classified as current when it is:
a) expected to be realised the assets, or intends to sell or
consume it, in its normal operating cycle;
b) held the asset primarily for the purpose of trading;
c) expected to realised the asset within 12 months after
the reporting period; or
d) cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least 12
months after the reporting period.
Current assets include the current portion of non¬
current financial assets. All other assets are classified
as non-current.
Liabilities
A liability is classified as current when:
a) it is expected to settled in its normal operating cycle;
b) it is held primarily for the purpose of trading;
c) it is due to be settled within 12 months after the
reporting period; or
d) It does not have the right at the end of the reporting
period to defer settlement of the liability for at least
twelve months after the reporting period.
Current liabilities include current portion of non-current
financial liabilities. All other liabilities are classified as non¬
current.
Deferred tax assets and liabilities are classified as non¬
current assets and liabilities.
Based on the time involved between the acquisition of
assets for processing and their realization in cash and cash
equivalents, the Company has identified twelve months as
its operating cycle for determining current and non-current
classification of assets and liabilities in the balance sheet.
b. Fair value measurement
The Company has an established control framework with
respect to the measurement of fair values. The valuation
team regularly reviews significant unobservable inputs and
valuation adjustments.
Fair values are categorised into different levels in a fair
value hierarchy based on the inputs used in the valuation
techniques as follows:
- Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities.
- Level 2 inputs are inputs other than quoted prices
included in Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices).
- Level 3 inputs are inputs for the asset or liability that are
not based on observable market data (unobservable
inputs).
When measuring the fair value of an asset or a liability, the
Company uses observable market data as far as possible.
If the inputs used to measure the fair value of an asset or
a liability fall into different levels of the fair value hierarchy,
then the fair value measurement is categorised in its entirety
in the same level of the fair value hierarchy as the lowest
level input that is significant to the entire measurement. The
Company recognizes transfers between levels of the fair
value hierarchy at the end of the reporting period during
which the change has occurred.
A. Foreign currency transactions and translations
Foreign currency transactions are translated into the
functional currency using the exchange rates at the
dates of transactions and monetary assets and liabilities
denominated in foreign currencies as at the balance sheet
date, are translated at the balance sheet date exchange
rates. Foreign exchange gains and losses resulting from
settlement of such transactions and from the translation
of monetary assets and liabilities denominated in foreign
currencies at the balance sheet date exchange rates are
generally recognised in statement of profit and loss.
Foreign exchange differences regarded as an adjustment to
borrowing cost are presented in the statement of profit and
loss, within finance costs. All other foreign exchange gains
and losses are presented in the statement of profit and loss
on a net basis within other income or other expenses.
Non-monetary items that are measured at fair value in a
foreign currency are translated using the exchange rates
at the date when the fair value was determined. Translation
differences on assets and liabilities carried at fair value are
reported as part of the fair value gain or loss. For example,
translation differences on non-monetary assets and
liabilities such as equity instruments (other than investment
in subsidiaries and joint ventures) held at fair value through
profit or loss are recognized in statement of profit or loss as
part of the fair value gain or loss and translation differences
on non-monetary assets such as equity investments
(other than investment in subsidiaries and joint ventures)
classified as Fair Value through Other Comprehensive
Income (FVOCI) are recognized in other comprehensive
income (OCI).
The derivative financial instruments such as forward
exchange contracts to hedge its risk associated with foreign
currency fluctuation are stated at fair value. Any gains or
losses arising from changes in fair value are taken directly
to the statement of profit or loss.
B. i.) Revenue from contracts with customers
The Company manufactures and trades variety of auto
components products. Revenue from contracts with
customers is recognized when control of the goods or
services are transferred to the customer at an amount
that reflects the consideration to which the Company
expects to be entitled in exchange for those goods
or services. The Company has generally concluded
that it is the principal in its revenue arrangements,
because it typically controls the goods or services
before transferring them to the customer. A receivable
is recognized when the control of the product is
transferred as the consideration is unconditional and
payment becomes due upon passage of time as per
the terms of contract with customers. The Company
collects GST on behalf of the government and,
therefore, it is not an economic benefit flowing to the
company, hence it is excluded from revenue.
ii.) Revenue from sales of products
The Company recognises revenue when (or as) a
performance obligation is satisfied, i.e. when 'control'
of the goods underlying the particular performance
obligation are transferred to the customer.
