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Kilburn Engineering

BSE: 522101|NSE: KILBUNENGG|ISIN: INE338F01015|SECTOR: Engineering - Heavy
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Kilburn Engineering is not traded in the last 30 days
Mar 16
Notes to Accounts Year End : Mar '18

Notes:1

1. In accordance with the Ind AS 36 on ''Impairment of Assets'', the Company has reassessed the carrying amount of its Intangible assets and is of the view that no further impairment / reversal is considered to be necessary in view of its expected realisable value.

2. For Intangible Assets existing as on 1 April 2016 i.e., the date of transition to Ind AS, the Company has used Indian GAAP carrying value as deemed cost.

Investments at fair value through OCI (fully paid) reflect investment in quoted equity securities. These equity shares are designated as FVTOCI as they are not held for trading purpose. Thus disclosing their fair value fluctuation in profit and loss will not reflect the purpose of holding.

** The Company has availed working capital loan from bank aggregating to Rs. 10,300 lacs as at 31 March 2018 (31 March 2017: Rs. 11,000 lacs, 1 April 2016: INR NIL). However, pending utilisation of the monies for the aforesaid, the Company has placed Rs. 9,930 lacs (31 March 2017: Rs.10,480lacs, 1 April 2016: Rs. NIL) with group companies as Inter-Corporate Deposit (included in Inter-corporate deposits given to Others shown above).

***Bank deposits with maturity more than 12 months includes balances with banks held as margin money of Rs. 30.68 lacs (31 March 2017: Rs.24.90 lacs, 1 April 2016 :Rs. 11.70 lacs) having residual maturity of more than 12 months.

Derivative instruments at fair value through profit or loss includes foreign exchange forward contracts entered into by the Company with the intention of reducing the foreign exchange risk of trade receivables. These contracts are not designated in hedge relationships and are measured at fair value through profit or loss.

1. No trade receivables are due from directors or other persons in whom directors are interested.

2. Trade receivables are non-interest bearing and are generally on terms of 30 to 90 days.

Terms/ rights attached to equity shares

The Company has only one class of equity shares having par value of INR 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend 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 equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

There are no shares issued as bonus, shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date.

Other equity

Capital Redemption Reserve - The Company had made an offer of buyback of its own fully paid up equity shares through the methodology of Open Market Purchase through Stock Exchange pursuant to the approval of Board of Directors at their meeting held on 29 January 2009. The Company bought back 2,40,032 equity shares for an aggregate amount of Rs.63.54 lacs by utilising Securties Premium Account to the extent of Rs.39.53 lacs. Capital Redemption Reserve of Rs. 24.01 lacs has been created being the nominal value of the shares bought back.

Securities Premium Reserve - Where the Company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of the premium received on those shares shall be transferred to Securities Premium Reserve. The Company may issue fully paid-up bonus shares to its members out of the securities premium reserve and the Company can use this reserve for buy-back of shares.

Capital Reserve - Capital Reserve contains profit on re-issue of forfeited shares.

General Reserve - General Reserve is created out of the profits earned by the Company by way of transfer from surplus in the statement of profit and loss. The Company can use this reserve for payment of dividend and issue of fully paid-up bonus shares.

FVOCI - Net gain/(loss) on hedging instruments in a cash flow hedge - The Company has taken foreign exchange forward contracts and cross currency interest rate swaps to hedge foreign currency term loans taken from banks to meet the working capital requirements. The forward contracts and cross currency interest rate swaps have been taken to offset the effect of changes in interest rates and foreign exchange rates. The net gain / (loss) on these foreign exchange forward contracts and cross currency interest rate swaps have been recognised in other comprehensive income in accordance with the requirements of Ind AS.

FVOCI - Net gain/(loss) on FVOCI equity investments - As per Ind AS 109, investment in equity shares are to be initially measured at fair value and subsequently at fair value through profit and loss or other comprehensive income. At initial recognition, an entity may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument within the scope of this Standard that is neither held for trading nor contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 applies.

The Company represents that its investments are long term strategic investments and the Company intends to hold the same for an indefinite period. Thus, the Company has decided to subsequently measure investments at fair value through other comprehensive income.

Proposed dividends on equity shares are subject to approval at the annual general meeting and are not recognised as a liability (including dividend distribution tax thereon) as at 31 March.

