1. Basis of preparation
The financial statements of KDDL Limited (the Company) have been
prepared on accrual basis under the historical cost convention, in
accordance with the generally accepted accounting principles in India
and to comply with the Accounting Standards referred to in sub section
(3C) of section 211 of the Companies Act, 1956 (the Act) and the
Rules framed there under. The accounting policies have been
consistently applied by the Company unless otherwise stated.
2. Use of estimates
In preparing the financial statements in conformity with accounting
principles generally accepted in India, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates. Any revisions to accounting estimates are recognised
in the current and future periods.
3. Revenue recognition
a) Revenue from sale of goods is recognised when the significant risks
and rewards in respect of ownership of the goods are transferred to the
customer and is stated inclusive of excise duty and net of trade
discounts, sales returns and sales tax wherever applicable.
b) Duty Entitlements Pass Book (DEPB) and any other scheme are
recognized in the profit and loss account when the right to receive
credit as per the terms of the scheme is established in respect of the
c) Revenue in respect of tool development and job charges is recognized
as per the terms of the contract with the customers.
d) Interest income is recognized on a time proportion basis, taking
into account the amount outstanding and the rates applicable.
e) Dividend income is recognized when the Company''s right to receive
the same is established.
4. Fixed assets
Fixed assets are stated at cost (gross block) less accumulated
depreciation and impairment losses, if any. Cost comprises the purchase
price (net of Cenvat credit availed) and any attributable cost of
bringing the asset to its working condition for its intended use.
Expenditure on account of modification / alteration in plant and
machinery / building, which increases the future benefit from the
existing asset beyond its previous assessed standard of performance, is
Borrowing costs directly attributable to acquisition or construction of
fixed assets, which necessarily takes a substantial period of time to
get ready for their intended use are capitalized.
Assets acquired on hire purchase are capitalized at the inception of
the hire purchase agreement. Interest cost is charged to profit and
loss account on accrual basis.
5. Depreciation and amortisation
Depreciation is provided on straight line method as per the rates
specified in Schedule XIV to the Act, as applicable at the time of
addition of the respective fixed assets, on pro-rata basis from the
month of addition, except for the following:
Depreciation on improvements carried out on buildings taken on lease
(included under buildings) is provided over the period of the lease.
Depreciation on a particular class of dies and tools manufactured by
the Company and put to use after 01 April 2003 is provided over a
period of 3 years.
The rates of depreciation are indicative of the useful lives of the
The cost of leasehold land is not amortised as these are perpetual
Know-how is amortised over a period of four years.
Software is amortised over a period not exceeding six years.
Inventories are valued as follows:
1. Raw materials & components, stores and spares, finished goods and
stock in process: At lower of cost and net realisable value.
2. Scrap: At estimated realisable value.
3. Cost of inventories is ascertained on the following basis:
a) Raw materials and components and stores & spares - on moving
weighted average basis.
b) Cost of finished goods and stock in process comprise material cost
on moving weighted average. Finished goods are stated inclusive of
excise duty, labour and related estimated overheads including
Investments that are readily realisable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments.
Long-term investments are stated at cost. Provision is made for
diminution in the value of long-term investments to recognise decline,
if any, other than temporary in nature.
8. Foreign currency transactions
Investments in foreign entities are recorded at the exchange rate
prevailing on the date of making the investment. Transactions in
foreign currencies are recorded at the rates prevailing on the date of
the transaction and monetary items denominated in foreign currency are
restated at the rate prevailing on the balance sheet date.
Differences arising on foreign currency translations of transactions
settled during the year are recognised in the profit and loss account.
The exchange differences arising on forward contracts other than those
entered into to hedge the foreign currency risk of firm commitments or
highly probable forecast transactions are recognised in the year in
which they arise based on the difference between i) foreign currency
amount of the contract translated at the exchange rate on the reporting
date and ii) the same foreign currency amount translated at the later
of the date of inception of the forward exchange contract or the last
The premium or discount arising at the inception of the forward
contracts other than those entered into to hedge the foreign currency
risk of firm commitments or highly probable forecast transactions is
amortised as expense or income over the life of the contract.
Any profit or loss arising on cancellation or renewal of forward
exchange contracts is recognised as income or expense for the year.
9. Employee benefits
The Company''s contribution to provident fund, being a defined
contribution plan, is recognised in the profit and loss account.
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related services are recognized as a liability determined based on
actuarial valuation using the Projected Unit Credit Method at the
Balance Sheet date. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are charged or
credited to the Profit and Loss Account in the year in which such gains
or losses arise.
Gratuity is a post employment defined benefit plan. The present value
of obligation for gratuity is determined based on actuarial valuation
using the Projected Unit Credit Method, less the fair value of plan
assets, together with adjustments for unrecognized actuarial gains or
losses and past service costs. Gratuity and superannuation funds are
administered by trustees of independently constituted trusts. Actuarial
gains and losses arising from experience adjustments and changes in
actuarial assumptions are charged or credited to the Profit and Loss
Account in the year in which such gains or losses arise. In respect of
superannuation, the Company makes contribution to Life Insurance
Corporation of India (LIC) of an amount payable by the trusts to LIC,
which is charged to the profit and loss account.
10. Taxes on income
Tax expense comprises current tax and deferred income tax.
Current tax is determined as the amount of tax payable in respect of
taxable income for the year.
Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years. Deferred tax is
measured based on the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. In respect of carry
forward losses and unabsorbed depreciation, deferred tax assets are
recognized only to the extent there is virtual certainty that
sufficient future taxable income will be available against which such
losses can be realised.
Minimum alternate tax (''MAT1) credit is recognised as an asset only
when and to the extent there is convincing evidence that the Company
will pay normal income tax during the specified period. In the year in
which MAT credit becomes eligible to be recognised as an asset in
accordance with the recommendations contained in guidance note issued
by the Institute of Chartered Accountants of India, the said asset is
created by way of a credit to the Profit and Loss Account and shown as
MAT credit entitlement. The Company reviews the same at each balance
sheet date and writes down the carrying amount of MAT credit
entitlement to the extent there is no longer convincing evidence to the
effect that the company will pay normal income tax during the specified
11. Earnings per share
The earnings considered in ascertaining the Company''s earnings per
share comprise the net profit or loss for the year attributable to the
equity shareholders. Earnings per share are computed using the weighted
average number of shares outstanding during the year.
For the purpose of calculating diluted earning per share, the net
profit or loss for the period attributable to equity share holders and
the weighted average number of shares outstanding during the period are
adjusted for the effect of all dilutive potential equity shares.
Lease of assets under which significant risks and rewards of ownership
are effectively retained by the lessor are classified as operating
leases. Lease rentals in respect of assets taken under an operating
lease are charged to the profit and loss account on a straight line
basis over the term of the lease. In respect of assets given on
operating lease, income is being recognised on a straight line basis
over the term of the lease.
13. Contingent liabilities and provisions
The Company makes a provision when there is a present obligation as a
result of a past event where the outflow of economic resources is
probable and a reliable estimate of the amount of obligation can be
made. A disclosure is made for possible or present obligations that may
but probably will not require outflow of resources or where a reliable
estimate cannot be made, as a contingent liability in the financial
14. Impairment of assets
The Company on an annual basis makes an assessment of any indicator
that may lead to impairment of assets. If any such indication exists,
the Company estimates the recoverable amount of the assets. If such
recoverable amount is less than the carrying amount, then the carrying
amount is reduced to its recoverable amount by treating the difference
as impairment loss and is charged to the profit and loss account.