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JBM Auto

BSE: 532605|NSE: JBMA|ISIN: INE927D01028|SECTOR: Auto Ancillaries
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Notes to Accounts Year End : Mar '18

1. General Information

JBM Auto Limited (the “Company”) is a public limited company incorporated under the Companies Act 1956 having its registered office at 601, Hemkunt chambers, 89, Nehru place, New Delhi. The Company is engaged in the automotive business that manufactures and sell sheet metal components, tools dies & moulds and buses including sale of spare parts, accessories & maintenance contract of Buses. The Company is listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).

The financial statements for the year ended March 31, 2018 were approved by the Board of Directors and authorize for issue on May 15, 2018.

ii) Terms/rights attached to equity shares

The Company has one class of equity shares having par value of Rs. 5/- per share. Each shareholder is entitled for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of shareholders in the ensuing Annual General Meeting, except in the case of interim dividend. in the event of liquidation, the equity shareholders are eligible to receive remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

iii) Details of shareholders holding more than 5% equity shares in the Company (Refer Note No .50).

iv) Aggregate number of shares issued as bonus share during 5 year immediately preceding 31st March ,2018

The company has alloted 2,03,97,682 fully paid up equity shares of face value Rs. 5 each during the year ended 31.03.2015 pursuant to a bonus issue approved by the shareholders through a postal ballot.

* During the year 2017-18, the Company has paid dividend of Rs. 2/- per share (PY Rs. 1.75 per share) (on fully paid-up equity share of Rs. 5 each) amounting to Rs. 982.01 lakhs (PY Rs. 783.54 lakhs) (including corporate dividend tax thereon of Rs. 166.10 lakhs (PY Rs. 69.62 lakhs)

The Board at its meeting held on May 15th, 2018 has recommended a dividend @ 40% i.e. Rs. 2/- per share (on fully paid up equity share of Rs. 5/-each) for the year ended 31st March 2018. This equity dividend is subject to approval by shareholders at the Annual General Meeting. The total estimated equity dividend to be paid is Rs. 983.62 Lakhs (including corporate dividend tax thereon of Rs. 167.71 Lakhs).

*Term loan of Rs. 625.83 lakhs is secured by First Pari-Passu charge on the movable and immovable fixed assets of Indore, Greater Noida & Faridabad and Second Pari-Passu charge of the on all the current assets of the company both present and future situated at Faridabad, indore & Greater Noida.

Term loan of Rs. 2500.00 lakhs has exclusive charge on plant & machinery to the tune of 1.5X coverage of the term loan value.

Term loan of Rs. 781.25 lakhs is secured by First Pari Passu charge on the entire movable and immovable assets of Indore unit located at plot no 157 E sec-3,pitampura Industrial area ,Dhar - 454775 ,Indore , Madhya Pradesh, both present and future and also the entire movable and immovable assets situated at Greater Noida and Faridabad, both present and future. Second Pari Passu charge on the entire current assets of the Company both present and future situated at Faridabad, indore and Greater Noida Units.

Term loan of Rs. 1728.29 lakhs is secured by First Pari Passu charge on both movable and immovable fixed assets of the Company at Indore, Greater Noida and Faridabad plant (both present & future ).

Second Pari Passu charge on the current assets of Indore,Greater Noida and Faridabad Plants (both present & future)

**Term loan of Rs. 1875.00 lakhs has exclusive charge on plant & machinery of the Company with a minimum asset cover of 1.50X (as per WDv).

Second Pari Passu charge on all current assets of Sanand unit, both present and future.

Term loan of Rs. 5000.00 lakhs is secured by Pari Passu charge over the movable fixed assets of the Company with a minimum asset cover of 1.30X.

*Secured by hypothecation on pari passu interse between banks by way of first charge on current assets of the company (excluding current assets of Sanand unit, Gujarat) and by way of second charge on entire moveable assets of the Company (excluding moveable assets of Sanand unit, Gujarat) both present and future. Facility utilised of Rs. 525.21 Lakhs is secured by exclusive first charge on the entire current assets of Sanand unit, Gujrat of the Company and second charge on movable fixed assets including plant and machinery at Sanand unit, Gujarat of the Company, both present and future.

