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CMI FPE

BSE: 500147|NSE: FLATPROD|ISIN: INE515A01019|SECTOR: Engineering - Heavy
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Nov 20, 14:53
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CMI FPE is not traded in the last 30 days
Mar 17
Notes to Accounts Year End : Mar '18

1 General information:

CMI FPE Limited (‘the Company’) is a subsidiary of Cockerill Maintenance and Ingenierie SA and a public limited Company incorporated and domiciled in India. The registered office of the Company is located at Mehta House, Plot No. 64, Road No. 13, MIDC, Andheri (East), Mumbai - 400 093. The Company is listed on the BSE Limited.

The principal activities of the Company comprise customised design, engineering, and installation, and manufacturing components of Cold Rolling Mill Complexes, Processing Lines, Chemical equipment, industrial furnaces and auxiliary equipment for the world-wide steel industry.

* Trade receivables include retention monies of Rs. 2,714.21 lakhs (As at March 31, 2017: Rs. 864.50 lakhs, As at April 01, 2016: Rs. 3,552.33 lakhs)

Trade receivables have been hypothecated as security for bank loans and non-fund based limits.

In determining the allowance for doubtful trade receivable, the Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking information. The expected credit loss allowance is based on the ageing of days receivables (including retention) are due and the rates used in the provision matrix.

The cost of inventories recognised as an expense during the year was Rs. 30.77 lakhs (for the year ended March 31, 2017: Rs. 201.81 lakhs).

The above inventories have been hypothecated as security for bank loans and non-fund based limits.

Management of the Company had made a decision to sell a vacated flat owned by the Company and was actively looking for the buyer. Considering sales being highly probable, the carrying amount of the flat was expected to be recovered principally through a sale rather than continuing use therefore it had been classified as asset held for sale as at April 01, 2016. It had been sold during the previous year ended March 31, 2017. Company had recognised a gain of Rs. 63.70 lakhs on derecognition of the asset held for sale.

The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities related to income taxes levied by the same tax authority.

Note: The unrecognised MAT credit of Rs. 4.09 lakhs will expire in Assessment Year (AY) 2028-29, Rs. 148.85 lakhs in AY 2030-31, Rs. 22.79 lakhs in AY 2031-32, Rs. 78.35 lakhs in AY 2032-33 and Rs. 201.63 lakhs in AY 2033-34.

Unused MAT credit as on March 31, 2016 and March 31, 2017 are as per Income-tax returns filed by the Company for the respective financial years. Unused MAT credit as on March 31, 2018 is as per tax computation done by the Company.

(ii) Terms/rights attached to equity shares:

The Company is having only one class of equity shares having par value of Rs. 10/- each. Each holder of equity share is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend, if proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive remaining assets of the Company, after the distribution of all preferential amounts. The distribution will be in proportion of the paid up share capital held by the shareholders.

(a) Security premium reserve is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.

(b) General reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the general reserve will not be reclassified subsequently to the Statement of Profit and Loss.

(c) Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve, dividends or other distributions paid to shareholders.

(d) The effective portion of cash flow hedges represents the cumulative effective portion of gains or losses arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges. The cumulative gain or loss arising on changes in fair value of the designated portion of the hedging instruments that are recognised and accumulated under the heading of ‘Effective portion of cash flow hedges’ will be reclassified to profit or loss only when the hedged transaction affects the profit or loss.

Credit period varies as per the contractual terms of various suppliers/vendors. No interest is generally charged by the suppliers/vendors. The Company has appropriate policy in place to ensure that all dues are paid within the credit terms agreed with the parties.

Provision for warranties

The Company gives warranties on certain products and services, undertaking to repair or replace the items that fail to perform satisfactorily during the warranty period. Provision made as at March 31, 2018 represents the amount of the expected cost of meeting such obligations of rectification/replacement. The timing of the outflows is expected to be within a period of one to three years from the date of Balance Sheet.