Further, revenue from sale of goods is recognized
based on a 5-Step Methodology which is as follows:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligation in
contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the
performance obligations in the contract
Step 5: Recognise revenue when (or as) the entity
satisfies a performance obligation
Revenue is measured based on the transaction price,
which is the consideration, adjusted for volume
discounts, price concessions and incentives, if any, as
specified in the contract with the customer. Revenue
also excludes taxes collected from customers.
Contracts are subject to modification to account for
changes in contract specification and requirements.
The Company reviews modification to contract in
conjunction with the original contract, basis which
the transaction price could be allocated to a new
performance obligation, or transaction price of
an existing obligation could undergo a change. In
the event transaction price is revised for existing
obligation, a cumulative adjustment is accounted for.
iii.) Contract Assets
Contract assets are recognised when there is excess
of revenue earned over billings on contracts. Contract
assets are classified as unbilled receivables (only act
of invoicing is pending) when there is unconditional
right to receive cash, and only passage of time is
required, as per contractual terms.
iv) Contract liabilities
A contract liability is recognised if a payment is
received or a payment is due (whichever is earlier)
from a customer before the Company transfers the
related goods or services. Contract liabilities are
recognised as revenue when the Company performs
under the contract (i.e., transfers control of the related
goods or services to the customer).
v) Trade receivables
A trade receivable is recognised if the amount of
consideration is unconditional (i.e., only the passage
of time is required before payment of the consideration
is due). Refer to accounting policies of financial assets
in section - Financial instruments - initial recognition
and subsequent measurement.
vi) Variable consideration
The Company applies the expected value method to
estimate the variable consideration in the contract.
The selected method that best predicts the amount
of variable consideration is primarily driven by the
number of volume thresholds as per terms agreed
with customers. The expected value method is used
for those with more than one volume threshold.
The Company then applies the requirements on
constraining estimates in order to determine the
amount of variable consideration that can be
included in the transaction price and recognised as
revenue. The disclosures of significant estimates and
assumptions relating to the estimation of variable
consideration for volume rebates are provided in
notes to account.
vii) Warranty obligations
The Company generally provides for warranties for
general repair of defects that existed at the time of
sale. These warranties are assurance-type warranties
under Ind AS 115, which are accounted for under
Ind AS 37 (Provisions, Contingent Liabilities and
Contingent Assets).
viii) Significant financing components
In respect of short-term advances from its customers,
using the practical expedient in Ind AS 115, the
Company is not required to adjust the promised
amount of consideration for the effects of a significant
financing component because it expects, at contract
inception, that the period between the transfer of the
promised good or service to the customer and when
the customer pays for that good or service will be
within normal operating cycle.
ix) Export benefits
Export incentive entitlements are recognized as
income when the right to receive credit as per the
terms of the scheme is established in respect of the
exports made, and where there is no uncertainty
regarding the ultimate collection of the relevant export
proceeds.
x) Other operating income
Service income including job work income is
recognized as per the terms of contracts with
customers when the related services are rendered.
Income from royalty, technical know-how
arrangements is recognized on an accrual basis in
accordance with the terms of the relevant agreement.
Other income
Other income comprises interest income on deposits, gain/
(losses) on disposal of financial assets and non-financial assets.
It is recognised on accrual basis except where the receipt of
income is uncertain.
Interest income is recognised using the effective interest method.
The ‘effective interest rate' is the rate that exactly discounts the
estimated future cash payments or receipts over the expected
life of the financial instrument to:
• The gross carrying amount of the financial asset; or
• The amortised cost of the financial liability.
Dividend income is accounted when the right to receive the
dividend is established, Dividend income is included under
the head "Other income" in the statement of profit and loss
account.
C. Property, plant and equipment
a. Recognition and measurement
Item of property, plant and equipment are carried
at cost, which includes capitalized borrowing costs,
less accumulated depreciation and accumulated
impairment losses, if any.
Cost of an item of property, plant and equipment
includes its purchase price, import duties and non-
refundable purchase taxes, duties or levies, after
deducting trade discounts and rebates, any other
directly attributable cost of bringing the asset to its
working condition for its intended use and estimated
cost of dismantling and removing the items and
restoring the site on which it is located. The present
value of the expected cost for the decommissioning
of an asset after its use is included in the cost of
the respective asset if the recognition criteria for a
provision are met.