There have been no breach of covenants mentioned in the loan agreements during the reporting periods.

NOTE 2: EARNING PER SHARE

Basic EPS amounts are calculated by dividing the profit for the year attributable to equity holders of the Company by the weighted average number of equity shares outstanding during the year.

Diluted EPS amounts are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of equity shares outstanding during the year plus the weighted average number of equity shares that would be issued on conversion of all the dilutive potential equity shares into equity shares, unless the effect of potential dilutive equity share is antidilu-tive.

The following reflects the income and share data used in the basic and diluted EPS computations:

NOTE 3 : CONTINGENT LIABILITIES AND COMMITMENTS

A Contingent liabiities

(Claims against the Company not acknowledged as debts)

Against above demands, an amount of Rs. 57.42 lakhs has been paid under dispute.

It is not practicable for the Company to estimate the timings and amount of cash outflows, if any, in respect of the above pending resolution of the respective proceedings.

During the F. Y 2017-18 the Company has paid amounting to Rs. 240.00 lakhs for purchasing the equity shares of JBM Solaris Electric Vehicles Private Limited, but upto 31st March 2018 equity shares has not been issued by the Investee Company (JBM Solaris Electric Vehicles Private Limited). This amount is appearing as share application money given under “Other Non Current Financial Assets” in the balance sheet. Further share in respect of such application money has been alloted as on April 12, 2018.

NOTE 4 : SEGMENT INFORMATION

As per Indain Accounting Standard (Ind AS) 108 on “Operating Segment” segment information has been provided under notes to consolidated financial statements.

* The Company has set up Skill - Development Centre to enhance employability in society thereby increasing availability of skilled personnel for the Company and society at large.

NOTE 5 : The Company had filed a writ petition with the Hon’ble High Court of Kolkata, West Bengal for the injunction restraining the Govt. of West Bengal for acting in terms of Singur Land Rehabilitation and Development Act, 2011(The Act). The Division Bench of the Kolkata High Court had held that the Singur Act was unconstitutional and had therefore stuck down the Act. The State Government challanged the said judgment of the Kolkata High Court before the Hon’ble Supreme Court and the same has been disposed off by the Hon’ble Supreme Court. Now, the Company is exploring further legal options on this matter. The State Government is still retaining the possession of the Singur Land.

Note: Figures in brackets represents previous year’s amounts

NOTE 6 : During the F. Y 2016-17, the Company had entered into a joint venture agreement on 14th July 2016 with Solaris Bus & Coach S.A., Poland to establ ish a company for the man ufacturing of Elect ric and Hybrid Buses. The Company is holding 80% paid up equity share capital into the joint venture company (JBM Solaris Electric vehicles P rivate Limited).

NOTE 7 : During the F.Y. 2017-18 the joint venture partner MA SRL Italy has exited from JV Agreement on 31.01.2018 by sale of its entire holding in the JV company, JBM MA Automative Private Limited. However, the JV company is continuing its existing business.

NOTE 8 : in their meeting held on 01.03.2018, the Board of Directors of the company has approved the Scheme of Amalgamation of JBM Auto System Private Limited (“Subsdiary Company”) and JBM MA Automotive Private Limited (“Associate Company”) with JBM Auto Limited from appointed date 01.04.2017 subject to obtaining of necessary Regulatory Approvals. Pending such Regulatory Approvals no adjustment has been made in the above financial statements.

NOTE 9 : During the F Y 2016-17, Exceptional income represents Rs. 1,105.00 lakhs receivable from one of the customer against the claim made for the compensation, on account of loss for the underutilization of resources due to less volume purchased by the customer.

The above disclosure has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.

NOTE 10 : Cost of material consumed has been computed by adding purchase to the opening stock and deducting closing stock verified physically by the management.

NOTE 11 : LEASES

OPERATING LEASE : COMPANY AS LESSEE

The Company leases mainly office facilities under cancellable operating lease agreements. Minimum lease payments under operating lease are recognized on a straight line basis over the term of the lease. Rent expense for operating leases for the year ended March 31, 2018 and March 31,2017 was Rs. 142.68 Lakhs and Rs. 147.57 Lakhs respectively. There are no restrictions imposed by the lease agreements and there is a sub leases during the F. Y. 2017-18 and rental income from this sub lease is Rs. 9.12 Lakhs. There are no contingent rents. The operating lease agreements are renewable on a periodic basis. Some of these lease agreements have price escalation clause.

