Kernex Microsystems (India)

1 SIGNIFICANT ACCOUNTING POLICIES
 
1.1    Basis of accounting and preparation of financial statements
 
The financial statements of the Company have been prepared in accordance with the Generally Accepted
Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards notified under the
Companies (Accounts) Rules, 2014 (as amended) and the relevant provisions of the Companies Act, 2013. The
financial statements have been prepared on accrual basis under the historical cost convention. The accounting
policies adopted in the preparation of the financial statements are consistent with those followed in the
previous year unless otherwise stated.
 
1.2    Use of estimates
 
The preparation of the financial statements in conformity with Indian GAAP requires the Management to
make estimates and assumptions considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the year. The Management believes that
the estimates used in preparation of the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the actual results and the estimates are
recognized in the periods in which the results are known / materialize.
 
1.3    Inventories
 
Inventories of components are valued at cost or realizable value whichever is less. Work in Progress is
valued at cost of materials and services used.
 
1.4    Cash and cash equivalents
 
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances
(with an original maturity of three months or less from the date of acquisition), highly liquid investments
that are readily convertible into known amounts of cash and which are subject to insignificant risk of
changes in value.
 
1.5    Cash flow statement
 
Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and
tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or
future cash receipts or payments. The cash flows from operating, investing and financing activities of the
Company are segregated based on the available information.
 
1.6    Depreciation
 
Depreciation has been provided on the fixed assets on WDV method as per the rates prescribed in Schedule
II to the Companies Act, 2013.
 
1.7    Revenue recognition Revenue from contracts
 
Revenue from contracts priced on a time and material basis are recognized when services are rendered and
related costs are incurred.
 
Revenue from services
 
Service income is recognized as per the terms of contracts with the customer, when the related service is
performed.
 
Sale of goods
 
Revenue from the product sales is exclusive of returns, and applicable trade discounts but inclusive of
duties and taxes collected on the same.
 
1.8    Other income
 
Interest income is accounted on accrual basis.
 
1.9    Tangible fixed assets
 
Fixed Assets are valued at original cost including incidental expenditures, taxes and duties net of
CENVAT and VAT credit availed.
 
Capital work-in-progress:
 
Projects under which assets are not ready for their intended use and other capital work-in-progress are
carried at cost, comprising direct cost, related incidental expenses and attributable interest.
 
1.10    Foreign currency transactions and translations Initial recognition
 
Transactions in foreign currencies entered into by the Company and its integral foreign operations are
accounted at the exchange rates prevailing on the date of the transaction or at rates that closely
approximate the rate at the date of the transaction.
 
Measurement of foreign currency monetary items at the Balance Sheet date
 
Foreign currency monetary items of the Company and its net investment in non-integral foreign operations
outstanding at the Balance Sheet date are restated at the year-end rates.
 
Treatment of exchange differences
 
Exchange differences arising on settlement / restatement of short-term foreign currency monetary assets
and liabilities of the Company are recognized as income or expense in the Statement of Profit and Loss. 
 
1.11    Investments
 
Long Term investments in (Subsidiary (100% Wholly owned subsidiary) are carried at cost
 
1.12    Employee benefits Defined contribution plans
 
In respect of retirement benefits in the form of provident fund, the contribution payable by the company
for a year is charged to the Profit and Loss account.
 
Defined benefit plans
 
Gratuity: Gratuity benefit is applicable to all the permanent and full time employees of the company.
Gratuity paid out is based on last drawn basic salary and DA at the time of termination or retirement.
 
The scheme takes into account each completed year of service or part thereof in excess of 6 months.
Annual Contribution to the employee''s Gratuity fund, Established with LIC of India(LIC) are determined based
on an actuarial valuation made by the LIC as at the year end.
 
Short-term employee benefits
 
The Company does not have any scheme for Leave encashment in place.
 
1.13    Segment reporting
 
Since the Company has no Reportable segment to report, Segment Reporting under Accounting Standard - 17
Issued by Institute of Chartered Accountants of India (ICAI) is not applicable.
 
1.14    Earnings per share
 
Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax
effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the
year. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax
effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or
income relating to the dilutive potential equity shares, by the weighted average number of equity shares
considered for deriving basic earnings per share and the weighted average number of equity shares which could
have been issued on the conversion of all dilutive potential equity shares.
 
1.15    Taxes on income
 
Current tax is the amount of tax payable on the taxable income for the year as determined in accordance
with the provisions of the Income Tax Act, 1961.Minimum Alternate Tax (MAT) paid in accordance with the tax
laws, which gives future economic benefits in the form of adjustment to future income tax liability, is
considered as an asset if there is convincing evidence that the Company will pay normal income tax.
Accordingly, MAT is recognized as an asset in the Balance Sheet when it is probable that future economic
benefit associated with it will flow to the Company. Deferred tax is recognized on timing differences, being
the differences between the taxable income and the accounting income that originate in one period and are
capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the
tax laws enacted or substantially enacted as at the reporting date. Deferred tax liabilities are recognized
for all timing differences. Deferred tax assets in respect of unabsorbed depreciation and carry forward of
losses are recognized only if there is virtual certainty that there will be sufficient future taxable income
available to realize such assets. Deferred tax assets are recognized for timing differences of other items
only to the extent that reasonable certainty exists that sufficient future taxable income will be available
against which these can be realized. Deferred tax assets and liabilities are offset if such items relate to
taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for
such set off. Deferred tax assets are reviewed at each Balance Sheet date for their reliability. 
 
1.16    Provisions and contingencies
 
A provision is recognized when the Company has a present obligation as a result of past events and it is
probable that an outflow of resources will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present
value and are determined based on the best estimate required to settle the obligation at the Balance Sheet
date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.
Contingent liabilities are disclosed in the Notes.