1.1 PROPERTY, PLANT AND EQUIPMENT
Freehold Land is carried at historical cost. All other items of Property, Plant and Equipment are recorded
at cost less accumulated depreciation. The cost of acquisition of property, plant and equipment is
net of duty or tax credit availed and includes purchase cost or its construction cost, inward freight
and other expenses incidental to acquisition or installation and any cost directly attributable to bring
the asset into the location and condition necessary for it to be capable of operating in the manner
intended for its use. Cost of spares relating to specific item of an asset is capitalized. For major
projects, interest and other costs incurred on / related to borrowings attributable to such projects /
fixed assets during construction period and related pre-operative expenses are capitalized as part of
the cost of respective assets. Cost of assets not ready to use before such date are disclosed under
“Capital Work-in-Progress”.
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.
Depreciation is provided using the Straight Line Method as per the useful lives of the assets at the
rates prescribed under Schedule II of the Companies Act, 2013.
1.2 INVENTORIES
Inventories are valued at the lower of cost and net realizable value. Cost is ascertained on weighted
average basis. Cost includes cost of purchase, cost of conversion, and other costs incurred in
bringing the inventories to their present location and condition. 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.
Raw materials, Stores and Spares of inventory are measured at weighted average cost. Work-in¬
progress and finished goods are valued at cost or net realizable value whichever is lower. Loose
Tools, Moulding Boxes and Patterns are measured at cost less amortized value on a straight line
basis over its useful life.
1.3 FINANCIAL INSTRUMENTS
The Company measures financial instruments at fair value at each balance sheet date. 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. The fair value measurement is based on
the presumption that the transaction to sell the asset or transfer the liability takes place either in
the principal market for the asset or liability, or in the absence of a principal market, in the most
advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company. The fair value
of an asset or a liability is measured using the assumptions that market participants would use when
pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to
generate economic benefits by using the asset in its highest and best use or by selling it to another
market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable inputs
and minimizing the use of unobservable inputs.
Non-derivative Financial Instruments
(i) Financial assets carried at amortized cost
A financial asset is subsequently measured at amortized 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.
(ii) Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income
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. The Company has made an irrevocable election for its investments which
are classified as equity instruments to present the subsequent changes in fair value in other
comprehensive income based on its business model.
(iii) Financial assets at fair value through profit or loss
A financial asset which is not classified in any of the above categories is subsequently fair
valued through profit or loss.
(iv) Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest where
the fair value differs from the Transaction Price. Where the fair value does not differ, materially,
from Transaction Price, the financial liabilities are stated at transaction price only.
Derivative Financial Instruments
The Company holds derivative financial instruments such as foreign currency forward contracts to
mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for
these contracts is generally a bank.
1.4 REVENUE RECOGNITION
Sale of Goods: The Company derives revenues primarily from sale of Iron Castings. Revenue is
measured based on the consideration specified in a contract with a customer. Revenue is recognised
upon transfer of control of promised products or services to customers in an amount that reflects the
probable consideration expected to be received in exchange for those products or services. Claims
on the Company for price revision are accounted when facts and circumstances indicate that a price
reduction is probable and the amount can be reasonably estimated. The claims by the Company are
recorded when it is accepted and it is reasonably certain that the amounts will be collected. Advances
received from customers will be adjusted during the normal course of business.
Interest Income: Interest Income is recognised on effective interest method taking into account the
amount outstanding and the rate applicable.
Profit on sale of investments: Profit on sale of investments is recognised only at the time when the
investments are realized.
Export benefits, incentives and licenses: Export incentives are recognised 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 significant uncertainty regarding the ultimate collection of the relevant export
proceeds.
1.5 SEGMENT INFORMATION
The Company is principally engaged only in the business of manufacture of Iron Castings and there
are no other reportable segments. The geographical segments considered for disclosure based on
location of its customers.
1.B. OTHER ACCOUNTING POLICIES:1.6 INTANGIBLE ASSETS
Intangible assets are carried at cost less any accumulated amortization and accumulated impairment
loss.
Costs incurred towards purchase of computer software are amortized using the straight line method
over a period based on management’s estimate of useful lives of such software or over the license
period of the software, whichever is shorter.
1.7 USE OF ESTIMATES
The preparation of the financial statements in conformity with the generally accepted accounting
principles in India requires management to make estimates and assumptions that affect the reported
amount of assets and liabilities as of the Balance Sheet date, reported amount of revenue and
expenses for the year and disclosure of contingent liabilities and contingent assets as of the date
of Balance Sheet. The estimates and assumptions used in these financial statements are based
on management’s evaluation of the relevant facts and circumstances as of the date of the financial
statements. The actual amounts may differ from the estimates used in the preparation of the financial
statements and the difference between actual results and the estimates are recognised in the period
in which the results are known / materialise.
1.8 IMPAIRMENT OF ASSETS
All assets other than Inventories and Investments are reviewed for impairment, wherever events
or changes in circumstances indicate that the carrying amount of those assets may not be fully
recoverable, in such cases the carrying amount of such assets is reduced to its estimated recoverable
amount and the amount of such impairment loss is charged to the Statement of Profit and Loss.
