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Siemens

BSE: 500550|NSE: SIEMENS|ISIN: INE003A01024|SECTOR: Infrastructure - General
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« Sep 14
Accounting Policy Year : Sep '15
Basis of preparation of financial statements
 
 The financial statements are prepared and presented under the
 historical cost convention, on the accrual basis of accounting except
 for certain derivative instruments which are measured at fair value in
 accordance with generally accepted accounting principles in India
 (Indian GAAP)- The Company has prepared these financial statements to
 comply in all material respects with the accounting standards notified
 under section 133 of the Companies Act 2013, read together with
 paragraph 7 of the Companies (Accounts) Rules 2014. The accounting
 policies adopted in the preparation of financial statements are
 consistent with those of previous year other than note 43.
 
 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.
 
 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.
 
 Depreciation on tangible assets is provided on a straight-line basis
 over the useful lives of assets estimated by the management. The useful
 life has been assessed based on internal technical advice, taking into
 account the nature of the asset, the estimated usage of the assets on
 the basis of managements'' best estimation of getting economic benefits
 from those classes of assets and the management believes that these
 useful lives do not vary with the number of shifts the asset operates.
 The Company uses its technical expertise along with historical and
 industry trends for arriving the economic life of an asset, which may
 not necessarily be in alignment with the indicative useful lives
 prescribed by Schedule II to the Companies Act, 2013. Such class of
 assets and their estimated useful lives are as under:
 
 Vehicles 4 years
 
 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.
 Intangible assets are stated at cost of acquisition less accumulated
 amortization and impairment losses, if any. These intangible assets are
 amortized 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 recognized.
 
 7.5 Investments
 
 Investments that are readily realizable and intended to be held for not
 more than a year from the date on which such investments 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 operations of the Company,
 is classified as an 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 capitalization
 criteria are met and directly attributable cost of bringing the
 investment property to its working condition for the intended use.
 
 Depreciation on investment property is provided on a straight-line
 basis over the useful lives of assets estimated by the management. The
 useful life has been assessed based on internal technical advice,
 taking into account the nature of the asset, the estimated usage of the
 assets on the basis of managements'' best estimation of getting economic
 benefits from those classes of assets and the management believes that
 these useful lives do not vary with the number of shifts the asset
 operates. The Company uses its technical expertise along with
 historical and industry trends for arriving the economic life of an
 asset, which may not necessarily be in alignment with the indicative
 useful lives prescribed by Schedule II to the Companies Act, 2013. Such
 class of investment property and their estimated useful lives are as
 under:
 
 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 recognized 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 recognized on transfer of significant
 risk and rewards of ownership of the products to the customers, which
 is generally on dispatch of goods other than revenue from sale of
 healthcare equipments which is recognized upon installation at customer
 premises. Sales are stated exclusive of sales tax and net of trade and
 quantity discount.
 
 Revenue from services is recognized 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 recognized 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 up to 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 Other 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 recognized when proof of shipment is received from
 the supplier.
 
 Interest income is recognized 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 realizable 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 realizable value. Excise duty is included in the
 value of finished goods inventory. Cost is determined on a weighted
 average basis.
 
 The net realizable 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 realizable value.
 
 1.8 Leases
 
 Where the Company is the lessee:
 
 Leases where the less or 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
 recognized as an expense in the statement of profit and loss on a
 straight line basis over the lease term.
 
 Where the Company is the less or:
 
 Assets subject to operating leases are included in fixed assets and
 investment property. Lease income is recognized in the statement of
 profit and loss on a straight-line basis over the lease term. Costs,
 including depreciation are recognized as an expense in the statement of
 profit and loss. Initial direct costs such as legal costs, brokerage
 costs, etc. are recognized 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 recognized 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
 recognized 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 recognizes 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 recognized 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 recognized
 directly in Cash Flow Hedge Reserve under Reserves and Surplus, net of
 applicable deferred income taxes and the ineffective portion is
 recognized immediately in the statement of profit and loss.
 
 
 1.10 Foreign currency transactions (Continued)
 
 Amounts accumulated in Cash Flow Hedge Reserve are reclassified to
 profit and loss in the same periods during which the forecasted
 transaction materializes.
 
 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 recognized in Cash Flow Hedge Reserve is
 retained there until the forecasted transaction occurs.
 
 If the forecasted transaction is no longer expected to occur, the net
 cumulative gain or loss recognized 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 recognized using the tax rates that have been
 enacted or substantively enacted by the balance sheet date. Deferred
 tax assets are recognized only to the extent there is reasonable
 certainty that the asset can be realized in future; however, where
 there is unabsorbed depreciation or carried forward loss under taxation
 laws, all deferred tax assets are recognized only if there is a virtual
 certainty supported by convincing evidence of realization 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 realized.
 
 1.12 Earnings per share
 
 Basic earnings per share are 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.
 
 For the purpose of calculating diluted earnings per share, the net
 profit or loss for the period attributable to equity shareholders and
 the weighted average number of shares outstanding during the period are
 adjusted for the effects of all dilutive potential equity shares.
 
 1.13 Provisions and Contingencies
 
 Provisions are recognized when the Company recognizes 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
 recognized 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, cherubs in hand, cash at bank
 and short term deposits with banks having maturity of three months or
 less.
 
 1.15 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 Schedule III to the Companies Act, 2013. 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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