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Siemens
BSE: 500550|NSE: SIEMENS|ISIN: INE003A01024|SECTOR: Infrastructure - General
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« Sep 12
Accounting Policy Year : Sep '13
1.1 Use of estimates
 
 The preparation of financial statements in conformity with Indian GAAP
 requires management to make estimates and assumptions that affect the
 reported amounts of assets and liabilities and the disclosure of
 contingent liabilities on the date of the financial statements. Actual
 results could differ from those estimates. Any revision to accounting
 estimates is recognised prospectively in current and future periods.
 
 1.2 Tangible fixed assets and depreciation
 
 Fixed assets are stated at cost of acquisition or revalued amounts less
 accumulated depreciation and impairment losses, if any. The cost of
 fixed assets includes taxes, duties, freight and other incidental
 expenses related to the acquisition and installation of the respective
 assets.
 
 Depreciation is provided on the straight-line method (''SLM''). The
 depreciation rates prescribed in Schedule XIV to the Act are considered
 as the minimum rates. If the management''s estimate of the useful life
 of a fixed asset at the time of acquisition of the asset or of the
 remaining useful life on a subsequent review is shorter than that
 envisaged in the aforesaid Schedule, depreciation is provided at a
 higher rate based on the management''s estimate of useful life/remaining
 life.
 
 Diagnostics equipments are being treated as traded items of inventory
 when they are received. However, if these instruments are issued from
 inventory to customers under placement agreement, these are treated as
 capital asset in the period of such issue and are stated at cost less
 accumulated depreciation.
 
 The key fixed asset blocks and related annual depreciation rates, which
 in management''s opinion reflect the estimated useful economic lives of
 the fixed assets, are:
 
 1.2 Tangible fixed assets and depreciation (Continued)
 
 Where depreciable assets are revalued, depreciation is provided on the
 revalued amount and the additional depreciation on accretion to assets
 on revaluation is transferred from revaluation reserve to the statement
 of profit and loss.
 
 Assets costing Rs. 5,000 or less are fully charged to the statement of
 profit and loss in the year of acquisition.
 
 Items of fixed assets that have been retired from active use and are
 held for disposal are stated at the lower of their net book value and
 estimated net realizable value and are disclosed separately in the
 financial statements.
 
 Capital work-in-progress includes the cost of fixed assets that are not
 ready to use at the balance sheet date.
 
 1.3 Intangible assets
 
 Intangible assets comprise goodwill, software and technical know-how.
 These intangible assets are amortised on straight- line basis based on
 the following useful lives, which in management''s estimate represents
 the period during which economic benefits will be derived from their
 use:
 
 1.4 Impairment of assets
 
 The Company assesses at each balance sheet date whether there is any
 indication that an asset or a group of assets (cash generating unit)
 may be impaired. If any such indication exists, the Company estimates
 the recoverable amount of the asset or cash generating unit.
 
 The recoverable amount is the greater of the asset''s net selling price
 and value in use. In assessing value in use, the estimated future cash
 flows are discounted to the 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 asset. In determining net selling price,
 recent market transactions are taken into account, if available. If no
 such transactions can be identified, an appropriate valuation model is
 used. If such recoverable amount of the asset or the recoverable amount
 of the cash-generating unit to which the asset belongs is less than its
 carrying amount, the carrying amount is reduced to its recoverable
 amount. The reduction is treated as an impairment loss and is
 recognized in the statement of profit and loss. If at the balance sheet
 date there is an indication that a previously assessed impairment loss
 no longer exists, the recoverable amount is reassessed and the asset is
 reflected at the recoverable amount subject to a maximum of depreciable
 historical cost, had no impairment been recognised.
 
 1.5 Investments
 
 Investments that are readily realizable 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 carried at cost. Provision for diminution is
 made to recognize a decline, other than temporary in value of long-term
 investments and is determined separately for each individual
 investment.
 
 Investment property
 
 An investment in land or buildings, which is not intended to be
 occupied substantially for use by or in the operation of the Company,
 is classified as investment property. Investment properties are stated
 at cost, net of accumulated depreciation and accumulated impairment
 losses, if any.
 
 The cost comprise purchase price, borrowing costs if capitalisation
 criteria are met and directly attributable cost of bringing the
 investment property to its working condition for the intended use.
 
 1.5 Investments (Continued)
 
 Investment property (Continued)
 
 Depreciation on investment property is calculated on a straight line
 basis based on the useful lives estimated by the management or that
 prescribed under the Schedule XIV to the Act, whichever is higher. The
 Company has used depreciation rate of 1.39% - 3.45%.
 
 On disposal of an investment property, the difference between its
 carrying amount and net disposal proceeds is charged or credited to the
 statement of profit and loss.
 
 1.6 Revenue recognition
 
 Revenue is recognised to the extent it is probable that the economic
 benefits will flow to the Company and the revenue can be reliably
 measured.
 