Provision for estimated losses on contracts

In line with requirements of Ind AS 11 - Construction Contracts, when it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately in the Statement of Profit and Loss and provision for estimated loss is recognised in the Financial Statement.

* Construction material consumed Closing stock - Opening stock

# Purchases include Rs. 5,967.18 lakhs (Year ended March 31, 2017: Rs. 1,769.25 lakhs) being cost of equipments bought and supplied directly to customer’s site as a part of construction contracts.

Note:

Since the Company is a project management company and engaged in the business of putting up projects for its clients on turnkey basis, the Company is following percentage of completion method as prescribed under Ind AS-11 Construction contracts under which project stock, manufactured items and other direct costs are considered as project cost incurred till date. Purchases figure is derived figure. Inventory procured for a specific project is immediately booked to the project as consumed and is not considered as inventory. In view of the above, itemwise break-up for cost of materials consumed is not available in the system.

a.2 Terms and Conditions

i) All outstanding balances are unsecured and are repayable as per terms of credit and settlement occurs in cash.

ii) All related party transactions entered during the year were in ordinary course of business and on arms length basis.

iii) The Company has not recorded any impairment of receivables related to amounts owed by related parties.

*Matters relating to:

(i) During the period April 2009 to July 2014, the Company had paid service tax on the commission charged by their non-resident commission agents for the services rendered in connection with sales of the Company’s finished goods in overseas market and availed Cenvat Credit. The Central Excise department had issue a show cause notice dated September 26, 2014 for denial of wrongly availed Cenvat Credit of Rs. 184.63 lakhs (excluding interest, as applicable) of service tax paid as input service. The Company has replied to show cause notice.

(ii) During the period April 2010 to December 2014, the Company had paid service tax for services rendered and excise duty on dispatch of goods considering contracts as divisible contracts. Service tax department issued show cause notice dated October 21, 2015 for demanding service tax of Rs. 4,817.55 lakhs on contracts categorised as ‘Works contracts’ by the department on which excise duty of Rs. 10,510.51 lakhs had been paid. The Commissioner of Central Excise & Service Tax, Large Taxpayers Unit - Audit vide their order dated November 30, 2016 upheld the service tax liability of Rs. 4,817.55 lakhs, penalty of Rs. 4,817.65 lakhs and interest, as applicable, estimated to be Rs. 4,571.52 lakhs. An appeal has been filed by the Company before CESTAT, Mumbai vide appeal dated March 20, 2017. The Company has paid appropriate excise duty on goods manufactured and service tax on services rendered. The order is seen by the Company as a change of opinion by the department after higher bench judgement in one of the recent case. In continuance of the above matter, the Company has further received show cause notice dated December 22, 2017 for period January 2015 to March 2015 demanding service tax of Rs. 175.46 lakhs on which excise duty of Rs. 377.56 lakhs had been paid and show cause notice dated March 19, 2018 for the period April 2015 to June 2017 demanding service tax of Rs. 759.27 lakhs on which excise duty of Rs. 1,670.08 lakhs had been paid. The estimated penalty amount of Rs. 175.46 lakhs and Rs. 759.27 lakhs and interest, as applicable, of Rs. 86.83 lakhs and Rs. 239.58 lakhs respectively, will be applicable, in case the service tax demand is upheld by the department. The Company has duly replied to show cause notices received.

**Matters relating to (i) detention of goods despatched by vendor of the Company at site of customer without valid TIN/CST mentioned on the said invoice on 19.02.2013 and (ii) omission of trading purchases and adoption of wrong output tax on lubricants noticed during Value Added Tax Audit for the year 2012-13. The Company has filed the petition before Joint Commissioner (Vellore) and appeal before Appellate Deputy Commissioner III Chennai respectively.

