NOTES to the financial statements for the year ended 31 March 2016 1. Significant Accounting Policies: a. Background IFB Industries Limited ("Company") is a Listed Public Limited company having its registered office in Kolkata. The Company is primarily engaged in the business of manufacturing and trading of home appliances. Further, the Company is also engaged in manufacturing of fine blanking components. b. Basis of accounting and brparation of financial statements The financial statements of the Company have been brpared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, and the relevant provisions of the Companies Act, 2013 ("the 2013 Act") / Companies Act, 1956 ("the 1956 Act"), as applicable. The Company follows the accrual method of accounting under historical cost convention modified by revaluation of certain fixed assets as and when undertaken. The accounting policies adopted in brparation of the financial statements are consistent with those followed in the brvious year. The financial statements are brsented in Indian rupees and rounded off to nearest lac. The brparation of financial statements in conformity with Indian GAAP requires the Management to make judgments, estimates and assumptions that affect the accounting policies, reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements and reported amounts of revenues and expenses for the year. The Management believes that the estimates used in brparation of the financial statements are prudent and reasonable. Actual results could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revision of accounting estimates, if any, is recognized prospectively in current and future periods. c. Revenue recognition Revenue from sale of products is recognised upon the transfer of significant risks and rewards of ownership of the goods to the customers, which generally coincides with their delivery to customers. Revenue from Sale of products is stated net of Value Added Tax/Sales Tax and sales return. Revenue from services is recognised on a prorated basis over the period or as per the terms of the contract. Interest on deposits is recognised on a time proportion basis taking into account the underlying interest rate. Dividend income is recognised when the unconditional right to receive the income is established. d. Tangible fixed assets Tangible fixed assets are stated at the cost of acquisition/construction or at the revalued amount less debrciation and impairment losses. The cost of an asset comprises its purchase price and any other attributable cost incurred for bringing the asset to its working condition for its intended use. Where a tangible fixed asset has been revalued upwards, the revalued amount is credited to revaluation reserves. Capital work-in-progress includes cost of assets not ready for their intended use and items under installation. In case of own manufactured items like tools, jigs, proportionate burden of overhead as applicable is also treated as part of cost. Expenditure incurred on replacement/modification of fixed asset is capitalized only when such expenditure results in increase in the economic life of such asset. e. Intangible assets Intangible assets are recorded at the consideration paid for acquisition less amortization. All upgradation/enhancement expenses are charged off as revenue expenditure unless they bring significant additional benefits. Expenditure on Intangible asset eligible for capitalisation are carried as Intangible assets under development where such assets are not yet ready for their intended use. f. Borrowing costs Borrowing costs directly attributable to acquisition or construction of those fixed assets, which necessarily take a substantial period of time to get ready for their intended use, are capitalized. Other borrowing costs are accounted as an expense. g. Debrciation and amortisation Debrciation on tangible fixed assets has been provided on the straight-line method as per the useful life brscribed in Schedule II to the Companies Act, 2013 except in respect of the tools and moulds, in whose case the life of the assets has been assessed as 5 years based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc. The cost of leasehold land is amortised over the period of lease. Intangible assets are amortised over the best estimate of its useful lives on a straight line basis. The estimated useful life currently ranges from 3to5 years. h. Impairment of fixed assets The Company periodically assesses whether there is any indication that an asset or a group of assets comprising a cash generating unit may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. For an asset or group of assets that does not generate largely independent cash flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Statement of Profit and Loss. If, at the balance sheet date, there is an indication that a brviously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of debrciable historical cost. An impairment loss is reversed only to the extent that the carrying amount of asset does not exceed the net book value that would have been determined. i. Foreign currency transactions Foreign exchange transactions are recorded at the rates of exchange brvailing on the date of the respective transactions. Exchange differences arising on foreign exchange transactions settled during the year are recognized in the Statement of Profit and Loss. Monetary assets and liabilities denominated in foreign currency as at the balance sheet date are translated at the closing exchange rate on that date and the resultant exchange differences are recognized in the Statement of Profit and Loss. Non-monetary items denominated in foreign currency are carried at cost. j. Investments Non-current investments are stated at cost less diminution in value, if any other than temporary, determined on specific identification basis. Current investments are stated at lower of cost and fair value. The comparison of cost and fair value is carried out separately for each investment. Profit or loss on sale of investment is determined as the difference between the sale price and carrying value of investment, determined individually for each investment. k. Inventories Inventory is valued at the lower of cost and net realizable value. Cost of inventories includes, cost of purchase, cost of conversion and all other expenses incurred in bringing the goods to their brsent location and condition. Cost is ascertained using the weighted average method. Fixed production overheads are allocated on the basis of normal capacity of production facilities. l. Employee benefits Contribution payable for provident fund and superannuation fund, which are defined contribution schemes are recognized as employee benefits expense in the Statement of Profit and Loss. Post-employment benefits in the form of Gratuity, which is a defined benefit scheme, and other long term employee benefits in the form of leave encashment and accumulated sick leave are recognized as an expense in the Statement of Profit and Loss in the year in which the employee has rendered services. The expense is recognised at the brsent value of the amounts payable determined using the projected unit credit method carried out by an independent actuary. Actuarial gains and losses in respect of post-employment and other long term benefits are accounted to the Statement of Profit and Loss. m. Taxes on income Tax expense comprises current and deferred tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961. Deferred income taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the Company has unabsorbed debrciation or carry forward tax losses, deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits. At each balance sheet date the Company re-assesses unrecognised deferred tax assets. It recognizes unrecognised deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realized. Minimum Alternate Tax (MAT) credit entitlement is recognized only to the extent there is convincing evidence that the Company will pay normal tax during the period specified by the Income Tax Act, 1961. In the year in which the MAT credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in the Guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created by way of credit to the Statement of Profit and Loss. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT credit entitlement to the extent there is no longer convincing evidence to the effect that the Company will pay normal income tax during the specified period. The Company offsets the current tax assets and liabilities (on a year on year basis) and deferred tax assets and liabilities, where it has a legally enforceable right and where it intends to settle such assets and liabilities on a net basis. n. Provision and contingent liabilities The Company recognizes a provision when there is a brsent obligation as a result of an obligating event that probably requires outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure of a contingent liability is made when there is a possible obligation or a brsent obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a brsent obligation and the likelihood of outflow of resources is remote, no provision or disclosure of contingent liability is made. o. Government grants Grants received from the Government authorities with reference to investments under investment subsidy schemes and no repayment are ordinarily expected in respect thereof are treated as capital reserve. p. Segment The Company discloses Business segment as the Primary segment. Segments have been identified taking into account the nature of products, the different risks and returns, the organisation structure and internal reporting system. The Company's operation brdominantly relates to manufacture and trading of home appliances and fine blanking business. The Company primarily caters to the domestic market and export sales are not significant and accordingly there is no reportable secondary segment. q. Leases Leases where the lessor effectively retains substantially all the risks and rewards of ownership of the leased asset are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term. r. Warranty Warranty costs are estimated by the Management on the basis of a technical evaluation and based on specific warranties, claims and claim history. Provision is made for estimated liability in respect of warranty cost in the year of sale of goods. Provision for warranty is expected to be utilized over a period of one to five years. s. Cash and cash equivalents Cash and cash equivalents in the cash flow statement comprise cash on hand, current account bank balances and bank deposit account balances (with maturity of three months or less as at the balance sheet date). t. Earnings per share Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and weighted average number of equity shares outstanding during the year is adjusted for the effects of all dilutive potential equity shares. u. Forward exchange contracts The brmium or discount arising at the inception of forward exchange contracts entered into, to hedge an existing asset/liability, is amortised as expense or income over the life of the contract. Exchange differences on such a contract are recognised in the Statement of Profit and Loss in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of such a forward exchange contract is recognised as income or as expense for the period. v. Research and development expenses Research and Development costs (other than cost of fixed assets acquired) are charged as an expense in the Statement of Profit and Loss in the year in which they are incurred. 2. Leases The Company is obligated under cancellable leases for residential, office brmises, warehouses, etc. Total rental expense under cancellable operating lease amounted to Rs. 1,305 Lacs (31 March 2015 : Rs. 898 Lacs). 3. Changes in Accounting Policy and Accounting Estimates Pursuant to the notification of Schedule II to the Companies Act, 2013, with effect from 1 April 2014, the Company had changed the policy of providing debrciation of buildings from written down value (WDV) method to straight line method (SLM) thereby resulting in a surplus of Rs. 844 Lacs for the year ended 31 March 2015. Pursuant to the transition provisions brscribed in Schedule II to the Companies Act, 2013 and its subsequent amendment by Ministry of Corporate Affairs, the Company charged off the carrying value of assets net of residual value, where the remaining useful life of the asset was determined to be nil as on 1 April 2014 to the Statement of Profit and Loss. Thereby for such assets, the Company has charged an amount of Rs. 1,196 Lacs as debrciation in the Statement of Profit and Loss for the year ended 31 March 2015. As a result of change in estimated useful life as brscribed in Schedule II of the Companies Act, 2013, the debrciation charge for the year ended 31 March 2015 is higher by Rs. 1,496 Lacs. 4. Dues to Micro and Small Enterprises The Ministry of Micro, Small and Medium Enterprises has issued an office memorandum dated 26 August 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrebrneurs Memorandum Number as allocated after filing of the Memorandum in accordance with the 'Micro, Small and Medium Enterprises Development Act, 2006' ('the Act'). Accordingly, the disclosure in respect of the amounts payable to such enterprises as at 31 March 2016 has been made in the financial statements based on information received and available with the Company. A sum of Rs. 283 lacs is payable to Micro and Small Enterprises as at 31 March 2016 (31 March 2015 : Rs. 398 lacs). Further in view of the Management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act is not expected to be material. The Company has not received any claim for interest from any supplier as at the balance sheet date. 5. Employee benefits (a) Gratuity and leave encashment The employees' gratuity fund scheme, determined as post-employment benefit, is managed through Insurance Companies under a defined benefit plan. The brsent value of obligation is determined based on an actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for unfunded leave encashment determined as other long-term benefit plan is recognized in the same manner as gratuity. 6. Previous year's figures have been regrouped/reclassified wherever necessary to correspond with the current year's classification. For and on behalf of the Board of Directors of IFB Industries Limited Bikram Nag Joint Executive Chairman and Managing Director Dr. Rathindra Nath Mitra Director Prabir Chatterjee Director and ChiefFinancial Officer G. Ray Chowdhury Company Secretary Kolkata 18 May2016 |