 Revenue from sale of products is recognised on transfer of significant
 risk and rewards of ownership of the products to the customers, which
 is generally on dispatch of goods. Sales are stated exclusive of sales
 tax and net of trade and quantity discount.
 
 Revenue from services is recognised as per the terms of the contract
 with the customer using the proportionate completion method.
 
 Revenue from services represents service income other than from
 services which are incidental to sale of products and projects.
 
 Income from fixed price construction contracts is recognised by
 reference to the estimated overall profitability of the contract under
 the percentage of completion method. Percentage of completion is
 determined as a proportion of the costs incurred upto the reporting
 date to the total estimated contract costs. Contract revenue earned in
 excess of billing has been reflected as Project Excess Cost under
 Other current assets and Billing in excess of contract revenue has
 been reflected under Current Liabilities in the balance sheet.
 Provision for expected loss is recognized immediately when it is
 probable that the total estimated contract costs will exceed total
 contract revenue.
 
 Commission income is recognised when proof of shipment is received from
 the supplier.
 
 Interest income is recognised on the time proportion basis.
 
 Export incentives receivable are accrued for when the right to receive
 the credit is established and there is no significant uncertainty
 regarding the ultimate collection of export proceeds.
 
 1.7 Inventories
 
 Inventories comprise all costs of purchase, conversion and other costs
 incurred in bringing the inventories to their present location and
 condition.
 
 Raw materials are valued at the lower of cost and net realisable value.
 Cost is determined on the basis of the weighted average method.
 
 Work-in-progress, finished goods and traded goods are valued at the
 lower of cost and net realisable value. Excise duty is included in the
 value of finished goods inventory. Cost is determined on a weighted
 average basis.
 
 The net realisable value of work-in-progress is determined with
 reference to the estimated selling price less estimated cost of
 completion and estimated costs necessary to make the sale of related
 finished goods. Raw materials held for the production of finished goods
 are not written down below cost except in case where material prices
 have declined and it is estimated that the cost of the finished product
 will exceed its net realisable value.
 
 1.8 Leases
 
 Where the Company is the lessee:
 
 Leases where the lessor effectively retains substantially all the risk
 and benefits of ownership of the leased items are classified as
 operating leases. Lease payments under an operating lease, are
 recognised as an expense in the statement of profit and loss on a
 straight line basis over the lease term.
 
 Where the Company is the lessor:
 
 Assets subject to operating leases are included in fixed assets. Lease
 income is recognised in the statement of profit and loss on a
 straight-line basis over the lease term. Costs, including depreciation
 are recognised as an expense in the statement of profit and loss.
 Initial direct costs such as legal costs, brokerage costs, etc. are
 recognised immediately in the statement of profit and loss.
 
 1.9 Employee benefits
 
 (a) Short term employee benefits
 
 All employee benefits payable wholly within twelve months of rendering
 the service are classified as short-term employee benefits. Benefits
 such as salaries, wages and short term compensated absences, etc. and
 the expected cost of ex-gratia is recognised in the period in which the
 employee renders the related service.
 
 (b) Post-employment benefits
 
 (i) Defined Contribution Plans: The Company''s approved superannuation
 scheme and employee state insurance scheme are defined contribution
 plans. The Company''s contribution paid/payable under the schemes is
 recognised as expense in the statement of profit and loss during the
 period in which the employee renders the related service.
 
 (ii) Defined Benefit Plans and other Long Term Benefits: The Company''s
 provident fund, gratuity, pension and medical benefit schemes are
 defined benefit plans. Leave wages, retention bonus, silver jubilee and
 star awards are other long term benefits. The present value of the
 obligation under such defined benefit plans and other long term
 benefits are determined based on actuarial valuation using the
 Projected Unit Credit Method, which recognises each period of service
 as giving rise to additional unit of employee benefit entitlement and
 measures each unit separately to build up the final obligation.
 
 Provision for leave wages, pension, medical benefit, retention bonus,
 silver jubilee and star awards which is expected to be utilized within
 the next 12 months is treated as short term employee benefits and
 beyond 12 months as long term employee benefits. For the purpose of
 presentation, the allocation between short and long term provisions has
 been made as determined by an actuary.
 
 Actuarial gains and losses are recognised immediately in the statement
 of profit and loss.
 
 1.10 Foreign currency transactions
 
 The Company is exposed to currency fluctuations on foreign currency
 transactions. Transactions denominated in foreign currency are recorded
 at the exchange rate prevailing on the date of transactions.
 
 Exchange differences arising on foreign exchange transactions settled
 during the year are recognized in the statement of profit and loss of
 the year.
 
 Translation
 
 Monetary assets and liabilities in foreign currency, which are
 outstanding as at the year-end, are translated at the year-end at the
 closing exchange rate and the resultant exchange differences are
 recognized in the statement of profit and loss.  Non monetary items are
 stated in the balance sheet using the exchange rate at the date of the
 transaction.
 