The cost of a self-constructed item of property, plant
and equipment comprises the cost of materials and
direct labor, any other costs directly attributable to
bringing the item to working condition for its intended
use, and estimated costs of dismantling and removing
the item and restoring the site on which it is located.
If significant parts of an item of property, plant and
equipment have different useful lives, then they are
accounted for as separate items (major components)
of property, plant and equipment.
A property, plant and equipment is eliminated from
the standalone financial statements on disposal or
when no further benefit is expected from its use and
disposal. Assets retired from active use and held for
disposal are generally stated at the lower of their net
book value and net realizable value. Any gain or losses
arising disposal of property, plant and equipment is
recognized in the Standalone Statement of Profit and
Loss.
Once classified as held-for-sale, property, plant and
equipment are no longer depreciated.
The residual values, useful lives and methods of
depreciation of property, plant and equipment are
reviewed at each financial year end and adjusted
prospectively, if appropriate.
Advance paid towards the acquisition of property, plant
and equipment are shown under non-current asset
and property, plant and equipment under construction
are disclosed as capital work-in-progress. Capital
work in progress includes cost of assets at site, direct
and indirect expenditure incidental to construction
and interest on the funds deployed for construction.
b. Subsequent costs
Subsequent costs are included in the asset's
carrying amount or recognized as a separate asset,
as appropriate, only when it is probable that future
economic benefits associated with the item will
flow to the Company and the cost of the item can
be measured reliably. The carrying amount of any
component accounted for as a separate asset is
derecognized when replaced. The costs of the day
to day servicing of property, plant and equipment are
recognised in the standalone statement of profit and
loss as incurred.
c. Derecognition
An item of property, plant and equipment and any
significant part initially recognized is de-recognized
upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain or loss
arising on de-recognition of the asset (calculated as
the difference between the net disposal proceeds
and the carrying amount of the asset) is included in
the standalone statement of profit and loss when the
asset is derecognized.
d. Depreciation
Depreciation on property, plant and equipment is
provided on the straight-line method at the rates
reflective of the estimated useful life of the assets
estimated by the management.
The identified components are depreciated over their
useful life, the remaining asset is depreciated over the
life of the principal asset. Leasehold improvements
are depreciated over the shorter of the lease term and
their useful lives. Freehold land is not depreciated.
The management has estimated, supported by
independent assessment by technical experts,
professionals, the useful lives of vehicles as 4 years
which is lower than those indicated in Schedule II.
Depreciation methods, useful lives and residual values
are reviewed at each financial year end and adjusted,
if appropriate. Based on technical evaluation and
consequent advice, the management believes that
its estimates of useful lives are realistic and reflect
fair value approximation of the period over which the
assets are likely to be used.
Depreciation on additions (disposals) is provided on a
pro-rata basis i.e. from (upto) the date on which asset
is ready for use (disposed of).
D. Goodwill
Goodwill arising on an acquisition of a business is carried
at cost as established at the date of acquisition of the
business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated
to cash-generating units. The allocation is made to those
cash generating units or groups of cash generating units
that are expected to benefit from the business combination
in which such goodwill arose. A cash-generating unit to
which goodwill has been allocated is tested for impairment
annually, or more frequently when there is an indication
that the unit may be impaired.
If the recoverable amount of the cash-generating unit is less
than its carrying amount, the impairment loss is allocated
first to reduce the carrying amount of any goodwill allocated
to the unit and then to the other assets of the unit pro rata
based on the carrying amount of each asset in the unit.
Any impairment loss for goodwill is recognized directly in
statement of profit and loss. An impairment loss recognised
for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit,
the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
E. Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired
in a business combination is their fair value at the date of
acquisition. Following initial recognition, intangible assets
are carried at cost less any accumulated amortisation and
accumulated impairment losses.
The useful lives of intangible assets are assessed as either
finite or indefinite.
Intangible assets with finite lives are amortised over
the useful economic life and assessed for impairment
whenever there is an indication that the intangible asset may
be impaired. The amortisation period and the amortisation
method for an intangible asset with a finite useful life are
reviewed at least at the end of each reporting period.
