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Precision Wires India

BSE: 523539|NSE: PRECWIRE|ISIN: INE372C01029|SECTOR: Metals - Non Ferrous
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Notes to Accounts Year End : Mar '18

A. COMPANY INFORMATION

Precision Wires India Limited (‘the Company’) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956 (CIN: L31300MH1989PLC054356) having its registered office at Saiman House, J A Raul Street, Off Sayani Road, Prabhadevi, Mumbai - 400 025. The company is listed on the Bombay Stock Exchange Ltd. (BSE) and the National Stock Exchange of India Ltd. (NSE) in India. The company is engaged in manufacturing of Enamelled Round and Rectangular Copper Winding Wires, Continuously Transposed Conductor (CTC) and Paper/Mica/Nomex Insulated Copper Conductors (PICC) which are used by the electrical/electronics industries.

Notes to the Reconciliation

a : Property, Plant and Equipment and Inventory

As per the requirement of Ind AS 16, the spares related to a particular machinery needs to be capitalized alongwith the machinery and depreciated accordingly. Such spares previously were recorded under inventory of Spares. Therefore the depreciation on such spares (capitalised) and also the deferred tax related to such depreciation from the date of their purchase till the date oftransition (01/04/2016) has been adjusted against the retained earnings and the impact for the year ended 31st March, 2017 has been recognised in''Depreciation ''in the Statement of Profit and Loss.

b : Trade Receivables

Under Previous GAAP, bad debts were written off or reserve for bad debts was created based on the indication of the same. However under Ind AS 109 financial instruments, which includes Trade Receivables, needs to be shown at their fair value after providing for the expected credit losses based on past trends of bad debts incurred by the company.

c : Other Equity

i) Under Previous GAAP, bad debts written off or reserve for bad debts was created based on the indication of the same. However under ind AS 109 financial instruments, which includes Trade Receivables has to be shown at their fairvalue after providing for the expected credit losses based on past trends of bad debts incurred by the company.

ii) The spares related to a particular machinery, under earlier GAAP was treated as inventory of Spares. However, as per the requirement of Ind AS, such inventory or spares are required to be capitalized under the particular plant and machinery and depreciated accordingly. Therefore the depreciation on the spares (capitalized) and also the deferred tax on such deprecation from the date of their purchase till the date of transition has been adjusted against the retained earnings. The impact for the year ended 31st March, 2017 has been recognized in ''Depreciation'' in the Statement of Profit and Loss.

iii) Under previous GAAP proposed dividend and related dividend distribution tax was recognized as a provision in the year to which they relate, irrespective of when they are declared. Under Ind AS, dividends and related dividend distribution tax are recognized as a liability in the year in which it is approved by the share holders in the AGM of the Company.

iv) Under Previous GAAP, Prior period expenses were debited to the statement of profit and loss account in the year in which the expenses were incurred. However under Ind AS 8 the profit and loss statement has to be reinstated for the prior period expenses by restating the profit and loss account of the year to which the expenses (net of tax) pertains to. If the expenses relates to the period before the earliest period presented under Ind AS, the opening balance sheet (reserves) of the earliest period presented to be restated accordingly.

v) Tax effect on account of the above Ind AS adjustments

d : Deferred Tax Liability

Under Previous GAAP, taxes were recognized for the tax effect of timing differences between accounting profit and taxable profit for the year using income statement approach under Ind AS deferred taxes are recognized using the balance sheet for future tax consequences of temporary difference between the carrying value of assets and liabilities and their respective tax basis. The above difference, together with the consequential tax impact of the other Ind AS transitional adjustments lead to temporary differences. Deferred Tax adjustments are recognized in correlation to the underlying transactions either in retained earnings or through other comprehensive income.

e : Revenue from Operations and Excise Duty

According to the requirements of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, revenue for the year under review is reported inclusive of excise duty. Goods and Service Tax (''GST'') has been implemented with effect from 1st July, 2017 which replaces Excise Duty and other indirect taxes. As per Ind AS 18, the revenue is reported net of GST.

f : Employee Benefits and Other Comprehensive Income

Under Previous GAAP, the actuarial gain/(loss) of defined benefit plans had been recognized in Statement of Profit and Loss as an exceptional item. Under Ind AS, the remeasurement gain/(loss) on net defined benefit plans is recognized in Other Comprehensive Incomenetoftax.

g : Other Expenses

i) As per note ''C'' on Trade Receivables

ii) Under Previous GAAP, Prior period expenses were debited to the statement of profit and loss account in the year in which the expenses were incurred. However under Ind AS 8 the profit and loss statement has to be reinstated for the prior period expenses by restating the profit and loss account of the year to which the expenses pertains to. If the expenses relates to the period before the earliest period presented under Ind AS, the opening balance sheet (reserves) of the earliest period presented to be restated accordingly.

