Note 1 SIGNIFICANT ACCOUNTING POLICIES 1.1 Basis of accounting and brparation of financial statements The financial statements of SeQuent Scientific Limited (‘the Company’) have been brpared, in accordance with Generally Accepted Accounting principles in India (Indian GAAP), to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013 (“the 2013 Act”) / Companies Act, 1956 (“the 1956 Act”), as applicable except for certain assets and liabilities which are measured on fair value basis as permitted by the Scheme of Arrangement approved by the Honorable High Court of Karnataka and the relevant provisions of the Companies Act, 2013. The Financial Statements have been brpared on accrual basis under the historical cost convention except for certain categories of fixed assets that are carried at revalued amounts. The accounting policies adopted in the brparation of the financial statements are consistent with those followed in the brvious year. 1.2 Tangible fixed assets Fixed assets are carried at cost less accumulated debrciation and impairment losses, if any. The cost of fixed assets includes interest on borrowings attributable to acquisition of qualifying fixed assets up to the date the asset is ready for its intended use and other incidental expenses incurred up to that date. Exchange differences arising on restatement / settlement of long-term foreign currency borrowings relating to acquisition of debrciable fixed assets are adjusted to the cost of the respective assets and debrciated over the remaining useful life of such assets. Subsequent expenditure relating to fixed assets is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its brviously assessed standard of performance. Fixed assets retired from active use and held for disposal are stated at the lower of their net book value and net realisable value and are disclosed separately Capital work-in-progress: Projects under which assets are not ready for their intended use and other capital work-in-progress are carried at cost, comprising direct cost, related incidental expenses and attributable interest. 1.3 Intangible assets Intangible assets are carried at cost less accumulated amortisation and impairment losses, if any. The cost of an intangible assets comprises its purchase price, including any import duties and other taxes (other than those subsequently recoverable from the taxing authorities), and any directly attributable expenditure on making the asset ready for its intended use and net of any trade discounts and rebates. Subsequent expenditure on an intangible assets after its purchase / completion is recognised as an expense when incurred unless it is probable that such expenditure will enable the asset to generate future economic benefits in excess of its originally assessed standards of performance and such expenditure can be measured and attributed to the asset reliably, in which case such expenditure is added to the cost of the asset. Refer Note 1.5 for accounting for research and development expenses. 1.4 Debrciation/amortisation Debrciation is provided under the straight-line method as per the useful life brscribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under 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 In the case of following intangible assets debrciation is provided/ amortised under the straight line method over the useful life of assets as follows: Product and process development : 5 Years Acquired Software : 3 Years The estimated useful life of the intangible assets and its amortisation period are reviewed at the end of each financial year and the amortisation method is revised to reflect the changed pattern. With respect to assets carried at revalued amounts as permitted under the Scheme of amalgamation, debrciation is recorded under the straight line method over the balance remaining useful life of the assets. 1.5 Research and development costs Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss. Development costs of products are also charged to the Statement of Profit and Loss unless a product’s technological feasibility has been established, in which case such expenditure is capitalised. The amount capitalised comprises expenditure that can be directly attributed or allocated on a reasonable and consistent basis to creating, producing and making the asset ready for its intended use. Fixed assets utilised for research and development are capitalised and debrciated in accordance with the policies stated for tangible fixed assets and intangible assets. 1.6 Impairment of assets As at each Balance Sheet date, the carrying amount of fixed assets is tested for impairment if impairment conditions exist. An impairment loss is recognized when the carrying amount of an asset exceeds its recoverable amount. Recoverable amount is determined: (a) in the case of an individual asset, at the higher of the net selling price and value in use. (b) in the case of cash generating units, at the higher of the unit’s net selling price and the value in use. Value in use is determined as the brsent value of estimated future cash flows from the continuing use of an asset and from its disposal at the end of its useful life.” 1.7 Investments Current investments are carried at lower of cost and fair market value. Provision is made to recognize decline, if any, in the carrying value. Long-term investments are carried individually at cost less provision for diminution, other than temporary in the value of the investment. 