Changes in the expected useful life or the expected pattern
of consumption of future economic benefits embodied in
the asset are considered to modify the amortisation period
or method, as appropriate, and are treated as changes
in accounting estimates. The amortisation expense on
intangible assets with finite lives is recognised in the
statement of profit and loss account.
The useful lives of intangible assets that is considered for
amortization of intangible assets are as follows:
The residual values, useful lives and method of amortization
of intangible assets are reviewed at each financial year end
and adjusted, if appropriate.
Intangible assets with indefinite useful lives are not
amortised, but are tested for impairment annually, either
individually or at the cash-generating unit level. The
assessment of indefinite life is reviewed annually to
determine whether the indefinite life continues to be
supportable. If not, the change in useful life from indefinite
to finite is made on a prospective basis.
An intangible asset is derecognised upon disposal (i.e., at
the date the recipient obtains control) or when no future
economic benefits are expected from its use or disposal.
Any gain or loss arising upon derecognition of the asset
(calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included
in the statement of profit and loss account when the asset
is derecognised.
F. Borrowing Cost
Borrowing costs that are directly attributable to the
acquisition, construction or development of qualifying
assets are capitalized. Capitalization of borrowing costs
ceases when substantially all the activities necessary
to prepare the qualifying assets for their intended uses
are complete. Qualifying assets are assets which take a
substantial period of time to get ready for their intended
use or sale. Borrowing costs include exchange differences
arising from foreign currency borrowings to the extent
that they are regarded as an adjustment to interest costs.
Other borrowing costs are recognized as an expense in the
standalone statement of profit and loss in the year in which
they are incurred.
G. Inventories
Inventories which include raw materials, work in progress,
finished goods, stock in trade and stores and spares are
valued at lower of cost and net realizable value. However,
raw materials, components 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 or
in cases where material prices have declined, and it is
estimated that the cost of the finished products will exceed
their net realisable value. The basis of determination of cost
for various categories of inventory is as follows:
Net realizable value is the estimated selling price in the
ordinary course of business, less estimated costs of
completion and the estimated costs necessary to make
the sale. The net realizable value of work-in-progress is
determined with reference to the selling prices of related
finished products.
The comparison of cost and net realizable value is made on
an item-by-item basis
H. Impairment of non-financial assets
At the end of each reporting period, the Company reviews
the carrying amounts of non-financial assets (other than
inventories, contract asset and deferred tax assets) to
determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication
exists, the recoverable amount is determined on an
individual asset basis unless the asset does not generate
cash flows that are largely independent of those from
other assets. In such cases, the recoverable amount is
determined for the cash generating unit (CGU) to which the
asset belongs.
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 such assets are considered to be impaired, the impairment
to be recognized in the statement of profit and loss is
measured by the amount by which the carrying value of the
assets exceeds the estimated recoverable amount of the
asset. An impairment loss is reversed in the statement of
profit and loss if there has been a change in the estimates
used to determine the recoverable amount.
When an impairment loss subsequently reverses, the
carrying amount of the asset / CGU is increased to its
revised recoverable amount, provided that this amount
does not exceed the carrying amount that would have
been determined (net of any accumulated amortization or
depreciation) had no impairment loss been recognized for
the asset in prior years. A reversal of impairment loss is
recognized immediately in the statement of profit and loss.
Goodwill is tested for impairment annually at the CGU level,
as appropriate, and when circumstances indicate that the
carrying value may be impaired.
I. Research and Development
Revenue expenditure on research is expensed off under
the respective heads of account in the year in which it is
incurred.
Capitalised development expenditure is stated at cost
less accumulated amortization and impairment losses,
if any. Property, plant and equipment used for research
and development are depreciated in accordance with the
Company's policy as stated above. Expenditure incurred
at development phase, where it is reasonably certain that
outcome of development will be commercially exploited to
yield economic benefits to the Company, is considered as
an intangible asset and amortized over the estimated life of
the assets.
J. Government Grant and Subsidies
Grants from the government are recognised at their fair
value where there is a reasonable assurance that the grant
will be received and the Company will comply with all the
attached conditions.
Government grant relating to income are deferred and
recognised in the standalone statement of profit and loss
over the period necessary to match them with the costs
that they are intended to compensate and presented within
other operating income other than export benefits which
are accounted for in the year of export based on eligibility
and there is no uncertainty in receiving the same.