FINANCE LEASE: COMPANY AS LESSEE

The Company has taken land under finance leases. The following is the summary of future minimum lease rental payments under finance leases entered into by the company:

There are no sub leases and no contingent rents. Certain finance lease agreements are renewable at the end of the lease period. There is price escalation clause in certain lease agreements.

NOTE 12 : EXCISE DUTY

Consequent to the indroduction of Goods & Service Tax (GST) with effect from 1st July, 2017 Central Excise, Value Added Tax (VAT) etc have been subsumed into GST. In accordance with Indian Accounting Standard -18 on Revenue and Schedule III of the Companies Act 2013, unlike Excise Duties, levies like GST, VAT etc are not part of revenue. Accordingly the figures for the periods upto 30th June 2017 are not strictly relatable to those thereafter. The following additional information is being provided to facilitate such understanding.

NOTE 13 : EMPLOYMENT BENEFITS

A. Defined Benefit Plans as per Ind AS 19 Employee Benefits:

Gratuity : The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of servicegets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. These benefits are funded. The following tables summaries the components of net benefit expense recognized in the Statement of Profit and Loss and the funded status and amounts recognized in the Balance Sheet.

These Plans typically expose the Compay to acturial risks such as : Investment risk, Interest rate risk, Longevity risk and Salary risk.

Investment Risk : The Probability or likelihood of occurrence of losses relative to the expected return on any particular investment.

Interest 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 ulimate cost of providing the above benefit and will thus result in an increase in the value of the liability.

Longevity risk : The present value of defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants during employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.

Salary 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.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. in practice, this is unlikely to occur and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defind benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied which was applied while calculating the defined benefit obligation liability recognised in the Balance Sheet.

The Company is expected to contribute Rs 236.37 lakhs to Defined Benefit Plan Obligation Funds in next year

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to prior period.

B Other Long Term Benefits as per Ind AS 19 Employee Benefits: Leave Encashment and Compensated absences (Unfunded)

The leave obligations cover the Company’s liability for sick and earned leaves.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

C. Defined Contribution and Other Plans

Contributions are made to the Provident and Other funds. The contributions are normally based upon a proportion of the employee’s salary.

The Company has recognized the following amounts in the Statement of Profit and Loss :

NOTE 14 : RELATED PARTY DISCLOSURES :

The list of related parties as identified by the management is as under:

Subsidiaries - JBM Auto System Private Limited

Associates - JBM MA Automotive Private Limited (w.e.f 01.02.2018)

Joint ventures - JBM MA Automotive Private Limited (upto 31.01.2018)

- JBM Ogihara Automotive India Limited

- JBM Solaris Electric vehicle Private Limited

- INDO Toolings Private Limited

Key Management personnel: - Mr. vivek Gupta, CFO & Company Secretary

- Mr. Sandip Sanyal, Executive Director

Post employement benefit plan of the Comany -JBM Auto Group Gratuity Scheme Trust

NOTE 15 : SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Company’s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities.These include recognition and measurement of financial instruments, estimates of useful lives and residual value of property, plant and equipment and intangible Assets, valuation of inventories, measurement of recoverable amounts of cash-generating units, measurement of employee benefits, actuarial assumptions, provisions etc.

Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. The Company continually evaluates these estimates and assumptions based on the most recently available information. Revisions to accounting estimates are recognized prospectively in the Statement of Profit and Loss in the period in which the estimates are revised and in any future periods affected.

Judgments

In the process of applying the Company’s accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognized in the financial statements:

(i) Land on finance lease - Company as lessee

The Company has obtained various lands from the Government for purpose of plants and manufacturing facilities. These lands are having various tenures, generally 90 years and at the end of lease term, the lease could be extended for another term or the land could be returned to the Government Authority. The Company has determined, based on an evaluation of the terms and conditions of the arrangements e.g. lease term, annual rental, transfer / retention of significant risks and rewards of ownership of land determined the lease as finance leases and accordingly accounted the same in the financial statements.