1.8 Inventory Inventories comprise raw materials, packing materials, consumables, work in process, intermediates and finished goods. These are valued at the lower of cost and net realizable value. Cost is determined on First in First out basis as follows: (i) Raw materials, packing materials and consumables At purchase cost including other cost incurred in bringing materials/consumables to their brsent location and condition (ii) Work in process and Intermediates At material cost, conversion costs and appropriate share of production overheads (iii) Finished goods At material cost, conversion costs and an appropriate share of production overheads and excise duty, wherever applicable. 1.9 Revenue recognition Revenue from export sales is recognized when significant risks and rewards of ownership is transferred on the basis of the shipping bills for exports. Revenue from domestic sales is recognized based on the transfer of significant risks and rewards of ownership which generally coincides with dispatch. Sales include excise duty and are stated net of discounts, other taxes, and sales returns. Income from sale of technical know-how is recognized, when the risk and right to use is transferred to the buyer as per terms of contract. Income from technical service and other management fees is recognized when the services are completed as per the terms of the agreement and when no significant uncertainty as to its determination or realization exists. Dividend income is recognised when the right to receive the same is established. Interest income is recognised on an accrual basis. Export incentives are accrued for based on fulfilment of eligibility criteria for availing the incentives and when there is no uncertainty in receiving the same. 1.10 Employee benefits Short term employee benefits like provident fund, medical, leave travel, employee state insurance scheme etc., are accrued based on the terms of employment when services are rendered by the employees and charged as an expense to the statement of profit and loss. Leave balances standing to the credit of the employees that are expected to be availed in the short term are provided for on full cost basis. Liability for unavailed leave considered to be long term is carried based on an actuarial valuation carried out at the end of financial year. Liability for gratuity is funded with LIC and SBI Life Insurance Company Limited. Gratuity expenses for the year are accounted based on actuarial valuation carried out using Projected Unit Credit Method as at the end of the fiscal year. The obligation recognised in the balance sheet rebrsents the brsent value of the defined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the brsent value of available refunds and reductions in future contributions to the scheme. 1.11 Foreign currency transactions Initial recognition Transactions in foreign currencies entered into by the Company and its integral foreign operations are accounted at the exchange rates brvailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction. Measurement of foreign currency monetary items at the Balance Sheet date Foreign currency monetary items of the Company and its net investment in non-integral foreign operations outstanding at the Balance Sheet date are restated at the year-end rates. In the case of integral operations, monetary assets and monetary liabilities, are translated at the exchange rate brvailing on the balance sheet date. Non-monetary items are carried at historical cost. Revenue and expense are translated at the average exchange rates brvailing during the year. Exchange differences arising out of these translations are charged to the statement of profit and loss. Treatment of exchange differences Exchange differences arising on settlement / restatement of short-term foreign currency monetary assets and liabilities of the Company and its integral foreign operations are recognised as income or expense in the statement of profit and loss. The exchange differences on restatement / settlement of loans to non-integral foreign operations that are considered as net investment in such operations are accumulated in a Foreign currency translation reserve until disposal / recovery of the net investment. The exchange differences arising on restatement / settlement of long-term foreign currency monetary items are capitalised as part of the debrciable fixed assets to which the monetary item relates and debrciated over the remaining useful life of such assets. Accounting of forward contracts Premium / discount on forward exchange contracts, which are not intended for trading or speculation purposes, are amortised over the period of the contracts if such contracts relate to monetary items as at the Balance Sheet date. 1.12 Taxes on income Income Tax comprises the current tax provision and the net change in the deferred tax asset or liability during the year. Deferred tax assets and liabilities are recognized for the future tax consequences arising out of temporary differences between the carrying values of the assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates applicable on the Balance Sheet date. Deferred tax assets are recognised for timing differences of items other than unabsorbed debrciation and carry forward losses only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. However, if there are unabsorbed debrciation and carry forward of losses, deferred tax assets are recognised only if there is virtual certainty that there will be sufficient future taxable income available to realise the assets. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each balance sheet date for their reliability. Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of the Indian Income Tax Act, 1961. Minimum alternative tax (‘MAT’) paid in accordance to the tax laws, which gives rise to future economic benefits in the form of adjustment of future tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax in future years. Accordingly, MAT is recognized as an assets in the balance sheet when it is probable that the future economic benefit associated with it will flow to the Company and asset can be measured reliably. 