2. Material accounting policy information
2.1 Basis of preparation
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) as
prescribed under Section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015
and the Companies (Indian Accounting Standards) (Amendment) Rules, 2016.
The financial statements have been prepared on accrual and going concern basis under the historical cost convention, except
for the certain assets and liabilities which have been measured at different basis and such basis has been disclosed in relevant
accounting policy.
The financial statements are presented in INR and all values are rounded to the nearest lakh (INR 00,000), except when
otherwise indicated.
2.2 Material accounting policy information
a. Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current / non-current classification.
An asset/ liability is treated as current when it is:
• Expected to be realised or intended to be sold or consumed or settled in normal operating cycle
• Held primarily for the purpose of trading
• Expected to be realised/settled within twelve months after the reporting period,
• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months
after the reporting period
• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting
period.
All other assets and liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively.
b. Property, plant and equipment
Tangible assets
Property, plant and equipment are stated at cost [i.e., cost of acquisition or construction inclusive of freight, erection and
commissioning charges, non-refundable duties and taxes, expenditure during construction period, borrowing costs (in
case of a qualifying asset) upto the date of acquisition/ installation], net of accumulated depreciation and accumulated
impairment losses, if any.
When significant parts of property, plant and equipment (identified individually as component) are required to be replaced
at intervals, the Company derecognizes the replaced part, and recognizes the new part with its own associated useful
life and it is depreciated accordingly. Whenever major inspection/overhaul/repair is performed, its cost is recognized in
the carrying amount of respective assets as a replacement, if the recognition criteria are satisfied. All other repair and
maintenance costs are recognized in the statement of profit and loss.
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.
Property, plant and equipment are eliminated from financial statements, either on disposal or when retired from active use.
Losses/gains arising in case retirement/disposals of property, plant and equipment are recognized in the statement of profit
and loss in the year of occurrence.
Depreciation on property, plant and equipment are provided to the extent of depreciable amount on the straight line (SLM)
Method. Depreciation is provided at the rates and in the manner prescribed in Schedule II to the Companies Act, 2013
except on some assets, where useful life has been taken based on internal technical evaluation as given below:
Particulars Useful lives
Dies and Molds 15 years
Leasehold Land and Leasehold Improvements are amortized over the period of the lease or the useful life of the asset,
whichever is lower.
The residual values, useful lives and methods of depreciation/ amortization of property, plant and equipment are reviewed
at each financial year end and adjusted prospectively, if appropriate.
i. Capital work in progress
Capital work in progress includes construction stores including material in transit/ equipment / services, etc. received
at site for use in the projects.
All revenue expenses incurred during construction period, which are exclusively attributable to acquisition / construction
of fixed assets, are capitalized at the time of commissioning of such assets.
c. Investment properties
Investment properties held to earn rentals or for capital appreciation or both are stated in the balance sheet at cost, less
any subsequent accumulated depreciation and subsequent accumulated impairment losses. Depreciation is charged on
a straight line basis over their estimated useful lives. Any gain or loss on disposal of investment property is determined as
the difference between net disposal proceeds and the carrying amount of the property and is recognized in the statement
of profit and loss. Transfer to, or from, investment property is done at the carrying amount of the property.
d. Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible
assets are carried at cost less any accumulated amortization and accumulated impairment loss.
Intangible assets with finite lives (i.e. software and licenses) are amortized 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 method
for an intangible asset is reviewed at least at the end of each reporting period.
Costs relating to computer software and technical know-how are capitalised and amortised on straight line method over
their estimated useful economic life of six years.
Internally generated: Research & development Costs
a) Research costs are charged to the statement of Profit and Loss in the year in which they are incurred.
b) Product development costs incurred on new dies and molds and new products are recognised as intangible assets,
when feasibility has been established, the Company has committed technical, financial and other resources to
complete the development and it is probable that asset will generate future economic benefits.
The cost of an internally generated intangible asset is the sum of directly attributable expenditure incurred from the
date when the intangible asset first meets the recognition criteria to the completion of its development.
Product development costs is amortised over the life of the related product, being a period of 6 years.
Product development expenditure is measured at cost less accumulated amortisation and impairment, if any.