If at the Balance sheet date there is an indication that the previously assessed impairment loss no
longer exists, then such loss is reversed and the asset is restated to that effect.
1.9 INVESTMENTS
All Investments are carried at cost. Investments, which at the inception, have been designated to be
held for a long term capital appreciation, the changes in the fair value are considered through Other
Comprehensive Income. All other investments are valued at fair value and the gains or losses being
recognised in Statement of Profit and Loss.
1.10 CASH AND CASH EQUIVALENTS
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term
investments with an original maturity of three months or less, which are subject to an insignificant
risk of changes in value.
1.11 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.
A lease that transfers substantially all the risks and rewards incidental to ownership to the Company
is classified as a finance lease. Lease where the Lessor retains substantially all the risks and
rewards incidental to the ownership is classified as an operating lease. Operating lease payments
are recognised as an expense in the Statement of Profit and Loss on straight-line basis over the
lease term.
1.12 CONTRIBUTED EQUITY
Equity Shares are classified as equity. Incremental costs directly attributable to the issue of new
shares are shown in equity as a deduction, net of tax, from the proceeds.
1.13 DIVIDEND
Final dividend on shares is recorded as a liability on the date of approval by the shareholders and
interim dividend is recorded as liability on the date of declaration by the Board.
1.14 GOVERNMENT GRANTS AND SUBSIDIES
Government grants are recognised where there is reasonable assurance that the grant will be
received and all attached conditions will be complied with. When the grant relates to an expense
item, it is recognised as income on a systematic basis over the periods that the related costs, for
which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised
as income in equal amounts over the expected useful life of the related asset.
1.15 FOREIGN CURRENCY TRANSACTION
Initial Recognition:
On initial recognition, all foreign currency transactions are recorded by applying to the foreign
currency amount the exchange rate between the reporting currency and the foreign currency at the
date of the transaction.
Subsequent Recognition:
As at the reporting date, non-monetary items which are carried in terms of historical cost denominated
in a foreign currency are reported using the exchange rate at the date of the transaction. All monetary
assets and liabilities in foreign currency are restated at the end of the accounting period. Exchange
differences on restatement of all monetary items are recognised in the Statement of Profit and Loss.
1.16 BORROWING COSTS
Borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale capitalized as
part of the cost of an asset. Where specific borrowings are identified to assets, the Company uses
the interest rates applicable to that specific borrowing as the capitalization rate. Where borrowings
cannot be specifically identified to assets, the capitalization rate applied is the weighted average of
the interest rates applicable to all borrowings of the Company.
All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of
interest and other costs that an entity incurs in connection with the borrowing of funds.
1.17 TAXES
Income tax expense comprises of current and deferred tax. Current income tax assets and liabilities
are measured at the amount expected to be recovered from or paid to the taxation authorities in
accordance with the Indian Income Tax Act, 1961. The tax rate and tax laws used to compute the
amount are those that are enacted or substantially enacted, at the reporting date. Current income tax
relating to items recognised outside profit or loss is recognised outside profit or loss (either in other
comprehensive income or 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 provision where appropriate.
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 all deductible temporary differences, the carry forward of
unused tax credits and any unused tax losses. Deferred tax assets are recognised 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 utilized.
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.
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 relating to items recognised outside profit or loss is recognised outside profit or loss
(either in other comprehensive income or 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 taxation authority.
1.18 EMPLOYEE BENEFITSa. Defined Contribution Plans
i) Provident Fund: The Company makes monthly Provident contributions at specified
percentage of specified salary in accordance with the provisions of Employees
Provident Funds and Miscellaneous Provisions Act, 1952 and the contributions are
charged to Statement of Profit and Loss.
ii) Superannuation Fund: The Company makes annual Superannuation fund
contributions to defined contribution plan, administered by the Life Insurance
Corporation of India, for qualifying employees. Under the Scheme, the Company is
required to contribute a specified percentage of specified salary to fund the benefits.
The contributions are charged to the Statement of Profit and Loss.
b. Defined Benefit Plan
Gratuity: The Company provides for Gratuity, a defined benefit retirement plan covering
eligible employees as per the provisions of the Payment of Gratuity Act, 1972. The plan
provides for a payment to vested employees at retirement, death while in employment or
on termination of employment, an amount equivalent to fifteen days salary payable for each
year of completed service subject to maximum amount as may be prescribed. Vesting occurs
upon completion of five years of service, except in case of death while in employment in
which case the legal heirs would receive the Gratuity.
The cost of providing benefits determined using the projected unit credit method, which
actuarial valuation being carried out at each Balance Sheet date. The retirement benefit
obligation recognised as expenditure represents the present value of defined benefit
obligation as reduced by the fair value of scheme assets. The Company makes contribution
to Life Insurance Corporation of India to administer the fund. The changes in the actuarial
assumptions are accounted through Other Comprehensive Income.
1.19 EARNINGS 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 period.
There are no diluted earnings per share as there are no dilutive potential equity shares.
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