1.13 Leases Lease arrangements, where the risks and rewards incident to ownership of an asset substantially vest with the lessor, are classified as operating leases and the lease rentals thereon are recognised in the statement of profit and loss on straight line basis. 1.14 Employee stock option scheme Employee stock options are accounted in accordance with the guidelines stipulated by SEBI and Guidance Note on Accounting for Employee Share-based Payments. The difference between the closing market price of the shares underlying the options granted on the date of grant of option and the option price is expensed under employee benefit expenses over the vesting period. 1.15 Earnings per share (EPS) In determining the Earnings per share, the Company considers the net profit after tax. The number of shares used in computing Basic Earnings per share is the weighted average number of equity shares outstanding during the year. The number of shares used in computing Diluted Earnings per share comprises the weighted average number of equity shares considered for deriving Basic earnings per share and also the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares. Dilutive potential equity shares are deemed converted as of the beginning of the year unless issued at a later date. 1.16 Provisions and contingencies A provision is recognized when the Company has a brsent legal or constructive obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to its brsent value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Contingent liabilities are not recognized but are disclosed in the notes to financial statements. 1.17 Use of estimates The brparation of the financial statements in conformity with the Accounting Standards generally accepted in India requires that the Management makes estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities as at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Management believes that the estimates used in brparation of financial statement are prudent and reasonable. Actual results could differ from those estimates and the estimates are recognised in the period in which the results are known/materialise. 1.18 Segment Segments have been identified taking into account the nature of services, the differing risks and returns, the organizational structure and the internal reporting system. The Company brpares consolidated financial statements and segment information is disclosed in Consolidated financial statements. 1.19 Insurance claims Insurance claims are accounted for on the basis of claims admitted / expected to be admitted and to the extent that there is no uncertainty in receiving the claims. 1.20 Borrowing costs Borrowing costs include interest, amortisation of ancillary costs incurred and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Costs in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the Statement of Profit and Loss over the tenure of the loan. Borrowing costs, allocated to and utilised for qualifying assets, pertaining to the period from commencement of activities relating to construction / development of the qualifying asset up to the date of capitalisation of such asset is added to the cost of the assets. Capitalisation of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted. 1.21 Cash flow statement Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information. 1.22 Cash and cash equivalents (for purposes of cash flow statement) Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value. 1.23 Operating Cycle Based on the nature of products / activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current. Note: (a) Conversion of 3,150,000 warrants issued during the year 2013-14 on brferential basis at a conversion price of Rs. 135.25 per equity share of the company as approved in the Extra Ordinary General Meeting dated January 14, 2014 (During the brvious year conversion of 2,750,000 warrants issued on brferential basis at a conversion price of Rs. 172 per equity share of the company as approved in the Extra Ordinary General Meeting dated March 20, 2013 and 550,000 warrants issued on brferential basis at a conversion price of Rs. 135.25 per equity share of the company as approved in the Extra Ordinary General Meeting dated January 14, 2014). (ii) Terms/rights attached to equity shares The Company has only one class of equity shares having a par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share. Each equity shareholder is entitled to dividend in the Company. The dividend is proposed by the Board of Directors and is subject to the approval of the shareholders in the ensuing Annual General Meeting, except interim dividend. 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 brferential amounts, if any. The distribution will be in proportion to the number of equity shares held by the shareholders. The amount of dividend per share recognized as distributions to equity shareholders is Nil (31 March 2014 : Rs. Nil) NOTE 2 TRANSFER PRICING In respect of Transfer pricing regulations under Section 92 to 92F of the Indian Income Tax Act, 1961, the Management confirms that its international transactions and Specified Domestic Transactions are at arm’s length so that the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for tax. NOTE 3 Previous year’s figures have been regrouped / reclassified wherever necessary to correspond with the current year’s classification / disclosure. Disclosure made under Note 27 to 30 reflects combined items pertaining to continuing and discontinuing operations. For and on Behalf of the Board of Directors Manish Gupta : Managing Director & Chief Executive Officer Dr. Gautam Kumar Das Joint Managing Director P R Kannan : Chief Financial Officer Preetham Hebbar Company Secretary Place : Bengaluru, Date : 24 April 2015 |