Notes:2

a. Secured by hypothecation of cars. Two loans - One loan having effective interest rate of 8.25% and payable on EMI basis up to 05 March 2021 and other loan having effective interest rate of 9.70% and payable on EMI basis up to 07 July 2020.

b. Details of security :

1. Equitable Mortgage created by way of Deposit of Title Deed on the Company''s immovable property situated at Plot No.6, KalyanBhiwandi Industrial Area, Thane.

2. Hypothecation of present and future stocks of raw materials, semi-finished goods, finished goods and book debts by way of first charge and also by hypothecation of movable plant and machinery by way of first charge.

Outstanding loans carry an average interest rate of 11.60% to 14.50% p.a.(31 March 2017 : 13.00% to 14.50% p.a., 1 April 2016 : 13.50% to 15.80% p.a.)

c. Secured by Letter of Comfort from Steel Authority of India Ltd. This loan carries an interest rate of 10.25% p.a. (31 March 2017 : 10.25%, 1 April 2016 : 10.25% p.a.)

d. i) Payable on demand on 6 October 2018 – Rs. 4000 lacs, Rate of interest - 1 year LIBOR plus 321 basis points. The effective rate of interest on this loan is 15.40%. However, since there has been a breach in the condition of the covenant as per the loan agreement, the term loan has become repayable on demand. The breach has not been remediated upto the date of issue of financial statements.

Details of security :

1. Subservient charge on the current assets and movable fixed assets of the Company.

2. Board resolution backed Letter of Comfort from McleodRussel India Limited

3. Unconditional and irrevocable corporate guarantee of Williamson Financial Services Ltd to remain valid during the currency of loan.

4. Unconditional and irrevocable personal guarantee of Mr.AdityaKhaitan to remain valid during the currency of the loan.

ii) Payable on demand on 22 September 2018 – Rs. 4000 lacs, Rate of interest - 1 year LIBOR plus 350 basis points. The effective rate of interest on this loan is 15.93%. However, since there has been a breach in the condition of the covenant as per the loan agreement, the term loan has become repayable on demand. The breach has not been remediated upto the date of issue of financial statements.

Details of security :

1. Subservient charge on the current assets and movable fixed assets of the Company.

2. Board resolution backed Letter of Comfort from McleodRussel India Limited

3. Unconditional and irrevocable corporate guarantee of Williamson Financial Services Ltd to remain valid during the currency of loan.

4. Unconditional and irrevocable personal guarantee of Mr.AdityaKhaitan (Chairman) to remain valid during the currency of the loan.

iii) Payable on demand on 30 September 2017 - Rs. 4000 lacs, Rate of interest - 6 months LIBOR 300 basis points. The effective rate of interest on this loan is 15.40%. However, since there has been a breach in the condition of the covenant as per the loan agreement, the term loan has become repayable on demand. The breach has not been remediated upto the date of issue of financial statements.

Details of security :

1. Subservient charge on the current assets and movable fixed assets of the Company.

2. Board resolution backed Letter of Comfort from McleodRussel India Limited

3. Unconditional and irrevocable corporate guarantee of Williamson Financial Services Ltd to remain valid during the currency of loan.

iv) Payable on demand on 6 August 2017 - Rs.INR 4000 lacs, Rate of interest - 10.50%. The effective rate of interest on this loan is 15.75%. However, since there has been a breach in the condition of the covenant as per the loan agreement, the term loan has become repayable on demand. The breach has not been remediated upto the date of issue of financial statements.

Details of security :

1. Subservient charge on the current assets and movable fixed assets of the Company.

2. Board resolution backed Letter of Comfort from McleodRussel India Limited.

3. Unconditional and irrevocable corporate guarantee of Williamson Financial Services Ltd to remain valid during the currency of loan.

4. Unconditional and irrevocable corporate guarantee of Bishnauth Investments Limited (of Rs. 2000 lacs).

5. Unconditional and irrevocable personal guarantee of Mr.AdityaKhaitan (Chairman).

1. Trade payables are non-interest bearing and are normally settled on 60-90 day terms.

2. For explanations on the Company''s credit risk management processes, refer to Note 40.

** Disclosure as required under Section 22 of Micro, Small & Medium Enterprises Development Act, 2006 (the Act):

The information has been given in respect of such vendors to the extent they could be identified as ''Micro & Small Enterprises'' on the basis of information available with the Company.

** Includes term loan repayable to RBL Bank by way of three annual installments starting from 30 September 2017: Rs. 700 lacs, 30 September 2018: Rs. 800 lacs& 30 September 2019: Rs. 1500 lacs as per the loan agreement carrying an interest rate of 6 months LIBOR plus 300 basis points. The effective interest rate on this loan is 15.40%. However, since there has been a breach in the condition of the covenant as per the loan agreement, the term loan has become repayable on demand. The breach has not been remediated upto the date of issue of financial statements.