***Matter relating to non-reversal of proportionate Cenvat Credit on inventory shortages identified during the course of EA 2000 audit conducted for the period from April 2009 to March 2011 .The Central Excise department had issued a show cause notice dated January 6, 2014 for Rs. 88.33 lakhs (excluding interest and penalty, as applicable). The Joint Commissioner of Central Excise & Service Tax, Large Taxpayer Unit - Audit vide their order dated January 31, 2017 upheld the excise duty liability of Rs. 88.33 lakhs, penalty of Rs. 88.33 lakhs and interest, as applicable, estimated to be Rs. 128.70 lakhs. An appeal has been filed by the Company before the Commissioner of Central Excise & Service Tax, Large Taxpayer Unit - Audit, Mumbai.

Note 3 Operating lease:

The Company has entered into operating lease or leave and licence arrangements for residential premises/godowns (including furniture and fittings therein as applicable). These leasing arrangements which are not non-cancellable range between 11 months to 36 months.

Note 4 Employee benefits

a) Defined contribution plan Superannuation

All eligible employees are entitled to benefits under superannuation, a defined contribution plan. The Company makes quarterly contributions until retirement or resignation of the employee. The Company recognises such contributions as an expense when incurred. The company has no further obligation beyond its quarterly contribution.

Company’s contribution to superannuation recognised in statement of profit and loss of Rs. 40.56 lakhs (for the year ended March 31, 2017 Rs. 36.89 lakhs) (included in Note 27).

Provident fund

All eligible employees of the Company are entitled to receive benefits under the provident fund, a defined contribution plan in which both the employees and employer (at a determined rate) contribute monthly. Contributions are made to provident fund in India for employees at the rate of 12% of basic salary as per regulation. The contributions are made to registered provident fund administered by the government. The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation.

Company’s contribution to provident fund recognised in statement of profit and loss of Rs. 200.97 lakhs (for the year ended March 31, 2017 Rs. 179.04 lakhs) (included in Note 27).

b) Defined benefit plans:

Gratuity (funded)

The Company sponsors funded defined benefit plans for all eligible employees. The defined benefit plan is administered by a separate fund that is legally separated from the entity.

Under the gratuity plan, the eligible employees are entitled to post-retirement benefit at the rate of 1 5 days salary for each year of service until the retirement age of 60 years, without any payment ceiling. The vesting period for gratuity as payable under The payment of Gratuity Act is 5 years.

Compensated absences

Under the compensated absences plan, leave encashment is payable to all eligible employees on separation from the Company due to death, retirement, superannuation, or resignation, at the rate of daily salary, as per current accumulation of leave days restricted to maximum 60 days.

The plans typically expose the Company to actuarial risks such as investment risk, interest rate risk, liquidity risk and salary escalation risk.

a) Investment risk

The present value of the defined benefit plan liability is calculated using a discount rate determined by reference to government bond yields; if the return on plan asset is below this rate, it will create a plan deficit. Currently the plan has a relatively balanced investment in insurer managed funds.

b) Interest rate risk

The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of the liability (as shown in financial statements).

c) Liquidity risk

This is the risk that the Company is not able to meet the short-term gratuity pay outs. This may arise due to non availability of enough cash / cash equivalents to meet the liabilities or holding of liquid assets not being sold in time.

d) Salary escalation risk

The present value of the defined benefit plan is calculated with the assumption of salary increase rate of plan participants in future. Deviation in the rate of increase of salary in future for plan participants from the rate of increase in salary used to determine the present value of obligation will have a bearing on the plan’s liability.

No other post-retirement benefits are provided to these employees.

The most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out at March 31, 2018 by M/s. KP Actuaries and Consultants. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method.

E. Principal Actuarial assumptions

With the objective of presenting the plan assets and plan obligations of the defined benefits plans at their fair value on the Balance Sheet, assumptions under Ind AS 19 are set by reference to market conditions at the valuation date.

The discount rate is based on the prevailing market yields of Government of India securities as at the Balance Sheet date for the estimated term of the obligations.

Interest income on plan asset is a component of the return on plan asset and is determined by multiplying the fair value of the plan assets by the discount rate specified in para 83, both as determined at the start of the annual reporting period, taking account of any changes in the plan assets held during the period as a result of contributions and benefit payments.

