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Moneycontrol.com India | Accounting Policy > Consumer Goods - White Goods > Accounting Policy followed by Fedders Electric and Engineering - BSE: 500139, NSE: FEDDERELEC
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Fedders Electric and Engineering

BSE: 500139|NSE: FEDDERELEC|ISIN: INE249C01011|SECTOR: Consumer Goods - White Goods
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Fedders Electric and Engineering is not traded in the last 30 days
Jun 15
Accounting Policy Year : Mar '16

1.1 corporate information

Fedders Lloyd Corporation Limited is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on National Stock Exchange of India Limited (NSE) & Bombay Stock Exchange Limited (BSE) in India and well diversified in the field of Environment Control Systems (ECS), fabrication of steel structures for Power, commercial and industrial construction projects and implementation of high power transmission lines. The Company has also been into exports of power equipments/components to various funded projects by multilateral agencies.

The Company has been generating revenues mainly from three segments:-

1. Environmental Control Systems

2. Steel Structures & Engineering

3. Power Transmission & Distribution and Overhead Electrification (OHE)

1.2 BASIS OF PREPARATION

The Financial Statements of the company have been prepared in accordance with Generally Accepted Accounting Principles in India (GAAP). The Company has prepared these financial statements to comply in all material respects with the accounting standards specified under Section 133 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014 (as amended). The financial statements have been prepared on an accrual basis and under the historical cost convention.

The accounting policies adopted in the preparation of financial statements are consistent with those of previous year, except for the change in accounting policy explained below.

1.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

a) Use of estimates

The preparation of Financial Statements in conformity with Indian GAAP requires the management to make estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities and disclosure of contingent liabilities, at the date of the Financial Statements. Although these estimates are based upon management''s best knowledge of current events and actions, actual results could differ from these estimates. Difference between the actual results and estimates are recognized in the period in which the results are known/materialized.

b) Tangible Fixed Assets:

Fixed assets except leasehold land are stated at cost less accumulated depreciation. The cost includes freight, duties, taxes and other incidental expenses related to acquisition and installation. CENVAT claim, if any, on capital goods is reduced from the cost.

Capital Work-in-Progress

Projects under commissioning and other Capital Work-in-Progress are carried at cost, comprising direct cost, related incidental expenses and attributable interest.

c) Depreciation on tangible fixed assets

i) After enactment of the Companies Act, 2013, Depreciation on fixed assets is provided on straight-line basis at the rates prescribed in Schedule II to the Companies Act, 2013.

ii) Depreciation on assets added during the year, is calculated on pro-rata basis with reference to the date of installation.

d) Intangible Assets

Intangible Assets are stated at cost of acquisition.

e) Grant

Grants are recognized when there is reasonable assurance that the grant will be received and conditions attached to them are complied with.

f) Research and Development

Research costs are expensed as incurred.

g) Impairment of Assets

The carrying values of assets/cash generating units at each Balance Sheet date are reviewed for impairment of assets. If any indication of such impairment exists, the recoverable amount of such assets is estimated and impairment is recognized, if the carrying amount of these assets exceeds their recoverable amount. The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor. When there is indication that an impairment loss recognized for an asset in prior accounting periods no longer exists or may have decreased such reversal of impairment loss is recognized.

h) Inventory Valuation:

i) Raw materials and consumables are valued at cost net of MODVAT as per the FIFO method after providing for cost of obsolescence value.

ii) Stock in process is valued at direct cost i.e. cost of materials and variable manufacturing expenses.

iii) Finished goods are valued at lower of cost or net realizable value.

iv) Stock in transit lying in customs warehouse is valued at cost but does not include custom duty payable, however, non-provision of duty does not affect the profit for the year.

i) Revenue Recognition:

i) Income and Expenditure are recognized on accrual basis.

ii) Sale of goods

Revenue from sale of goods is recognized when all the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods. The Company collects Central Sales Taxes and Value Added Taxes (VAT) on behalf of the government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year.

iii) Export sales are accounted on the basis of date of bill of lading.

iv) Sales and service include excise duty and adjustments made towards liquidated damages and price variation, wherever applicable. Escalation and other claims, which are not ascertainable/acknowledged by customers, are not taken into account.

v) Revenue from project related activity is recognized on the basis of running bills raised on the basis of completion of the project activities.

vi) Dividend income is recognized when the right to receive the dividend is established.

j) Investments

Long term Investments are stated at cost. Investments in subsidiary company are of long-term strategic value and the diminution, if any, in the value of these investments is temporary in nature.