Details of security :

1. Subservient charge on the current assets and movable fixed assets of the Company.

2. Board resolution backed Letter of Comfort from group company McleodRussel India Limited.

3. Unconditional and irrevocable corporate guarantee of Williamson Financial Services Ltd to remain valid during the currency of loan.

Financial Liabilities at fair value through other comprehensive income

Financial Liabilities at fair value through other comprehensive income reflect the change in fair value of foreign exchange forward contracts and cross currency interest rate swaps designated as cash flow hedges to hedge foreign currency term loans taken from banks to meet the working capital requirements. The Company is exposed to changes in the rates of interest and foreign exchange rates on its foreign currency loans. The forward contracts and cross currency interest rate swaps have been taken to offset the effect of changes in interest rates and foreign exchange rates. The Company has a policy to hedge all its foreign currency loans.

Provision for liquidated damages

The Company creates provision for liquidated damages on those construction contracts for which delivery has been delayed and no formal communication regarding extension of time has been received from the customers. The provision has been created on the basis of purchase order raised by the customers.

**The Government of India introduced the Goods and Service Tax (GST) with effect from 1 July 2017, GST is collected on behalf of the Government and no economic benefit flows to the Company and hence gross revenue under GST regime is presented excluding GST as per Ind AS. However, gross revenue under pre-GST regime included Excise Duty which is now subsumed in GST. Consequently, the figures for the year ended 31 March 2018 are not comparable with the year ended 31 March 2017.

Fair value gain on financial instruments at fair value through profit or loss relates to foreign exchange forward contracts that did not qualify for hedge accounting and embedded derivatives, which have been separated. No ineffectiveness has been recognised on foreign exchange and interest rate hedges.

Note 3: Employee benefit disclosure

A. Defined contribution plans:

Amount of Rs. 118.97 lacs (31 March 2017: Rs.116.08 lacs) is recognised as expenses and included in Note No. 28 Employee benefit expense in the Statement of Profit and Loss.

B. Defined benefit plans:

The Company has following post employment benefits which are in the nature of defined benefit plans:

(a) Gratuity

The Company has a defined benefit gratuity plan in India (funded). The Company''s defined benefit gratuity plan is a final salary plan for employees, which requires contributions to be made to a separately administered fund. The fund is managed by a trust which is governed by the Board of Trustees. The Board of Trustees are responsible for the administration of the plan assets and for the definition of the investment strategy.

Gratuity is a defined benefit plan and company is exposed to the following risks:

Interest rate risk : A fall in the discount rate which is linked to the Government Securities Rate will increase the present value of the liability requiring higher provision. A fall in the discount rate generally increases the mark to market value of the assets depending on the duration of asset.

Salary Risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of members. As such, an increase in the salary of the members more than assumed level will increase the plan''s liability.

Investment Risk: The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. If the return on plan asset is below this rate, it will create a plan deficit. Currently, for the plan in India, it has a relatively balanced mix of investments in government securities, and other debt instruments.

Asset Liability Matching Risk: The plan faces the ALM risk as to the matching cash flow. Since the plan is invested in lines of Rule 101 of Income Tax Rules, 1962, this generally reduces ALM risk.

Mortality risk: Since the benefits under the plan is not payable for life time and payable till retirement age only, plan does not have any longevity risk.

Concentration Risk: Plan is having a concentration risk as all the assets are invested with the insurance company and a default will wipe out all the assets. Although probability of this is very less as insurance companies have to follow regulatory guidelines.

During the year, there were no plan amendments, curtailments and settlements.

A separate trust fund is created to manage the Gratuity plan and the contributions towards the trust fund is done as guided by rule 103 of Income Tax Rules, 1962.

Terms and conditions of transactions with related parties

1. The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm ''s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables.

2. ICD''s given to related party carries interest rate of NIL (31 March 2017: 14.00% & 1 April 2016 : 14.00%)

Commitments with related parties

The company has not provided any commitments to the related party as at 31 March 2018 (31 March 2017 : Nil & 1 April 2016: Nil)

NOTE 4: Segment information:

A. Primary operating segment

In line with the provision of Ind AS-108 - Operating Segments, Chief Operating Decision Maker (CODM) reviews the operations of the Company as manufacturer of Engineering Products, which is considered to be the only reportable segment by the management. Accordingly, no separate disclosure of primary operating segment information has been made.