The estimate of future salary increase, considered in actuarial valuation, takes into acount the inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

Due to absence of data provided by Life Insurance Corporation of India, break-up of plan assets (asset allocation) in insurer managed funds have not been furnished.

G. Sensitivity analysis

Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase and mortality. The sensitivity analysis below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The results of sensitivity analysis is given below.

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is same as that applied in calculating the defined benefit obligation recognised in the Balance Sheet.

H. The Average Duration of the defined benefit obligation at the end of reporting period is 9 years.

Note 5 Financial Instruments

5.1 Capital management

The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the returns to stakeholders through the optimisation of the debt and equity balance. For the purpose of the Company’s capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to maximise the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders. The Company is a debt free company and cash required for operation is managed through internal accruals.

5.2 Financial risk management objective

The Company has a Risk Management Committee established by its Board of Directors for overseeing the Risk Management Framework and developing and monitoring the Company’s risk management policies. The risk management policies are established to ensure timely identification and evaluation of risks, setting acceptable risk threshold, identifying and mapping controls against these risks, monitor the risks and their limits, improve risk awareness and transparency. Risk management policies and systems are reviewed regularly to reflect changes in the market conditions and the Company’s activities to provide reliable information to the management and the Board to evaluate the adequacy of the risk management framework in relation to the risk faced by the Company.

The risk management policies aims to mitigate the following risk arising from the financial instruments:

- Market risk (includes foreign currency risk and price risk)

- Credit risk and

- Liquidity risk

5.3 Market risk

Market risk is the risk that the fair value of future cash flows of a financial instruments will fluctuate because of changes in the market prices. The Company in the ordinary course of its business is exposed to risks related to changes in foreign currency exchange rates.

The Company seeks to minimise the effect of these risks by using derivative financial instruments to hedge risk exposures. The Company does not enter into or trade financial instruments, including derivatives for speculation purposes.

5.4 Foreign currency risk management

The Company’s functional currency is Indian Rupees (INR). The Company undertakes transactions denominated in foreign currencies; consequently, exposure to exchange rate fluctuations arise. Volatility in exchange rates affects the Company’s revenue from export markets and the costs of imports, primarily in relation to raw materials. The Company is exposed to exchange rate risk under its trade portfolio.

Favourable movements in the exchange rates will conversely result in reduction in the Company’s receivables in foreign currency. In order to hedge exchange rate risk, the Company hedge cash flows up to a specific tenure using forward exchange contracts in respect of imports and other payables, mostly, it covered by natural hedge. The Company uses forward foreign exchange contracts to hedge its exposure in foreign currency related to firm commitments and highly probable forecast transactions.

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as under:

5.5 Foreign currency risk sensitivity

The following table details the Company’s sensitivity to a 1% increase and decrease in the INR against the relevant major foreign currencies. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year-end for a 1% change in foreign currency rates, with all other variables held constant. A positive number below indicates an increase in profit or equity where INR strengthens 1% against the relevant currency. For a 1% weakening of INR against the relevant currency, there would be a comparable impact on profit or equity and the balances below would be negative.

5.6 Forward foreign exchange contracts

The Company has adopted a Risk Management Policy approved by the Board of Directors for managing foreign currency exposure. The policy has approved use of forward contracts to manage the foreign currency risk.

The following table details the forward foreign currency (FC) contracts outstanding at the end of the reporting period.

5.7 Commodity price risk

The Company is exposed to movement in metal commodity price of steel. Our sales contracts are on fixed price basis. Profitability in case of firm price orders is impacted by movement in the prices of steel. The Company primarily purchases its raw materials in the open market from third parties. The Company either places long term firm price order with the suppliers or builds stock on need basis to mitigate the risk.

5.8 Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instruments will fluctuate because of changes in market interest rates. The Company is debt free Company and has not borrowed fund during the year from banks, therefore Company is not exposed to interest rate risk.

5.9 Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks, foreign exchange transactions and other financial instruments.

