(i) Foreign currencyForeign currency transactions and translation
Transactions in foreign currencies are translated into
the functional currency of the Company at the exchange
rates on the date of the transactions. Monetary assets
and liabilities denominated in foreign currencies are
translated into the functional currency at the exchange
rate at the reporting date. Non-monetary assets and
liabilities that are measured at fair value in a foreign
currency are translated into the functional currency at
the exchange rate when the fair value was determined.
Non-monetary assets and liabilities that are measured
based on historical cost in a foreign currency are
translated at the exchange rate at the date of the
transaction. Exchange differences are recognized in
profit or loss,
Foreign exchange gains and losses are presented in the
statement of Profit and loss on net basis.
(ii) Financial Instruments(a) Non derivative financial instruments consist of:
• financial assets, which include cash and cash
equivalents, Loans given, trade receivables,
investments in equity & Mutual funds and
eligible current and noncurrent assets; and
• financial liabilities, which include borrowings,
trade payables and eligible current and
noncurrent liabilities.
Non-derivative financial instruments are
recognised initially at fair value. Subsequent
to initial recognition, non-derivative financial
instruments are measured as described below:
Cash and cash equivalents.
The Company's cash and cash equivalents consist
of cash on hand and in banks and demand deposits
with banks, which can be withdrawn at any time,
without prior notice or penalty on the principal.
For the purposes of the statement of cash flows,
cash and cash equivalents include cash on hand,
in banks and demand deposits with banks and
are considered part of the Company's cash
management system.
Investments
Financial instruments measured at fair value
through profit or loss ("FVTPL”):
Instruments that do not meet the amortised cost or
FVTOCI criteria are measured at FVTPL. Financial
assets at FVTPL are measured at fair value at the
end of each reporting period, with any gains or
losses arising on re-measurement recognised in
the statement of profit and loss. The gain or loss
on disposal is recognised in the statement of profit
and loss.
Investments in subsidiaries:
Investment in equity instruments of subsidiaries
are measured at cost less impairment (if any). Cost
represents amount paid for acquisition of the said
investments.
The Company assesses at the end of each reporting
period, if there are any indications that the said
investments may be impaired. If so, the Company
estimates the recoverable value/amount of the
investment and provides for impairment, if any i.e.
the deficit in the recoverable value over cost.
The recoverable amount is the higher of:
a. Fair value less costs of disposal,
and
b. Value in use (present value of estimated future
cash flows expected from the investment).
An impairment loss is recognized in the Statement
of Profit and Loss if the recoverable amount of the
investment is less than its carrying amount.
The impairment loss recognized in prior periods is
reversed if there has been a change in the estimates
used to determine the investment's recoverable
amount, but only to the extent that the carrying
amount of the investment does not exceed the
carrying amount that would have been determined
had no impairment loss been recognized in earlier
years. The impairment testing is performed in
accordance with the principles of Ind AS 36 -
Impairment of Assets.
Other financial assets
Other financial assets are non-derivative financial
assets with fixed or determinable payments that
are not quoted in an active market. These comprise
trade receivables loans given, lease receivables,
and eligible current and noncurrent assets. They
are presented as current assets, except for those
expected to be realised later than twelve months
after the reporting date which are presented
as non-current assets. All financial assets are
initially recognised at fair value and subsequently
measured at amortised cost using the effective
interest method, less any impairment losses.
However, trade receivables that do not contain a
significant financing component are measured at
the Transaction Price.
Trade payables and other liabilities
Trade payables are initially recognised at
transaction price, and subsequently carried at
transaction price.
Other liabilities are initially recognised at
transaction price, and subsequently carried at
amortised cost using the effective interest method.
For these financial instruments, the carrying
amounts approximate fair value due to the short¬
term maturity of these instruments.
(b) Derecognition of financial instruments
The Company derecognises a financial asset
when the contractual rights to the cash flows
from the financial asset expire or it transfers
the financial asset and the transfer qualifies for
derecognition under Ind AS 109. If the Company
retains substantially all the risks and rewards
of a transferred financial asset, the Company
continues to recognise the financial asset and
recognises a borrowing for the proceeds received.
A financial liability (or a part of a financial liability)
is derecognised from the Company's balance sheet
when the obligation specified in the contract is
discharged or cancelled or expires.
(c) Offsetting
Financial assets and financial liabilities are offset,
and the net amount presented in the Balance Sheet
when, and only when, the Company currently has
a legally enforceable right to set off the amounts
and it intends either to settle them on a net basis
or to realize the asset and settle the liability
simultaneously.