The management assessed that cash and cash equivalents, trade receivables, current loans given, other current financial assets, trade payables, short term borrowings and other current financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

Note 5: Financial risk management objectives and policies

The Company''s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade payables and other financial liabilities. The main purpose of these financial liabilities is to finance the Company''s operations and to provide guarantees to support its operations. The Company''s principal financial assets include loans, trade receivables, cash and cash equivalents, bank balances other than that included in cash and cash equivalents and other financial assets that arise directly from its operations. The Company also holds FVTOCI investments and enters into derivative transactions.

The Company is exposed to market risk, credit risk and liquidity risk. The Company''s senior management oversees the management of these risks. The Board of Directors have adopted risk management policy to identify the risks involved in all activities of the Company. Further, the Company has a policy to hedge all foreign currency loans carrying a floating rate of interest with the help of foreign exchange forward contracts and cross currency interest rate swaps to cover foreign exchange rate and interest rate risk. It is the Company''s policy that no trading in derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise currency rate risk and interest rate risk. Financial instruments affected by market risk include loans and borrowings, FVTOCI financial investments, trade receivables, trade payables and derivative financial instruments.

The Company''s activities expose it to a variety of financial risks, including the effects of changes in foreign currency exchange rates and interest rate movement. The Company uses derivative financial instruments such as foreign exchange forward contracts and cross currency interest rate swaps to manage its exposures to foreign exchange fluctuations.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company''s exposure to the risk of changes in market interest rates relates primarily to the Company''s debt obligations.

The Company manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings. The Company also enters into cross currency interest rate swaps, in which it agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon principal amount.

Interest rate sensitivity

With all other variables held constant, the following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected, after the impact of hedge accounting on profit before tax and equity as follows:

The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment.

Foreign currency risk

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).

The Company manages its foreign currency risk by taking foreign exchange forward contracts and cross currency interest rate swaps.

When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure.

The Company hedges its exposure to fluctuations on the translation into INR of its foreign operations by holding net borrowings in foreign currencies and by using cross currency interest rate swaps and forwards.

Foreign currency sensitivity

The following table demonstrates the sensitivity in the USD and Euro to the functional currency of the Company, 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 foreign currency derivatives.

Equity price risk

The Company''s investment consists of investments in publicly traded companies held for the purpose other than trading. Such investments represents a low exposure risk for the Company and are not hedged. As at 31 March 2018, the exposure to listed equity securities at fair value was Rs. 1,608.52 lacs (31 March 2017: Rs. 1,264.46 lacs, 1 April 2016 :Rs. 1,400.87 lacs). A decrease / increase of 10% on the BSE market index could have an impact of approximatelyRs.160.85 lacs (31 March 2017: Rs.126.45 lacs, 1 April 2016:Rs.140.09 lacs) respectively on the OCI and equity. These changes would not have an affect on profit or loss.

Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.

Trade receivables

Customer credit risk is managed as per the Company''s established policy, procedures and controls relating to customer credit risk management. Trade receivables are non-interest bearing and are generally on credit term in line with respective industry norms. Outstanding customer receivables are regularly monitored. The Company has no concentration of credit risk as the customer base is widely distributed both economically and geographically.

The requirement for impairment is analysed at each reporting date. Refer Note 6 for details on the impairment of trade receivables.

Financial instruments and cash deposits

Credit risk from balances with banks is managed by the Company''s treasury department in accordance with the Company''s policy. Investments of surplus funds are made only on the basis of decision taken by the Company''s senior management.

The Company''s maximum exposure to credit risk for the components of the balance sheet at 31 March 2018 and 31 March 2017 is the carrying amounts as illustrated in Note 16, 17 & 18 except for derivative financial instruments. The Company''s maximum exposure relating to financial derivative instruments is noted in note 18 and the liquidity table below.

Liquidity risk

Liquidity risk is the risk that the Company may not be able to make its present and future collateral obligations without incurring unacceptable losses. The Company''s objective is to, at all times maintain optimum levels of liquidity to meet its cash and collateral requirements. The Company closely monitors its liquidity position and maintains adequate sources for financing including debts, cash credits and overdrafts at an optimised cost.

Note 41: Capital management

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 or its business requirements. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings less cash and cash equivalents.

No changes were made in the objectives, policies or processes for managing capital during the years ended 31 March 2018, 31 March 2017 and 1 April 2016.

Note 6: First-time adoption of Ind AS

These financial statements, for the year ended 31 March 2018, are the first Ind AS financial statements the Company has 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 the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (previous Indian GAAP).