Amortisation is not recorded on product engineering in progress until development is complete.
e. Borrowing costs
Borrowing costs are 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 are capitalised as part of the cost of the respective asset.
All other borrowing costs are expensed in the period in which they occur.
f. Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any
indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable
amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs
of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not
generate cash inflows that are largely independent of those from other assets or groups of assets.
When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is
written down to its recoverable amount.
Impairment losses of continuing operations, including impairment on inventories, are recognised in the statement of profit
and loss.
g. Inventories
Items of inventories are measured at lower of cost and net realizable value after providing for obsolescence, wherever
considered necessary. Cost of inventories comprises of cost of purchase, cost of conversion and other costs including
manufacturing overheads incurred in bringing them to their respective present location and condition. Cost of raw material,
stores and spares, packing materials, trading and other products are determined on moving weighted average basis. Work-
in-progress is carried at cost or net realisable value whichever is lower.
h. Revenue Recognition
The Company derives revenues primarily from manufacturing and sale of automotive components and molds.
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects
the consideration we expect to receive in exchange for those products or services.
Arrangements with customers for sale of automotive components and molds are mostly on a fixed - price basis.
Revenue from fixed-price contracts are recognised when the performance obligations are satisfied upon delivery of
components to the customers and where there is no uncertainty as to measurement or collectability of consideration. When
there is uncertainty as to measurement or ultimate collectability, revenue recognition is postponed until such uncertainty is
resolved.
The Company accounts for volume discounts and pricing incentives to customers as a reduction of revenue based on the
rateable allocation of the discounts/ incentives to each of the underlying performance obligation that corresponds to the
progress by the customer towards earning the discount/ incentive. Also, when the level of discount varies with increase
in levels of revenue transactions, the Company recognizes the liability based on its estimate of the customer’s future
purchases. If it is probable that the criteria for the discount will not be met, or if the amount thereof cannot be estimated
reliably, then discount is not recognized until the payment is probable and the amount can be estimated reliably. The
Company recognizes changes in the estimated amount of obligations for discounts in the period in which the change
occurs.
Contract modifications are accounted for when additions, deletions or changes are approved either to the contract scope
or contract price.
Revenues in excess of invoicing are classified as contract assets (which we refer as unbilled revenue) while invoicing in
excess of revenues are classified as contract liabilities (which we refer to as unearned revenues).
Dividend income is recognized when the right to receive payment is established.
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the interest rate
applicable.
Foreign currency transactions
The Company’s financial statements are presented in INR, which is also its functional currency.
Foreign currency transactions are initially recorded in functional currency using the exchange rates at the date the
transaction.
At each balance sheet date, foreign currency monetary items are reported using the exchange rate prevailing at the year
end.
Exchange differences arising on settlement or translation of monetary items are recognised in statement of profit and loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rates at the dates of the initial transactions.
i. Taxes on income
Current tax
Current tax is measured at the amount expected to be paid/ recovered to/from 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 recognised directly in equity/other comprehensive income is recognised under the
respective head and not in the statement of profit & loss. 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
where appropriate.
Current tax assets are offset against current tax liabilities if, and only if, a legally enforceable right exists to set off the
recognised amounts and there is an intention either to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Minimum Alternate Tax (MAT), paid in accordance with the Income Tax Act, 1961 gives rise to expected future economic
benefits in the form of adjustment of future tax liability arising within a specified period, is recognised as an asset only to the
extent there is convincing evidence that the Company will pay normal income tax during the specified period. Such asset
is reviewed at each balance sheet date and the carrying amount of MAT credit asset is written down to the extent there is
no longer convincing evidence to the effect that the Company will pay normal income tax during the specified period.
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 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 utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset
is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at
the balance sheet date. Tax relating to items recognized directly in equity/other comprehensive income is recognized in
respective head and not in the statement of profit & loss.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and is adjusted to the extent that it is
no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.
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.
j. Employee benefits
Short-term obligations
Liabilities for wages and salaries including non-monetary benefits that are expected to be settled within twelve months of
rendering the service are recognised in the period in which the employee renders the related service and are measured at
the undiscounted amount expected to be paid.
Other long-term employee benefit obligations
Other long-term employee benefits are recognised as an expense in the Statement of Profit and Loss as and when they accrue.