(ii) Operating lease commitments - Company as lessor

The Company has entered into leasing arrangements wherein the Company is receiving lease rental income. The Company has determined, based on an evaluation of the terms and conditions of the arrangements e.g. lease term, lease rental income, fair value of the land, transfer /retention of significant risks and rewards of ownership of land determined the lease as operating leases.

(iii) Operating lease commitments - Company as lessee

The Company has entered into leasing arrangements wherein the Company is required to pay monthly lease rentals. The Company has determined, based on an evaluation of the terms and conditions of the arrangements e.g. lease term, lease rental income, fair value of the land, transfer / retention of significant risks and rewards of ownership of land determined the lease as operating leases.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

(i) Gratuity benefits

The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates.

Due to the complexity of the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. In determining the appropriate discount rate, management considers the interest rates of government bonds, and extrapolated maturity corresponding to the expected duration of the defined benefit obligation. The mortality rate is based on publicly available mortality tables. Future salary increases and pension increases are based on expected future inflation rates. Further details about the assumptions used, including a sensitivity analysis, are given in Note no 53.

(ii) Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow (DCF) model based on level-2 and level-3 inputs. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as price estimates, volume estimates, rate estimates etc. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

(iii) Impairment of financial assets

The impairment provisions for trade receivables are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation based on the Company’s past history and other factors at the end of each reporting period.

(iv) Estimates related to useful life of Property Plant and Equipments and Intangible Assets :

Depreciation on property plant and equipment is calculated on a straight-line basis over the useful lives estimated by the management. These rates are in line with the lives prescribed under Schedule ii of the Companies Act, 2013.

The management has re-estimated useful lives and residual values of its assets. The management based upon the nature of asset, the operating condition of the asset, the estimated usage of the asset, past history of replacement and anticipated technological changes, believes that depreciation rates currently used fairly reflect its estimate of the useful lives and residual values of property, plant and equipment & intangible Assets.

(v) Impairment of Assets

An impairment exists when the carrying value of an asset exceeds its recoverable amount. Recoverable amount is the higher of its fair value less costs to sell and its value in use. The value in use calculation is based on a discounted cash flow model. in calculating the value in use, certain assumptions are required to be made in respect of highly uncertain matters, including management’s expectations of growth in EBITDA, long term growth rates; and the selection of discount rates to reflect the risks involved.

(vi) Contingent liabilities

The contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company. The Company evaluates the obligation through Probable, Possible or Remote model (‘PPR’). in making the evaluation for PPR, the Company take into consideration the industry perspective, legal and technical view, availability of documentation/agreements, interpretation of the matter, independent opinion from professionals (specific matters) etc. which can vary based on subsequent events. The Company provides the liability in the books for probable cases, while possible cases are shown as contingent liability. The remotes cases are not disclosed in the financial statement.

(vii) Taxes

Provision for tax liabilities require judgments on the interpretation of tax legislation, developments in case law and the potential outcomes of tax audits and appeals which may be subject to significant uncertainty. Therefore the actual results may vary from expectations resulting in adjustments to provisions, the valuation of deferred tax assets, cash tax settlements and therefore the tax charge in the Statement of Profit and Loss.

NOTE 16: FINANCIAL INSTRUMENTS

A. Capital management

The Company manages its capital to ensure that the Company will be able to continue as a going concern while maximising the return to stakeholders through efficient allocation of capital towards expansion of business, opitimisation of working capital requirements and deployment of surplus funds into various investment options.

The management of the Company reviews the capital structure of the Company on regular basis. As part of this review, the Board considers the cost of capital and the risks associated with the movement in the working capital.

The Company monitors its capital using gearing ratio, which is net debt divided to total equity. Net debt includes, loans and borrowings less cash and cash equivalents.

B. Fair value measurements

The Company uses the following hierarchy for determining and/or disclosing the fair value of financial instruments by valuation techniques:

The following is the basis of categorising the financial instruments measured at fair value into Level 1 to Level 3:

Level 1: This level includes financial assets that are measured by reference to quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: This level includes financial assets and liabilities, measured using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

Level 3: This level includes financial assets and liabilities measured using inputs that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part, using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.