1. Cash Flow Statement:

Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing orfinancing cash flows. The cash flows are segregated into operating, investing and financing activities.

2. (G) Employee benefits :

In accordance with the stipulations ofthe Ind AS19 “Employee Benefits”, the disclosures ofemployee benefits as defined in the Indian Accounting Standard are given below:

a. Defined Contribution Plan :

The Company makes contribution towards Employee Provident Fund. The Company is required to contribute specified percentage of payroll cost.

b. Defined Benefits Plan :

Gratuity :

15 days salary for each completed year of service. Vesting period is 5 years and the payment is at actual on superannuation, resignation, termination, disablement or on death. The liability for gratuity as above is recognised on the basis ofactuarial valuation.

The Company makes contribution to LIC for gratuity benefits according to the Payment of Gratuity Act, 1972.

The Company recognizes the liability towards the gratuity at each Balance Sheet date.

The most recent actuarial valuation of the defined benefit obligation for gratuity was carried out at March 31, 2018 by an actuary. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of benefit entitlement and measures each unit separately to build up the final obligation. Scheme is funded through LIC.

These plans typically expose the Company to actuarial risks such as: Investment risk, Mortality risk, Concentration risk, Salary risk and Asset Liability Matching risk.

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.

Interest Rate Risk

A fall in the discount rate which is linked to the G.Sec. 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.

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.

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.

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.

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.

The sensitivity analysis have been determined based on reasonably possible changes of the respective assumptions occurring at the end ofthe reporting period, while holding all other assumptions constant.

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

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

Maturity Analysis ofthe Benefit Payments: From the Fund

3. Risk:

The Company''s activities exposes it to various risk such as market risk, liquidity risk and credit risks. This section explains the risks which the Company is exposed to and how it manages the risks.

A. Market risk

The Winding Wire business works on focusing on processing margins. The risk of variation in purchase price of the input copper and sales price of Finished Goods, which is linked to the same international pricing benchmarks, is managed by entering into back to back transactions for input copper purchase against sales order booked. The aforesaid method is generally adopted for all sales transaction other than sale to Dealer market.

B. Foreign Currency Risk

The Company may also have Foreign Currency Exchange Risk on procurement of Raw Material and Capital Equipment(s) for its Businesses. The Company manages this forex risk, using derivatives, wherever required, to mitigate or eliminate the risk. The Company may also have Foreign Currency Exchange Risk on Foreign Currency denominated Borrowings for its Businesses. The Company manages this forex risk, using derivatives, wherever required, to mitigate or eliminate the risk.

In respect of the import of the raw materials an equipment, the Company used forward cover contacts to hedge its exposure to the movements in the foreign currency exchange rates. Such forward covers are used to reduce the risk which may result from foreign currency rates fluctuations and is not used by the Company for trading or speculations purposes.

The Company''s exposure to foreign currency risk at the end of the reporting period expressed in ''Rs.'' Given below

C. Liquidity Risk

The Company determines its liquidity requirements in the short, medium and long term. This is done by drawing up cash forecast for short and medium term requirements and strategic financing plans for long term needs.

The Company manages its liquidity risk in a manner so as to meet its normal financial obligations without any significant delay or stress. Such risk is managed through ensuring operational cash flow while at the same time maintaining adequate cash and cash equivalent position. The management has arranged for diversified funding sources and adopted a policy of managing assets with liquidity in mind and monitoring future cash flows and liquidity on a regular basis. Besides, it generally has certain undrawn credit facilities which can be accessed as and when required; such credit facilities are reviewed at regular intervals.

D. Credit Risk

Credit risks is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligation, and arises principally from the Company''s receivables from customers.

The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking information. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates as given in the provision matrix. The provision matrix at the end ofthe reporting period is as follows:

4. As the Company operates in the single business segment of Winding Wires made of Copper, there are no reportable segments of business as defined under Ind AS 108.

5. Figures in brackets pertain to the previous year.

6. Previous GAAP figures have been reclassified / regrouped to conform to the presentation requirements under Ind AS and the requirements laid down in Division-ll to the Schedule-Ill ofthe CompaniesAct, 2013.

Source : Dion Global Solutions Limited
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