5.10 Trade receivables

Customer credit risk is managed centrally by the Company. The Company evaluates the creditworthiness based on publicly available financial information and the Company’s historical experiences. Further, majority of the Company’s customers are Companies with strong financial stability. Credit risk on receivables is also mitigated by securing the same against letters of credit of reputed banks. Trade receivables spread across diverse geographical areas with no significant concentration of credit risk. Outstanding trade receivables are regularly monitored and appropriate actions are taken for collection of overdue receivables. The Company’s exposure to counterparties are continuously reviewed and monitored by the management. Credit period varies as per the contractual terms with the customers. No interest is generally charged on overdue trade receivables.

The Company directly reduces the gross carrying amount of financial assets when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The amount of financial assets are net of allowance for doubtful accounts, estimated by the Company and based, in part, on the age of specific receivable balance and the current and expected collection trends. The Company has used practical expedient by computing expected credit loss allowance for trade receivables by taking into consideration historic credit loss experience and adjusted for forward looking information. The expected credit loss is based on the ageing of the days and the expected credit loss rate.

Apart from the largest customer of the Company in Belgium (which is the parent company) and 3 major customers in India (which are Limited Companies), the Company does not have significant credit risk exposure to any single customer. Concentration of credit risk related to the customer in Belguim exceed 15% of the trade receivables of the Company and credit risk related to the 3 major customers exceeds 38%, 19% and 17% of the trade receivables of the Company. Concentration of credit risk to any other customer did not exceed 10% of the trade receivables of the Company at reporting date.

The history of trade receivables shows a negligible allowance for bad and doubtful debts.

5.11 Other financial assets

The Company maintains exposure in cash and cash equivalents, term deposits with banks, and derivative instruments. The Company attempts to limit the credit risk by only dealing with reputable banks having high-credit ratings assigned by credit-rating agencies. The Company’s maximum exposure to the credit risk for the component of Balance Sheet as at March 31, 2018, March 31, 2017 and April 1, 2016 is the carrying amounts of each class of financial assets.

5.12 Liquidity risk management

Liquidity risk refers to the risk of financial distress or extraordinary high financing costs arising due to shortage of liquid funds in a situation where business conditions unexpectedly deteriorate and requiring financing. The Company requires fund both for short-term operational needs as well as for long-term capital expenditure growth projects. The Company generates sufficient cash flow for operations, which together with the available cash and cash equivalents and short-term investments provide liquidity in the short-term and long-term. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flow and by matching the maturity profiles of the financial assets and liabilities.

The Company regularly monitors the rolling forecasts to ensure it has sufficient cash on an on-going basis to meet operational needs. Any short-term surplus cash generated, over and above the amount required for working capital management and other operational requirements, is retained as cash and cash equivalents (to the extent required) and any excess is invested in bank fixed deposits to optimise the cash returns on cash and cash equivalents while ensuring sufficient liquidity to meet its liabilities.

The following table gives details of the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The table below has been drawn up based on the undiscounted cash flows of financial liabilities on the earliest date on which the Company can be required to pay. The table include both interest and principal cash flows.

The derivative assets and liabilities (refer notes 8 and 19) are having maturity within one year of the Balance Sheet date.

5.13 Collateral

Property, plant and equipment with a carrying amount of Rs. 3,856.69 lakhs (As at March 31, 2017: Rs. 4,247.97 lakhs, As at April 01, 2016: Rs. 4,586.46 lakhs), have been mortgaged as collateral security for bank loans and non-fund based limits.

The Company has access to various fund and non-fund based bank facilities. The amount of unused borrowing facilities (fund and non fund based) available for future operating activities and to settle commitments as at March 31, 2018 Rs. 14,738.96 lakhs (As at March 31, 2017 Rs. 13,347.90 lakhs, As at April 01, 2016 Rs. 16,757.43 lakhs).

5.14 Fair value measurement Calculation of fair values

The fair values of the financial assets and liabilities are defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Methods and assumptions used to estimate the fair values are consistent with those used for the year ended March 31, 2017.