The fair value of the financial assets are determined at the amount that would be received to sell an asset in an orderly transaction between market participants. The following methods and assumptions were used to estimate the fair values:

Fair value of the Company’s financial assets that are measured at fair value on a recurring basis:

There are certain Company’s financial assets which are measured at fair value at the end of each reporting period. There have been no transfer between among levels during the period. Following table gives information about how the fair values of these financial assets are determined:

The Company entered into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. Cross currency interest rate swaps are valued using valuation techniques which employs the use of market observable inputs. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies, interest rate curves and forward rate curves of the underlying commodity. All derivative contracts are fully cash collateralised, thereby eliminating both counterparty and the Company’s own non-performance risk. As at 01 April 2016, the marked-to-market value of derivative asset positions is net of a credit valuation adjustment attributable to derivative counterparty default risk.

*including current maturities of non current borrowings

Carring value of loans, other financial assets, trade receivables, cash and cash equivalents, other bank balances, Borrowings ,other financial liabilities , trade payables are considered to be same as their fair value

D. Financial risk management

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 thresholds, 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 risks arising from the financial instruments:

- Market risk

- Credit risk; and

- Liquidity risk

D.1 Market risk

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

a) Foreign currency risk management

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense is denominated in a foreign currency) and foreign currency loans and borrowings (Foreign currency buyer’s credit).

The Company has taken derivative contract to hedge its foreign currency exposures in relation to foreign currency term loan availed by the Company. Further, the Company has not entered into any derivative or hedging instruments in relation to its foreign currency exposures other than foreign currency term loan.

Foreign currency exposure that have not been hedged by derivative instrument are given below.

Foreign currency sensitivity analysis

The following tables demonstrate the sensitivity to a reasonably possible change in USD, EURO, SEK and JPY exchange rates, with all other variables held constant. The impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities including non-designated foreign currency derivatives and embedded derivatives. The Company’s exposure to foreign currency changes for all other currencies is not material.

b) Interest rate risk management

The Company is exposed to interest rate risk because Company borrow funds at both fixed and floating interest rates. The risk is managed by the Company by maintaining an appropriate mix between fixed and floating rate borrowings. The Company’s exposures to interest rates on financial liabilities are detailed in the liquidity risk management section of this note.

The Company manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings. In respect of non-current Foreign Currency Borrowings denominated in US Dollars (USD), the Company is having Libor linked rate. To mitigate the risk of any adverse interest rate movement, the Company had entered into Cross Currency Interest Rate Swaps (CCIRS) i.e. pay fixed receive variable rate of interest. In the event of any adverse movement of interest rates, the Company was required only to pay the fixed interest eventually thereby offsetting the interest loss from the CCIRS. Accordingly, no sensitivity analysis in respect of such loans is given.

Interest rate sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to interest rates at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates .

D.2 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 has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults.The Company’s exposure and wherever appropriate, the credit ratings of its counterparties are continuously monitored and spread amongst various counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the management of the Company

Financial instruments that are subject to concentrations of credit risk, principally consist of balance with banks, trade receivables, loans and advances and derivative financial instruments. None of the financial instruments of the Company result in material concentrations of credit risks.

Balances with banks were not past due or impaired as at the year end. In other financial assets that are not past dues and not impaired, there were no indication of default in repayment as at the year end.

D.3 Liquidity risk management

Liquidity risk refers to the risk that the Company can not meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and to ensure funds are available for use as per the requirements.

The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of non-current borrowings, current borrowings and trade payables etc. The Company has access to a sufficient variety of sources of funding and debt maturing within 12 months can be rolled over with existing lenders.

NOTE 17 : EVENTS AFTER THE REPORTING PERIOD

There are no reportable events that ocurred after the end of the reporting period.

NOTE 18 : FIRST-TIME ADOPTION OF IND AS

These financial statements, for the year ending 31 March 2018 are the first annual financial statements prepared in accordance with Ind AS. For periods up to and including the year ended 31 March 2017, the Company prepared its financial statements in accordance with accounting standards notified under Section 133 of Companies Act 2013 read with paragraph 7 of the Companies (Accounts) rules, 2014 (IGAAP).

Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for periods ending on 31 March 2018, together with the comparative period data as at 31 March 2017, as described in the summary of significant accounting policies. In preparing these financial statements, the Company’s opening balance sheet was prepared as at 1 April 2016, the Company’s transition date to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the opening Balance Sheet as at 1 April 2016 and the financial statements for the year ended 31 March, 2017.

Exemptions applied:

Ind AS 101 allows first-time adopters certain exemptions from the retrospective applications of certain requirements under Ind AS. The Company has applied the following exemptions:

A. Mandatory exemptions:

a) Estimates:

The estimates at 1 April 2016 and at 31 March 2017 are consistent with those made for the same dates in accordance with indian GAAP (after adjustments to reflect any differences in accounting policies).

b) Derecognition of financial assets:

The company has applied the de-recognition requirements in ind AS 109 prospectively for transactions occurring on or after the date of transition to ind AS.

c) Classification and measurement of financial assets:

Financial assets like security deposits paid has been classified and measured at amortised cost on the basis of the facts and circumstances that exist at the date of transition to ind ASs.

d) Impairment of financial assets: (Trade receivables and other financial assets)

At the date of transition to ind ASs, the Company has recognised a loss allowance at an amount equal to lifetime expected credit losses at each reporting date until that financial instrument is derecognised (unless that financial instrument is low credit risk at a reporting date).

B. Optional exemptions:

a) Deemed cost-Previous GAAP carrying amount (PPE and Intangible Assets):

Since there is no change in the functional currency, the Company has elected to continue with the carrying value for all of Property, Plant and Equipment and Intangible Assets, as recognised in its Indian GAAP financial as deemed cost at the transition date.

b) Foreign Currency Monetary Items:

Under previous GAAP, paragraph 46A of Accounting Standard for ‘The Effects of Changes in Foreign Exchange Rates’ (AS 11) provided an alternative accounting treatment whereby exchange differences arising on long term foreign currency monetary items relating to depreciable asset are adjusted in fixed assets and depreciated over the remaining life of such assets and in other cases are accumulated in Foreign Currency Monetary item Translation Difference Account (FCMiTDA) to be amortised over balance period of long term asset/liability. Ind AS 101 includes an optional exemption that allows a first-time adopter to continue the above accounting treatment in respect of the long-term foreign currency monetary items recognised in the financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period. The Company has elected this exemption and opted to continue with the Previous GAAP carrying value.

c) Arrangements containing a lease:

Appendix C to indAS 17 requires an entity to assess whether a contract or arrangement contains a lease. in accordance with ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. However, the Company has used Ind AS 101 exemption and assessed all arrangements based for embedded leases based on conditions in place as at the date of transition.

d) Investment in subsidiaries and Joint Ventures & Associates:

There is an option to measure investments in subsidiaries, joint ventures and associates at cost in accordance with iND AS 27 either at fair value on date of transition or previous gap carrying values. The Company has elected this exemption and opted to continue with the “Previous GAAP” carrying value of investment in subsidiaries and joint ventures, as recognised in its Indian GAAP financials, as deemed cost at the date of transition.

e) Business combinations:

IND AS 103 Business Combinations has not been applied to acquisitions of subsidiaries, which are considered businesses for IND AS or of interests in joint ventures that occurred before April 01, 2016. Use of this exemption means that the Indian GAAP carrying amounts of assets and liabilities, that are required to be recognized under IND AS, is their deemed cost at the date of acquisition. After the date of acquisition measurement is in accordance with IND AS. Assets and liabilities that do not qualify for recognition under are excluded from opening IND AS balance sheet. The Company did not recognise or exclude any previously recognised amounts as a result of IND AS recognition requirements.

Note: No statement of comprehensive income was produced under previous GAAP. Therefore the above reconciliation starts with profit under previous GAAP.

(iii) Reconciliation of Cash Flow

There were no significant item between Cash Flows prepared under Indian GAAP and those prepared under Ind AS.