Government grants relating to purchase of property, plant
and equipment are included in non-current liabilities
as deferred income and are credited to the standalone
statement of profit and loss on a straight line basis over the
expected lives of the related assets and presented within
other operating income.
When the Company receives grants of non-monetary
assets, the asset and the grant are recorded at fair value
amounts and released to profit or loss over the expected
useful life in a pattern of consumption of the benefit of the
underlying asset i.e. by equal annual instalments.
K. Dividend
The Company recognizes a liability to pay dividend to
equity holders when the distribution is authorized and the
distribution is no longer at the discretion of the Company. As
per the corporate laws in India, a distribution is authorized
when it is approved by the shareholders. A corresponding
amount is recognized directly in equity.
L. Employee Benefits
a. Defined contribution plan:
A defined contribution plan is a post-employment
benefit plan under which an entity pays specified
contributions to a separate entity and has no obligation
to pay any further amounts. The Company makes
specified monthly contributions towards employee
Provident Fund to Government administered Provident
Fund Scheme which is a defined contribution plan.
The Company's contribution is recognized as an
expense in the statement of profit and loss during
the period in which the employee renders the related
service.
b. Defined benefit plan:
The Company's gratuity plan is a defined benefit
plan. The present value of gratuity obligation under
such defined benefit plans is determined based on
actuarial valuations carried out by an independent
actuary using the Projected Unit Credit Method,
which recognizes each period of service as giving
rise to additional unit of employee benefit entitlement
and measure each unit separately to build up the
final obligation. The obligation is measured at the
present value of estimated future cash flows. The
discount rates used for determining the present value
of obligation under defined benefit plans, is based
on the market yields on Government securities as
at the balance sheet date, having maturity periods
approximating to the terms of related obligations.
Actuarial gains or losses are recognized in other
comprehensive income. Further, the statement of
profit and loss does not include an expected return
on plan assets. Instead net interest recognized in
profit or loss is calculated by applying the discount
rate used to measure the defined benefit obligation
to the net defined benefit liability or asset. The actual
return on plan assets above or below the discount
rate is recognized as part of remeasurement of net
defined liability or asset through other comprehensive
income.
Remeasurements comprising actuarial gains or losses
and return on plan assets (excluding amounts included
in net interest on the net defined benefit liability).
The Company's gratuity scheme is administered
through a third party trust and the provision for the
same is determined on the basis of actuarial valuation
carried out by an independent actuary. Provision is
made for the shortfall, if any, between the amounts
required to be contributed to meet the accrued liability
for gratuity as determined by actuarial valuation and
the available corpus of the funds.
c. Short-term employee benefits
All employee benefits falling due wholly within twelve
months of rendering the services are classified as
short term employee benefits, which include benefits
like salaries, wages and performance incentives and
are recognised as expenses in the period in which the
employee renders the related service.
Short term employee benefits are measured on
an undiscounted basis and are expensed as the
related service is provided. A liability is recognized
for the amount expected to be paid e.g. short term
performance incentive, if the Company has a present
legal or constructive obligation to pay this amount as a
result of past services provided by the employee and
the amount of obligation can be estimated reliably.
When the benefits of a plan are changed or when a
plan is curtailed, the resulting change in benefit that
relates to past service (‘past service cost' or ‘past
service gain') or the gain or loss on curtailment is
recognized immediately in the statement of profit and
loss. The Company recognizes gains and losses on
the settlement of a defined benefit plan when the
settlement occurs.
d. Compensated absences:
Accumulated leave, which is expected to be utilized
within the next 12 months, is treated as short-term
employee benefit. The Company measures the
expected cost of such absences as the additional
amount that it expects to pay as a result of the unused
entitlement that has accumulated at the reporting
date. The Company recognizes expected cost of
short-term employee benefit as an expense, when an
employee renders the related service.
The Company treats accumulated leave expected to
be carried forward beyond twelve months, as long¬
term employee benefit for measurement purposes.
Such long-term compensated absences are provided
for based on the actuarial valuation using the
projected unit credit method at the reporting date.