For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair value.

Financial assets and liabilities measured at fair value as at Balance Sheet date:

1. The fair values of the forward contracts used for expected future sale has been determined using forward pricing, based on present value calculations.

2. The Company has disclosed financial instruments such as trade receivables, cash and cash equivalents, other bank balances, loans to employees, other current financial assets, trade payables and other current financial liabilities at carrying value, because, their carrying amounts are a reasonable approximation of the fair values due to their short-term nature.

Fair value of financial assets and financial liabilities that are not measured at fair value (but fair value disclosures are required):

The carrying amounts of financial assets and financial liabilities recognised in the financial statements approximate their fair values.

Note 6 Segment information:

The principal activities of the Company comprise customised manufacturing and installation of cold rolling mills, galvanizing lines, colour coating lines, tension levelling lines, skin pass mills, acid regeneration plants, wet flux line and pickling lines (“the projects”) for ferrous and non-ferrous industries world wide.

For management purpose, the Company comprise of only one reportable segment - Original equipment manufacturer and project management. Information is reported to and evaluated regularly by the Chief Operational Decision Maker (CODM) i.e. Managing Director for the purpose of resource allocation and assessing the performance of the business as a whole. The CODM reviews the Company’s performance on the analysis of profit before tax at an overall entity level. Accordingly there is no other separate reportable segment as defined by Ind AS 108 “Operating Segments”.

The information relating to revenue from external customers and location of non-current assets of the single reportable segment has been disclosed as follows:

Revenue from operations have been allocated on the basis of location of customers.

Rs. 10,666.94 lakhs, Rs. 7,904.11 lakhs and Rs. 6,137.61 lakhs is derived as revenue from each of the Company’s three major customer.

b) Non-current operating assets

All Non-current assets other than financial instruments, deferred tax assets of the Company are located in India.

Note 7 Ind AS adoption:

The below notes explains the material adjustments made while transition from previous Accounting Standards to Ind AS

1 To Comply with the Companies (Accounting Standard) Rules, 2006, certain account balances have been regrouped as per the format prescribed under Division II of Schedule III to the Companies Act, 2013.

2 Operating lease arrangements

Under previous GAAP, the long term operating lease for leasehold land were considered under Property, plant and equipment. Under Ind AS, it is treated as part of prepaid expenses and amortised over the lease term.

3 Other comprehensive income (OCI)

Under Ind AS, all items of income and expense recognized in the period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Under Ind AS items of income and expense that are not recognised in profit or loss but are shown in the Statement of Profit and Loss as “Other comprehensive income” includes remeasurements of defined benefit plans, effective portion of gains and losses on cash flow hedging instruments. The concept of other comprehensive income did not exist under previous GAAP.

Remeasurements of post employment benefit obligation

Under previous GAAP, remeasurement of defined benefit plans (gratuity) arising primarily due to change in actuarial assumptions was recognised as employee benefit expenses in the Statement of Profit and Loss. Under Ind AS, such remeasurements changes relating to defined benefit plan is recognised in the OCI. This change does not affect equity but there is increase in profit before tax for the year ended March 31, 2017 by Rs. 115.01 lakhs and corresponding decrease in OCI along with the related tax charge of Rs. 38.03 lakhs.

Under previous GAAP, for designated hedging relationships, the Company has recognised mark to market gain on derivative and non-derivative instruments which are designated in hedging relationship under the Effective portion of cash flow hedges. Under Ind AS, movement in this reserve during the year ended March 31, 2017 of Rs. 46.39 lakhs (net of deferred tax of Rs. 13.48 lakhs) is shown under OCI.

4 Financial assets/financial liabilities at amortised cost

Certain financial assets held on with an object to collect contractual cash flows in the nature of principal and interest have been recognised at amortised cost on transition date as against historical cost under the previous GAAP with the difference being adjusted to the opening retained earnings. Interest income/expense is recognised during financial year March 31, 2017, using effective interest method.