(iii) Property, plant and equipmenti. Recognition and measurement
Items of property, plant and equipment are
measured at cost (cash price equivalent), which
includes capitalized borrowing costs, less
accumulated depreciation, and accumulated
impairment losses, if any.
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.
Any gain or loss on disposal of an item of property,
plant and equipment is recognized in profit or loss.
Capital work in progress is stated at cost and
includes the cost of the assets that are not ready
for their intended use at the Balance Sheet date.
PPE is derecognized upon disposal or when no
future economic benefits are expected from its use
or disposal. Any gain or loss arising on derecognition
is recognised in the Statement of Profit and Loss in
the same period.
ii. Subsequent expenditure
Subsequent expenditure is capitalized only if it
is probable that the future economic benefits
associated with the expenditure will flow to the
Company.
iii. Depreciation
Depreciation is calculated on cost of items of
property, plant and equipment less their estimated
residual values over their estimated useful lives
using the straight-line method and is generally
recognized in the statement of profit and loss.
Freehold land is not depreciated.
Depreciation on property, plant and equipment is
provided over the useful life of assets as assessed
by the management are in line with useful lives
prescribed in Schedule II to the Companies Act
2013, as follows -
Cost of leasehold land is amortised over the period
of lease i.e, 80 years to 99 years
Depreciation method, useful lives and residual
values are reviewed at each financial year-end and
adjusted if appropriate.
Depreciation on additions (disposals) is provided
on a pro-rata basis i.e. from (up to) the date on
which the asset is ready for use (disposed of).
(iv) Intangible assets
Intangible assets acquired separately are measured
at cost of acquisition. Following initial recognition,
intangible assets are carried at cost less accumulated
amortization and impairment losses, if any. The
amortization of an intangible asset with a finite useful
life reflects the manner in which the economic benefit
is expected to be generated. The estimated useful
life of amortizable intangibles is reviewed and where
appropriate is adjusted, annually.
The estimated useful lives of the amortizable intangible
assets are considered as 3 to 5 years.
(v) Asset classified as held for sale.
The Company classifies non-current assets as held
for sale if their carrying amounts will be recovered
principally through a sale rather than through continuing
use.
Non-current assets held for sale are measured at the
lower of their carrying amount and the fair value less
costs to sell. Assets and liabilities classified as held for
sale are presented separately in the balance sheet.
Following their classification as held for sale, non
current assets are not depreciated.
(vi) Investment Property.(i) Investment properties carried at cost:
Properties that are held for long-term rental yields
and/or for capital appreciation are classified as
investment properties. Investment properties are
stated at cost of acquisition or construction less
accumulated depreciation and impairment, if any.
Depreciation is recognised using the straight line
method so as to amortise the cost of investment
properties over their useful lives as specified in
Schedule II of the Companies Act, 2013. Freehold
land and properties under construction are not
depreciated.
(ii) Reclassification to/from investment property:
When an item of property, plant and equipment
or right-of-use assets is transferred to investment
property following a change in its use, the carrying
amount of the item immediately prior to transfer is
recognised as the deemed cost of the investment
property for subsequent accounting.
(iii) Derecognition of Investment property:
An item of investment property is derecognised
upon disposal or when no future economic benefits
are expected to arise from the continued use of
asset. Any gain or loss arising on the disposal or
retirement of an item of investment property is
determined as the difference between the sales
proceeds and the carrying amount of the property
and is recognised in the Statement of Profit and
Loss.
Income received from investment property is
recognised in the Statement of Profit and Loss on
a straight line basis over the term of the lease/
agreement.
(vii) Impairmenti. Impairment of Financial assets
The Company applies the expected credit
loss model for recognizing impairment loss on
financial assets measured at amortized cost,
trade receivables, loans given, Lease receivables
and other financial assets. Expected credit loss
is the difference between the contractual cash
flows and the cash flows that the entity expects
to receive discounted using the effective interest
rate.
Loss allowances for trade receivables, loans given
Lease receivables are measured at an amount
equal to lifetime expected credit loss. Lifetime
expected credit losses are the expected credit
losses that result from all possible default events
over the expected life of a financial instrument.
