1.2 Significant accounting policies
a) Statement of compliance
The Standalone Financial Statements comply, in all material aspects, with Indian Accounting Standards
('Ind AS') notified under Section 133 of the Companies Act, 2013 ('the Act') read with Rule 3 of the
Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act.
b) Basis of Preparation
These financial statements have been prepared in accordance with the Generally Accepted Accounting
Principles in India ('Indian GAAP') to comply with the Accounting Standards specified under Section
133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the
relevant provisions of the Companies Act, 2013. The financial statements have been prepared under the
historical cost convention on accrual basis, except for certain items which are measured at fair value.
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 a the measurement date, regardless of the price is directly
observable or estimated using another valuation technique.
All assets and liabilities have been classified as current or non current as per the Company's normal
operating cycle and other criteria set out in the Schedule III of the Companies Act, 2013 and Ind AS,
based on the nature of products and the time between the acquisition of assets or processing and their
realisation in cash and cash accruals
c) Property, plant and equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and impairment loss, if
any. Depreciation is provided for property, plant and equipment so as to expense the cost less residual
value over their estimated useful lives based on technical evaluation. The estimated useful lives and
residual value are reviewed at the end of each reporting period, with the effect of any change in estimate
accounted for on a prospective basis.
Depreciation on tangible assets is provided on the straight-line method over the useful lives of assets
as prescribed under Part C of Schedule II of the Companies Act 2013 except for Building and Plant and
Machinery for which the Management estimates the useful lives as follows:
(1) For these Building and Plant and Machinery, based on the internal assessment and independent
technical evaluation carried out by the management, the useful lives as given above represent the
period over which management expects to use these assets. Hence useful lives of these assets is
different from the part C of Schedule II of the Companies Act, 2013.
Depreciation is not recorded on capital work In progress until construction and installation is
complete and the asset is ready for its intended use.
d) Intangible assets
Intangible assets that the Company controls and from which Intangible Assets that the Company controls
and from which it expects future economic benefits are capitalised upon acquisition and measured
initially:
a. for assets acquired in a business combination, at fair value on the date of acquisition
b. for separately acquired assets, at cost comprising the purchase price (including import duties and
non-efundable taxes) and directly attributable costs to prepare the asset for its intended use.
e) Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the
arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfillment of the
arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right
to use the asset or assets, even if that right is not explicitly specified in an arrangement.
(i) As a lessee
A lease is classified at the inception date as a finance lease or an operating lease. Leases of property,
plant and equipment where the company, as lessee, has substantially all the risks and rewards of
ownership are classified as finance leases.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the
Company as lessee are classified as operating leases. Payments made under operating leases are
charged to profit or loss on a straight-line basis over the period of the lease unless the payments are
structured to increase in line with expected general inflation to compensate for the lessor's expected
inflationary cost increases.
(ii) As a lessor
Leases are classified as finance leases when substantially all of the risks and rewards of ownership
transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded
as receivables at the Company's net investment in the leases. Finance lease income is allocated to
accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding
in respect of the lease.
Lease income from operating leases where the company is a lessor is recognised in income on a
straight-line basis over the lease term unless the receipts are structured to increase in line with expected
general inflation to compensate for the expected inflationary cost increases. The respective leased
assets are included in the balance sheet based on their nature.
f) Impairment
The Company assesses at each reporting date whether a financial asset (or a group of financial assets)
such as investments, trade receivables, advances and security deposits held at amortised cost and
financial assets that are measured at fair value through other comprehensive income are tested for
impairment based on evidence or information that is available without undue cost or effort. Expected
credit losses are assessed and loss allowances recognised if the credit quality of the financial asset has
deteriorated significantly since initial recognition
g) Investments
Long-term investments , are carried individually at cost less provision for diminution, other than
temporary, in the value of such investments. Current investments are carried individually, at the lower of
cost and fair value. Cost of investments include acquisition charges such as brokerage, fees and duties.
h) Employee benefits
Short Term Employee Benefits
All employee benefits payable within twelve months of rendering the services are recognized in the
period in which the employee renders the related service.
Post Employment / Retirement Benefits
Defined Contribution Plans such as Provident Fund etc., are charged to the Profit and Loss account as
incurred.
Defined Obligation Plans - The Present Value of the obligation under such plans, is determined based
on an actuary valuation, using the Projected Unit Credit Method. Actuarial gains and losses arising on
such valuation are recognized immediately in the Profit and Loss account.
Other Long Term Employee Benefits are recognized in the same manner as Defined Benefit Plans.
Termination Benefits
Termination Benefits are recognized as and when incurred.
i) Revenue recognition
National Fittings Ltd., (referred as Company) earns revenue primarily from sale of SG Iron Grooved
and Screwed Pipe Fittings, Stainless Pipe Fittings and Ball Valves for industrial and non-industrial
applications.
Revenue is measured at the fair value of the consideration received or receivable for goods supplied
and services rendered, net of returns and discounts to customers. Revenue from the sale of goods is
shown excludes Goods and Services Tax which are payable in respect of sale of goods and services.
Revenue from the sale of goods and services is recognised when the Company performs its obligations
to its customers and the amount of revenue can be measured reliably and recovery of the consideration
is probable. The timing of such recognition in case of sale of goods is when the control over the same is
transferred to the Customer, which is mainly upon delivery and in case of services, in the period in which
such services are rendered.
Export Benefits are accounted on estimated basis and recognised in the year of export.
j) Taxes on Income
Taxes on income comprise current taxes and deferred taxes. Current tax in the Statement of Profit and Loss
is provided as the amount of tax payable in respect of taxable income for the period using tax rates and tax
laws enacted during the period, together with any adjustment to tax payable in respect of previous years.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and
liabilities and the amounts used for taxation purposes (tax base), at the tax rates and tax laws enacted
or substantively enacted by the end of the reporting period. Deferred tax assets are recognised for
the future tax consequences to the extent it is probable that future taxable profits will be available
against which the deductible temporary differences can be utilised. Income tax, insofar as it relates
to items disclosed under other comprehensive income or equity, is disclosed separately under other
comprehensive income or equity, as applicable. Deferred tax assets and liabilities are offset when there
is legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances
relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has
a legally enforceable right to offset and intends either to settle on net basis, or to realize the asset and
settle the liability simultaneously.
k) Foreign currency transactions
The Functional and presentation currency of the Company is Indian Rupee.
i. The transactions involving Foreign Currencies are accounted for at the rates prevailing on the date
of transactions and accordingly Gains/(Losses) arising out of fluctuation in exchange rates are
recognized in the Profit & Loss Statement
ii In case of forward contracts, if any, the difference between the forward rate and the exchange rate
at the prevailing period is recognized in the Profit & Loss Statement over the life of the contract.
iii. Foreign currency monetary Assets & Liabilities such as cash, receivables, payables etc., are
translated at the exchange rate prevailing at the year end and overall net gain/loss is adjusted to
the Profit & Loss Statement.
iv. Non-monetary items denominated in foreign currency such as investment, fixed assets etc., are
valued at the exchange rate prevailing on the date of transactions
l) Inventories
Inventories of Raw Materials, Stores and Spares parts, Work in progress and Finished goods are
valued at the lower of cost ascertained on weighted average cost basis and the net realisable value
after providing for obsolescence and other losses, where considered necessary. Cost includes all
charges in bringing the goods to the point of sale, including octroi and other levies, transit insurance
and receiving charges. Work-in-progress and finished goods include appropriate proportion of
overheads .
Stock of tools are valued at cost and are written off over a period of ten years.
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