5 Deferred tax as per Balance Sheet approach

Under previous GAAP, deferred tax was accounted using the income statement approach, on the timing differences between the taxable profit and accounting profit for the period. Under Ind AS, deferred tax is recognised following Balance Sheet approach on the temporary differences between the carrying amount of asset or liability in the Balance Sheet and its tax base. In addition, various transitional adjustments has also led to recognition of deferred taxes on new temporary differences.

6 Excise duty

Under the previous GAAP, excise duty on sale of goods was reduced from sales to present the revenue from operations. Whereas, under Ind AS, this excise duty is included in the revenue from operations and the corresponding expense is included as part of total expenses. The change does not affect total equity as at April 01, 2016 and profit for the year ended March 31, 2017.

7 Provision for doubtful debts

Under previous GAAP, the Company has created provision for doubtful debts on receivables on the basis of incurred loss. Under Ind AS, loss allowance on financial assets has been determined on the basis of Expected Credit Loss (ECL). Consequently, the Company has recognised ECL on its financial assets as at March 31, 2017 aggregating Rs. 374.01 lakhs (As at April 01, 2016 by Rs. 600.43 lakhs). The above has resulted in decrease in equity and financial assets as at March 31, 2017 by Rs. 374.01 lakhs (As at April 01, 2016 by Rs. 600.43 lakhs) and increase in profit before tax for the year ended March 31, 2017 by Rs. 226.42 lakhs.

8 Retained earnings

Retained earnings as at April 01, 2016 has been adjusted consequent to the above Ind AS transition adjustments.

9 Current tax

Tax component on actuarial gains and losses which is transferred to other comprehensive income under Ind AS has been debited to the Statement of Profit and Loss.

10 The Ind AS adjustments are either non-cash adjustments or are regrouping among the cash flows from operating, investing and financing activities. Consequently, Ind AS adoption has no impact on the net cash flow for the year ended March 31, 2017 as compared with the previous GAAP.

Note 8 Disclosure of additional information

(a) Corporate Social Responsibility (CSR) expenditure:

As per Section 135 of the Companies Act, 2013, a company meeting the applicability threshold, needs to spend at least 2% of it’s average net profit for the immediately preceding three financial year on corporate social responsibility (CSR) activities. A CSR committee has been formed by the Company as per the Act. The expenditure has been incurred on activities specified in Schedule VII of the Companies Act, 2013.

(i) Gross amount required to be spend during the year is ‘ Nil (Year ended March 31, 2017: Rs. 0.99 lakhs).

(ii) Amount spent during the year on:

(b) Disclosure required under Section 22 of the Micro, Small and Medium Enterprises Development Act, 2006

Total outstanding dues of Micro and Small Enterprises, which are outstanding for more than the stipulated period are given below:

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. Due dates with regards to payments to be made to Micro and Small Enterprises have been determined with reference to Micro, Small and Medium Enterprises Development Act, 2006, considering criteria of quality of goods and related incidental services provided by the vendors. This has been relied upon by the auditors.

(e) Brand and Technology fees:

The Company has also entered into an agreement with CMI SA for providing knowhow, access to various industrial processes, development and implementation of strategy, access to best practices for business operations, exploitation of knowledge for new business initiatives, access to new global business opportunities, etc.

The Company has entered into an agreement with CMI SA for rights to use the CMI brand name. The Company pays 0.6% of net sales. The agreement is originally effective from January 1, 2010 for the tenure of 5 years and revised for another 5 years with effect from January 1, 2015.

Note: The Company’s records do not distinguish between raw materials, components and stores and spares. Therefore, separate figures for each category of imported items have not been given. The above amounts have been computed based on the purchase bills to the extent identified by the Company, for imported items.

Note: Sales on CFR/CIF/CIP/CPT/DAP basis has been converted into FOB.

(i) Previous year’s figures have been regrouped/reclassified wherever necessary to correspond with the current year’s classification/disclosure.

Source : Dion Global Solutions Limited
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