Remeasurement gains/losses are immediately taken
to the statement of profit and loss account and are
not deferred. The obligations are presented as current
liabilities in the balance sheet if the entity does not
have a right to defer the settlement for at least twelve
months after the reporting date.
e. Share-based payment transactions
Employees of the Company receive remuneration
in the form of share-based payments, whereby
employees render services as consideration for
equity instruments (equity-settled transactions).
The cost of equity-settled transactions is determined
by the fair value at the date when the grant is made
using an appropriate valuation model.
That cost is recognised, together with a corresponding
increase in share-based payment (SBP) reserves in
equity, over the period in which the performance and/
or service conditions are fulfilled in employee benefits
expense. The cumulative expense recognised for
equity-settled transactions at each reporting date
until the vesting date reflects the extent to which the
vesting period has expired and the Company's best
estimate of the number of equity instruments that will
ultimately vest. The expense or credit in the statement
of profit and loss account for a period represents the
movement in cumulative expense recognised as at the
beginning and end of that period and is recognised in
employee benefits expense.
The dilutive effect of outstanding options is reflected
as additional share dilution in the computation of
diluted earnings per share.
M. Accounting for warranty
Warranty costs are estimated by the Company on the
basis of technical evaluation and past experience of
costs. Provision is made for the estimated liability in
respect of warranty costs in the year of recognition of
revenue and is included in the standalone statement
of profit and loss. The estimates used for accounting
for warranty costs are reviewed periodically and
revisions are made, as and when required.
N. Leases
The Company assesses at contract inception
whether a contract is, or contains, a lease, that is if
the contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration.
Company as a lessee
The Company accounts for each lease component within the
contract as a lease separately from non-lease components of
the contract and allocates the consideration in the contract to
each lease component on the basis of the relative stand-alone
price of the lease component and the aggregate stand-alone
price of the non-lease components.
The Company recognises a right-of-use (ROU) asset representing
its right to use the underlying assets for the lease term and a
lease liability at the lease commencement date. The ROU asset
is initially measured at cost, which comprises the initial amount
of the lease liability adjusted for any lease payments made at or
before the commencement date, plus any initial direct costs, less
any lease incentives received.
The right-of-use asset is subsequently measured at cost less
any accumulated depreciation, accumulated impairment losses,
if any and adjusted for any remeasurement of the lease liability.
The right-of-use assets is depreciated using the straight-line
method from the commencement date over the shorter of lease
term or useful life of right-of-use asset. The estimated useful
lives of right-of-use assets are as follows:
Land : 99 years
Building : 3 to 15 years
Right-of-use assets are tested for impairment whenever there is
any indication that their carrying amounts may not be recoverable.
Impairment loss, if any, is recognised in the statement of profit
and loss.
At the commencement date of the lease, the Company recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include
fixed payments (including in substance fixed payments) less
any lease incentives receivable, variable lease payments that
depend on an index or a rate, and amounts expected to be paid
under residual value guarantees.
When the lease liability is remeasured in this way, a corresponding
adjustment is made to the carrying amount of the right-of-use
asset or is recorded in profit or loss if the carrying amount of the
right-of-use asset has been reduced to zero.
The Company applies the short-term lease recognition exemption
to all assets that have a lease term of 12 months or less from the
commencement date. The lease payments associated with these
leases are recognized as an expense on a straight-line basis
over the lease term.
O. Investments in subsidiaries, joint venture/ associate
Investment in subsidiaries, joint venture/ associate are
shown at cost less impairment. Where the carrying amount
of an investment is greater than its estimated recoverable
amount, it is written down immediately to its recoverable
amount and the difference is transferred to the statement
of profit and loss.
The Company reviews its carrying value of investments
carried at cost annually, or more frequently when there is
indication for impairment. If the recoverable amount is less
than its carrying amount, the impairment loss is recorded in
the Statement of Profit and Loss.
On disposal of investment, the difference between the net
disposal proceeds and the carrying amount is charged or
credited to the statement of profit and loss.
P. Segment reporting
Basis for segmentation
An operating segment is a component of the Company
that engages in business activities from which it may
earn revenues and incur expenses, including revenues
and expenses that relate to transactions with any of the
Company's other components, and for which discrete
financial information is available. The Company is primarily
engaged in the manufacturing of Automobile Components
and Parts thereof. All operating segments' operating results
are reviewed regularly by the Company's Chief Operating
Decision Maker ("CODM") to make decisions about
resources to be allocated to the segments and assess their
performance. CODM believes that these are governed by
same set of risk and returns hence CODM reviews as one
balance sheet component.