The Company determines the liability using the Projected Unit Credit Method, with actuarial valuations carried out as at the
balance sheet date. Actuarial gains and losses in respect of such benefits are charged to the Statement of Profit and Loss.
Post-employment obligations
Defined contribution plans:
The Company makes payments made to defined contribution plans such as provident fund and employees’ state insurance
fund. The Company has no further payment obligations once the contributions have been paid. The contributions are accounted
for as defined contribution plans and the contributions are recognised as employee benefit expense when they are due.
Defined benefit plans:
The Company has defined benefit plan namely gratuity fund for employees. The gratuity fund is recognised by the income
tax authorities and is administered through trust set up by the Company. Any shortfall in the size of the fund maintained
by the trust is additionally provided for in profit or loss. The liability or asset recognised in the balance sheet in respect of
gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of
plan assets. The defined benefit obligation is calculated annually by actuary using the projected unit credit method. The
present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference
to market yields at the end of the reporting period on Government bonds that have terms approximating to the terms of the
related obligation. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit
obligation and the fair value of plan assets. This cost is included in employee benefit expense in profit or loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are
recognised in the period in which they occur, directly in other comprehensive income. They are included in retained
earnings in the statement of changes in equity and in the balance sheet. Changes in the present value of the defined
benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past
service cost.
k. Employee Share based Payments
The Company operates equity settled share based plan for the employees (Referred to as employee stock option plan
(ESOP)). ESOP granted to the employees are measured at fair value of the stock options at the grant date using Black-
Scholes model. Such fair value of the equity settled share based payments is expensed on a straight line basis over the
vesting period, based on the Company’s estimate of equity shares that will eventually vest, with a corresponding increase
in equity (employee stock option reserve). At the end of each reporting period, the Company revises its estimate of number
of equity shares expected to vest. The impact of the revision of the original estimates, if any, is recognised in the Statement
of Profit and Loss such that cumulative expense reflects the revised estimate, with a corresponding adjustment to the
employee stock option reserve. The Company recovers the expenses incurred on behalf of its subsidiary for the stock
options granted to the employees of the subsidiaries.
l. Royalty
The Company pays/ accrues for royalty in accordance with the relevant licence agreement with the technical know-how
provider. The lump sum royalty incurred towards obtaining technical assistance/ technical know-how and engineering support
to manufacture new parts, ownership of which rests with the technical know-how provider, is recognised as an intangible asset.
Royalty payable on sales of products i.e. running royalty is charged to the Statement of Profit and loss as and when incurred.
m. Leases
As a lessee:
The Company recognizes a right-of-use asset (ROU) and a corresponding lease liability for all lease arrangements in which it is
a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term
and low value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the
term of the lease. Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease
term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
Lease Liability
At the commencement date of the lease, the Company recognizes 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, and amounts expected to be paid under residual value guarantees. The
lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company
and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to
terminate. Variable lease payments that do not depend on an index or a rate are recognized as expenses in the period in
which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease
commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement
date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments
made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease
term, a change in the lease payments.
Right of Use (ROU) Assets
The ROU assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before
the commencement day and any initial direct costs. They are subsequently measured at cost less accumulated depreciation
and impairment losses.
Whenever the Company incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which
it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision
is recognised and measured under Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets. The costs are
included in the related right-of-use asset.
The right-of-use assets are also subject to impairment. Refer to the accounting policies in section 2.3, Impairment of non¬
financial assets.
ROU assets are depreciated over the shorter period of the lease term and useful life of the underlying asset. If the
Company is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying
asset’s useful life. The depreciation starts at the commencement date of the lease.
Lease liability and ROU asset is separately presented in the balance sheet and lease payments is classified as financing
cash flows.
As a lessor :
The Company enters into lease arrangements as a lessor with respect to some of its investment properties and buildings.
Leases for which the Company is a lessor are classified as finance or operating leases. Whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as finance lease. All
other leases are classified as operating leases.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct
costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and
recognised on a straight-line basis over the lease term.
Amounts due from lessees under finance leases are recognised as receivables at the amount of 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 Company’s net investment outstanding in respect of the leases.
|