k) Foreign currency transactions

i. 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 transaction.

ii. Conversion

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.

iii. Exchange Differences

Exchange differences arising on the settlement of monetary items or on reporting company''s monetary items 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.

iv. Forward Exchange Contracts not intended for trading or speculation purposes

The premium or discount arising at the inception of forward exchange contract is amortized and recognized as an expense/income over the life of the contract. Exchange differences on such contracts, except the contracts which are long-term foreign currency monetary items, are recognized in the Statement of Profit and Loss in the period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such forward exchange contract is also recognized as income or as expense for the year.

l) Retirement Benefits:

Provident Fund:-

Retirement benefit in form of provident fund is a defined contribution scheme and the contributions are charged to the Profit and Loss account of the period when the contributions to the respective funds are due.

Gratuity:-

The Company''s liability in respect of payment of gratuity is provided on accrual basis as per actuarial valuation. The Company is in process of having arrangement with Insurance co. to administer its Superannuation & Gratuity Fund.

Leave Encashment:-

Leave Encashment are valued at cost to company basis without considering any discounting and salary increase and provided on the basis of actual valuation.

m) Taxation:

Current Tax:

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, except for the overseas subsidiaries and joint ventures where current tax provisions is determined based on the local tax laws. Deferred tax is recognized for all timing differences, subject to the consideration of prudence applying the tax rates that have been substantively enacted by the Balance Sheet date.

Deferred Tax:

Deferred tax liabilities represent the tax effect of temporary differences substantially on account of differences in the written down value of Fixed Assets on account of differing depreciation methods and rates and other timing differences.

Minimum Alternate Tax:

Minimum Alternate Tax (MAT) paid during a period is charged to the Statement of Profit and Loss as current tax. The Company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternate Tax under the Income Tax Act, 1961, the said asset is created by way of credit to the Statement of Profit and Loss and shown as MAT Credit Entitlement.” The Company reviews the MAT credit entitlement asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will pay normal tax during the specified period.

n) Borrowing Cost

Cost in connection with the borrowing of funds to the extent not directly related to the acquisition of fixed assets are amortized and charged to the Profit and Loss Account, over the tenure of the loan. Borrowing cost to the extent directly attributable to acquisition of fixed assets are added to the cost of fixed assets.

o) Segment Reporting

As per Accounting Standard 17 on segment reporting of Institute of Chartered Accountants of India (ICAI), the Company has reportable segments viz. Environmental Control Systems, Steel Structural & Engineering and Power Projects during the period under review. Accordingly the reporting is done segment wise.

p) Earning Per Share

The earnings considered in ascertaining the Company''s Earnings per Share (EPS) comprise the net profits after tax. The number of shares used in computing basic EPS is the weighted average number of shares outstanding during the year.

The diluted EPS is calculated on the same basis as basic EPS, after adjusting for the effects of potential dilutive equity shares.

q) Cash Flow Statement

The Cash Flow Statement is prepared by the indirect method set out in Accounting Standard-3 issued by the Institute of Chartered Accountants of India as required by the SEBI on Cash Flow Statement and presents cash flows by operating, investing and financing activities of the Company. Cash and cash equivalents presented in the cash flow statement consists of cash in hand and demand deposits with banks as on the Balance Sheet date.

r) Sundry Debtors/Loans & Advances

Company, as a policy, obtains balance confirmation from Sundry Debtors, Creditors and other advances on monthly/ quarterly/half yearly basis depending upon quantum of transaction made with the parties. Considering the same, Company does not have all balance confirmations as at 31st March, 2016 the effect of the same, if any, which is not likely to be material will be adjusted at the time of confirmation.

s) Provisions/Contingencies

A provision is recognized when there is a present obligation as a result of past event 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 determined based on best estimate of the amount required to settle the obligation at the Balance Sheet date.

Contingent liabilities are not recognized and are disclosed in the Notes to Financial Statement.

t) Derivative Instruments

The Company has entered into derivative contracts in the nature of interest rate swaps and forward contracts with intention to hedge its requirements and firm commitments. The contracts are mark to market and losses are recognized in the Profit and Loss account. Gains arising on the same are not recognized on ground of prudence.

u) Deferred Revenue Expenditure

Cost of travelling, Consultancy fee and other expenses related to IRIS Certification are considered as deferred revenue expenditure. 1/5 of the expenditures have been charged to Profit and Loss account.

Source : Dion Global Solutions Limited
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