Q. Income taxes
Income tax expense comprises current and deferred tax.
It is recognised in standalone statement of profit and loss
except to the extent that it relates to items recognised
directly in equity.
a. Current tax
Current tax comprises the expected tax payable or
receivable on the taxable income or loss for the year
and any adjustment to the tax payable or receivable
in respect of previous years. The amount of current
tax reflects the best estimate of the tax amount
expected to be paid or received after considering the
uncertainty, if any, related to income taxes.
Current income tax assets and liabilities are measured
at the amount expected to be recovered from or
paid to the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are
enacted or substantively enacted, at the reporting
date.
Current income tax relating to items recognized
outside profit or loss is recognized outside profit or
loss (either in other comprehensive income or in
equity). Current tax items are recognized in correlation
to the underlying transaction either in OCI or directly in
equity. Management periodically evaluates positions
taken in the tax returns with respect to situations
in which applicable tax regulations are subject to
interpretation and establishes provisions whereever
appropriate.
When the Company concludes that it is not probable
that the taxation authority will accept an uncertain
tax treatment, the Company reflects the effect of
uncertainty in determining the related taxable profit
(tax loss), tax bases, unused tax losses, unused tax
credits or tax rates. The Company reflects the effect
of uncertainty for each uncertain tax treatment by
using the most likely amount method.
Current tax assets and current tax liabilities are offset
only if there is a legally enforceable right to set off
the recognized amounts, and it is intended to realise
the asset and settle the liability on a net basis or
simultaneously.
b. Deferred tax
Deferred tax is provided using the liability method
on temporary differences between the tax bases of
assets and liabilities and their carrying amounts for
financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable
temporary differences. Deferred tax assets are
recognised for unused tax losses, unused tax credits
and deductible temporary differences to the extent
that it is probable that future taxable profits will
be available against which they can be used. The
carrying amount of deferred tax assets unrecognised
or recognised, are reviewed at each reporting date
and are recognised / reduced to the extent that it
is probable / no longer probable respectively that
the related tax benefit will be realised. Significant
management judgement is required to determine
the probability of deferred tax asset. Deferred tax is
measured at the tax rates that are expected to apply
to the period when the asset is realised or liability is
settled, based on the laws that have been enacted
or substantively enacted by the reporting date.
The measurement of deferred tax reflects the tax
consequences that would follow from the manner in
which the Company expects, at the reporting date, to
recover or settle the carrying amount of its assets and
liabilities.
The criteria for recognising deferred tax assets arising
from the carryforward of unused tax losses and tax
credits are the same as the criteria for recognising
deferred tax assets arising from deductible
temporary differences. However, the existence of
unused tax losses is strong evidence that future
taxable profit may not be available. Therefore, the
Company recognises a deferred tax asset arising
from unused tax losses or tax credits only to the
extent that the entity has sufficient taxable temporary
differences or there is convincing other evidence that
sufficient taxable profit will be available against which
the unused tax losses or unused tax credits can be
utilised.
Deferred tax relating to items recognized outside
profit or loss is recognized outside profit or loss
(either in other comprehensive income or in equity).
Deferred tax items are recognized in correlation to
the underlying transaction either in OCI or directly in
equity
Deferred tax assets and deferred tax liabilities are
offset if a legally enforceable right exists to set off
current tax assets against current tax liabilities and the
deferred taxes relate to the same taxable entity and
the same taxation authority.
R. Earning per share
Basic earnings per share are calculated by dividing the net
profit or loss for the year attributable to equity shareholders
by the weighted average number of equity shares
outstanding during the year. The weighted average number
of equity shares outstanding during the year is adjusted for
events of bonus issue, if any, 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 year attributable to equity
shareholders and the weighted average number of shares
outstanding during the year are adjusted for the effects of
all dilutive potential equity shares except where the results
will be anti-dilutive.
The number of shares and potentially dilutive equity shares
are adjusted retrospectively for all periods presented for any
share splits and bonus shares issues including for changes
effected prior to the approval of the financial statements by
the Board of Directors.
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