Lifetime expected credit loss is computed based
on a provision matrix which takes in to account
risk profiling of customers and historical credit
loss experience adjusted for forward looking
information.
ii. Impairment of non-financial assets
The Company's non-financial assets such as
property, plant and equipment, inventories and
deferred tax assets, are reviewed at each reporting
date to determine whether there is any indication
of impairment. If any such indication exists, then
the asset's recoverable amount is estimated.
For impairment testing, assets that do not generate
independent cash inflows are grouped together into
cash-generating units (CGUs). Each CGU represents
the smallest group of assets that generates cash
inflows that are largely independent of the cash
inflows of other assets or CGUs.
The recoverable amount of a CGU (or an individual
asset) is the higher of its value in use and its fair
value less costs to sell. Value in use is based on the
estimated future cash flows, 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 CGU (or
the asset).
An impairment loss is recognized if the carrying
amount of an asset or CGU exceeds its estimated
recoverable amount. Impairment losses are
recognized in the statement of profit and loss.
In respect of assets for which impairment loss has
been recognized in prior periods, the Company
reviews at each reporting date whether there is
any indication that the loss has decreased or no
longer exists. An impairment loss is reversed if
there has been a change in the estimates used to
determine the recoverable amount. Such a reversal
is made only to the extent that the asset's carrying
amount does not exceed the carrying amount that
would have been determined, net of depreciation
or amortization, if no impairment loss had been
recognized.
(viii) Inventories:
Inventories are valued at lower of cost and net realizable
value including necessary provision for obsolescence.
Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated cost of
completion and selling expenses. The comparison of
cost and net realisable value is made on an item by item
basis.
The cost of raw materials, components, consumable
stores and spare parts are determined using the
weighted average method and includes freight, taxes
and duties, net of duty credits wherever applicable.
Finished goods and work in progress are valued at lower
of cost and net realisable value. Cost includes all direct
costs including applicable manufacturing overheads
incurred in bringing them to their present location and
condition
(ix) Employee benefitsi. Short term employee benefits
Short-term employee benefit obligations 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. under short-term cash bonus, if
the Company has a present legal or constructive
obligation to pay this amount as a result of past
service provided by the employee, and the amount
of obligation can be estimated reliably.
ii. Post-employment benefits (defined benefit
plans)
The Company provides for retirement benefits
in the form of Gratuity. A defined benefit plan is
a post-employment benefit plan other than a
defined contribution plan. The Company's net
obligation in respect of defined benefit plans is
calculated separately for each plan by estimating
the amount of future benefit that employees
have earned in the current and prior periods,
discounting that amount and deducting the fair
value of any plan assets.
The calculation of defined benefit obligation is
performed annually by a qualified actuary using the
projected unit credit method. When the calculation
results in a potential asset for the Company, the
recognized asset is limited to the present value
of economic benefits available in the form of any
future refunds from the plan or reductions in future
contributions to the plan ('the asset ceiling').
In order to calculate the present value of economic
benefits, consideration is given to any minimum
funding requirements.
Re-measurements of the net defined benefit
liability, which comprise actuarial gains and losses,
the return on plan assets (excluding interest) and
the effect of the asset ceiling (if any, excluding
interest), are recognized in OCI. The Company
determines the net interest expense (income)
on the net defined benefit liability (asset) for
the period by applying the discount rate used
to measure the defined benefit obligation at the
beginning of the annual period to the then-net
defined benefit liability (asset), taking into account
any changes in the net defined benefit liability
(asset) during the period as a result of contributions
and benefit payments. Net interest expense and
other expenses related to defined benefit plans are
recognized in profit or loss.
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 profit or
loss. The Company recognizes gains and losses on
the settlement of a defined benefit plan when the
settlement occurs.
iii. Defined contribution plans
The Company makes defined contribution to
Government Employee Provident Fund, and
Superannuation Scheme, which are recognized in
the Statement of Profit and Loss on accrual basis.
A defined contribution plan is a post-employment
benefit plan under which an entity pays fixed
contributions into a separate entity and will
have no legal or constructive obligation to pay
further amounts. The Company makes specified
monthly contributions towards Government
administered provident fund scheme. Obligations
for contributions to defined contribution plans
are recognised as an employee benefit expense in
profit or loss in the periods during which the related
services are rendered by employees.
Prepaid contributions are recognised as an asset
to the extent that a cash refund or a reduction in
future payments is available.
(x) Revenue Recognition
The Company derives revenue primarily from
manufacture and sale of castings camshaft and
machined camshafts. The Company also earns revenue
from Tooling contract used in manufacturing of
camshafts.