 Derivative instruments
 
 The Company''s exposure to foreign currency fluctuations relates to
 foreign currency assets, liabilities and forecasted cash flows. The
 Company limits the effects of foreign exchange rate fluctuations by
 following established risk management policies including the use of
 derivatives. The Company enters into forward exchange contracts, where
 the counterparty is a bank.
 
 As per Accounting Standard (''AS'') 11 - ''The Effects of Changes in
 Foreign Exchange Rates'', the premium or the discount on forward
 exchange contracts not relating to firm commitments or highly probable
 forecast transactions and not intended for trading or speculation
 purpose is amortized as expense or income over the life of the
 contract. All other derivatives except cash flow hedges, which are not
 covered by AS 11, are measured using the mark-to-market principle with
 the resulting gains / losses thereon being recorded in the statement of
 profit and loss.
 
 Hedge Accounting
 
 The Company uses foreign currency forward contracts to hedge its risks
 associated with foreign currency fluctuations relating to highly
 probable forecast transactions. The Company designates some of the
 forward contracts in a cash flow hedging relationship by applying the
 hedge accounting principles.
 
 These forward contracts are stated at fair value at each reporting
 date. Changes in the fair value of these forward contracts that are
 designated and effective as hedges of future cash flows are recognised
 directly in Cash Flow Hedge Reserve under Reserves and Surplus, net of
 applicable deferred income taxes and the ineffective portion is
 recognised immediately in the statement of profit and loss.
 
 Amounts accumulated in Cash Flow Hedge Reserve are reclassified to
 profit and loss in the same periods during which the forecasted
 transaction materialises.
 
 Hedge accounting is discontinued when the hedging instrument expires or
 is sold, terminated, or exercised, or no longer qualifies for hedge
 accounting. For forecasted transactions, any cumulative gain or loss on
 the hedging instrument recognised in Hedging Reserve Account is
 retained there until the forecasted transaction occurs.
 
 If the forecasted transaction is no longer expected to occur, the net
 cumulative gain or loss recognised in Cash Flow Hedge Reserve is
 immediately transferred to the statement of profit and loss for the
 period.
 
 1.11 Taxation
 
 Income-tax expense comprises current tax (i.e. amount of tax for the
 year determined in accordance with the income-tax law), deferred tax
 charge or credit (reflecting the tax effect of timing differences
 between accounting income and taxable income for the year) computed in
 accordance with the relevant provisions of the Income Tax Act, 1961.
 The deferred tax charge or credit and the corresponding deferred tax
 liabilities or assets are recognised using the tax rates that have been
 enacted or substantively enacted by the balance sheet date. Deferred
 tax assets are recognised only to the extent there is reasonable
 certainty that the asset can be realised in future; however, where
 there is unabsorbed depreciation or carried forward loss under taxation
 laws, all deferred tax assets are recognised only if there is a virtual
 certainty supported by convincing evidence of realisation of the
 assets. Deferred tax assets are reviewed as at each balance sheet date
 and written down or written-up to reflect the amount that is
 reasonable/virtually certain (as the case may be) to be realised.
 
 1.12 Earnings per share
 
 Basic and diluted earnings per share is computed by dividing the net
 profit attributable to equity shareholders for the year, by the
 weighted average number of equity shares outstanding during the year.
 
 1.13 Provision
 
 Provisions are recognized when the Company recognises it has a present
 obligation as a result of past events and it is probable that an
 outflow of resources embodying economic benefits will be required to
 settle the obligation and a reliable estimate can be made of the amount
 of the obligation. Provisions are not discounted to its present value
 and are determined based on best estimate required to settle the
 obligation at the balance sheet date. These are reviewed at each
 balance sheet date and adjusted to reflect current best estimates.
 
 Disclosures for contingent liability are made when there is a possible
 or present obligation which arises from past events which is not
 recognised since it is not probable that there will be an outflow of
 resources. When there is a possible or present obligation in respect of
 which the likelihood of outflow of resources is remote, no disclosure
 is made.
 
 Loss contingencies arising from claims, litigation, assessment, fines,
 penalties, etc. are recorded when it is probable that a liability has
 been incurred and the amount can be reasonably estimated.
 
 Contingent assets are neither recognized nor disclosed in the financial
 statements.
 
 1.14 Cash and Cash equivalents
 
 Cash and cash equivalents include cash, cheques in hand, cash at bank
 and short term deposits with banks having maturity of three months or
 less.
 
 1.15 Insurance claims
 
 Amounts by way of insurance claims are recognised as assets when it is
 reasonably certain that the claim is receivable and is recorded as a
 reduction in the expense where the corresponding loss has been debited.
 
 1.16 Operating cycle
 
 All assets and liabilities have been classified as current or
 non-current as per the Company''s normal operating cycle and other
 criteria set out in Revised Schedule VI to the Companies Act, 1956. The
 Company has ascertained its operating cycle as twelve months for the
 purpose of current or non-current classification of assets and
 liabilities.
Source : Dion Global Solutions Limited
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