(i) Nature of Operations
Timken India Limited is into manufacture and distribution of Tapered
Roller Bearings, Components & accessories for the Automotive Sector and
the Railway Industry. It also provides maintenance contract services.
(ii) Basis of Preparation
The financial statements have been prepared to comply in all material
respects with the accounting standards notified by the Companies''
(Accounting Standards) Rules, 2006,(as amended) and the relevant
provisions of the Companies Act, 1956. The financial statements have
been prepared under the historical cost convention on an accrual basis.
The accounting policies are consistent with those used in the previous
year, unless otherwise stated.
(iii) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon management''s best
knowledge of current events and actions, actual results could differ
from these estimates.
(iv) Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the company and the revenue can be
Sale of Goods
Revenue from sale of goods is recognized when the significant risks and
rewards of ownership of the goods have passed to the buyer, which
generally coincides with delivery to the customers. Excise Duty
deducted from turnover (gross) is the amount that is included in the
amount of turnover (gross) and not the entire amount of liability
arisen during the year.
Income from Services
Revenue from Agency Commission and Maintenance and Service Contracts
are recognized as and when services are rendered.
Export Incentives under the Duty Entitlement Pass Book (DEPB) / Duty
drawback scheme are recognized when such incentive accrues upon export
of goods, in applicable cases.
Revenue for dividend income is recognized when the right to receive
payment is established by the balance sheet date.
(v) Fixed Assets
Fixed Assets are stated at cost of acquisition less accumulated
depreciation and impairment loss (if any). Cost of acquisition includes
duties (net of Cenvat), taxes, incidental expenses, erection /
commissioning expenses. Borrowing costs relating to acquisition of
fixed assets which takes substantial period of time to get ready for
its intended use are also included to the extent they relate to the
period till such assets are ready to be put to use.
(vi) Cash & Cash Equivalents
Cash and cash equivalents for the purpose of cash flow statement
comprise cash at bank, in hand, cheques in hand and short- term
investments with an original maturity of three months or less.
Depreciation is provided under straight line method as per the useful
lives of the assets estimated by the management, or at the rates
prescribed under Schedule XIV of the Companies Act, 1956, whichever is
Additions / deletions during the year are depreciated pro-rata from the
date of such addition / deletion except assets costing below Rs. 5000
which are fully depreciated in the year they are put to use. Extra
shift depreciation is calculated on actual shift basis in respect of
each operating department.
(viii) Foreign Currency Translations
(a) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(c) Exchange Differences
Exchange differences arising on the settlement of monetary items not
covered above, or on reporting such monetary items of company at rates
different from those at which they were initially recorded during the
year, or reported in previous financial statements, are recognized as
income or as expenses in the year in which they arise.
(d) Forward Exchange Contracts not intended for trading or speculation
The premium or discount arising at the inception of forward exchange
contracts is amortised as expense or income over the life of the
contract. Exchange differences on such contracts are recognised in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognised as income or as expense for the
Inventories are valued as follows :
Raw materials, Lower of cost and net realizable value. However,
materials and other items held for use in the components, production of
inventories are not written down below cost if the finished products in
which they will stores and be incorporated are expected to be sold at
or above cost. Cost is determined on a weighted average spares basis.
Work-in-progress Lower of cost and net realizable value. Cost includes
direct materials and labour and a proportion of and finished
manufacturing overheads based on normal operating capacity. Cost of
finished goods includes goods excise duty. Cost is determined on a
weighted average basis.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
(x) Retirement Benefits
a) Gratuity is administered through an approved benefit fund. Gratuity
liability is defined benefit obligation and is provided for on the
basis of an actuarial valuation on projected unit credit method made at
the end of each financial year.
b) The liability on account of long term compensated absences and death
benefit scheme due to the employees are provided for on the basis of an
actuarial valuation on projected unit credit method at the end of each
c) Retirement benefits in the form of Provident Fund and Superannuation
/ Pension Schemes are charged to the Profit & Loss Account of the year
when the contribution to the respective funds are accrued. Interest
shortfall, if any, on Provident Fund are provided for based on year-end
actuarial valuation on projected unit credit method.
d) Actuarial gains/losses are immediately taken to profit and loss
account and are not deferred.
(xi) Excise Duty
Excise Duty is accounted for at the point of manufacture of goods and
accordingly, is considered for valuation of finished goods stock lying
in the manufactu ring locations as on the balance sheet date.
Assets taken on Lease
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit and Loss Account on a straight-line basis over the lease
Assets given on Lease
Assets subject to operating leases are included in fixed assets. Lease
income is recognized in the profit and loss account on a straight line
basis over the lease term. Costs, including depreciation are recognized
as an expense in the profit and loss account. An initial direct cost
such as legal and professional cost is recognised immediately in the
profit and loss account.
(xiii) Income Taxes
Tax expense comprises current and deferred tax. Current income tax is
measured at the amount expected to be paid to the tax authorities in
accordance with the Indian Income Tax Act, 1961 enacted in India.
Deferred income tax 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. Deferred
tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. The carrying
amount of deferred tax assets are reviewed at each balance sheet date.
The company writes-down the carrying amount of a deferred tax asset to
the extent that it is no longer reasonably certain that sufficient
future taxable income will be available against which deferred tax
asset can be realized. Any such write-down is reversed to the extent
that it becomes reasonably certain that sufficient future taxable
income will be available.
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.
Current investments are carried at lower of cost or fair market value
determined on an individual investment basis. Long-term investments are
carried at cost. However, provision for diminution in value is made to
recognize a decline other than temporary in the value of long-term
(xv) Borrowing Costs
a) Borrowing costs that are directly attributable to the acquisition /
construction of a qualifying asset are capitalized as part of the cost
of that asset till the time it is ready to put to use.
b) All other borrowing costs are recognized as expenditure during the
period in which these are incurred. Borrowing costs consist of interest
and other cost that an entity incurs in connection with the borrowing
A provision is recognized when an enterprise 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 are not discounted to
their 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 the current best
(xvii) Contingent Liabilities
No provision is made for liabilities which are contingent in nature,
unless it is probable that future events will confirm that a liability
is incurred as at the balance sheet date and a reasonable estimate of
the resulting loss can be made. However, all known, material contingent
liabilities are disclosed by way of separate notes.
a) The carrying amounts of assets are reviewed at each balance sheet
date if there is any indication of impairment based on
internal/external factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the assets net selling price and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount
rate that reflects cu rrent market assessments of the time value of
money and risks specific to the asset.
b) After impairment, depreciation is provided on the revised carrying
amount of the assets over its remaining useful life.
c) A previously recognized impairment loss is increased or reversed
depending on changes in circumstances. However the carrying value after
reversal is not increased beyond the carrying value that would have
prevailed by charging usual depreciation if there was no impairment.
(xix) Earnings Per Share
Basic Earnings per share is calculated by dividing the net profit for
the year attributable to equity shareholders 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 year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
(xx) Segment Reporting Policies Identification of segments:
The Company''s business includes manufacture and sale of bearings and
related components and providing services in connection with or
incidental to such sales. This is the only reportable business segment
which is also the primary reportable segment.
Secondary reportable segments are based on geographical location of
customers. The geographical segments have been disclosed based on
revenues within India and outside India.
Allocation of common costs:
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
The company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the company as a whole.