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 and for the year ended 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 date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian previous GAAP financial statements, including the balance sheet as at 1 April 2016 and the financial statements as at and for the year ended 31 March 2017.

Exemptions applied

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

Deemed cost

Ind AS 101 permits a first time adopter to elect to measure an item of property, plant and equipment including capital work in progress at the transition to Ind AS at its carrying value and use that carrying value as its deemed cost at that date. This exemption can also be used for intangible assets covered by Ind AS 38. Accordingly, the Company has elected to measure all of its property, plant and equipment & intangible assets including capital work in progress at previous indian GAAP carrying value on the date of transition to Ind AS and used those carrying value as deemed cost of Property, plant and equipment & Intangible assets.

Designation of previously recognised financial instruments

Ind AS 101 allows an entity to designate investments in equity instruments at FVOCI on the basis of facts and circumstances at the date of transition to IndAS . The Company has elected to apply this exemption.

Classification and measurement of financial assets

Ind AS 101 requires an entity to assess classification and measurement of financial assets on the basis of the facts and circumstances that exist at the date of transition to Ind AS.

Estimates

An entity''s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous indian GAAP, unless there is objective evidence that those estimates were in error. Ind AS estimates as at 1 April 2016 and 31 March 2017 are consistent with the estimates as at the same date made in the conformity with previous indianGAAP . The Company made estimates for the following in accordance with Ind AS at the date of transition as these were not required under previous indian GAAP:

1. Investment in equity instruments carried at FVOCI

2. Impairment of financial assets based on Expected Credit Loss model

The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at 1 April 2016, the date of transition to Ind AS and as of 31 March 2017.

Footnotes to the reconciliation of equity as at 1 April 2016 and 31 March 2017 and profit or loss for the year ended 31 March 2017:

1. FVTOCI financial assets

Under previous Indian GAAP, the Company accounted for long term investments in quoted equity shares as investment measured at cost less provision for other than temporary diminution in the value of investments. Under Ind AS, the Company has designated such investments as FVTOCI investments. Ind AS requires FVTOCI investments to be measured at fair value. At the date of transition to Ind AS, difference between the instruments fair value and previous Indian GAAP carrying amount of Rs. 108.76 lacs has been recognised in retained earnings. Further the difference between the change in instruments fair value during the year ended 31 March 2017 and provision for other than temporary dimunition in the value of investment as per previous indian GAAP of Rs. 63.59 lacs has been recognised in the statement of profit and loss.

2. Expected credit loss

Under previous Indian GAAP, the Company has created provision for impairment of trade receivables and unbilled revenue on project accounts on specific identification basis. Under Ind AS, impairment allowance has been determined based on Expected Credit Loss model (ECL) as per Ind AS 109. Due to ECL model, the Company impaired its trade receivables and unbilled revenue on project accounts byRs.210.98 lacs andRs.252.95 lacs respectively on 1 April 2016 which has been eliminated against retained earnings. The impact of reversal of provision of Rs. 0.35 lacs for trade receivables and provision of Rs.16.92 lacs for unbilled revenue on project accounts for year ended 31 March 2017 has been recognized in the statement of profit and loss.

3. Derivative instruments

The Company uses derivative financial instruments, such as foreign exchange forward contracts and cross currency interest rate swaps, to hedge its foreign currency risks and interest rate risks. Under previous Indian GAAP, there is no mandatory standard that deals comprehensively with hedge accounting, which has resulted in the adoption of varying practices. The Company has designated various cash flow hedges and applied the cash flow hedge accounting principles to avoid profit or loss mismatch. All the hedges designated under previous Indian GAAP are of types which qualify for hedge accounting in accordance with Ind AS 109 also. Accordingly the Company has recognised cash flow hedge reserve of Rs.185.23 lacs in the statement of profit and loss which is equivalent to the impact of exchange difference recognised on restatement of foreign currency borrowings at closing rate and Rs. 180.89 lacs has been recognised in other comprehensive income for the year ended 31 March 2017.

4. Proposed Dividend

Under previous Indian GAAP, proposed dividend including dividend distribution tax, are recognised as liability in the period to which they relate, irrespective of when they are recommended by the Board of Directors and approved by the shareholders in a general meeting. Under Ind AS, proposed dividend is recognised as a liability in the period in which it is declared by the Company, usually when approved by shareholders in a general meeting, or paid. Therefore, the proposed dividend including dividend distribution tax amounting to Rs.319.09 lacs has been derecognised and adjusted against the retained earnings as on the date of transition.