Sale of Products:
Revenue from sale of product is recognized at point
in time when control of the goods has transferred to
the customer. Control over a good refers to the ability
to direct the use of, and obtain substantially all of the
remaining benefits from, those goods. Control is usually
transferred upon shipment, delivery to, upon receipt
of goods by the customer, in accordance with the
individual delivery and acceptance terms agreed with
the customers. The amount of revenue to be recognized
(transaction price) is based on the consideration
expected to be received in exchange for goods, excluding
amounts collected on behalf of third parties such as
goods and services tax or other taxes directly linked
to sales. Revenue from product sales are recorded net
of allowances for estimated rebates and estimates of
product returns, all of which are established at the time
of sale.
Tooling contract:
The Company recognizes revenue from developed
tools only when they are approved by the customer.
Accordingly, revenue from tooling is recognized at a
point in time, post-approval by the customer, at the
transaction price agreed upon in the contract.
(xi) Export Incentives:
Government grants in the nature of export incentives
are accounted for in the period of export of goods if the
entitlements can be estimated with reasonable accuracy
and conditions precedent to claim are reasonably
expected to be fulfilled.
(xii) Dividend:
Dividends are recognised when they become legally
payable. In the case of interim dividends to equity
shareholders, this is when declared by the directors. In
the case of final dividends, this is when approved by the
shareholders at the annual general meeting.
(xiii) Income tax
Income tax comprises current and deferred tax. It is
recognised in profit or loss except to the extent that
it relates to an item recognised directly in equity or in
other comprehensive income
i. Current income tax
Tax on income for the current period is determined
on the basis of taxable income and tax credits
computed in accordance with the provisions of
the Income Tax Act,1961 and using estimates
and judgments based on the expected outcome of
assessments/appeals and the relevant rulings in
the areas of allowances and disallowances.
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 realize the asset and settle the liability on a net
basis or simultaneously.
ii. Deferred tax
Deferred income tax is provided in full, using the
balance sheet approach, on temporary differences
between the carrying amounts of assets and
liabilities for financial reporting purposes and the
corresponding amounts used for taxation purposes.
Deferred tax is also recognized in respect of carried
forward tax losses and tax credits.
Deferred tax liabilities are generally recognized for
all taxable temporary differences except where
the Company is able to control the reversal of
the temporary difference and it is probable that
the temporary difference will not reverse in the
foreseeable future.
Deferred tax assets - unrecognized or recognized,
are reviewed at each reporting date and are
recognized/ reduced to the extent that it is
probable/ no longer probable respectively that the
related tax benefit will be realized.
Deferred tax is 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 the laws
that have been enacted or substantively enacted
by the reporting date.
Deferred tax assets and liabilities are offset if there
is a legally enforceable right to offset current tax
liabilities and assets, and they relate to income
taxes levied by the same tax authority.
(xiv) LeasesCompany as a lessee:
The Company applies a single recognition and
measurement approach for all leases, except for
short-term leases and leases of low-value assets. The
Company recognises lease liabilities representing
obligations to make lease payments and right-of-use
assets representing the right to use the underlying
assets
Right-of-use assets:
The Company recognises right-of-use assets at the
commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use
assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted
for any remeasurement of lease liabilities. The cost
of right-of-use assets includes the amount of lease
liabilities recognised, initial direct costs incurred, and
lease payments made at or before the commencement
date less any lease incentives received. Right-of-use
assets are depreciated on a straight-line basis over the
shorter of the lease term and the estimated useful lives
of the assets.
If ownership of the leased asset transfers to the
Company at the end of the lease term or the cost
reflects the exercise of a purchase option, depreciation
is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment.
Refer to the material accounting policies in section 2(c)
(vii) Impairment of non-financial assets
Lease liabilities
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. 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 recognised as expenses (unless they are
incurred to produce inventories) 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 (e.g., changes to future
payments resulting from a change in an index or rate
used to determine such lease payments) or a change in
the assessment of an option to purchase the underlying
asset.
Short-term leases and leases of low-value assets:
The Company applies the short-term lease recognition
exemption to its short-term leases (i.e., those leases
that have a lease term of 12 months or less from the
commencement date and do not contain a purchase
option). It also applies the lease of low-value assets
recognition exemption to leases that are considered to
be low value. Lease payments on short-term leases and
leases of low-value assets are recognised as expense on
a straight-line basis over the lease term.
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