(iv) Reconciliation of the assets and liabilities presented in the balance sheet prepared as per Indian GAAP and as per Ind AS as at 31st March 2017 are as follows:

Notes to the reconciliation of Balance sheet as at 01st April 2016 and 31st March 2017 and the Total Comphrehensive Income for the year ended 31st March 2017

1. In the financial statements prepared under Previous GAAP, dividend on equity shares recommended by the Board of Directors after the end of reporting period but before the financial statements were approved for issue, was recognised as a liability in the financial statements in the reporting period relating to which dividend was proposed.

Under Ind AS, such dividend is recognised in the reporting period in which the same is approved by the members in a general meeting.

2. Under Indian GAAP , redeemable preference share capital was part of share capital where as under IND AS the same has been classified as borrowing and deferred income. Interest charge at EIR on borrowings has been recognised as finance cost . Deferred income is booked on deferred component of preference share capital in Statement of Profit and Loss over the remaining period of preference share capital.

3. Under Indian GAAP, non current security deposits given for the purpose of obtaining asset on lease are recorded at transaction value. Under Ind AS, these security deposits are recorded at fair value at the date of transition. The difference in transaction value and the fair value is recorded as prepaid rent expense and recorded as rent expense over the term of the deposit. Security deposit recorded at discounted value is accreted to its full value by recording.

4. Leasehold land was scoped out from AS 19 “Leases” but the same is covered under Ind AS 17 “Leases”. Certain land taken on lease is in the nature of finance lease consequently present value of all future rentals have been capitalised to leasehold land and recorded as finance lease obligation. Subsequently, this amount is amortised over the remaining lease period, interest expense is booked on finance lease obligation and rent paid is reduced from finance.

5. Leasehold land was scoped out from AS 19 “Leases” but the same is covered under Ind AS 17 “Leases”. Certain land taken on lease is in the nature of operating lease consequently amount recognised as leasehold land under IGAAP has been trasferred from leasehold land to prepaid expenses. Prepaid expense in such respect of leasehold land is amortised as rent expense over the period of lease obligation.

6. Both under Indian GAAP and Ind AS, the Company recognised costs related to its post-employment defined benefit plan on an actuarial basis.Under Indian GAAP, the entire cost, including actuarial gains and losses, are charged to profit or loss. Under Ind AS, remeasurements [comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets excluding amounts included in net interest on the net defined benefit liability are recognised in OCI.

7. Under the previous GAAP, revenue from sale to goods was presented exclusive of excise duty. Under Ind AS revenue from sales of goods is presented inclusive of excise duty. Excise duty paid is presented on face of Statement of Profit and Loss as a part of expense. There is no impact on total equity and profit.

8. Under the previous GAAP, cash discount, packing expense recovered and freight expenses recovered was presented under other expenses. Under Ind AS revenue from sales of goods is recognised at fair value of consideration expected to be received. Accordingly revenue for the year ended March 31, 2017 is presented net of cash discount, freight and packing charges recovered.

9. Previous year GAAP figures have been reclassified to confirm to the Ind AS presentation requirements for the purpose of the note.

10.Under previous GAAP, there was no concept of other comprehensive income. Under Ind AS, specified items of income expense, gains or losses are required to be presented in other comprehensive income.

NOTE 19 : AMENDMENTS TO STANDARDS THAT ARE NOT YET EFFECTIVE AND HAVE NOT BEEN ADOPTED BY THE COMPANY

Appendix B to Ind AS 21, Foreign currency transactions and advance consideration:

On March 28, 2018, Ministry of Corporate Affairs (“MCA”) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency.

The amendment will come into force from April 1, 2018. The Company has evaluated the effect of this on the financial statements and the impact is not material.

Ind AS 115- Revenue from Contract with Customers:

On March 28, 2018, Ministry of Corporate Affairs (“MCA”) has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers.

The standard permits two possible methods of transition:

- Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with ind AS 8- Accounting Policies, Changes in Accounting Estimates and Errors

- Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch - up approach)

The effective date for adoption of Ind AS 115 is financial periods beginning on or after April 1, 2018.

The Company is evaluating the requirements of the amendment and its effect on the financial statements.

Source : Dion Global Solutions Limited
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