5. Deferred Tax

The various transitional adjustments lead to temporary differences, which the Company has to account for. Deferred tax adjustments are recognised in correlation to the underlying transaction either in retained earnings or a separate component of equity. On the date of transition, the net impact on deferred tax assets aggregating Rs.160.56 lacs has been adjusted to retained earnings as on 1 April 2016. Further, Rs.68.34 lacs has been recognised in the statement of profit and loss for the year ended 31 March 2017.

6. Revenue from Operations

Under the previous Indian GAAP, sale of goods was presented net of excise duty. However, under Ind AS, sale of goods includes excise duty. Excise Duty on sale of goods is presented separately on the face of statement of profit and loss. Thus, revenue from operations under Ind AS has increased by Rs.1,239.78 lacs with excise duty on sales shown separately.

7. Defined benefit obligation

Under previous Indian GAAP, the entire cost, including actuarial gains and losses on post-employment defined benefit plan is charged to the statement of profit or loss. Under Ind-AS, remeasurements comprising of actuarial gains and losses are recognised through Other Comprehensive Income. Thus, employee benefits expense is reduced by Rs.17.30 lacs (tax impact of Rs.5.99 lacs has been reclassified from statement of profit and loss to other comprehensive income) and is recognised in Other Comprehensive Income during the year ended 31 March 2017.

8. Utilization of MAT Credit Entitlement

The Company has recorded entry for utilization of MAT Credit Entitlement of Rs.164.04 lacs. Under previous indian GAAP, the Company had provision for tax liability of Rs.108.87 lacs which was shown under short term provisions. Due to utilization of MAT Credit Entitlement of Rs.164.04 lacs, the Company will now be entitled to a refund of Rs.55.17 lacs which has been shown under income tax assets (net).

9. Reclassification of assets and liabilities in accordance with Ind AS

The Company has reclassified its assets and liabilities shown as per previous indian GAAP to confirm with the disclosure requirement of Ind AS and schedule III of the Companies Act 2013.

Note 7: Leases

Operating Leases :

The Company has entered into leasing arrangements for lease of premises with lease terms ranging between 2 to 3 years. The Company has the option to renew the leases upon expiry based on mutually agreed terms to be decided upon at the time of renewal of leases. Lease payments recognized in the Statement of Profit and Loss : 31 March 2018 : Rs.27.46 lacs (31 March 2017 : Rs.28.78 lacs)

Note 8: Research and development costs

The Company has an inhouse research and development department which concentrates on product development and developing new products. Research and development costs that are not eligible for capitalisation have been expensed out in the respective years. The total amount of research and development cost expensed out in the year ended 31 March 2018 was Rs.70.23 lacs (31 March 2017: Rs.63.95 lacs).

Note 9: Disclosure in terms of Indian Accounting Standard 11 on the Accounting of Construction Contracts is as under:

The Company has recognized unbilled revenue during the year in respect of high value, long delivery orders which are delivered in parts over the execution period. The Unbilled revenue is calculated based on percentage of completion of individual contracts.

Note 10: New standards / amendments to existing standards issued but not yet adopted:

Following are the new standards / amendments to existing standards which have been issued by The Ministry of Corporate Affairs (''MCA'') that are not effective for the reporting period and have not been early adopted by the Company:

a. Issue of Ind AS 115 - Revenue from Contracts with Customers:

On March 28, 2018, the Ministry of Corporate Affairs (MCA) notified the new revenue recognition standard, viz., Ind AS 115 Revenue from Contracts with Customers. Ind AS 115 is applicable to the Company for the financial years beginning on or after April 1, 2018 for all the companies who have migrated to Ind AS. The new standard establishes a five step model related to revenue recognition from contracts with customers. It permits either ''full retrospective'' adoption in which the standard is applied to all of the periods presented or a ''modified retrospective'' adoption.

The Company is evaluating its various contractual arrangement and the available transition methods. The Company has established a team for evaluation of the contracts with customers to implement Ind-AS 115. Reliable estimates of the quantitative impact of Ind-AS 115 on the financial statements will be possible after a detailed evaluation.

b. Amendment to existing standards:

The MCA has also carried out amendments of the following accounting standards, applicable to the Company:

i. Ind AS 21 - The Effects of Changes in Foreign Exchange Rates;

ii. Ind AS 12 - Income Taxes

Application of above amendments are not expected to have any significant impact on the Company''s financial statements.

Source : Dion Global Solutions Limited
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